Radio Shack 2008 Annual Report Download - page 76

Supplemental Executive Retirement Plan: Prior to January 1, 2006, certain officers of the Company
were participants in RadioShack’s Salary Continuation Plan (“SCP”) or its Deferred Compensation Plan
(“DCP” and, together with the SCP, the “Plans”), which provided a defined benefit to be paid out over a
ten-year period upon retirement between the ages of 55 and 70. Participation in the Plans and the benefit
payments were based solely on the MD&C’s discretion and approval, and the benefit payments did not
bear any relationship to a participant’s present compensation, final compensation or years of service. We
accrued benefit payments earned based on the provisions set forth by the MD&C for each individual
person. Based on the method by which the Plans were administered and because there was not a specific
plan governing the benefit payment calculation, the accounting and disclosure provisions of SFAS No. 87,
“Employers’ Accounting for Pensions,” were not previously required.
The Company adopted an unfunded Supplemental Executive Retirement Plan (“SERP”) effective January
1, 2006, for selected officers of the Company. Upon retirement at age 55 years or older, participants in the
SERP are eligible to receive, for ten years, an annual amount equal to a percentage of the average of their
five highest consecutive years of compensation (base salary and bonus), to be paid in 120 monthly
installments. The amount of the percentage increases by 2 ½% for each year of participation in the SERP,
up to a maximum of 50%.
To be a participant in the SERP, officers who were participants in the SCP or DCP had to withdraw from
the applicable plan and would then only receive benefits under the SERP. These benefits are calculated
under the SERP using a formula that calculates the benefit under each plan (SERP, SCP or DCP) and
pays the participant the highest dollar benefit.
If a SERP participant terminates employment due to retirement or disability between the ages of 55 and
70, the participant is entitled to their normal vested SERP benefit, paid in 120 equal monthly payments.
Based on the effective date of the SERP of January 1, 2006, fiscal year 2006 was the initial year in which
an actuarial valuation was performed. The projected benefit obligation at the beginning of 2006 represents
the actuarial valuation that was performed as of January 1, 2006, based on the information and
assumptions developed at that time. Participants in the SERP as of January 1, 2006, were given credit for
prior service as an officer. Therefore, this service credit generated prior service costs that are not required
to be immediately recognized, but that are amortized for purposes of the net periodic benefit cost
calculation over the estimated average remaining service period for active employee participants.
In accordance with SFAS 158, we use the last day of our fiscal year as the measurement date for
determining SERP obligations and conduct an actuarial valuation at that date. The change in benefit
obligation, plan assets, and funded status for 2008 and 2007 are as follows:
Year Ended
December 31,
(In millions) 2008 2007
Change in benefit obligation:
Benefit obligation at beginning of year $ 30.7 $ 34.4
Service cost – benefits earned during the year 0.6 0.7
Interest cost on projected benefit obligation 1.6 1.9
Curtailments -- (1.5)
Actuarial loss (gain) (1.1) 0.5
Benefits paid (5.3) (5.3)
Benefit obligation at end of year 26.5 30.7
Change in plan assets:
Fair value of plan assets at beginning of year -- --
Employer contribution 5.3 5.3
Benefits paid (5.3) (5.3)
Fair value of plan assets at end of year -- --
Underfunded status $ (26.5) $ (30.7)
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