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Deferred Compensation and Retirement Plans
 12 Months Ended
Apr. 30, 2012
Deferred Compensation and Retirement Plans
6. Deferred Compensation and Retirement Plans

The Company has several deferred compensation and retirement plans for eligible consultants and vice-presidents that provide defined benefits to participants based on the deferral of current compensation or contributions made by the Company subject to vesting and retirement or termination provisions.

The total benefit obligations for these plans were as follows:

 

     Year Ended April 30,  
     2012     2011  
     (in thousands)  

Deferred compensation plans

    $ 78,479      $ 70,319   

Pension plan

      4,214        3,952   

International retirement plans

      2,776        3,153   

Executive Capital Accumulation Plan

      71,134        67,214   
  

 

 

    

 

 

  

Total benefit obligations

      156,603        144,638   

Less: current portion of benefit obligation

      (7,614 )      (5,080 ) 
  

 

 

    

 

 

  

Non-current benefit obligation

    $ 148,989      $ 139,558   
  

 

 

    

 

 

  

 

Deferred Compensation Plans

The Enhanced Wealth Accumulation Plan (“EWAP”) was established in fiscal 1994, which replaced the Wealth Accumulation Plan (“WAP”). Certain vice presidents elected to participate in a “deferral unit” that required the participant to contribute a portion of their compensation for an eight year period, or in some cases, make an after tax contribution, in return for defined benefit payments from the Company over a fifteen year period generally at retirement age of 65 or later. Participants were able to acquire additional “deferral units” every five years. Vice presidents who did not choose to roll over their WAP units into the EWAP continue to be covered under the earlier version in which participants generally vest and commence receipt of benefit payments at retirement age of 65. In June 2003, the Company amended the EWAP and WAP plans, so as not to allow new participants or the purchase of additional deferral units by existing participants.

The Company also maintains a Senior Executive Incentive Plan (“SEIP”) for participants approved by the Board. Generally, to be eligible, the vice president must be participating in the EWAP. Participation in the SEIP required the participant to contribute a portion of their compensation during a four-year period, or in some cases make an after tax contribution, in return for a defined benefit paid by the Company generally over a fifteen year period after ten years of participation in the plan or such later date as elected by the participant. In June 2003, the Company amended the SEIP plan, so as not to allow new participants or the purchase of additional deferral units by existing participants.

Pension Plan

The Company has a defined benefit pension plan, referred to as the Worldwide Executive Benefit (“WEB”), covering certain executives in the U.S. and foreign countries. The WEB is designed to integrate with government sponsored and local benefits and provide a monthly benefit to vice presidents upon retirement from the Company. Each year a plan participant accrued and was fully vested in one-twentieth of the targeted benefits expressed as a percentage set by the Company for that year. Upon retirement, a participant receives a monthly benefit payment equal to the sum of the percentages accrued over such participant’s term of employment, up to a maximum of 20 years, multiplied by the participant’s highest average monthly salary during the 36 consecutive months in the final 72 months of active full-time employment through June 2003. In June 2003, the Company froze the WEB, so as to not allow new participants, future accruals and future salary increases.

Accounting for Deferred Compensation and Pension Plans

During fiscal 2012, due to the change in the discount rate from 4.94% to 3.79%, the Company recorded an increase in deferred compensation and pension plan liabilities of $8.8 million, a decrease in accumulated other comprehensive income of $5.6 million and a net increase of $3.2 million in deferred income tax assets.

During fiscal 2011, due to the change in the discount rate from 5.61% to 4.94%, the Company recorded an increase in deferred compensation and pension plan liabilities of $6.7 million, a decrease in accumulated other comprehensive income of $4.1 million and a net increase of $2.6 million in deferred income tax assets.

 

Deferred Compensation Plan

The following tables reconcile the benefit obligation for the deferred compensation plans:

 

     Year Ended April 30,  
     2012     2011     2010  
     (in thousands)  

Change in benefit obligation:

       

Benefit obligation, beginning of year

    $ 70,319      $ 64,890      $ 52,149   

Service cost

      —        137        339   

Interest cost

      3,346        3,495        3,557   

Plan participants’ contributions with interest

      —        65        194   

Actuarial loss

      9,885        6,764        12,848   

Benefits paid

      (5,071 )      (5,032 )      (4,197 ) 
  

 

 

    

 

 

    

 

 

  

Benefit obligation, end of year

      78,479        70,319        64,890   

Less: current portion of benefit obligation

      (4,959 )      (3,682 )      (4,000 ) 
  

 

 

    

 

 

    

 

 

  

Non-current benefit obligation

    $ 73,520      $ 66,637      $ 60,890   
  

 

 

    

 

 

    

 

 

  

The components of net periodic benefits costs are as follows:

 

     Year Ended April 30,  
     2012      2011      2010  
     (in thousands)  

Service cost

    $ —       $ 137       $ 339   

Interest cost

      3,346         3,495         3,557   

Amortization of actuarial loss

      1,374         422         —   
  

 

 

     

 

 

     

 

 

  

Net periodic benefit cost

    $ 4,720       $ 4,054       $ 3,896   
  

 

 

     

 

 

     

 

 

  

The weighted-average assumptions used in calculating the benefit obligations were as follows:

 

     Year Ended April 30,  
     2012     2011     2010  

Discount rate, beginning of year

      4.94 %      5.61 %      7.10 % 

Discount rate, end of year

      3.79 %      4.94 %      5.61 % 

Rate of compensation increase

      0.00 %      0.00 %      0.00 % 

 

Pension Plan

The following tables reconcile the benefit obligation for the pension plan:

 

     Year Ended April 30,  
     2012     2011     2010  
     (in thousands)  

Change in benefit obligation:

       

Benefit obligation, beginning of year

    $ 3,952      $ 3,630      $ 3,125   

Interest cost

      189        197        214   

Actuarial loss

      289        307        503   

Benefits paid

      (216 )      (182 )      (212 ) 
  

 

 

    

 

 

    

 

 

  

Benefit obligation, end of year

      4,214        3,952        3,630   

Less: current portion of benefit obligation

      (212 )      (137 )      (147 ) 
  

 

 

    

 

 

    

 

 

  

Non-current benefit obligation

    $ 4,002      $ 3,815      $ 3,483   
  

 

 

    

 

 

    

 

 

  

The components of net periodic benefits costs are as follows:

 

     Year Ended April 30,  
     2012      2011     2010  
     (in thousands)  

Interest cost

    $ 189       $ 197      $ 214   

Amortization of actuarial loss (gain)

      47         (2 )      (78 ) 
  

 

 

     

 

 

    

 

 

  

Net periodic benefit cost

    $ 236       $ 195      $ 136   
  

 

 

     

 

 

    

 

 

  

The weighted-average assumptions used in calculating the benefit obligations were as follows:

 

     Year Ended April 30,  
     2012     2011     2010  

Discount rate, beginning of year

      4.94 %      5.61 %      7.10 % 

Discount rate, end of year

      3.79 %      4.94 %      5.61 % 

Rate of compensation increase

      0.00 %      0.00 %      0.00 % 

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as follows:

 

Year Ending April 30,

    Deferred
Compensation
Plans		      Pension
Benefits		  
     (in thousands)  

2013

    $ 5,601       $ 275   

2014

      6,134         308   

2015

      6,067         314   

2016

      6,075         310   

2017

      5,997         317   

2018-2022

      28,276         1,334   

 

International Retirement Plans

The Company also maintains various retirement plans and other miscellaneous deferred compensation arrangements in ten foreign jurisdictions. The aggregate of the long-term benefit obligation accrued at April 30, 2012 and 2011 is $2.8 million for 189 participants and $3.2 million for 155 participants, respectively. The Company’s contribution to these plans was $0.5 million and $0.9 million in fiscal 2012 and 2011, respectively.

Executive Capital Accumulation Plan

The Company has an ECAP, which is intended to provide certain employees an opportunity to defer salary and/or bonus on a pre-tax basis or make an after-tax contribution. In addition, the Company, under its incentive plans, makes discretionary contributions into the ECAP and such contributions are granted to key employees annually based on the employee’s performance. In addition, certain key management may receive Company ECAP contributions upon commencement of employment. Participants generally vest in Company contributions over a four year period. Participants have the ability to allocate their deferrals among a number of investment options and may receive their benefits at termination, retirement or “in service” either in a lump sum or in quarterly installments over five, ten or fifteen years. The Company operates two similar plans in Asia Pacific and Canada.

The Company made contributions to the ECAP during fiscal 2012, 2011 and 2010, of $15.8 million, $0.4 million and $1.9 million, respectively. The Company may make additional ECAP contributions in fiscal 2013 if key employees are hired.

The ECAP is accounted for whereby the changes in the fair value of the vested amounts owed to the participants are adjusted with a corresponding charge (or credit) to compensation and benefits costs. During fiscal 2012, 2011, and 2010, deferred compensation liability increased; therefore, the Company recognized compensation expenses of $0.9 million, $6.7 million and $8.9 million, respectively.

Changes in the ECAP liability were as follows:

 

     Year Ended April 30,  
     2012     2011  
     (in thousands)  

Balance, beginning of year

    $ 67,214      $ 57,871   

Employee contributions

      3,483        2,403   

Amortization of employer contributions

      7,423        6,525   

Gain on investment

      884        6,667   

Employee distributions

      (7,661 )      (6,567 ) 

Exchange rate translations

      (209 )      315   
  

 

 

    

 

 

  

Balance, end of year

      71,134        67,214   

Less: current portion

      (2,443 )      (1,261 ) 
  

 

 

    

 

 

  

Non-current portion, end of year

    $ 68,691      $ 65,953   
  

 

 

    

 

 

  

As of April 30, 2012 and 2011, the unamortized portion of the Company contributions to the ECAP was $11.5 million and $4.9 million, respectively.

 

Defined Contribution Plan

The Company has a defined contribution plan (“401(k) plan”) for eligible employees. Participants may contribute up to 50% of their base compensation as defined in the plan agreement. In addition, the Company has the option to make matching contributions. The Company did not make the matching contribution for fiscal 2012 and fiscal 2010 but did make a $1.2 million matching contribution for fiscal 2011.

Company Owned Life Insurance

The Company purchased COLI contracts insuring employees eligible to participate in the deferred compensation and pension plans as a means of funding benefits under such plans. The gross CSV of these contracts of $151.1 million and $143.9 million is offset by outstanding policy loans of $73.3 million and $72.9 million in the accompanying consolidated balance sheets as of April 30, 2012 and 2011, respectively. Total death benefits payable, net of loans under COLI contracts, were $202.9 million and $195.7 million at April 30, 2012 and 2011, respectively. Management intends to use the future death benefits from these insurance contracts to fund the deferred compensation and pension arrangements; however, there may not be a direct correlation between the timing of the future cash receipts and disbursements under these arrangements. The market value of the underlying COLI investments increased by $6.3 million and $7.2 million during the year ended April 30, 2012 and 2011, respectively, recorded as a decrease in compensation and benefits expense. In addition, certain policies are held in trusts to provide additional benefit security for the deferred compensation and pension plans, excluding the WEB. As of April 30, 2012, COLI contracts with a net CSV of $60.9 million and death benefits payable, net of loans, of $117.2 million were held in trust for these purposes.