Radio Shack 2011 Annual Report Download - page 66

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the Plans and the benefit payments were based solely on
the discretion and approval of the MD&C, 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 the FASB’s accounting
guidance 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. The SERP was
most recently amended and restated effective as of
December 31, 2010. 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. The benefits for these officers 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 of the Company.
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.
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 2011 and
2010 are as follows:
Year Ended
December 31,
(In millions) 2011 2010
Change in benefit obligation:
Benefit obligation at
beginning of year $ 21.2 $ 24.0
Service cost – benefits earned
during the year 0.8 0.6
Interest cost on projected
benefit obligation 0.8 1.0
Actuarial loss 0.3 0.5
Benefits paid (4.0) (4.9)
Benefit obligation at end of year 19.1 21.2
Change in plan assets:
Fair value of plan assets at
beginning of year -- --
Employer contribution 4.0 4.9
Benefits paid (4.0) (4.9)
Fair value of plan assets
at end of year -- --
Underfunded status $ (19.1) $ (21.2)
The accumulated benefit obligation was $18.8 million and
$20.6 million at December 31, 2011 and 2010, respectively.
Amounts recognized as liabilities in the Consolidated
Balance Sheets consist of:
December 31,
(In millions) 2011 2010
Accrued expenses and other
current liabilities $ 3.2 $ 3.9
Other non-current liabilities 15.9 17.3
Net amount recognized $ 19.1 $ 21.2
The cost of the SERP defined benefit plan included the
following components for the last three years:
(In millions) 2011 2010 2009
Service cost – benefits
earned during the year
$ 0.8 $ 0.6 $ 0.5
Interest cost on projected
benefit obligation 0.8 1.0 1.4
Amortization of prior
service cost 0.1 0.1 0.1
Net periodic benefit cost $ 1.7 $ 1.7 $ 2.0
Amounts not yet reflected in net periodic benefit cost and
included in accumulated other comprehensive loss (pre-tax)
included prior service cost of $0.5 million and $0.7 million at
December 31, 2011 and 2010, respectively, and an
actuarial loss of $0.5 million and $0.2 million at December
31, 2011 and 2010, respectively. The amount of prior
service cost that will be amortized from accumulated other
comprehensive loss into net periodic benefit cost in 2012 is
estimated to be $0.1 million.