Dollar General 2005 Annual Report Download - page 55

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The supplemental retirement plan and compensation
deferral plan assets are invested at the option of the par-
ticipant in either an account that mirrors the performance
of a fund or funds selected by the Compensation
Committee of the Company’s Board of Directors or its del-
egate (the “Mutual Funds Option”), or in an account which
mirrors the performance of the Company’s common stock
(the “Common Stock Option”). Pursuant to a provision in
the November 1, 2004 amendment that was effective
January 1, 2005, investments in the Common Stock Option
cannot be subsequently diversified and investments in the
Mutual Funds Option cannot be subsequently transferred
into the Common Stock Option. Effective November 1,
2005, certain former employees who were receiving distri-
butions from the plan were given a limited opportunity
until January 31, 2006, to transfer assets out of the
Common Stock Option.
In accordance with a participant’s election, a partici-
pant’s compensation deferral plan and supplemental
retirement plan account balances will be paid in cash by
(a) lump sum, (b) monthly installments over a 5, 10 or 15-
year period or (c) a combination of lump sum and install-
ments.The vested amount will be payable at the time
designated by the plan upon the participant’s termination
of employment or retirement, except that participants may
elect to receive an in-service lump sum distribution of
vested amounts credited to the compensation deferral
account, provided that the date of distribution is a date
that is no sooner than five years after the end of the year
in which amounts are deferred. In addition, a participant
who is an employee may request to receive an “unforesee-
able emergency hardship” in-service lump sum distribu-
tion of vested amounts credited to his compensation
deferral account. Effective January 1, 2005 for active
participants, account balances deemed to be invested in
the Mutual Funds Option are payable in cash and account
balances deemed to be invested in the Common Stock
Option are payable in shares of Dollar General common
stock and cash in lieu of fractional shares. Prior to January
1, 2005, all account balances were payable in cash.
Asset balances in the Mutual Funds Option are stated
at fair market value, which is based on quoted market
prices, and are included in Prepaid expenses and other
current assets. In accordance with EITF 97-14 “Accounting
for Deferred Compensation Arrangements Where
Amounts Earned Are Held in a Rabbi Trust and Invested,”
the Company’s stock is recorded at historical cost and
included in Other shareholders’ equity. The deferred
compensation liability related to the Company stock for
active plan participants was reclassified to shareholders’
equity and subsequent changes to the fair value of the
obligation will not be recognized, in accordance with the
provisions of EITF 97-14.The deferred compensation
liability related to the Mutual Funds Option is recorded
at the fair value of the investments held in the trust
and is included in Accrued expenses and other in the
consolidated balance sheets.
During 2003, the Company established two supple-
mental executive retirement plans, each with one
executive participant. During 2004, one of these plans was
terminated in connection with the termination of that
participant’s employment. The Company accounts for the
remaining plan in accordance with SFAS No. 87,
“Employers’ Accounting for Pensions”, as amended by
SFAS No. 132,“Employers’ Disclosures about Pensions and
Other Postretirement Benefits”, and supplemented by
SFAS No. 130,“Reporting Comprehensive Income”, but
has not included additional disclosures due to the plan’s
immateriality to the consolidated financial statements as
a whole. Effective January 25, 2006, the Board approved
the restatement of the remaining plan to clarify certain
provisions, comply with pending federal legislation and
establish a grantor trust to hold certain assets in connec-
tion with the plan. The grantor trust provides for assets
to be placed in the trust upon an actual or potential
change in control (as defined in the grantor trust). The
assets of the grantor trust are subject to the claims of
the Company’s creditors.
Non-employee directors may defer all or a part of any
fees normally paid by the Company to them pursuant to a
voluntary nonqualified compensation deferral plan. The
compensation eligible for deferral includes the annual
retainer, meeting and other fees, as well as any per diem
compensation for special assignments, earned by a
director for his or her service to the Company’s Board of
Directors or one of its committees. The compensation
deferred is credited to a liability account, which is then
invested at the option of the director, in either the Mutual
Funds Option or the Common Stock Option. In accor-
dance with a director’s election, the deferred compensa-
tion will be paid in a lump sum or in monthly installments
over a 5, 10 or 15-year period, or a combination of both, at
the time designated by the plan upon a director’s resigna-
tion or termination from the Board. However, a director
may request to receive an “unforeseeable emergency
hardship” in-service lump sum distribution of amounts
credited to his account in accordance with the terms of
the directors’ deferral plan. All deferred compensation will
be immediately due and payable upon a “change in
control” (as defined in the directors’ deferral plan) of the