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Note 7 - Postretirement and Postemployment Benefits | 12 Months Ended
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Sep. 29, 2019
Other Postretirement Benefits Plan [Member] |
Notes to Financial Statements |
Pension and Other Postretirement Benefits Disclosure [Text Block] | 7 POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS We provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations. The level and adjustment of participant contributions vary depending on the specific plan. In addition, St. Louis Post Dispatch LLC provides postemployment disability benefits to certain employee groups prior to retirement . Our liability and related expense for benefits under the postretirement plans are recorded over the service period of active employees based upon annual actuarial calculations. We accrue postemployment disability benefits when it becomes probable that such benefits will be paid and when sufficient information exists to make reasonable estimates of the amounts to be paid. The net periodic postretirement benefit cost (benefit) components for our postretirement plans are as follows:
(Thousands of Dollars) |  | 2019 |  |  | 2018 |  |  | 2017 |
Service cost for benefits earned during the year |  |  | — |  |  |  | — |  |  |  | 13 |
Interest cost on projected benefit obligation |  |  | 412 |  |  |  | 365 |  |  |  | 412 |
Expected return on plan assets |  |  | (1,082 | ) |  |  | (1,080 | ) |  |  | (1,056 | )
Amortization of net actuarial gain |  |  | (976 | ) |  |  | (984 | ) |  |  | (987 | )
Amortization of prior service benefit |  |  | (723 | ) |  |  | (785 | ) |  |  | (1,459 | )
Curtailment gains |  |  | 0 |  |  |  | (2,031 | ) |  |  | (3,741 | )
Net periodic postretirement benefit |  |  | (2,369 | ) |  |  | (4,515 | ) |  |  | (6,818 | )
In March 2017, we notified certain participants in one of our postemployment medical plans of changes to their plan, which included notice that the plan will terminate on December 31, 2017. These changes resulted in a non-cash curtailment gain of $2,031,000 and $3,741,000 in 2018 and 2017, respectively. The curtailment gain is recorded in assets loss (gain) on sales, impairments and other in the Consolidated Statements of Income and Comprehensive Income. These charges also reduced the postemployment benefit obligation by $7,036,000 and reduced accumulated other comprehensive loss by $106,000 and $1,417,000 in 2018 and 2017, respectively. Changes in benefit obligations and plan assets are as follows:
(Thousands of Dollars) |  | 2019 |  |  | 2018 |
Benefit obligation, beginning of year |  |  | 11,756 |  |  |  | 15,667 |
Service cost |  |  | — |  |  |  | — |
Interest cost |  |  | 412 |  |  |  | 365 |
Actuarial loss (gain) |  |  | 1,033 |  |  |  | (1,054 | )
Benefits paid, net of premiums received |  |  | (1,507 | ) |  |  | (1,399 | )
Curtailment |  |  | — |  |  |  | (1,924 | )
Medicare Part D subsidies |  |  | 58 |  |  |  | 101 |
Benefit obligation, end of year |  |  | 11,752 |  |  |  | 11,756 |
Fair value of plan assets, beginning of year |  |  | 24,647 |  |  |  | 24,626 |
Actual return on plan assets |  |  | 2,097 |  |  |  | 2,106 |
Employer contributions |  |  | 222 |  |  |  | 422 |
Benefits paid, net of premiums and Medicare Part D subsidies received |  |  | (1,449 | ) |  |  | (1,298 | )
Benefits paid for active employees |  |  | (1,382 | ) |  |  | (1,209 | )
Fair value of plan assets at measurement date |  |  | 24,135 |  |  |  | 24,647 |
Funded status |  |  | 12,383 |  |  |  | 12,891 |
Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows:
|  | September 29 |  |  | September 30 |
(Thousands of Dollars) |  | 2019 |  |  | 2018 |
Non-current assets |  |  | 12,383 |  |  |  | 12,891 |
Postretirement benefit obligations |  |  | — |  |  |  | — |
Accumulated other comprehensive income (before income tax benefit) |  |  | 14,818 |  |  |  | 17,917 |
Amounts recognized in accumulated other comprehensive income are as follows:
|  | September 29 |  |  | September 30 |
(Thousands of Dollars) |  | 2019 |  |  | 2018 |
Unrecognized net actuarial gain |  |  | 4,970 |  |  |  | 12,224 |
Unrecognized prior service benefit |  |  | 9,848 |  |  |  | 5,693 |
|  |  | 14,818 |  |  |  | 17,917 |
We expect to recognize $743,000 and $647,000 of unrecognized net actuarial gain and unrecognized prior service benefit, respectively, in net periodic postretirement benefit in 2020. Assumptions Weighted-average assumptions used to determine postretirement benefit obligations are as follows:
|  | September 29 |  |  | September 30 |
(Percent) |  | 2019 |  |  | 2018 |
Discount rate |  |  | 2.8 |  |  |  | 4.0 |
Expected long-term return on plan assets |  |  | 4.5 |  |  |  | 4.5 |
The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets. Weighted-average assumptions used to determine net periodic benefit cost are as follows:
(Percent) |  | 2019 |  |  | 2018 |  |  | 2017 |
Discount rate - service cost |  |  | 4.0 |  |  |  | 3.4 |  |  |  | 3.1 |
Discount rate - interest cost |  |  | 3.7 |  |  |  | 2.8 |  |  |  | 2.4 |
Expected long-term return on plan assets |  |  | 4.5 |  |  |  | 4.5 |  |  |  | 4.5 |
For 2019 , the expected long-term return on plan assets is 4.5%. The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets. Assumed health care cost trend rates are as follows:
|  | September 29 |  |  | September 30 |
(Percent) |  | 2019 |  |  | 2018 |
Health care cost trend rates |  |  | 8.5 |  |  |  | 9.0 |
Rate to which the cost trend rate is assumed to decline (the “Ultimate Trend Rate”) |  |  | 4.5 |  |  |  | 4.5 |
Year in which the rate reaches the Ultimate Trend Rate |  | 2027 |  |  | 2026 |
Administrative costs related to indemnity plans are assumed to increase at the health care cost trend rates noted above. Assumed health care cost trend rates have an effect on the amounts reported for the postretirement plans. A one percentage point change in assumed health care cost trend rates would have the following annualized effects on reported amounts for 2019 :
|  | One Percentage Point |
(Thousands of Dollars) |  | Increase |  |  | Decrease |
Effect on net periodic postretirement benefit |  |  | 11 |  |  |  | (10 | )
Effect on postretirement benefit obligation |  |  | 425 |  |  |  | (389 | )
Plan Assets Assets of the retiree medical plan are invested in a master trust. The master trust also pays benefits of active employee medical plans for the same union employees. The fair value of master trust assets allocated to the active employee medical plans at September 29, 2019 and September 30, 2018 is $1,955,000 and $3,266,000, respectively, which are included within the tables below. The primary objective of our investment strategy is to satisfy our postretirement obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation and reinvestment of dividend and interest income and safety of invested funds. Our investment policy outlines the governance structure for decision making, sets investment objectives and restrictions, and establishes criteria for selecting and evaluating investment managers. The use of derivatives is strictly prohibited, except on a case-by-case basis where the manager has a proven capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment committee, consisting of certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation. The weighted-average asset allocation of our postretirement assets is as follows:
(Percent) |  | Policy Allocation |  |  | Actual Allocation |
|  |  |  |  |  | September 29 |  |  | September 30 |
Asset Class |  | September 29 2019 |  |  | 2019 |  |  | 2018 |
Equity securities |  |  | 20 |  |  |  | 18 |  |  |  | 18 |
Debt securities |  |  | 70 |  |  |  | 68 |  |  |  | 69 |
Hedge fund investment |  |  | 10 |  |  |  | 14 |  |  |  | 13 |
Cash and cash equivalents |  |  | — |  |  |  | — |  |  |  | — |
Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines. Fair Value Measurements The fair value hierarchy of postretirement assets at September 29, 2019 is as follows:
(Thousands of Dollars) |  | NAV |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Domestic equity securities |  |  | 778 |  |  |  | 2,640 |  |  |  | — |  |  |  | — |
International equity securities |  |  | — |  |  |  | 628 |  |  |  | 750 |  |  |  | — |
Debt securities |  |  | — |  |  |  | 17,707 |  |  |  | — |  |  |  | — |
Hedge fund investment |  |  | 3,587 |  |  |  | — |  |  |  | — |  |  |  | — |
The fair value hierarchy of postretirement assets at September 30, 2018 is as follows:
(Thousands of Dollars) |  | NAV |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and cash equivalents |  |  | — |  |  |  | 242 |  |  |  | — |  |  |  | — |
Domestic equity securities |  |  | 820 |  |  |  | 2,589 |  |  |  | — |  |  |  | — |
International equity securities |  |  | — |  |  |  | 681 |  |  |  | 780 |  |  |  | — |
Debt securities |  |  | — |  |  |  | 19,185 |  |  |  | — |  |  |  | — |
Hedge fund investment |  |  | 3,616 |  |  |  | — |  |  |  | — |  |  |  | — |
There were no purchases, sales or transfers of assets classified as Level 3 in 2019 or 2018 . Postretirement assets included in the fair value hierarchy at net asset value, or "NAV", include two investments:
| • | U.S. small cap value equity common/collective fund for which fund prices are not publicly available. The balance of this investment is $778,000 and $820,000 as of 9/29/2019 and 9/30/2018, respectively. We can redeem this fund on a monthly basis.
| • | Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $3,587,000 and $3,616,000 as of 9/29/2019 and 9/30/20018, respectively. We can redeem up to 90% of our investment in this fund within 90 - 120 days of notice with the remaining distributed following completion of the audit of the Fund's financial statements for the year.
Cash Flows Based on our forecast at September 29, 2019 , we do not expect to contribute to our postretirement plans in 2019 . The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Modernization Act”) introduced a prescription drug benefit under Medicare (“Medicare Part D”) and a federal subsidy to sponsors of retiree health care benefit plans (“Subsidy”) that provide a benefit at least actuarially equivalent (as that term is defined in the Modernization Act) to Medicare Part D. We concluded we qualify for the Subsidy under the Modernization Act since the prescription drug benefits provided under our postretirement health care plans generally require lower premiums from covered retirees and have lower deductibles than the benefits provided in Medicare Part D and, accordingly, are actuarially equivalent to or better than, the benefits provided under the Modernization Act. We anticipate future benefit payments to be paid either with future contributions to the plan or directly from plan assets, as follows:
|  |  |  |  |  |  | Less |  |  |  |  |
|  |  |  |  |  |  | Medicare |  |  |  |  |
|  |  | Gross |  |  | Part D |  |  | Net |
(Thousands of Dollars) |  |  | Payments |  |  | Subsidy |  |  | Payments |
2020 |  |  |  | 1,241 |  |  |  | (66 | ) |  |  | 1,175 |
2021 |  |  |  | 1,201 |  |  |  | (65 | ) |  |  | 1,136 |
2022 |  |  |  | 1,154 |  |  |  | (63 | ) |  |  | 1,091 |
2023 |  |  |  | 1,099 |  |  |  | (60 | ) |  |  | 1,039 |
2024 |  |  |  | 1,039 |  |  |  | (57 | ) |  |  | 982 |
2025-2029 |  |  |  | 4,185 |  |  |  | (221 | ) |  |  | 3964 |
Postemployment Plan Our postemployment benefit obligation, which represents certain disability benefits , is $2,550,000 at September 29, 2019 and $2,580,000 at September 30, 2018 .

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