CarMax 2011 Annual Report Download - page 76

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The discount rate used for retirement benefit plan accounting reflects the yields available on high-quality, fixed
income debt instruments. For our plans, we review high quality corporate bond indices in addition to a hypothetical
portfolio of corporate bonds with maturities that approximate the expected timing of the anticipated benefit
payments.
To determine the expected long-term return on plan assets, we consider the current and anticipated asset allocations,
as well as historical and estimated returns on various categories of plan assets. We apply the estimated rate of return
to a market-related value of assets, which reduces the underlying variability in the asset values. The use of expected
long-term rates of return on pension plan assets could result in recognized asset returns that are greater or less than
the actual returns of those pension plan assets in any given year. Over time, however, the expected long-term
returns are anticipated to approximate the actual long-term returns, and therefore, result in a pattern of income and
expense recognition that more closely matches the pattern of the services provided by the employees. Differences
between actual and expected returns, which are a component of unrecognized actuarial gains/losses, are recognized
over the average future expected service of the active employees in the pension plan.
Given the frozen status of the pension and benefit restoration plans, the rate of compensation increases is not
applicable for periods subsequent to December 31, 2008. Prior to this date, we determined the rate of compensation
increases based upon our long-term plans for these increases. Mortality rate assumptions are based on the life
expectancy of the population and were updated as of February 28, 2011, to account for increases in life expectancy.
(B) Retirement Savings 401(k) Plan
We sponsor a 401(k) plan for all associates meeting certain eligibility criteria. In conjunction with the retirement
benefit plan curtailments, enhancements were made to the 401(k) plan effective January 1, 2009. The enhancements
increased the maximum salary contribution for eligible associates and increased our matching contribution.
Additionally, an annual company-funded contribution regardless of associate participation was implemented, as well
as an additional company-funded contribution to those associates meeting certain age and service requirements. The
total cost for company contributions was $20.5 million in fiscal 2011, $20.1 million in fiscal 2010 and $5.7 million
in fiscal 2009.
(C) Retirement Restoration Plan
Effective January 1, 2009, we replaced the frozen restoration plan with a new non-qualified retirement plan for
certain senior executives who are affected by Internal Revenue Code limitations on benefits provided under the
Retirement Savings 401(k) Plan. Under this plan, these associates may continue to defer portions of their
compensation for retirement savings. We match the associates’ contributions at the same rate provided under the
401(k) plan, and also provide the annual company-funded contribution made regardless of associate participation, as
well as the additional company-funded contribution to the associates meeting the same age and service
requirements. This plan is unfunded with lump sum payments to be made upon the associate’s retirement. The total
cost for this plan was $1.0 million in fiscal 2011. The total cost for this plan was not material in fiscal 2010 or fiscal
2009.
(D) Executive Deferred Compensation Plan
Effective January 1, 2011, we established an unfunded nonqualified deferred compensation plan to permit certain
eligible key associates to defer receipt of a portion of their compensation to a future date. This plan also includes a
restorative company contribution designed to compensate the plan participants for any loss of company
contributions under the Retirement Savings 401(k) Plan and the Retirement Restoration Plan due to a reduction in
their eligible compensation resulting from deferrals into the Executive Deferred Compensation Plan. The total cost
for this plan was not material in fiscal 2011.