Avon 2009 Annual Report Download - page 85

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NOTE 11. Employee Benefit Plans
Savings Plan
We offer aqualified 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. We made matching
contributions in cash to the PSA of $12.1 in 2009, $13.0 in 2008
and $12.8 in 2007, which were then used by the PSA to pur-
chase our shares in the open market.
Defined Benefit Pension and
Postretirement Plans
Avon and certain subsidiaries have contributory and noncontrib-
utory 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 major-
ity 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 employ-
ees 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 August 2009, we announced changes to our
postretirement medical and life insurance benefits offered to
U.S. retirees. The changes to the retiree medical benefits reduced
the plan’s obligations by $36.3. This amount is being amortized
as anegative prior service cost over the average future service of
active participants which is approximately 12 years. The changes
to the retiree life insurance benefits reduced the plan’s obliga-
tions by $27.7. This amount is being amortized as anegative
prior service cost over 3.3 years, which is the remaining term of
the plan.
We are required, among other things, to recognize the funded
status of pension and other postretirement benefit plans on the
balance sheet. Each overfunded plan is recognized as an asset
and each underfunded plan is recognized as aliability. The
recognition of 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 other
comprehensive income in shareholders’ equity.
AVON2009 F-21