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BENEFIT PLANS | 3 Months Ended
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Oct. 27, 2018
Retirement Benefits [Abstract] |
BENEFIT PLANS | BENEFIT PLANS The Company acquired various pension and other post retirement benefit plans with the acquisition of Supervalu, which resulted in the revaluation of pension and other postretirement benefit plan obligations as of the acquisition date. The Company’s employees who participate are covered by various contributory and non-contributory pension, profit sharing or 401(k) plans. The Company’s primary defined benefit pension plan, the SUPERVALU INC. Retirement Plan, and certain supplemental executive retirement plans were closed to new participants and service crediting ended for all participants as of December 31, 2007. Pay increases were reflected in the amount of benefits accrued in these plans until December 31, 2012. More than one-half of the union employees participate in multiemployer retirement plans under collective bargaining agreements. The remaining either participate in plans sponsored by the Company or are not currently eligible to participate in a retirement plan. In addition to sponsoring both defined benefit and defined contribution pension plans, the Company provides healthcare and life insurance benefits for eligible retired employees under postretirement benefit plans. The Company also provide certain health and welfare benefits, including short-term and long-term disability benefits, to inactive disabled employees prior to retirement. The terms of the postretirement benefit plans vary based on employment history, age and date of retirement. For many retirees, the Company provides a fixed dollar contribution and retirees pay contributions to fund the remaining cost. Net periodic benefit (income) cost and other changes in plan assets and benefit obligations recognized in Net periodic benefit income, excluding service cost for defined benefit pension and other postretirement benefit plans consist of the following (in thousands):
| 13-Week Period Ended October 27, 2018
| Pension Benefits |  | Other Postretirement Benefits
Service cost | $ | — |  |  | $ | 4 |
Interest cost | 1,847 |  |  | 38 |
Expected return on plan assets | (2,724 | ) |  | (5 | )
Net periodic benefit (income) cost | $ | (877 | ) |  | $ | 37 |
Contributions to benefit plans | $ | (37 | ) |  | $ | (9 | )
The benefit obligation, fair value of plan assets and funded status of our defined benefit pension plans and other postretirement benefit plans assumed with the Supervalu acquisition consisted of the following as of the acquisition date (in thousands):
| October 22, 2018
| Pension Benefits |  | Other Postretirement Benefits
Benefit obligation as of October 22, 2018 | $ | 2,499,954 |  |  | $ | 52,276 |
Fair value of plan assets at October 22, 2018 | 2,305,020 |  |  | 11,586 |
Unfunded status at October 22, 2018 | $ | (194,934 | ) |  | $ | (40,690 | )
For the defined benefit pension plans, the accumulated benefit obligation is equal to the projected benefit obligation. Amounts recognized in the Condensed Consolidated Balance Sheets as of the acquisition date consist of the following (in thousands):
| October 22, 2018
| Pension Benefits |  | Other Postretirement Benefits
Accrued compensation and benefits | $ | 1,300 |  |  | $ | — |
Pension and other postretirement benefit obligations | 193,634 |  |  | 40,690 |
Total | $ | 194,934 |  |  | $ | 40,690 |
Assumptions Weighted average assumptions used to determine benefit obligations and net periodic benefit cost consisted of the following:
| October 22, 2018
Benefit obligation assumptions: |
Discount rate | 4.30% - 4.42%
The Company reviews and select the discount rate to be used in connection with measuring our pension and other postretirement benefit obligations annually. In determining the discount rate, the Company uses the yield on corporate bonds (rated AA or better) that coincides with the cash flows of the plans’ estimated benefit payouts. The model uses a yield curve approach to discount each cash flow of the liability stream at an interest rate specifically applicable to the timing of each respective cash flow. The model totals the present values of all cash flows and calculates the equivalent weighted average discount rate by imputing the singular interest rate that equates the total present value with the stream of future cash flows. This resulting weighted average discount rate is then used in evaluating the final discount rate to be used. For those retirees whose health plans provide for variable employer contributions, the assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation before age 65 was 7.80 percent as of October 22, 2018. The assumed healthcare cost trend rate for retirees before age 65 will decrease each year through fiscal 2026, until it reaches the ultimate trend rate of 4.50 percent. For those retirees whose health plans provide for variable employer contributions, the assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation after age 65 was 8.70 percent as of October 22, 2018. The assumed healthcare cost trend rate for retirees after age 65 will decrease through fiscal 2026, until it reaches the ultimate trend rate of 4.50 percent. For those retirees whose health plans provide for a fixed employer contribution rate, a healthcare cost trend is not applicable. The healthcare cost trend rate assumption would have had the following impact on the amounts reported: a 100 basis point increase in the trend rate would have impacted the Company’s service and interest cost by approximately $0.1 million for the portion of the Company’s fiscal year following the transaction date; a 100 basis point decrease in the trend rate would have decreased the Company’s accumulated postretirement benefit obligation as of the Company’s acquisition date by approximately $2.7 million; and a 100 basis point increase would have increased our accumulated postretirement benefit obligation by approximately $3.2 million. Pension Plan Assets Pension plan assets are held in a master trust and invested in separately managed accounts and other commingled investment vehicles holding domestic and international equity securities, domestic fixed income securities and other investment classes. The Company employs a total return approach whereby a diversified mix of asset class investments is used to maximize the long-term return of plan assets for an acceptable level of risk. Alternative investments are also used to enhance risk-adjusted long-term returns while improving portfolio diversification. Risk is managed through diversification across asset classes, multiple investment manager portfolios and both general and portfolio-specific investment guidelines. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and our financial condition. This asset allocation policy mix is reviewed annually and actual versus target allocations are monitored regularly and rebalanced on an as-needed basis. Plan assets are invested using a combination of active and passive investment strategies. Passive, or “indexed” strategies, attempt to mimic rather than exceed the investment performance of a market benchmark. The plan’s active investment strategies employ multiple investment management firms. Managers within each asset class cover a range of investment styles and approaches and are combined in a way that controls for capitalization, and style biases (equities) and interest rate exposures (fixed income) versus benchmark indices. Monitoring activities to evaluate performance against targets and measure investment risk take place on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews. The asset allocation targets and the actual allocation of pension plan assets are as follows:
Asset Category | Target |  | October 22, 2018
Domestic equity | 20.8 | % |  | 19.8 | %
International equity | 6.0 | % |  | 5.4 | %
Private equity | 5.0 | % |  | 5.0 | %
Fixed income | 64.8 | % |  | 64.2 | %
Real estate | 3.4 | % |  | 5.6 | %
Total | 100.0 | % |  | 100.0 | %
The following is a description of the valuation methodologies used for investments measured at fair value: Common stock—Valued at the closing price reported in the active market in which the individual securities are traded. Common collective trusts—Investments in common/collective trust funds are stated at net asset value (“NAV”) as determined by the issuer of the common/collective trust funds and is based on the fair value of the underlying investments held by the fund less its liabilities. The majority of the common/collective trust funds have a readily determinable fair value and are classified as level 2. Other investments in common/collective trust funds determine NAV on a less frequent basis and/or have redemption restrictions. For these investments, NAV is used as a practical expedient to estimate fair value. Corporate bonds—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 fair value is based upon an industry valuation model, which maximizes observable inputs. Government securities—Certain government securities are valued at the closing price reported in the active market in which the security is traded. Other government securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings. Mortgage backed securities—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 securities, the fair value is based upon an industry valuation model, which maximizes observable inputs. Mutual funds—Mutual funds are valued at the closing price reported in the active market in which the individual securities are traded. Private equity and real estate partnerships—Valued based on NAV provided by the investment manager, updated for any subsequent partnership interests’ cash flows or expected changes in fair value. The NAV is used as a practical expedient to estimate fair value. Other—Valued under an approach that maximizes observable inputs, such as gathering consensus data from the market participant’s best estimate of mid-market pricing for actual trades or positions held. The valuation methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement. The fair value of assets of our defined benefit pension plans and other postretirement benefits plans held in master trusts as of October 22, 2018 assumed with the Supervalu acquisition, by asset category, consisted of the following as of the acquisition date (in thousands):
| Level 1 |  | Level 2 |  | Level 3 |  | Measured at NAV |  | Total
Common stock | $ | 299,234 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 299,234 |
Common collective trusts | — |  |  | 739,822 |  |  | — |  |  | 78,230 |  |  | 818,052 |
Corporate bonds | — |  |  | 368,145 |  |  | — |  |  | — |  |  | 368,145 |
Government securities | 51,030 |  |  | 155,279 |  |  | — |  |  | — |  |  | 206,309 |
Mutual funds | 887 |  |  | 309,582 |  |  | — |  |  | — |  |  | 310,469 |
Mortgage-backed securities | — |  |  | 14,920 |  |  | — |  |  | — |  |  | 14,920 |
Other | 52,952 |  |  | 2,193 |  |  | — |  |  | — |  |  | 55,145 |
Private equity and real estate partnerships | — |  |  |  |  | — |  |  | 244,332 |  |  | 244,332 |
Total plan assets at fair value | $ | 404,103 |  |  | $ | 1,589,941 |  |  | $ | — |  |  | $ | 322,562 |  |  | $ | 2,316,606 |
Contributions No minimum pension contributions are required to be made to the SUPERVALU Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in fiscal 2019. The Company expects to contribute approximately $5.0 million to $10.0 million to its defined benefit pension plans and postretirement benefit plans in fiscal 2019. The Company funds its defined benefit pension plans based on the minimum contribution required under the Code, ERISA the Pension Protection Act of 2006 and other applicable laws, as determined by our external actuarial consultant, and additional contributions made at its discretion. The Company may accelerate contributions or undertake contributions in excess of the minimum requirements from time to time subject to the availability of cash in excess of operating and financing needs or other factors as may be applicable. The Company assesses the relative attractiveness of the use of cash including such factors as expected return on assets, discount rates, cost of debt, reducing or eliminating required Pension Benefit Guaranty Corporation variable rate premiums or the ability to achieve exemption from participant notices of underfunding. Estimated Future Benefit Payments The estimated future benefit payments to be made from our defined benefit pension and other postretirement benefit plans, which reflect expected future service, are as follows (in thousands):
Fiscal Year | Pension Benefits |  | Other Postretirement Benefits
Remaining fiscal 2019 | $ | 120,447 |  |  | $ | 3,869 |
2020 | 158,500 |  |  | 4,800 |
2021 | 163,100 |  |  | 4,700 |
2022 | 169,900 |  |  | 4,600 |
2023 | 174,600 |  |  | 4,500 |
Years 2024-2027 | 849,500 |  |  | 19,400 |
Defined Contribution Plans The Company sponsors defined contribution and profit sharing plans pursuant to Section 401(k) of the Internal Revenue Code. Employees may contribute a portion of their eligible compensation to the plans on a pre-tax basis. We match a portion of certain employee contributions by contributing cash into the investment options selected by the employees. The total amount contributed by us to the plans is determined by plan provisions or at our discretion. Total employer contribution expenses for these plans were $3.3 million and $2.8 million for the first quarters of fiscal 2019 and 2018, respectively. Post-Employment Benefits The Company recognizes an obligation for benefits provided to former or inactive employees. The company is self-insured for certain disability plan programs, which comprise the primary benefits paid to inactive employees prior to retirement. Amounts recognized in the Condensed Consolidated Balance Sheets consisted of the following (in thousands):
|  | Post-Employment Benefits
|  | October 27, 2018
Accrued compensation and benefits |  | $ | 2,730 |
Other long-term liabilities |  | 5,135 |
Total |  | $ | 7,865 |
Multiemployer Pension Plans The Company contributes to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and the unions that are parties to the relevant collective bargaining agreements. Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. The Company acquired multiemployer plan obligations related to continuing and discontinued operations as part of the Supervalu acquisition. The risks of participating in these multiemployer plans are different from the risks associated with single-employer plans in the following respects:
a. | Assets contributed to the multiemployer plan by one employer are held in trust and 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 choose to stop participating in some multiemployer plans, or make market exits or closures or otherwise have participation in the plan drop below certain levels, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company’s participation in these plans is outlined in the table below. The EIN-Pension Plan Number column provides the Employer Identification Number (“EIN”) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) zone status available in 2018 and 2017 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that we received from the plan and is annually certified by each plan’s actuary. Among other factors, red zone status plans are generally less than 65 percent funded and are considered in critical status, plans in yellow zone status are less than 80 percent funded and are considered in endangered or seriously endangered status, and green zone plans are at least 80 percent funded. The Multiemployer Pension Reform Act of 2014 (“MPRA”) created a new zone status called “critical and declining” or “Deep Red”. Plans are generally considered Deep Red if they are projected to become insolvent within 15 years. The FIP/RP Status Pending/Implemented column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each plan. The following table contains information about the Company’s significant multiemployer plans:
| EIN—Pension Plan Number |  | Plan Month/Day End Date |  | Pension Protection Act Zone Status |  | FIP/RP Status Pending/ Implemented |  | Surcharges Imposed(1) |  | Amortization Provisions
Pension Fund | 2019 |
Minneapolis Food Distributing Industry Pension Plan(2) | 416047047-001 |  | 12/31 |  | Green |  | No |  | No |  | No
Minneapolis Retail Meat Cutters and Food Handlers Pension Fund(3) | 410905139-001 |  | 2/28 |  | Yellow |  | Implemented |  | No |  | No
Central States, Southeast and Southwest Areas Pension Fund(2)(3) | 366044243-001 |  | 12/31 |  | Deep Red |  | Implemented |  | No |  | Yes
UFCW Unions and Participating Employer Pension Fund(3) | 526117495-001 |  | 10/31 |  | Red |  | Implemented |  | No |  | No
Western Conference of Teamsters Pension Plan Trust(2) | 916145047-001 |  | 12/31 |  | Green |  | No |  | No |  | No
UFCW Unions and Employers Pension Plan(3) | 396069053-001 |  | 10/31 |  | Red |  | Implemented |  | No |  | Yes
All Other Multiemployer Pension Plans(4) |  |  |  |  |  |  |  |  |  |  |
(1) | PPA surcharges are 5 percent or 10 percent of eligible contributions and may not apply to all collective bargaining agreements or total contributions to each plan.
(2) | These multiemployer pension plans reflect plans underlying continuing operations.
(3) | These multiemployer pension plans reflect plans underlying discontinued operations.
(4) | All Other Multiemployer Pension Plans include 6 plans, none of which is individually significant when considering contributions to the plan, severity of the underfunded status or other factors.
The following table describes the expiration of the Company’s collective bargaining agreements associated with the significant multiemployer plans in which we participate:
|  |  | Most Significant Collective Bargaining Agreement |  |
Pension Fund | Range of Collective Bargaining Agreement Expiration Dates |  | Total Collective Bargaining Agreements |  | Expiration Date |  | % of Associates under Collective Bargaining Agreement (1) |  | Over 5% Contribution 2018
Minneapolis Food Distributing Industry Pension Plan(2) | 5/31/2022 |  | 1 |  |  | 5/31/2022 |  | 100.0 | % |  | Yes
Minneapolis Retail Meat Cutters and Food Handlers Pension Fund(3) | 3/4/2023 |  | 1 |  |  | 3/4/2023 |  | 100.0 | % |  | Yes
Central States, Southeast and Southwest Areas Pension Fund(2)(3) | 5/31/2019 - 9/14/2019 |  | 4 |  |  | 9/14/2019 |  | 42.3 | % |  | No
UFCW Unions and Participating Employer Pension Fund(3) | 7/9/2017 - 7/11/2020 |  | 2 |  |  | 7/11/2020 |  | 68.2 | % |  | Yes
Western Conference of Teamsters Pension Trust(2) | 4/20/2019 - 4/22/2023 |  | 21 |  |  | 7/17/2021 |  | 20.8 | % |  | No
UFCW Unions and Employers Pension Plan(3) | 4/6/2019 |  | 1 |  |  | 4/6/2019 |  | 100.0 | % |  | Yes
(1) | Company participating employees in the most significant collective bargaining agreement as a percent of all Company employees participating in the respective fund.
(2) | These multiemployer pension plans reflect plans of continuing operations.
(3) | These multiemployer pension plans reflect plans of discontinued operations.
In connection with the closure of the Shop ‘n Save locations and the acquisition of Supervalu, we acquired a $35.7 million multiemployer pension plan withdrawal liability, under which payments will be made over the next 20 years and is included in Other long-term liabilities. Multiemployer Postretirement Benefit Plans Other than Pensions The Company also makes contributions to multiemployer health and welfare plans in amounts set forth in the related collective bargaining agreements. These plans provide medical, dental, pharmacy, vision and other ancillary benefits to active employees and retirees as determined by the trustees of each plan. The vast majority of the Company’s contributions benefit active employees and as such, may not constitute contributions to a postretirement benefit plan. However, the Company is unable to separate contribution amounts to postretirement benefit plans from contribution amounts paid to benefit active employees. The Company co ntributed $0.1 million in both the first quarter of fiscal 2019 and fiscal 2018 to multiemployer health and welfare plans. If healthcare provisions within these plans cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Operating expenses could increase in the future. Collective Bargaining Agreements As of October 27, 2018, we had approximately 19,900 employees. Approximately 4,900 employees are covered by 45 collective bargaining agreements. During the first quarter of fiscal 2019, 6 collective bargaining agreements covering approximately 775 employees were renegotiated. One collective bargaining agreements covering approximately 10 employees expired without their terms being renegotiated. Negotiations are expected to continue with the bargaining units representing the employees subject to those agreements. During fiscal 2020, 6 collective bargaining agreements covering approximately 460 employees are scheduled to expire. During fiscal 2019, 11 collective bargaining agreements covering approximately 1,100 employees are scheduled to expire.

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