LensCrafters 2009 Annual Report Download - page 84

> 82 | ANNUAL REPORT 2009
10. EMPLOYEE BENEFITS
Liability for Termination Indemnities
With regards to staff leaving indemnities ("TFR"), Italian law provides for severance payments to employ-
ees upon dismissal, resignation, retirement or other termination of employment. TFR, through December
31, 2006, was considered an unfunded defi ned benefi t plan. Therefore, through December 31, 2006, the
Company accounted for the defi ned benefi t plan in accordance with EITF 88-1, "Determination of Vested
Benefi t Obligation for a Defi ned Benefi t Pension Plan" which is now included in ASC No. 715, using the
option to record the vested benefi t obligation, which is the actuarial present value of the vested benefi ts
to which the employee would be entitled if the employee retired, resigned or were terminated as of the
date of the fi nancial statements.
Effective January 1, 2007, the TFR system was reformed, and under the new law, employees are given the
ability to choose where the TFR compensation is invested, whereas such compensation otherwise would
be directed to the National Social Security Institute or Pension Funds. As a result, contributions under the
reformed TFR system are accounted for as a defi ned contribution plan. The liability accrued until Decem-
ber 31, 2006 continues to be considered a defi ned benefi t plan, therefore each year, the Company adjusts
its accrual based upon headcount and infl ation, excluding changes in compensation level.
There are also some termination indemnities in other countries which are provided through payroll tax and
other social contributions in accordance with local statutory requirements. The related charges to earnings
for the years ended December 31, 2009, 2008 and 2007 were Euro 17.7 million, Euro 17.9 million and Euro
15.4 million, respectively.
Qualifi ed Pension Plans - During fi scal years 2009, 2008, and 2007, the Company continued to sponsor a
qualifi ed noncontributory defi ned benefi t pension plan, the Luxottica Group Pension Plan ("Lux Plan"),
which provides for the payment of benefi ts to eligible past and present employees of the Company upon
retirement. Pension benefi ts are accrued based on length of service and annual compensation under a
cash balance formula.
Nonqualifi ed Pension Plans and Agreements - The Company also maintains a nonqualifi ed, unfunded
supplemental executive retirement plan ("SERP") for participants of its qualifi ed pension plan to provide
benefi ts in excess of amounts permitted under the provisions of prevailing tax law. The pension liability and
expense associated with this plan are accrued using the same actuarial methods and assumptions as those
used for the qualifi ed pension plan.
The Company sponsors for certain US entities a Supplemental Pension Plan. This plan is a nonqualifi ed
unfunded SERP for certain participants of certain US entities pension plan who were designated by the
Board of Directors of those US entities on the recommendation of former chief executive offi cer of those
US entities at such time. This plan provides benefi ts in excess of amounts permitted under the provisions
of the prevailing tax law. The pension liability and expense associated with this plan are accrued using the
same actuarial methods and assumptions as those used for the qualifi ed pension plan.
As required by ASC 715-30-35-62 (formerly FASB Statement No. 158), during fi scal 2008 the Company
adopted a December 31 measurement date for the pension and SERP plans. In accordance with such
standard, the Company elected to use prior year measurements to calculate the effect of adoption. As a
result of this change in measurement date, the adjustment to retained earnings net of tax related to the
pension and SERP plans was a decrease of Euro 2.9 million and Euro 0.2 million, respectively. The impact
on accumulated other comprehensive income net of tax related to the pension and SERP plans was an
increase of Euro 0.2 million and Euro 0.0 million, respectively.