Kroger 2015 Annual Report Download - page 44

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(5) For 2015, the amounts reported consist of the aggregate change in the actuarial present value of
the NEO’s accumulated benefit under a defined benefit pension plan (including supplemental plans),
which applies to all eligible NEOs, and preferential earnings on nonqualified deferred compensation,
which applies to Messrs. McMullen, Donnelly and Hjelm:
Name
Change in
Pension Value
Preferential Earnings on Nonqualified
Deferred Compensation
Mr. McMullen $ 537,941 $80,092
Mr. Schlotman $ 44,163 N/A
Mr. Donnelly $ 316,969 $ 4,576
Mr. Hjelm $ (1,142) $ 168
Mr. Morganthall $(429,556) N/A
The change in value of the accumulated pension benefit for each of Messrs. Hjelm and Morganthall
are not included in the table because the value decreased.
Amounts reported for 2015 and 2014 include the change in the actuarial present value of
accumulated pension benefits and preferential earnings on nonqualified deferred compensation.
Amounts reported for 2013 include only preferential earnings on nonqualified deferred
compensation because the changes in pension value were negative, which are not required to be
reported in the table in accordance with SEC rules. Pension values may fluctuate significantly from
year to year depending on a number of factors, including age, years of service, average annual
earnings and the assumptions used to determine the present value, such as the discount rate. The
change in the actuarial present value of accumulated pension benefits for 2014 was significantly
greater than 2013 primarily due to a lower discount rate and revised mortality assumptions. The
change in the actuarial present value of accumulated pension benefits for 2015 is primarily due to
a lower discount rate. Please see the Pension Benefits section for further information regarding the
assumptions used in calculating pension benefits.
Messrs. McMullen, Donnelly and Hjelm participate in Kroger’s nonqualified deferred compensation
plan. Under the plan, deferred compensation earns interest at a rate representing Kroger’s cost of
ten-year debt, as determined by the CEO and approved by the Compensation Committee prior to
the beginning of each deferral year. For each participant, a separate deferral account is created
each year and the interest rate established for that year is applied to that deferral account until the
deferred compensation is paid out. If the interest rate established by Kroger for a particular year
exceeds 120% of the applicable federal long-term interest rate that corresponds most closely to
the plan rate, the amount by which the plan rate exceeds 120% of the corresponding federal rate
is deemed to be above-market or preferential. In thirteen of the twenty-two years in which at least
one NEO deferred compensation, the rate set under the plan for that year exceeds 120% of the
corresponding federal rate. For each of the deferral accounts in which the plan rate is deemed to be
above-market, Kroger calculates the amount by which the actual annual earnings on the account
exceed what the annual earnings would have been if the account earned interest at 120% of the
corresponding federal rate, and discloses those amounts as preferential earnings. Amounts deferred
in 2015 earn interest at a rate lower than 120% of the corresponding federal rate; accordingly there
are no preferential earnings on these amounts. In 2015, Mr. Morganthall participated in the Harris
Teeter Supermarkets, Inc.Flexible Deferral Plan (the “HT Flexible Deferral Plan”), which does not
provide above-market or preferential earnings on deferred compensation.