Avon 2005 Annual Report Download - page 37

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2005฀ANNUAL฀REPORT฀฀57
10฀
EMPLOYEE฀BENEFIT฀PLANS
Savings Plan
We offer a qualified defined contribution plan for U.S.-based
employees, the Avon Personal Savings Account Plan, which allows
eligible participants to contribute up to 25% of eligible compen-
sation through payroll deductions. Prior to February 2005, we
matched employee contributions dollar for dollar up to the first 3%
of eligible compensation and fifty cents for each dollar contributed
from 4% to 6% of eligible compensation. In February 2005, Avon
temporarily suspended the matching contribution which has been
resumed in 2006. In 2005, 2004 and 2003, matching contributions
approximating $1.8, $14.6 and $14.5, respectively, were made
to this plan in cash, which was then used by the plan to purchase
Avon shares in the open market.
Retirement Plans
Avon and certain subsidiaries have contributory and noncon-
tributory retirement plans for substantially all employees of those
subsidiaries. Benefits under these plans are generally based on
an employee’s years of service and average compensation near
retirement. Plans are funded based on legal requirements and
cash flow.
Effective July 1998, the defined benefit retirement plan covering
U.S.-based employees was converted to a cash balance plan with
benefits determined by pay-based credits related to age and service
and interest credits based on individual account balances and pre-
vailing interest rates. A ten-year transitional period was established
for all employees covered under the pre-existing defined benefit
retirement plan. For the period from July 1, 1998, through June 30,
2008, benefits are calculated under both the former final average
pay formula and the cash balance formula. Employees who were
hired before July 1, 1998 are eligible to receive whichever benefit
(final average pay or cash balance) yields the higher amount. For
employees who were hired before July 1, 1998, however, the ben-
efit calculated under the former final average pay formula is frozen
at June 30, 2008. The cash balance formula continues to accrue
benefits on and after July 1, 2008.
Any pension plan participant who has retired on or after May 1,
2002, but before March 31, 2005 who chose to receive 20% or
more of his or her benefit as an annuity at retirement was eligible
to receive a social security supplement payable until the age of 65.
Postretirement Benefits
We provide health care and life insurance benefits for the majority
of employees who retire under our retirement plans in the United
States and certain foreign countries. The cost of such health care
benefits is shared by us and our retirees for employees hired on or
before January 1, 2005. Employees hired after January 1, 2005,
pay the full cost of the health care benefits.
In August 2005, we announced
that our Board of Directors
authorized us to repurchase
an additional $500.0 of our
common stock. The $500.0
program was completed
during December 2005.