Visa 2007 Annual Report Download - page 131

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 12—Pension, Postretirement and Other Benefits
The Company sponsors various qualified and non-qualified defined benefit pension plans, which provide for retirement benefits for Visa U.S.A. and
Visa International employees residing in the United States. The benefits are based on years of service, age and the employee's final three years of earnings;
and for employees hired after September 30, 2002, the employee's final five years of earnings. Pension plan expense is accrued as actuarially determined
under the Projected Unit Credit Method. The funding policy is to contribute annually no less than the minimum and no more than the maximum amount that
can be deducted for federal income tax purposes. The pension plan assets are invested in pooled and mutual funds.
The Company also sponsors a postretirement benefit plan that provides medical benefits for Visa U.S.A. and Visa International retirees and dependents
who meet minimum age and service requirements. Benefits are provided from retirement date until age sixty-five. Retirees must contribute on a monthly basis
for the same coverage that is generally available to active employees and their dependents. The Company's contributions are funded on a current basis.
Pension Plan Amendment
In August 2007, the Company approved changes to the pension plan and began transitioning from a traditional final average pay formula to a cash
balance benefits formula for determining pension benefits, effective January 1, 2008. The change to a cash balance benefit formula will take effect
immediately for employees hired or rehired after December 31, 2007. However, for employees hired before January 1, 2008 (and not rehired thereafter), the
current retirement plan benefit formula will be grandfathered for a three-year period. Grandfathered employees will continue to accrue benefits under their
current retirement plan benefit formula and their accrued benefits at December 31, 2010 (the last day of the grandfather period), or the date they terminate
employment, if earlier, will be preserved. After that date, employees will not accrue any additional benefits under the current retirement plan benefit formulas
and all future benefit accruals will be under the cash balance benefit formula. The cash balance formula will provide contributions at a rate of 6% of eligible
compensation. The plan amendment reduced the total plan benefit obligation by $123.9 million and reduced the fiscal 2007 net periodic benefit cost by $2.8
million, which represents 1/12th of the anticipated annual cost reduction since the amendment took place on September 1, 2007. The Visa U.S.A. share of the
reduction to the total plan benefit obligation and fiscal 2007 net periodic pension cost was $96.6 million and $2.2 million, respectively. The plan amendment
did not impact the postretirement benefit plan.
Pension Plan Settlements
At September 30, 2007 and 2006, excess pension plan obligations were settled totaling $0.9 million and $5.3 million, respectively. In connection with
excess pension plan obligation settlements, the Company recognizes previously unrecognized net losses through settlement accounting as defined by SFAS
No. 88, Employers' Accounting for Settlement and Curtailment of Defined Benefit Pension Plans and for Termination Benefits. There were no settlement
losses recognized in fiscal 2007 and $3.1 million and $12.5 million in fiscal 2006 and 2005, respectively. Visa U.S.A.'s share of pension plan settlement
losses was $1.8 million and $8.9 million in fiscal 2006 and 2005, respectively. The net settlement losses on plan assets are recorded in personnel expense in
the Company's consolidated statements of operations.
Adoption of New Accounting Standard
At September 30, 2007, the Company adopted the provisions of Statement of Financial Accounting Standard No. 158 (SFAS 158), Employers'
Accounting for Defined Benefit Pension and Other Postretirement
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