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Note H - Employee Benefit Plans
 12 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Retirement Benefits [Text Block]

H. Employee Benefit Plans

 

401(k) Plan

 

We have a profit-sharing plan pursuant to Section 401(k) of the Code, whereby participants may contribute a percentage of compensation not in excess of the maximum allowed under the Code. Effective January 1, 2022, all employees became eligible to participate in the plan the first of the month following 30 days of employment. Also effective, January 1, 2025, we match 50% of the first 6% of a participant’s compensation contributed to the plan. The total contributions under the plan charged to income from operations totaled $0.5 million for fiscal 2025 and $0.6 million for fiscal 2024.

 

Additionally, we have a discretionary profit-sharing plan pursuant to Section 401(k) of the Code, whereby we may contribute an additional percentage of compensation. Employees are not required to contribute to the plan to receive the discretionary profit-sharing contribution. We did not make any discretionary profit-sharing contributions in fiscal 2025 or in fiscal 2024. 

 

We have a “Cafeteria Plan” pursuant to Section 125 of the Code, whereby health care benefits are provided for active employees through insurance companies. Substantially all active full-time employees are eligible for these benefits. We recognize the cost of providing these benefits by expensing the annual premiums, which are based on benefits paid during the year. The premiums expensed to results from operations for these benefits totaled $1.6 million for the fiscal year ended June 30, 2025 and $1.4 million for the fiscal year ended June 30, 2024.

 

Deferred Compensation Plan

 

Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest.

 

The Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. The terms of each Award, including the amount and any conditions that must be met to be entitled to payment of the Award are set forth in an Award Agreement between each Participant and NAI. The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date.

 

During the year ended June 30, 2025, we granted a total of $0.2 million in deferred cash awards to members of our Board of Directors. During the year ended June 30, 2024, we granted a total of $0.9 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. Each deferred cash award provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since the Award Date, and continues to be through the Payment Date, a member of our Board of Directors or an employee of NAI. In the event a Participant ceases to be an employee of NAI or a member of our Board of Directors prior to any Payment Date, no further payments shall be made in connection with the Award.

 

No deferred cash awards were forfeited during the fiscal year ended June 30, 2025 and the fiscal year ended June 30, 2024.

 

Defined Benefit Pension Plan

 

We formerly sponsored a defined benefit pension plan, which provides retirement benefits to employees based generally on years of service and compensation during the last five years before retirement. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. Annually, we contribute an amount not less than the minimum funding requirements of the Employee Retirement Income Security Act of 1974 nor more than the maximum tax-deductible amount.

 

Disclosure of Funded Status

 

The following table sets forth the defined benefit pension plan’s funded status and amount recognized in our consolidated balance sheets at June 30 (in thousands):

 

  

2025

  

2024

 

Change in Benefit Obligation:

        

Benefit obligation at beginning of year

 $1,374  $1,364 

Interest cost

  46   49 

Actuarial gain (loss)

  62   (39)

Benefits paid

  (330)  — 

Benefit obligation at end of year

 $1,152  $1,374 

Change in Plan Assets:

        

Fair value of plan assets at beginning of year

 $1,232  $1,025 

Actual return on plan assets

  92   91 

Employer contributions

  48   116 

Benefits paid

  (330)  — 

Fair value of plan assets at end of year

 $1,042  $1,232 

Reconciliation of Funded Status:

        

Difference between benefit obligation and fair value of plan assets

 $(110) $(142)

Unrecognized net actuarial loss in accumulated other comprehensive income

  217   282 

Net amount recognized

 $107  $140 
         

Projected benefit obligation

 $1,152  $1,374 

Accumulated benefit obligation

 $1,152  $1,374 

Fair value of plan assets

 $1,042  $1,232 

 

The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was 5.29% for the year ended June 30, 2025 and 5.28% during the year ended June 30, 2024.

 

Net Periodic Benefit Cost

 

The components included in the defined benefit pension plan’s net periodic benefit expense for the fiscal years ended June 30 were as follows (in thousands):

 

  

2025

  

2024

 

Interest cost

 $46  $49 

Expected return on plan assets

  (51)  (42)

Recognized actuarial loss

  24   39 

Settlement loss

  62   — 

Net periodic benefit expense

 $81  $46 

 

In the fiscal year ended June 30, 2025, we contributed $48,000 to our defined benefit pension plan, and in the fiscal year ended  June 30, 2024, we contributed $116,000 to our defined benefit pension plan.

 

The following is a summary of changes in plan assets and benefit obligations recognized in other comprehensive income (loss) (in thousands): 

 

  

2025

  

2024

 

Net income (loss)

 $21  $(88)

Settlement loss

  (62)  — 

Amortization of net loss

  (24)  (39)

Total recognized in other comprehensive loss

 $(65) $(127)

Total recognized in net periodic benefit cost and other comprehensive loss

 $16  $(81)

 

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is approximately $17,000. We do not have any transition obligations or prior service costs recorded in accumulated other comprehensive income.

 

The following benefit payments are expected to be paid (in thousands):

 

2026

 $781 

2027

  101 

2028

  29 

2029

  33 

2030

  — 

2031-2035

  244 

Total benefit payments expected to be paid

 $1,188 

 

The weighted-average rates used for the years ended June 30 in determining the defined benefit pension plan’s net pension costs, were as follows:

 

  

2025

  

2024

 

Discount rate

  5.29%  5.28%

Expected long-term rate of return

  6.70%  6.70%

Compensation increase rate

  N/A   N/A 

 

Our expected rate of return is determined based on a methodology that considers historical returns of multiple classes analyzed to develop a risk-free real rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plan.

 

Our defined benefit pension plan’s weighted average asset allocation at June 30 and weighted average target allocation were as follows:

 

          

Target

 
  

2025

  

2024

  

Allocation

 

Equity securities

  60%  72%  53%

Debt securities

  35%  14%  41%

Cash alternatives

  4%  14%  2%

Commodities

  1%  0%  4%
   100%  100%  100%

 

The underlying basis of the investment strategy of our defined benefit pension plan is to ensure that pension funds are available to meet the plan’s benefit obligations when due. Our investment strategy is a long-term risk controlled approach using diversified investment options with relatively minimal exposure to volatile investment options like derivatives.

 

The fair values by asset category of our defined benefit pension plan at June 30, 2025 were as follows (in thousands):

 

      

Quoted

         
      

Prices in

         
      

Active

         
      

Markets for

  

Significant

  

Significant

 
      

Identical

  

Observable

  

Unobservable

 
      

Assets

  

Inputs

  

Inputs

 
  

Total

  

(Level 1)

  

(Level 2)

  

(Level 3)

 

Equity securities (1)

 $623  $623  $—  $— 

Debt securities (2)

 $370  $370  $—  $— 

Other (3)

 $49  $49  $—  $— 

Total

 $1,042  $1,042  $—  $— 

 

(1)

This category is comprised of publicly traded funds of which 74% are U.S. large-cap funds, 20% are U.S. mid-cap funds, and 6% U.S. small-cap funds.

 

(2)

This category is comprised of publicly traded funds, of which 52% are U.S. fixed income funds and 48% are corporate, foreign or emerging market funds.

 

(3)

This category is comprised of publicly traded assets, of which 81% are money market funds and 19% are commodities.