Motorola 2009 Annual Report Download - page 74

66 MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Restructuring Activities
The Company maintains a formal Involuntary Severance Plan (the ‘‘Severance Plan’’), which permits the
Company to offer eligible employees severance benefits based on years of service and employment grade level in
the event that employment is involuntarily terminated as a result of a reduction-in-force or restructuring. Effective
August 1, 2009, the Company amended and restated the Severance Plan. Under the amended Severance Plan,
severance benefits will be paid in bi-weekly installments to impacted employees rather than in lump sum
payments. Each separate reduction-in-force has qualified for severance benefits under the Severance Plan. The
Company recognizes termination benefits based on formulas per the Severance Plan at the point in time that
future settlement is probable and can be reasonably estimated based on estimates prepared at the time a
restructuring plan is approved by management. Exit costs consist of future minimum lease payments on vacated
facilities and other contractual terminations. At each reporting date, the Company evaluates its accruals for exit
costs and employee separation costs to ensure the accruals are still appropriate. In certain circumstances, accruals
are no longer required because of efficiencies in carrying out the plans or because employees previously identified
for separation resigned from the Company and did not receive severance or were redeployed due to circumstances
not foreseen when the original plans were initiated. The Company reverses accruals through the income statement
line item where the original charges were recorded when it is determined they are no longer required.
Retirement Benefits
The Company’s noncontributory pension plan (the ‘‘Regular Pension Plan’’) covers U.S. employees who
became eligible after one year of service. The benefit formula is dependent upon employee earnings and years of
service. Effective January 1, 2005, newly-hired employees were not eligible to participate in the Regular Pension
Plan. The Company also provides defined benefit plans which cover non-U.S. employees in certain jurisdictions,
principally the United Kingdom, Germany, Ireland, Japan and Korea (the ‘‘Non-U.S. Plans’’). Other pension plans
are not material to the Company either individually or in the aggregate.
The Company also has a noncontributory supplemental retirement benefit plan (the ‘‘Officers’ Plan’’) for its
elected officers. The Officers’ Plan contains provisions for vesting and funding the participants’ expected
retirement benefits when the participants meet the minimum age and years of service requirements. Elected
officers who were not yet vested in the Officers’ Plan as of December 31, 1999 had the option to remain in the
Officers’ Plan or elect to have their benefit bought out in restricted stock units. Effective December 31, 1999,
newly elected officers are not eligible to participate in the Officers’ Plan. Effective June 30, 2005, salaries were
frozen for this plan.
The Company has an additional noncontributory supplemental retirement benefit plan, the Motorola
Supplemental Pension Plan (‘‘MSPP’’), which provides supplemental benefits to individuals by replacing the
Regular Pension Plan benefits that are lost by such individuals under the retirement formula due to application of
the limitations imposed by the Internal Revenue Code. However, elected officers who are covered under the
Officers’ Plan or who participated in the restricted stock buy-out are not eligible to participate in MSPP. Effective
January 1, 2007, eligible compensation was capped at the IRS limit plus $175,000 (the ‘‘Cap’’) or, for those
already in excess of the Cap as of January 1, 2007, the eligible compensation used to compute such employee’s
MSPP benefit for all future years will be the greater of: (i) such employee’s eligible compensation as of January 1,
2007 (frozen at that amount), or (ii) the relevant Cap for the given year. Additionally, effective January 1, 2009,
the MSPP was frozen to new participants unless such participation was due to a prior contractual entitlement.
In February 2007, the Company amended the Regular Pension Plan and the MSPP, modifying the definition
of average earnings. For years ended prior to December 31, 2007, benefits were calculated using the rolling
average of the highest annual earnings in any five years within the previous ten calendar year period. Beginning in
January 2008, the benefit calculation was based on the set of the five highest years of earnings within the ten
calendar years prior to December 31, 2007, averaged with earnings from each year after 2007. Also effective
January 2008, the Company amended the Regular Pension Plan, modifying the vesting period from five years to
three years.
In December 2008, the Company amended the Regular Pension Plan, the Officers’ Plan and the MSPP
(collectively, the ‘‘2008 Amended Pension Plans’’) such that, effective March 1, 2009: (i) no participant shall
accrue any benefit or additional benefit on or after March 1, 2009, and (ii) no compensation increases earned by
a participant on or after March 1, 2009 shall be used to compute any accrued benefit. In 2008, the Company
recognized a $237 million curtailment gain associated with this plan amendment.