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Note 8 - Retirement Plans | 12 Months Ended
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Jan. 31, 2023
Notes to Financial Statements |
Retirement Benefits [Text Block] | Note 8 - Retirement plans Pension plan The defined benefit plan (the "Pension 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 Pension Plan dated May 15, 2013. The accrued benefit of each participant was frozen as of the freeze date, and no further benefits accrued with respect to any service or hours of service after the freeze date. The benefits were based on fixed amounts multiplied by years of service of participants. The Company engaged outside actuaries to calculate its obligations and costs. During the year ended January 31, 2023, the Company’s Board of Directors approved the termination of the Pension Plan. The Company provided participants of the Pension Plan an option to elect either a lump sum distribution or an annuity. A group annuity contract was purchased with an insurance company for all participants who did not elect a lump sum distribution. That insurance company became responsible for administering and paying pension benefit payments effective December 1, 2022. During the year ended January 31, 2023, the Company recognized a non-cash pre-tax settlement charge of $0.9 million, within other income/(expense) in the consolidated statements of operations in connection with the Pension Plan termination process, which represents the acceleration of deferred charges previously included within accumulated other comprehensive loss and the impact of remeasuring the Pension Plan assets and obligations at termination. In addition, the Company recorded an income tax benefit of $0.1 million for the year ended January 31, 2023, to reclassify the tax effects in accumulated other comprehensive loss upon completion of the termination of the Pension Plan. The Pension Plan termination did not require a cash outlay by the Company. Upon completion of the termination and settlement processes, the Company expects a remaining pension surplus investment balance of approximately $0.9 million. Asset allocation The Pension Plan holds no securities of Perma-Pipe International Holdings, Inc.; 100% of the assets are held for benefits under the Pension 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) |  | 2022 |  |  | 2021 |
Level 1 market value of plan assets |  |  |  |  |  |  |  |
Equity securities |  | $ | - |  |  | $ | 4,119 |
U.S. bond market |  |  | - |  |  |  | 1,544 |
Real estate securities |  |  | - |  |  |  | 322 |
Subtotal |  |  | - |  |  |  | 5,985 |
Level 2 significant other observable inputs |  |  |  |  |  |  |  |
Money market fund |  | $ | 895 |  |  | $ | 321 |
Subtotal |  |  | 895 |  |  |  | 321 |
Investments measured at net asset value* |  | $ | 22 |  |  | $ | 829 |
Total |  | $ | 917 |  |  | $ | 7,135 |
* 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 the Pension Plan. On January 31, 2023, the Pension Plan assets were held 100% in cash. Investment market conditions in 2022 resulted in $0.5 million loss on plan assets, computed as the actual return as presented below less the expected return, which decreased the fair value of plan assets at year end.
Reconciliation of benefit obligations, plan assets and funded status of plan (in thousands) |  | 2022 |  |  | 2021 |
Accumulated benefit obligations |  |  |  |  |  |  |  |
Vested benefits |  | $ | - |  |  | $ | 6,448 |
Accumulated benefits |  | $ | - |  |  | $ | 6,448 |
Change in benefit obligation |  |  |  |  |  |  |  |
Benefit obligation - beginning of year |  | $ | 6,448 |  |  | $ | 7,090 |
Interest cost |  |  | 141 |  |  |  | 173 |
Actuarial gain |  |  | (220 | ) |  |  | (511 | )
Benefits paid |  |  | (259 | ) |  |  | (304 | )
Lump sum benefits paid |  |  | (5,531 | ) |  |  | - |
Reimbursement of premiums |  |  | 112 |  |  |  | - |
Effect of settlement/curtailment |  |  | (691 | ) |  |  | - |
Benefit obligation - end of year |  | $ | - |  |  | $ | 6,448 |
Change in plan assets |  |  |  |  |  |  |  |
Fair value of plan assets - beginning of year |  | $ | 7,135 |  |  | $ | 7,016 |
Actual (loss) gain on plan assets |  |  | (540 | ) |  |  | 423 |
Benefits paid |  |  | (259 | ) |  |  | (304 | )
Lump sum benefits paid |  |  | (5,531 | ) |  |  | - |
Reimbursement of premiums |  |  | 112 |  |  |  | - |
Fair value of plan assets - end of year |  | $ | 917 |  |  | $ | 7,135 |
Over-funded/(unfunded) status |  | $ | 917 |  |  | $ | 688 |
Balance sheet classification |  |  |  |  |  |  |  |
Prepaid expenses and other current assets |  | $ | 917 |  |  | $ | 322 |
Other assets |  |  | - |  |  |  | 2,050 |
Deferred compensation liabilities |  |  | - |  |  |  | (1,684 | )
Net amount recognized |  | $ | 917 |  |  | $ | 688 |
Amounts recognized in accumulated other comprehensive loss |  |  |  |  |  |  |  |
Unrecognized actuarial loss |  | $ | - |  |  | $ | 1,362 |
Net amount recognized |  | $ | - |  |  | $ | 1,362 |
Weighted-average assumptions used to determine net cost and benefit obligations |  | 2022 |  |  | 2021 |
End of year benefit obligation discount rate |  |  | N/A |  |  |  | 3.00 | %
End of year net periodic benefit cost discount rate |  |  | N/A |  |  |  | 2.50 | %
Expected return on plan assets |  |  | N/A |  |  |  | 7.50 | %
In connection with the termination of the Pension Plan, participants elected either a lump sum payment or annuity. For those electing lump sum payouts, the benefit obligation was based on rates determined as of the beginning of the plan year, in accordance with the plan document. For those electing annuity payouts, the benefit obligation was determined by the annuity provider.
Components of net periodic benefit cost (in thousands) |  | 2022 |  |  | 2021 |
Interest cost |  | $ | 141 |  |  | $ | 173 |
Expected return on plan assets |  |  | - |  |  |  | (514 | )
Recognized actuarial loss |  |  | 49 |  |  |  | 119 |
Net periodic benefit expense/(income) |  | $ | 190 |  |  | $ | (222 | )
Amounts recognized in other comprehensive income (in thousands) |  |  |  |  |  |
Actuarial gain/(loss) on obligation |  | $ | 220 |  |  | $ | 511 |
Settlement/plan termination |  |  | 1,518 |  |  |  | - |
Actual gain/(loss) on plan assets |  |  | (540 | ) |  |  | (90 | )
Amounts recognized in current year |  |  | 49 |  |  |  | 119 |
Total in other comprehensive income |  | $ | 1,247 |  |  | $ | 540 |
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, 2023, there was an actuarial loss of $0.3 million. This actuarial loss is comprised of an asset loss of $0.5 million and liability gain of $0.2 million. The liability gain is primarily the result of demographic gains. 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. Due to the termination of the Pension Plan there are no expected employer contributions. 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, 2023 and 2022. 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 |  | 2022 |  |  | 2021 |  | Surcharge |
Plan Name |  | EIN |  |  | Plan # |  | Funded Zone Status | Pending/Implemented |  | Contribution |  |  | Contribution |  | Imposed | Collective Bargaining Expiration Date
Plumbers & Pipefitters Local 572 Pension Fund |  | 62-6102837 |  |  | 001 |  | Yellow | No |  | $178 |  |  | $172 |  | No | 3/31/2025

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