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Note 8 - Retirement Plans | 12 Months Ended
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Jan. 31, 2022
Notes to Financial Statements |
Retirement Benefits [Text Block] | Note 8 - Retirement plans Pension plan The defined benefit plan that covered the hourly rate employees of a non-operating filtration business unit, previously located in Winchester, Virginia, was frozen on June 30, 2013 per the third Amendment to the Plan dated May 15, 2013. The accrued benefit of each participant was frozen as of the freeze date, and no further benefits shall accrue with respect to any service or hours of service after the freeze date. The benefits are based on fixed amounts multiplied by years of service of participants. The Company engages outside actuaries to calculate its obligations and costs. The funding policy is to contribute such amounts as are necessary to provide for benefits attributed to service to date. The amounts contributed to the plan are sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974. Asset allocation The pension plan holds no securities of Perma-Pipe International Holdings, Inc.; 100% of the assets are held for benefits under the plan. The fair value of the major categories of the pension plan's investments are presented below. The FASB has established a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
(In thousands) |  | 2021 |  |  | 2020 |
Level 1 market value of plan assets |  |  |  |  |  |  |  |
Equity securities |  | $ | 4,119 |  |  | $ | 4,112 |
U.S. bond market |  |  | 1,544 |  |  |  | 1,716 |
Real estate securities |  |  | 322 |  |  |  | 198 |
Subtotal |  |  | 5,985 |  |  |  | 6,026 |
Level 2 significant other observable inputs |  |  |  |  |  |  |  |
Money market fund |  | $ | 321 |  |  | $ | 139 |
Subtotal |  |  | 321 |  |  |  | 139 |
Investments measured at net asset value* |  | $ | 829 |  |  | $ | 851 |
Total |  | $ | 7,135 |  |  | $ | 7,016 |
* Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the reconciliation of benefit obligations, plan assets and funded status of plan. On January 31, 2022, plan assets were held 69% in equity, 26% in debt and 5% in other. The investment policy is to invest all funds not needed to pay benefits and investment expenses for the year, with target asset allocations of approximately 60% equities, 30% fixed income and 10% alternative investments, diversified across a variety of sub-asset classes and investment styles, following a flexible asset allocation approach that will allow the plan to participate in market opportunities as they become available. The expected long-term rate of return on assets is based on historical long-term rates of equity and fixed income investments and the asset mix objective of the funds. Investment market conditions in 2021 resulted in $0.1 million loss on plan assets, computed as the actual return as presented below less the expected return, which increased the fair value of plan assets at year end. The Company kept its expected return on plan assets used in determining cost and benefit obligations consistent at 7.5%, based on long-term market expectations that were relatively unchanged from the prior year. The plan's investments are intended to earn long-term returns to fund long-term obligations, and investment portfolios with asset allocations similar to those of the plan's investment policy have attained such returns over several decades. The Company does not expect to make any future contributions to maintain funding requirements.
Reconciliation of benefit obligations, plan assets and funded status of plan (in thousands) |  | 2021 |  |  | 2020 |
Accumulated benefit obligations |  |  |  |  |  |  |  |
Vested benefits |  | $ | 6,448 |  |  | $ | 7,090 |
Accumulated benefits |  | $ | 6,448 |  |  | $ | 7,090 |
Change in benefit obligation |  |  |  |  |  |  |  |
Benefit obligation - beginning of year |  | $ | 7,090 |  |  | $ | 6,959 |
Interest cost |  |  | 173 |  |  |  | 190 |
Actuarial loss |  |  | (511 | ) |  |  | 256 |
Benefits paid |  |  | (304 | ) |  |  | (315 | )
Benefit obligation - end of year |  | $ | 6,448 |  |  | $ | 7,090 |
Change in plan assets |  |  |  |  |  |  |  |
Fair value of plan assets - beginning of year |  | $ | 7,016 |  |  | $ | 6,550 |
Actual gain on plan assets |  |  | 423 |  |  |  | 781 |
Benefits paid |  |  | (304 | ) |  |  | (315 | )
Fair value of plan assets - end of year |  | $ | 7,135 |  |  | $ | 7,016 |
Over-funded/(unfunded) status |  | $ | 688 |  |  | $ | (74 | )
Balance sheet classification |  |  |  |  |  |  |  |
Prepaid expenses and other current assets |  | $ | 322 |  |  | $ | 332 |
Other assets |  |  | 2,050 |  |  |  | 1,828 |
Deferred compensation liabilities |  |  | (1,684 | ) |  |  | (2,234 | )
Net amount recognized |  | $ | 688 |  |  | $ | (74 | )
Amounts recognized in accumulated other comprehensive loss |  |  |  |  |  |  |  |
Unrecognized actuarial loss |  | $ | 1,362 |  |  | $ | 1,902 |
Net amount recognized |  | $ | 1,362 |  |  | $ | 1,902 |
Weighted-average assumptions used to determine net cost and benefit obligations |  | 2021 |  |  | 2020 |
End of year benefit obligation discount rate |  |  | 3.00 | % |  |  | 2.50 | %
End of year net periodic benefit cost discount rate |  |  | 2.50 | % |  |  | 2.80 | %
Expected return on plan assets |  |  | 7.50 | % |  |  | 7.50 | %
The discount rate was based on the FTSE pension discount curve of high quality fixed income investments with cash flows matching the plan's expected benefit payments, consistent with prior years. The Company determines the expected long-term rate of return on plan assets by performing a detailed analysis of historical and expected returns based on the strategic asset allocation approved by the Board of Directors and the underlying return fundamentals of each asset class. The Company's historical experience with the pension fund asset performance is also considered.
Components of net periodic benefit cost (in thousands) |  | 2021 |  |  | 2020 |
Interest cost |  | $ | 173 |  |  | $ | 190 |
Expected return on plan assets |  |  | (514 | ) |  |  | (479 | )
Recognized actuarial loss |  |  | 119 |  |  |  | 139 |
Net periodic benefit income |  | $ | (222 | ) |  | $ | (150 | )
Amounts recognized in other comprehensive income (in thousands) |  |  |  |  |  |
Actuarial gain/(loss) on obligation |  | $ | 511 |  |  | $ | (256 | )
Actual gain/(loss) on plan assets |  | $ | (90 | ) |  | $ | 302 |
Amounts recognized in current year |  |  | 119 |  |  |  | 139 |
Total in other comprehensive income |  | $ | 540 |  |  | $ | 185 |
Other comprehensive income is also affected by the tax effect of the valuation allowance recorded on the domestic deferred tax assets. During the year ended January 31, 2022, there was an actuarial gain of $0.4 million. This actuarial gain is comprised of an asset loss of $0.1 million and liability gain of $0.5 million. The liability gain is the combination of: (i) a gain due to a 50 basis point increase in the discount rate, (ii) a loss resulting from an update to the mortality improvement assumption and (iii) other demographic gains. During the year ended January 31, 2021, there was an actuarial gain of less than $0.1 million. This actuarial gain was comprised of an asset gain of $0.3 million and liability loss of $0.3 million. The liability loss is the combination of: (i) a loss due to a 30 basis point decrease in the discount rate, (ii) a gain resulting from an update to the mortality improvement assumption and (iii) other demographic losses.
Cash flows (in thousands) |  |  |  |  |
Expected employer contributions for the fiscal year ending January 31, 2023 |  |  | $ | — |
Expected employee contributions for the fiscal year ending January 31, 2023 |  |  |  | — |
Estimated future plan benefit payments reflecting expected future service for the fiscal year(s) ending January 31,: |  |  |  |  |
2023 |  |  | $ | 321 |
2024 |  |  |  | 316 |
2025 |  |  |  | 319 |
2026 |  |  |  | 322 |
2027 |  |  |  | 330 |
2028 - 2032 |  |  |  | 1,610 |
401(k) plan The domestic employees of the Company participate in the PPIH 401(k) Employee Savings Plan, which is applicable to all employees except employees covered by collective bargaining agreement benefits. The plan allows employee pretax payroll contributions from 1% to 16% of total compensation. The Company matches 100% of each participant's payroll deferral contributions up to 1% of their compensation, plus 50% of each participant's payroll deferral contributions on the next 5% of compensation. Contributions to the 401(k) plan were $0.3 million each in the years ended January 31, 2022 and 2021. Multi-employer plans The Company contributes to a multi-employer plan for certain collective bargaining U.S. employees. The risks of participating in this multi-employer plan are different from a single employer plan in the following aspects:
| • | Assets contributed to the multi-employer plans by one employer may be used to provide benefits to employees of other participating employers.
| • | If a participating employer ceases contributing to the plan, the unfunded obligations of the plan may be inherited by the remaining participating employers.
| • | If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company has assessed and determined that the multi-employer plans to which it contributes are not significant to the Company's consolidated financial statements. The Company does not expect to incur a withdrawal liability or expect to significantly increase its contribution over the remainder of the contract period. The Company made contributions to the bargaining unit supported multi-employer pension plans (in thousands):
|  |  |  |  |  |  |  |  |  | FIP/RP Status |  | 2021 |  |  | 2020 |  | Surcharge |
Plan Name |  | EIN |  |  | Plan # |  | Funded Zone Status | Pending/Implemented |  | Contribution |  |  | Contribution |  | Imposed | Collective Bargaining Expiration Date
Plumbers & Pipefitters Local 572 Pension Fund |  | 626102837 |  |  | 001 |  | Green | No |  | $172 |  |  | $206 |  | No | 3/31/2025

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