Pep Boys 2005 Annual Report Download - page 59

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended January 28, 2006, January 29, 2005 and January 31, 2004
(dollar amounts in thousands, except share data)
NOTE 10—BENEFIT PLANS
DEFINED BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all of its full-time employees hired on or before
February 1, 1992. Normal retirement age is 65. Pension benefits are based on salary and years of service. The Company’s
policy is to fund amounts as are necessary on an actuarial basis to provide assets sufficient to meet the benefits to be paid to
plan members in accordance with the requirements of ERISA.
The actuarial computations are made using the “projected unit credit method.” Variances between actual experience and
assumptions for costs and returns on assets are amortized over the remaining service lives of employees under the plan.
As of December 31, 1996, the Company froze the accrued benefits under the plan and active participants became fully
vested. The plan’s trustee will continue to maintain and invest plan assets and will administer benefit payments.
The Company also has a Supplemental Executive Retirement Plan (SERP). This unfunded plan has a defined benefit component
that provides key employees designated by the Board of Directors with retirement and death benefits. Retirement benefits are
based on salary and bonuses; death benefits are based on salary. Benefits paid to a participant under the defined pension plan
are deducted from the benefits otherwise payable under the defined benefit portion of the SERP.
On January 31, 2004, the Company amended and restated its SERP. This amendment converted the defined benefit plan
to a defined contribution plan for certain unvested participants and all future participants, and resulted in an expense under
SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits” (SFAS 88), of approximately $2,191. All vested participants under the defined benefits portion will continue to
accrue benefits according to the previous defined benefit formula.
In fiscal 2004, the Company settled several obligations related to the benefits under the defined benefit SERP. These
obligations totaled $2,065. These obligations resulted in an expense under SFAS 88 of approximately $774 in fiscal 2004.
In fiscal 2003, the Company settled an obligation of $12,620 related to the defined benefits SERP obligation for the
former Chairman and CEO. That obligation resulted in an expense under SFAS 88 of approximately $5,231.
The Company uses a December 31 measurement date for determining benefit obligations and the fair value of plan assets
of its plans.
Pension expense includes the following:
Year ended
Jan. 28,
2006
Jan. 29,
2005
Jan. 31,
2004
Service cost $ 363 $ 438 $ 611
Interest cost 3,011 2,903 3,056
Expected return on plan assets (2,339) (2,299) (2,064)
Amortization of transitional obligation 163 163 274
Amortization of prior service cost 360 364 615
Recognized actuarial loss 2,205 1,733 1,723
Net periodic benefit cost 3,763 3,302 4,215
FAS 88 curtailment charge — — 2,191
FAS 88 settlement charge 568 774 5,231
FAS 88 special termination benefits — — 300
Total Pension Expense $ 4,331 $ 4,076 $ 11,937