Sears 2008 Annual Report Download - page 71

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
Retirement Savings Plans
We sponsor Sears and Kmart 401(k) retirement savings plans for employees meeting service eligibility
requirements. We match a portion of employee contributions made to the plans. Total expense related to the
Retirement Savings Plans was $84 million, $91 million, and $96 million in fiscal 2008, fiscal 2007 and fiscal
2006, respectively. The Company announced during fiscal 2008 that it would suspend matching contributions on
employee deferrals to 401(k) plans with respect to eligible compensation earned for payroll periods that end after
January 31, 2009.
Effective July 1, 2008, the Sears Canada defined pension plan was amended and a defined contribution
component was added. The defined benefit service accrual ceased and all plan members earn pensionable service
under the defined contribution component of the Sears Registered Retirement Plan. The defined contribution
expense was $13 million for fiscal 2008.
Kmart’s Benefit Plans
Prior to 1996, the Predecessor Company (defined in Note 10) had a tax-qualified and a non-qualified
defined benefit pension plan, which covered eligible associates who met certain requirements of age, length of
service, and hours worked per year. Effective January 31, 1996, the pension plans were frozen, and associates no
longer earn additional benefits under the plans.
The non-qualified defined benefit plan is for certain current and former Kmart associates, and is funded as
benefits are paid. The benefit obligation was $2 million at each of January 31, 2009 and February 2, 2008, and is
included in the accompanying consolidated balance sheet. The projected benefit obligation is equal to the
accumulated benefit obligation for all periods presented.
Kmart provides employees and pre-65 retirees certain medical benefits. Effective January 1, 2008, Holdings
provides eligible post-65 retirees medical benefits as well. The plan is contributory, with retiree contributions
adjusted annually. The accounting for the plan anticipates future cost-sharing changes that are consistent with our
expressed intent to increase the retiree contribution rate annually. There were no accrued post-retirement benefit
costs as of January 31, 2009 and February 2, 2008.
Sears’ Benefit Plans
Certain domestic full-time and part-time employees of Sears are eligible to participate in noncontributory
defined benefit plans after meeting age and service requirements. Substantially all full-time Canadian employees
as well as some part-time employees are eligible to participate in contributory defined benefit plans. Pension
benefits are based on length of service, compensation and, in certain plans, social security or other benefits.
Funding for the various plans is determined using various actuarial cost methods. Effective January 1, 2006, the
Sears domestic pension plan was frozen and domestic associates no longer earn additional benefits under the
plan.
In addition to providing pension benefits, Sears provides domestic and Canadian employees and retirees
certain medical benefits. These benefits provide access to medical plans, with Company subsidies for certain
eligible retirees. Certain domestic Sears’ retirees are also provided life insurance benefits. To the extent we share
the cost of the retiree medical benefits with retirees, such cost sharing is based on years of service and year of
retirement. Sears’ postretirement benefit plans are not funded. We have the right to modify or terminate these
plans.
Effective January 1, 2006, we eliminated our subsidization of retiree medical costs under the Sears’
domestic retiree medical plan for those Sears’ retirees who were under age 65 as of December 31, 2005. In
February 2007, Sears Canada announced amendments to its post-retirement programs including the introduction
of a defined contribution component to its pension plan and the discontinuation of retiree medical, dental and life
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