Pizza Hut 2009 Annual Report Download - page 73

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plan ceased after 2009 due to Australian tax law changes. These contributions have been replaced
by contributions to a more tax-efficient foreign expatriate non-qualified defined contribution plan.
For 2009, the Company made contributions to both plans because the Australian plan year for
contributions ended in July 2009 and contributions to the foreign expatriate non-qualified plan were
made to ensure Mr. Creed received a full year of contributions on a calendar year basis. While the
Company makes contributions to the Australian plan and the foreign expatriate defined
contribution plan, Mr. Creed will not accrue a benefit under the Retirement Plan or the Pension
Equalization Plan, 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 years was offset by the Company’s 2002 and 2003 contributions to the
Australian Plan.
(1) YUM! Brands Retirement Plan
The Retirement Plan and the 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
Proxy Statement
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
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.
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