Postretirement Benefits

12 Months Ended

Nov. 30, 2011

Postretirement Benefits [Abstract]

Postretirement Benefits

Note 18.    Postretirement Benefits

The Company has a supplemental non-qualified, unfunded retirement plan, the KB Home Retirement Plan, effective as of July 11, 2002, pursuant to which the Company pays supplemental pension benefits to certain employees upon retirement. In connection with the plan, the Company has purchased cost recovery life insurance on the lives of certain employees. Insurance contracts associated with the plan are held by a trust, established as part of the plan to implement and carry out the provisions of the plan and to finance the benefits offered under the plan. The trust is the owner and beneficiary of such contracts. The amount of the insurance coverage is designed to provide sufficient revenues to cover all costs of the plan if assumptions made as to employment term, mortality experience, policy earnings and other factors are realized. The cash surrender value of these insurance contracts was $41.7 million at November 30, 2011 and $41.4 million at November 30, 2010.

The Company also has an unfunded death benefit plan, the KB Home Death Benefit Only Plan, implemented on November 1, 2001, for certain key management employees. In connection with the plan, the Company has purchased cost recovery life insurance on the lives of certain employees. Insurance contracts associated with the plan are held by a trust, established as part of the plan to implement and carry out the provisions of the plan and to finance the benefits offered under the plan. The trust is the owner and beneficiary of such contracts. The amount of the coverage is designed to provide sufficient revenues to cover all costs of the plan if assumptions made as to employment term, mortality experience, policy earnings and other factors are realized. The cash surrender value of these insurance contracts was $13.7 million at November 30, 2011 and $13.6 million at November 30, 2010.

The net periodic benefit cost of the Company’s postretirement benefit plans for the year ended November 30, 2011 was $5.5 million, which included service costs of $1.2 million, interest costs of $2.3 million, amortization of unrecognized loss of $.6 million and amortization of prior service costs of $1.5 million, partly offset by other income of $.1 million. The net periodic benefit cost of these plans for the year ended November 30, 2010 was $5.5 million, which included service costs of $1.2 million, interest costs of $2.2 million, amortization of unrecognized loss of $.3 million, amortization of prior service costs of $1.6 million and other costs of $.2 million. For the year ended November 30, 2009, the net periodic benefit cost of these plans was $5.6 million, which included service costs of $1.1 million, interest costs of $2.4 million, amortization of prior service costs of $1.5 million and a charge of $.8 million due to plan settlements, partly offset by other income of $.2 million. In 2009, in connection with the settlement of certain stockholder derivative litigation, the Company paid $22.2 million to its former chairman and chief executive officer with respect to supplemental, unfunded retirement plan balances. The liabilities related to the postretirement benefit plans were $53.1 million at November 30, 2011 and $44.1 million at November 30, 2010, and are included in accrued expenses and other liabilities in the consolidated balance sheets. For the years ended November 30, 2011 and 2010, the discount rates used for the plans were 4.4% and 5.2%, respectively.

Benefit payments under the Company’s postretirement benefit plans are expected to be paid as follows: 2012 — $.3 million; 2013 — $1.0 million; 2014 — $1.5 million; 2015 — $1.6 million; 2016 — $2.4 million; and for the five years ended November 30, 2021 — $16.6 million in the aggregate.