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Employee Benefits | 12 Months Ended
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Jan. 01, 2022
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 all 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:
| January 1, 2022 |  | January 2, 2021
| (In thousands)
Change in projected benefit obligation: |  |  |
Projected benefit obligation at beginning of period | $ | 113,827 |  |  | $ | 107,026 |
Interest cost | 2,019 |  |  | 2,892 |
Actuarial (gain) loss | (4,106) |  |  | 9,813 |
Benefits paid | (5,866) |  |  | (5,904) |
Projected benefit obligation at end of period | $ | 105,874 |  |  | $ | 113,827 |
Change in plan assets: |  |  |
Fair value of assets at beginning of period | $ | 91,143 |  |  | $ | 83,606 |
Actual return on plan assets | 7,892 |  |  | 11,948 |
Employer contributions | 1,100 |  |  | 1,493 |
Benefits paid | (5,866) |  |  | (5,904) |
Fair value of assets at end of period | 94,269 |  |  | 91,143 |
Net unfunded status of plan | $ | (11,605) |  |  | $ | (22,684) |
The accumulated benefit obligation for the pension plan was $105.9 million and $113.8 million at January 1, 2022, and January 2, 2021, respectively. 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 January 1, 2022, we measured the fair value of our plan assets and benefit obligations. As of January 1, 2022, and January 2, 2021, the net unfunded status of our benefit plan was $11.6 million and $22.7 million, respectively. We have elected to utilize a full yield curve approach in the estimation service and interest cost components for pension (income)/expense recognized during the fiscal year by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant projected cash flows. 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 2021 and fiscal 2020, was a $6.6 million net of tax gain and a $1.4 million net of tax loss, respectively. The adjustments in both fiscal years are primarily due to a combination of actuarial adjustments at year-end in addition to the amortization of unrealized gain and/or losses throughout the fiscal year. The decrease in the unfunded obligation for the fiscal year was approximately $11.1 million and was primarily comprised of $7.4 million of actuarial gain, $4.6 million of investment gains, $1.1 million of pension contributions (comprised of cash contributions and lease payments for the properties contributed to the pension plan in 2013), and a charge of $2.0 million due to current year interest cost. The net periodic pension credit was $1.3 million in fiscal 2021 compared to $0.9 million in fiscal 2020, driven primarily by a reduction in the interest cost on the projected benefit obligation. 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:
| January 1, 2022 |  | January 2, 2021
| (In thousands)
Unfunded status | $ | (11,605) |  |  | $ | (22,684) |
Unrecognized actuarial loss | 24,200 |  |  | 32,921 |
Net amount recognized | $ | 12,595 |  |  | $ | 10,237 |
Amounts recognized on the balance sheet consist of: |  |  |
Accrued pension liability | $ | (11,605) |  |  | $ | (22,684) |
Accumulated other comprehensive loss (pre-tax) | 24,200 |  |  | 32,921 |
Net amount recognized | $ | 12,595 |  |  | $ | 10,237 |
The net periodic pension credit for the pension plan included the following:
| Fiscal Year Ended January 1, 2022 |  | Fiscal Year Ended January 2, 2021
| (In thousands)
Service cost | $ | — |  |  | $ | — |
Interest cost on projected benefit obligation | 2,019 |  |  | 2,892 |
Expected return on plan assets | (4,560) |  |  | (4,840) |
Amortization of unrecognized loss | 1,283 |  |  | 1,052 |
Net periodic pension credit for the pension plan | $ | (1,258) |  |  | $ | (896) |
The following assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost:
| January 1, 2022 |  | January 2, 2021
Projected benefit obligation: |  |  |
Discount rate | 2.90 | % |  | 2.51 | %
Average rate of increase in future compensation levels | N/A |  | N/A
Net periodic pension: |  |  |
Discount rate | 1.84 | % |  | 2.79 | %
Average rate of increase in future compensation levels | N/A |  | N/A
Expected long-term rate of return on plan assets | 5.20 | % |  | 6.00 | %
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. Pension plan assets are managed under a 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. We employ a designated fiduciary to manage the day-to-day investment responsibilities for pension plan assets and relationships with certain agents, advisors, and other fiduciaries. The discount rate. We utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve of high-quality corporate bonds 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 projected from 2015 for annuitants. Additionally, we use the most current generational projection scales, which were MP-2021 as of January 1, 2022, and MP-2020 as of January 2, 2021. Plan Assets and Long-Term Rate of Return Fiscal 2021 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 2021, we used a 5.20% expected rate of return on plan assets. 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. We employ a designated fiduciary to manage the day to day investment responsibilities for pension plan assets and relationships with certain agents, advisors, and other fiduciaries. The current targets, adjusted to exclude non-GAAP BlueLinx real-estate holdings, and actual investment allocation, by asset category as of January 1, 2022, consisted of the following:
Type |  | Current Target Allocation |  | Actual Allocation, January 1, 2022
Global equity |  | 44.4 | % |  | 47.2 | %
Diversified credit |  | 16.7 | % |  | 16.5 | %
Real assets |  | 8.9 | % |  | 10.0 | %
Liability-hedging |  | 27.8 | % |  | 23.8 | %
Cash |  | 2.2 | % |  | 2.5 | %
Total |  | 100 | % |  | 100 | %
The following table sets forth by level, within the fair value hierarchy (as defined in Note 7, Fair Value Measurements), pension plan assets at their fair values as of January 1, 2022:
Type |  | Quoted prices in active markets of identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant other unobservable inputs (Level 3) |  | Assets measured at net asset value (NAV)(3) |  | Total
|  | (In thousands)
Return-seeking securities |  |  |  |  |  |  |  |  |  |
Investments in trusts and funds(1) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 69,397 |  |  | $ | 69,397 |
Liabilities-matching securities: |  |  |  |  |  |  |  |  |  |
Investments in trusts and funds(2) |  | — |  |  | — |  |  | — |  |  | 22,473 |  |  | 22,473 |
Cash and cash equivalents |  | 2,399 |  |  | — |  |  | — |  |  | — |  |  | 2,399 |
Total |  | $ | 2,399 |  |  | $ | — |  |  | $ | — |  |  | $ | 91,870 |  |  | $ | 94,269 |
(1) This category is comprised of a collective investment trust of equity funds that track the MCSI World Index, a collective investment trust that holds publicly traded listed infrastructure securities, and a pooled investment fund. (2) This category consists of a collective investment trust investing in Treasury STRIPS, in addition to a collective investment fund that tracks to U.S. government bond indexes, and a pooled investment fund. (3) Investments that are measured at net asset value (“NAV”) (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair value of the Level 1 assets was based on quoted prices in active markets for the identical assets. Certain investments are measured at fair value using the net asset value ("NAV") per share as a practical expedient and have not been classified in the fair value hierarchy. 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 January 1, 2022. 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 2020 The following table sets forth by level, within the fair value hierarchy, pension plan assets at their fair values as of January 2, 2021:
Type |  | Quoted prices in active markets of identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant other unobservable inputs (Level 3) |  | Assets measured at net asset value (NAV)(3) |  | Total
|  | (In thousands)
Return-seeking securities |  |  |  |  |  |  |  |  |  |
Investments in trusts and funds(1) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 64,870 |  |  | $ | 64,870 |
Liabilities-matching securities: |  |  |  |  |  |  |  |  |  |
Investments in trusts and funds(2) |  | — |  |  | — |  |  | — |  |  | 23,905 |  |  | 23,905 |
Cash and cash equivalents |  | 2,371 |  |  | — |  |  | — |  |  | — |  |  | 2,371 |
Total: |  | $ | 2,371 |  |  | $ | — |  |  | $ | — |  |  | $ | 88,775 |  |  | $ | 91,146 |
(1) This category is comprised of a collective investment trust of equity funds that track the MCSI World Index, a collective investment trust that holds publicly traded listed infrastructure securities, and a pooled investment fund. (2) This category consists of a collective investment trust investing in Treasury STRIPS, in addition to a collective investment fund that tracks to U.S. government bond indexes, and a pooled investment fund. (3) Investments that are measured at net asset value (“NAV”) (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. In our fiscal 2020 10-K, we presented investments measured at net asset value (NAV) as Level 2 investments in the fair value hierarchy. The presentation has been adjusted to show those investments measured at NAV in the table above. Pension Plan Cash Flows Our estimated normal future benefit payments to pension plan participants are as follows:
Fiscal Year Ended | (In thousands)
2022 | $ | 6,943 |
2023 | 6,602 |
2024 | 6,644 |
2025 | 6,671 |
2026 | 6,647 |
Thereafter | 31,723 |
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 (“Pension Act”). We are not required to make any cash contributions to the pension plan for fiscal funding year 2022. Multiemployer Pension Plans We are involved in various multiemployer pension plans (“MEPPs”) that provide retirement benefits to certain union employees in accordance with certain collective bargaining agreements (“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 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 |  | 2021 |  | 2020
Central States, Southeast and Southwest Areas Pension Fund | 366044243 | Critical and Declining (January 1, 2020) | RP | No |  | $ | 0.6 |  |  | $ | 0.3 |
Total |  |  |  |  |  | $ | 0.6 |  |  | $ | 0.3 |
Our contributions to this plan are approximately 0.1 percent of total contributions, which is less than the required disclosure threshold of five percent of total plan contributions. However, this plan is deemed significant for disclosure as it is severely underfunded. Our current CBA that requires contributions to the plan expires on December 31, 2022. In May 2020, we received a demand letter for payment resulting from our partial withdrawal in 2018 from the Central States Plan and started making payments in June 2020. These payments are payable monthly for a period of 20 years. Our liability for the remainder of these payments was $7.3 million as of January 1, 2022. We may, in the future, record an additional liability if required by an event of our complete withdrawal from the plan or a mass withdrawal. Our most recent contingent withdrawal liability was estimated at approximately $59.2 million, for a complete withdrawal occurring in 2022. In the case of a complete withdrawal or a mass withdrawal, the Central States Plan could demand yearly payments of approximately $1.1 million, which do not include payments for the partial withdrawal of approximately $0.6 million annually. 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 not amortize fully under current government regulations, and payments would continue indefinitely. Defined Contribution Plans Our employees also participate in two defined contribution plans: the BlueLinx Corporation Hourly Savings Plan covering hourly employees, and the BlueLinx Corporation 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 years 2020 and 2021 were approximately $0.7 million and $0.7 million, respectively. Employer contributions to the salaried savings plan for fiscal 2020 of approximately $1.8 million were deferred and paid in the first quarter of 2021. Employer contributions to the salaried savings plan for fiscal 2021 of approximately $2.0 million were deferred and will be paid in the first quarter of 2022.

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