Napa Auto Parts 2014 Annual Report Download - page 65

Genuine Parts Company and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
December 31, 2014
and $12,340,000 of accrued interest and penalties at December 31, 2014 and 2013, respectively. The Company
recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax
expense.
7. Employee Benefit Plans
The Company’s defined benefit pension plans cover employees in the U.S. and Canada who meet eligibility
requirements. The plan covering U.S. employees is noncontributory. In December 2012, the U.S. qualified
defined benefit plan was amended to reflect a hard freeze as of December 31, 2013. Therefore, no further benefit
accruals were provided after that date for additional credited service or earnings. In addition, all participants who
are employed after December 31, 2013 became fully vested as of December 31, 2013. The Company recognized
a one-time noncash curtailment gain in 2012 of $23,507,000 in connection with this amendment. The Canadian
plan is contributory and benefits are based on career average compensation. The Company’s funding policy is to
contribute an amount equal to the minimum required contribution under applicable pension legislation. The
Company may increase its contribution above the minimum, if appropriate to its tax and cash position and the
plans’ funded position.
The Company also sponsors supplemental retirement plans covering employees in the U.S. and Canada. The
Company uses a measurement date of December 31 for its pension plans.
Several assumptions are used to determine the benefit obligations, plan assets, and net periodic (income)
cost. The discount rate for the pension plans is calculated using a bond matching approach to select specific
bonds that would satisfy the projected benefit payments. The bond matching approach reflects the process that
would be used to settle the pension obligations. The expected return on plan assets is based on a calculated
market-related value of plan assets, where gains and losses on plan assets are amortized over a five year period
and accumulate in other comprehensive income. Other non-investment unrecognized gains and losses are amor-
tized in future net income based on a “corridor” approach, where the corridor is equal to 10% of the greater of the
benefit obligation or the market-related value of plan assets at the beginning of the year. The unrecognized gains
and losses in excess of the corridor criteria are amortized over the average future lifetime or service of plan
participants, depending on the plan. These assumptions are updated at each annual measurement date.
Changes in benefit obligations for the years ended December 31, 2014 and 2013 were:
2014 2013
(In Thousands)
Changes in benefit obligation
Benefit obligation at beginning of year ............................ $2,035,185 $2,165,692
Service cost ................................................. 7,824 19,083
Interest cost ................................................. 102,465 89,408
Plan participants’ contributions .................................. 3,526 3,543
Actuarial loss (gain) .......................................... 346,875 (164,784)
Foreign currency exchange rate changes .......................... (18,697) (13,893)
Gross benefits paid ........................................... (125,084) (73,186)
Acquired plan ............................................... —9,322
Benefit obligation at end of year ................................. $2,352,094 $2,035,185
The actuarial loss incurred in the year ended December 31, 2014 is primarily attributable to a lower discount
rate, as well as changes in the mortality assumptions.
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