Nordstrom 2008 Annual Report Download - page 48

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Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share and per option amounts
NOTE 8: SELF INSURANCE
We retain a portion of the risk for certain losses related to health and welfare, workers’ compensation and general liability claims. Liabilities
associated with these losses include estimates of both losses reported and losses incurred but not yet reported. We estimate our ultimate cost
based on analysis of historical data and independent actuarial estimates.
• Health and Welfare – We are self insured for the majority of our health and welfare coverage and we do not use stop-loss coverage. Participants
contribute to the cost of their coverage through both premiums and out of pocket expenses and are subject to certain plan limits and deductibles.
Our health and welfare reserve was $16 and $14 at the end of 2008 and 2007.
• Workers’ Compensation – We have a retention per claim of $1 or less and no policy limits. Our workers’ compensation reserve was $53 at the end
of both 2008 and 2007 and our expense was $19, $15 and $21 in 2008, 2007 and 2006.
• General Liability – Our General Liability encompasses two types of losses – Employment Practices Liability and Commercial General Liability. We
have a retention per claim of $1 or less and a policy limit up to $25 and $150, respectively. Our general liability insurance reserve was $11 at the end
of 2008 and $10 at the end 2007.
NOTE 9: POST-RETIREMENT BENEFITS
We have an unfunded Supplemental Executive Retirement Plan (“SERP”), which provides retirement benefits to certain officers and select employees.
The SERP has different benefit levels depending on the participant’s role in the company. As of January 31, 2009 and February 2, 2008, there were 33
and 38 officers and select employees eligible for SERP benefits. This plan is non-qualified and does not have a minimum funding requirement.
Effective February 3, 2007, we adopted Statement of Financial Accounting Standards No. 158,
Employers’ Accounting for Defined Benefit Pension and
Other Postretirement Plans
(“SFAS 158”). The impact of the adoption of SFAS 158 is reflected within our consolidated financial statements as of
February 3, 2007. SFAS 158 requires the recognition of a plan’s overfunded or underfunded status as an asset or liability in the consolidated balance
sheet and the recognition of changes in that funded status in the year in which the changes occur through comprehensive income.
The following table reflects the effects of the adoption of SFAS 158 on our consolidated balance sheet as of February 3, 2007:
Before Application After Application
of Statement 158 Adjustments of Statement 158
Other assets $185 $2 $187
Total assets 4,820 2 4,822
Other liabilities 228 12 240
Accumulated other comprehensive earnings (loss), net 1 (10) (9)
Total shareholders’ equity 2,179 (10) 2,169
Total liabilities and shareholders’ equity $4,820 $2 $4,822
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive earnings (pre-tax) included prior service
cost of $(2) and $(3) and accumulated loss of $(9) and $(28) at the end of 2008 and 2007.
The change in benefit obligation and plan assets for 2008 and 2007 are as follows:
January 31, 2009 February 2, 2008
Change in benefit obligation:
Benefit obligation at beginning of year $95 $98
Participant service cost 3 3
Interest cost 7 6
Benefits paid (4) (4)
Actuarial gain (16) (8)
Benefit obligation at end of year $85 $95
Change in plan assets:
Fair value of plan assets at beginning of year — —
Employer contribution $4 $4
Distributions (4) (4)
Fair value of plan assets at end of year — —
Underfunded status $(85) $(95)
The accumulated benefit obligation was $81 at January 31, 2009 and $86 at February 2, 2008.