CarMax 2014 Annual Report Download - page 66

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62
Benefit Obligations. Accumulated and projected benefit obligations (“ABO” and “PBO”) represent the obligations
of the benefit plans for past service as of the measurement date. ABO is the present value of benefits earned to date
with benefits computed based on current service and compensation levels. PBO is ABO increased to reflect
expected future service and increased compensation levels. As a result of the freeze of plan benefits under our
pension and restoration plans as of December 31, 2008, the ABO and PBO balances are equal to one another at all
subsequent dates.
ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS
As of February 28
Pension Plan Restoration Plan
2014 2013 2014 2013
Discount rate (1) 4.55 % 4.30 % 4.55 % 4.30 %
(1) For the restoration plan, the discount rate presented is applied to the pre-2004 annuity amounts. A rate of 4.50% is
assumed for the post-2004 lump sum amounts paid from the plan for fiscal 2014 and fiscal 2013.
FAIR VALUE OF PLAN ASSETS AND FAIR VALUE HIERARCHY
As of February 28
(In thousands) 2014 2013
Mutual funds (Level 1):
Equity securities (1) $ 78,576 $ 67,957
Equity securities – international (2) 15,649 13,536
Fixed income securities (3) 29,500 26,218
Collective funds (Level 2):
Short-term investments (4) 1,046 255
Investment (payables) receivables, net (Level 1) (59) 2
Total $ 124,712 $ 107,968
(1) Includes large-, mid- and small-cap companies primarily from diverse U.S. industries including bank, oil and gas, retail and
pharmaceutical sectors; approximately 95% of securities relate to U.S. entities and 5% of securities relate to non-U.S.
entities as of February 28, 2014 (95% and 5%, respectively, as of February 28, 2013) .
(2) Consists of equity securities of primarily foreign corporations from diverse industries including bank, pharmaceutical,
telecommunication, oil and gas, insurance and food sectors; 100% of securities relate to non-U.S. entities as of
February 28, 2014 (100% relate to non-U.S. entities, as of February 28, 2013).
(3) Includes debt securities of U.S. and foreign governments, their agencies and corporations, and diverse investments in
mortgage-backed securities and banks; approximately 90% of securities relate to U.S. entities and 10% of securities relate
to non-U.S. entities as of February 28, 2014 (85% and 15%, respectively, as of February 28, 2013).
(4) Includes pooled funds representing short-term instruments that include governments, their agencies and corporations and
large-, mid- and small-cap companies primarily from the U.S. bank sector; nearly 100% of securities relate to U.S. entities
as of February 28, 2014 (nearly 100% as of February 28, 2013).
Plan Assets. Our pension plan assets are held in trust and management sets the investment policies and strategies.
Long-term strategic investment objectives include asset preservation and appropriately balancing risk and return.
We oversee the investment allocation process, which includes selecting investment managers, setting long-term
strategic targets and monitoring asset allocations and performance. Target allocations for plan assets are guidelines,
not limitations, and occasionally plan fiduciaries may approve allocations above or below the targets. We target
allocating 75% of plan assets to equity and equity-related instruments and 25% to fixed income securities. Equity
securities are currently composed of mutual funds that include highly diversified investments in large-, mid- and
small-cap companies located in the United States and internationally. The fixed income securities are currently
composed of mutual funds that include investments in debt securities, mortgage-backed securities, corporate bonds
and other debt obligations primarily in the United States. We do not expect any plan assets to be returned to us
during fiscal 2015. Plan assets also include collective funds, which are public investment vehicles with the
underlying assets representing high quality, short-term instruments that include securities of governments, their
agencies and corporations and large, mid, and small cap companies located in the United States and internationally.