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Nordstrom, Inc. and subsidiaries 37
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Amounts in thousands except per share amounts
NOTE 3: POST-RETIREMENT BENEFITS
We have an unfunded Supplemental Executive Retirement Plan (“SERP”), which provides retirement benefits to certain officers and select
employees. This plan is non-qualified and does not have a minimum funding requirement.
The following table provides a reconciliation of our accumulated benefit obligation:
January 28, 2006 January 29, 2005
Change in benefit obligation:
Accumulated benefit obligation at beginning of year $63,950 $59,613
Participant service cost 1,763 1,489
Interest cost 4,747 3,965
Amortization of net loss 2,615 1,543
Amortization of prior service cost 962 962
Change in additional minimum liability 12,623 (766)
Distributions (2,850) (2,856)
Accumulated benefit obligation at end of year $83,810 $63,950
The following table details the change in plan assets, our projected benefit obligation, our funded status of the SERP, and a reconciliation
to amounts recognized in the consolidated balance sheets:
January 28, 2006 January 29, 2005
Change in plan assets:
Fair value of plan assets at beginning of year — —
Employer contribution $2,850 $2,856
Distributions (2,850) (2,856)
Fair value of plan assets at end of year — —
Projected benefit obligation 91,036 69,598
Underfunded status (91,036) (69,598)
Unrecognized prior service cost 5,198 5,266
Unrecognized loss 39,258 24,989
Accrued pension cost (46,580) (39,343)
Additional minimum liability (37,230) (24,607)
Total SERP liability $(83,810) $(63,950)
Amounts recognized in the balance sheets:
Accrued pension cost $46,580 $39,343
Intangible asset included in other assets 5,198 5,266
Deferred tax asset 12,492 7,543
Accumulated other comprehensive loss, net of tax 19,540 11,798
Net amount recognized $83,810 $63,950
The components of SERP expense and a summary of significant assumptions are as follows:
Fiscal year 2005 2004 2003
Participant service cost $1,763 $1,489 $819
Interest cost 4,747 3,965 3,420
Amortization of net loss 2,615 1,543 751
Amortization of prior service cost 962 962 693
Total expense $10,087 $7,959 $5,683
Assumption percentages:
Discount rate 6.00% 6.25% 6.25%
Rate of compensation increase 4.00% 4.00% 4.00%
Measurement date 10/31/05 10/31/04 10/31/03
We use a discount rate that is determined by constructing a hypothetical bond portfolio based on bonds available on October 31, 2005 rated “AA” or
better by either Moody’s or Standard & Poor’s, which yield 6.077%. This assumption was built to match the expected benefit payments under the SERP.