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Postretirement Plans | 9 Months Ended
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Oct. 06, 2018
Compensation And Retirement Disclosure [Abstract] |
Postretirement Plans | 18. POSTRETIREMENT PLANS The following summarizes the company’s balance sheet related pension and other postretirement benefit plan accounts at October 6, 2018 compared to accounts at December 30, 2017 (amounts in thousands):
|  | October 6, 2018 |  |  | December 30, 2017 |
Current liability |  | $ | 935 |  |  | $ | 935 |
Noncurrent liability |  | $ | 41,075 |  |  | $ | 60,107 |
Accumulated other comprehensive loss, net of tax |  | $ | 107,292 |  |  | $ | 78,076 |
Defined Benefit Plans and Nonqualified Plan On September 28, 2018, the Board of Directors approved a resolution to terminate the Flowers Foods, Inc. Retirement Plan No. 1 (“Plan No. 1”), effective December 31, 2018. The plan was closed to new participants on January 1, 1999 and benefit accruals were previously frozen on or before August 1, 2008. The Company has commenced the plan termination process and expects to distribute a portion of the pension plan assets as lump sum payments during late 2019 (or early 2020) with the remaining balance transferred to an insurance company in the form of an annuity. The total payments distributed will depend on the lump sum offer participation rate of eligible participants. Based on the estimated value of assets held in the plan, the Company currently estimates that a cash contribution of approximately $5.0 million to $35.0 million will be required to fully fund the plan’s liabilities at termination. In addition, based on current assumptions, the Company estimates a final non-cash settlement charge of approximately $125.0 million. The company amended our qualified defined benefit plans in October 2015 to allow pension plan participants not yet receiving benefit payments the option to elect to receive their benefit as a single lump sum payment. This amendment was effective as of January 1, 2016. In addition, the company continues to recognize settlement accounting charges each year as a result of the ongoing lump sum payments from the plan. Settlement accounting, which accelerates recognition of a plan’s unrecognized net gain or loss, is triggered if the lump sums paid during a year exceeds the sum of the plan’s service and interest cost. The company determined it was probable a settlement would occur and paid lump sums that exceeded that threshold during our first quarter of fiscal 2018. The table below presents our recognized settlement loss by quarter for the forty weeks ended October 6, 2018 (amounts in thousands:
|  | Settlement charge |
First quarter |  | $ | 4,668 |
Second quarter |  |  | 1,035 |
Third quarter |  |  | 930 |
For the forty weeks ended October 6, 2018 |  | $ | 6,633 |
An additional settlement charge will be recognized in the fourth quarter of fiscal 2018. The amount will depend on the amounts settled and the plan’s unrecognized net gain or loss at the end of the quarter. The company used a measurement date of December 31, 2017 for the defined benefit and postretirement benefit plans described below (excluding Plan No. 1, which has a measurement date of September 30, 2018 due to the settlement). The actuarial loss for Plan No. 1 from December 31, 2017 to September 30, 2018 is primarily due to revaluing the benefit obligations reflecting the plan termination cost to settle the obligations. This valuation assumption basis and method is different than what was used for prior measurement dates, and is a more precise measurement of the obligation now that the termination is imminent. Plan termination is subject to regulatory approval, prevailing market conditions, and other considerations, including interest rates and annuity pricing at the time assets are distributed. For Plan No. 1, a discount rate of 3.47% was used to derive the estimated plan termination obligations as of September 30, 2018. Interest Cost for the fourth quarter of 2018 for Plan No. 1 will not use the granular approach, given that the Plan No. 1’s assets are expected to be distributed within the next 18 months. The long-term expected rate of return, net of expenses, for the defined benefit plans was 5.9% at the March 31, 2018 re-measurement. When Plan No. 1 was re-measured as of June 30, 2018 and September 30, 2018, the expected return was changed from 5.9% to 5.2% due to re-balancing the plan asset allocation to more debt rather than equities as part of our pension de-risking strategy. The mortality assumptions were not changed from the re-measurement as of December 31, 2017. The company voluntarily contributed $10.0 million during our first quarter of fiscal 2018, $30.0 million during our second quarter of fiscal 2018, and $0.1 million during our third quarter of fiscal 2018 to Plan No. 1. A voluntary contribution of $0.6 million was made to Plan No. 2 during the third quarter of fiscal 2018. The net periodic pension cost (income) for the company’s plans include the following components (amounts in thousands):
|  | For the Twelve Weeks Ended |  |  | For the Forty Weeks Ended |
|  | October 6, 2018 |  |  | October 7, 2017 |  |  | October 6, 2018 |  |  | October 7, 2017 |
Service cost |  | $ | 216 |  |  | $ | 174 |  |  | $ | 720 |  |  | $ | 581 |
Interest cost |  |  | 3,166 |  |  |  | 2,779 |  |  |  | 9,413 |  |  |  | 9,792 |
Expected return on plan assets |  |  | (4,464 | ) |  |  | (5,437 | ) |  |  | (14,549 | ) |  |  | (19,191 | )
Settlement loss |  |  | 930 |  |  |  | 3,030 |  |  |  | 6,633 |  |  |  | 3,030 |
Amortization of prior service cost |  |  | 97 |  |  |  | 83 |  |  |  | 291 |  |  |  | 291 |
Amortization of net loss |  |  | 1,126 |  |  |  | 1,365 |  |  |  | 3,956 |  |  |  | 4,792 |
Total net periodic pension cost (income) |  | $ | 1,071 |  |  | $ | 1,994 |  |  | $ | 6,464 |  |  | $ | (705 | )
The components of net periodic benefit cost (income) other than the service cost are included in the other components of net periodic pension and postretirement benefits credit line item on our Condensed Consolidated Statements of Operations. Postretirement Benefit Plan The company provides certain medical and life insurance benefits for eligible retired employees covered under the active medical plans. The plan incorporates an up-front deductible, coinsurance payments and retiree contributions at various premium levels. Eligibility and maximum period of coverage is based on age and length of service. The net periodic postretirement income for the company includes the following components (amounts in thousands):
|  | For the Twelve Weeks Ended |  |  | For the Forty Weeks Ended |
|  | October 6, 2018 |  |  | October 7, 2017 |  |  | October 6, 2018 |  |  | October 7, 2017 |
Service cost |  | $ | 66 |  |  | $ | 59 |  |  | $ | 221 |  |  | $ | 197 |
Interest cost |  |  | 54 |  |  |  | 52 |  |  |  | 181 |  |  |  | 174 |
Amortization of prior service credit |  |  | (49 | ) |  |  | (49 | ) |  |  | (163 | ) |  |  | (163 | )
Amortization of net gain |  |  | (99 | ) |  |  | (114 | ) |  |  | (331 | ) |  |  | (383 | )
Total net periodic postretirement income |  | $ | (28 | ) |  | $ | (52 | ) |  | $ | (92 | ) |  | $ | (175 | )
The components of net periodic postretirement benefits income other than the service cost are included in the other components of net periodic pension and postretirement benefits credit line item on our Condensed Consolidated Statements of Operations. 401(k) Retirement Savings Plan The Flowers Foods, Inc. 401(k) Retirement Savings Plan (“401(k) plan”) covers substantially all the company’s employees who have completed certain service requirements. During the twelve weeks ended October 6, 2018 and October 7, 2017, the total cost and employer contributions were $6.0 million and $6.5 million, respectively. During the forty weeks ended October 6, 2018 and October 7, 2017 the total cost and employer contributions were $19.6 million and $22.0 million, respectively. Multi-employer Pension Plan On August 18, 2017, the union participants of the Bakery and Confectionary Union and Industry International Pension Fund (the “MEPP Fund”) at our Lakeland, Florida plant voted to withdraw from the MEPP Fund in the most recent collective bargaining agreement. The withdrawal was effective, and the union participants were eligible to participate in the 401(k) plan, on November 1, 2017. During the third quarter of fiscal 2017, the company recorded a liability of $15.2 million related to the withdrawal from the MEPP Fund. During the first quarter of fiscal 2018, the company recorded an additional liability of $2.3 million for the final settlement amount of the withdrawal liability. The withdrawal liability was computed as the net present value of 20 years of monthly payments derived from the company’s share of unfunded vested benefits. The company began making payments during the first quarter of fiscal 2018. While this is our best estimate of the ultimate cost of the withdrawal from the MEPP Fund, additional withdrawal liability may be incurred based on the final fund assessment or in the event of a mass withdrawal, as defined by statute following our complete withdrawal. Transition payments, including related tax payments, were made on November 3, 2017 to, and for the benefit of, union participants as part of the collective bargaining agreement. An additional $3.1 million was recorded for these transition payments. The withdrawal liability charge and the transition payments were recorded in the multi-employer pension plan withdrawal costs line item on our Condensed Consolidated Statements of Operations and are in the DSD Segment. The liability on December 30, 2017 was recorded in other accrued current liabilities on the Condensed Consolidated Balance Sheets. We paid $0.2 million during the first quarter of fiscal 2018 and the balance was paid early in the second quarter of fiscal 2018.

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