| Postretirement Plans | Note 22.
Postretirement Plans The following summarizes the company’s balance sheet related pension and other postretirement benefit plan accounts at December 29, 2018 and December 30, 2017 (amounts in thousands):
December 29, 2018
December 30, 2017
Current benefit liability
$
1,283
$
935
Noncurrent benefit liability
$
39,149
$
60,107
Accumulated other comprehensive loss, net of tax
$
105,036
$
78,076
On September 28, 2018, the Board of Directors approved a resolution to terminate the Flowers Foods, Inc. Retirement Plan No. 1 (“Plan No. 1”), effective December 31, 2018. The company has commenced the plan termination process and expects to distribute a portion of the pension plan assets as lump sum payments during early 2020 with the remaining balance transferred to an insurance company in the form of an annuity. The total payments distributed will depend on the lump sum offer participation rate of eligible participants. Based on the estimated value of assets held in the plan, the company currently estimates that a cash contribution of approximately $5.0 million to $35.0 million will be required to fully fund the plan’s liabilities at termination. In addition, based on current assumptions, the company estimates a final non-cash settlement charge of approximately $125.0 million. The company amended our qualified defined benefit plans in October 2015 to allow pension plan participants not yet receiving benefit payments the option to elect to receive their benefit as a single lump sum payment. This amendment was effective as of January 1, 2016. The company continues to recognize settlement accounting charges each year as a result of the ongoing lump sum payments from the plan. Settlement accounting, which accelerates recognition of a plan’s unrecognized net gain or loss, is triggered if the lump sums paid during a year exceeds the sum of the plan’s service and interest cost. The company determined it was probable a settlement would occur and paid lump sums that exceeded that threshold during our first quarter of fiscal 2018 and, as a result, recorded settlement charges in each quarter of fiscal 2018. The table below presents the recognized settlement charges by quarter for fiscal years 2018, 2017, and 2016 (amounts in thousands):
Settlement loss by fiscal quarter
Fiscal 2018
Fiscal 2017
Fiscal 2016
Quarter 1
$
4,668
$
—
$
—
Quarter 2
1,035
—
4,641
Quarter 3
930
3,030
1,832
Quarter 4
1,148
1,619
173
Total
$
7,781
$
4,649
$
6,646
The company used a measurement date of December 31, 2018 for the defined benefit and postretirement benefit plans described below. The company voluntarily contributed $10.0 million during our first quarter of fiscal 2018, $30.0 million during our second quarter of fiscal 2018, and $0.1 million during our third quarter of fiscal 2018 to Plan No. 1. A voluntary contribution of $0.6 million was made to Plan No. 2 during the third quarter of fiscal 2018. Pension Plans The company has trusteed, noncontributory defined benefit pension plans covering certain current and former employees. Benefits under the company’s largest pension plan are frozen. The company continues to maintain an ongoing plan that covers a small number of certain union employees. The benefits in this plan are based on years of service and the employee’s career earnings. The qualified plans are funded at amounts deductible for income tax purposes but not less than the minimum funding required by the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Pension Protection Act of 2006 (“PPA”). The company uses a calendar year end for the measurement date since the plans are based on a calendar year end and because it approximates the company’s fiscal year end. As of December 31, 2018 and December 31, 2017, the assets of the qualified plans included certificates of deposit, marketable equity securities, mutual funds, corporate and government debt securities, other diversifying strategies and annuity contracts. The company expects pension cost of approximately $3.0 million for fiscal 2019. The net periodic pension cost (income) for the company’s pension plans includes the following components for fiscal years 2018, 2017 and 2016 (amounts in thousands):
Fiscal 2018
Fiscal 2017
Fiscal 2016
Service cost
$
937
$
755
$
830
Interest cost
12,513
12,852
13,682
Expected return on plan assets
(18,831
)
(25,669
)
(26,644
)
Settlement loss
7,781
4,649
6,646
Amortization:
Prior service cost
387
387
387
Actuarial loss
5,811
6,355
7,294
Net periodic pension cost (income)
8,598
(671
)
2,195
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Current year actuarial loss (gain)
25,492
4,119
8,879
Settlement loss
(7,781
)
(4,649
)
(6,646
)
Amortization of prior service cost
(387
)
(387
)
(387
)
Amortization of actuarial loss
(5,811
)
(6,355
)
(7,294
)
Total recognized in other comprehensive (loss) income
11,513
(7,272
)
(5,448
)
Total recognized in net periodic benefit cost and other comprehensive loss
$
20,111
$
(7,943
)
$
(3,253
) Actual return on plan assets for fiscal years 2018, 2017, and 2016 was $2.4 million, $42.1 million, and $4.7 million, respectively. Approximately $7.5 million will be amortized from accumulated other comprehensive income into net periodic benefit cost in fiscal 2019 relating to the company’s pension plans. The funded status and the amounts recognized in the Consolidated Balance Sheets for the company’s pension plans are as follows (amounts in thousands):
December 29, 2018
December 30, 2017
Change in benefit obligation:
Benefit obligation at beginning of year
$
393,952
$
398,595
Service cost
937
755
Interest cost
12,513
12,852
Actuarial loss
9,098
20,526
Benefits paid
(23,843
)
(24,408
)
Settlements
(24,879
)
(14,368
)
Benefit obligation at end of year
$
367,778
$
393,952
Change in plan assets:
Fair value of plan assets at beginning of year
$
340,854
$
335,663
Actual return on plan assets
2,437
42,076
Employer contribution
40,971
1,891
Benefits paid
(23,843
)
(24,408
)
Settlements
(24,879
)
(14,368
)
Fair value of plan assets at end of year
$
335,540
$
340,854
Funded status, end of year:
Fair value of plan assets
$
335,540
$
340,854
Benefit obligations
(367,778
)
(393,952
)
Unfunded status and amount recognized at end of year
$
(32,238
)
$
(53,098
)
Amounts recognized in the balance sheet:
Current liability
(258
)
(260
)
Noncurrent liability
(31,980
)
(52,838
)
Amount recognized at end of year
$
(32,238
)
$
(53,098
)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss before taxes
$
137,903
$
126,002
Prior service cost before taxes
5,039
5,426
Amount recognized at end of year
$
142,942
$
131,428
Accumulated benefit obligation at end of year
$
366,709
$
392,057
Assumptions used in accounting for the company’s pension plans at each of the respective fiscal years ending are as follows:
Fiscal 2018
Fiscal 2017
Fiscal 2016
Weighted average assumptions used to determine benefit obligations:
Measurement date
12/31/2018
12/31/2017
12/31/2016
Discount rate
3.41
%
3.58
%
4.00
%
Rate of compensation increase
3.00
%
3.00
%
3.00
%
Weighted average assumptions used to determine net periodic benefit cost/(income):
Measurement date
1/1/2018
1/1/2017
1/1/2016
Discount rate
3.58
%
4.00
%
4.25
%
Expected return on plan assets
5.34
%
8.00
%
8.00
%
Rate of compensation increase
3.00
%
3.00
%
3.00
% In developing the expected long-term rate of return on plan assets at each measurement date, the company considers the plan assets’ historical actual returns, targeted asset allocations, and the anticipated future economic environment and long-term performance of individual asset classes, based on the company’s investment strategy. While appropriate consideration is given to recent and historical investment performance, the assumption represents management’s best estimate of the long-term prospective return. Further, pension costs do not include an explicit expense assumption, and therefore the return on assets rate reflects the long-term expected return, net of expenses. The long-term expected rate of return, net of expenses, for the defined benefit plans was 5.9% at the March 31, 2018 re-measurement. When Plan No. 1 was re-measured as of June 30, 2018 and September 30, 2018, the expected return was changed from 5.9% to 5.2% due to re-balancing the plan asset allocation to a fixed income rather than an equity objective as part of our pension de-risking strategy. The plan administrator has separated the assets of Plan No. 1 and Plan No. 2 and will manage the assets with different investment objectives. Historically, these assets were collectively managed. The termination path for Plan No. 1 results in a short term conservative investment outlook while Plan No. 2 is still managed with a long-term investment outlook. Based on these factors the expected long-term rate of return assumption for Plan No. 1 was set at 5.2% for fiscal 2019. The expected long-term rate of return assumption for Plan No. 2 was set at 7.4% for fiscal 2019. The average annual return on the plan assets over the last 15 years (while the assets were collectively managed) was approximately 6.9% (net of expenses). Plan Assets Effective January 1, 2014, the Finance Committee (“committee”) of the Board of Directors delegated its fiduciary and other responsibilities with respect to the plans to the newly established Investment Committee. The Investment Committee, which consists of certain members of management, establishes investment guidelines and strategies and regularly monitors the performance of the plans’ assets. The Investment Committee is responsible for executing these strategies and investing the pension assets in accordance with ERISA and fiduciary standards. The investment objective of the pension plans is to preserve the plans’ capital and maximize investment earnings within acceptable levels of risk and volatility. The Investment Committee meets on a regular basis with its investment advisors to review the performance of the plans’ assets. Based upon performance and other measures and recommendations from its investment advisors, the Investment Committee rebalances the plans’ assets to the targeted allocation when considered appropriate. The fair values of all of the company pension plan assets at December 31, 2018 and December 31, 2017, by asset class are as follows (amounts in thousands):
Fair value of Pension Plan Assets as of December 31, 2018
Asset Class
Quoted prices in active markets for identical assets (Level 1)
Significant Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total
Short term investments and cash
$
—
$
34,118
$
—
$
34,118
Fixed income securities:
U.S. government bonds
—
4,581
—
4,581
U.S. government agency bonds
—
3,561
—
3,561
U.S. corporate bonds
—
166,670
—
166,670
International corporate bonds
—
53,709
—
53,709
Other types of investments measured at contract value (^):
Guaranteed insurance contracts(a)
—
—
—
10,853
Pending transactions(b)
—
—
—
59,452
Other assets and (liabilities)(b)
—
—
—
2,636
Accrued (expenses) income(b)
—
—
—
(40
)
Total
$
—
$
262,639
$
—
$
335,540
Fair value of Pension Plan Assets as of December 31, 2017
Asset Class
Quoted prices in active markets for identical assets (Level 1)
Significant Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total
Short term investments and cash
$
—
$
19,771
$
—
$
19,771
Equity securities:
U.S. companies
65,414
—
—
65,414
International companies
665
—
—
665
Domestic equity funds(c)
19,879
—
—
19,879
International equity funds(d)
22,178
—
—
22,178
Fixed income securities:
U.S. government bonds
—
6,538
—
6,538
U.S. government agency bonds
—
10,531
—
10,531
U.S. mortgage backed securities
—
3,004
—
3,004
U.S. corporate bonds
—
9,993
—
9,993
Other types of investments measured at net asset value (*):
Hedged equity funds(e)
—
—
—
35,054
Absolute return funds(f)
—
—
—
52,704
International equity funds(d)
—
—
—
22,878
Other types of investments measured at contract value (^):
Guaranteed insurance contracts(a)
—
—
—
10,457
Pending transactions(b)
—
—
—
62,000
Other assets and (liabilities)(b)
—
—
—
(133
)
Accrued (expenses) income(b)
—
—
—
(79
)
Total
$
108,136
$
49,837
$
—
$
340,854
(a)
This class invests primarily guaranteed insurance contracts through various U.S. insurance companies.
(b)
This class includes accrued interest, dividends, and amounts receivable from asset sales and amounts payable for asset purchases.
( c )
This class includes funds with the principal strategy to invest primarily in long positions in domestic equity securities.
( d )
This class includes funds with the principal strategy to invest primarily in long positions in international equity securities. This asset was reclassified from a Level 2 to a Level 1 type for all periods. This asset was incorrectly presented as a Level 2.
(e)
This class invests primarily in hedged equity funds.
( f )
This class invests primarily in absolute return strategy funds and are reported at NAV.
(*)
Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
(^)
Certain investments, which are fully-benefit responsive investment contracts, are measured at contract value and have not been classified in the fair value hierarchy. The company’s investment policy includes various guidelines and procedures designed to ensure the plan’s assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. The plan asset allocation as of the measurement dates December 31, 2018 and December 31, 2017, and target asset allocations for fiscal year 2019 are as follows for Plan No. 1:
Target Allocation
Percentage of Plan Assets at the Measurement Date (As percent)
Asset Category
2019
2018
2017
Equity securities
0
%
2.5
38.6
Fixed income securities
90-100%
73.7
27.1
Other diversifying strategies(1)
0
%
15.0
28.8
Short term investments and cash
0-10%
8.8
5.5
Total
100.0
100.0
(1)
Includes absolute return funds, hedged equity funds, and guaranteed insurance contracts. The plan asset allocation as of the measurement dates December 31, 2018 and December 31, 2017, and target asset allocations for fiscal year 2019 are as follows for Plan No. 2:
Target Allocation
Asset Category
2019
Equity securities
0-80%
Fixed income securities
20-100%
Short term investments and cash
0-10%
Total
(1)
Includes absolute return funds, hedged equity funds, and guaranteed insurance contracts. Equity securities at December 31, 2017 include 2,030,363 shares of the company’s common stock in the amount of $39.2 million (11.5% of total plan assets). The plan sold all the company’s common stock during fiscal 2018. The total proceeds were $41.0 million to the plans. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans’ actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies. Cash Flows Company contributions to qualified and nonqualified plans are as follows (amounts in thousands):
Year
Required
Discretionary
Total
2018
$
271
$
40,700
$
40,971
2017
$
286
$
1,605
$
1,891
2016
$
341
$
1,000
$
1,341
All contributions are made in cash. The required contributions made during fiscal 2018 include $0.3 million in nonqualified pension benefits paid from corporate assets. The discretionary contributions of $40.7 million made to qualified plans during fiscal 2018 were not required to be made by the minimum funding requirements of ERISA, but the company believed, due to its strong cash flow and financial position, this was an appropriate time at which to make the contribution to reduce the impact of future contributions. During fiscal 2019, the company expects to make a $2.5 million contribution to our qualified pension plans and expects to pay $0.3 million in nonqualified pension benefits from corporate assets. These amounts represent estimates that are based on assumptions that are subject to change. Benefit Payments The following are benefits paid under the plans (including settlements) during fiscal years 2018, 2017 and 2016 and expected to be paid from fiscal 2019 through fiscal 2028. Estimated future payments include qualified pension benefits that will be paid from the plans’ assets (including potential payments related to the termination of Plan No. 1 discussed above) and nonqualified pension benefits that will be paid from corporate assets (amounts in thousands):
Year
Pension Benefits
2016
$
40,864
*
2017
$
38,776
^
2018
$
48,722
+
Estimated Future Payments:
2019
$
31,431
2020
$
327,280
2021
$
2,630
2022
$
2,715
2023
$
2,585
2024 – 2028
$
11,135
*
Includes $15.7 million and $1.6 million from Plan No. 1 and Plan No. 2, respectively, paid as lump sums.
^
Includes $14.4 million and $1.6 million from Plan No. 1 and Plan No. 2, respectively, paid as lump sums.
+
Includes $24.9 million and $1.5 million from Plan No. 1 and Plan No. 2, respectively, paid as lump sums. Postretirement Benefit Plans The company sponsors postretirement benefit plans that provide health care and life insurance benefits to retirees who meet certain eligibility requirements. Generally, this includes employees with at least 10 years of service who have reached age 55 and participate in a Flowers retirement plan. Retiree medical coverage is provided for a period of three to five years, depending on the participant’s age and service at retirement. Participant premiums are determined using COBRA premium levels. Retiree life insurance benefits are offered to a closed group of retirees. The company also sponsors a medical, dental, and life insurance benefits plan to a limited and closed group of participants. The company delivers retiree medical and dental benefits for Medicare eligible retirees through a health-care reimbursement account. The company no longer sponsors a medical plan for Medicare eligible retirees and does not file for a Medicare Part D subsidy. The net periodic benefit (income) cost for the company’s postretirement benefit plans includes the following components for fiscal years 2018, 2017 and 2016 (amounts in thousands):
Fiscal 2018
Fiscal 2017
Fiscal 2016
Service cost
$
288
$
256
$
401
Interest cost
234
227
309
Amortization:
Prior service credit
(212
)
(212
)
(212
)
Actuarial gain
(431
)
(497
)
(454
)
Total net periodic benefit income
(121
)
(226
)
44
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Current year actuarial loss (gain)
1,036
188
(2,354
)
Amortization of actuarial gain
431
497
454
Amortization of prior service credit
212
212
212
Total recognized in other comprehensive loss (income)
1,679
897
(1,688
)
Total recognized in net periodic benefit cost and other comprehensive loss (income)
$
1,558
$
671
$
(1,644
) Approximately $(0.3) million will be amortized from accumulated other comprehensive income into net periodic benefit cost in fiscal year 2019 relating to the company’s postretirement benefit plans. The unfunded status and the amounts recognized in the Consolidated Balance Sheets for the company’s postretirement benefit plans are as follows (amounts in thousands):
December 29, 2018
December 30, 2017
Change in benefit obligation:
Benefit obligation at beginning of year
$
7,943
$
7,648
Service cost
288
256
Interest cost
234
227
Participant contributions
823
330
Actuarial loss (gain)
1,037
188
Benefits paid
(2,131
)
(706
)
Benefit obligation at end of year
$
8,194
$
7,943
Change in plan assets:
Fair value of plan assets at beginning of year
$
—
$
—
Employer contributions
1,308
376
Participant contributions
823
330
Benefits paid
(2,131
)
(706
)
Fair value of plan assets at end of year
$
—
$
—
Funded status, end of year:
Fair value of plan assets
$
—
$
—
Benefit obligations
(8,194
)
(7,943
)
Unfunded status and amount recognized at end of year
$
(8,194
)
$
(7,943
)
Amounts recognized in the balance sheet:
Current liability
$
(1,025
)
$
(674
)
Noncurrent liability
(7,169
)
(7,269
)
Amount recognized at end of year
$
(8,194
)
$
(7,943
)
Amounts recognized in accumulated other comprehensive loss:
Net actuarial gain before taxes
$
(2,379
)
$
(3,846
)
Prior service credit before taxes
(50
)
(262
)
Amounts recognized in accumulated other comprehensive loss
$
(2,429
)
$
(4,108
) Assumptions used in accounting for the company’s postretirement benefit plans at each of the respective fiscal years ending are as follows:
Fiscal 2018
Fiscal 2017
Fiscal 2016
Weighted average assumptions used to determine benefit obligations:
Measurement date
12/31/2018
12/31/2017
12/31/2016
Discount rate
4.07
%
3.36
%
3.66
%
Health care cost trend rate used to determine benefit obligations:
Initial rate
6.50
%
6.00
%
6.50
%
Ultimate rate
5.00
%
5.00
%
5.00
%
Year trend reaches the ultimate rate
2025
2022
2023
Weighted average assumptions used to determine net periodic cost:
Measurement date
1/1/2018
1/1/2017
1/1/2016
Discount rate
3.36
%
3.66
%
3.83
%
Health care cost trend rate used to determine net periodic cost:
Initial rate
6.00
%
6.50
%
8.00
%
Ultimate rate
5.00
%
5.00
%
5.00
%
Year trend reaches the ultimate rate
2022
2023
2022
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects for fiscal years 2018, 2017, and 2016 (amounts in thousands):
One-Percentage-Point Decrease
One-Percentage-Point Increase
For the Year Ended
For the Year Ended
Fiscal 2018
Fiscal 2017
Fiscal 2016
Fiscal 2018
Fiscal 2017
Fiscal 2016
Effect on total of service and interest cost
$
(52
)
$
(47
)
$
(58
)
$
61
$
55
$
67
Effect on postretirement benefit obligation
$
(467
)
$
(473
)
$
(427
)
$
524
$
533
$
480
Cash Flows Company contributions to postretirement plans are as follows (amounts in thousands):
Year
Employer Net Contribution
2016
$
841
2017
$
376
2018
$
1,308
2019 (Expected)
$
1,041
The table above reflects only the company’s share of the benefit cost. Since the company no longer receives reimbursement for Medicare Part D subsidies, the entire $1.0 million expected funding for postretirement benefit plans during 2019 will be required to pay for benefits. Contributions by participants to postretirement benefits were $0.8 million, $0.3 million, and $0.3 million for fiscal years 2018, 2017, and 2016, respectively. Benefit Payments The following are benefits paid by the company during fiscal years 2018, 2017 and 2016 and expected to be paid from fiscal 2019 through fiscal 2028. All benefits are expected to be paid from the company’s assets (amounts in thousands):
Postretirement benefits
Year
Employer gross contribution
2016
$
841
2017
$
376
2018
$
1,308
Estimated Future Payments:
2019
$
1,041
2020
$
867
2021
$
812
2022
$
732
2023
$
696
2024 – 2028
$
3,608
Multiemployer Plans The company contributes to various multiemployer pension plans. Benefits provided under the multiemployer pension plans are generally based on years of service and employee age. Expense under these plans was $1.0 million for fiscal 2018, $2.1 million for fiscal 2017, and $2.2 million for fiscal 2016. The company contributes to several multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover various union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. If we choose to stop participating in some of these multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. None of the contributions to the pension funds was in excess of 5% or more of the total contributions for plan years 2018, 2017, and 2016. There are no contractually required minimum contributions to the plans as of December 29, 2018. On August 18, 2017, the union participants of the Bakery and Confectionary Union and Industry International Pension Fund (the “MEPP Fund”) at our Lakeland, Florida plant voted to withdraw from the MEPP Fund in the most recent collective bargaining agreement. The withdrawal was effective, and the union participants were eligible to participate in the 401(k) plan, on November 1, 2017. During the third quarter of fiscal 2017, the company recorded a liability of $15.2 million related to the withdrawal from the MEPP Fund. During the first quarter of fiscal 2018, the company recorded an additional liability of $2.3 million for the final settlement amount of the withdrawal liability. The withdrawal liability was computed as the net present value of 20 years of monthly payments derived from the company’s share of unfunded vested benefits. The company began making payments during the first quarter of fiscal 2018. While this is our best estimate of the ultimate cost of the withdrawal from the MEPP Fund, additional withdrawal liability may be incurred in the event of a mass withdrawal, as defined by statute following our complete withdrawal. Transition payments, including related tax payments, were made on November 3, 2017 to, and for the benefit of, union participants as part of the collective bargaining agreement. An additional $3.1 million was recorded for these transition payments. The withdrawal liability charge and the transition payments were recorded in the multi-employer pension plan withdrawal costs line item on our Consolidated Statements of Income and are in the DSD Segment. The liability on December 30, 2017 was recorded in other accrued current liabilities on the Consolidated Balance Sheets. We paid $0.2 million during the first quarter of fiscal 2018 and the balance was paid early in the second quarter of fiscal 2018. The company’s participation in these multiemployer plans for fiscal 2018 is outlined in the table below. The EIN/Pension Plan Number column provides the Employer Identification Number (“EIN”) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent PPA zone status available in 2018 and 2017 is for the plan’s year-end at December 31, 2018 and December 31, 2017, respectively. The zone status is based on information that the company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. 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. The last column lists the expiration date(s) of the collective-bargaining agreements to which the plans are subject. Finally, there have been no significant changes that affect the comparability of contributions. In December 2014, the Consolidated and Further Continuing Appropriations Act of 2015 (the “2015 Appropriations Act”) was signed into law and materially amended the PPA funding rules. In general, the PPA funding rules were made more flexible in order to make more manageable the steps necessary for multi-employer plans to become or remain economically viable in the future. While in previous years we have been informed that several of the multi-employer pension plans to which our subsidiaries contribute have been labeled with a “critical” or “endangered” status as defined by the PPA, the changes made by the 2015 Appropriations Act will materially impact, on a going forward basis, these prior funding status assessments. In any event, it is unclear at this time what impact, if any, the 2015 Appropriations Act will have on our future obligations to the multi-employer pension plans in which we participate.
Pension Protection Act
Contributions (Amounts in
Zone Status
thousands)
Expiration Date of
Pension
FIP/RP Status
2018
2017
2016
Surcharge
Collective Bargaining
Pension Fund
EIN
Plan No.
2018
2017
Pending/Implemented
($)
($)
($)
Imposed
Agreement
IAM National Pension Fund
51-6031295
002
Green
Green
No
108
139
121
No
4/30/2021
Retail, Wholesale and Department Store International Union and Industry Pension Fund
63-0708442
001
Red
Red
Yes
159
157
156
No
8/14/2021
Western Conference of Teamsters Pension Trust
91-6145047
001
Green
Green
No
293
276
233
No
2/4/2022
BC&T International Pension Fund*
52-6118572
001
*
*
Yes
220
965
1,194
Yes
10/25/2020
*
The union employees withdrew from the fund effective November 1, 2017. The collective bargaining agreement is still in effect. 401(k) Retirement Savings Plans The Flowers Foods 401(k) Retirement Savings Plan covers substantially all of the company’s employees who have completed certain service requirements. During fiscal years 2018, 2017, and 2016, the total cost and employer contributions were as follows (amounts in thousands):
Contributions by fiscal year
Defined contribution plans expense
Fiscal 2018
$
25,523
Fiscal 2017
$
28,346
Fiscal 2016
$
27,057
The company acquired Canyon during fiscal 2018 and assumed sponsorship of a 401(k) savings plan. We intend to merge this plan into the Flowers Foods 401(k) Retirement Savings Plan after receipt of final determination letters. |
