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Pension and Other Post-retirement Benefits | 12 Months Ended
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Oct. 25, 2015
Pension and Other Post-retirement Benefits |
Pension and Other Post-retirement Benefits | NOTE G Pension and Other Post-retirement Benefits The Company has several defined benefit plans and defined contribution plans covering most employees. Total costs associated with the Company’s defined contribution benefit plans in 2015, 2014, and 2013 were $31.7 million, $30.1 million, and $29.9 million, respectively. Benefits for defined benefit pension plans covering hourly employees are provided based on stated amounts for each year of service, while plan benefits covering salaried employees are based on final average compensation. The Company’s funding policy is to make annual contributions of not less than the minimum required by applicable regulations. Actuarial gains and losses and any adjustments resulting from plan amendments are deferred and amortized to expense over periods ranging from 9-23 years. Certain groups of employees are eligible for post-retirement health or welfare benefits. Benefits for retired employees vary for each group depending on respective retirement dates and applicable plan coverage in effect. Contribution requirements for retired employees are governed by the Retiree Health Care Payment Program and may change each year as the cost to provide coverage is determined. Eligible employees hired after January 1, 1990, may receive post-retirement medical coverage but must pay the full cost of the coverage. On October 17, 2012, the plan was amended, effective April 1, 2013, to terminate coverage for certain nonunion retirees who retired on or after August 1, 2002, and who are or will be Medicare eligible. If the cost of the nonunion retiree coverage is currently subsidized by the Company for the affected retirees, credits will be established in a health reimbursement account to help reimburse the retiree for the cost of purchasing coverage in the individual market. Actuarial gains and losses and any adjustments resulting from plan amendments are deferred and amortized to expense over periods ranging from 6-18 years. In 2011, an amendment was enacted for a defined benefit plan which included a change in the pension formula effective January 1, 2017. The amended formula remains a defined benefit formula, but will base the accrued benefit credit on age and service and define the benefit as a lump sum. Effective October 31, 2016, the 401(k) match for these participants will be increased. Net periodic cost of defined benefit plans included the following:
| Pension Benefits | Post-retirement Benefits
(in thousands) | 2015 | 2014 | 2013 | 2015 | 2014 | 2013
Service cost | $ 28,795 | $ 25,935 | $ 30,979 | $ 1,795 | $ 1,963 |  | $ 2,494
Interest cost | 52,522 | 53,030 | 47,688 | 13,479 | 15,279 |  | 14,910
Expected return on plan assets | (88,792) | (83,702) | (73,144) | – | – |  | –
Amortization of prior service cost | (4,878) | (4,971) | (5,079) | (1,337) | (1,337) |  | (1,332)
Recognized actuarial loss (gain) | 18,476 | 12,697 | 34,019 | (2) | (2) |  | 7,719
Curtailment charge | – | – | 6 | – | – |  | –
Net periodic cost | $ 6,123 | $ 2,989 | $ 34,469 | $ 13,935 | $ 15,903 |  | $ 23,791
The following amounts have not been recognized in net periodic pension cost and are included in accumulated other comprehensive loss:
(in thousands) | Pension Benefits | Post-retirement Benefits
2015 | 2014 | 2015 | 2014
Unrecognized prior service credit |  | $ 32,490 |  | $ 37,368 |  | $ 2,844 |  | $ 4,180
Unrecognized actuarial losses |  | (360,949) |  | (343,398) |  | (40,590) |  | (30,250)
The following amounts are expected to be recognized in net periodic benefit expense in fiscal year 2016:
|  | Post-
| Pension | retirement
(in thousands) | Benefits | Benefits
Amortized prior service credit | $ (4,878) | $ (1,337)
Recognized actuarial losses | 18,693 | 1,303
The following is a reconciliation of the beginning and ending balances of the benefit obligation, the fair value of plan assets, and the funded status of the plans as of the October 25, 2015, and the October 26, 2014, measurement dates:
| Pension Benefits | Post-retirement Benefits
(in thousands) | 2015 | 2014 | 2015 | 2014
Change in benefit obligation: |  |  |  |
Benefit obligation at beginning of year | $ 1,235,769 | $ 1,098,060 | $ 330,841 | $ 334,447
Service cost | 28,795 | 25,935 | 1,795 | 1,963
Interest cost | 52,522 | 53,030 | 13,479 | 15,279
Actuarial (gain) loss | (16,872) | 108,047 | 10,339 | 927
Employee contributions | – | – | 2,798 | 2,715
Medicare Part D subsidy | – | – | 1,313 | 1,941
Benefits paid | (52,005) | (49,303) | (26,021) | (26,431)
Benefit obligation at end of year | $ 1,248,209 | $ 1,235,769 | $ 334,544 | $ 330,841
| Pension Benefits | Post-retirement Benefits
(in thousands) | 2015 | 2014 | 2015 | 2014
Change in plan assets: |  |  |  |
Fair value of plan assets at beginning of year | $ 1,168,765 | $ 1,087,315 | $ – | $ –
Actual return on plan assets | 35,870 | 101,025 | – | –
Employee contributions | – | – | 2,798 | 2,715
Employer contributions | 27,147 | 29,728 | 23,223 | 23,716
Benefits paid | (52,005) | (49,303) | (26,021) | (26,431)
Fair value of plan assets at end of year | $ 1,179,777 | $ 1,168,765 | $ – | $ –
Funded status at end of year | $ (68,432) | $ (67,004) | $ (334,544) | $ (330,841)
Amounts recognized in the Consolidated Statements of Financial Position as of October 25, 2015, and October 26, 2014, are as follows:
| Pension Benefits | Post-retirement Benefits
(in thousands) | 2015 | 2014 | 2015 | 2014
Pension assets | $ 132,861 | $ 130,284 | $ – | $ –
Employee related expenses | (4,931) | (4,532) | (21,645) | (20,904)
Pension and post-retirement benefits | (196,362) | (192,756) | (312,899) | (309,937)
Net amount recognized | $ (68,432) | $ (67,004) | $ (334,544) | $ (330,841)
The following table provides information for pension plans with accumulated benefit obligations in excess of plan assets:
(in thousands) | 2015 | 2014
Projected benefit obligation | $ 201,293 | $ 197,288
Accumulated benefit obligation | 193,913 | 186,085
Fair value of plan assets | – | –
Weighted-average assumptions used to determine benefit obligations are as follows:
| 2015 | 2014
Discount rate | 4.50% | 4.31%
Rate of future compensation increase |  |
(for plans that base benefits on final compensation level) | 3.92% | 3.94%
Weighted-average assumptions used to determine net periodic benefit costs are as follows:
| 2015 | 2014 | 2013
Discount rate | 4.31% | 4.89% | 4.05%
Rate of future compensation increase (for plans that base benefits on final compensation level) | 3.94% | 3.91% | 3.97%
Expected long-term return on plan assets | 7.70% | 7.80% | 7.90%
The expected long-term rate of return on plan assets is based on fair value and is developed in consultation with outside advisors. A range is determined based on the composition of the asset portfolio, historical long-term rates of return, and estimates of future performance. For measurement purposes, an 8.0% annual rate of increase in the per capita cost of covered health care benefits for pre-Medicare and post-Medicare retirees’ coverage is assumed for 2016. The pre-Medicare and post-Medicare rate is assumed to decrease to 5.0% for 2021, and remain at that level thereafter. The assumed discount rate, expected long-term rate of return on plan assets, rate of future compensation increase, and health care cost trend rate have a significant impact on the amounts reported for the benefit plans. A one-percentage-point change in these rates would have the following effects:
| 1-Percentage-Point
| Expense | Benefit Obligation
(in thousands) | Increase | Decrease | Increase | Decrease
Pension Benefits: |  |  |  |
Discount rate | $ (12,892) | $ 16,810 | $ (157,394) | $ 197,869
Expected long-term rate of return on plan assets | (11,629) | 11,629 | – | –
Rate of future compensation increase | 461 | (442) | 2,504 | (2,417)
Post-retirement Benefits: |  |  |  |
Discount rate | $ (64) | $ 5,035 | $ (33,462) | $ 40,619
Health care cost trend rate | 1,749 | (1,451) | 38,194 | (31,112)
The actual and target weighted-average asset allocations for the Company’s pension plan assets as of the plan measurement date are as follows:
| 2015 | 2014
Asset Category | Actual | Target Range | Actual | Target Range
Large Capitalization Equity | 38.8% | 15-35% | 33.0% | 15-35%
Small Capitalization Equity | 5.4% | 5-15% | 6.0% | 5-15%
International Equity | 14.0% | 15-25% | 20.8% | 15-25%
Private Equity | 6.1% | 0-15% | 5.0% | 0-15%
Total Equity Securities | 64.3% | 50-75% | 64.8% | 55-75%
Fixed Income | 34.3% | 25-45% | 34.0% | 25-45%
Real Estate | – | 0-10% | – | –
Cash and Cash Equivalents | 1.4% | – | 1.2% | –
Target allocations are established in consultation with outside advisors through the use of asset-liability modeling to attempt to match the duration of the plan assets with the duration of the Company’s projected benefit liability. The asset allocation strategy attempts to minimize the long-term cost of pension benefits, reduce the volatility of pension expense, and achieve a healthy funded status for the plans. During 2014, the 1.7 million shares of Company common stock held in plan assets were sold. Dividends paid during 2014 on shares held by the plan were $0.7 million. Based on the October 25, 2015 measurement date, the Company anticipates making contributions of $24.1 million to fund the pension plans during fiscal year 2016. The Company also expects to make contributions of $27.2 million during 2016 that represent benefit payments for unfunded plans. Benefits expected to be paid over the next ten fiscal years are as follows:
|  | Post-
| Pension | retirement
(in thousands) | Benefits | Benefits
2016 | $ 53,515 | $ 22,113
2017 | 55,661 | 22,441
2018 | 58,010 | 22,612
2019 | 60,934 | 22,711
2020 | 63,916 | 22,621
2021 – 2025 | 361,518 | 108,832
Post-retirement benefits are net of expected federal subsidy receipts related to prescription drug benefits granted under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which are estimated to be $2.4 million per year through 2025. The fair values of the defined benefit pension plan investments as of October 25, 2015, and October 26, 2014, by asset category and fair value hierarchy level, are as follows:
| Fair Value Measurements at October 25, 2015
|  | Quoted Prices |  |
|  | in Active | Significant Other | Significant
|  | Markets for | Observable | Unobservable
| Total | Identical Assets | Inputs | Inputs
(in thousands) | Fair Value | (Level 1) | (Level 2) | (Level 3)
Investments at Fair Value: |  |  |  |
Cash Equivalents(1) |  | $ 16,551 |  | $ 16,551 |  | $ – |  | $ –
Large Capitalization Equity(2) |  |  |  |
Domestic |  | $ 300,735 |  | $ 175,206 |  | $ 125,529 |  | $ –
Foreign | 36,637 | 36,637 | – | –
World | 120,206 | – | 120,206 | –
Total Large Capitalization Equity |  | $ 457,578 |  | $ 211,843 |  | $ 245,735 |  | $ –
Small Capitalization Equity(3) |  |  |  |
Domestic |  | $ 55,513 |  | $ 55,513 |  | $ – |  | $ –
Foreign | 8,246 | 8,246 | – | –
Total Small Capitalization Equity |  | $ 63,759 |  | $ 63,759 |  | $ – |  | $ –
International Equity(4) |  |  |  |
Mutual fund |  | $ 101,062 |  | $ – |  | $ 101,062 |  | $ –
Collective trust | 63,861 | – | 63,861 | –
Total International Equity |  | $ 164,923 |  | $ – |  | $ 164,923 |  | $ –
Private Equity(5) |  |  |  |
Domestic |  | $ 54,748 |  | $ – |  | $ – |  | $ 54,748
International | 17,027 | – | – | 17,027
Total Private Equity |  | $ 71,775 |  | $ – |  | $ – |  | $ 71,775
Total Equity |  | $ 758,035 |  | $ 275,602 |  | $ 410,658 |  | $ 71,775
Fixed Income(6) |  |  |  |
US government issues |  | $ 130,456 |  | $ 104,460 |  | $ 25,996 |  | $ –
Municipal issues | 20,211 | – | 20,211 | –
Corporate issues – domestic | 210,035 | – | 210,035 | –
Corporate issues – foreign | 44,489 | – | 44,489 | –
Total Fixed Income |  | $ 405,191 |  | $ 104,460 |  | $ 300,731 |  | $ –
Total Investments at Fair Value |  | $ 1,179,777 |  | $ 396,613 |  | $ 711,389 |  | $ 71,775
| Fair Value Measurements at October 26, 2014
|  | Quoted Prices |  |
|  | in Active | Significant Other | Significant
|  | Markets for | Observable | Unobservable
| Total | Identical Assets | Inputs | Inputs
(in thousands) | Fair Value | (Level 1) | (Level 2 | (Level 3)
Investments at Fair Value: |  |  |  |
Cash Equivalents(1) |  | $ 14,342 |  | $ 14,342 |  | $ – |  | $ –
Large Capitalization Equity(2) |  |  |  |
Domestic |  | $ 351,195 |  | $ 196,977 |  | $ 154,218 |  | $ –
Foreign | 34,126 | 34,126 | – | –
Total Large Capitalization Equity |  | $ 385,321 |  | $ 231,103 |  | $ 154,218 |  | $ –
Small Capitalization Equity(3) |  |  |  |
Domestic |  | $ 62,521 |  | $ 62,521 |  | $ – |  | $ –
Foreign | 8,031 | 8,031 | – | –
Total Small Capitalization Equity |  | $ 70,552 |  | $ 70,552 |  | $ – |  | $ –
International Equity(4) |  |  |  |
Mutual fund |  | $ 69,393 |  | $ – |  | $ 69,393 |  | $ –
Collective trust | 173,008 | – | 173,008 | –
Total International Equity |  | $ 242,401 |  | $ – |  | $ 242,401 |  | $ –
Private Equity(5) |  |  |  |
Domestic |  | $ 43,340 |  | $ – |  | $ – |  | $ 43,340
International | 15,383 | – | – | 15,383
Total Private Equity |  | $ 58,723 |  | $ – |  | $ – |  | $ 58,723
Total Equity |  | $ 756,997 |  | $ 301,655 |  | $ 396,619 |  | $ 58,723
Fixed Income(6) |  |  |  |
US government issues |  | $ 126,894 |  | $ 96,199 |  | $ 30,695 |  | $ –
Municipal issues | 20,232 | – | 20,232 | –
Corporate issues – domestic | 212,299 | – | 212,299 | –
Corporate issues – foreign | 38,001 | – | 38,001 | –
Total Fixed Income |  | $ 397,426 |  | $ 96,199 |  | $ 301,227 |  | $ –
Total Investments at Fair Value |  | $ 1,168,765 |  | $ 412,196 |  | $ 697,846 |  | $ 58,723
The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy:
| (1) |  | Cash Equivalents: These Level 1 investments consist primarily of money market mutual funds that are highly liquid and traded in active markets.
| (2) |  | Large Capitalization Equity: The Level 1 investments include a mix of predominately U.S. common stocks and foreign common stocks, which are valued at the closing price reported on the active market in which the individual securities are traded. The Level 2 investment includes mutual funds consisting of a mix of U.S. and foreign common stocks that are valued at the publicly available net asset value (NAV) of shares held by the pension plans at year end.
| (3) |  | Small Capitalization Equity: The Level 1 investments include a mix of predominately U.S. common stocks and foreign common stocks, which are valued at the closing price reported on the active market in which the individual securities are traded.
| (4) |  | International Equity: These Level 2 investments include a mix of collective investment funds and mutual funds. The mutual funds are valued at the publicly available NAV of shares held by the pension plans at year end. The value of the collective investment funds is based on the fair value of the underlying investments and the NAV can be calculated for these funds.
| (5) |  | Private Equity: These Level 3 investments consist of various collective investment funds, which are managed by a third party, that invest in a well-diversified portfolio of equity investments from top performing, high quality firms that focus on U.S. and foreign small to mid-markets, venture capitalists, and entrepreneurs with a concentration in areas of innovation. Investment strategies include buyouts, growth capital, buildups, and distressed, as well as early stages of company development mainly in the U.S. The fair value of the units for these investments is based on the fair value of the underlying investments, and the NAV can be calculated for these funds.
| (6) |  | Fixed Income: The Level 1 investments include U.S. Treasury bonds and notes, which are valued at the closing price reported on the active market in which the individual securities are traded. The Level 2 investments consist principally of U.S. government securities, which are valued daily using institutional bond quote sources and mortgage-backed securities pricing sources; municipal, domestic, and foreign securities, which are valued daily using institutional bond quote sources; and mutual funds invested in long-duration corporate bonds that are valued at the publicly available NAV of shares held by the pension plans at year-end.
A reconciliation of the beginning and ending balance of the investments measured at fair value using significant unobservable inputs (Level 3) is as follows:
(in thousands) | 2015 | 2014
Beginning Balance | $ 58,723 | $ 45,783
Purchases, issuances, and settlements (net) | (3,574) | 3,050
Unrealized gains | 7,741 | 4,260
Realized gains | 7,623 | 4,479
Interest and dividend income | 1,262 | 1,151
Ending Balance | $ 71,775 | $ 58,723
The Company has commitments totaling $85.0 million for the private equity investments within the pension plans. The unfunded private equity commitment balance for each investment category as of October 25, 2015, and October 26, 2014 is as follows:
(in thousands) | 2015 | 2014
Domestic equity | $ 9,264 | $ 17,659
International equity | 9,514 | 12,640
Unfunded commitment balance | $ 18,778 | $ 30,299
Funding for future private equity capital calls will come from existing pension plan asset investments and not from additional cash contributions into the Company’s pension plans.

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