EMPLOYEE BENEFIT PLANS

The Company maintains defined contribution plans, a deferred compensation plan, and two defined benefit plans. The two defined benefit plans include the OshKosh B'Gosh pension plan and a post-retirement life and medical plan.

Oshkosh B'Gosh Pension Plan

Funded Status

The retirement benefits under the OshKosh B'Gosh pension plan were frozen as of December 31, 2005. A reconciliation of changes in the projected pension benefit obligation and plan assets is as follows:



	For the fiscal year ended
(dollars in thousands)	December 29, 2018			December 30, 2017
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	66,747		$	62,427
Interest cost	2,287			2,446
Actuarial (gain) loss	(4,371		)	4,269
Benefits paid	(2,366		)	(2,395		)
Projected benefit obligation at end of year	$	62,297		$	66,747

Change in plan assets:
Fair value of plan assets at beginning of year	$	54,437		$	51,213
Actual return on plan assets	(2,507		)	5,619
Employer contribution	6,000			—
Benefits paid	(2,366		)	(2,395		)
Fair value of plan assets at end of year	$	55,564		$	54,437

Unfunded status	$	6,733		$	12,310

The accumulated benefit obligation is equal to the projected benefit obligation as of December 29, 2018 and December 30, 2017 because the plan is frozen. The unfunded status is included in other long-term liabilities in the Company's consolidated balance sheet. The Company made a discretionary contribution of $6.0 million to the OshKosh B'Gosh pension plan in fiscal 2018. The Company does not expect to make any contributions to the OshKosh B'Gosh pension plan during fiscal 2019 as the plan's funding exceeds the minimum funding requirements. The actuarial gain in fiscal 2018 was primarily attributable to a higher discount rate while the actuarial loss incurred in fiscal 2017 was primarily attributable to a lower discount rate.

Net Periodic Pension Cost and Changes Recognized in Other Comprehensive Income

The components of net periodic pension cost recognized in the statement of operations and changes recognized in other comprehensive income were as follows:



	For the fiscal year ended
(dollars in thousands)	December 29, 2018			December 30, 2017			December 31, 2016
Recognized in the statement of operations:
Interest cost	$	2,287		$	2,446		$	2,515
Expected return on plan assets	(2,934		)	(2,601		)	(2,701		)
Recognized actuarial loss⁽¹⁾	709			681			578
Net periodic pension cost	$	62		$	526		$	392

Changes recognized in other comprehensive income:
Net loss arising during the fiscal year	$	1,070		$	1,251		$	1,644
Amortization of net loss⁽¹⁾	(709		)	(681		)	(578		)
Total changes recognized in other comprehensive income	$	361		$	570		$	1,066
Total net periodic cost and changes recognized in other comprehensive income	$	423		$	1,096		$	1,458


(1)	Represents pre-tax amounts reclassified from accumulated other comprehensive loss. For fiscal 2019, approximately $0.8 million is expected to be reclassified from accumulated other comprehensive loss to a component of net periodic pension cost.

Assumptions

The actuarial computations utilized the following assumptions, using year-end measurement dates:



Benefit obligation	2018	2017
Discount rate	4.00%	3.50%

Net periodic pension cost	2018	2017	2016
Discount rate	3.50%	4.00%	4.25%
Expected long-term rate of return on assets	6.25%	6.00%	6.00%

The discount rates used at December 29, 2018, December 30, 2017, and December 31, 2016 were determined with consideration given to the Citigroup Pension Discount and Liability Index and the Barclay Capital Aggregate AA Bond Index, adjusted for the timing of expected plan distributions. The Company believes these indexes reflect a risk-free rate consistent with a portfolio of high quality debt instruments with maturities that are comparable to the timing of the expected payments under the plan. The expected long-term rate of return assumption considers historic returns adjusted for changes in overall economic conditions that may affect future returns and a weighting of each investment class.

A 0.25% change in the assumed discount rate would result in an increase or decrease in the amount of the pension plan's projected benefit obligation of approximately $2.0 million.

The Company currently expects benefit payments for its defined benefit pension plans as follows for the next ten fiscal years:



(dollars in thousands)
2019	$	3,020
2020	$	2,600
2021	$	2,660
2022	$	2,860
2023	$	2,940
2024-2028	$	17,850

Plan Assets

The Company's investment strategy is to invest in a well-diversified portfolio consisting of mutual funds or group annuity contracts that minimize concentration of risks by utilizing a variety of asset types, fund strategies, and fund managers. The target allocation for plan assets is 45% equity securities, 50% bond funds, and 5% real estate investments. The plan expects to gradually reduce its equity exposure.

The Company’s investment policy anticipates a rate of return sufficient to fund pension plan benefits while minimizing the risk to the Company of additional funding. Based on actual returns over a long-term basis, the Company believes that a 5.50% annual return on plan assets can be achieved based on the current allocation and investment strategy.

Equity securities primarily include funds invested in large-cap and mid-cap companies, primarily located in the U.S., with a small exposure to international equities. Fixed income securities include funds holding corporate bonds of companies from diverse industries, and U.S. Treasuries. Real estate funds include investments in actively managed mutual funds that invest in real estate.

The fair value of the Company's pension plan assets at December 29, 2018 and December 30, 2017, by asset category, were as follows:



(dollars in thousands)	December 29, 2018						December 30, 2017
Asset Category	Total		Level 1		Level 2		Total		Level 1		Level 2
Cash and cash equivalents	$	550	$	550	$	—	$	539	$	539	$	—
Equity Securities:
U.S. Large-Cap blend⁽¹⁾	7,693		7,693		—		7,418		7,418		—
U.S. Large-Cap growth	3,478		3,478		—		3,331		3,331		—
U.S. Mid-Cap growth	3,355		3,355		—		3,228		3,228		—
U.S. Small-Cap blend	2,224		2,224		—		2,147		2,147		—
International blend	8,302		8,302		—		8,142		8,142		—
Fixed income securities:
Corporate bonds⁽²⁾	27,247		27,006		241		26,888		26,480		408
Real estate⁽³⁾	2,715		2,715		—		2,744		2,744		—
	$	55,564	$	55,323	$	241	$	54,437	$	54,029	$	408


(1)	This category comprises low-cost equity index funds not actively managed that track the Standard & Poor's 500 Index.


(2)	This category invests in both U.S. Treasuries and mid-term corporate debt from U.S. issuers from diverse industries.


(3)	This category represents an investment in a mutual fund that invests primarily in real estate securities, including common stocks, preferred stock and other equity securities issued by real estate companies.

Post-retirement Life and Medical Plan

Under a defined benefit plan frozen in 1991, the Company offers a comprehensive post-retirement medical plan to current and certain future retirees and their spouses. The Company also offers life insurance to current and certain future retirees. Employee contributions are required as a condition of participation for both medical benefits and life insurance and the Company's liabilities are net of these expected employee contributions.

Accumulated Post-Retirement Benefit Obligation

The following is a reconciliation of the accumulated post-retirement benefit obligation ("APBO") under this plan:



	For the fiscal years ended
(dollars in thousands)	December 29, 2018			December 30, 2017
APBO at beginning of fiscal year	$	3,969		$	4,125
Service cost	32			30
Interest cost	123			137
Actuarial loss (gain)	(573		)	26
Plan participants' contribution	1			6
Benefits paid	(324		)	(355		)
APBO at end of fiscal year	$	3,228		$	3,969

Approximately $2.9 million and $3.6 million of the APBO at the end of fiscal 2018 and 2017, respectively, were classified as other long term liabilities in the Company's consolidated balance sheets.

Net Periodic Post-Retirement (Benefit) Cost and Changes Recognized in Other Comprehensive Income

The components of net periodic post-retirement cost (benefit) recognized in the statement of operations and changes recognized in other comprehensive income were as follows:



	For the fiscal year ended
(dollars in thousands)	December 29, 2018			December 30, 2017			December 31, 2016
Recognized in the statement of operations:
Service cost – benefits attributed to service during the period	$	32		$	30		$	123
Interest cost on accumulated post-retirement benefit obligation	123			137			177
Amortization net actuarial gain^(*)	(289		)	(306		)	(198		)
Net periodic post-retirement (benefit) cost	$	(134	)	$	(139	)	$	102

Changes recognized in other comprehensive income:
Net loss (gain) arising during the fiscal year	$	(573	)	$	26		$	(740	)
Prior service cost	—			—			11
Amortization of net gain^(*)	289			306			198
Total changes recognized in other comprehensive income	$	(284	)	$	332		$	(531	)
Total net periodic (benefit) cost and changes recognized in other comprehensive income	$	(418	)	$	193		$	(429	)


(*)	Represents pre-tax amounts reclassified from accumulated other comprehensive loss. For fiscal 2019, approximately $0.4 million is expected to be reclassified from accumulated other comprehensive loss as a credit to periodic net periodic pension cost.

Assumptions

The actuarial computations utilized the following assumptions, using year-end measurement dates:



Benefit obligation	2018	2017
Discount rate	4.00%	3.25%

Net periodic pension cost	2018	2017	2016
Discount rate	3.25%	3.50%	3.75%

The discount rates used at December 29, 2018, December 30, 2017, and December 31, 2016, were determined with primary consideration given to the Citigroup Pension Discount and Liability Index adjusted for the timing of expected plan distributions. The Company believes this index reflects a risk-free rate with maturities that are comparable to the timing of the expected payments under the plan.

The effects on the Company's plan of all future increases in health care costs are borne primarily by employees; accordingly, increasing medical costs are not expected to have any material effect on the Company's future financial results.

The Company's contribution for these post-retirement benefit obligations was approximately $0.3 million in fiscal year 2018, $0.3 million in fiscal year 2017, and $0.4 million in fiscal year 2016. The Company expects that its contribution and benefit payments for post-retirement benefit obligations will be approximately $0.3 million for fiscal years 2019, 2020, 2021, 2022, and 2023. For the five years subsequent to fiscal 2023, the aggregate contributions and benefit payments for post-retirement benefit obligations is expected to be approximately $1.1 million. The Company does not pre-fund this plan and as a result there are no plan assets.

Deferred Compensation Plan

The Company maintains a deferred compensation plan allowing voluntary salary and incentive compensation deferrals for qualifying employees as permitted by the Internal Revenue Code. Participant deferrals earn investment returns based on a select number of investment options, including equity, debt, and real estate mutual funds. The Company invests comparable amounts in marketable securities to mitigate the risk associated with the investment return on the employee deferrals.

Defined Contribution Plan

The Company also sponsors defined contribution savings plans in the United States and Canada. The U.S. plan covers employees who are at least 21 years of age and have completed one calendar month of service and, if part-time, work a minimum of one thousand hours of service within the one-year period following the commencement of employment or during any subsequent calendar year. The plan provides for a discretionary employer match. The Company's expense for the U.S. defined contribution savings plan totaled approximately $8.0 million, $13.9 million, and $10.5 million for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively. Expenses related to the Canadian defined contribution savings plan were approximately $0.1 million for the fiscal year ended December 29, 2018 and approximately $0.3 million for the fiscal year ended December 30, 2017; amounts for fiscal 2016 were not material.