AutoZone 2010 Annual Report Download - page 57

(1) As the plan benefits were frozen as of December 31, 2002, there is no service cost and increases in future
compensation levels no longer impact the calculations. The benefit of each participant is accrued based on
a funding formula computed by our independent actuaries, Mercer. See Note K, Pension and Savings
Plans, to our consolidated financial statements in our 2010 Annual Report for a discussion of our assump-
tions used in determining the present value of the accumulated pension benefits.
Prior to January 1, 2003, substantially all full-time AutoZone employees were covered by a defined
benefit pension plan, the AutoZone, Inc. Associates Pension Plan (the “Pension Plan”). The Pension Plan is a
traditional defined benefit pension plan which covered full-time AutoZone employees who were at least
21 years old and had completed one year of service with the Company. The benefits under the Pension Plan
were based on years of service and the employee’s highest consecutive five-year average compensation.
Compensation included total annual earnings shown on Form W-2 plus any amounts directed on a tax-deferred
basis into Company-sponsored benefit plans, but did not include reimbursements or other expense allowances,
cash or non-cash fringe benefits, moving expenses, non-cash compensation (regardless of whether it resulted in
imputed income), long-term cash incentive payments, payments under any insurance plan, payments under any
weekly-paid indemnity plan, payments under any long term disability plan, nonqualified deferred compensa-
tion, or welfare benefits.
AutoZone also maintained a supplemental defined benefit pension plan for certain highly compensated
employees to supplement the benefits under the Pension Plan as part of our Executive Deferred Compensation
Plan (the “Supplemental Pension Plan”). The purpose of the Supplemental Pension Plan was to provide any
benefit that could not be provided under the qualified plan due to IRS limitations on the amount of salary that
could be recognized in the qualified plan. The benefit under the Supplemental Pension Plan is the difference
between (a) the amount of benefit determined under the Pension Plan formula but using the participant’s total
compensation without regard to any IRS limitations on salary that can be recognized under the qualified plan,
less (b) the amount of benefit determined under the Pension Plan formula reflecting the IRS limitations on
compensation that can be reflected under a qualified plan.
In December 2002, both the Pension Plan and the Supplemental Pension Plan were frozen. Accordingly,
all benefits to all participants in the Pension Plan were fixed and could not increase, and no new participants
could join the plans.
Annual benefits to the Named Executive Officers are payable upon retirement at age 65. Sixty monthly
payments are guaranteed after retirement. The benefits will not be reduced by Social Security or other amounts
received by a participant. The basic monthly retirement benefit is calculated as 1% of average monthly
compensation multiplied by a participant’s years of credited service. Benefits under the Pension Plan may be
taken in one of several different annuity forms. The actual amount a participant would receive depends upon
the payment method chosen.
A participant in the Pension Plan is eligible for early retirement under the plan if he or she is at least
55 years old AND was either (a) a participant in the original plan as of June 19, 1976; or (b) has completed at
least ten (10) years of service for vesting (i.e. years in which the participant worked at least 1,000 hours after
becoming a Pension Plan participant). The early retirement date will be the first of any month after the
participant meets these requirements and chooses to retire. Benefits may begin immediately, or the participant
may elect to begin receiving them on the first of any month between the date he or she actually retires and the
normal retirement date. If a participant elects to begin receiving an early retirement benefit before the normal
retirement date, the amount of the accrued benefit will be reduced according to the number of years by which
the start of benefits precedes the normal retirement date. Mr. Goldsmith is eligible for early retirement under
the Pension Plan.
Messrs. Rhodes and Goldsmith are participants in the Pension Plan and the Supplemental Pension Plan.
No named officers received payment of a retirement benefit in fiscal 2010.
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