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Note 11 - Employee Benefit Plans | 12 Months Ended
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Oct. 01, 2016
Notes to Financial Statements |
Pension and Other Postretirement Benefits Disclosure [Text Block] | (1 1 ) Employee Benefit Plans Retirement plans . We had one defined benefit pension plan, the Insteel Wire Products Company Retirement Income Plan for Hourly Employees, Wilmington, Delaware (the “Delaware Plan”). The Delaware Plan provided benefits for eligible employees based primarily upon years of service and compensation levels. The Delaware Plan was frozen effective September 30, 2008 whereby participants no longer earned additional benefits. During the second quarter of 2016, we notified plan participants of our intent to terminate the Delaware Plan effective May 1, 2016. During September 2016, the Delaware Plan settled plan liabilities through either lump sum distributions to plan participants or annuity contracts purchased from a third-party insurance company that provided for the payment of vested benefits to those participants that did not elect the lump sum option. As of October 1, 2016, there were no remaining plan assets. We made contributions totaling $1.9 million, $234,000 and $240,000 to the Delaware Plan during 2016, 2015 and 2014, respectively. As a result of the pension termination, unrecognized losses, which previously were recorded in accumulated other comprehensive loss on our consolidated balance sheets, were recognized as expense and the pension plan settlement loss of $2.5 million was recorded on our consolidated statements of operations for the year ended October 1, 2016. The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized in our consolidated balance sheets for the Delaware Plan is as follows:
|  | Year Ended |
|  | October 1, |  |  | October 3, |  |  | September 27, |
(In thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Change in benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of year |  | $ | 3,463 |  |  | $ | 3,078 |  |  | $ | 2,973 |
Interest cost |  |  | 147 |  |  |  | 130 |  |  |  | 137 |
Actuarial loss |  |  | 324 |  |  |  | 514 |  |  |  | 174 |
Plan settlement |  |  | 290 |  |  |  | - |  |  |  | - |
Distributions |  |  | (4,224 | ) |  |  | (259 | ) |  |  | (206 | )
Benefit obligation at end of year |  | $ | - |  |  | $ | 3,463 |  |  | $ | 3,078 |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 2,201 |  |  | $ | 2,253 |  |  | $ | 2,045 |
Actual return on plan assets |  |  | 104 |  |  |  | (27 | ) |  |  | 178 |
Employer contributions |  |  | 1,919 |  |  |  | 234 |  |  |  | 240 |
Plan settlement |  |  | (4,003 | ) |  |  | - |  |  |  | - |
Distributions |  |  | (221 | ) |  |  | (259 | ) |  |  | (210 | )
Fair value of plan assets at end of year |  | $ | - |  |  | $ | 2,201 |  |  | $ | 2,253 |
Reconciliation of funded status to net amount recognized: |  |  |  |  |  |  |  |  |  |  |  |
Funded status |  | $ | - |  |  | $ | (1,263 | ) |  | $ | (825 | )
Net amount recognized |  | $ | - |  |  | $ | (1,263 | ) |  | $ | (825 | )
Amounts recognized on the consolidated balance sheet: |  |  |  |  |  |  |  |  |  |  |  |
Accrued benefit liability |  | $ | - |  |  | $ | (1,263 | ) |  | $ | (825 | )
Accumulated other comprehensive loss (net of tax) |  |  | - |  |  |  | 1,197 |  |  |  | 782 |
Net amount recognized |  | $ | - |  |  | $ | (66 | ) |  | $ | (43 | )
Amounts recognized in accumulated other comprehensive loss: |  |  |  |  |  |  |  |  |  |  |  |
Unrecognized net loss |  | $ | - |  |  | $ | 1,930 |  |  | $ | 1,261 |
Net amount recognized |  | $ | - |  |  | $ | 1,930 |  |  | $ | 1,261 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 685 |  |  | $ | 723 |  |  | $ | 165 |
Amortization of net loss |  |  | (76 | ) |  |  | (53 | ) |  |  | (43 | )
Settlement loss |  |  | (2,539 | ) |  |  | - |  |  |  | - |
Total recognized in other comprehensive income (loss) |  | $ | (1,930 | ) |  | $ | 670 |  |  | $ | 122 |
Net periodic pension cost for the Delaware Plan includes the following components:
|  | Year Ended |
|  | October 1, |  |  | October 3, |  |  | September 27, |
(In thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Interest cost |  | $ | 147 |  |  | $ | 130 |  |  | $ | 137 |
Expected return on plan assets |  |  | (175 | ) |  |  | (181 | ) |  |  | (165 | )
Settlement loss recognized |  |  | 2,539 |  |  |  | - |  |  |  | - |
Amortization of net loss |  |  | 76 |  |  |  | 53 |  |  |  | 43 |
Net periodic pension cost |  | $ | 2,587 |  |  | $ | 2 |  |  | $ | 15 |
The assumptions used in the valuation of the Delaware Plan are as follows:
|  | Measurement Date |
|  | October 1, 2016 |  |  | October 3, 2015 |  |  | September 27, 2014 |
Assumptions at year-end: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 3.75 | % |  |  | 4.25 | % |  |  | 4.25 | %
Expected long-term rate of return on assets |  |  | N/A |  |  |  | 8.00 | % |  |  | 8.00 | %
The assumed discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we reviewed published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the Delaware Plan. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and future expectations of returns for each asset class, as well as the target asset allocation of the Delaware Plan portfolio. Prior to the termination and settlement of the Delaware Plan the fundamental goal underlying the investment policy was to ensure that its assets were invested in a prudent manner to meet its obligations as such obligations became due. The primary investment objectives included providing a total return that would promote the goal of benefit security by attaining an appropriate ratio of plan assets to plan obligations, diversifying investments across and within asset classes, minimizing the impact of losses in single investments and adhering to investment practices that complied with applicable laws and regulations. The investment strategy for equities emphasized U.S. large cap equities with the portfolio’s performance measured against the S&P 500 index or other applicable indices. The investment strategy for fixed income investments was focused on maintaining an overall portfolio with a minimum credit rating of A-1 as well as a minimum rating of any security at the time of purchase of Baa/BBB by Moody’s or Standard & Poor’s, if rated. The Delaware Plan had a long-term target asset mix of 60% equities and 40% fixed income. The asset allocations for the Delaware Plan in 2015 and 2014 were as follows:
|  | Percentage of Plan Assets at Measurement Date |
|  | October 3, |  |  | September 27, |
|  | 2015 |  |  | 2014 |
Large-cap equities |  |  | 37.6 | % |  |  | 36.6 | %
Mid-cap equities |  |  | 7.7 | % |  |  | 7.4 | %
Small-cap equities |  |  | 8.2 | % |  |  | 8.3 | %
International equities |  |  | 8.8 | % |  |  | 8.8 | %
Fixed income securities |  |  | 37.3 | % |  |  | 38.0 | %
Cash and cash equivalents |  |  | 0.4 | % |  |  | 0.9 | %
As of October 3, 2015, the Delaware Plan’s assets included equity securities, fixed income securities and cash and cash equivalents, and were required to be measured at fair value. We used a three-tier hierarchy, which prioritizes the inputs used in measuring fair value, defined as follows: Level 1 - observable inputs such as quoted prices in active markets for identical assets and liabilities; Level 2 - inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 - unobservable inputs in which little or no market data exists, thereby requiring the development of valuation assumptions. The fair values of the Delaware Plan’s assets as of October 3, 2015 were as follows:
(In thousands) |  | Total |  |  | Quoted Prices in Active Markets (Level 1) |  |  | Observable Inputs (Level 2) |  |  | Unobservable Inputs (Level 3) |
Large-cap equities |  | $ | 828 |  |  | $ | 828 |  |  | $ | - |  |  | $ | - |
Mid-cap equities |  |  | 169 |  |  |  | 169 |  |  |  | - |  |  |  | - |
Small-cap equities |  |  | 181 |  |  |  | 181 |  |  |  | - |  |  |  | - |
International equities |  |  | 195 |  |  |  | 195 |  |  |  | - |  |  |  | - |
Fixed income securities |  |  | 820 |  |  |  | 820 |  |  |  | - |  |  |  | - |
Cash and cash equivalents |  |  | 8 |  |  |  | - |  |  |  | 8 |  |  |  | - |
Total |  | $ | 2,201 |  |  | $ | 2,193 |  |  | $ | 8 |  |  | $ | - |
Equity securities are primarily direct investments in the stock of publicly-traded companies that are valued based on the closing price reported in an active market on which the individual securities are traded. Fixed income securities are government and corporate debt securities that are valued based on the closing price reported in an active market on which the individual securities are traded. Cash and cash equivalents are money market funds that are valued based on the net asset value as determined by the fund each business day. Supplemental employee retirement plan. We have Retirement Security Agreements (each, a “SERP”) with certain of our employees (each, a “Participant”). Under the SERPs, if the Participant remains in continuous service with us for a period of at least 30 years, we will pay them a supplemental retirement benefit for the 15-year period following their retirement equal to 50% of their highest average annual base salary for five consecutive years in the 10-year period preceding their retirement. If the Participant retires prior to the later of age 65 or the completion of 30 years of continuous service with us, but has completed at least 10 years of continuous service, the amount of their supplemental retirement benefit will be reduced by 1/360th for each month short of 30 years that they were employed by us. In 2005, we revised the SERPs to add Participants and increase benefits to existing Participants. The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized for the SERPs in our consolidated balance sheets is as follows:
|  | Year Ended |
(In thousands) |  | October 1, 2016 |  |  | October 3, 2015 |  |  | September 27, 2014 |
Change in benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of year |  | $ | 7,821 |  |  | $ | 7,480 |  |  | $ | 6,938 |
Service cost |  |  | 263 |  |  |  | 287 |  |  |  | 219 |
Interest cost |  |  | 326 |  |  |  | 323 |  |  |  | 315 |
Actuarial loss |  |  | 1,039 |  |  |  | 21 |  |  |  | 298 |
Distributions |  |  | (290 | ) |  |  | (290 | ) |  |  | (290 | )
Benefit obligation at end of year |  | $ | 9,159 |  |  | $ | 7,821 |  |  | $ | 7,480 |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |
Actual employer contributions |  | $ | 290 |  |  | $ | 290 |  |  | $ | 290 |
Actual distributions |  |  | (290 | ) |  |  | (290 | ) |  |  | (290 | )
Plan assets at fair value at end of year |  | $ | - |  |  | $ | - |  |  | $ | - |
Reconciliation of funded status to net amount recognized: |  |  |  |  |  |  |  |  |  |  |  |
Funded status |  | $ | (9,159 | ) |  | $ | (7,821 | ) |  | $ | (7,480 | )
Net amount recognized |  | $ | (9,159 | ) |  | $ | (7,821 | ) |  | $ | (7,480 | )
Amounts recognized in accumulated other comprehensive loss: |  |  |  |  |  |  |  |  |  |  |  |
Unrecognized net loss |  | $ | 2,485 |  |  | $ | 1,531 |  |  | $ | 1,627 |
Net amount recognized |  | $ | 2,485 |  |  | $ | 1,531 |  |  | $ | 1,627 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 1,039 |  |  | $ | 21 |  |  | $ | 298 |
Amortization of net loss |  |  | (85 | ) |  |  | (117 | ) |  |  | (52 | )
Total recognized in other comprehensive income (loss) |  | $ | 954 |  |  | $ | (96 | ) |  | $ | 246 |
Net periodic pension cost for the SERPs includes the following components:
|  | Year Ended |
(In thousands) |  | October 1, 2016 |  |  | October 3, 2015 |  |  | September 27, 2014 |
Service cost |  | $ | 263 |  |  | $ | 287 |  |  | $ | 219 |
Interest cost |  |  | 326 |  |  |  | 323 |  |  |  | 315 |
Amortization of net loss |  |  | 85 |  |  |  | 117 |  |  |  | 52 |
Net periodic pension cost |  | $ | 674 |  |  | $ | 727 |  |  | $ | 586 |
The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic pension cost during 2017 is $174,000. The assumptions used in the valuation of the SERPs are as follows:
|  | Measurement Date |
|  | October 1, 2016 |  |  | October 3, 2015 |  |  | September 27, 2014 |
Assumptions at year-end: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 3.75 | % |  |  | 4.25 | % |  |  | 4.25 | %
Rate of increase in compensation levels |  |  | 3.00 | % |  |  | 3.00 | % |  |  | 3.00 | %
The assumed discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the plan. The SERPs expected rate of increase in compensation levels is based on the anticipated increases in annual compensation. The projected benefit payments under the SERPs are as follows:
Fiscal year(s) |  | In thousands |
2017 |  | $ | 290 |
2018 |  |  | 359 |
2019 |  |  | 321 |
2020 |  |  | 241 |
2021 |  |  | 241 |
2022- 2026 |  |  | 3,403 |
As noted above, the SERPs were revised in 2005 to add Participants and increase benefits to certain existing Participants. However, for certain Participants we still maintain the benefits of the respective SERPs that were in effect prior to the 2005 changes, which entitle them to fixed cash benefits upon retirement at age 65, payable annually for 15 years. These SERPs are supported by life insurance policies on the Participants that are purchased and owned by us. The cash benefits paid under these SERPs were $25,000 in 2016, 2015 and 2014. The expense attributable to these SERPs was $26,000 in 2016, $23,000 in 2015 and $16,000 in 2014. Retirement savings plan. In 1996, we adopted the Retirement Savings Plan of Insteel Industries, Inc. (the “Plan”) to provide retirement benefits and stock ownership for our employees. The Plan is an amendment and restatement of our Employee Stock Ownership Plan. As allowed under Sections 401(a) and 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary deductions for eligible employees. The Plan allows for discretionary contributions to be made by us as determined by the Board of Directors, which are allocated among eligible participants based on their compensation relative to the total compensation of all participants . Employees are permitted to contribute up to 75% of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Code. During 2014 to 2016, we matched employee contributions up to 100% of the first 1% and 50% of the next 5% of eligible compensation that was contributed by employees. Our contributions to the Plan were $1.0 million in 2016 and 2015 and $0.9 million in 2014. Voluntary Employee Beneficiary Associations (“VEBA”) . We have a VEBA which allows both us and our employees to make contributions to pay for medical costs. Our contributions to the VEBA were $5.4 million in 2016, $6.3 million in 2015 and $4.6 million in 2014. We are primarily self-insured for our employee’s healthcare costs, carrying stop-loss insurance coverage for individual claims in excess of $175,000 per benefit plan year. Our self-insurance liabilities are based on the total estimated costs of claims filed and claims incurred but not reported, less amounts paid against such claims. We review current and historical claims data in developing our estimates.

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