Pep Boys 2007 Annual Report Download - page 113

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THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 2, 2008, February 3, 2007 and January 28, 2006
(dollar amounts in thousands, except share data)
NOTE 10—BENEFIT PLANS
DEFINED BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all of its full-time
employees hired on or before February 1, 1992. Normal retirement age is 65. Pension benefits are
based on salary and years of service. The Company’s policy is to fund amounts as are necessary on an
actuarial basis to provide assets sufficient to meet the benefits to be paid to plan members in
accordance with the requirements of ERISA.
The actuarial computations are made using the ‘‘projected unit credit method.’’ Variances between
actual experience and assumptions for costs and returns on assets are amortized over the remaining
service lives of employees under the plan.
As of December 31, 1996, the Company froze the accrued benefits under the plan and active
participants became fully vested. The plan’s trustee will continue to maintain and invest plan assets and
will administer benefit payments.
The Company also has a Supplemental Executive Retirement Plan (SERP). This unfunded plan
has a defined benefit component that provides key employees designated by the Board of Directors
with retirement and death benefits. Retirement benefits are based on salary and bonuses; death
benefits are based on salary. Benefits paid to a participant under the defined pension plan are
deducted from the benefits otherwise payable under the defined benefit portion of the SERP.
On January 31, 2004, the Company amended and restated its SERP. This amendment converted
the defined benefit plan to a defined contribution plan for certain unvested participants and all future
participants. All vested participants under the defined benefits portion will continue to accrue benefits
according to the previous defined benefit formula.
The Company uses a fiscal year-end measurement date for determining benefit obligations and the
fair value of plan assets of its plans.
Pension expense includes the following:
Year ended
February 2, February 3, January 28,
2008 2007 2006
Service cost ......................................... $ 166 $ 246 $ 363
Interest cost ......................................... 3,419 3,071 3,011
Expected return on plan assets ........................... (2,320) (2,176) (2,339)
Amortization of transitional obligation ...................... 163 163 163
Amortization of prior service cost ......................... 370 360 360
Recognized actuarial loss ............................... 1,814 2,335 2,205
Net periodic benefit cost ................................ 3,612 3,999 3,763
FAS No. 88 settlement charge ............................ — — 568
Total Pension Expense ................................. $3,612 $ 3,999 $ 4,331
67
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