BENEFIT PLANS

12 Months Ended

Aug. 01, 2020

Retirement Benefits [Abstract]

BENEFIT PLANS

NOTE 14—BENEFIT PLANS

The Company’s employees who participate are covered by various contributory and non-contributory pension, profit sharing or 401(k) plans. The Company’s primary defined benefit pension plans are the SUPERVALU INC. Retirement Plan, Unified Grocers pension plan and certain supplemental executive retirement plans. These plans were closed to new participants and service crediting ended for all participants as of December 31, 2007. Pay increases were reflected in the amount of benefits accrued in these plans until December 31, 2012. Approximately 60% of the union employees participate in multiemployer retirement plans under collective bargaining agreements. The remaining either participate in plans sponsored by the Company or are not currently eligible to participate in a retirement plan. In addition to sponsoring both defined benefit and defined contribution pension plans, the Company provides healthcare and life insurance benefits for eligible retired employees under postretirement benefit plans. The Company also provides certain health and welfare benefits, including short-term and long-term disability benefits, to inactive disabled employees prior to retirement. The terms of the postretirement benefit plans vary based on employment history, age and date of retirement. For many retirees, the Company provides a fixed dollar contribution and retirees pay contributions to fund the remaining cost.

For the defined benefit pension plans, the accumulated benefit obligation is equal to the projected benefit obligation. The benefit obligation, fair value of plan assets and funded status of our defined benefit pension plans and other postretirement benefit plans consisted of the following:

	2020						2019
(in thousands)	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
Changes in Benefit Obligation
Benefit Obligation at beginning of year	$	2,709,274		$	37,682		$	—		$	—
Benefit obligation at acquisition date of October 22, 2018	—			—			2,499,954			52,276
Plan amendment	—			—			—			(4,199		)
Service cost	—			54			—			173
Interest cost	57,495			943			75,706			1,447
Actuarial loss (gain)	276,635			719			249,899			(9,836		)
Settlements paid	(689,989		)	—			—			—
Benefits paid	(93,928		)	(2,285		)	(116,285		)	(2,179		)
Benefit obligation at end of year	2,259,487			37,113			2,709,274			37,682
Changes in Plan Assets
Fair value of plan assets at beginning of year	2,496,547			11,243			—			—
Fair value of plan assets at acquisition date of October 22, 2018	—			—			2,305,020			11,586
Actual return on plan assets	261,839			845			303,696			260
Employer contributions	16,099			2,601			4,116			1,636
Settlements paid	(689,989		)	—			—			—
Benefits paid	(93,928		)	(2,285		)	(116,285		)	(2,239		)
Fair value of plan assets at end of year	1,990,568			12,404			2,496,547			11,243
Unfunded status at end of year	$	(268,919	)	$	(24,709	)	$	(212,727	)	$	(26,439	)

Net periodic benefit (income) cost and other changes in plan assets and benefit obligations recognized consist of the following:

	2020						2019
(in thousands)	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
Net Periodic Benefit (Income) Cost
Service cost	$	—		$	54		$	—		$	173
Interest cost	57,495			943			75,706			1,447
Expected return on plan assets	(105,596		)	(215		)	(111,695		)	(184		)
Amortization of net actuarial gain	—			(3,107		)	—			—
Pension settlement charge	11,303			—			—			—
Net periodic benefit (income) cost	(36,798		)	(2,325		)	(35,989		)	1,436
Other Changes in Plan Assets and Benefits Obligations Recognized in Other Comprehensive (Loss) Income
Prior service benefit	—			—			—			(4,199		)
Amortization of prior service benefit	—			1,400			—			—
Net actuarial loss (gain)	108,990			89			57,902			(9,912		)
Amortization of net actuarial loss	—			1,707			—			—
Total expense (benefit) recognized in Other comprehensive (loss) income	108,990			3,196			57,902			(14,111		)
Total expense (benefit) recognized in net periodic benefit cost (income) and Other comprehensive (loss) income	$	72,192		$	871		$	21,913		$	(12,675	)

On August 1, 2019, the Company amended the SUPERVALU Retirement Plan to provide for a lump sum settlement window. On August 2, 2019, the Company sent plan participants lump sum settlement election offerings that committed the plan to pay certain deferred vested pension plan participants and retirees, who make such an election, a lump sum payment in exchange for their rights to receive ongoing payments from the plan. The lump sum payment amounts are equal to the present value of the participant’s pension benefits, and were made to certain former (i) retired associates and beneficiaries who are receiving their monthly pension benefit payment and (ii) terminated associates who are deferred vested in the plan, had not yet begun receiving monthly pension benefit payments and who are not eligible for any prior lump sum offerings under the plan. Benefit obligations associated with the lump sum offering have been incorporated into the funded status utilizing the actuarially determined lump sum payments based on offer acceptances. As disclosed in the preceding two tables, in fiscal 2020, the plan made aggregate lump sum settlement payments, which resulted in a non-cash pension settlement charges from the acceleration of a portion of the accumulated unrecognized actuarial loss, which was based on the fair value of SUPERVALU Retirement Plan assets and remeasured liabilities. As a result of the settlement payments reported in the second quarter of fiscal 2020, the SUPERVALU Retirement Plan obligations were remeasured using a discount rate of 3.1 percent and the MP-2019 mortality improvement scale. This remeasurement resulted in a $1.5 million decrease to Accumulated other comprehensive loss.

Estimated net actuarial loss expected to be amortized from Accumulated other comprehensive loss into net periodic benefit cost for the defined benefit pension plans during fiscal 2021 is $0.8 million. The estimated net amount of prior service benefit and net actuarial gain for the postretirement benefit plans that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost during fiscal 2021 is $2.7 million.

Amounts recognized in the Consolidated Balance Sheets as of August 1, 2020 and August 3, 2019 consist of the following:

	August 1, 2020				August 3, 2019
(in thousands)	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Accrued compensation and benefits	$	1,500	$	—	$	1,900	$	—
Pension and other postretirement benefit obligations	267,419		24,709		210,827		26,439
Total	$	268,919	$	24,709	$	212,727	$	26,439

Assumptions

Weighted average assumptions used to determine benefit obligations and net periodic benefit cost consisted of the following:

	2020	2019
Benefit obligation assumptions:
Discount rate	1.74% - 2.37%	2.99% - 3.49%
Net periodic benefit cost assumptions:
Discount rate	2.99% - 3.49%	4.30% - 4.42%
Rate of compensation increase	—	—	%
Expected return on plan assets(1)	2.00% - 5.75%	2.25% - 6.50%

(1) Expected return on plan assets is estimated by utilizing forward-looking, long-term return, risk and correlation assumptions developed and updated annually by the Company. These assumptions are weighted by the actual or target allocation to each underlying asset class represented in the pension plan asset portfolio. We also assess the expected long-term return on plan assets assumption by comparison to long-term historical performance on an asset class to ensure the assumption is reasonable. Long-term trends are also evaluated relative to market factors such as inflation, interest rates, and fiscal and monetary policies in order to assess the capital market assumptions.

The Company reviews and selects the discount rate to be used in connection with measuring our pension and other postretirement benefit obligations annually. In determining the discount rate, the Company uses the yield on corporate bonds (rated AA or better) that coincides with the cash flows of the plans’ estimated benefit payouts. The model uses a yield curve approach to discount each cash flow of the liability stream at an interest rate specifically applicable to the timing of each respective cash flow. The model totals the present values of all cash flows and calculates the equivalent weighted average discount rate by imputing the singular interest rate that equates the total present value with the stream of future cash flows. This resulting weighted average discount rate is then used in evaluating the final discount rate to be used.

For those retirees whose health plans provide for variable employer contributions, the assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation before age 65 was 7.80 percent as of August 1, 2020. The assumed healthcare cost trend rate for retirees before age 65 will decrease each year through fiscal 2029, until it reaches the ultimate trend rate of 4.50 percent. For those retirees whose health plans provide for variable employer contributions, the assumed healthcare cost trend rate used in measuring the accumulated postretirement benefit obligation after age 65 was 8.00 percent as of August 1, 2020. The assumed healthcare cost trend rate for retirees after age 65 will decrease through fiscal 2029, until it reaches the ultimate trend rate of 4.50 percent. For those retirees whose health plans provide for a fixed employer contribution rate, a healthcare cost trend is not applicable. The healthcare cost trend rate assumption would have had the following impact on the amounts reported: a 100 basis point increase in the trend rate would increase the accumulated postretirement benefit obligation by approximately $0.8 million as of the end of fiscal 2020 and would increase service and interest cost by less than $0.1 million. Conversely, a 100 basis point decrease in the healthcare cost trend rate would decrease the Company’s accumulated postretirement benefit obligation as of the end of fiscal 2020 by approximately $0.7 million and would decrease service and interest cost by less than $0.1 million.

Pension Plan Assets

Pension plan assets are held in a master trust and invested in separately managed accounts and other commingled investment vehicles holding domestic and international equity securities, domestic fixed income securities and other investment classes. The Company employs a total return approach whereby a diversified mix of asset class investments is used to maximize the long-term return of plan assets for an acceptable level of risk. Alternative investments are also used to enhance risk-adjusted long-term returns while improving portfolio diversification. Risk is managed through diversification across asset classes, multiple investment manager portfolios and both general and portfolio-specific investment guidelines. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and our financial condition. This asset allocation policy mix is reviewed annually and actual versus target allocations are monitored regularly and rebalanced on an as-needed basis. Plan assets are invested using a combination of active and passive investment strategies. Passive, or “indexed” strategies, attempt to mimic rather than exceed the investment performance of a market benchmark. The plan’s active investment strategies employ multiple investment management firms. Managers within each asset class cover a range of investment styles and approaches and are combined in a way that controls for capitalization, and style biases (equities) and interest rate exposures (fixed income) versus benchmark indices. Monitoring activities to evaluate performance against targets and measure investment risk take place on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.

The asset allocation targets and the actual allocation of pension plan assets are as follows:

Asset Category	Target		2020		2019
Domestic equity	22.4	%	22.6	%	22.1	%
International equity	6.8	%	6.0	%	6.2	%
Private equity	5.3	%	4.7	%	4.2	%
Fixed income	59.7	%	60.4	%	62.3	%
Real estate	5.8	%	6.3	%	5.2	%
Total	100.0	%	100.0	%	100.0	%

The following is a description of the valuation methodologies used for investments measured at fair value:

Common stock - Valued at the closing price reported in the active market in which the individual securities are traded.

Common collective trusts - Investments in common/collective trust funds are stated at net asset value (“NAV”) as determined by the issuer of the common/collective trust funds and is based on the fair value of the underlying investments held by the fund less its liabilities. The majority of the common/collective trust funds have a readily determinable fair value and are classified as Level 2. Other investments in common/collective trust funds determine NAV on a less frequent basis and/or have redemption restrictions. For these investments, NAV is used as a practical expedient to estimate fair value.

Corporate bonds - 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 fair value is based upon an industry valuation model, which maximizes observable inputs.

Government securities - Certain government securities are valued at the closing price reported in the active market in which the security is traded. Other government securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

Mortgage backed securities - 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 securities, the fair value is based upon an industry valuation model, which maximizes observable inputs.

Mutual funds - Mutual funds are valued at the closing price reported in the active market in which the individual securities are traded.

Private equity and real estate partnerships - Valued based on NAV provided by the investment manager, updated for any subsequent partnership interests’ cash flows or expected changes in fair value. The NAV is used as a practical expedient to estimate fair value.

Other - Consists primarily of options, futures, and money market investments priced at $1 per unit.

The valuation 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 Company believes our valuation 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.

The fair value of assets of our defined benefit pension plans held in master trusts as of August 1, 2020, by asset category, consisted of the following (in thousands):

	Level 1		Level 2		Level 3		Measured at NAV as a Practical Expedient		Total
Common stock	$	334,194	$	—	$	—	$	—	$	334,194
Common collective trusts	—		901,258		—		59,454		960,712
Corporate bonds	—		310,694		—		—		310,694
Government securities	—		131,424		—		—		131,424
Mutual funds	456		42,867		—		—		43,323
Mortgage-backed securities	—		3,979		—		—		3,979
Other	10,314		23,137		—		—		33,451
Private equity and real estate partnerships	—		—		—		172,791		172,791
Total plan assets at fair value	$	344,964	$	1,413,359	$	—	$	232,245	$	1,990,568

The fair value of assets of our defined benefit pension plans held in master trusts as of August 3, 2019, by asset category, consisted of the following (in thousands):

	Level 1		Level 2		Level 3		Measured at NAV as a Practical Expedient		Total
Common stock	$	397,800	$	—	$	—	$	—	$	397,800
Common collective trusts	—		1,046,590		—		83,504		1,130,094
Corporate bonds	—		362,251		—		—		362,251
Government securities	—		248,872		—		—		248,872
Mutual funds	469		62,254		—		—		62,723
Mortgage-backed securities	—		10,920		—		—		10,920
Other	5,603		73,745		—		—		79,348
Private equity and real estate partnerships	—		—		—		204,539		204,539
Total plan assets at fair value	$	403,872	$	1,804,632	$	—	$	288,043	$	2,496,547

Contributions

No minimum pension contributions are required to be made under either the SUPERVALU Retirement Plan or the Unified Grocers, Inc. Cash Balance Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in fiscal 2021. The Company expects to contribute approximately $0.0 million to $5.3 million to its other defined benefit pension plans and postretirement benefit plans in fiscal 2021.

The Company funds its defined benefit pension plans based on the minimum contribution required under the Code, ERISA the Pension Protection Act of 2006 and other applicable laws, as determined by our external actuarial consultant, and additional contributions made at its discretion. The Company may accelerate contributions or undertake contributions in excess of the minimum requirements from time to time subject to the availability of cash in excess of operating and financing needs or other factors as may be applicable. The Company assesses the relative attractiveness of the use of cash including such factors as expected return on assets, discount rates, cost of debt, reducing or eliminating required Pension Benefit Guaranty Corporation variable rate premiums or the ability to achieve exemption from participant notices of underfunding.

Estimated Future Benefit Payments

The estimated future benefit payments to be made from our defined benefit pension and other postretirement benefit plans, which reflect expected future service, are as follows (in thousands):

Fiscal Year	Pension Benefits		Other  Postretirement Benefits
2021	$	117,700	$	3,800
2022	112,900		3,600
2023	114,500		3,400
2024	118,000		3,200
2025	123,200		3,000
Years 2026-2030	592,300		12,000

Defined Contribution Plans

The Company sponsors defined contribution and profit sharing plans pursuant to Section 401(k) of the Internal Revenue Code. Employees may contribute a portion of their eligible compensation to the plans on a pre-tax basis. We match a portion of certain employee contributions by contributing cash into the investment options selected by the employees. The total amount contributed by us to the plans is determined by plan provisions or at our discretion. Total employer contribution expenses for these plans were $21.0 million, $21.0 million and $11.6 million for fiscal 2020, 2019 and 2018, respectively.

Post-Employment Benefits

The Company recognizes an obligation for benefits provided to former or inactive employees. The company is self-insured for certain disability plan programs, which comprise the primary benefits paid to inactive employees prior to retirement.

Amounts recognized in the Consolidated Balance Sheets consisted of the following (in thousands):

	Post-Employment Benefits
	August 1, 2020		August 3, 2019
Accrued compensation and benefits	$	2,356	$	2,356
Other long-term liabilities	5,053		5,053
Total	$	7,409	$	7,409

Multiemployer Pension Plans

The Company contributes to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and the unions that are parties to the relevant collective bargaining agreements.

Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. The Company acquired multiemployer plan obligations related to continuing and discontinued operations as part of the Supervalu acquisition. The risks of participating in these multiemployer plans are different from the risks associated with single-employer plans in the following respects:

a. Assets contributed to the multiemployer plan by one employer are held in trust and 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 choose to stop participating in some multiemployer plans, or make market exits or closures or otherwise have participation in the plan drop below certain levels, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company’s participation in these plans 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 Pension Protection Act (“PPA”) zone status available in 2019 relates to the plans’ most recent fiscal year-end. The zone status is based on information that we received from the plan and is annually 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, plans in yellow zone status are less than 80 percent funded and are considered in endangered or seriously endangered status, and green zone plans are at least 80 percent funded. The Multiemployer Pension Reform Act of 2014 (“MPRA”) created a new zone status called “critical and declining” or “Deep Red”. Plans are generally considered Deep Red if they are projected to become insolvent within 15 years. The FIP/RP Status Pending/Implemented column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each plan.

Certain plans have been aggregated in the All Other Multiemployer Pension Plans line in the following table, as the contributions to each of these plans are not individually material. None of our collective bargaining agreements require that a minimum contribution be made to these plans.

At the date the financial statements were issued, Forms 5500 of the plans were generally not available for the plan years ending in 2019.

The following table contains information about the Company’s significant multiemployer plans (in millions):

			Pension Protection Act Zone Status		Contributions
Pension Fund	EIN-Pension Plan Number	Plan Month/Day End Date	2020	FIP/RP Status Pending/Implemented	2020		2019		Surcharges Imposed(1)	Amortization Provisions
Minneapolis Food Distributing Industry Pension Plan	416047047-001	12/31	Green	No	$	11	$	8	No	☐
Minneapolis Retail Meat Cutters and Food Handlers Pension Fund	410905139-001	2/28	Red	Implemented	9		7		No	☒
Minneapolis Retail Meat Cutters and Food Handlers Variable Annuity Pension Fund	832598425-001	12/31	NA	NA	3		1		NA	☐
Central States, Southeast and Southwest Areas Pension Fund	366044243-001	12/31	Deep Red	Implemented	6		5		No	☒
UFCW Unions and Participating Employer Pension Fund(2)	526117495-001	12/31	Red	Implemented	7		4		No	☐
Western Conference of Teamsters Pension Plan Trust	916145047-001	12/31	Green	No	13		12		No	☐
UFCW Unions and Employers Pension Plan	396069053-001	10/31	Deep Red	Implemented	1		1		No	☒
All Other Multiemployer Pension Plans(3)					2		3
Total					$	52	$	41

(1) PPA surcharges are 5 percent or 10 percent of eligible contributions and may not apply to all collective bargaining agreements or total contributions to each plan.

(2) These multiemployer pension plans are associated with continued and discontinued operations.

(3) All Other Multiemployer Pension Plans include 7 plans, none of which is individually significant when considering contributions to the plan, severity of the underfunded status or other factors.

The following table describes the expiration of the Company’s collective bargaining agreements associated with the significant multiemployer plans in which we participate:

			Most Significant Collective Bargaining Agreement
Pension Fund	Range of Collective Bargaining Agreement Expiration Dates	Total Collective Bargaining Agreements	Expiration Date	% of Associates under Collective Bargaining Agreement (1)		Over 5% Contributions 2020
Minneapolis Food Distributing Industry Pension Plan	5/31/2022	1	5/31/2022	100.0	%	☒
Minneapolis Retail Meat Cutters and Food Handlers Pension Fund	3/4/2023	1	3/4/2023	100.0	%	☒
Minneapolis Retail Meat Cutters and Food Handlers Variable Annuity Pension Fund	3/4/2023	1	3/4/2023	100.0	%	☒
Central States, Southeast and Southwest Areas Pension Fund	9/14/2019 - 5/31/2025	4	8/3/2024	39.2	%	☐
UFCW Unions and Participating Employer Pension Fund(2)	11/8/2020	2	11/8/2020	66.2	%	☒
Western Conference of Teamsters Pension Plan Trust	5/31/2020 - 4/22/2023	15	9/19/2020	20.7	%	☐
UFCW Unions and Employers Pension Plan	4/9/2022	1	4/9/2022	100.0	%	☒

(1) Company participating employees in the most significant collective bargaining agreement as a percent of all Company employees participating in the respective fund.

(2) These multiemployer pension plans are associated with continued and discontinued operations.

In connection with the closure of the Shop ‘n Save locations and the acquisition of Supervalu, we acquired a $35.7 million multiemployer pension plan withdrawal liability, under which payments will be made over the next 20 years and is included in Other long-term liabilities. In addition, the Company had withdrawal liabilities related to five of its other multi-employer plans of approximately $9.7 million.

In connection with the Company’s consolidation of distribution centers in the Pacific Northwest, during the second quarter of fiscal 2020, the Company recorded a $10.6 million multiemployer pension plan withdrawal liability, under which payments will be made over a one-year period beginning in fiscal 2022. The withdrawal liability is included in Other long-term liabilities and the withdrawal charge was recorded within Restructuring, acquisition and integration related expenses.

Accrued multiemployer pension plan withdrawal liabilities included in other-long-term liabilities were $51.6 million and $43.2 million, in fiscal 2020 and 2019 respectively for seven multiemployer plans.

The Company contributed $52.3 million, $41.3 million and $0.5 million in fiscal 2020, 2019 and 2018, respectively, to multiemployer pension plans.

Multiemployer Postretirement Benefit Plans Other than Pensions

The Company also makes contributions to multiemployer health and welfare plans in amounts set forth in the related collective bargaining agreements. These plans provide medical, dental, pharmacy, vision and other ancillary benefits to active employees and retirees as determined by the trustees of each plan. The vast majority of the Company’s contributions benefit active employees and as such, may not constitute contributions to a postretirement benefit plan. However, the Company is unable to separate contribution amounts to postretirement benefit plans from contribution amounts paid to benefit active employees.

The company contributed $88.5 million and $72.5 million in fiscal 2020 and fiscal 2019, respectively, to multiemployer health and welfare plans. If healthcare provisions within these plans cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Operating expenses could increase in the future.

Collective Bargaining Agreements

As of August 1, 2020, we had approximately 28,300 employees. Approximately 11,800 employees are covered by 51 collective bargaining agreements. During fiscal 2020, 2 collective bargaining agreements covering approximately 200 employees were renegotiated and 7 collective bargaining agreements covering approximately 1,600 employees expired without their terms being renegotiated. Negotiations are expected to continue with the bargaining units representing the employees subject to those agreements. During fiscal 2021, 19 collective bargaining agreements covering approximately 1,400 employees are scheduled to expire.