New Accounting Pronouncements
No recent accounting pronouncements or changes in accounting pronouncements have occurred since those discussed in the Plan’s Annual Report on Form 11-K for the year ended December 31, 2021, that are of a material significance, or have potential material significance, to the Plan.
NOTE 2. DESCRIPTION OF THE PLAN
General
The following description of the Plan is provided for general information only. Participants should refer to the plan agreement for a complete description of the Plan’s provisions.
The Plan is a defined contribution pension plan providing retirement benefits to substantially all non-union employees of the Company who have attained age 21. The Plan is sponsored by the Company and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Please refer to the Plan agreement for complete information.
Trust Services
On October 1, 2022, the trustee function of the Plan changed from being performed by T. Rowe Price Company (“T. Rowe Price”) to Fidelity Management Trust Company (“Fidelity”). As of December 31, 2022 and 2021, the Plan investments were held by Fidelity and T. Rowe Price, respectively, in various funds. The trustee has authority for the purchase and sale of investments and makes payments from the Plan based on participant direction, subject to certain restrictions as specified in the trust agreement, the Plan document and ERISA.
Contributions
Participants may contribute up to 100% of their annual eligible compensation, as defined in the Plan document, to the Plan up to $20.5 thousand and $19.5 thousand for the years ended December 31, 2022 and 2021, respectively. Participants 50 years of age or older may contribute up to $27 thousand and $26 thousand of their annual eligible compensation, as defined in the Plan document, to the Plan for the years ended December 31, 2022 and 2021, respectively. Eligible team members are automatically enrolled in the Plan at a contribution rate of 2% of their annual eligible compensation. Eligible team members may choose not to participate by declaring their intentions to do so prior to their initial enrollment date.
Eligible participants may make permitted voluntary rollover contributions to the Plan, subject to Plan requirements.
The Plan provides for a Company match of 100% of the first 2% of each participant’s voluntary contribution and 25% of the next 4% of each participant’s voluntary contribution. A participant generally must be employed on December 31 to receive that year’s Company matching contribution, with the matching contribution funded annually at the beginning of the subsequent year following the year in which the matching contribution was earned. Additionally, the Company may make discretionary profit sharing contributions to the Plan annually, as determined by its Board of Directors, up to a maximum aggregate Company contribution of 25% of the participants’ annual eligible compensation. Participants are eligible for these discretionary contributions after at least 1,000 hours of service in a 12-consecutive month period of employment and generally must be employed on the last day of the Plan year. During the years ended December 31, 2022 or 2021, the Company did not make any discretionary contributions to the Plan. Participants can elect to allocate their contributions, as well as the employer contributions, to various equity, bond, fixed income or target date funds, O’Reilly Automotive, Inc. common stock, or a combination thereof.
Vesting
Participants are immediately vested in all voluntary contributions and actual earnings on these contributions. Employer contributions, and earnings on employer contributions, vest based on years of service with the Company at a rate of 20% per year from years two through six and are 100% vested after six years of service. In addition, upon a participant’s death or disability, as defined in the Plan document, all employer contributions, and earnings on employer contributions, become 100% vested. Effective January 1, 2023, employer contributions, and earnings on employer contributions, vest based on years of service with the Company at a rate of 33% per year from years two through four and are 100% vested after four years of service.
Participant Accounts
Each participant’s account is credited with the participant’s contribution and actual earnings and with an allocation of the Company’s contribution and actual Plan earnings. Allocations of Company matching contributions are based on participant contributions and allocation of Company discretionary contributions are based on participant compensation. Allocations of Plan earnings are based on participants’ account balances. The non-vested portions of terminated participants’ account balances are transferred to a Plan controlled forfeiture account. Each participant account is also charged with an allocation of administrative fees and investment fees.