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Employee Benefits | 12 Months Ended
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Dec. 29, 2018
Retirement Benefits [Abstract] |
Employee Benefits | Employee Benefits Single-Employer Defined Benefit Pension Plan We sponsor a noncontributory defined benefit pension plan administered solely by us (the “pension plan”). Most of the participants in the plan are inactive, with the majority of the remaining active participants no longer accruing benefits, and the plan is closed to new entrants. Our funding policy for the pension plan is based on actuarial calculations and the applicable requirements of federal law. Benefits under the pension plan primarily are related to years of service. The following tables set forth the change in projected benefit obligation and the change in plan assets for the pension plan:
| December 29, 2018 |  | December 30, 2017
| (In thousands)
Change in projected benefit obligation: |  |  |
Projected benefit obligation at beginning of period | $ | 118,812 |  |  | $ | 113,436 |
Service cost | 534 |  |  | 633 |
Interest cost | 3,853 |  |  | 4,663 |
Actuarial (gain) loss | (9,732 | ) |  | 5,808 |
Curtailment gain | — |  |  | (310 | )
Benefits paid | (5,558 | ) |  | (5,418 | )
Projected benefit obligation at end of period | 107,909 |  |  | 118,812 |
Change in plan assets: |  |  |  |  |
Fair value of assets at beginning of period | 88,452 |  |  | 79,087 |
Actual (loss) return on plan assets | (6,321 | ) |  | 11,109 |
Employer contributions | 4,668 |  |  | 3,674 |
Benefits paid | (5,558 | ) |  | (5,418 | )
Fair value of assets at end of period | 81,241 |  |  | 88,452 |
Net unfunded status of plan | $ | (26,668 | ) |  | $ | (30,360 | )
We recognize the unfunded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of our pension plan in our Consolidated Balance Sheets, with a corresponding adjustment to AOCI, net of tax. On December 29, 2018, we measured the fair value of our plan assets and benefit obligations. As of December 29, 2018, and December 30, 2017, the net unfunded status of our benefit plan was $26.7 million and $30.4 million, respectively. Historically, we estimated the service and interest cost components utilizing a single-weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. At the end of fiscal 2017, we changed the approach we use to determine the service and interest components of net periodic pension cost for our pension plan. This change was effective for pension (income)/expense recognized during fiscal 2018 and future fiscal years. We have elected to utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant projected cash flows. We have made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. This change does not affect the measurement of our total benefit obligations. Actuarial gains and losses occur when actual experience differs from the estimates used to determine the components of net periodic pension cost, and when certain assumptions used to determine the fair value of the plan assets or projected benefit obligation are updated, including but not limited to, changes in the discount rate, plan amendments, differences between actual and expected returns on plan assets, mortality assumptions, and plan re-measurement. We amortize a portion of unrecognized actuarial gains and losses for the pension plan into our Consolidated Statements of Operations and Comprehensive Income (Loss). The amount recognized in the current year’s operations is based on amortizing the unrecognized gains or losses for the pension plan that exceed the larger of 10% of the projected benefit obligation or the fair value of plan assets, also known as the corridor. In the current fiscal year, the amount representing the unrecognized gain or loss that exceeds the corridor is amortized over the estimated average remaining life expectancy of participants, as almost all the participants in the plan are inactive. The net adjustment to other comprehensive income (loss) for fiscal 2018, fiscal 2017, and fiscal 2016 was a $0.6 million loss, $0.1 million gain, and a $2.1 million loss, respectively, primarily from the net recognized and unrecognized actuarial gain (loss) for those fiscal periods. The decrease in the unfunded obligation for the fiscal year was approximately $3.7 million and was comprised of $9.7 million of actuarial gains, $6.3 million of investment losses including an asset gain, $4.7 million of pension contributions, and a charge of $4.4 million due to current year service and interest cost. The net periodic pension cost increased to $0.2 million in fiscal 2018, from a credit of $0.2 million in fiscal 2017, driven primarily by a reduction in investment returns. In fiscal 2017, a freeze of certain unionized participants in the pension plan due to renegotiation of union contracts resulted in a reduction in future years of service for the remaining active participants in the plan, which triggered a curtailment. As a result, there was an immaterial curtailment gain from the event which resulted in an immaterial decrease to the projected benefit obligation in fiscal 2017. The unfunded status recorded as Pension Benefit Obligation on our Consolidated Balance Sheets for the pension plan is set forth in the following table, along with the unrecognized actuarial loss, which is presented as part of Accumulated Other Comprehensive Loss:
| December 29, 2018 |  | December 30, 2017
| (In thousands)
Unfunded status | $ | (26,668 | ) |  | $ | (30,360 | )
Unrecognized prior service cost | — |  |  | — |
Unrecognized actuarial loss | 34,699 |  |  | 33,884 |
Net amount recognized | $ | 8,031 |  |  | $ | 3,524 |
Amounts recognized on the balance sheet consist of: |  |  |  |  |
Accrued pension liability | $ | (26,668 | ) |  | $ | (30,360 | )
Accumulated other comprehensive loss (pre-tax) | 34,699 |  |  | 33,884 |
Net amount recognized | $ | 8,031 |  |  | $ | 3,524 |
The portion of estimated net loss for the pension plan that is expected to be amortized from accumulated other comprehensive loss into net periodic cost over the next fiscal year is approximately $1.0 million. The accumulated benefit obligation for the pension plan was $107.4 million and $118.2 million at December 29, 2018, and December 30, 2017, respectively. Net periodic pension cost (credit) for the pension plan included the following:
| Fiscal Year Ended December 29, 2018 |  | Fiscal Year Ended December 30, 2017 |  | Fiscal Year Ended December 31, 2016
| (In thousands)
Service cost | $ | 534 |  |  | $ | 633 |  |  | $ | 996 |
Interest cost on projected benefit obligation | 3,853 |  |  | 4,663 |  |  | 4,901 |
Expected return on plan assets | (5,309 | ) |  | (6,538 | ) |  | (6,224 | )
Amortization of unrecognized loss | 1,084 |  |  | 1,056 |  |  | 1,126 |
Net periodic pension cost (credit) | $ | 162 |  |  | $ | (186 | ) |  | $ | 799 |
The following assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost:
| December 29, 2018 |  | December 30, 2017
Projected benefit obligation: |  |  |
Discount rate | 4.37 | % |  | 3.69 | %
Average rate of increase in future compensation levels | Graded 5.5-2.5% |  |  | Graded 5.5-2.5% |
Net periodic pension cost: |  |  |  |  |
Discount rate | 3.69 | % |  | 4.26 | %
Average rate of increase in future compensation levels | Graded 5.5-2.5% |  |  | Graded 5.5-2.5% |
Expected long-term rate of return on plan assets | 6.00 | % |  | 8.10 | %
Our estimates of the amount and timing of our future funding obligations for our defined benefit pension plan are based upon various assumptions specified above. These assumptions include, but are not limited to, the discount rate, projected return on plan assets, and mortality rates. The rate of increase in future compensation levels has a minimal effect on both the projected benefit obligation and net periodic pension cost, as almost all the participants in the plan are inactive, the majority of the remaining active participants are no longer accruing benefits, and the plan is closed to new entrants. Projected return on plan assets. Historically, pension plan assets were managed under an investment strategy comprising two major components: equities, to generate long-term growth; and fixed income securities, to provide current income and stable periodic returns. As also discussed below, during fiscal 2017, the pension plan’s Investment Committee conducted a broad strategic review of portfolio construction and investment allocation policies for the pension plan. Pension plan assets are now managed under a new balanced portfolio allocation policy comprised of two major components: a return-seeking portion and a liability-matching portion. The expected role of return-seeking investments is to achieve a reasonable long-term growth of pension assets with a prudent level of risk, while the role of liability-matching investments is to provide a partial hedge against liability performance associated with changes in interest rates. The objective within return-seeking investments is to achieve asset diversity in order to balance return and volatility. The discount rate. Historically, we estimated the service and interest cost components utilizing a single-weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. At the end of fiscal 2017, we changed our approach, and elected to utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant projected cash flows. We have made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. Mortality rates. The valuations and assumptions reflect adoption of the Society of Actuaries updated RP-2014 mortality tables, with a “blue collar employee” adjustment for non-annuitants and a BlueLinx custom adjustment for annuitants. Additionally, we use the most current generational projection scales, which were MP-2018 as of December 30, 2018 and MP-2017 as of December 31, 2017. Plan Assets and Long-Term Rate of Return Fiscal 2018 We base the asset return assumption on current and expected asset allocations, as well as historical and expected returns on the plan asset categories. The allocation of the plan’s assets impacts our expected return on plan assets. The expected return on plan assets is based on a targeted allocation consisting of return-seeking securities (including public equity, real assets and diversified credit investment strategies), liability-matching securities (fixed income), and cash and cash equivalents. Our net benefit cost increases as the expected return on plan assets decreases. We believe that our actual long-term asset allocations on average will approximate our targeted allocation. Our targeted allocation is driven by our investment strategy to earn a reasonable rate of return while maintaining risk at acceptable levels through the diversification of investments across and within various asset categories. For fiscal 2018, we used a 6.00% expected return on plan assets. During fiscal 2017, the pension plan’s Investment Committee conducted a broad strategic review of portfolio construction and investment allocation policies for the pension plan. Pension assets are now managed under a new balanced portfolio allocation policy comprised of two major components: a return-seeking portion and a liability-matching portion. The expected role of return-seeking investments is to achieve a reasonable long-term growth of pension assets with a prudent level of risk, while the role of liability-matching investments is to provide a partial hedge against liability performance associated with changes in interest rates. The objective within return-seeking investments is to achieve asset diversity in order to balance return and volatility. The investment policy for the pension plan, in general, is to achieve a reasonable long-term rate of return on plan assets with an acceptable level of risk in order to maintain adequate funding levels. The pension plan’s Investment Committee establishes risk mitigation policies and regularly monitors investment performance and investment allocation policies, with a third party investment advisor executing on these strategies. The current targets, adjusted to exclude non-GAAP BlueLinx real-estate holdings, and actual investment allocation, by asset category as of December 30, 2018, consisted of the following:
|  | Current Target Allocation |  | Actual Allocation, December 29, 2018
Return-seeking securities |  | 70 | % |  | 69 | %
Liability-matching securities |  | 28 | % |  | 30 | %
Cash and cash equivalents |  | 2 | % |  | 1 | %
Total |  | 100 | % |  | 100 | %
The following table sets forth by level, within the fair value hierarchy (as defined in Note 10), pension plan assets at their fair values as of December 29, 2018:
|  | Quoted prices in active markets of identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant other unobservable inputs (Level 3) |  | Total
|  | (In thousands)
Return-seeking securities |  |  |  |  |  |  |  |
Corporate bonds (a) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Global equity securities (b) |  | — |  |  | — |  |  | — |  |  | — |
Collective investment trust (c) |  | — |  |  | 55,766 |  |  | — |  |  | 55,766 |
Liability-matching securities |  |  |  |  |  |  |  |
Corporate bonds (d) |  | — |  |  | — |  |  | — |  |  | — |
Collective investment trusts (e) |  | — |  |  | 24,649 |  |  | — |  |  | 24,649 |
Cash and cash equivalents |  | 853 |  |  | — |  |  | — |  |  | 853 |
Total |  | $ | 853 |  |  | $ | 80,415 |  |  | $ | — |  |  | $ | 81,268 |
(a) This category comprises high yield and global bond funds. (b) This category consists of a diversified global mutual fund. (c) This category is comprised of a collective investment trust of equity funds that track the MCSI World Index, and a collective investment trust that holds publicly traded listed infrastructure securities. (d) This category comprises fixed income funds primarily invested in U.S. Treasury notes and bonds, along with high-quality mortgage-backed securities and corporate bonds. (e) This category is consists of a collective investment trust investing in Treasury STRIPS. The fair value of the Level 1 assets was based on quoted prices in active markets for the identical assets. The fair value of the Level 2 assets was determined by management based on an assessment of valuations provided by asset management entities and was calculated by aggregating market prices for all underlying securities. Investment objectives for our pension plan assets are: •Matching Plan liability performance •Diversifying risk •Achieving a target investment return We believe that there are no significant concentrations of risk within our plan assets as of December 29, 2018. We comply with the rules and regulations promulgated under the Employee Retirement Income Security Act of 1974 (“ERISA”) and we prohibit investments and investment strategies not allowed by ERISA. Fiscal 2017 The following table sets forth by level, within the fair value hierarchy, pension plan assets at their fair values as of December 30, 2017:
|  | Quoted prices in active markets of identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant other unobservable inputs (Level 3) |  | Total
|  | (In thousands)
Return-seeking securities |  |  |  |  |  |  |  |
Corporate bonds (a) |  | $ | 10,393 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,393 |
Global equity securities (b) |  | 25 |  |  | — |  |  | — |  |  | 25 |
Collective investment trust (c) |  | — |  |  | 43,910 |  |  | — |  |  | 43,910 |
Liability-matching securities |  |  |  |  |  |  |  |
Corporate bonds (d) |  | 20,711 |  |  | — |  |  | — |  |  | 20,711 |
Collective investment trusts (e) |  | — |  |  | 11,739 |  |  | — |  |  | 11,739 |
Cash and cash equivalents |  | 1,674 |  |  | — |  |  | — |  |  | 1,674 |
Total |  | $ | 32,803 |  |  | $ | 55,649 |  |  | $ | — |  |  | $ | 88,452 |
Pension Plan Cash Flows Our estimated normal future benefit payments to pension plan participants are as follows:
Fiscal Year Ending | (In thousands)
2019 | $ | 6,345 |
2020 | 6,585 |
2021 | 6,844 |
2022 | 6,965 |
2023 | 7,080 |
Thereafter | 35,800 |
We fund the pension plan liability in accordance with the limits imposed by ERISA, federal income tax laws, and the funding requirements of the Pension Protection Act of 2006. We are required to make four quarterly cash contributions to the pension plan totaling approximately $2.2 million for fiscal funding year 2019. Multiemployer Pension Plans We participate in several multiemployer pension plans (“MEPPs”) that provide retirement benefits to certain union employees in accordance with certain CBAs. As one of many participating employers in these MEPPs, we are generally responsible with the other participating employers for any plan underfunding. Our contributions to a particular MEPP are established by the applicable CBAs; however, our required contributions may increase based on the funded status of an MEPP and legal requirements such as those of the Pension Protection Act of 2006 (“Pension Act”), which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve their funded status. Factors that could impact funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions and the utilization of extended amortization provisions. A FIP or RP requires a particular MEPP to adopt measures to correct its underfunded status. These measures may include, but are not limited to: an increase in our contribution rate to the applicable CBA, a reallocation of the contributions already being made by participating employers for various benefits to individuals participating in the MEPP, and/or a reduction in the benefits to be paid to future and/or current retirees. We could also be obligated to make future payments to MEPPs if we either cease to have an obligation to contribute to the MEPP or significantly reduce our contributions to the MEPP because we reduce our number of employees who are covered by the relevant MEPP for various reasons, including, but not limited to, layoffs or closures, assuming the MEPP has unfunded vested benefits. The amount of such payments (known as a complete or partial withdrawal liability) generally would equal our proportionate share of the plan’s unfunded vested benefits. The following table lists our participation in our multiemployer plans which we deem significant. “Contributions” represent the amounts contributed to the plan during the fiscal years presented:
|  |  |  |  |  | Contributions (in millions)
Pension Fund: | EIN/Pension Plan Number | Pension Act Zone Status | FIP/RP Status | Surcharge |  | 2018 |  | 2017 |  | 2016
Lumber Employees Local 786 Retirement Fund (1) | 516067407 | Green (September 1, 2015) | N/A | No |  | n/a |  |  | n/a |  |  | $ | 0.4 |
Central States, Southeast and Southwest Areas Pension Fund (2) | 366044243 | Critical and Declining (January 1, 2018) | RP | No |  | 0.4 |  |  | 0.7 |  |  | 0.6 |
Other |  |  |  |  |  | 0.1 |  |  | 0.2 |  |  | 0.4 |
Total |  |  |  |  |  | $ | 0.5 |  |  | $ | 0.9 |  |  | $ | 1.4 |
(1) We withdrew from this plan in fiscal 2017, and recorded an estimated $5.0 million withdrawal liability on the Consolidated Balance Sheet in “other non-current liabilities,” and recorded an offsetting non-cash expense in the Consolidated Statement of Operations in “selling, general, and administrative” costs. We expect the liability to be paid over a 19-year period, with payments substantially similar on a total annual basis to those disclosed above. Our contributions for fiscal 2016 exceeded 5% of total plan contributions, and we were deemed to be a significant contributor to this plan. (2) Our contributions to this plan are approximately 0.06% of total contributions, which is less than the required disclosure threshold of 5% of total plan contributions. However, this plan is deemed significant for disclosure as it is severely underfunded. Additionally, we recorded an estimated partial withdrawal liability of $7.1 million in fiscal 2018, related to the closure of certain facilities. We may, in the future, record an additional liability if required by an event of our withdrawal from the plan or a mass withdrawal. Our most recent contingent withdrawal liability was estimated at approximately $52.5 million, for a complete withdrawal occurring in fiscal 2019. In the case of both a complete withdrawal and a mass withdrawal, our payments to the Central States Plan would generally continue at approximately the current rate, which, even with potential rehabilitation increases, is less than $1.0 million per year. In a complete withdrawal, the payments would not amortize the liability fully; however, payments for a complete withdrawal are limited to a 20-year period. In the case of a mass withdrawal, the liability would never amortize, and payments would continue indefinitely. Defined Contribution Plans Our employees also participate in two defined contribution plans: the “hourly savings plan” covering hourly employees, and the “salaried savings plan” covering salaried employees. Discretionary contributions to the plans are based on employee contributions and compensation, and, in certain cases, participants in the hourly savings plan also receive employer contributions based on union negotiated match amounts. Employer contributions to the hourly savings plan for fiscal 2018, fiscal 2017, and fiscal 2016 were $0.6 million and $0.3 million, and $0.2 million, respectively. Employer contributions totaling $1.8 million for the salaried savings plan for fiscal 2018 have been deferred until the first quarter of 2019. Employer contributions to the salaried savings plan for fiscal 2017 of $1.0 million were deferred and paid in the first quarter of fiscal 2018, and the fiscal 2016 employer contributions to this plan of $0.9 million were deferred and paid in the first quarter of fiscal 2017.

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