| Pension Plans and Other Retirement Benefits | Pension Plans and Other Retirement Benefits Pension TJX has a funded defined benefit retirement plan that covers eligible U.S. employees hired prior to February 1, 2006. No employee contributions are required, or permitted, and benefits are based principally on compensation earned in each year of service. TJX’s funded defined benefit retirement plan assets are invested in domestic and international equity and fixed income securities, both directly and through investment funds. The plan does not invest in TJX securities. TJX also has an unfunded supplemental retirement plan that covers certain key employees and provides additional retirement benefits based on final average compensation for certain of those employees (the “primary benefit”) or, alternatively, based on benefits that would be provided under the funded retirement plan absent Internal Revenue Code limitations (the “alternative benefit”). Presented below is financial information relating to TJX’s funded defined benefit pension plan (“qualified pension plan” or “funded plan”) and its unfunded supplemental pension plan (“unfunded plan”) for the fiscal years indicated. The Company has elected the practical expedient pursuant to ASU 2015-4– Compensation-retirement benefits (Topic 715) and has selected the measurement date of January 31, the calendar month end closest to the Company’s fiscal year end. Funded Plan Unfunded Plan In thousands January 30, February 1, January 30, February 1, Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 1,532,416 $ 1,221,170 $ 104,823 $ 96,759 Service cost 50,123 44,685 2,430 2,059 Interest cost 50,210 52,172 3,283 3,740 Actuarial losses 13,758 237,125 8,229 4,682 Benefits paid (24,527) (19,891) (5,287) (2,417) Expenses paid (2,706) (2,845) — — Projected benefit obligation at end of year $ 1,619,274 $ 1,532,416 $ 113,478 $ 104,823 Accumulated benefit obligation at end of year $ 1,481,505 $ 1,383,298 $ 97,451 $ 88,038 Funded Plan Unfunded Plan In thousands January 30, February 1, January 30, February 1, Change in plan assets: Fair value of plan assets at beginning of year $ 1,562,274 $ 1,245,335 $ — $ — Actual return on plan assets 151,594 239,675 — — Employer contribution 100 100,000 5,287 2,417 Benefits paid (24,527) (19,891) (5,287) (2,417) Expenses paid (2,706) (2,845) — — Fair value of plan assets at end of year $ 1,686,735 $ 1,562,274 $ — $ — Reconciliation of funded status: Projected benefit obligation at end of year $ 1,619,274 $ 1,532,416 $ 113,478 $ 104,823 Fair value of plan assets at end of year 1,686,735 1,562,274 — — Funded status – excess (asset) obligation $ (67,461) $ (29,858) $ 113,478 $ 104,823 Net (asset) liability recognized on Consolidated Balance Sheets $ (67,461) $ (29,858) $ 113,478 $ 104,823 Amounts not yet reflected in net periodic benefit cost and included in Accumulated other comprehensive income (loss): Prior service cost $ 803 $ 1,181 $ — $ — Accumulated actuarial losses 245,506 316,695 35,880 32,266 Amounts included in Accumulated other comprehensive income (loss) $ 246,309 $ 317,876 $ 35,880 $ 32,266 The Consolidated Balance Sheets reflect the funded status of the plans with any unrecognized prior service cost and actuarial gains and losses recorded in Accumulated other comprehensive income (loss). The combined net accrued liability of $46 million at January 30, 2021 is reflected on the Consolidate Balance Sheets as of that date as a current liability of $7 million, a long-term liability of $106 million, and a long-term asset of $67 million. The combined net accrued liability of $75 million at February 1, 2020 is reflected on the Consolidated Balance Sheets as of that date as a current liability of $3 million, a long-term liability of $102 million, and a long-term asset of $30 million. The reduction in the actuarial losses included in Accumulated other comprehensive income (loss) for the funded plan for fiscal 2021 was driven by the actual return on assets which exceeded our estimated return by $63 million. TJX determined the assumed discount rate using the BOND: Link model in fiscal 2021 and fiscal 2020. TJX uses the BOND: Link model as this model allows for the selection of specific bonds resulting in better matches in timing of the plans’ expected cash flows. Presented below are weighted average assumptions for measurement purposes for determining the obligation at the year-end measurement date: Funded Plan Unfunded Plan January 30, February 1, January 30, February 1, Discount rate 3.20 % 3.30 % 2.80 % 3.10 % Rate of compensation increase (a) 4.00 % 4.00 % 4.00 % 4.00 % (a) As of fiscal 2020, the rate of compensation increase for the Unfunded Plan, reflects the rate for participants eligible for the alternative benefit as the participants eligible for the primary benefit no longer accrue benefits under this plan. TJX made aggregate cash contributions of $5 million in fiscal 2021, $102 million in fiscal 2020 and $106 million in fiscal 2019 to the funded plan and to fund current benefit and expense payments under the unfunded plan. TJX’s policy with respect to the funded plan is to fund, at a minimum, the amount required to maintain a funded status of 80% of the applicable pension liability (the Funding Target pursuant to the Internal Revenue Code section 430) or such other amount as is sufficient to avoid restrictions with respect to the funding of nonqualified plans under the Internal Revenue Code. The Company does not anticipate any required funding in fiscal 2022 for the funded plan. The Company anticipates making contributions of $4 million to provide current benefits coming due under the unfunded plan in fiscal 2022. The following are the components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) related to our pension plans: Funded Plan Unfunded Plan In thousands January 30, February 1, February 2, January 30, February 1, February 2, Net periodic pension cost: Service cost $ 50,123 $ 44,685 $ 45,342 $ 2,430 $ 2,059 $ 2,391 Interest cost 50,210 52,172 54,355 3,283 3,740 3,600 Expected return on plan assets (88,997) (74,141) (79,190) — — — Amortization of prior service cost 377 377 377 — — — Amortization of net actuarial loss 22,351 19,055 12,250 4,616 3,124 3,409 Settlement charge — — 36,122 — — — Total expense $ 34,064 $ 42,148 $ 69,256 $ 10,329 $ 8,923 $ 9,400 Other changes in plan assets and benefit obligations recognized in other comprehensive income: Net (gain) loss (48,838) $ 71,590 $ 68,770 $ 8,229 $ 4,682 $ 5,955 Amortization of net (loss) (22,351) (19,055) (12,250) (4,616) (3,124) (3,409) Settlement charge — — (36,122) — — — Amortization of prior service cost (377) (377) (377) — — — Total recognized in other comprehensive income (loss) $ (71,566) $ 52,158 $ 20,021 $ 3,613 $ 1,558 $ 2,546 Total recognized in net periodic benefit cost and other comprehensive income (loss) $ (37,502) $ 94,306 $ 89,277 $ 13,942 $ 10,481 $ 11,946 Weighted average assumptions for expense purposes: Discount rate 3.30 % 4.30 % 4.00%/4.40% 3.10 % 4.10 % 3.80 % Expected rate of return on plan assets 5.75 % 6.00 % 6.00%/6.00% N/A N/A N/A Rate of compensation increase (a) 4.00 % 4.00 % 4.00 % 4.00 % 6.00 % 6.00 % (a) For fiscal 2020 and fiscal 2019, the rate of compensation increase for participants eligible for the primary benefit under the unfunded plan is 6.00%. The assumed rate of compensation increase for participants eligible for the alternative benefit under the unfunded plan is 4.00%. During the third quarter of fiscal 2019, TJX annuitized and transferred current pension obligations for certain U.S. retirees and beneficiaries under the funded plan through the purchase of a group annuity contract with an insurance company. TJX transferred $207 million of pension plan assets to the insurance company, thereby reducing its pension benefit obligations. The transaction had no cash impact on TJX but did result in a non-cash pre-tax pension settlement charge of $36 million, which is reported separately on the Consolidated Statements of Income. As a result of the annuity purchase the Company re-measured the funded status of its pension plan as of September 30, 2018. The assumptions for pension expense presented above include a discount rate of 4.00% through the measurement date and 4.40% thereafter. The expected rate of return on plan assets is 6.00% through the measurement date and 6.00% thereafter. The discount rate for determining the obligation at the measurement date is 4.40%. TJX develops its long-term rate of return assumption by evaluating input from professional advisors taking into account the asset allocation of the portfolio and long-term asset class return expectations, as well as long-term inflation assumptions. The unrecognized gains and losses in excess of 10% of the projected benefit obligation are amortized over the average remaining service life of participants. The following is a schedule of the benefits expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter: In thousands Funded Plan Unfunded Plan Fiscal Year 2022 $ 35,475 $ 4,088 2023 40,692 45,914 2024 46,242 6,148 2025 51,865 7,356 2026 57,629 7,992 2027 through 2031 371,352 37,035 The following tables present the fair value hierarchy (See Note G—Fair Value Measurements) for pension assets measured at fair value on a recurring basis as of January 30, 2021 and February 1, 2020: Funded Plan at January 30, 2021 In thousands Level 1 Level 2 Total Asset category: Short-term investments $ 8,598 $ — $ 8,598 Equity Securities 174,691 — 174,691 Fixed Income Securities: Corporate and government bond funds — 548,667 548,667 Futures Contracts — 4,896 4,896 Total assets in the fair value hierarchy $ 183,289 $ 553,563 $ 736,852 Assets measured at net asset value (a) — — 949,883 Fair value of assets $ 183,289 $ 553,563 $ 1,686,735 Funded Plan at February 1, 2020 In thousands Level 1 Level 2 Total Asset category: Short-term investments $ 109,953 $ — $ 109,953 Equity Securities 231,607 — 231,607 Fixed Income Securities: Corporate and government bond funds — 480,519 480,519 Futures Contracts — (2,540) (2,540) Total assets in the fair value hierarchy $ 341,560 $ 477,979 $ 819,539 Assets measured at net asset value (a) — — 742,735 Fair value of assets $ 341,560 $ 477,979 $ 1,562,274 (a) In accordance with Subtopic 820-10, certain investments that were measured using net asset value per share (or its equivalent) as a practical expedient have not been classified 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 fair value of assets presented above. Pension plan assets are reported at fair value. Investments in equity securities traded on a national securities exchange are valued at the composite close price, as reported in the Wall Street Journal, as of the financial statement date. This information is provided by the independent pricing sources. Short-term investments are primarily cash related to funding of the plan which had yet to be invested as of balance sheet dates. Certain corporate and government bonds are valued at the closing price reported in the active market in which the bond is traded. Other bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the bond is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. All bonds are priced by independent pricing sources. Assets measured at net asset value include investments in limited partnerships which are stated at the fair value of the plan’s partnership interest based on information supplied by the partnerships as compared to financial statements of the limited partnership or other fair value information as determined by management. Cash equivalents or short-term investments are stated at cost which approximates fair value, and the fair value of common/collective trusts is determined based on net asset value as reported by their fund managers. The following is a summary of TJX’s target allocation guidelines for qualified pension plan assets as of January 30, 2021 along with the actual allocation of qualified pension plan assets as of the valuation date for the fiscal years presented: Target Allocation January 30, February 1, Return-seeking assets 50% 48% 44% Liability-hedging assets 50% 51% 49% All other – primarily cash —% 1% 7% Under TJX’s investment policy, plan assets are to be invested with the objective of generating investment returns that, in combination with funding contributions, provide adequate assets to meet all current and reasonably anticipated future benefit obligations under the plan. The investment policy includes a dynamic asset allocation strategy, whereby, over time, in connection with any improvements in the plan’s funded status, the target allocation of return-seeking assets (generally, equities and other instruments with similar risk profile) may decline and the target allocation of liability-hedging assets (generally, fixed income and other instruments with a similar risk profile) may increase. Risks are sought to be mitigated through asset diversification and the use of multiple investment managers. Investment risk is measured and monitored on an ongoing basis through investment portfolio reviews, annual liability measurements and periodic asset/liability studies. Other Retirement Benefits TJX also sponsors an employee savings plan under Section 401(k) of the Internal Revenue Code for all eligible U.S. employees and a similar type of plan for eligible employees in Puerto Rico. Employees may contribute up to 50% of eligible pay, subject to limitations. TJX matches employee contributions, up to 5% of eligible pay, including a basic match at rates of 25% or 75% (based upon date of hire and other eligibility criteria) plus a discretionary match, generally up to 25%, based on TJX’s performance. TJX may also make additional discretionary contributions. Eligible employees are automatically enrolled in the U.S. plan at a 2% deferral rate, unless the employee elects otherwise. The total cost of TJX contributions to these plans was $61 million in fiscal 2021, $59 million in fiscal 2020 and $61 million in fiscal 2019. TJX also has a nonqualified savings plan (the Executive Savings Plan) for certain U.S. employees. TJX matches employee deferrals at various rates which amounted to $3 million in fiscal 2021, $7 million in fiscal 2020 and $6 million in fiscal 2019. Although the plan is unfunded, in order to help meet its future obligations TJX transfers an amount generally equal to employee deferrals and the related company match to a separate “rabbi” trust. The trust assets, which are invested in a variety of mutual funds, are included in other assets on the balance sheets. In addition to the plans described above, TJX also contributes to retirement/deferred savings programs for eligible Associates at certain of its foreign subsidiaries. The Company contributed $22 million for these programs in fiscal 2021, $20 million for these programs in fiscal 2020 and $15 million in fiscal 2019. Multiemployer Pension Plans TJX contributes to certain multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover union-represented employees. TJX contributed $19 million in fiscal 2021, $20 million in fiscal 2020 and $19 million in fiscal 2019 to the Legacy Plan of the National Retirement Fund (EIN #13-6130178, plan #1), the Adjustable Plan of the National Retirement Fund (EIN #13-6130178, plan #2), the Legacy Plan of the UNITE HERE Retirement Fund (EIN #82-0994119, plan #1) and the Adjustable Plan of the UNITE HERE Retirement Fund (EIN #82-0994119, plan #2). TJX was listed in the Form 5500 for the Legacy Plan of the National Retirement Fund and the Adjustable Plan of the National Retirement Fund as providing more than 5% of the total contributions for the plan year ending December 31, 2019. In addition, based on information available to TJX, the Pension Protection Act Zone Status for each of the Legacy Plan of the National Retirement Fund and the Legacy Plan of the UNITE HERE Retirement Fund is Critical and rehabilitation plans have been implemented. The risks of participating in multiemployer pension plans are different from the risks of single-employer pension plans in certain respects, including the following: (a) assets contributed to the multiemployer 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; (c) if we cease to have an obligation to contribute to a multiemployer plan in which we had been a contributing employer, or in certain other circumstances, we may be required to pay to the plan an amount based on our allocable share of the underfunded status of the plan, referred to as a withdrawal liability. |
