Pension Plans and Other Retirement Benefits | Note I. Pension Plans and Other Retirement Benefits Pension : 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: Funded Plan Fiscal Year Ended Unfunded Plan Fiscal Year Ended In thousands January 30, January 31, January 30, January 31, Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 1,309,889 $ 996,968 $ 82,238 $ 59,566 Service cost 50,080 40,481 1,562 1,398 Interest cost 51,710 49,522 3,033 3,001 Actuarial (gains) losses (170,674 ) 251,144 3,806 19,552 Benefits paid (24,956 ) (28,348 ) (5,672 ) (1,279 ) Expenses paid (3,049 ) (2,945 ) — — Plan amendment — 3,067 — — Projected benefit obligation at end of year $ 1,213,000 $ 1,309,889 $ 84,967 $ 82,238 Accumulated benefit obligation at end of year $ 1,120,602 $ 1,203,464 $ 70,750 $ 68,591 Funded Plan Fiscal Year Ended Unfunded Plan Fiscal Year Ended In thousands January 30, January 31, January 30, January 31, Change in plan assets: Fair value of plan assets at beginning of year $ 1,170,748 $ 944,801 $ — $ — Actual return on plan assets (72,901 ) 107,240 — — Employer contribution 50,000 150,000 5,672 1,279 Benefits paid (24,956 ) (28,348 ) (5,672 ) (1,279 ) Expenses paid (3,049 ) (2,945 ) — — Fair value of plan assets at end of year $ 1,119,842 $ 1,170,748 $ — $ — Reconciliation of funded status: Projected benefit obligation at end of year $ 1,213,000 $ 1,309,889 $ 84,967 $ 82,238 Fair value of plan assets at end of year 1,119,842 1,170,748 — — Funded status – excess obligation $ 93,158 $ 139,141 $ 84,967 $ 82,238 Net liability recognized on consolidated balance sheets $ 93,158 $ 139,141 $ 84,967 $ 82,238 Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income (loss): Prior service cost $ 2,690 $ 3,067 $ — $ — Accumulated actuarial losses 348,289 401,165 29,046 29,198 Amounts included in accumulated other comprehensive income (loss) $ 350,979 $ 404,232 $ 29,046 $ 29,198 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 $178.1 million at January 30, 2016 is reflected on the balance sheet as of that date as a current liability of $3.2 million and a long-term liability of $174.9 million. The combined net accrued liability of $221.4 million at January 31, 2015 is reflected on the balance sheet as of that date as a current liability of $3.5 million and a long-term liability of $217.9 million. The estimated prior service cost that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in fiscal 2017 for the funded plan is $377,000. The estimated net actuarial loss that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in fiscal 2017 is $28.5 million for the funded plan and $3.5 million for the unfunded plan. In fiscal 2015, the Society of Actuaries issued new mortality tables projecting longer life expectancies that will result in higher postretirement benefit obligations for U.S. companies. Accordingly, we updated our mortality assumptions at January 31, 2015. The new mortality assumptions increased our funded plan’s benefit obligation by $59 million and the unfunded plan’s benefit obligation by $4 million at January 31, 2015. Both of these amounts are included in actuarial gains/losses presented in the change in the projected benefit obligation. TJX determined the assumed discount rate using the BOND: Link model in fiscal 2016 and fiscal 2015. 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 Fiscal Year Ended Unfunded Plan Fiscal Year Ended January 30, January 31, January 30, January 31, Discount rate 4.80 % 4.00 % 4.20 % 3.70 % Rate of compensation increase 4.00 % 4.00 % 6.00 % 6.00 % TJX made aggregate cash contributions of $55.7 million in fiscal 2016, $151.3 million in fiscal 2015 and $32.7 million in fiscal 2014 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. We do not anticipate any required funding in fiscal 2017 for the funded plan. We anticipate making contributions of $3.3 million to provide current benefits coming due under the unfunded plan in fiscal 2017. 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 Fiscal Year Ended Unfunded Plan Fiscal Year Ended Dollars in thousands January 30, January 31, February 1, January 30, January 31, February 1, Net periodic pension cost: Service cost $ 50,080 $ 40,481 $ 44,623 $ 1,562 $ 1,398 $ 1,716 Interest cost 51,710 49,522 44,654 3,033 3,001 2,447 Expected return on plan assets (78,042 ) (65,187 ) (60,474 ) — — — Amortization of prior service cost 377 — — — 2 3 Amortization of net actuarial loss 33,146 13,848 28,070 3,958 2,146 2,884 Total expense $ 57,271 $ 38,664 $ 56,873 $ 8,553 $ 6,547 $ 7,050 Other changes in plan assets and benefit obligations recognized in other comprehensive income: Net (gain) loss $ (19,731 ) $ 209,091 $ (89,265 ) $ 3,806 $ 19,552 $ (2,925 ) Amortization of net (loss) (33,146 ) (13,848 ) (28,070 ) (3,958 ) (2,146 ) (2,884 ) Amortization of prior service cost (377 ) — — — (2 ) (3 ) Plan amendment — 3,067 — — — — Total recognized in other comprehensive income (loss) $ (53,254 ) $ 198,310 $ (117,335 ) $ (152 ) $ 17,404 $ (5,812 ) Total recognized in net periodic benefit cost and other comprehensive income (loss) $ 4,017 $ 236,974 $ (60,462 ) $ 8,401 $ 23,951 $ 1,238 Weighted average assumptions for expense purposes: Discount rate 4.00% 5.00% 4.40% 3.70% 4.80% 4.00% Expected rate of return on plan assets 6.75% 7.00% 7.00% N/A N/A N/A Rate of compensation increase 4.00% 4.00% 4.00% 6.00% 6.00% 6.00% The rate of compensation increase presented for the unfunded plan (for measurement purposes and expense purposes) is the rate assumed for participants eligible for the primary benefit. The assumed rate of compensation increase for participants eligible for the alternative benefit under the unfunded plan is the same rate as assumed for the funded plan. 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 Expected Benefit Payments Unfunded Plan Expected Benefit Payments Fiscal Year 2017 $ 32,624 $ 3,324 2018 36,341 5,505 2019 40,419 5,778 2020 44,794 34,008 2021 49,427 3,534 2022 through 2026 319,360 22,974 The following table presents the fair value hierarchy (See Note F) for pension assets measured at fair value on a recurring basis as of January 30, 2016: Funded Plan In thousands Level 1 Level 2 Total Asset category: Short-term investments $ 57,713 $ — $ 57,713 Equity Securities 216,526 — 216,526 Fixed Income Securities: Corporate and government bond funds — 337,864 337,864 Futures Contracts — (33 ) (33 ) Total assets in the fair value hierarchy $ 274,239 $ 337,831 $ 612,070 Assets measured at net asset value* — — 507,772 Fair value of assets $ 274,239 $ 337,831 $ 1,119,842 * 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. The following table presents the fair value hierarchy for pension assets measured at fair value on a recurring basis as of January 31, 2015: Funded Plan In thousands Level 1 Level 2 Total Asset category: Short-term investments $ 136,276 $ — $ 136,276 Equity Securities 234,765 — 234,765 Fixed Income Securities: Corporate and government bond funds — 300,761 300,761 Total assets in the fair value hierarchy $ 371,041 $ 300,761 $ 671,802 Assets measured at net asset value* — — 498,946 Fair value of assets $ 371,041 $ 300,761 $ 1,170,748 * 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, 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 plan assets along with the actual allocation of plan assets as of the valuation date for the fiscal years presented: Actual Allocation for Fiscal Year Ended Target Allocation January 30, January 31, Equity securities 50% 40% 44% Fixed income 50% 55% 45% All other – primarily cash — 5% 11% TJX employs a total return investment approach whereby a mix of equities and fixed income investments is used to seek to maximize the long-term return on plan assets with a prudent level of risk. 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 quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies. 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. Assets under the plans totaled $1,314.8 million as of December 31, 2015 and $1,275.4 million as of December 31, 2014, and are invested in a variety of funds. 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. Eligible employees are automatically enrolled in the U.S. plan at a 2% deferral rate, unless the employee elects otherwise. TJX contributed $30.8 million in fiscal 2016, $31.2 million in fiscal 2015 and $29.7 million in fiscal 2014 to these employee savings plans. The plans include a TJX stock fund in which participants could invest a portion of TJX’s matching contribution. The TJX stock fund was closed to new investments, other than reinvestment of dividends, at the end of calendar 2015. The TJX stock fund represented 7.1% of plan assets at December 31, 2015, 7.4% of plan assets at December 31, 2014 and 8.3% of plan investments at December 31, 2013. 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 $1.3 million in fiscal 2016, $3.5 million in fiscal 2015 and $2.4 million in fiscal 2014. 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 maintains retirement/deferred savings plans for eligible associates at its foreign subsidiaries. We contributed $9.7 million for these plans in fiscal 2016, $9.3 million for these plans in fiscal 2015 and $8.1 million in fiscal 2014. Multiemployer Pension Plans: 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, 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. Postretirement Medical : TJX paid $161,000 of benefits in fiscal 2016 and has a postretirement liability of $1 million as of January 31, 2016, representing the present value of future benefits TJX expected to pay. The amendment to the plan in fiscal 2006 resulted in a negative plan amendment of $46.8 million, which was being amortized over the average remaining life of the active participants. As of January 31, 2016 the unamortized balance of $6.2 million was included in accumulated other comprehensive income (loss). During fiscal 2016 there was a pre-tax benefit of $3.5 million reflected in the consolidated statements of income as it relates to this postretirement medical plan. During fiscal 2017, TJX decided to terminate the plan and make a discretionary lump sum payment to participants. The settlement of the liability and the recognition of the remaining negative plan amendment is expected to result in a pre-tax benefit of $5.6 million in the first quarter of fiscal 2017. |