Note H. Pension Plans and Other Retirement Benefits

Presented below is financial information relating to TJX’s funded defined benefit pension plan (qualified pension plan or funded plan) and its unfunded supplemental pension plan (unfunded plan) for the periods shown:


	Funded Plan						Unfunded Plan
	Thirteen Weeks Ended						Thirteen Weeks Ended
In thousands	October 29, 2016			October 31, 2015			October 29, 2016		October 31, 2015
Service cost	$	11,360		$	11,453		$	293	$	(215	)
Interest cost		14,023			12,885			793		533
Expected return on plan assets		(17,633	)		(19,546	)		—		—
Recognized actuarial losses		7,943			8,048			783		211

Expense related to current period		15,693			12,840			1,869		529
Pension settlement charge		31,173			—			—		—

Total expense	$	46,866		$	12,840		$	1,869	$	529


	Funded Plan						Unfunded Plan
	Thirty-Nine Weeks Ended						Thirty-Nine Weeks Ended
In thousands	October 29, 2016			October 31, 2015			October 29, 2016		October 31, 2015
Service cost	$	33,778		$	37,561		$	1,376	$	1,172
Interest cost		42,747			38,783			2,543		2,275
Expected return on plan assets		(53,503	)		(58,532	)		—		—
Recognized actuarial losses		22,362			25,142			2,512		2,969

Net periodic pension cost		45,384			42,954			6,431		6,416
Pension settlement charge		31,173			—			—		—

Total expense	$	76,557		$	42,954		$	6,431	$	6,416

TJX’s policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded status of 80% of the applicable pension liability (the funding target pursuant to the Internal Revenue Code section 430) or such other amount sufficient to avoid restrictions with respect to the funding of TJX’s nonqualified plans under the Internal Revenue Code. TJX does not anticipate any required funding in fiscal 2017 for the funded plan. TJX anticipates making payments of $3.3 million to provide current benefits coming due under the unfunded plan in fiscal 2017.

The amounts included in recognized actuarial losses in the table above have been reclassified in their entirety from other comprehensive income to the statements of income, net of related tax effects, for the periods presented.

During the third quarter, TJX offered eligible, former TJX Associates, who had not yet commenced receiving their pension benefit, an opportunity to receive a lump sum payout of their vested pension benefit. On October 21, 2016 the Company’s pension plan paid $103.2 million from pension plan assets to those who accepted this offer, thereby reducing its pension benefit obligations. The transaction had no cash impact on TJX but did result in a non-cash pre-tax pension settlement charge of $31.2 million, which is reported separately on the consolidated statements of income. As a result of the lump sum payout the Company re-measured the funded status of its pension plan as of September 30, 2016. The assumptions for pension expense presented above includes a discount rate of 4.80% through the measurement date and 3.80% thereafter. The expected rate of return on plan assets is 6.50% through the measurement date and 6.00% thereafter. The discount rate for determining the obligation at the measurement date is 3.80%. Presented below is the funded status of the plan as a result of this measurement and lump sum payment:


In thousands
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	1,213,000
Service cost		28,337
Interest cost		38,754
Actuarial (gains) losses		231,636
Benefits paid including lump sum payment		(122,029	)
Expenses paid		(2,980	)

Projected benefit obligation at measurement date	$	1,386,718

Change in plan assets:
Fair value of plan assets at beginning of year	$	1,119,842
Actual return on plan assets		159,787
Employer contribution		—
Benefits paid including lump sum payment		(122,029	)
Expenses paid		(2,980	)

Fair value of plan assets at measurement date	$	1,154,620

Funded status:
Projected benefit obligation at measurement date	$	1,386,718
Fair value of plan assets at measurement date		1,154,620

Funded status – excess obligation at measurement date	$	232,098

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income (loss):
Prior service cost	$	2,438
Accumulated actuarial losses		416,873

Amounts included in accumulated other comprehensive income (loss)	$	419,311

TJX also has an unfunded postretirement medical plan which was closed to new benefits in fiscal 2006. The amendment to the plan benefits in fiscal 2006 resulted in a negative plan amendment which was being amortized to income over the estimated average remaining life of the eligible plan participants.

During the first quarter of fiscal 2017, TJX terminated the unfunded postretirement medical plan and made a discretionary lump sum payment to participants. The settlement of the liability and the recognition of the remaining negative plan amendment resulted in a pre-tax benefit of $5.5 million in the first quarter of fiscal 2017. Amortization from other comprehensive income to net income was $864,000 for the quarter ended October 31, 2015 and $2.6 million for the thirty-nine weeks ended October 31, 2015.