Hertz 2014 Annual Report Download - page 91

Table of Contents
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 
is based on the expected return for each asset class (including the value added by active investment management), weighted by the target asset
allocation. The past annualized long-term performance of the Plans' assets has generally been in line with the long-term rate of return assumption.
In October, 2014, we amended The Hertz Corporation Benefit Equalization Plan, or “BEP,” and The Hertz Corporation Supplemental Executive
Retirement Plan, or “SERP II", two non-qualified, unfunded pension plans. Under the amendments and effective as of December 31, 2014, we
have discontinued future benefit accruals as well as new participation under the BEP and the SERP II. Service will continue to be recognized for
vesting and retirement eligibility requirements under the BEP and SERP II. In addition, we also amended our cash balance pension plan effective
December 31, 2014 to permanently discontinue future benefits accruals and participation for non-union employees. In connection with the freezing
of the pension plan, effective January 1, 2015, we increased employer contributions under the qualified 401(k) savings plan.
During 2014, we changed our method of accounting for the value of plan assets utilized for purposes of calculating net periodic pension expense
from a market-related value to fair value. Our historical results have been adjusted to reflect the impact of this change in methodology. The
cumulative impact from 2005-2014 is an increase in accumulated other comprehensive loss and a decrease in the accumulated deficit of $27
million ($17 million, net of tax), $24 million ($15 million, net of tax) of which has been deemed to be due to the change in accounting principle, and
$3 million ($2 million, net of tax) is attributable to the correction of an error. The impact of the change in accounting principle was a $4 million
increase to accumulated deficit and a corresponding reduction to accumulated other comprehensive loss as of January 1, 2012 (net of tax), while
the impact of the error correction was a $2 million decrease to accumulated deficit and increase to accumulated other comprehensive loss as of
January 1, 2012 (net of tax). In 2014, based on fair value (the new method), we recorded net periodic pension expense of $12 million. Had the
market-related value been utilized, we would have recorded net periodic pension expense of $26 million. This change in methodology increases the
impact of market volatility. This risk is mitigated in part by the plan changes discussed below. See Note 7, "Employee Retirement Benefits" for
more details on the impact of the change in accounting principle on our financial statements.
Effective December 31, 2014, we amended the Hertz Retirement Plan to permanently discontinue future benefit accruals and participation under
the plan for non-union employees. We anticipate that, while compensation credits will no longer be provided under the Hertz Retirement Plan after
2014 for affected participants, interest credits will continue to be credited on existing participant account balances under the plan until benefits are
distributed and service will continue to be recognized for vesting and retirement eligibility requirements.
In connection with the freezing of the Hertz Retirement Plan, we plan to increase employer contributions under our qualified 401(k) savings plan
(the “401(k) Plan”). Effective January 1, 2015, eligible participants under the 401(k) Plan will receive a matching employer contribution to their
401(k) Plan account equal to (i) 100% of the first 3% of employee contributions made by such participant and (ii) 50% of the next 2% of employee
contributions, with the total amount of such matching employer contribution to be completely vested, subject to applicable limits under the United
States Internal Revenue Code. Certain eligible participants under the 401(k) Plan will also receive additional employer contribution amounts to their
401(k) Plan account depending on their years of service and age.
Effective January 1, 2014, the Hertz Retirement Plan was amended to provide a maximum annual compensation credit equal to 5% of eligible
compensation paid to all plan members who are hired or rehired before January 1, 2014, unless as of December 31, 2013 the member has at least
120 months of continuous service, in which case the member continues with an annual credit of 6.5%. All Hertz employees who are hired on or
after January 1, 2014 and Dollar Thrifty employees who become plan members on or after January 1, 2014 were eligible for a flat 3% annual
compensation credit, regardless of the member's number of months of continuous service.
See Note 7, "Employee Retirement Benefits" to the Notes to our consolidated financial statements included in this Annual Report under the
caption Item 8, "Financial Statements and Supplementary Data.” For a discussion of the risks associated with our pension plans, see Item 1A,
"Risk Factors” in this Annual Report.
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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