Pizza Hut 2008 Annual Report Download - page 86

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accrue a benefit, except, however, he did accrue a benefit for two years, 2002 and 2003, under a
transition provision of the Retirement Plan. The benefit Mr. Creed earned under the Pension
Equalization Plan for those was offset by the Company’s 2002 and 2003 contributions to the
Australian Plan.
(1) YUM! Brands Retirement Plan
The Retirement Plan and the YUM! Brands Inc. Pension Equalization Plan (discussed below) provide
an integrated program of retirement benefits for salaried employees that were hired by the Company prior
to October 1, 2001. Both plans apply the same formulas (except as noted below), and together they replace
the same level of pre-retirement pensionable earnings for all similarly situated participants. The
Retirement Plan is a tax qualified plan, and it is designed to provide the maximum possible portion of this
integrated benefit on a tax qualified and funded basis.
Benefit Formula
Benefits under the Retirement Plan are based on a participant’s Final Average Earnings (subject to
the limits under Internal Revenue Code Section 401(a)(17)) and service under the plan. Upon termination
of employment, a participant’s Normal Retirement Benefit from the plan is equal to
A. 3% of Final Average Earnings times Projected Service up to 10 years of service, plus
B. 1% of Final Average Earnings times Projected Service in excess of 10 years of service, minus
C. .43% of Final Average Earnings up to Social Security covered compensation multiplied by
Projected Service up to 35 years of service
the result of which is multiplied by a fraction the numerator of which is actual service as of date of
termination and the denominator of which is the participant’s Projected Service. Projected Service is the
service that the participant would have earned if he had remained employed with the Company until his
Normal Retirement Age (generally age 65).
If a participant leaves employment after becoming eligible for Early or Normal Retirement, benefits
Proxy Statement
are calculated using the formula above except that actual service attained at the participant’s retirement
date is used in place of Projected Service.
Final Average Earnings
A participant’s Final Average Earnings is determined based on his highest 5 consecutive years of
pensionable earnings. Pensionable earnings is the sum of the participant’s base pay and annual incentive
compensation from the Company, including amounts under the YUM! Leaders’ Bonus Program. In
general base pay includes salary, vacation pay, sick pay, short term disability payments and commission
payments. Extraordinary bonuses and lump sum payments made in connection with a participant’s
termination of employment are not included.
Vesting
A participant receives a year of vesting service for each year of employment with the Company. A
participant is 0% vested until he has been credited with at least 5 years of vesting service. Upon attaining
5 years of vesting service, a participant becomes 100% vested. All the named executive officers are vested.
Normal Retirement Eligibility
A participant is eligible for Normal Retirement following the later of age 65 or 5 years of vesting
service.
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