Invacare 2006 Annual Report Download - page 81

Retirement and Benefit Plans
Substantially all full-time salaried and hourly domestic employees are included in the Invacare Retirement
Savings Plan sponsored by the company. The company makes matching cash contributions up to 66.7% of
employees’ contributions up to 3% of compensation, quarterly contributions based upon 4% of qualified wages and
may make discretionary contributions to the domestic plans based on an annual resolution of the Board of Directors.
The company sponsors a Deferred Compensation Plus Plan covering certain employees, which provides for
elective deferrals and the company retirement deferrals so that the total retirement deferrals equal amounts that
would have contributed to the company’s principal retirement plans if it were not for limitation imposed by income
tax regulations. Contribution expense for the above plans in 2006, 2005 and 2004 was $5,514,000, $5,811,000, and
$5,860,000, respectively.
The company also sponsors a non-qualified defined benefit Supplemental Executive Retirement Plan (SERP)
for certain key executives. The projected benefit obligation related to this unfunded plan was $33,676,000 and
$31,071,000 at December 31, 2006 and 2005, respectively, and the accumulated benefit obligation was $20,236,000
and $15,386,000 at December 31, 2006 and 2005, respectively based upon estimated salary increases of 5%, an
assumed discount rate of 6.75% and a retirement age of 65. Expense for the plan in 2006, 2005 and 2004 was
$2,861,000, $2,439,000, and $2,278,000, respectively of which $1,407,000, $1,278,000 and $1,211,000 was related
to interest cost. Benefit payments in 2006, 2005 and 2004 were $952,000, $424,000, and $424,000, respectively.
In conjunction with these non-qualified plans, the company has invested in life insurance policies related to
certain employees to satisfy these future obligations. The current cash surrender value of these policies approx-
imates the current benefit obligations. In addition, the projected policy benefits exceed the projected benefit
obligations.
On December 31, 2006, the company adopted the recognition and disclosure provisions of FAS 158, which
required the company to recognize the funded status (i.e., the difference between the fair value of plan assets and the
projected benefit obligations) of its SERP and the Death Benefit Only (DBO) Plan in the December 31, 2006
consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive earnings, net of
tax. The incremental effects of adopting the provisions of FAS 158 on the company’s balance sheet at December 31,
2006 are presented in the following table. The adoption of FAS 158 had no effect on the company’s consolidated
statement of operations for the year ended December 31, 2006, or for any prior period presented, and it will not
effect the company’s operating results in future periods. The incremental effect of adopting FAS 158 on the
company’s balance sheet at December 31, 2006 is as follows (in thousands):
Prior to
Application of
Statement 158
Effect of
Adopting
Statement 158
As Reported
at December 31,
2006
At December 31, 2006
Accrued SERP liability ....................... $ 20,236 $ 13,440 $33,676
DBO Plan liability .......................... 461 1,500 1,961
Accumulated other comprehensive earnings ........ $114,128 $(14,940) $99,188
The SERP liability includes a current portion included in accrued expenses and the long-term portion, which is
included in other long term obligations in the company’s consolidated balance sheet. As a result of the adoption of
FAS 158, deferred federal income taxes of $5,229,000 have been recorded and a full valuation allowance has been
recorded as well.
FS-22
INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)