Invacare 2015 Annual Report Download - page 97

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-25
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. The company also makes quarterly contributions to this Plan equal to a percentage of qualified wages. In 2015,
quarterly contributions were made at 1% of qualified wages. The company may make discretionary contributions to the domestic
plans based on an annual resolution of the Board of Directors. Contribution expense for the Invacare Retirement Savings Plan in
2015, 2014 and 2013 was $2,573,000, $2,698,000 and $3,126,000, respectively.
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 limitations imposed by income tax regulations.
The company sponsors a non-qualified defined benefit Supplemental Executive Retirement Plan (SERP) for certain key
executives. Effective December 31, 2008, the SERP was amended, in part to comply with IRS Section 409A. As a result of the
amendment, the plan became a defined benefit cash balance plan for the non-retired participants and thus, future payments by the
company will be made based upon a cash balance formula with interest credited at a rate determined annually by the Compensation
and Management Development Committee of the Board of Directors. In 2015 interest was credited at 0% for active participants
in the SERP in accordance with a July 1, 2011 resolution of the Compensation and Management Development Committee of the
Board of Directors. The plan continues to be unfunded with individual hypothetical accounts maintained for each participant.
The SERP projected benefit obligation related to this unfunded plan was $6,209,000 and $27,548,000 at December 31, 2015
and 2014, respectively, and the accumulated benefit obligation was $6,209,000 and $27,548,000 at December 31, 2015 and 2014,
respectively. The projected benefit obligations were calculated using an assumed future salary increase of 4% at both December 31,
2015 and 2014. The assumed discount rate, relevant for three participants unaffected by the plan conversion was 4.34% and 3.95%
for 2015 and 2014, respectively, based upon the discount rate on high-quality fixed-income investments without adjustment. The
retirement age was 67 for 2015 and 67 for 2014. Expense for the plan in 2015 was $142,000 compared to expense of $539,000 in
2014 and income of $14,000 in 2013. The expense was comprised of interest income of $42,000 in 2015, interest expense of
$377,000 in 2014 and income of $236,000 in 2013 with the remaining portion related to service costs, prior service costs and other
gains/losses. Benefit payments in 2015, 2014 and 2013 were $21,517,000, $394,000 and $398,000, respectively.
The company also sponsors a Death Benefit Only Plan (DBO) for certain key executives that provides a benefit equal to
three times the participant’s final target earnings should the participant’s death occur while an employee and a benefit equal to one
times the participant’s final earnings upon the participant’s death after normal retirement or if a participant dies after his or her
employment with the company is terminated following a change in control of the company. Expense for the plan in 2015 was
$103,000 compared to expense of $808,000 and income of $259,000 in 2014 and 2013, respectively. The expense was comprised
of service and accrual adjustment expense of $28,000 in 2015, expense of $692,000 in 2014 and income of $364,000 in 2013 with
the remaining portion related to interest costs in each year, respectively. There were no benefit payments in 2015, 2014 or 2013.
In conjunction with these non-qualified and unfunded U.S. defined benefit plans, the company has invested in life insurance
policies related to certain employees to help satisfy these obligations of which $11,902,000 and $21,338,000 in life insurance
policies were sold during 2015 and 2014, respectively, to fund payments related to the retirement of certain executive officers of
the company.
In Europe, the company maintains two defined benefit plans in Switzerland. In Switzerland, a statutory pension plan is
maintained with a private insurance company and, in accordance with Swiss law, the plan functions as a defined contribution plan
whereby employee and employer contributions are defined as a percentage of individual salary depending on the age of the employee
and a guaranteed interest rate, which is annually defined by the Swiss Pension Fund. Under U.S. GAAP, the plans are treated as
a defined benefit plans. During 2014, the company terminated its plan in the Netherlands which contained benefits and provisions
for an Old Age Pension benefit that started at age 65 and were payable until death and a Survivors Pension that started immediately
after the death of the insured and is payable until the death of the surviving spouse. Under U.S. GAAP the plan was treated as a
defined benefit plan. Income for both the Switzerland and Netherlands plans was $19,000, $220,000 and $205,000 in 2015, 2014
and 2013, respectively.
Accumulated other comprehensive income associated with the SERP, DBO, Swiss and Netherlands pension plans combined
was $9,757,000 and $7,601,000 as of December 31, 2015 and 2014, respectively for a net change of $2,156,000 with $226,000
in net periodic benefit income recognized during the year.