Employee and Retiree Benefits

Postretirement health care and deferred compensation benefits are as follows:



(In thousands)	August 31, 2013			August 25, 2012
Postretirement health care benefit cost	$	36,244		$	45,132
Non-qualified deferred compensation	22,366			23,630
Executive share option plan liability	6,959			7,798
SERP benefit liability	2,876			3,342
Executive deferred compensation	105			102
Officer stock-based compensation	543			—
Total postretirement health care and deferred compensation benefits	69,093			80,004
Less current portion	(5,019		)	(4,869		)
Long-term postretirement health care and deferred compensation benefits	$	64,074		$	75,135

Postretirement Health Care Benefits

We provide certain health care and other benefits for retired employees hired before April 1, 2001, who have fulfilled eligibility requirements at age 55 with 15 years of continuous service. We use a September 1 measurement date for this plan and our postretirement health care plan currently is not funded. In Fiscal 2005, we established dollar caps on the amount that we will pay for postretirement health care benefits per retiree on an annual basis so that we were not exposed to continued medical inflation. Retirees are required to pay a monthly premium in excess of the employer dollar caps for medical coverage based on years of service and age at retirement. In January 2012 and January 2013 the employer established dollar caps were reduced by 10% in each year through plan amendments which reduced our liability for postretirement health care by $4.6 million and $4.3 million, respectively, as presented in the table below.

The discount rate used in determining the accumulated postretirement benefit obligation was 4.6% at August 31, 2013 and 3.6% at August 25, 2012. In Fiscal 2013, the increase in the discount rate resulted in a decrease to the benefit obligation of $5.6 million, presented as an actuarial gain in the following table. Assumed health care cost trend rates do not have a significant effect in determining the accumulated postretirement benefit obligation due to employer caps established.

Changes in our postretirement health care liability are as follows:



(In thousands)	August 31, 2013			August 25, 2012
Balance at beginning of year	$	45,132		$	41,370
Interest cost	1,508			1,849
Service cost	574			539
Net benefits paid	(1,109		)	(1,213		)
Actuarial (gain) loss	(5,572		)	7,185
Plan amendment	(4,289		)	(4,598		)
Balance at end of year	$	36,244		$	45,132

Net periodic postretirement benefit income for the past three fiscal years consisted of the following components:



	Year Ended
(In thousands)	August 31, 2013			August 25, 2012			August 27, 2011
Interest cost	$	1,508		$	1,849		$	1,905
Service cost	574			539			608
Amortization of prior service benefit	(5,170		)	(4,592		)	(4,199		)
Amortization of net actuarial loss	1,603			1,029			1,095
Net periodic postretirement benefit income	$	(1,485	)	$	(1,175	)	$	(591	)

For accounting purposes, we recognized net periodic postretirement income as presented in the table above, due to the amortization of prior service benefit associated with the establishment of caps on the employer portion of benefits in Fiscal 2005 and the 10% cap reductions in both Fiscal 2013 and Fiscal 2012.

Amounts not yet recognized in net periodic benefit cost and included in accumulated other comprehensive income (before taxes) are as follows:



(In thousands)	August 31, 2013			August 25, 2012
Prior service credit	$	(16,926	)	$	(17,808	)
Net actuarial loss	14,899			22,075
Accumulated other comprehensive (loss) income	$	(2,027	)	$	4,267

The estimated amounts that will be will be amortized from accumulated other comprehensive income to net periodic benefit cost in Fiscal 2014 include a prior service credit of $5.3 million and an actuarial net loss of $1.1 million.

Expected future benefit payments for postretirement health care for the next ten years are as follows:



(In thousands)		Amount
Year:	2014	$	1,202
	2015	1,402
	2016	1,573
	2017	1,735
	2018	1,893
	2019-2023	11,383
	Total	$	19,188

The expected future benefit payments have been estimated based on the same assumptions used to measure our benefit obligation as of August 31, 2013 and include benefits attached to estimated current employees' future services.

Deferred Compensation Benefits

Non-Qualified Deferred Compensation Program (1981)

We have a Non-Qualified Deferred Compensation Program which permitted key employees to annually elect to defer a portion of their compensation until their retirement. The plan has been closed to any additional deferrals since January 2001. The retirement benefit to be provided is based upon the amount of compensation deferred and the age of the individual at the time of the contracted deferral. An individual generally vests at age 55 and 5 years of participation under the plan. For deferrals prior to December 1992, vesting occurs at the later of age 55 and 5 years of service from first deferral or 20 years of service. Deferred compensation expense was $1.5 million, $1.6 million and $1.8 million in Fiscal 2013, 2012 and 2011, respectively. Total deferred compensation liabilities were $22.4 million and $23.6 million at August 31, 2013 and August 25, 2012, respectively.

Supplemental Executive Retirement Plan (SERP)

The primary purpose of this plan was to provide our officers and managers with supplemental retirement income for a period of 15 years after retirement. We have not offered this plan on a continuing basis to members of management since 1998. The plan was funded with individual whole life insurance policies (Split Dollar Program) owned by the named insured officer or manager. We initially paid the life insurance premiums on the life of the individual and the individual would receive life insurance and supplemental cash payment during the 15 years following retirement. In October 2008, the plan was amended as a result of changes in the tax and accounting regulations and rising administrative costs. Under the redesigned SERP, the underlying life insurance policies previously owned by the insured individual became COLI by a release of all interests by the participant and assignment to us as a prerequisite to participation in the SERP and transition from the Split Dollar Program. Total SERP liabilities were $2.9 million and $3.3 million at August 31, 2013 and August 25, 2012, respectively. This program remains closed to new employee participation.

To assist in funding the deferred compensation and SERP liabilities, we have invested in COLI policies. The cash surrender value of these policies is presented as investment in life insurance in the accompanying balance sheets and consists of the following:



(In thousands)	August 31, 2013			August 25, 2012
Cash value	$	55,484		$	53,948
Borrowings	(30,433		)	(30,821		)
Investment in life insurance	$	25,051		$	23,127

Non-Qualified Share Option Program (2001)

The Non-Qualified Share Option Program permitted participants in the Executive Share Option Plan (the "Executive Plan") to choose to defer a portion of their salary or other eligible compensation in the form of options to purchase selected securities, primarily equity-based mutual funds. These assets are treated as trading securities and are recorded at fair value. The Executive Plan has been closed to any additional deferrals since January 2005. The Executive Plan assets related to those options that will expire within a year are included in prepaid expenses and other assets in the accompanying balance sheets. The remaining assets are included in other assets. Total assets on August 31, 2013 and August 25, 2012 were $8.2 million and $9.4 million, respectively, and the liabilities were $7.0 million and $7.8 million, respectively. The difference between the asset and liability balances represents the additional 25% we contributed at the time of the initial deferrals to aid in potential additional earnings to the participant. This contribution is required to be paid back to us when the option is exercised. A participant may exercise his or her options per the plan document, but there is a requirement that after these dollars have been invested for 15 years the participant is required to exercise such option.

Executive Deferred Compensation Plan (2007)

In December 2006, we adopted the Winnebago Industries, Inc. Executive Deferred Compensation Plan (the "Executive Deferred Compensation Plan"). Under the Executive Deferred Compensation Plan, corporate officers and certain key employees may annually choose to defer up to 50% of their salary and up to 100% of their cash incentive awards. The assets are presented as other assets and the liabilities are presented as postretirement health care and deferred compensation benefits in the accompanying balance sheets. Such assets on August 31, 2013 and August 25, 2012 were $105,000 and $102,000, respectively, and liabilities were $105,000 and $102,000, respectively.

Profit Sharing Plan

We have a qualified profit sharing and contributory 401(k) plan for eligible employees. The plan provides quarterly discretionary matching cash contributions as approved by our Board of Directors. Contributions to the plan for Fiscal 2013, 2012 and 2011 were $865,000, $676,000 and $676,000, respectively.