Advance Auto Parts 2006 Annual Report Download - page 93

ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
December 30, 2006, December 31, 2005 and January 1, 2005
(in thousands, except per share data)
17. Benefit Plans:
401(k) Plan
The Company maintains a defined contribution team member benefit plan, which covers substantially all team
members after one year of service and who have attained the age of twenty-one. The plan allows for team member
salary deferrals, which are matched at the Company’s discretion. Company contributions were $7,726, $6,779 and
$6,752 in fiscal 2006, fiscal 2005 and fiscal 2004, respectively.
Deferred Compensation
During the third quarter of fiscal 2003, the Company established an unqualified deferred compensation plan for
certain team members. The Company has accounted for the unqualified deferred compensation plan in accordance
with EITF 97-14, “Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held in a
Rabbi Trust and Invested.” The liability related to the former Discount deferred compensation plan, which was
terminated in May 2002, was merged into the new plan. This plan provides for a minimum and maximum deferral
percentage of the team member’s base salary and bonus, as determined by the Retirement Plan Committee. The
Company establishes and maintains a deferred compensation liability for this plan. The Company funds this liability
by remitting the team member’s deferrals to a Rabbi Trust where these deferrals are invested in certain life insurance
contracts. Accordingly, any change in the cash surrender value on these contracts, which are held in the Rabbi Trust
to fund the deferred compensation liability, is recognized in the Company’s consolidated statement of operations.
At December 30, 2006 and December 31, 2005 these liabilities were $3,402 and $2,693, respectively.
Postretirement Plan
The Company provides certain health care and life insurance benefits for eligible retired team members through
a postretirement plan, or the Plan. These benefits are subject to deductibles, co-payment provisions and other
limitations. The Plan has no assets and is funded on a cash basis as benefits are paid. During the second quarter of
fiscal 2004, the Company amended the Plan to exclude outpatient prescription drug benefits to Medicare eligible
retirees effective January 1, 2006. Due to this plan amendment, the Company's accumulated postretirement benefit
obligation was reduced by $7,557, resulting in an unrecognized prior service cost in the same amount. The
unrecognized prior service cost is being amortized over the 13-year estimated remaining life expectancy of the plan
participants as allowed under SFAS No. 106, “Employers Accounting for Postretirement Benefits Other Than
Pensions.”
Other financial information related to the plans was determined by the Company’s independent actuaries. The
measurement date used by the actuaries was October 31 of each fiscal year. The following provides a reconciliation
of the accrued benefit obligation included in other long-term liabilities in the accompanying consolidated balance
sheets, recorded and the funded status of the plan as of December 30, 2006 and December 31, 2005:
F-30