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111
TYCO INTERNATIONAL LTD.
obligations for Messrs. Kozlowski and Swartz as of September 30,
2002 were $50.6 million and $25.9 million, respectively. Retire-
ment benefits are available at earlier ages and alternative forms
of benefits can be elected. Any such variations would be
actuarially equivalent to the fixed lifetime benefit starting at
age 65. Amounts owed to Messrs. Kozlowski and Swartz under
the ERA are in dispute by the Company. For further information,
see Note 18.
Defined Contribution Retirement Plans The Company maintains
several defined contribution retirement plans, which include
401(k) matching programs, as well as qualified and nonqualified
profit sharing and share bonus retirement plans. Pension
expense for the defined contribution plans is computed as a
percentage of participants’ compensation and was $184.0 mil-
lion, $179.9 million and $152.8 million for fiscal 2003, fiscal
2002 and fiscal 2001, respectively. The Company also maintains
an unfunded Supplemental Executive Retirement Plan (“SERP”).
This plan is nonqualified and restores the employer match that
certain employees lose due to IRS limits on eligible compensa-
tion under the defined contribution plans. Expense related to
the SERP was $4.0 million, $16.1 million and $9.3 million in
fiscal 2003, fiscal 2002 and fiscal 2001, respectively.
Deferred Compensation Plans The Company has nonqualified
deferred compensation plans, which permit eligible employees
to defer a portion of their compensation. A record keeping
account is set up for each participant and the participant chooses
from a variety of measurement funds for the deemed invest-
ment of their accounts. The measurement funds correspond to
a number of funds in the Company’s 401(k) plans and the
account balance fluctuates with the investment returns on those
funds. Deferred compensation expense was $17.4 million,
$15.9 million and $10.3 million for fiscal 2003, fiscal 2002 and
fiscal 2001, respectively. Total deferred compensation liabilities
were $189.0 million, $182.3 million and $292.3 million for fiscal
2003, fiscal 2002 and fiscal 2001. The Company has established
a rabbi trust that is currently funded through corporate-owned
life insurance policies. The rabbi trust assets, which are consoli-
dated, are available to pay plan benefits and are subject to the
claims of the Company’s creditors in the event of the Company’s
insolvency. The cash surrender value of these policies, net of
outstanding loans, included in other noncurrent assets on the
Consolidated Balance Sheet were $231.7 million, $316.0 mil-
lion and $328.6 million in fiscal 2003, fiscal 2002 and fiscal
2001, respectively. The employees are general creditors of the
Company with respect to these benefits.
Postretirement Benefit Plans The Company generally does not
provide postretirement benefits other than pensions for its
employees. However, certain acquired operations provide these
benefits to employees who were eligible at the date of acquisition,
and a small number of U.S. and Canadian operations provide
on-going eligibility for such benefits. The following tables
exclude amounts related to the discontinued operations of CIT
for all periods presented.
Net periodic postretirement benefit cost reflects the following
components ($ in millions):
2003 2002 2001
Service cost $««2.0 $««1.8 $««3.4
Interest cost 23.5 22.5 22.7
Expected return on assets (0.3) (0.4) (0.3)
Recognition of prior
service credit (3.3) (3.5) (2.5)
Recognition of net actuarial
loss (gain) 7.1 — (1.7)
Curtailment/settlement
(gain) loss (2.3) —0.4
Net periodic postretirement
benefit cost $26.7 $20.4 $22.0
The components of the accrued postretirement benefit
obligation, substantially all of which are unfunded, are as follows
($ in millions):
SEPTEMBER 30, 2003 2002
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $«355.4 $«332.6
Service cost 2.0 1.8
Interest cost 23.5 22.5
Amendments (14.3) 0.7
Actuarial loss 71.0 32.5
Acquisition —(1.1)
Plan curtailments (4.6) —
Expected net benefits paid (36.2) (33.6)
Currency translation adjustment 1.1 —
Benefit obligation at end of year $«397.9 $«355.4
CHANGE IN PLAN ASSETS
Fair value of assets at beginning of year $«««««4.7 $«««««5.2
Employer contributions 35.8 33.5
Payment of benefits from plan assets (36.2) (33.6)
Actual return on plan assets 0.4 (0.4)
Fair value of plan assets at end of year $«««««4.7 $«««««4.7
Funded status $(393.2) $(350.7)
Unrecognized net loss 110.6 47.5
Unrecognized prior service cost (36.1) (24.0)
Accrued postretirement benefit cost $(318.7) $(327.2)