Pier 1 2008 Annual Report Download - page 125

earnings). Additionally, Pier 1 Imports recognizes the value of the past and present services of
employees participating in the BRP by making matching contributions to employee deferrals plus
paying interest earnings on the deferral and match amounts. Pier 1 Imports’ matching contribution is
(i) 100% of the first one percent of the participant’s compensation deferral, and (ii) 50% of the next
four percent of the participant’s compensation deferral.
Each participant’s deferral and matched amounts are credited at least quarterly with an amount of
interest at an annual rate equal to Moody’s Corporate Bond Index plus 1%. Over the last three fiscal
years, the annual interest rates have ranged from 6.63% to 7.13%. During fiscal 2008, the interest rates
were 7.05% through December 31, 2007 and 7.03% January 1, 2008 through March 1, 2008.
Participants’ accounts are paid to them upon separation from Pier 1 Imports in a lump-sum amount
unless the participant has previously elected and qualified for a five-year installment form of payment.
Participants may also elect an in-service lump-sum distribution with a 10% penalty for early
withdrawal. Participants’ deferral amounts and the interest earned on those amounts are fully vested.
No loans are permitted. Matching contributions and the interest earned on those contributions are
subject to the same vesting requirements as Pier 1 Imports’ 401(k) retirement plan regardless of
whether the participant is actually participating in the 401(k) plan. The 401(k) vesting schedule is 20%
per year of service (as defined in the plan) beginning with two years of service. Participants are fully
vested in Pier 1 Imports matching contributions plus earnings after six years of service with Pier 1
Imports.
Effective December 31, 2004, the BRP was closed to further contributions by participants. The plan
was renamed the BRP I and Pier 1 Imports offered after that date the BRP II plan described below.
Only vested account balances remain in the BRP I along with the interest continuing to be earned on
those amounts.
•Pier 1 Imports Benefit Restoration Plan II — All unvested BRP I amounts were transferred to the Pier 1
Imports BRP II. The BRP II has the same purpose as the BRP I, but was adopted to separate the
portion of the BRP that became subject to new deferred compensation taxation laws effective January 1,
2005 generally referred to as 409A.
BRP II participants may defer pre-tax amounts of up to 20% of their compensation (generally W-2
earnings). Participants’ contributions and the interest earned on those contributions are fully vested. No
loans are permitted. Pier 1 Imports’ matching contribution is (i) 100% of the first one percent of the
participant’s compensation deferral, and (ii) 50% of the next four percent of the participant’s
compensation deferral. Matching contributions and the interest earned on those contributions are
subject to the same vesting requirements as Pier 1 Imports’ 401(k) retirement plan regardless of
whether the participant is actually participating in the 401(k) plan. The 401(k) vesting schedule is 20%
per year of service (as defined in the plan) beginning with two years of service. Participants are fully
vested in Pier 1 Imports’ matching contributions plus earnings after six years of service with Pier 1
Imports.
Each participant’s deferral amount plus the Pier 1 Imports match is credited at least quarterly with an
amount of interest at an annual rate equal to Moody’s Corporate Bond Index plus 1%. Over the last
three fiscal years, the annual interest rates have ranged from 6.63% to 7.13%. During fiscal 2008, the
interest rates were 7.05% through December 31, 2007 and 7.03% January 1, 2008 through March 1,
2008. The BRP II allows for an in-service lump-sum distribution for an unforeseen emergency. Unless
participants elect to have their account balance paid out to them in five annual installments, then upon
separation from Pier 1 Imports their current balance is paid out to them in lump-sum distribution,
subject to delay as required by 409A.
Trusts have been established for the purpose of setting aside funds to be used to settle obligations under
the benefit restoration plans. The trusts assets are consolidated in Pier 1 Imports’ financial statements and
consist of interest yielding investments aggregating $1,459,000 at March 1, 2008. The trusts also own and are
the beneficiaries of a number of insurance policies on the lives of current and past key executives. At March 1,
2008, the cash surrender value of these policies was $7,187,000. These investments are restricted and may
44