7. EMPLOYEE BENEFITS

We have a qualified defined benefit pension plan (“Pension Plan”) covering substantially all of our employees who began their employment prior to March 31, 2009. Effective March 31, 2009, the Pension Plan was frozen such that no new participants may enter the Pension Plan and no further benefits will accrue. However, years of service continue to count toward early retirement calculations and vesting of benefits previously earned.

We also have a limited number of supplemental retirement plans to provide key employees hired prior to March 31, 2009, with additional retirement benefits. These plans are funded on a pay‑as‑you‑go basis and the accrued pension obligation is largely included in other long‑term obligations. We paid $8.5 million, $8.3 million and $8.2 million in fiscal years 2014, 2013 and 2012, 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 28, 2014, and December 29, 2013:


	Pension Benefits				Post-retirement Benefits
(in thousands)	2014		2013		2014		2013
Change in Benefit Obligation
Benefit obligation, beginning of year	$	1,849,321	$	2,073,218	$	12,586	$	15,932
Service cost		8,030		5,545		—		—
Interest cost		91,004		84,596		514		497
Plan participants’ contributions		—		—		267		586
Actuarial (gain)/loss		213,176		(214,353)		467		(754)
Gross benefits paid		(101,441)		(94,253)		(1,611)		(3,289)
Plan amendment		—		—		(1,621)		(386)
Administrative expenses		(8,183)		(5,432)		—		—
Benefit obligation, end of year	$	2,051,907	$	1,849,321	$	10,602	$	12,586


	Pension Benefits				Post-retirement Benefits
(in thousands)	2014		2013		2014		2013
Change in Plan Assets
Fair value of plan assets, beginning of year	$	1,432,695	$	1,358,877	$	—	$	—
Actual return on plan assets		122,133		157,614		—		—
Employer contribution		33,482		15,889		1,344		2,703
Plan participants’ contributions		—		—		267		586
Gross benefits paid		(101,441)		(94,253)		(1,611)		(3,289)
Administrative expenses		(8,183)		(5,432)		—		—
Fair value of plan assets, end of year	$	1,478,686	$	1,432,695	$	—	$	—


	Pension Benefits				Post-retirement Benefits
(in thousands)	2014		2013		2014		2013
Funded Status
Fair value of plan assets	$	1,478,686	$	1,432,695	$	—	$	—
Benefit obligations		(2,051,907)		(1,849,321)		(10,602)		(12,586)
Funded status and amount recognized, end of year	$	(573,221)	$	(416,626)	$	(10,602)	$	(12,586)

Amounts recognized in the consolidated balance sheets at December 28, 2014, and December 29, 2013, consists of:


	Pension Benefits				Post-retirement Benefits
(in thousands)	2014		2013		2014		2013
Current liability	$	(8,529)	$	(33,418)	$	(1,270)	$	(1,585)
Noncurrent liability		(564,692)		(383,208)		(9,332)		(11,001)
	$	(573,221)	$	(416,626)	$	(10,602)	$	(12,586)

Amounts recognized in accumulated other comprehensive income for the years ended December 28, 2014, and December 29, 2013, consist of:


	Pension Benefits				Post-retirement Benefits
(in thousands)	2014		2013		2014		2013
Net actuarial loss/(gain)	$	701,408	$	518,914	$	(9,385)	$	(11,041)
Prior service cost/(credit)		—		12		(12,768)		(13,436)
	$	701,408	$	518,926	$	(22,153)	$	(24,477)

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


	Years Ended
	December 28,		December 29,		December 30,
(in thousands)	2014		2013		2012
Pension plans:
Service Cost	$	8,030	$	5,545	$	5,540
Interest Cost		91,004		84,596		91,898
Expected return on plan assets		(107,460)		(101,053)		(107,760)
Prior service cost amortization		12		14		14
Actuarial loss		16,009		25,557		12,687
Net pension expense		7,595		14,659		2,379
Net post-retirement benefit credit		(2,963)		(2,497)		(995)
Net retirement expenses	$	4,632	$	12,162	$	1,384

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
	2014		2013		2014		2013
Discount rate	4.24	%	5.01	%	3.69	%	4.36	%

Weighted average assumptions used in calculating expense:


	Pension Benefit Expense						Post-retirement Expense
	December 28,		December 29,		December 30,		December 28,		December 29,		December 30,
	2014		2013		2012		2014		2013		2012
Expected long-term return on plan assets	8.00	%	8.00	%	8.25	%	N/A		N/A		N/A
Discount rate	5.01	%	4.17	%	5.31	%	4.36	%	3.39	%	4.26 % / 3.31	%	(1)

⁽¹⁾

4.26% for January 2012 to September 2012; 3.31% for October 2012 to December 2012 due to plan change.

As of December 28, 2014, a 1% increase in the assumed health care cost trend rate would increase the benefit obligation by $0.1 million and a 1% decrease in the assumed health care cost trend rate would decrease the benefit obligation by $0.1 million. As of December 29, 2013, a 1% increase in the assumed health care cost trend rate would increase the benefit obligation by $0.5 million and a 1% decrease in the assumed health care cost trend rate would decrease the benefit obligation by $0.5 million.

Contributions and Cash Flows

In August 2014, the federal Highway and Transportation Funding Act was enacted, which, in addition to funding the highway trust fund, also provided pension funding stabilization that reduced our minimum contribution requirements for the 2013-2017 plan years. The application of this new requirement reduced the funding requirements going back to 2013, which provided us with over funded credits that can be used to reduce our cash contributions in future periods. As a result of the enacted Highway and Transportation Funding Act, we do not expect to have a required cash minimum contribution, to the Pension Plan, in fiscal year 2015.

In fiscal year 2014, we contributed $25 million of cash to the Pension Plan. In fiscal year 2013, we contributed $7.6 million of cash to the Pension Plan. In fiscal year 2012, we contributed $40.0 million of cash to the Pension Plan.

The contribution and leaseback of certain properties in fiscal year 2011 was treated as a financing transaction and, accordingly, we continue to depreciate the carrying value of the properties in our financial statements. No gain or loss is recognized on the contributions until the termination of the individual leases on those properties. At the time of our contribution, our pension obligation was reduced and a long‑term and short‑term financing obligation was recorded. The financing obligation is reduced by a portion of the lease payments made to the Pension Plan each month. The balance of this obligation at December 28, 2014, was $34.6 million.

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
2015	$	98,178	$	1,270
2016		100,455		1,188
2017		104,703		1,108
2018		107,539		1,031
2019		112,049		955
2020-2024		603,352		3,694
Total	$	1,126,276	$	9,246

⁽¹⁾

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, taking into account 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 28, 2014, the target allocations for the Pension Plan assets were 61% equity securities, 33% debt securities and 6% real estate securities. As of December 29, 2013, the target allocations for the Pension Plan assets were 60% equity securities, 28% debt securities, 7% real estate securities and 5% commodities.

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 above, as of the year ended December 28, 2014:


	2014
	Plan Assets
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1,068	$	—	$	—	$	1,068
Mutual funds		485,488		—		—		485,488
Corporate debt instruments		—		106		—		106
Common collective trusts		—		937,809		—		937,809
Real estate		—		—		47,579		47,579
Other		—		—		6,636		6,636
Total	$	486,556	$	937,915	$	54,215		1,478,686
Pending trades								—
							$	1,478,686

The table below summarizes changes in the fair value of the Pension Plan’s Level 3 investment assets held for the year ended December 28, 2014:


(in thousands)	Real Estate		Private Equity (1)		Total
Beginning Balance, December 29, 2013	$	52,265	$	7,167	$	59,432
Purchases, issuances, sales, settlements		(3,312)		—		(3,312)
Realized gains (losses)		3,973		(16,153)		(12,180)
Transfer in or out of level 3		(3,973)		(483)		(4,456)
Unrealized gains (losses)		(1,374)		16,105		14,731
Ending Balance, December 28, 2014	$	47,579	$	6,636	$	54,215

⁽¹⁾

The activity within the unrealized gains (losses) and the realized gains (losses) relates to closing out two funds within the private equity funds. There was no impact to the total asset value of the private equity funds as a result of these transactions.


	2013
	Plan Assets
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	844	$	—	$	—	$	844
Mutual fund		273,450		—		—		273,450
Corporate debt instruments		—		105		—		105
U.S. Government securities		—		112,530		—		112,530
Common collective trusts		—		980,317		—		980,317
Real estate		—		—		52,265		52,265
Other		—		—		7,167		7,167
Total	$	274,294	$	1,092,952	$	59,432		1,426,678
Pending trades								6,017
							$	1,432,695

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, 2013:


(in thousands)	Real Estate		Private Equity		Total
Beginning Balance, December 30, 2012	$	51,579	$	6,408	$	57,987
Purchases, issuances, sales, settlements		—		—		—
Realized gains		4,817		—		4,817
Transfer in or out of level 3		(4,817)		(167)		(4,984)
Unrealized gains		686		926		1,612
Ending Balance, December 29, 2013	$	52,265	$	7,167	$	59,432

Cash and cash equivalents. The carrying value of these items approximates fair value.

Mutual funds. These investments are publicly traded investments, which are valued using the Net Asset Value (NAV). The NAV of the mutual funds is a quoted price in an active market. The NAV is determined once a day after the closing of the exchange based upon the underlying assets in the fund, less the fund’s liabilities, expressed on a per‑share basis.

Corporate debt instruments. The fair value of corporate debt instruments is based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar debt instruments, the fair value is based upon an industry valuation model, which maximizes observable inputs.

U.S. Government securities. U.S. government securities primarily consist of investments in U.S. Treasury Bonds, Indexed Linked Bonds and Treasury Inflation Protected Securities. The fair value of U.S. government securities is based on quoted market prices when available or is based on yields currently available on comparable securities or on an industry valuation model, which maximizes observable inputs. As of December 28, 2014, no funds are held in U.S. Government securities.

Common collective trusts. These investments are valued based on the NAV of the underlying investments and are provided by the fund issuers. NAV for these funds represent the quoted price in a non‑market environment. There are no restrictions on participants’ ability to withdraw funds from the common collective trusts.

Real estate. On January 14, 2011, we contributed Company‑owned real property from seven locations to our Pension Plan. The Pension Plan obtained independent appraisals of the property, and based on these appraisals, the Pension Plan recorded the contribution at fair value on January 14, 2011. The properties are leased by us for our newspaper operations. The properties are managed on behalf of the Pension Plan by an independent fiduciary, and the terms of the leases between us and the Pension Plan were negotiated with the fiduciary. The property is valued by independent appraisals conducted under the direction of the independent fiduciary.

Other. Other includes:

Private equity fund. 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.

401(k) Plan

We have a deferred compensation plans (“401(k) plan”), which enables qualified employees to voluntarily defer compensation. The 401(k) plan includes a matching company contribution and a supplemental contribution that is tied to our performance. We suspended our matching contributions to the 401(k) plan in fiscal year 2009 and as of December 28, 2014, we have not reinstated that benefit.