Sears 2009 Annual Report Download - page 74

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
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
benefits for those Sears Canada associates who did not achieve eligibility for such benefits by December 31,
2008. The amendments to the post-retirement programs generated a curtailment gain and reduction to the benefit
plan obligation in the amount of $27 million during the fiscal year ended February 2, 2008.
Merger of Plans
The Kmart tax-qualified defined benefit pension plan was merged with and into the Sears domestic pension
plan effective as of January 30, 2008. The merged plan was renamed as the Sears Holdings Pension Plan (“SHC
domestic plan”) and Holdings accepted sponsorship of the SHC domestic plan effective as of that date.
Effective January 1, 2007, the Kmart pre-65 retiree medical plan and the Sears pre-65 and post-65 retiree
medical plans were merged into a master retiree medical program sponsored by Holdings. Effective
December 19, 2007, this master program was merged with a subsidiary’s retiree program, creating a new master
plan, which includes separate Holdings pre-65 and post-65 programs.
Eligible Kmart associates who retired on or after January 1, 2008 and all eligible Sears retirees are covered
by both of these programs. Kmart associates who retired before January 1, 2008 are eligible for the pre-65
program only.
Changes in Accounting for Pensions and Postretirement Plans
Effective January 31, 2009, a provision of a previously adopted accounting standard regarding pension and
postretirement plans required us to measure plan assets and benefit obligations at fiscal year end. We previously
performed this measurement at December 31 of each year. The change in our measurement date did not have a
material impact on our results of operations or financial condition.
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