NOTE 12 – EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS

We sponsor a noncontributory defined benefit pension plan for Monro employees and the former Kimmel Automotive, Inc. employees. In fiscal 2005, the previously separate Monro and Kimmel pension plans were merged. The merged plan provides benefits to certain full-time employees who were employed with Monro and with Kimmel prior to April 2, 1998 and May 15, 2001, respectively.

Effective as of those dates, each company’s Board of Directors approved plan amendments whereby the benefits of each of the defined benefit plans would be frozen and the plans would be closed to new participants. Prior to these amendments, coverage under the plans began after employees completed one year of service and attained age 21. Benefits under both plans, and now the merged plan, are based primarily on years of service and employees’ pay near retirement. The funding policy for Monro’s merged plan is consistent with the funding requirements of U.S. federal law and regulations. The measurement date used to determine the pension plan measurements disclosed herein is March 31 for both 2018 and 2017.

The funded status of Monro’s defined benefit plan is recognized as an other non-current asset in the Consolidated Balance Sheets as of March 31, 2018 and March 25, 2017, respectively.

The funded status of the plan is set forth below:



	Fiscal March
	2018		2017
	(Dollars in thousands)
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	20,702	$	19,465
Actual return on plan assets		631		2,309
Benefits paid		(704)		(1,072)
Fair value of plan assets at end of year		20,629		20,702
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year		20,405		21,373
Interest cost		796		806
Actuarial loss/(gain)		109		(702)
Benefits paid		(704)		(1,072)
Benefit obligation at end of year		20,606		20,405
Funded status of plan	$	23	$	297

The projected and accumulated benefit obligations were equivalent at March 31 for both 2018 and 2017.

Amounts recognized in accumulated other comprehensive loss consist of:



	Year Ended
	Fiscal March
	2018		2017
	(Dollars in thousands)
Unamortized transition obligation	$	0	$	0
Unamortized prior service cost		0		0
Unamortized net loss		5,675		5,117
Total	$	5,675	$	5,117

Changes in plan assets and benefit obligations recognized in other comprehensive (loss) income consist of:



	Year Ended
	Fiscal March
	2018		2017
	(Dollars in thousands)
Net transition obligation	$	0	$	0
Prior service cost		0		0
Net actuarial (loss)/income		(558)		2,203
Total	$	(558)	$	2,203

Pension (income) expense included the following components:



	Year Ended Fiscal March
	2018		2017		2016
	(Dollars in thousands)
Interest cost on projected benefit obligation	$	796	$	806	$	803
Expected return on plan assets		(1,416)		(1,332)		(1,389)
Amortization of unrecognized actuarial loss		336		524		648
Net pension (income) expense	$	(284)	$	(2)	$	62

The weighted-average assumptions used to determine benefit obligations are as follows:

The weighted-average assumptions used to determine net periodic pension costs are as follows:



	Year Ended Fiscal March
	2018		2017		2016
Discount rate	3.98	%	3.83	%	3.69	%
Expected long-term return on assets	7.00	%	7.00	%	7.00	%

The expected long-term rate of return on plan assets is established based upon assumptions related to historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

The investment strategy of the plan is to conservatively manage the assets in order to meet the plan’s long-term obligations while maintaining sufficient liquidity to pay current benefits. This is achieved by holding equity investments while investing a portion of assets in long duration bonds to match the long-term nature of the liabilities. Monro’s general target allocation for the plan is 40% fixed income and 60% equity securities.

Monro’s asset allocations, by asset category, are as follows at the end of each year:



	March 31,		March 25,
	2018		2017
Cash and cash equivalents	1.3	%	1.7	%
Fixed income	39.3	%	39.7	%
Equity securities	59.4	%	58.6	%
Total	100.0	%	100.0	%

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following table provides fair value measurement information for Monro’s major categories of defined benefit plan assets at March 31, 2018 and March 25, 2017, respectively:



	Fair Value Measurements at March 31, 2018 Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Equity securities:
U.S. companies	$	8,062	$	7,785	$	277
International companies		4,186		4,186
Fixed income:
U.S. corporate bonds		7,505				7,505
International bonds		614				614
Cash equivalents		262				262
Total	$	20,629	$	11,971	$	8,658



	Fair Value Measurements at March 25, 2017 Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Equity securities:
U.S. companies	$	8,296	$	7,984	$	312
International companies		3,839		3,839
Fixed income:
U.S. corporate bonds		7,902				7,902
International bonds		317				317
Cash equivalents		348				348
Total	$	20,702	$	11,823	$	8,879

There are no required or expected contributions in fiscal 2019 to the plan.

The following pension benefit payments are expected to be paid:



	Year Ended
	Fiscal March
	(Dollars in thousands)
2019	$	972
2020		1,006
2021		1,059
2022		1,115
2023		1,149
2024 - 2028		6,068

We have a 401(k)/Profit Sharing Plan that covers full-time employees who meet the age and service requirements of the plan. The 401(k) salary deferral option was added to the plan during fiscal 2000. The first employee deferral occurred in March 2000. We make matching contributions consistent with the provisions of the plan. Charges to expense for our matching contributions for fiscal 2018, 2017 and 2016 amounted to approximately $1.0 million, $.8 million and $.7 million, respectively. We may also make annual profit sharing contributions to the plan at the discretion of Monro’s Compensation Committee.

We have a deferred compensation plan (the “Deferred Compensation Plan”) to provide an opportunity for additional tax-deferred savings to a select group of management or highly compensated employees. The Deferred Compensation Plan permits participants to defer all or any portion of the compensation that would otherwise be payable to them for the calendar year. In addition, Monro will credit to the participants’ accounts such amounts as would have been contributed to Monro’s 401(k)/Profit Sharing Plan but for the limitations that are imposed under the Internal Revenue Code based upon the participants’ status as highly compensated employees. We may also make such additional discretionary allocations as are determined by the Compensation Committee. The Deferred Compensation Plan is an unfunded arrangement and the participants or their beneficiaries have an unsecured claim against the general assets of Monro to the extent of their Deferred Compensation Plan benefits. We maintain accounts to reflect the amounts owed to each participant. At least annually, the accounts are credited with earnings or losses calculated on the basis of an interest rate or other formula as determined by Monro’s Compensation Committee. The total liability recorded in our financial statements at March 31, 2018 and March 25, 2017 related to the Deferred Compensation Plan was approximately $2.1 million.

Year Ended

Fiscal March

Discount rate