Pizza Hut 2012 Annual Report Download - page 70

YUM! BRANDS, INC.-2013Proxy Statement52
Proxy Statement
EXECUTIVE COMPENSATION
The table below shows when each of the Named Executive Offi cers became eligible for Early Retirement and the estimated lump sum
value of the benefi t each participant would receive from the YUM plans (both qualifi ed and non-qualifi ed) if he retired from the Company
on December31,2012 and received a lump sum payment.
Name
Earliest
Retirement Date
Estimated Lump
Sum from the
Qualifi ed Plan(1)
Estimated Lump
Sum from the Non-
Qualifi ed Plan(2)
Total Estimated
Lump Sum
David C. Novak November1,2007 1,478,888.77 27,600,000.00 29,078,888.77
Jing-ShyhS. Su May1,2007 — 18,854,370.11 18,854,370.11
Richard T. Carucci July1,2012 1,328,780.53 11,107,751.51 12,436,532.04
(1) The YUM!Brands Retirement Plan
(2) Mr.Su’s benefit is paid solely from the YUM!Brands International Retirement Plan. All other non-qualified benefits are paid from the YUM!Brands Inc. Pension Equalization Plan.
The estimated lump sum values in the table above are calculated assuming no increase in the participant’s Final Average Earnings. The lump
sums are estimated using the mortality table and interest rate assumptions in the YUM! Brands Retirement Plan. Actual lump sums may
be higher or lower depending on the mortality table and interest rate in effect at the time of distribution and the participant’s Final Average
Earnings at his date of retirement.
Lump Sum Availability
Lump sum payments are available to participants who meet the
requirements for Early or Normal Retirement. Participants who leave
the Company prior to meeting the requirements for Early or Normal
Retirement must take their benefi ts in the form of a monthly annuity
and no lump sum is available. When a lump sum is paid from the
plan, it is calculated based on actuarial assumptions for lump sums
required by Internal Revenue Code Section417(e)(3) (currently this
is the annual 30-year Treasury rate for the 2ndmonth preceding the
date of distribution and the gender blended 1994 Group Annuity
Reserving Table as set forth in Revenue Ruling2001-62).
(2) YUM!Brands Inc. Pension Equalization Plan
The YUM!Brands Inc. Pension Equalization Plan is an unfunded,
non-qualifi ed plan that complements the YUM!Brands Retirement
Plan by providing benefi ts that federal tax law bars providing under
the Retirement Plan. Benefi ts are generally determined and payable
under the same terms and conditions as the Retirement Plan (except
as noted below) without regard to federal tax limitations on amounts
of includible compensation and maximum benefi ts. Benefi ts paid are
reduced by the value of benefi ts payable under the Retirement Plan.
Participants who earned at least $75,000 during calendar year 1989
are eligible to receive benefi ts calculated under the Retirement Plan’s
pre-1989 formula, if this calculation results in a larger benefi t from the
YUM!Brands Inc. Pension Equalization Plan. Messrs.Novak and Carucci
qualify for benefi ts under this formula. This formula is similar to the formula
described above under the Retirement Plan except that partC of the
formula is calculated as follows:
C. 1
2
/
3
% of an estimated primary Social Security amount
multiplied by Projected Service up to 30years
Retirement distributions are always paid in the form of a lump sum.
In the case of a participant whose benefi ts are payable based on the
pre-1989 formula, the lump sum value is calculated as the actuarial
equivalent to the participant’s 50% Joint and Survivor Annuity with
no reduction for survivor coverage. In all other cases, lump sums
are calculated as the actuarial equivalent of the participant’s life only
annuity. Participants who terminate employment prior to meeting
eligibility for Early or Normal Retirement must take their benefi ts from
this plan in the form of a monthly annuity.
As described in the Compensation D iscussion and Analysis, the
Management Planning and Development Committee discontinued
Mr. Novak’s accruing pension benefi ts under the Pension Equali zation
Plan effective January 1, 2012 and replaced this benefi t, effective
January 1, 2013, with a benefi t determined under the Leadership
Retirement Plan. See footnote (5) to the S ummary C ompensation
T able at page 45 for more detail .
(3) YUM!Brands International Retirement Plan
The YUM!Brands International Retirement Plan (the “YIRP”) is an unfunded,
non-qualifi ed defi ned benefi t plan that covers certain international
employees who are designated by the Company as third country
nationals. Mr.Su is eligible for benefi ts under this plan. The YIRP provides
a retirement benefi t similar to the Retirement Plan except that partC of
the formula is calculated as the sum of:
a) Company fi nanced State benefi ts or Social Security benefi ts
if paid periodically
b) The actuarial equivalent of all State paid or mandated lump
sum benefi ts fi nanced by the Company
c) Any other Company fi nanced benefi ts that are attributable
to periods of pensionable service and that are derived from
a plan maintained or contributed to by the Company or
one or more of the group of corporations that is controlled
by the Company.
Benefi ts are payable under the same terms and conditions as the
Retirement Plan without regard to Internal Revenue Service limitations
on amounts of includible compensation and maximum benefi ts.
(4) Present Value of Accumulated Benefi ts
As noted at footnote(5) of the Summary Compensation Table on
page 45 , the change in pension value for the 2012 fi scal year is mainly
the result of a signifi cantly lower discount rate applied to calculate
the present value of the benefi t. For all plans, the Present Value of
Accumulated Benefi ts (determined as of December31,2012) is
calculated assuming that each participant is eligible to receive an
unreduced benefi t payable in the form of a single lump sum at age
62. In Mr.Novak’s case, the Present Value of Accumulated Benefi ts
is calculated assuming he is eligible to receive an unreduced benefi t
payable in the form of a single lump sum on January1,2016. This
is consistent with the methodologies used in fi nancial accounting
calculations. In addition, the economic assumptions for the lump
sum interest rate, post retirement mortality, and discount rate are
also consistent with those used in fi nancial accounting calculations.