Note J. Pension Plans and Other Retirement Benefits

Pension: TJX has a funded defined benefit retirement plan that covers eligible U.S. employees hired prior to February 1, 2006. No employee contributions are required, or permitted, and benefits are based principally on compensation earned in each year of service. TJX’s funded defined benefit retirement plan assets are invested in domestic and international equity and fixed income securities, both directly and through investment funds. The plan does not invest in TJX securities. TJX also has an unfunded supplemental retirement plan that covers certain key employees and provides additional retirement benefits based on final average compensation for certain of those employees (the primary benefit) or, alternatively, based on benefits that would be provided under the funded retirement plan absent Internal Revenue Code limitations (the alternative benefit).

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 fiscal years indicated. The Company has elected the practical expedient pursuant to ASU 2015-04 and has selected the measurement date of January 31, the calendar month end closest to the Company’s fiscal year end.


	Funded Plan Fiscal Year Ended						Unfunded Plan Fiscal Year Ended
In thousands	January 28, 2017			January 30, 2016			January 28, 2017			January 30, 2016
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	1,213,000		$	1,309,889		$	84,967		$	82,238
Service cost		45,440			50,080			1,835			1,562
Interest cost		56,094			51,710			3,391			3,033
Actuarial (gains) losses		91,114			(170,674	)		740			3,806
Settlements		(103,197	)		—			—			—
Benefits paid		(28,751	)		(24,956	)		(4,624	)		(5,672	)
Expenses paid		(4,690	)		(3,049	)		—			—
Plan amendment		—			—			—			—
Projected benefit obligation at end of year	$	1,269,010		$	1,213,000		$	86,309		$	84,967
Accumulated benefit obligation at end of year	$	1,151,151		$	1,120,602		$	71,273		$	70,750


	Funded Plan Fiscal Year Ended						Unfunded Plan Fiscal Year Ended
In thousands	January 28, 2017			January 30, 2016			January 28, 2017			January 30, 2016
Change in plan assets:
Fair value of plan assets at beginning of year	$	1,119,842		$	1,170,748		$	—		$	—
Actual return on plan assets		143,756			(72,901	)		—			—
Employer contribution		50,000			50,000			4,624			5,672
Settlements		(103,197	)		—			—			—
Benefits paid		(28,751	)		(24,956	)		(4,624	)		(5,672	)
Expenses paid		(4,690	)		(3,049	)		—			—
Fair value of plan assets at end of year	$	1,176,960		$	1,119,842		$	—		$	—
Reconciliation of funded status:
Projected benefit obligation at end of year	$	1,269,010		$	1,213,000		$	86,309		$	84,967
Fair value of plan assets at end of year		1,176,960			1,119,842			—			—
Funded status – excess obligation	$	92,050		$	93,158		$	86,309		$	84,967
Net liability recognized on consolidated balance sheets	$	92,050		$	93,158		$	86,309		$	84,967
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income (loss):
Prior service cost	$	2,313		$	2,690		$	—		$	—
Accumulated actuarial losses		303,612			348,289			26,438			29,046
Amounts included in accumulated other comprehensive income (loss)	$	305,925		$	350,979		$	26,438		$	29,046

The consolidated balance sheets reflect the funded status of the plans with any unrecognized prior service cost and actuarial gains and losses recorded in accumulated other comprehensive income (loss). The combined net accrued liability of $178.4 million at January 28, 2017 is reflected on the balance sheet as of that date as a current liability of $4.0 million and a long-term liability of $174.4 million. The combined net accrued liability of $178.1 million at January 30, 2016 is reflected on the balance sheet as of that date as a current liability of $3.2 million and a long-term liability of $174.9 million.

The estimated prior service cost that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in fiscal 2018 for the funded plan is $377,000. The estimated net actuarial loss that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in fiscal 2018 is $21.9 million for the funded plan and $3.3 million for the unfunded plan.

TJX determined the assumed discount rate using the BOND: Link model in fiscal 2017 and fiscal 2016. TJX uses the BOND: Link model as this model allows for the selection of specific bonds resulting in better matches in timing of the plans’ expected cash flows. Presented below are weighted average assumptions for measurement purposes for determining the obligation at the year-end measurement date:


	Funded Plan Fiscal Year Ended						Unfunded Plan Fiscal Year Ended
	January 28, 2017			January 30, 2016			January 28, 2017			January 30, 2016
Discount rate		4.40	%		4.80	%		4.00	%		4.20	%
Rate of compensation increase		4.00	%		4.00	%		6.00	%		6.00	%

TJX made aggregate cash contributions of $54.6 million in fiscal 2017, $55.7 million in fiscal 2016 and $151.3 million in fiscal 2015 to the funded plan and to fund current benefit and expense payments under the unfunded plan. 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 as is sufficient to avoid restrictions with respect to the funding of nonqualified plans under the Internal Revenue Code. We do not anticipate any required funding in fiscal 2018 for the funded plan. We anticipate making contributions of $4.1 million to provide current benefits coming due under the unfunded plan in fiscal 2018.

The following are the components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) related to our pension plans:


	Funded Plan Fiscal Year Ended									Unfunded Plan Fiscal Year Ended
Dollars in thousands	January 28, 2017			January 30, 2016			January 31, 2015			January 28, 2017			January 30, 2016			January 31, 2015
Net periodic pension cost:
Service cost	$	45,440		$	50,080		$	40,481		$	1,835		$	1,562		$	1,398
Interest cost		56,094			51,710			49,522			3,391			3,033			3,001
Expected return on plan assets		(70,535	)		(78,042	)		(65,187	)		—			—			—
Amortization of prior service cost		377			377			—			—			—			2
Amortization of net actuarial loss		31,397			33,146			13,848			3,349			3,958			2,146
Settlement charge		31,173			—			—			—			—			—
Total expense	$	93,946		$	57,271		$	38,664		$	8,575		$	8,553		$	6,547
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net (gain) loss	$	17,894		$	(19,731	)	$	209,091		$	740		$	3,806		$	19,552
Amortization of net (loss)		(31,397	)		(33,146	)		(13,848	)		(3,349	)		(3,958	)		(2,146	)
Settlement charge		(31,173	)		—			—			—			—			—
Amortization of prior service cost		(377	)		(377	)		—			—			—			(2	)
Plan amendment		—			—			3,067			—			—			—
Total recognized in other comprehensive income (loss)	$	(45,053	)	$	(53,254	)	$	198,310		$	(2,609	)	$	(152	)	$	17,404
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	48,893		$	4,017		$	236,974		$	5,966		$	8,401		$	23,951
Weighted average assumptions for expense purposes:
Discount rate		4.80%/3.80%			4.00%			5.00%			4.20%			3.70%			4.80%
Expected rate of return on plan assets		6.50%/6.00%			6.75%			7.00%			N/A			N/A			N/A
Rate of compensation increase		4.00%			4.00%			4.00%			6.00%			6.00%			6.00%

During the third quarter of fiscal 2017, 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 rate of compensation increase presented for the unfunded plan (for measurement purposes and expense purposes) is the rate assumed for participants eligible for the primary benefit. The assumed rate of compensation increase for participants eligible for the alternative benefit under the unfunded plan is the same rate as assumed for the funded plan.

TJX develops its long-term rate of return assumption by evaluating input from professional advisors taking into account the asset allocation of the portfolio and long-term asset class return expectations, as well as long-term inflation assumptions.

The unrecognized gains and losses in excess of 10% of the projected benefit obligation are amortized over the average remaining service life of participants.

The following is a schedule of the benefits expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter:


In thousands	Funded Plan Expected Benefit Payments		Unfunded Plan Expected Benefit Payments
Fiscal Year
2018		36,344		4,063
2019		39,888		4,534
2020		43,673		39,428
2021		47,775		4,425
2022		52,167		4,380
2023 through 2027		329,327		26,285

The following table presents the fair value hierarchy (See Note G) for pension assets measured at fair value on a recurring basis as of January 28, 2017:


	Funded Plan
In thousands	Level 1		Level 2			Total
Asset category:
Short-term investments	$	63,704	$	—		$	63,704
Equity Securities		208,451		—			208,451
Fixed Income Securities:
Corporate and government bond funds		—		386,777			386,777
Futures Contracts		—		(31	)		(31	)
Total assets in the fair value hierarchy	$	272,155	$	386,746		$	658,901
Assets measured at net asset value*		—		—			518,059
Fair value of assets	$	272,155	$	386,746		$	1,176,960

In accordance with Subtopic 820-10, certain investments that were measured using net asset value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of assets presented above.

The following table presents the fair value hierarchy for pension assets measured at fair value on a recurring basis as of January 30, 2016:


	Funded Plan
In thousands	Level 1		Level 2			Total
Asset category:
Short-term investments	$	57,713	$	—		$	57,713
Equity Securities		216,526		—			216,526
Fixed Income Securities:
Corporate and government bond funds		—		337,864			337,864
Futures Contracts		—		(33	)		(33	)
Total assets in the fair value hierarchy	$	274,239	$	337,831		$	612,070
Assets measured at net asset value*		—		—			507,772
Fair value of assets	$	274,239	$	337,831		$	1,119,842

Pension plan assets are reported at fair value. Investments in equity securities traded on a national securities exchange are valued at the composite close price, as reported in the Wall Street Journal, as of the financial statement date. This information is provided by the independent pricing sources.

Short-term investments are primarily cash related to funding of the plan which had yet to be invested as of balance sheet dates.

Certain corporate and government bonds are valued at the closing price reported in the active market in which the bond is traded. Other bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the bond is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. All bonds are priced by independent pricing sources.

Assets measured at net asset value include investments in limited partnerships which are stated at the fair value of the plan’s partnership interest based on information supplied by the partnerships as compared to financial statements of the limited partnership or other fair value information as determined by management. Cash equivalents or short-term investments are stated at cost which approximates fair value, and the fair value of common/collective trusts is determined based on net asset value as reported by their fund managers.

The following is a summary of TJX’s target allocation guidelines for plan assets along with the actual allocation of plan assets as of the valuation date for the fiscal years presented:


			Actual Allocation for Fiscal Year Ended
	Target Allocation		January 28, 2017		January 30, 2016
Return-seeking assets (previously equity securities)		50%		44%		40%
Liability-hedging assets (previously fixed income)		50%		51%		55%
All other – primarily cash		—		5%		5%

Under TJX’s investment policy, plan assets are to be invested with the objective of generating investment returns that, in combination with funding contributions, provide adequate assets to meet all current and reasonably anticipated future benefit obligations under the plan. Effective January 1, 2017, the investment policy includes a dynamic asset allocation strategy, whereby, over time, in connection with any improvements in the plan’s funded status, the target allocation of return-seeking assets (generally, equities and other instruments with similar risk profile) may decline and the target allocation of liability-hedging assets (generally, fixed income and other instruments with a similar risk profile) may increase. Risks are sought to be mitigated through asset diversification and the use of multiple investment managers. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

TJX also sponsors an employee savings plan under Section 401(k) of the Internal Revenue Code for all eligible U.S. employees and a similar type of plan for eligible employees in Puerto Rico. Assets under the plans totaled $1,480.9 million as of December 31, 2016 and $1,314.8 million as of December 31, 2015, and are invested in a variety of funds. Employees may contribute up to 50% of eligible pay, subject to limitations. TJX matches employee contributions, up to 5% of eligible pay, including a basic match at rates of 25% or 75% (based upon date of hire and other eligibility criteria) plus a discretionary match, generally up to 25%, based on TJX’s performance. Eligible employees are automatically enrolled in the U.S. plan at a 2% deferral rate, unless the employee elects otherwise. TJX contributed $34.5 million in fiscal 2017, $30.8 million in fiscal 2016 and $31.2 million in fiscal 2015 to these employee savings plans. The plans include a TJX stock fund in which participants could invest a portion of TJX’s matching contribution. The TJX stock fund was closed to new investments, other than reinvestment of dividends, at the end of calendar 2015 and is scheduled to be eliminated from the plans in March 2018. The TJX stock fund represented 6.2% of plan assets at December 31, 2016, 7.1% of plan assets at December 31, 2015 and 7.4% of plan assets at December 31, 2014.

TJX also has a nonqualified savings plan (the Executive Savings Plan) for certain U.S. employees. TJX matches employee deferrals at various rates which amounted to $5.8 million in fiscal 2017, $4.5 million in fiscal 2016 and $3.5 million in fiscal 2015. Although the plan is unfunded, in order to help meet its future obligations TJX transfers an amount generally equal to employee deferrals and the related company match to a separate “rabbi” trust. The trust assets, which are invested in a variety of mutual funds, are included in other assets on the balance sheets.

In addition to the plans described above, TJX also maintains retirement/deferred savings plans for eligible associates at its foreign subsidiaries. We contributed $10.2 million for these plans in fiscal 2017, $9.7 million for these plans in fiscal 2016 and $9.3 million in fiscal 2015.

Multiemployer Pension Plans: TJX contributes to certain multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover union-represented employees. TJX contributed $14.5 million in fiscal 2017, $13.4 million in fiscal 2016 and $11.5 million in fiscal 2015 to the Legacy Plan of the National Retirement Fund (formerly, the National Retirement Fund) (EIN #13-6130178, plan #001) and the Adjustable Plan of the National Retirement Fund (EIN #13-6130178, plan #002) and was listed in each plan’s Form 5500 as providing more than 5% of the total contributions for the plan year ending December 31, 2015. Based on information available to TJX, the Pension Protection Act Zone Status of the Legacy Plan of the National Retirement Fund is Critical and a rehabilitation plan has been implemented.

The risks of participating in multiemployer pension plans are different from the risks of single-employer pension plans in certain respects, including the following: (a) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; (b) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; (c) if we cease to have an obligation to contribute to a multiemployer plan in which we had been a contributing employer, or in certain other circumstances, we may be required to pay to the plan an amount based on our allocable share of the underfunded status of the plan, referred to as a withdrawal liability.

Postretirement Medical: TJX has maintained a postretirement medical plan that provides limited postretirement medical benefits to retirees who are eligible for the defined benefit plan and who retired at age 55 or older with ten or more years of service. During fiscal 2006, TJX eliminated this benefit for all active associates and modified the benefit that was offered to retirees enrolled in the plan at that time.

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.