Famous Footwear 2011 Annual Report Download - page 58

56 2011 BROWN SHOE COMPANY, INC. FORM 10-K
6. RETIREMENT AND OTHER BENEFIT PLANS
The Company sponsors pension plans in both the United States and Canada. The Company’s domestic pension plans cover
substantially all United States employees. Under the domestic plans, salaried, management and certain hourly employees’
pension benefi ts are based on the employee’s highest consecutive fi ve years of compensation during the 10 years before
retirement. The Company’s Canadian pension plans cover certain employees based on plan specifi cations. Under the
Canadian plans, employees’ pension benefi ts are based on the employee’s highest consecutive fi ve years of compensation
during the 10 years before retirement. The Company’s funding policy for all plans is to make the minimum annual
contributions required by applicable regulations.
The Company also maintains an unfunded Supplemental Executive Retirement Plan (“SERP”). As of January 28, 2012,
the projected benefi t obligation of this plan was $8.0 million and the accumulated benefi t obligation was $6.2 million.
In addition to providing pension benefi ts, the Company sponsors unfunded defi ned benefi t postretirement life insurance
plans that cover both salaried and hourly employees who became eligible for benefi ts by January 1, 1995. The life insurance
plans provide coverage of up to twenty-thousand dollars for qualifying retired employees.
Benefi t Obligations
The following table sets forth changes in benefi t obligations, including all domestic and Canadian plans:
Pension Benefi ts Other Postretirement Benefi ts
($ thousands) 2011 2010 2011 2010
Benefi t obligation at beginning of year . . . . . . . . . . . . . . . . . . . . $ 215,373 $ 197,259 $ 3,230 $ 3,657
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,256 7,826 – –
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,533 12,102 176 186
Plan participants’ contribution . . . . . . . . . . . . . . . . . . . . . . . . . 11 10 17 41
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 18 – –
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,746 13,480 315 (409)
Benefi ts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,590) (15,677) (253) (245)
Foreign exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . (23) 355 – –
Benefi t obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . $ 261,459 $ 215,373 $ 3,485 $ 3,230
The accumulated benefi t obligation for the United States pension plans was $236.7 million and $196.6 million as of
January 28, 2012 and January 29, 2011, respectively. The accumulated benefi t obligation for the Canadian pension plans
was $4.6 million and $5.1 million as of January 28, 2012 and January 29, 2011, respectively.
Pension Benefi ts Other Postretirement Benefi ts
Weighted-average assumptions used to determine benefi t obligations,
end of year 2011 2010 2011 2010
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.75% 5.75% 4.75% 5.75%
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . 4.00% 4.00% N/A N/A
Plan Assets
Pension assets are managed in accordance with the prudent investor standards of the Employee Retirement Income
Security Act (“ERISA”). The plan’s investment objective is to earn a competitive total return on assets, while also ensuring
plan assets are adequately managed to provide for future pension obligations. This results in the protection of plan
surplus and is accomplished by matching the duration of the projected benefi t obligation using leveraged fi xed income
instruments and, while maintaining a 70% overall (United States and international) equity commitment, managing an equity
overlay strategy. The overlay strategy is intended to protect the managed equity portfolios against adverse stock market
environments. The Company delegates investment management to specialists in each asset class and regularly monitors
manager performance and compliance with investment guidelines. The Company’s overall investment strategy is to achieve
a mix of approximately 95% of investments for long-term growth and 5% for near-term benefi t payments with a wide
diversifi cation of asset types, fund strategies and fund managers. The target allocations for plan assets for 2012 are 55%
domestic equities, 30% debt securities and 15% foreign equities. Allocations may change periodically based upon changing
market conditions. Domestic equities did not include any Company stock at January 28, 2012 or January 29, 2011.
Assets of the Canadian pension plans, which total approximately $4.9 million at January 28, 2012, were invested 55% in
equity funds, 42% in bond funds and 3% in money market funds. The Canadian pension plans did not include any Company
stock as of January 28, 2012 or January 29, 2011.
A fi nancial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is signifi cant to
the fair value measurement. See further discussion on the fair value hierarchy in Note 14 to the consolidated fi nancial
statements. Following is a description of the pension plan investments measured at fair value, including the general
classifi cation of such investments pursuant to the valuation hierarchy.