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PENSION AND OTHER POSTRETIREMENT BENEFITS
 12 Months Ended
Dec. 30, 2012
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]  
Pension and Other Postretirement Benefits Disclosure [Text Block]

14. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors programs that provide retirement benefits to most of its employees. These programs include qualified defined benefit pension plans, nonqualified defined benefit retirement plans, a defined benefit postretirement life insurance plan, and defined contribution retirement savings plans. Under all of our retirement plans, the Company’s expenses were $8.7 million, $7.9 million and $9.5 million in 2012, 2011 and 2010, respectively.

The Company used a year-end measurement date of December 30, 2012 for its pension and postretirement benefits plans. Certain disclosures are listed below. Other disclosures are not material to the financial statements.

Qualified Defined Benefit Pension Plans

The Company sponsored three qualified defined benefit pension plans:

  • The Pilgrim’s Pride Retirement Plan for Union Employees (the “Union Plan”),
  • The Pilgrim’s Pride Retirement Plan for El Dorado Union Employees (the “El Dorado Plan”), and
  • The Pilgrim’s Pride Pension Plan for Legacy Gold Kist Employees (the “GK Pension Plan”).

The Union Plan covers certain locations or work groups within PPC. The El Dorado Plan was spun off from the Union Plan effective January 1, 2008 and covered certain eligible locations or work groups within the Company. This plan was settled in 2010. The GK Pension Plan covers certain eligible U.S. employees who were employed at locations that the Company purchased through its acquisition of Gold Kist Inc. (“Gold Kist”) in 2007. Participation in the GK Pension Plan was frozen as of February 8, 2007 for all participants with the exception of terminated vested participants who are or may become permanently and totally disabled. The plan was frozen for that group as of March 31, 2007.

Nonqualified Defined Benefit Pension Plans

The Company sponsored two nonqualified defined benefit retirement plans:

  • The Former Gold Kist Inc. Supplemental Executive Retirement Plan (the “SERP Plan”), and
  • The Former Gold Kist Inc. Directors’ Emeriti Retirement Plan (the “Directors’ Emeriti Plan”).

Pilgrim’s Pride assumed sponsorship of the SERP Plan and Directors’ Emeriti Plan through its acquisition of Gold Kist in 2007. The SERP Plan provides benefits on compensation in excess of certain Internal Revenue Code limitations to certain former executives with whom Gold Kist negotiated individual agreements. Benefits under the SERP Plan were frozen as of February 8, 2007. The Directors’ Emeriti Plan provides benefits to former Gold Kist directors.

Defined Benefit Postretirement Life Insurance Plan

The Company currently sponsors one defined benefit postretirement life insurance plan named the Gold Kist Inc. Retiree Life Insurance Plan (the “Insurance Plan”).

Pilgrim’s Pride also assumed defined benefit postretirement medical and life insurance obligations, including the Insurance Plan, through its acquisition of Gold Kist in 2007. In January 2001, Gold Kist began to substantially curtail its programs for active employees. On July 1, 2003, Gold Kist terminated medical coverage for retirees age 65 or older, and only retired employees in the closed group between ages 55 and 65 could continue their coverage at rates above the average cost of the medical insurance plan for active employees. These retired employees all reached the age of 65 in 2012 and liabilities of the postretirement medical plan then ended.

Defined Benefit Plans Obligations and Assets

The change in benefit obligation, change in fair value of plan assets, funded status and amounts recognized in the Consolidated Balance Sheets for these plans were as follows:

Pension Benefits Other Benefits
2012 2011 2012 2011
Change in projected benefit obligation: (In thousands)
Projected benefit obligation, beginning of year $ 167,931 $ 155,653 $ 1,961 $ 2,127
Service cost 51 173 — —
Interest cost 8,272 8,213 96 112
Actuarial losses (gains) 24,872 12,072 159 (170 )
Benefits paid (6,692 ) (8,180 ) — (108 )
Curtailments and settlements — — (283 ) —
Projected benefit obligation, end of year $ 194,434 $ 167,931 $ 1,933 $ 1,961
Pension Benefits Other Benefits
2012 2011 2012 2011
Change in plan assets: (In thousands)
Fair value of plan assets, beginning of year $ 81,193 $ 84,863 $ — $ —
Actual return on plan assets 8,013 (3,247 ) — —
Contributions by employer 9,769 7,757 283 108
Benefits paid (6,692 ) (8,180 ) — (108 )
Curtailments and settlements — — (283 ) —
Fair value of plan assets, end of year $ 92,283 $ 81,193 $ — $ —
Pension Benefits Other Benefits
2012 2011 2012 2011
Funded status: (In thousands)
Unfunded benefit obligation, end of year $ (102,151 ) $ (86,738 ) $ (1,933 ) $ (1,961 )
Pension Benefits Other Benefits
2012 2011 2012 2011
Amounts recognized in the Consolidated Balance Sheets
at end of year: (In thousands)
Current liability $ (6,656 ) $ (10,993 ) $ (158 ) $ (166 )
Long-term liability (95,495 ) (75,745 ) (1,775 ) (1,795 )
Recognized liability $ (102,151 ) $ (86,738 ) $ (1,933 ) $ (1,961 )
Pension Benefits Other Benefits
2012 2011 2012 2011
Amounts recognized in accumulated other
comprehensive loss at end of year: (In thousands)
Net actuarial loss (gain) $ 53,368 $ 31,108 $ (49 ) $ (217 )
 
The accumulated benefit obligation for our defined benefit pension plans was $194.4 million and $167.9 million at December 30, 2012 and December 25, 2011, respectively. Each of our defined benefit pension plans had accumulated benefit obligations that exceeded the fair value of plan assets at December 30, 2012 and December 25, 2011, respectively.
 
Net Periodic Benefit Cost (Income)

Net pension and other postretirement costs included the following components:

Pension Benefits Other Benefits
2012 2011 2010 2012 2011 2010
(In thousands)
Service cost $ 51 $ 173 $ 165 $ — $ — $ —
Interest cost 8,272 8,213 8,659 96 112 115
Estimated return on plan assets (5,867 ) (6,177 ) (6,117 ) — — —
Curtailment loss — 16 36 — — —
Settlement loss (gain) — — 1,504 (7 ) — —
Amortization of prior service cost — 3 3 — — —
Amortization of net loss (gain) 465 96 1 (2 ) — —
Net cost $ 2,921 $ 2,324 $ 4,251 $ 87 $ 112 $ 115
 
Economic Assumptions
 
The weighted average assumptions used in determining pension and other postretirement plan information were as follows:
Pension Benefits Other Benefits
2012 2011 2010 2012 2011 2010
Benefit obligation:
Discount rate 4.22 % 5.09 % 5.50 % 4.22 % 5.09 % 5.50 %
Rate of compensation increase NA 3.00 % 3.00 % NA NA NA
Net pension and other postretirement cost:
Discount rate 5.09 % 5.50 % 5.69 % 5.09 % 5.50 % 5.69 %
Rate of compensation increase 3.00 % 3.00 % 3.00 % NA NA NA
Expected return on plan assets 7.50 % 7.75 % 7.67 % NA NA NA

The expected rate of return on plan assets was determined based on the current interest rate environment and historical market premiums relative to the fixed income rates of equities and other asset classes. We also take into consideration anticipated asset allocations, investment strategies and the views of various investment professionals when developing this rate.
 
Plan Assets

The following table reflects the pension plans’ actual asset allocations:

2012 2011
Common collective trusts that invest in equity securities 71 % 71 %
Common collective trusts that invest in fixed income securities 29 % 29 %
Total assets 100 % 100 %
 
Absent regulatory or statutory limitations, the target asset allocation for the investment of the assets for our ongoing pension plans is 30% in fixed income securities and 70% in equity securities. The plans only invest in fixed income and equity instruments for which there is a ready public market. We develop our expected long-term rate of return assumptions based on the historical rates of returns for equity and fixed income securities of the type in which our plans invest. 

The fair value measurements of plan assets fell into the following levels of the fair value hierarchy as of December 30, 2012 and December 25, 2011:

2012 2011
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(In thousands)
Common collective trusts
the invest in:
Equity securities $ — $ 65,145 $ — $ 65,145 $ — $ 57,495 $ — $ 57,495
Fixed income securities — 27,138 — 27,138 — 23,698 — 23,698
Total $ — $ 92,283 $ — $ 92,283 $ — $ 81,193 $ — $ 81,193
 
The valuation of plan assets in Level 2 is determined using a market approach based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for substantially the full term of the financial instrument. Level 2 securities primarily include equity and fixed income securities funds.
 
Benefit Payments

The following table reflects the benefits as of December 30, 2012 expected to be paid in each of the next five years and in the aggregate for the five years thereafter from our pension and other postretirement plans. Because our pension plans are primarily funded plans, the anticipated benefits with respect to these plans will come primarily from the trusts established for these plans. Because our other postretirement plans are unfunded, the anticipated benefits with respect to these plans will come from our own assets.

Pension
Benefits Other Benefits
(In thousands)
2013 $ 12,040 $ 158
2014 11,774 160
2015 11,307 161
2016 11,371 162
2017 11,304 162
2018-2022 53,511 763
Total $ 111,307 $ 1,566
 
We anticipate contributing $6.7 million and $0.2 million, as required by funding regulations or laws, to our pension and other postretirement plans, respectively, during 2013.

Unrecognized Benefit Amounts in Accumulated Other Comprehensive Loss (Income)

The amounts in accumulated other comprehensive income (loss) that were not recognized as components of net periodic benefits cost and the changes in those amounts are as follows:

Pension Benefits Other Benefits
2012 2011 2010 2012 2011 2010
(In thousands)
Net actuarial loss (gain),
beginning of year $ 31,108 $ 9,708 $ 10,017 $ (217 ) $ (47 ) $ (50 )
Amortization (465 ) (96 ) (1 ) 2 — —
Curtailment and settlement
adjustments — — (1,768 ) 7 — —
Actuarial loss (gain) 24,872 12,072 6,675 159 (170 ) 3
Asset loss (gain) (2,147 ) 9,424 (5,215 ) — — —
Net actuarial loss (gain),
end of year $ 53,368 $ 31,108 $ 9,708 $ (49 ) $ (217 ) $ (47 )
Net prior service cost,
beginning of year $ — $ 19 $ 58 $ — $ — $ —
Amortization — (19 ) (39 ) — — —
Net prior service cost, end
of year $ — $ — $ 19 $ — $ — $ —

The Company expects to recognize in net pension cost throughout 2013 an actuarial loss of $1.1 million that was recorded in accumulated other comprehensive income at December 30, 2012.

Defined Contribution Plans

The Company currently sponsors two defined contribution retirement savings plans:

  • The Pilgrim’s Pride Retirement Savings Plan (the “RS Plan”), a Section 401(k) salary deferral plan, and
  • The To-Ricos Employee Savings and Retirement Plan (the “To-Ricos Plan”), a Section 1165(e) salary deferral plan.

Under the RS Plan, eligible U.S. employees may voluntarily contribute a percentage of their compensation. The Company matches up to 30.0% of the first 2.14% to 6.00% of salary based on the salary deferral and compensation levels up to $245,000. The To-Ricos Plan is maintained for certain eligible Puerto Rican employees. Under the To-Ricos Plan, eligible employees may voluntarily contribute a percentage of their compensation and there are various company matching provisions.

The Company also maintains three postretirement plans for eligible Mexico employees as required by Mexico law that primarily cover termination benefits.

The Company’s expenses related to its defined contribution plans totaled $5.7 million, $5.5 million and $5.2 million in 2012, 2011 and 2010, respectively.

Certain retirement plans that the Company sponsors invest in a variety of financial instruments. Certain postretirement funds in which the Company participates hold significant amounts of mortgage-backed securities. However, none of the mortgages collateralizing these securities are considered subprime.