Avon 2008 Annual Report Download - page 72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. Employee Benefit Plans
Savings Plan
We offer a qualified defined contribution plan for U.S.-based
employees, the Avon Personal Savings Account Plan (the “PSA”),
which allows eligible participants to contribute up to 25% of
eligible compensation through payroll deductions. We match
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 2008, 2007, and
2006, matching contributions approximating $13.0, $12.8 and
$12.7, respectively, were made to the PSA in cash, which were
then used by the PSA to purchase Avon shares in the open
market.
Defined Benefit Pension and
Postretirement Plans
Avon and certain subsidiaries have contributory and non-
contributory 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.
We provide health care and life insurance benefits for the
majority of employees who retire under our retirement plans in
the U.S. and certain foreign countries. In the U.S., 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, will pay the full cost of the health care
benefits upon retirement.
In September 2006, the FASB issued SFAS No. 158, Employers’
Accounting for Defined Benefit Pension and Other Postretire-
ment Plans - an amendment of FASB Statements No. 87, 88, 106
and 132R (“SFAS 158”). SFAS 158 requires, among other things,
the recognition of the funded status of pension and other post-
retirement benefit plans on the balance sheet. Each overfunded
plan is recognized as an asset and each underfunded plan is
recognized as a liability. The initial impact of the standard, due
to unrecognized prior service costs or credits and net actuarial
gains or losses, as well as subsequent changes in the funded
status, were recognized as components of accumulated compre-
hensive loss in shareholders’ equity. Additional minimum pen-
sion liabilities and related intangible assets were also derecog-
nized upon adoption of the new standard. The adoption of SFAS
158 resulted in a decrease to accumulated other comprehensive
loss of $254.7 after taxes at December 31, 2006. The adoption
of SFAS 158 had no impact on our Consolidated Statement of
Income for the year ended December 31, 2006. SFAS 158’s
provisions regarding the change in the measurement date of
defined benefit and other postretirement plans had no impact as
we were already using a measurement date of December 31 for
our pension plans.