Note 10

Associate Retirement Plans

SpartanNash’s retirement programs include pension plans providing non-contributory benefits and salary reduction defined contribution plans providing contributory benefits. Substantially all of SpartanNash’s associates not covered by collective bargaining agreements are covered by either a frozen non-contributory cash balance pension plan, a frozen pension plan, a defined contribution plan or both. Associates covered by collective bargaining agreements are included in multi-employer pension plans.

Effective January 1, 2011, the Spartan Stores, Inc. Cash Balance Pension Plan (“Cash Balance Pension Plan”) was frozen and, as a result, additional service credits are no longer added to each associate’s account, however, interest credits will continue to accrue. No additional associates are eligible to participate in the Cash Balance Pension Plan after January 1, 2011. Prior to the plan freeze, the plan benefit formula utilized a cash balance approach. Under the cash balance formula, credits were added annually to a participant’s “account” based on a percent of the participant’s compensation and years of vested service at the beginning of each calendar year. At SpartanNash’s discretion, interest credits are also added annually to a participant’s account based upon the participant’s account balance as of the last day of the immediately preceding calendar year. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act of 1976 (“ERISA”). Plan assets consist principally of common stocks and U.S. government and corporate obligations. The plan does not hold any SpartanNash stock.

One of our subsidiaries has a qualified non-contributory pension plan, Retirement Plan for Employees of Super Food Services, Inc. (“Super Foods Plan”), to provide retirement income for certain eligible full-time employees who are not covered by a union retirement plan. Pension benefits under the plan are based on length of service and compensation. Our subsidiary contributes amounts necessary to meet minimum funding requirements. This plan has been curtailed and no new associates can enter the plan. This plan is also frozen for additional service credits.

During the fiscal year ended January 3, 2015, terminated vested participants of the Cash Balance Pension Plan and the Super Foods Plan were offered a temporary opportunity to elect to receive a lump sum distribution. As a result, distributions of $10.6 million were made and a resulting settlement accounting charge of $1.6 million was incurred.

On January 1, 2015, the Super Foods Plan was merged into the Cash Balance Pension Plan which was renamed the SpartanNash Cash Balance Pension Plan. The merging of the plans will result in lower administrative fees and reduced cash funding.

SpartanNash also maintains a Supplemental Executive Retirement Plan (“SERP”), which provides nonqualified deferred compensation benefits to SpartanNash key employees and executive officers. Benefits under the SERP are paid from SpartanNash’s general assets as there is no separate trust established to fund benefits.

Expense for employer matching and profit sharing contributions made to defined contribution plans totaled $13.6 million, $4.8 million and $4.8 million in fiscal year ended January 3, 2015, the 39 week period ended December 28, 2013 and fiscal year ended March 30, 2013, respectively.

We also have deferred compensation plans for a select group of management or highly compensated associates. The plans are unfunded and permit participants to defer receipt of a portion of their base salary, annual bonus or long-term incentive compensation which would otherwise be paid to them. The deferred amounts, plus earnings, are distributed following the associate’s termination of employment. Earnings are based on the performance of phantom investments elected by the participant from a portfolio of investment options.

SpartanNash also has two separate trusts established for the protection of cash balances owed to participants in our deferred compensation plans. We were required to fund these trusts with 125% of our pre-merger liability to plan participants. This requirement was specified by the plan documents. We currently have cash balances in these trusts, which are administered by Wells Fargo. When we make payments to plan participants, we submit a claim to the trust for reimbursement. The corporate-owned life insurance was intended in the past to mirror our liability to participants in the deferred compensation plan. It was our intention to mirror the investments chosen by plan participants so as to minimize our risk if the phantom investments chosen by the plan participants increased in value. The net cash surrender value of approximately $5.2 million at January 3, 2015 is recorded on the balance sheet in Other Long-term Assets. These policies have an aggregate amount of life insurance coverage of approximately $66 million.

SpartanNash also holds additional variable universal life insurance policies on certain key associates intended to fund distributions under some of the deferred compensation plans referenced above. The company-owned policies have annual premium payments of $0.8 million. The net cash surrender value of approximately $4.2 and $3.3 million at January 3, 2015 and December 28, 2013, respectively, is recorded in the accompanying consolidated balance sheets in Other Long-term Assets. These policies have an aggregate amount of life insurance coverage of approximately $15 million.

SpartanNash and certain subsidiaries provide health care benefits to retired associates who were not covered by collective bargaining arrangements during their employment (“covered associates”) under the SpartanNash Company Retiree Medical Plan (“SpartanNash Medical Plan”). Former Spartan Stores associates who have at least 30 years of service or 10 years of service and have attained age 55, and who were not covered by collective bargaining arrangements during their employment qualify as covered associates. Qualified covered associates that retired prior to March 31, 1992 receive major medical insurance with deductible and coinsurance provisions until age 65 and Medicare supplemental benefits thereafter. Covered associates retiring after April 1, 1992 are eligible for monthly postretirement health care benefits of $5 multiplied by the associate’s years of service. This benefit is in the form of a credit against the monthly insurance premium. The retiree pays the balance of the premium. Associates hired after December 31, 2001 are not eligible for these benefits.

The following tables set forth the actuarial present value of benefit obligations, funded status, change in benefit obligation, change in plan assets, weighted average assumptions used in actuarial calculations and components of net periodic benefit costs for SpartanNash’s pension and postretirement benefit plans excluding multi-employer plans. The accrued benefit costs are reported in Postretirement benefits in the consolidated balance sheets.

	Cash Balance Pension Plan						Super Foods Plan
	Cash Balance Pension Plan						Super Foods Plan						SERP
(In thousands, except percentages)	January 3,			December 28,			January 3,			December 28,			January 3,			December 28,
	2015			2013			2015			2013			2015			2013
Funded Status
Projected Benefit Obligation
Beginning of year	$	57,825		$	60,202		$	44,675		$	—		$	856		$	877
Obligation assumed in merger		—			—			—			44,915			—			—
Interest cost		2,225			1,682			1,998			234			35			24
Actuarial (gain) loss		2,579			(427	)		3,380			6			101			1
Benefits paid		(10,188	)		(3,632	)		(9,460	)		(480	)		(78	)		(46	)
End of year	$	52,441		$	57,825		$	40,593		$	44,675		$	914		$	856
Fair value of plan assets
Beginning of year	$	66,977		$	64,590		$	38,972		$	—		$	—		$	—
Assets assumed in merger		—			—			—			38,147			—			—
Actual return on plan assets		2,872			6,019			2,220			1,305			—			—
Company contributions		—			—			2,325			—			78			46
Benefits paid		(10,188	)		(3,632	)		(9,460	)		(480	)		(78	)		(46	)
Plan assets at fair value at measurement date	$	59,661		$	66,977		$	34,057		$	38,972		$	—		$	—
Funded (unfunded) status	$	7,220		$	9,152		$	(6,536	)	$	(5,703	)	$	(914	)	$	(856	)
Components of net amount recognized in financial position:
Noncurrent assets	$	7,220		$	9,152		$	—		$	—		$	—		$	—
Current liabilities		—			—			—			—			(100	)		(91	)
Noncurrent liabilities		—			—			(6,536	)		(5,703	)		(814	)		(765	)
Net asset/(liability)	$	7,220		$	9,152		$	(6,536	)	$	(5,703	)	$	(914	)	$	(856	)
Amounts recognized in accumulated other comprehensive income:
Net unrecognized actuarial loss (gain)	$	14,557		$	14,568		$	2,015		$	(1,041	)	$	408		$	337
Weighted average assumptions at measurement date:
Discount rate		3.60	%		4.35	%		3.85	%		4.65	%		3.60	%		4.35	%
Expected return on plan assets		5.50	%		5.95	%		5.50	%		5.70	%	N/A			N/A

The accumulated benefit obligation for all of the defined benefit pension plans was $93.9 million and $103.4 million at January 3, 2015 and December 28, 2013, respectively.

	SpartanNash Medical Plan
(In thousands, except percentages)	January 3, 2015			December 28, 2013
Funded Status
Accumulated Benefit Obligation
Beginning of year	$	7,967		$	9,982
Service cost		186			194
Interest cost		394			287
Plan amendments		—			(582	)
Actuarial loss (gain)		1,593			(1,665	)
Benefits paid		(235	)		(249	)
End of year	$	9,905		$	7,967
Fair value of plan assets
Beginning of year	$	—		$	—
Employer contributions		235			249
Benefits paid		(235	)		(249	)
Plan assets at fair value at measurement date	$	—		$	—
Unfunded status	$	(9,905	)	$	(7,967	)
Components of net amount recognized in financial position:
Current liabilities	$	(319	)	$	(323	)
Non-current liabilities		(9,586	)		(7,644	)
Net liability	$	(9,905	)	$	(7,967	)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	2,554		$	981
Prior service credit		(724	)		(882	)
	$	1,830		$	99
Weighted average assumption at measurement date:
Discount rate		4.15	%		5.05	%

Components of net periodic benefit cost (income)

	Cash Balance Pension Plan									Super Foods Plan
(In thousands)	January 3, 2015			December 28, 2013			March 31, 2013			January 3, 2015			December 28, 2013
Interest cost	$	2,225		$	1,682		$	2,587		$	1,998		$	234
Expected return on plan assets		(3,547	)		(3,069	)		(4,499	)		(2,190	)		(258	)
Amortization of actuarial net loss		970			976			1,279			—			—
Net periodic benefit (income) cost		(352	)		(411	)		(633	)		(192	)		(24	)
Settlement expense		2,294			621			—			294			—
Total expense (income)	$	1,942		$	210		$	(633	)	$	102		$	(24	)
Weighted average assumptions at measurement date:
Discount rate		4.35	%		3.90	%		4.50	%		4.65	%		4.60	%
Expected return on plan assets		5.95	%		6.55	%		7.50	%		5.70	%		6.00	%

	SERP
(In thousands)	January 3, 2015			December 28, 2013			March 30, 2013
Interest cost		35			24			39
Amortization of actuarial net loss		30			23			32
Net periodic benefit cost		65			47			71
Settlement expense		—			—			50
Total expense	$	65		$	47		$	121
Weighted average assumption at measurement date:
Discount rate		4.35	%		3.90	%		4.50	%

	SpartanNash Medical Plan
(In thousands)	January 3, 2015			December 28, 2013			March 30, 2013
Service cost	$	186		$	194		$	194
Interest cost		394			287			404
Amortization of prior service credit		(158	)		(42	)		(54	)
Amortization of actuarial net loss		20			134			137
Net periodic benefit cost	$	442		$	573		$	681
Weighted average assumption at measurement date:
Discount rate		5.05	%		3.90	%		4.50	%

The net actuarial loss and prior service cost included in “Accumulated Other Comprehensive Income” and expected to be recognized in net periodic benefit cost during fiscal year 2015 are as follows:

	Pension Benefits
(In thousands)	Cash Balance Pension Plan		Super Foods Plan		SERP
Net actuarial loss	$	827	$	—	$	42

(In thousands)	Spartan Stores Medical Plan
Prior service credit	$	(158	)
Net actuarial loss		173

Prior service costs (credits) are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses for the Cash Balance Pension Plan are amortized over the average remaining service life of active participants when the accumulation of such gains and losses exceeds 10% of the greater of the projected benefit obligation and the fair value of plan assets. As a result of the continued separation of participants from the other pension plan, almost all participants are inactive. Actuarial gains and losses are recognized over the average remaining life expectancy of inactive participants.

Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement plan. Assumed health care cost trend rates were as follows:

	January 3, 2015			December 28, 2013			March 31, 2013
Pre – 65		7.75	%		8.00	%		8.50	%
Post – 65		6.85	%		7.00	%		7.50	%

The effect of a one-percentage point increase or decrease in assumed health care cost trend rates on the total service and interest components and the post-retirement benefit obligations would be less than $0.1 million.

SpartanNash has assumed an average long-term expected return on Cash Balance Pension Plan assets of 5.50% as of January 3, 2015. The expected return assumption was modeled by third-party investment portfolio managers, based on asset allocations and the expected return and risk components of the various asset classes in the portfolio. Determining projected stock and bond returns and then applying these returns to the target asset allocations of the plan assets developed the expected return. Equity returns were based primarily on historical returns of the S&P 500 Index. Fixed-income projected returns were based primarily on historical returns for the broad U.S. bond market. This overall return assumption is believed to be reasonable over a longer-term period that is consistent with the liabilities. SpartanNash has assumed an average long-term expected return on the Super Foods Plan assets of 5.50% as of January 3, 2015. The expected return assumption was based on asset allocations and the expected return and risk components of the various asset classes in the portfolio. This assumption is assumed to be reasonable over a long-term period that is consistent with the liabilities.

SpartanNash has an investment policy for the Cash Balance Pension Plan with a long-term asset allocation mix designed to meet the long-term retirement obligations. The asset allocation mix is reviewed periodically and, on a regular basis, actual allocations are rebalanced to approximate the prevailing targets. The following table summarizes both the targeted allocation of the Cash Balance Pension Plan’s weighted-average asset allocation by asset category and actual allocations as of January 3, 2015 and December 28, 2013:

				Cash Balance Pension Plan Assets
Asset Category	Target			January 3, 2015			December 28, 2013
Equity securities		15.0	%		14.8	%		63.5	%
Fixed income		85.0			84.6			35.8
Cash equivalents		0.0			0.6			0.7
Total		100.0	%		100.0	%		100.0	%

The investment policy emphasizes the following key objectives: (1) provide benefit security to participants by maximizing the return on Plan assets at an acceptable risk level (2) maintain adequate liquidity for current benefit payments (3) avoid unexpected increases in pension expense and (4) within the scope of the above objectives, minimize long term funding to the Plan.

SpartanNash has an investment policy for the Super Foods Plan with a long-term asset allocation mix designed to meet the long-term retirement obligations by investing in equity, fixed income and other securities to cover cash flow requirements of the plan and minimize long-term costs. The asset allocation mix is reviewed periodically and, on a regular basis, actual allocations are rebalanced to approximate the prevailing targets. The following table summarizes both the targeted allocation of the Super Foods Plan’s weighted-average asset allocation by asset category and actual allocations as of January 3, 2015:

				Super Foods Plan Assets
Asset Category	Target Range			January 3, 2015			December 28, 2013
Equity securities		55.0 - 65.0	%		59.0	%		63.7	%
Fixed income		35.0 - 45.0			41.0			36.3
Total		100.0	%		100.0	%		100.0	%

Upon the merger of the Cash Balance Pension Plan and the Super Foods Plan on January 1, 2015, a third-party fiduciary manages the plan assets under a pre-determined glide path based on funded status, interest rates, mortality tables and expected return on assets.

The fair value of the pension plans’ assets at January 3, 2015 by asset category is as follows:

	Fair Value Measurements
(In thousands)	Total		Quoted prices in markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Mutual funds	$	29,851	$	29,851	$	—	$	—
Pooled funds		45,737		—		45,737		—
Money market fund		381		—		381		—
Guaranteed annuity contract		17,749		—		—		17,749
Total fair value	$	93,718	$	29,851	$	46,118	$	17,749

The fair value of the pension plans’ assets at December 28, 2013 by asset category is as follows:

	Fair Value Measurements
(In thousands)	Total		Quoted prices in markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Mutual funds	$	87,439	$	87,439	$	—	$	—
Money market fund		439		—		439		—
Guaranteed annuity contract		18,071		—		—		18,071
Total fair value	$	105,949	$	87,439	$	439	$	18,071

Level 3 assets consisted of the guaranteed annuity contracts. A reconciliation of the beginning and ending balances for Level 3 assets follows:

(In thousands)	January 3, 2015			December 28, 2013
Balance, beginning of year	$	18,071		$	3,890
Balance assumed in merger		—			14,324
Purchases, sales, issuances and settlements, net		(1,402	)		(578	)
Interest income		799			236
Realized gains		281			199
Balance, end of year	$	17,749		$	18,071

See Note 7 for a discussion of the levels of the fair value hierarchy. The assets’ fair value measurement level above is based on the lowest level of any input that is significant to the fair value measurement.

The following is a description of the valuation methods used for the plans’ assets measured at fair value in the above tables:

—	Cash & money market funds: The carrying value approximates fair value.

—

Mutual Funds: These investments are publicly traded investments, which are valued using the net asset value (NAV). The NAV of the mutual funds is a quoted price in an active market. The NAV is determined once a day after the closing of the exchange based upon the underlying assets in the fund, less the fund’s liabilities, expressed on a per-share basis. The NAV is a quoted price in an active market and classified within level 1 of the fair value hierarchy of ASC 820.

—

Pooled Funds: The plan holds units of various Aon Hewitt Group Trust Funds offered through a private placement. The units are valued daily using the net asset value (“NAV”). The NAV’s are based on the fair value of each fund’s underlying investments. Level 1 assets are priced using quotes for trades occurring in active markets for the identical asset. Level 2 assets are priced using observable inputs for the asset (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). Level 3 assets are priced using observable inputs.

—

Guaranteed Annuity Contracts: The guaranteed annuitys contracts are immediate participation contracts held with insurance companies that act as custodian of the pension plans’ assets. The guaranteed annuity contracts are stated at contract value as determined by the custodians, which approximate fair values. We evaluate the general financial condition of the custodians as a component of validating whether the calculated contract value is an accurate approximation of fair value. The review of the general financial condition of the custodians is considered obtainable/observable through the review of readily available financial information the custodians are required to file with the Securities and Exchange Commission. The group annuity contracts are classified within level 3 of the valuation hierarchy of ASC 820.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuations methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.

SpartanNash expects to make contributions of $0.7 million to the Cash Balance Plan in the fiscal year ending January 2, 2016.

The following estimated benefit payments are expected to be paid in the following fiscal years:

(In thousands)	Pension Benefits and SERP Benefits		Post-retirement Benefits
2015	$	8,498	$	383
2016		8,271		406
2017		8,177		443
2018		7,639		485
2019		7,375		523
2020 to 2024		32,146		3,127

In addition to the plans described above, SpartanNash participates in the Central States Southeast and Southwest Areas pension plan and, the Michigan Conference of Teamsters and Ohio Conference of Teamsters Health and Welfare plans (collectively referred to as “multiemployer plans”) and other company sponsored defined contribution plans for most associates covered by collective bargaining agreements.

SpartanNash contributes to these multiemployer plans under the terms contained in existing collective bargaining agreements and in the amounts set forth within these agreements. The health and welfare plans provide medical, dental, pharmacy, vision, and other ancillary benefits to active employees and retirees as determined by the trustees of the plan. The vast majority of SpartanNash’s contributions benefits active employees and as such, may not constitute contributions to a postretirement benefit plan. However, SpartanNash is unable to separate contribution amounts to postretirement benefit plans from contribution amounts paid for active participants in the plan.

In regards to SpartanNash’s participation in the Central States Southeast and Southwest Areas pension plan, expense is recognized as contributions are funded and in accordance with accounting standards. SpartanNash contributed $12.9 million, $6.8 million and $8.2 million to this plan for fiscal year ended January 3, 2015, the 39 week period ended December 28, 2013 and fiscal year ended March 30, 2013, respectively. The risk of participating in a multi-employer pension plan is different from the risk associated with single-employer plans in the following respects:

a.	Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

b.	If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

If a company chooses to stop participating in some multi-employer plans, or makes market exits or otherwise has participation in the plan drop below certain levels, 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.

SpartanNash’s participation in the Central States Southeast and Southwest Areas pension plan is outlined in the tables below which provide additional information about the collective bargaining agreements associated with this multi-employer plan in which SpartanNash participates. The EIN/Pension Plan Number column provides the Employee Identification Number (“EIN”) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act zone status (“PPA”) available in 2014 and 2013 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that SpartanNash received from the plan and is certified by each plan’s actuary. Among other factors, red zone status plans are generally less than 65 percent funded and are considered in critical status. The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each plan.

Pension

EIN – Pension

Plan

Month /
Day End

Pension
Protection Act
Zone Status

FIP/RP
Status
Pending/

Contributions

Surcharges

Imposed or

Amortization

Fund

Plan Number

Date

2014

2013

Implemented

2014

2013

2012

Provisions

Central States, Southeast and Southwest Areas Pension Fund

36-6044243-001

12/31

Red

Implemented

12,858

6,822

8,248

(b)

Pension Fund

Total Collective
Bargaining
Agreements (a)

Expiration Date

Percentage of
Associates under
Collective Bargaining
Agreement

Over 5%
Contribution 2014

Central States, Southeast and Southwest Areas Pension Fund

10/2015 to 02/2017

8.0%

(a)

SpartanNash is party to four collective-bargaining agreements that require contributions to the Central States, Southeast and Southwest Areas Pension Plan. These agreements cover warehouse personnel and drivers in Grand Rapids, Michigan, Bellefontaine, Ohio and Lima, Ohio distribution centers. In the last contract negotiation, the Agreement covering the Bellefontaine facility warehouse employees was consolidated into the GMS Agreement.

(b)

SpartanNash is party to four collective-bargaining agreements that require contributions to the Central States, Southeast and Southwest Areas Pension Plan. The agreement that covers warehouse personnel and drivers in the Grand Rapids, Michigan distribution center has no surcharges imposed or amortization provisions while the agreements that cover warehouse personnel and drivers in the Bellefontaine, Ohio and Lima, Ohio distribution centers does have surcharges imposed or amortization provisions.

At the date the financial statements were issued, Form 5500 was generally not available for the plan year ended in 2014.

See Note 8 for further information regarding SpartanNash’s participation in the Central States, Southeast and Southwest Areas Pension Fund.