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EMPLOYEE BENEFIT PLANS
 12 Months Ended
Jan. 01, 2022
Retirement Benefits [Abstract]  
EMPLOYEE BENEFIT PLANS 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)January 1, 2022January 2, 2021
Change in projected benefit obligation:
Projected benefit obligation at beginning of year$74,128 $68,331 
Interest cost1,818 2,171 
Actuarial (gain) loss (2,405)6,666 
Benefits paid(2,666)(3,040)
Projected benefit obligation at end of year $70,875 $74,128 
Change in plan assets:
Fair value of plan assets at beginning of year$65,417 $61,961 
Actual return on plan assets5,938 6,496 
Benefits paid(2,666)(3,040)
Fair value of plan assets at end of year$68,689 $65,417 
Unfunded status$2,186 $8,711 
The accumulated benefit obligation is equal to the projected benefit obligation as of January 1, 2022 and January 2, 2021 because the plan is frozen. The unfunded status is included in Other long-term liabilities in the Company’s consolidated balance sheet. The Company does not expect to make any contributions to the OshKosh B’Gosh pension plan during fiscal 2022 as the plan’s funding exceeds the minimum funding requirements. The actuarial gain in fiscal 2021 was primarily attributable to a higher discount rate, and the actuarial loss incurred in fiscal 2020 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)January 1, 2022January 2, 2021December 28, 2019
Recognized in the statement of operations:
Interest cost$1,818 $2,171 $2,432 
Expected return on plan assets(3,577)(3,217)(2,613)
Amortization of net loss(*)
428 510 795 
Net periodic pension (benefit) cost$(1,331)$(536)$614 
Changes recognized in other comprehensive income:
Net (gain) loss arising during the fiscal year$(4,765)$3,387 $(182)
Amortization of net loss(*)
(428)(510)(795)
Total changes recognized in other comprehensive income$(5,193)$2,877 $(977)
Total net periodic cost and changes recognized in other comprehensive income$(6,524)$2,341 $(363)
(*)Represents pre-tax amounts reclassified from accumulated other comprehensive loss. For fiscal 2022, approximately $0.2 million is expected to be reclassified from accumulated other comprehensive loss to a component of net periodic pension cost.
Assumptions
The actuarial assumptions used in determining the benefit obligation and net periodic pension cost for our pension plan is presented in the following table:
Benefit obligation20212020
Discount rate2.75%2.50%
Net periodic pension cost202120202019
Discount rate2.50%3.25%4.00%
Expected long-term rate of return on plan assets6.00%6.00%5.50%
The discount rates used at January 1, 2022, January 2, 2021, and December 28, 2019 were determined with consideration given to the FTSE Pension Liability Index and the Bloomberg US 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 $2.3 million.
The Company currently expects benefit payments for its defined benefit pension plans as follows for the next ten fiscal years:
(dollars in thousands)
2022$2,900 
2023$2,980 
2024$3,170 
2025$3,350 
2026$3,610 
2027-2031$19,050 
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 60% bond funds, 36% equity securities, and 4% 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. To calculate net periodic pension cost for the next fiscal year, the Company will use an expected long-term rate of return on plan assets of 5.50%. The Company believes that this annual return on plan assets can be achieved based on actual returns over a long-term basis, 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 January 1, 2022 and January 2, 2021, by asset category, were as follows:
(dollars in thousands)January 1, 2022January 2, 2021
Asset categoryTotalLevel 1
Level 2
Total
Level 1
Level 2
Cash and cash equivalents$1,370 $1,370 $— $644 $644 $— 
Equity securities:
U.S. Large-Cap blend(1)
7,508 7,508 — 9,006 9,006 — 
U.S. Large-Cap growth3,390 3,390 — 4,105 4,105 — 
U.S. Mid-Cap growth3,426 3,426 — 3,913 3,913 — 
U.S. Small-Cap blend2,054 2,054 — 2,608 2,608 — 
International blend8,200 8,200 — 9,882 9,882 — 
Fixed income securities:
Corporate bonds(2)
39,970 39,746 224 31,995 31,751 244 
Real estate(3)
2,771 2,771 — 3,264 3,264 — 
$68,689 $68,465 $224 $65,417 $65,173 $244 
(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)January 1, 2022January 2, 2021
APBO at beginning of fiscal year$2,998 $3,311 
Service cost15 25 
Interest cost57 94 
Actuarial (gain) loss(140)(162)
Plan participants’ contribution20 9 
Benefits paid(288)(279)
APBO at end of fiscal year$2,662 $2,998 
Approximately $2.4 million and $2.7 million of the APBO at the end of fiscal 2021 and 2020, 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 benefit 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)January 1, 2022January 2, 2021December 28, 2019
Recognized in the statement of operations:
Service cost
$15 $25 $21 
Interest cost
57 94 123 
Amortization of net gain(*)
(295)(345)(396)
Net periodic post-retirement benefit (income) cost$(223)$(226)$(252)
Changes recognized in other comprehensive income:
Net (gain) loss arising during the fiscal year$(140)$(162)$238 
Amortization of net gain(*)
295 345 396 
Total changes recognized in other comprehensive income$155 $183 $634 
Total net periodic post-retirement benefit (income) cost and changes recognized in other comprehensive income$(68)$(43)$382 
(*)Represents pre-tax amounts reclassified from accumulated other comprehensive loss. For fiscal 2022, approximately $0.3 million is expected to be reclassified from accumulated other comprehensive loss to a component of net periodic post-retirement benefit cost.
Assumptions
The actuarial computations utilized the following assumptions, using year-end measurement dates:
Post-retirement benefit obligation20212020
Discount rate2.50%2.00%
Net periodic post-retirement benefit cost202120202019
Discount rate2.00%3.00%4.00%
The discount rates used at January 1, 2022, January 2, 2021, and December 28, 2019, were determined with primary consideration given to the FTSE Pension Discount Curve 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 for fiscal years 2021, 2020, and 2019. The Company expects that its contribution and benefit payments for post-retirement benefit obligations will be approximately $0.3 million for fiscal years 2022 and 2023, and approximately $0.2 million for fiscal years 2024, 2025, and 2026. For the five years subsequent to fiscal 2026, the aggregate contributions and benefit payments for post-retirement benefit obligations is expected to be approximately $0.8 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 of employee contributions. The Company’s expense for the U.S. defined contribution savings plan totaled approximately $16.1 million, $7.7 million, and $8.0 million for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019, respectively. Expenses related to the Canadian defined contribution savings plan were approximately $0.3 million in fiscal year 2021, $0.2 million in fiscal year 2020, and $0.1 million in fiscal year 2019.