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BENEFIT PLANS | 12 Months Ended
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Aug. 03, 2019
Retirement Benefits [Abstract] |
BENEFIT PLANS | NOTE 14—BENEFIT PLANS 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 plans are the SUPERVALU INC. Retirement Plan, Unified Grocers pension plan and certain supplemental executive retirement plans. These 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. Approximately 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 provides 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. For the defined benefit pension plans, the accumulated benefit obligation is equal to the projected benefit obligation. The benefit obligation, fair value of plan assets and funded status of our defined benefit pension plans and other postretirement benefit plans consisted of the following:
|  | 2019
(in thousands) |  | Pension Benefits |  | Other Postretirement Benefits
Changes in Benefit Obligation |  |  |  |
Benefit obligation at acquisition date of October 22, 2018 |  | $ | 2,499,954 |  |  | $ | 52,276 |
Plan amendment |  | — |  |  | (4,199 | )
Service cost |  | — |  |  | 173 |
Interest cost |  | 75,706 |  |  | 1,447 |
Actuarial loss (gain) |  | 249,899 |  |  | (9,836 | )
Benefits paid |  | (116,285 | ) |  | (2,179 | )
Benefit obligation at end of year |  | 2,709,274 |  |  | 37,682 |
Changes in Plan Assets |  |  |  |
Fair value of plan assets at acquisition date of October 22, 2018 |  | 2,305,020 |  |  | 11,586 |
Actual return on plan assets |  | 303,696 |  |  | 260 |
Employer contributions |  | 4,116 |  |  | 1,636 |
Benefits paid |  | (116,285 | ) |  | (2,239 | )
Fair value of plan assets at end of year |  | 2,496,547 |  |  | 11,243 |
Unfunded status at end of year |  | $ | (212,727 | ) |  | $ | (26,439 | )
Net periodic benefit (income) cost and other changes in plan assets and benefit obligations recognized consist of the following:
|  | 2019
(in thousands) |  | Pension Benefits |  | Other Postretirement Benefits
Net Periodic Benefit (Income) Cost |  |  |  |
Service cost |  | $ | — |  |  | $ | 173 |
Interest cost |  | 75,706 |  |  | 1,447 |
Expected return on plan assets |  | (111,695 | ) |  | (184 | )
Net periodic benefit (income) cost |  | (35,989 | ) |  | 1,436 |
Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive Income (Loss) |  |  |  |
Prior service benefit |  | — |  |  | (4,199 | )
Amortization of prior service benefit |  | — |  |  | — |
Net actuarial loss (gain) |  | 57,902 |  |  | (9,912 | )
Total expense (benefit) recognized in Other comprehensive income (loss) |  | 57,902 |  |  | (14,111 | )
Total expense (benefit) recognized in net periodic benefit cost (income) and Other comprehensive income (loss) |  | $ | 21,913 |  |  | $ | (12,675 | )
No estimated net actuarial loss is expected to be amortized from Accumulated other comprehensive loss into net periodic benefit cost for the defined benefit pension plans during fiscal 2020. The estimated net amount of prior service benefit and net actuarial gain for the postretirement benefit plans that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost during fiscal 2020 is $3.1 million. Amounts recognized in the Consolidated Balance Sheets as of August 3, 2019 consist of the following:
|  | August 3, 2019
(in thousands) |  | Pension Benefits |  | Other Postretirement Benefits
Accrued compensation and benefits |  | $ | 1,900 |  |  | $ | — |
Pension and other postretirement benefit obligations |  | 210,827 |  |  | 26,439 |
Total |  | $ | 212,727 |  |  | $ | 26,439 |
Assumptions Weighted average assumptions used to determine benefit obligations and net periodic benefit cost consisted of the following:
|  | 2019
Benefit obligation assumptions: |  |
Discount rate |  | 2.99% - 3.49% |
Net periodic benefit cost assumptions: |  |
Discount rate |  | 4.30% - 4.42% |
Rate of compensation increase |  | — | %
Expected return on plan assets(1) |  | 2.25% - 6.50% |
(1) | Expected return on plan assets is estimated by utilizing forward-looking, long-term return, risk and correlation assumptions developed and updated annually by the Company. These assumptions are weighted by the actual or target allocation to each underlying asset class represented in the pension plan asset portfolio. We also assess the expected long-term return on plan assets assumption by comparison to long-term historical performance on an asset class to ensure the assumption is reasonable. Long-term trends are also evaluated relative to market factors such as inflation, interest rates, and fiscal and monetary policies in order to assess the capital market assumptions.
The Company reviews and selects 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 7.30 percent as of August 3, 2019. 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 8.10 percent as of August 3, 2019. 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 increase the accumulated postretirement benefit obligation by approximately $0.7 million as of the end of fiscal 2020 and would increase service and interest cost by less than $0.1 million. Conversely, a 100 basis point decrease in the healthcare cost trend rate would decrease the Company’s accumulated postretirement benefit obligation as of the end of fiscal 2020 by approximately $0.7 million and would decrease service and interest cost by less than $0.1 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 |  | 2019
Domestic equity |  | 21.2 | % |  | 22.1 | %
International equity |  | 6.7 | % |  | 6.2 | %
Private equity |  | 5.3 | % |  | 4.2 | %
Fixed income |  | 60.9 | % |  | 62.3 | %
Real estate |  | 5.9 | % |  | 5.2 | %
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 - Consists primarily of options, futures, and money market investments priced at $1. 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 August 3, 2019, by asset category, consisted of the following (in thousands):
|  | Level 1 |  | Level 2 |  | Level 3 |  | Measured at NAV as a Practical Expedient |  | Total
Common stock |  | $ | 397,800 |  |  | $ | — |  |  | $ |  | $ |  | $ | 397,800 |
Common collective trusts |  | — |  |  | 1,046,590 |  |  | — |  |  | 83,504 |  |  | 1,130,094 |
Corporate bonds |  | — |  |  | 362,251 |  |  | — |  |  | — |  |  | 362,251 |
Government securities |  | — |  |  | 248,872 |  |  | — |  |  | — |  |  | 248,872 |
Mutual funds |  | 469 |  |  | 62,254 |  |  | — |  |  | — |  |  | 62,723 |
Mortgage-backed securities |  | — |  |  | 10,920 |  |  | — |  |  | — |  |  | 10,920 |
Other |  | 5,603 |  |  | 73,745 |  |  | — |  |  | — |  |  | 79,348 |
Private equity and real estate partnerships |  | — |  |  | — |  |  | — |  |  | 204,539 |  |  | 204,539 |
Total plan assets at fair value |  | $ | 403,872 |  |  | $ | 1,804,632 |  |  | $ | — |  |  | $ | 288,043 |  |  | $ | 2,496,547 |
Contributions No minimum pension contributions are required to be made to the SUPERVALU Retirement Plan in fiscal 2020. Minimum pension contributions of $8.25 million are required to be made under the Unified Grocers, Inc. Cash Balance Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in fiscal 2020. The Company expects to contribute approximately $0.0 million to $6.0 million to its other defined benefit pension plans and postretirement benefit plans in fiscal 2020. 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. Lump Sum Pension Settlement Offering On August 1, 2019, we amended the SUPERVALU Retirement Plan to provide for a lump sum settlement window. On August 2, 2019, we sent plan participants lump sum settlement election offerings that committed the SUPERVALU Retirement Plan to pay certain deferred vested pension plan participants and retirees, that make such an election, a lump sum payment in exchange for their rights to receive ongoing payments from the plan. The lump sum payment amounts are equal to the present value of the participant’s pension benefits, and will be made to certain former (i) retired associates and beneficiaries who are receiving their monthly pension benefit payment and (ii) terminated associates who are deferred vested in the Plan, had not yet begun receiving monthly pension benefit payments and who are not eligible for any prior lump sum offerings under the plan. Benefit obligations associated with the lump sum offering have been incorporated into the funded status utilizing the actuarially determined lump sum payments based on estimated offer acceptances. The Company expects the Plan to make lump sum settlement payments to Plan participants on or around November 1, 2019, which we anticipate will result in a required remeasurement of the defined benefit pension obligations under the plan at that time. 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
2020 |  | $ | 608,400 |  |  | $ | 4,000 |
2021 |  | 119,700 |  |  | 3,800 |
2022 |  | 125,200 |  |  | 3,600 |
2023 |  | 127,800 |  |  | 3,500 |
2024 |  | 131,300 |  |  | 3,300 |
Years 2025-2029 |  | 671,200 |  |  | 13,400 |
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 $21.0 million, $11.6 million and $10.1 million for fiscal 2019, 2018 and 2017, 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 Consolidated Balance Sheets consisted of the following (in thousands):
| Post-Employment Benefits
| August 3, 2019
Accrued compensation and benefits | $ | 2,356 |
Other long-term liabilities | 5,053 |
Total | $ | 7,409 |
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 relates to the plans’ most recent fiscal year-end. 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. Certain plans have been aggregated in the All Other Multiemployer Pension Plans line in the following table, as the contributions to each of these plans are not individually material. None of our collective bargaining agreements require that a minimum contribution be made to these plans. At the date the financial statements were issued, Forms 5500 were generally not available for the plan years ending in 2018. The following table contains information about the Company’s significant multiemployer plans (in millions):
|  |  |  |  | Pension Protection Act Zone Status |  |  |  | Contributions |  |  |  |
Pension Fund | EIN-Pension Plan Number |  | Plan Month/Day End Date |  | 2018 |  | FIP/RP Status Pending/Implemented |  | 2019 |  | Surcharges Imposed(1) |  | Amortization Provisions
Minneapolis Food Distributing Industry Pension Plan(2) | 416047047-001 |  | 12/31 |  | Green |  | No |  | $ | 8 |  |  | No |  | No
Minneapolis Retail Meat Cutters and Food Handlers Pension Fund(3) | 410905139-001 |  | 2/28 |  | Red |  | Implemented |  | 7 |  |  | No |  | No
Minneapolis Retail Meat Cutters and Food Handlers Variable Annuity Pension Fund(3) | 83-2598425 |  | 12/31 |  | N/A |  | N/A |  | 1 |  |  | N/A |  | N/A
Central States, Southeast and Southwest Areas Pension Fund(2) | 366044243-001 |  | 12/31 |  | Deep Red |  | Implemented |  | 5 |  |  | No |  | Yes
UFCW Unions and Participating Employer Pension Fund(3) | 526117495-001 |  | 12/31 |  | Red |  | Implemented |  | 4 |  |  | No |  | No
Western Conference of Teamsters Pension Plan Trust(2) | 916145047-001 |  | 12/31 |  | Green |  | No |  | 12 |  |  | No |  | No
UFCW Unions and Employers Pension Plan(3) | 396069053-001 |  | 10/31 |  | Deep Red |  | Implemented |  | 1 |  |  | Yes |  | Yes
All Other Multiemployer Pension Plans(4) |  |  |  |  |  |  |  |  | 3 |  |  |  |  |
Total |  |  |  |  |  |  |  |  | $ | 41 |  |  |  |  |
(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 are associated with continuing operations.
(3) | These multiemployer pension plans are associated with 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% Contributions 2019
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
Minneapolis Retail Meat Cutters and Food Handlers Variable Annuity Pension Fund(3) | 3/4/2023 |  | 1 |  |  | 3/4/2023 |  | 100.0 | % |  | N/A (contributions began 1/1/2019)
Central States, Southeast and Southwest Areas Pension Fund(2) | 5/31/2019 |  | 4 |  |  | 9/14/2019 |  | 39.4 | % |  | No
UFCW Unions and Participating Employer Pension Fund(3) | 7/11/2020 |  | 2 |  |  | 7/11/2020 |  | 71.3 | % |  | Yes
Western Conference of Teamsters Pension Plan Trust(2) | 4/20/2019 |  | 20 |  |  | 4/22/2023 |  | 15.6 | % |  | No
UFCW Unions and Employers Pension Plan(3) | 4/9/2022 |  | 1 |  |  | 4/9/2022 |  | 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 are associated with continuing operations.
(3) | These multiemployer pension plans are associated with 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. In addition, the Company had a withdrawal liability related to one of its multi-employer plans of approximately $3.4 million. The Company contributed $41.3 million, $0.5 million and $0.0 million in fiscal 2019, 2018 and 2017, respectively, to multiemployer pension plans. 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 contributed $58.5 million in fiscal 2019 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 August 3, 2019, we had approximately 19,000 employees. Approximately 4,800 employees are covered by 46 collective bargaining agreements, and negotiations are in progress for two initial collective bargaining agreements covering approximately 33 employees. During fiscal 2019, 14 collective bargaining agreements covering approximately 1,300 employees were renegotiated and 6 collective bargaining agreements covering approximately 550 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 470 employees are scheduled to expire.

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