Target 2009 Annual Report Download - page 68

The weighted average remaining life of currently exercisable options is 4.9 years, and the weighted average
remaining life of all outstanding options is 8.8 years. The total fair value of options vested was $85 million,
$69 million, and $55 million, in 2009, 2008, and 2007, respectively.
Compensation expense associated with outstanding performance share units is recorded over the life of
the awards. The expense recorded each period is dependent upon our estimate of the number of shares that
will ultimately be issued. Future compensation expense for currently outstanding awards could reach a
maximum of $51 million assuming payout of all outstanding awards. There were no share based liabilities paid
during 2009. The total share based liabilities paid were $15 million in 2008 and $18 million in 2007.
Total unrecognized compensation expense related to restricted stock unit awards was $16 million as of
January 30, 2010.
26. Defined Contribution Plans
Team members who meet certain eligibility requirements can participate in a defined contribution 401(k)
plan by investing up to 80 percent of their compensation, as limited by statute or regulation. Generally, we
match 100 percent of each team member’s contribution up to 5 percent of total compensation. Company
match contributions are made to the fund designated by the participant.
In addition, we maintain nonqualified, unfunded deferred compensation plans for approximately 3,500
current and retired team members. These team members choose from a menu of crediting rate alternatives
that are the same as the investment choices in our 401(k) plan, including Target common stock. We credit an
additional 2 percent per year to the accounts of all active participants, excluding executive officer participants,
in part to recognize the risks inherent to their participation in a plan of this nature. We also maintain a
nonqualified, unfunded deferred compensation plan that was frozen during 1996, covering 11 active and 50
retired participants. In this plan deferred compensation earns returns tied to market levels of interest rates,
plus an additional 6 percent return, with a minimum of 12 percent and a maximum of 20 percent, as
determined by the plan’s terms.
The American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code, changing the
federal income tax treatment of nonqualified deferred compensation arrangements. Failure to comply with the
new requirements would result in early taxation of nonqualified deferred compensation arrangements, as well
as a 20 percent penalty tax and additional interest payable to the IRS. In response to these new requirements,
we allowed participants to elect to accelerate the distribution dates for their account balances. Participant
elections resulted in payments of $29 million in 2009 and $86 million in 2008.
We control some of our risk of offering the nonqualified plans through investing in vehicles, including
company-owned life insurance and prepaid forward contracts in our own common stock that offset a
substantial portion of our economic exposure to the returns of these plans. These investment vehicles are
general corporate assets and are marked to market with the related gains and losses recognized in the
Consolidated Statements of Operations in the period they occur. The total change in fair value for contracts
indexed to our own common stock recorded in earnings was pretax income/(loss) of $36 million in 2009, $(19)
million in 2008, and $6 million in 2007. During 2009 and 2008, we invested approximately $34 million and
$215 million, respectively, in such investment instruments, and these investments are included in the
Consolidated Statements of Cash Flows within other investing activities. Adjusting our position in these
investment vehicles may involve repurchasing shares of Target common stock when settling the forward
contracts. In 2009, 2008, and 2007, these repurchases totaled 1.5 million, 4.7 million, and 3.4 million shares,
respectively, and are included in the total share repurchases described in Note 24.
Prepaid Forward Contracts on Target Common Stock Contractual
Number of Price Paid Fair Total Cash
(millions, except per share data) Shares per Share Value Investment
January 31, 2009 2.2 $39.98 $68 $88
January 30, 2010 1.5 $42.77 $79 $66
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PART II