Memorex 2009 Annual Report Download - page 73

practice, at a minimum, to fund amounts sufficient to meet the requirements set forth in applicable benefits laws and local
tax laws. From time to time, we contribute additional amounts, as we deem appropriate.
In connection with actions taken under our 2008 and 2007 cost reduction restructuring program, the number of
employees accumulating benefits under our pension plan in the United States was reduced significantly, which resulted in
the recognition of a curtailment loss of $1.2 million and $1.4 million in 2008 and 2007, respectively, included as a
component of restructuring and other in the Consolidated Statements of Operations. Further, as required by GAAP, we
remeasured the funded status of our United States plan as of the date of the curtailments.
Participants in the U.S. pension plan have the option of receiving cash lump sum payments when exiting the plan,
which a number of participants that exited the pension plan elected to receive. In accordance with authoritative guidance
for accounting for settlements of defined benefit pension plans and for termination benefits, once lump sum payments in
2009 exceeded our 2008 service and interest costs, a partial settlement event occurred and we recognized a pro rata
portion of the previously unrecognized net actuarial loss. As a result, we incurred partial settlement losses of $7.1 million,
$4.5 million and $1.0 million in 2009, 2008 and 2007 respectively, which were recorded in restructuring and other expense
on our Consolidated Statements of Operations. Further, as required by GAAP, we remeasured the funded status of our
United States plan as of the date of the settlements.
In connection with actions taken under our previously announced restructuring programs, we fully terminated a
defined benefit pension plan in Canada during the year ended December 31, 2009. We purchased annuities to fully fund
our obligation and removed the Company from future liability. A full settlement event occurred and, therefore, in accordance
with GAAP guidance related to pension settlement accounting, we recognized the previously unrecognized net actuarial
position and incurred a settlement loss of $4.6 million, which is included in restructuring and other expense on our
Consolidated Statement of Operations.
For the U.S. pension plan, employees who have completed three years or more of service, including service with 3M
Company before July 1, 1996, or who have reached age 65, are entitled to pension benefits beginning at normal retirement
age (65) based primarily on employees’ pay credits and interest credits. Through December 31, 2009, pay credits were
made to each eligible participant’s account equal to six percent of that participant’s eligible earnings for the year. In
addition, a monthly interest credit was made to each eligible participant’s account based on the participant’s account
balance as of the last day of the preceding year. The interest credit rate is established annually and is based on the
interest rate of certain low-risk debt instruments. The interest credit rate was four percent for 2009. Beginning January 1,
2010, pay credits will be reduced to three percent of each participant’s eligible earnings for the year. In accordance with
the annual update process, the interest credit rate will be 4.31 percent for 2010. Further, effective January 1, 2010, the
U.S. pension plan has been amended to exclude new hires and rehires from participating in the plan.
The U.S. pension plan permits four payment options: a lump-sum option, a life income option, a survivor option or a
period certain option. If a participant terminates prior to completing three years of service, the participant forfeits the right
to receive benefits under the pension plan unless the participant has reached the age of 65 at the time of termination.
The assets of our pension plans are valued at fair value using quoted market prices. Investments, in general, are
subject to various risks, including credit, interest and overall market volatility risks. During 2008, the United States equity
markets had a significant decline in value and, consequently, our plan assets decreased from December 31, 2007. During
2009, the equity markets have improved, but remain somewhat volatile.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)