9. EMPLOYEE BENEFITS

We maintain a qualified defined benefit pension plan (“Pension Plan”), which covers certain eligible employees. Benefits are based on years of service that continue to count toward early retirement calculations and vesting previously earned. No new participants may enter the Pension Plan and no further benefits will accrue.

We also have a limited number of supplemental retirement plans to provide certain key employees and retirees with additional retirement benefits. These plans are funded on a pay‑as‑you‑go basis and the accrued pension obligation is largely included in pension and post retirement obligations. We paid $8.8 million and $8.9 million in 2019 and 2018, respectively, for these plans. We also provide or subsidize certain life insurance benefits for employees.

The following tables provide reconciliations of the pension and post‑ retirement benefit plans’ benefit obligations, fair value of assets and funded status as of December 29, 2019, and December 30, 2018:


	Pension Benefits				Post-retirement Benefits
(in thousands)	2019		2018		2019		2018
Change in Benefit Obligation
Benefit obligation, beginning of year	$	1,920,987	$	2,080,013	$	6,827	$	7,625
Interest cost		79,309		79,154		262		256
Plan participants’ contributions		—		—		7		10
Actuarial (gain)/loss		181,506		(126,540)		(1,020)		(417)
Gross benefits paid		(149,859)		(111,640)		(584)		(647)
Special termination benefits		6,835		—		—		—
Benefit obligation, end of year	$	2,038,778	$	1,920,987	$	5,492	$	6,827


	Pension Benefits				Post-retirement Benefits
(in thousands)	2019		2018		2019		2018
Change in Plan Assets
Fair value of plan assets, beginning of year	$	1,259,979	$	1,477,926	$	—	$	—
Actual return on plan assets		271,332		(115,192)		—		—
Employer contribution		11,815		8,885		577		637
Plan participants’ contributions		—		—		7		10
Gross benefits paid		(149,859)		(111,640)		(584)		(647)
Fair value of plan assets, end of year	$	1,393,267	$	1,259,979	$	—	$	—


	Pension Benefits				Post-retirement Benefits
(in thousands)	2019		2018		2019		2018
Funded Status
Fair value of plan assets	$	1,393,267	$	1,259,979	$	—	$	—
Benefit obligations		(2,038,778)		(1,920,987)		(5,492)		(6,827)
Funded status and amount recognized, end of year	$	(645,511)	$	(661,008)	$	(5,492)	$	(6,827)

Amounts recognized in the consolidated balance sheets at December 29, 2019, and December 30, 2018, consist of:


	Pension Benefits				Post-retirement Benefits
(in thousands)	2019		2018		2019		2018
Current liability	$	(124,200)	$	(11,510)	$	(793)	$	(1,015)
Noncurrent liability		(521,311)		(649,498)		(4,699)		(5,812)
	$	(645,511)	$	(661,008)	$	(5,492)	$	(6,827)

Amounts recognized in accumulated other comprehensive income for the years ended December 29, 2019, and December 30, 2018, consist of:


	Pension Benefits				Post-retirement Benefits
(in thousands)	2019		2018		2019		2018
Net actuarial loss/(gain)	$	781,063	$	811,063	$	(7,464)	$	(7,334)
Prior service cost/(credit)		—		—		(2,482)		(4,456)
	$	781,063	$	811,063	$	(9,946)	$	(11,790)

The elements of retirement and post‑retirement costs are as follows:


	Years Ended
	December 29,		December 30,
(in thousands)	2019		2018
Pension plans:
Interest Cost	$	79,309	$	79,154
Expected return on plan assets		(83,820)		(90,495)
Prior service cost amortization		6,834		—
Actuarial loss		23,995		25,181
Net pension expense		26,318		13,840
Net post-retirement benefit credit		(2,603)		(2,726)
Net retirement expenses	$	23,715	$	11,114

Our discount rate was determined by matching a portfolio of long‑term, non‑callable, high-quality bonds to the plans’ projected cash flows.

Weighted average assumptions used for valuing benefit obligations were:


	Pension Benefit				Post-retirement
	Obligations				Obligations
	2019		2018		2019		2018
Discount rate	3.48	%	4.42	%	3.15	%	4.15	%

Weighted average assumptions used in calculating expense:


	Pension Benefit Expense				Post-retirement Expense
	December 29,		December 30,		December 29,		December 30,
	2019 (1)		2018		2019		2018
Expected long-term return on plan assets	7.75	%	7.75	%	N/A		N/A
Discount rate	4.42	%	3.91	%	4.15	%	3.60	%

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(1)

As discussed below, we performed an interim remeasurement of the Pension Plan on March 22, 2019, and used the assumptions described below. The expected long-term return on plan assets of 7.75% and discount rate of 4.42% presented in the table were used for the year end 2019 assumptions.

Early Retirement Incentive Program

In February 2019, we announced a one-time voluntary Early Retirement Incentive Program (“ERIP”) that was offered to approximately 450 employees. The ERIP allowed the employees to accept a special termination benefit based on years of continuous service and the option to take their vested benefits under our frozen Pension Plan in a lump sum payment. Nearly 50% of the eligible employees opted into the program.

Lump sum pension and termination payments made under the ERIP totaled approximately $35.1 million, decreasing both the benefit obligation and the fair value of plan assets. Due to the significance of this program, we remeasured the retirement plan assets and benefit obligations as of March 22, 2019, using a discount rate of 4.10% and an expected return on plan assets of 7.75%. The remeasurement and the special termination benefits resulted in a net reduction to the pension liability and the recognition of a one-time non-cash charge of $6.8 million for the special termination benefits, presented in retirement benefit expense on the statement of operations during the three months ended March 31, 2019. These are included in pension and postretirement obligations on the statements of operations.

Contributions and Cash Flows

We made a required cash minimum contribution of $3.1 million to the Pension Plan in the fourth quarter of 2019. We did not have a required cash minimum contribution to the Pension Plan in 2018 and made no voluntary cash contributions.

Minimum required contributions for fiscal year 2020 were estimated to be approximately $124.2 million, which would be paid in installments beginning in January 2020 with the majority of those payments due on or subsequent to September 2020. On January 14, 2020, we entered into a Standstill Agreement (“Agreement”) with the PBGC. The Agreement relates to our Pension Plan and the minimum required payments of approximately $4.0 million due on January 15, 2020 (“Payment Date”).

Pursuant to the Agreement, the PBGC agreed not to exercise the remedies available to it despite the fact that we were not making our scheduled Pension Plan contribution on the Payment Date. Under the Agreement, the PBGC agreed to a forbearance period until February 18, 2020 (“Forbearance Period”), unless terminated earlier, subject to customary terms and conditions. During the Forbearance Period, we continued to work towards a permanent solution under which the PBGC would assume our Pension Plan and we filed for Chapter 11 Bankruptcy protection on February 13, 2020. See Note 2 related to the Chapter 11 Cases.

As of December 29, 2019, the expected benefit payments to retirees under our retirement and post‑retirement plans over the next 10 years are summarized below:


	Retirement		Post-retirement
(in thousands)	Plans (1)		Plans
2020	$	105,047	$	806
2021		126,706		712
2022		118,914		629
2023		119,193		556
2024		120,023		488
2025-2029		612,922		1,663
Total	$	1,202,805	$	4,854

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Largely to be paid from the qualified defined benefit pension plan.

Pension Plan Assets

Our investment policies are designed to maximize Pension Plan returns within reasonable and prudent levels of risk, with an investment horizon of greater than 10 years so that interim investment returns and fluctuations are viewed with appropriate perspective. The policy also aims to maintain sufficient liquid assets to provide for the payment of retirement benefits and plan expenses, hence, small portions of the equity and debt investments are held in marketable mutual funds.

Our policy seeks to provide an appropriate level of diversification of assets, as reflected in its target allocations, as well as limits placed on concentrations of equities in specific sectors or industries. It uses a mix of active managers and passive index funds and a mix of separate accounts, mutual funds, common collective trusts and other investment vehicles.

Our assumed long‑term return on assets was developed using a weighted average return based upon the Pension Plan’s portfolio of assets and expected returns for each asset class, considering projected inflation, interest rates and market returns. The assumed return was also reviewed in light of historical and recent returns in total and by asset class.

As of December 29, 2019, and December 30, 2018, the target allocations for the Pension Plan assets were 61% equity securities, 33% debt securities and 6% real estate securities.

The table below summarizes the Pension Plan’s financial instruments that are carried at fair value on a recurring basis by the fair value hierarchy levels discussed in Note 3, as of the year ended December 29, 2019


	2019
	Plan Assets
(in thousands)	Level 1		Level 2		Level 3		NAV		Total
Cash and cash equivalents	$	9,355	$	—	$	—	$	—	$	9,355
Mutual funds		139,021		—		—		—		139,021
Common collective trusts		—		—		—		1,178,230		1,178,230
Real estate		—		—		55,874		—		55,874
Private equity funds		—		—		10,787		—		10,787
Total	$	148,376	$	—	$	66,661	$	1,178,230	$	1,393,267

The table below summarizes changes in the fair value of the Pension Plan’s Level 3 investment assets held for the year ended December 29, 2019:


(in thousands)	Real Estate		Private Equity		Total
Beginning Balance, December 30, 2018	$	55,398	$	9,609	$	65,007
Realized gains (losses), net		2,738		3		2,741
Transfer in or out of level 3		(4,953)		—		(4,953)
Unrealized gains (losses), net		2,691		1,175		3,866
Ending Balance, December 29, 2019	$	55,874	$	10,787	$	66,661


	2018
	Plan Assets
(in thousands)	Level 1		Level 2		Level 3		NAV		Total
Cash and cash equivalents	$	9,366	$	—	$	—	$	—	$	9,366
Mutual funds		139,978		—		—		—		139,978
Common collective trusts		—		—		—		1,045,628		1,045,628
Real estate		—		—		55,398		—		55,398
Private equity funds		—		—		9,609		—		9,609
Total	$	149,344	$	—	$	65,007	$	1,045,628	$	1,259,979

The table below summarizes changes in the fair value of the Pension Plan’s Level 3 investment assets held for the year ended December 30, 2018:


(in thousands)	Real Estate		Private Equity		Total
Beginning Balance, December 31, 2017	$	58,050	$	9,509	$	67,559
Realized gains (losses), net		4,528		3		4,531
Transfer in or out of level 3		(8,601)		—		(8,601)
Unrealized gains (losses), net		1,421		97		1,518
Ending Balance, December 30, 2018	$	55,398	$	9,609	$	65,007

Cash and cash equivalents: Held primarily in a short-term investment fund (“STIF”) are categorized as Level 1. They are valued at the daily closing price as reported by the fund. These funds are required to publish their daily net asset value and to transact at that price. The STIF held by the Pension Plan is deemed to be actively traded. With a readily determinable fair market value.

Mutual funds: Valued at the daily closing price as reported by the fund. Mutual funds held by the Pension Plan are open-ended mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value and to transact at that price. The mutual funds held by the Pension Plan are deemed to be actively traded.

Common collective trusts: Stated at fair value as determined by the issuers of the funds on the fair market value of the underlying investments, which is valued at net asset value (“NAV”) as a practical expedient to estimate fair value. The practical expedient would not be used if it is determined to be probable that the funds will sell the investment for an amount different from the reported NAV. NAV for these funds represent the quoted price in a non-market environment. The attributes relating to the nature and risk of such investments are as follows:


(in thousands)	2019		2018		Unfunded Commitments	Redemption Frequency (if Currently Eligible)	Redemption Notice Period
Common collective trust funds:
U.S equity funds (1)	$	358,088	$	296,135	N/A	Daily	None
International equity funds (2)		373,764		311,119	N/A	Daily - Monthly	None
Emerging markets equity funds (3)		179,707		153,927	N/A	Daily	None - 5-Day
Fixed income funds (4)		126,900		146,197	N/A	Daily	2-Day
Total common collective trust	$	1,038,459	$	907,378
Fixed income credit fund (4)		139,771		138,250	N/A	Weekly	2-Day
Total investments measured at NAV	$	1,178,230	$	1,045,628

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⁽¹⁾

U.S. equity fund strategies - Investments in U.S. equities are defined as commitments to U.S. dollar-denominated, publicly traded common stocks of U.S. domiciled companies and securities convertible into common stock. The aggregate U.S. equity portfolio is expected to exhibit characteristics comparable to, but not necessarily equal to, that of the Russell 3000 Index.

⁽²⁾

International equity funds strategies - Investments in international developed markets equities are defined as commitments to publicly traded common stocks and securities convertible into common stock issued by companies primarily domiciled in countries outside of the U.S.

⁽³⁾

Emerging markets equity fund strategies - Investments in emerging equities may include commitments to publicly traded common stocks and securities convertible into common stock issued by companies domiciled in countries considered emerging by one or more benchmark providers.

⁽⁴⁾

Fixed income fund strategies - Fixed income investments may include debt instruments issued by both U.S. and non-U.S. governments, agencies, “quasi Government” agencies, corporations, and any other public or private regulated debt security.

Real estate: In 2016 and 2011, we contributed certain of our real property to our Pension Plan, and we entered into leaseback arrangements for the contributed facilities. These contributions were measured at fair value using Level 3 inputs, which primarily consisted of expected cash flows and discount rate that we estimated market participants would seek for bearing the risk associated with such assets. The accounting treatment for both contributions is described below.

The contributions and leasebacks of these properties are treated as financing transactions and, accordingly, we continue to depreciate the carrying value of the properties in our financial statements. No gain or loss will be recognized on the contributions of any property until the sale of the property by the Pension Plan. At the time of our contributions, our pension obligation was reduced, and our financing obligations were recorded equal to the fair market value of the properties. The financing obligations are reduced by a portion of the lease payments made to the Pension Plan each month and increased for imputed interest expense on the obligations to the extent imputed interest exceeds monthly payments.

Certain of the contributed properties have been sold by the Pension Plan and others may be sold by the Pension Plan in the future.

In August 2019, the Pension Plan sold real property in Macon, Georgia, for approximately $0.8 million, and we terminated our lease on the property. The property was included in the real property contributions that we made to the Pension Plan in fiscal year 2011. As a result of the sale by the Pension Plan, we recognized a $0.6 million loss on the sale of the Macon property in other operating expenses on the consolidated statement of operations in 2019.

In May 2018, the Pension Plan sold real property in the Lexington, Kentucky, for approximately $4.1 million and we terminated our lease on the property. The property was included in the real property contributions that we made to the Pension Plan in fiscal year 2011. As a result of the sale by the Pension Plan, we recognized a $0.2 million loss on the sale of the Lexington property in other operating expenses on the consolidated statement of operations in 2018.

Private equity funds: Private equity funds represent investments in limited partnerships, which invest in start‑up or other private companies. Fair value is estimated based on valuations of comparable public companies, recent sales of comparable private and public companies, and discounted cash flow analysis of portfolio companies and is included as a Level 3 investment in the table above.

401(k) Plan

We have a deferred compensation plan (“401(k) plan”), which enables eligible employees to defer compensation. In the year ended December 29, 2019, and December 30, 2018, our matching contributions were $2.1 million and $2.5 million, respectively. Matching contributions recorded in our compensation line item of our consolidated statement of operations.