OfficeMax 2005 Annual Report Download - page 89

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covered under the plans sponsored by the Company. The OfficeMax, Retail employees, among
others, never participated in any of the Company’s defined benefit pension plans. The Company’s
salaried pension plan was closed to new entrants on November 1, 2003, and on December 31,
2003, the benefits of eligible OfficeMax, Contract participants were frozen. Active OfficeMax,
Contract employees who were eligible to participate in the plan on December 31, 2003 were
credited with one additional year of service on January 1, 2004, at a reduced 1% crediting rate. As
a result of these actions, the Company’s future annual pension expenses and contributions will be
less than the amounts included in prior periods.
Under the terms of the Company’s plans, the pension benefit for salaried employees was
based primarily on the employees’ years of service and highest five-year average compensation.
The pension benefit for hourly employees was generally based on a fixed amount per year of
service. The Company’s general funding policy is to make contributions to the plans in amounts
that are within the limits of deductibility under current tax regulations, and not less than the
minimum contribution required by law. The Company generally uses a December 31 measurement
date for its pension plans.
Other postretirement benefit obligations represent various retiree medical benefit plans. The
type of retiree medical benefits and the extent of coverage vary based on employee classification,
date of retirement, location, and other factors. All of the Company’s postretirement medical plans
are unfunded. The Company explicitly reserves the right to amend or terminate its retiree medical
plans at any time, subject only to constraints, if any, imposed by the terms of collective bargaining
agreements. Amendment or termination may significantly affect the amount of expense incurred.
During the third quarter of 2005, the Company made changes to its retiree medical benefit
plans that had the net effect of reducing the medical insurance subsidy provided to retirees,
including eliminating the subsidy for certain retirees. As a result of these plan changes, the
accumulated post-retirement benefit obligation was reduced by approximately $44 million. The plan
changes were considered to be a negative plan amendment, as defined in FASB Statement No.
106, ‘‘Employers’ Accounting for Postretirement Benefits Other than Pensions.’’ Accordingly, there
was no gain related to the plan changes recognized in the Consolidated Statement of Income
(Loss) for 2005. The reduction in the accumulated post-retirement benefit obligation will be
recognized ratably over the remaining life expectancy of the participants in the plans, which is
currently estimated to be approximately 12 years.
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