CarMax 2012 Annual Report Download - page 69

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COMPONENTS OF NET PENSION EXPENSE
(In thousands)
2012 2011 2010 2012 2011 2010 2012 2011 2010
Interes t cost 6,830$ 6,541$ 5,710$ 518$ 520$ 605$ 7,348$ 7,061$ 6,315$
Expected return on plan
ass ets (6,870) (6,580) (6,487) ʊ ʊ ʊ (6,870) (6,580) (6,487)
Recognized actuarial
los s 461 280 ʊ ʊ ʊ ʊ 461 280 ʊ
Net pension expense
(benefit) 421$ 241$ (777)$ 518$ 520$ 605$ 939$ 761$ (172)$
Years Ended February 29 or 28
Pens ion Plan Res toration Plan Total
CHANGES NOT RECOGNIZED IN NET PENSION EXPENSE BUT
RECOGNIZED IN OTHER COMPREHENSIVE INCOME
(In thousands)
Net actuarial loss (gain) 35,315$ (3,020)$ 471$ 68$ 35,786$ (2,952)$
2012 2011 2012 2011 2012 2011
Pension Plan Restoration Plan Total
Ye ars Ende d Fe br uar y 2 9 or 2 8
In fiscal 2013, we anticipate that $1.2 million in estimated actuarial losses of the pension plan will be amortized
from accumulated other comprehensive loss. We do not anticipate that any estimated actuarial losses will be
amortized from accumulated other comprehensive loss for the restoration plan.
ASSUMPTIONS USED TO DETERMINE NET PENSION EXPENSE
2012 2011 2010 2012 2011 2010
Discount rate 5.80% 6.10% 6.85% 5.80% 6.10% 6.85%
Expected rate of return on plan as sets 7.75% 7.75% 7.75% ʊʊʊ
Year s Ende d Febr uar y 2 9 or 2 8
Pension Plan Res toration Plan
Assumptions. Underlying both the calculation of the PBO and the net pension expense are actuarial calculations of
each plan's liability. These calculations use participant-specific information such as salary, age and years of service,
as well as certain assumptions, the most significant being the discount rate, rate of return on plan assets and
mortality rate. We evaluate these assumptions at least once a year and make changes as necessary.
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 in fiscal 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 pension plan
curtailments, enhancements were made to the 401(k) plan effective January 1, 2009. The enhancements increased