Benefit Plans

The Company has two non-contributory defined benefit pension plans covering certain of the Company’s executives. Retirement benefits are based on years of service, employees’ average compensation for the last five years prior to retirement and social security benefits. Currently, the plans are not funded. The Company purchased and is the beneficiary of life insurance policies for certain participants enrolled in the plans. There were no significant transactions between the employer or related parties and the plan during the period.

As of December 31, 2012, the Company had a non-qualified deferred compensation agreement with its Chief Executive Officer (“CEO”). In August, 2012, the CEO's agreement was amended to eliminate the tax gross-up provision which was previously applicable to his lump sum retirement payment. The current agreement provides for a lump sum payment upon retirement, no sooner than age 55. As of December 31, 2012, the CEO had reached age 55 and was eligible to receive the payment upon retirement. If the Company’s CEO had retired as of December 31, 2012, the Company would have had to pay him $6.6 million. During the fiscal year ended January 2, 2011, the Company paid a former executive $4.4 million, including an income tax gross up of $1.6 million, in discounted retirement benefits under the executive’s non-qualified deferred compensation agreement. As a result of the payments made to this executive, the Company recognized settlement charges during the fiscal years ended January 2, 2011 of $0.3 million. The long-term portion of the pension liability as of December 31, 2012 and January 1, 2012 was $19.5 million and $16.7 million, respectively, and is included in Other Non-Current liabilities in the accompanying balance sheets.

The following table summarizes key information related to the Company’s pension plans and retirement agreements. The table illustrates the reconciliation of the beginning and ending balances of the benefit obligation showing the effects during the periods presented attributable to service cost, interest cost, plan amendments, termination benefits, actuarial gains and losses. The assumptions used in the Company’s calculation of accrued pension costs are based on market information and the Company’s historical rates for employment compensation and discount rates.



	2012			2011
Change in Projected Benefit Obligation
Projected Benefit Obligation, Beginning of Year	$	16,879		$	13,830
Service Cost	774			645
Interest Cost	787			667
Plan Amendments	569			—
Actuarial Loss	945			1,922
Benefits Paid	(193		)	(185		)
Projected Benefit Obligation, End of Year	$	19,761		$	16,879
Change in Plan Assets
Plan Assets at Fair Value, Beginning of Year	$	—		$	—
Company Contributions	193			185
Benefits Paid	(193		)	(185		)
Plan Assets at Fair Value, End of Year	$	—		$	—
Unfunded Status of the Plan	$	(19,761	)	$	(16,879	)
Amounts Recognized in Accumulated Other Comprehensive Income
Prior Service Cost	—			—
Net Loss	4,283			3,531
Total Pension Cost	$	4,283		$	3,531



	2012			2011
Components of Net Periodic Benefit Cost
Service Cost	$	774		$	645
Interest Cost	787			667
Amortization of:
Prior Service Cost	569			—
Net Loss	193			62
Net Periodic Pension Cost	$	2,323		$	1,374
Weighted Average Assumptions for Expense
Discount Rate	4.40		%	5.50		%
Expected Return on Plan Assets	N/A			N/A
Rate of Compensation Increase	4.60		%	4.29		%

The amount included in other accumulated comprehensive income as of December 31, 2012 that is expected to be recognized as a component of net periodic benefit cost in fiscal year 2013 is $0.3 million.

The benefit payments reflected in the table below represent the Company’s obligations to employees that are eligible for retirement or have already retired and are receiving deferred compensation benefits:



Fiscal Year	Pension Benefits
	(In thousands)
2013	$	6,925
2014	367
2015	380
2016	428
2017	470
Thereafter	11,191

	$	19,761

The Company also maintains the GEO Group Inc. Deferred Compensation Plan (“Deferred Compensation Plan”), a non-qualified deferred compensation plan for employees who are ineligible to participate in its qualified 401(k) plan. Eligible employees may defer a fixed percentage of their salary and the Company matches employee contributions up to a certain amount based on the employee’s years of service. Payments will be made at retirement age of 65, at termination of employment or earlier depending on the employees’ elections. Effective December 18, 2009, the Company established a rabbi trust; the purpose of which is to segregate the assets of the Deferred Compensation Plan from the Company’s cash balances. The funds in the rabbi trust are included in Restricted Cash and Investments in the accompanying consolidated balance sheets. These funds are not available to the Company for any purpose other than to fund the Deferred Compensation Plan; however, these funds may be available to the Company’s creditors in the event the Company becomes insolvent. All employee and employer contributions relative to the Deferred Compensation Plan are made directly to the rabbi trust. The Company recognized expense related to its contributions of $0.4 million, $0.3 million and $0.2 million in fiscal years 2012, 2011 and 2010 respectively. The total liability, including the current portion, for this plan at December 31, 2012 and January 1, 2012 was $7.8 million and $8.0 million, respectively. The liability, excluding the current portion of $1.1 million and $0.6 million as of December 31, 2012 and January 1, 2012, respectively, is included in other non-current liabilities in the accompanying consolidated balance sheets.