Avon 2014 Annual Report Download - page 114

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Postretirement Benefits
For 2014, the assumed rate of future increases in the per capita cost of health care benefits (the health care cost trend rate) was 8.7% for all
claims and is assumed to gradually decrease each year thereafter to 5.0% (in 2022 and beyond for our U.S. plan). A one-percentage point
change in the assumed health care cost trend rates for all postretirement plans would have the following effects:
1 Percentage
Point Increase
1 Percentage
Point Decrease
Effect on total of service and interest cost components $ .2 $ (.2)
Effect on postretirement benefit obligation 2.2 (2.0)
Postemployment Benefits
We provide postemployment benefits, which include salary continuation, severance benefits, disability benefits and continuation of health
care benefits to eligible former employees after employment but before retirement. The accrued cost for such postemployment benefits was
$26.2 at December 31, 2014 and $39.1 at December 31, 2013, and was included in employee benefit plans in the Consolidated Balance
Sheets.
Supplemental Retirement Programs
In the U.S., in addition to qualified retirement plans (i.e., the PSA and the PRA), we also maintain unfunded non-qualified plans. We offer a
non-qualified deferred compensation plan, the Avon Products, Inc. Deferred Compensation Plan (the “DCP”), for certain higher paid key
employees. The DCP is an unfunded, unsecured plan for which obligations are paid to participants out of our general assets. The DCP allows
for the deferral of up to 50% of a participant’s base salary, the deferral of up to 100% of incentive compensation bonuses, the deferral of
performance restricted stock units for certain employees (through the end of 2012 only), and the deferral of contributions that would
normally have been made to the PSA but are not deferred because the amount was in excess of U.S. Internal Revenue Code limits on
contributions to the PSA. Participants may elect to have their deferred compensation invested in one or more of three permitted investment
alternatives. Expense associated with the DCP was $1.3 in 2014, $1.2 in 2013 and $1.7 in 2012. The benefit obligation under the DCP was
$45.5 at December 31, 2014 and $57.9 at December 31, 2013 and was included in other liabilities and accrued compensation in the
Consolidated Balance Sheets.
We maintain supplemental retirement programs consisting of the Supplemental Executive Retirement Plan of Avon Products, Inc. (“SERP”)
and the Benefit Restoration Pension Plan of Avon Products, Inc. under which non-qualified supplemental pension benefits are paid to higher
paid key employees in addition to amounts received under our qualified defined benefit retirement plan, which is subject to IRS limitations
on covered compensation. The SERP has not been offered to new employees in the last six years. The annual cost of these programs has
been included in the determination of the net periodic benefit cost shown previously and amounted to $7.1 in 2014, $7.6 in 2013 and $8.4
in 2012. The benefit obligation under these programs was $32.1 at December 31, 2014 and $44.2 at December 31, 2013 and was included
in employee benefit plans and accrued compensation in the Consolidated Balance Sheets.
We also maintain a Supplemental Life Plan (“SLIP”) under which additional death benefits ranging from $.4 to $2.0 are provided to certain
active and retired officers. The SLIP has not been offered to new officers in the last five years.
We established a grantor trust to provide assets that may be used for the benefits payable under the SERP and SLIP. The trust is irrevocable
and, although subject to creditors’ claims, assets contributed to the trust can only be used to pay such benefits with certain exceptions. The
assets held in the trust are included in other assets and at December 31 consisted of the following:
2014 2013
Corporate-owned life insurance policies $ 32.2 $ 30.5
Cash and cash equivalents 1.4 .8
Total $ 33.6 $ 31.3
The assets are recorded at fair market value, except for investments in corporate-owned life insurance policies which are recorded at their
cash surrender values as of each balance sheet date, which is a proxy of fair value. Changes in the cash surrender value during the period are
recorded as a gain or loss within selling, general and administrative expenses in the Consolidated Statements of Income.