Retirement and Benefit Plans

12 Months Ended

Dec. 31, 2012

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Retirement and Benefit Plans

Retirement and Benefit Plans

Substantially all full-time salaried and hourly domestic employees are included in the Invacare Retirement Savings Plan sponsored by the company. The company makes matching cash contributions up to 66.7% of employees’ contributions up to 3% of compensation. The company also makes quarterly contributions to this Plan equal to a percentage of qualified wages as determined by resolution of the Compensation and Management Development Committee of the Board of Directors. In 2012 quarterly contributions were made at 1% of qualified wages per a July 1, 2011 resolution of the Compensation and Management Development Committee of the Board of Directors in which the contribution percentage was reduced from 4% to 1% of qualified wages. The company may make discretionary contributions to the domestic plans based on an annual resolution of the Board of Directors. Contribution expense for the Invacare Retirement Savings Plan in 2012, 2011 and 2010 was $3,620,000, $5,599,000 and $7,153,000, respectively.

The company sponsors a Deferred Compensation Plus Plan covering certain employees, which provides for elective deferrals and the company retirement deferrals so that the total retirement deferrals equal amounts that would have contributed to the company’s principal retirement plans if it were not for limitations imposed by income tax regulations.

The company also sponsors a non-qualified defined benefit Supplemental Executive Retirement Plan (SERP) for certain key executives. Effective December 31, 2008, the SERP was amended, in part to comply with IRS Section 409A. As a result of the amendment, the plan became a defined benefit cash balance plan for the non-retired participants and thus, future payments by the company will be made based upon a cash balance formula with interest credited at a rate determined annually by the Compensation and Management Development Committee of the Board of Directors. In 2012 interest was credited at 0% in accordance with a July 1, 2011 resolution of the Compensation and Management Development Committee of the Board of Directors in which the interest crediting rate was reduced from 6% per annum to 0% effective as of for active participants in the SERP. The plan continues to be unfunded with individual hypothetical accounts maintained for each participant.

The SERP projected benefit obligation related to this unfunded plan was $27,851,000 and $27,879,000 at December 31, 2012 and 2011, respectively, and the accumulated benefit obligation was $27,851,000 and $27,879,000 at December 31, 2012 and 2011, respectively. The projected benefit obligations were calculated using an assumed future salary increase of 4% at both December 31, 2012 and 2011. The assumed discount rate, relevant for three participants unaffected by plan conversion was 4.05% and 4.4% for 2012 and 2011, respectively, based upon the discount rate on high-quality fixed-income investments without adjustment. The retirement age was 65 for both 2012 and 2011. Expense for the plan in 2012, 2011 and 2010 was $370,000, $1,765,000, and $2,176,000, respectively of which $187,000, $904,000, and $1,535,000 was related to interest cost with the remaining portion related to service costs, prior service costs and other gains/losses. Benefit payments in 2012, 2011 and 2010 were $398,000, $410,000 and $1,592,000, respectively. In 2011, benefit payments included a lump sum distribution to a plan participant.

In 2005, the company began sponsoring a Death Benefit Only Plan (DBO) for certain key executives that provides a benefit equal to three times the participant’s final target earnings should the participant’s death occur while an employee and a benefit equal to one times the participant’s final earnings upon the participant’s death after normal retirement or post-employment. Expense for the plan in 2012, 2011 and 2010 was $509,000, $536,000, and $399,000, respectively, of which $412,000, $449,000, and $235,000 was related to service cost and accrual adjustments with the remaining portion related to interest costs. There were no benefit payments in 2012, 2011 or 2010.

In conjunction with these non-qualified and unfunded U.S. defined benefit plans, the company has invested in life insurance policies related to certain employees to help satisfy these future obligations.

In Europe, the company maintains defined benefit plans in Switzerland and in the Netherlands. In Switzerland, a statutory pension plan is maintained with a private insurance company and, in accordance with Swiss law, the plan functions as a defined contribution plan whereby employee and employer contributions are defined as a percentage of individual salary depending on the age of the employee and a guaranteed interest rate, which is annually defined by the Swiss Pension Fund. Under U.S. GAAP, the plan is treated as a defined benefit plan. In the Netherlands, the statutory pension plan contains benefits and provisions for an Old Age Pension benefit that starts at age 65 and is payable until death and a Survivors Pension that starts immediately after the death of the insured and is payable until the death of the surviving spouse. The plan also provides for a Temporary Survivors Pension, an Orphans Pension and Premium Waiver During Disability. Under U.S. GAAP the plan is treated as a defined benefit plan. Income for the plans was $105,000 in 2012 and $215,000 in 2011 versus expense of $23,000 in 2010.

Accumulated other comprehensive income associated with the SERP, Swiss pension plan, Netherlands pension plan and DBO was $5,613,000 and $4,781,000 as of December 31, 2012 and 2011, respectively for a net change of $832,000 with $744,000 in net periodic benefit costs recognized during the year.