Note 11: Employee Benefits

Employee Retirement and Welfare Plans

Voluntary 401(k) retirement plans are offered to eligible employees within certain U.S. operating units. For most operating units, we make matching contributions based on specific formulas. On January 1, 2019, we increased our matching contributions for eligible employees which resulted in an additional expense of $1.7 million in fiscal 2019. During fiscal 2019 and prior periods presented below, we made supplemental contributions to this plan for eligible employees based on achievement of operating performance targets. The supplemental contribution will be discontinued for fiscal 2020 as a result of increasing the matching contributions mentioned above.

A performance compensation retirement plan (“PCRP”) is maintained for eligible highly compensated employees. The company contributions to plan are based on achievement of performance targets. Employees vest in these contributions if they achieve certain age and years of service with the Company, and can elect to receive benefit payments over a period ranging between five to twenty years after they leave the Company. As of April 27, 2019, and April 28, 2018, we had $0.5 million and $0.2 million, respectively, of obligations for this plan included in other current liabilities and $12.0 million and $9.5 million, respectively, included in other long-term liabilities.

We also maintain an executive deferred compensation plan for eligible highly compensated employees. An element of this plan allows contributions for eligible highly compensated employees. As of April 27, 2019, and April 28, 2018, we had $23.9 million and $23.2 million, respectively, of obligations for this plan included in other long-term liabilities. We had life insurance contracts related to this plan and the PCRP at April 27, 2019, and at April 28, 2018, with cash surrender values of $34.3 million and $31.6 million, respectively, which are included in other long-term assets. Mutual funds related to this plan are considered trading securities and are included in other current assets. This plan had $0.2 million in mutual funds at April 27, 2019, and $0.1 million in mutual funds at April 28, 2018.

We maintain a non-qualified defined benefit retirement plan for certain former salaried employees. Included in other long-term liabilities were plan obligations of $15.5 million for both fiscal 2019 and 2018, which represented the unfunded projected benefit obligation of this plan. The total cost recognized for this plan was $0.8 million in fiscal 2019 and fiscal 2018 which primarily related to interest cost. The actuarial loss recognized in accumulated other comprehensive loss was $0.2 million and the benefit payments during the year were $1.1 million for both fiscal 2019 and fiscal 2018. Benefit payments are scheduled to be approximately $1.1 million annually for the next ten years. The discount rate used to determine the obligations under this plan as of the end of fiscal 2019 and fiscal 2018 was 3.9% and 4.1%, respectively. This plan is not funded and is excluded from the obligation charts and disclosures that follow. We hold available-for-sale marketable securities to fund future obligations of this plan in a Rabbi trust (see Notes 7 and 20 for additional information on these investments). We are not required to fund the non-qualified defined benefit retirement plan in fiscal 2020; however, we have the discretion to make contributions to the Rabbi trust.

During the fourth quarter of fiscal 2019, we terminated our defined benefit pension plan for eligible factory hourly employees in our La-Z-Boy operating unit. In connection with the plan termination, we settled all future obligations under the plan through a combination of lump-sum payments to eligible participants who elected to receive them, and transferred any remaining benefit obligations under the plan to a highly rated insurance company. We recognized a non-cash pre-tax pension termination charge of $32.7 million in our consolidated statement of income associated with the plan termination during the fourth quarter of fiscal 2019.

The combined net periodic pension cost and retirement costs for retirement plans were as follows (for the fiscal years ended):


	(52 weeks)		(52 weeks)		(52 weeks)
(Amounts in thousands)	4/27/2019		4/28/2018		4/29/2017
Service cost	$	851	$	1,316	$	1,278
Interest cost		4,464		4,587		4,681
Expected return on plan assets		(4,544)		(4,818)		(4,978)
Net amortization and deferral		2,556		3,120		3,058
Pension termination charge		32,671		—		—
Net periodic pension cost (hourly plan)		35,998		4,205		4,039
401(k)(1)		9,128		7,093		7,124
PCRP(1)		3,084		1,347		1,488
Other(1)		284		360		51
Total retirement costs (excluding non-qualified defined benefit retirement plan)	$	48,494	$	13,005	$	12,702

(1)Not determined by an actuary

Employee Vacation Policy Changes

We enacted changes to our employee vacation policies that became effective on January 1, 2019. Our new vacation policies enhanced the amount of vacation time earned by our employees. Additionally, under these vacation policies, our salary and office hourly employees now accrue vacation in the current calendar year for use in the current calendar year, and any vacation time earned but not used will be forfeited at the end of each calendar year. These changes reduced our salary and office hourly vacation liability and resulted in a one-time non-cash gain of $5.1 million in our consolidated statement of income during fiscal 2019. Of the total $5.1 million gain recorded, $1.3 million was recorded in cost of sales with the remainder recorded in selling, general, and administrative expense. Our factory hourly vacation policies were only changed to enhance the amount of vacation time earned by our employees, with no change to accrual methodologies, and resulted in $1.1 million incremental expense in fiscal 2019, recorded in cost of sales.