

7	POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

We provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations. The level and adjustment of participant contributions vary depending on the specific plan. In addition, PD LLC provides postemployment disability benefits to certain employee groups prior to retirement. Our liability and related expense for benefits under the postretirement plans are recorded over the service period of active employees based upon annual actuarial calculations. We accrue postemployment disability benefits when it becomes probable that such benefits will be paid and when sufficient information exists to make reasonable estimates of the amounts to be paid. In 2011 the trust was amended to allow benefits for certain active employees to be paid from plan assets.

The net periodic postretirement benefit cost components for our postretirement plans are as follows:



(Thousands of Dollars)	2011		2010		2009

Service cost for benefits earned during the year	927		361		770
Interest cost on projected benefit obligation	1,600		2,971		5,022
Expected return on plan assets	(2,248	)	(2,274	)	(2,409	)
Amortization of net actuarial gain	(2,467	)	(2,447	)	(2,760	)
Amortization of prior service benefit	(1,455	)	(1,994	)	(2,197	)
Curtailment gains	(16,137	)	(43,008	)	—
Net periodic postretirement benefit cost (benefit)	(19,780	)	(46,391	)	(1,574	)

Changes in benefit obligations and plan assets are as follows:



(Thousands of Dollars)	2011		2010

Benefit obligation, beginning of year	50,482		80,947
Service cost	927		361
Interest cost	1,600		2,971
Actuarial (gain) loss	(2,311	)	2,352
Benefits paid, net of premiums received	(2,922	)	(3,330	)
Changes in plan provisions	(5,931	)	(5,065	)
Curtailment	(15,535	)	(30,260	)
Medicare Part D subsidies	162		340
Reclassifications	—		2,166
Benefit obligation, end of year	26,472		50,482
Fair value of plan assets, beginning of year	41,447		41,053
Actual return on plan assets	19		1,212
Employer contributions	1,347		2,172
Benefits paid, net of premiums and Medicare Part D subsidies received	(2,760	)	(2,990	)
Benefits paid for active employees	(1,524	)	—
Fair value of plan assets at measurement date	38,529		41,447
Funded status - benefit obligation in excess of (less than) plan assets	(12,057	)	9,035

The accumulated benefit obligation for plans with benefit obligations in excess of plan assets was $2,797,000 at September 25, 2011. There are no plan assets related to this plan. At September 25, 2010 all postretirement and postemployment benefit plans had benefit obligations in excess of plan assets.

Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows:



(Thousands of Dollars)	September 25 2011	September 26 2010

Noncurrent assets	14,934	—
Current portion of benefit obligation	—	2,360
Postretirement benefit obligations	2,877	6,675
Accumulated other comprehensive income (before income tax benefit)	42,379	42,415

Amounts recognized in accumulated other comprehensive income are as follows:



(Thousands of Dollars)	September 25 2011	September 26 2010

Unrecognized net actuarial gain	27,145	31,055
Unrecognized prior service benefit	15,234	11,360
	42,379	42,415

We expect to recognize $2,451,000 and $1,459,000 of unrecognized net actuarial gain and unrecognized prior service benefit, respectively, in net periodic postretirement benefit cost in 2012.

Assumptions

Weighted-average assumptions used to determine benefit obligations are as follows:



(Percent)	September 25 2011	September 26 2010

Discount rate	4.4	4.8
Expected long-term return on plan assets	5.75	5.75

The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns and current market conditions.

Weighted-average assumptions used to determine net periodic benefit cost are as follows:



(Percent)	2011	2010	2009

Discount rate	4.8	5.5	6.75
Expected long-term return on plan assets	5.75	5.75	5.75

Assumed health care cost trend rates are as follows:



(Percent)	September 25 2011	September 26 2010

Health care cost trend rates	9.0	11.0
Rate to which the cost trend rate is assumed to decline (the “Ultimate Trend Rate”)	5.0	4.0
Year in which the rate reaches the Ultimate Trend Rate	2019	2017

Administrative costs related to indemnity plans are assumed to increase at the health care cost trend rates noted above.

Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement plans. A one percentage point change in assumed health care cost trend rates would have the following annualized effects on reported amounts for 2011:



	One Percentage Point
(Thousands of Dollars)	Increase	Decrease

Effect on net periodic postretirement benefit cost	47	(43	)
Effect on postretirement benefit obligation	1,132	(1,025	)

Plan Assets

The primary objective of our investment strategy is to satisfy our postretirement obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation and reinvestment of dividend and interest income and safety of invested funds.

An investment policy outlines the governance structure for decision making, sets investment objectives and restrictions, and establishes criteria for selecting and evaluating investment managers. The use of derivatives is strictly prohibited, except on a case-by-case basis where the manager has a proven capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment committee, consisting of certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation.

The weighted-average asset allocation of our postretirement assets is as follows:



(Percent)		Actual Allocation
Asset Class	Policy Allocation	September 25 2011	September 26 2010

Equity securities	0-10	8	11
Debt securities	90-100	85	89
Cash		7	—

Plan assets include no Company securities. Assets include cash and cash equivalents from time to time due to the need to reallocate assets within policy guidelines. In 2012 the policy allocation was amended to allow allocation to equity securities of 10 - 30% and debt securities of 70 - 90%.

Fair Value Measurements

The fair value hierarchy of postretirement assets at September 25, 2011 is as follows:



(Thousands of Dollars)	Level 1	Level 2	Level 3

Cash and cash equivalents	2,608	—	—
Domestic equity securities	—	1,855	—
International equity securities	—	1,312	—
Debt securities	32,753	—	—

There were no purchases, sales or transfers of assets classified as Level 3 in 2011 or 2010.

Cash Flows

Based on our forecast at September 25, 2011, we do not expect to contribute to our postretirement plans in 2012.

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Modernization Act”) was signed into law. The Modernization Act introduced a prescription drug benefit under Medicare (“Medicare Part D”) and a federal subsidy to sponsors of retiree health care benefit plans (“Subsidy”) that provide a benefit at least actuarially equivalent (as that term is defined in the Act) to Medicare Part D. We concluded we qualify for the Subsidy under the Modernization Act since the prescription drug benefits provided under our postretirement health care plans generally require lower premiums from covered retirees and have lower deductibles than the benefits provided in Medicare Part D and, accordingly, are actuarially equivalent to or better than, the benefits provided under the Modernization Act.

We anticipate future benefit payments to be paid either with future contributions to the plan or directly from plan assets, as follows:



(Thousands of Dollars)	Gross Payments	Less Medicare Part D Subsidy		Net Payments

2012	3,100	(300	)	2,800
2013	2,960	(310	)	2,650
2014	2,910	(310	)	2,600
2015	2,840	(320	)	2,520
2016	1,760	(300	)	1,460
2017-2021	12,530	(1,470	)	11,060

2011 Changes to Plans

In May 2011, a new bargaining unit contract eliminated postretirement medical coverage for affected active employees and froze defined pension benefits. The elimination of postretirement medical coverage resulted in a non-cash curtailment gain of $3,974,000 which was recognized in the 13 weeks ended June 26, 2011, reduced 2011 net periodic postretirement medical expense by $82,000 beginning in the 13 weeks ended June 26, 2011 and reduced the benefit obligation liability at June 26, 2011 by $3,371,000. The freeze of defined pension benefits reduced 2011 net periodic pension expenses by $188,000 beginning in the 13 weeks ended June 26, 2011 and reduced the benefit obligation liability at June 26, 2011 by $592,000.

In March 2011, we notified certain participants in our postretirement medical plans of changes to be made to the plans, including increases in participant premium cost-sharing and elimination of coverage for certain participants. The changes resulted in a non-cash curtailment gain of $1,991,000 which was recognized in the 13 weeks ended March 27, 2011 and reduced the benefit obligation liability at March 27, 2011 by $3,030,000.

In November 2010, we notified certain participants in our postretirement medical plans of changes to be made to the plans, including increases in participant premium cost-sharing and elimination of coverage for certain participants. The changes resulted in a non-cash curtailment gain of $10,172,000 which was recognized in the 13 weeks ended December 26, 2010, reduced 2011 net periodic postretirement medical cost by $769,000 beginning in the 13 weeks ended December 26, 2010, and reduced the benefit obligation liability at December 26, 2010 by $15,065,000.

2010 Changes to Plans

In March 2010, members of the United Media Guild voted to approve a new 5.5 year contract, effective in April 2010. The new contract eliminated postretirement medical coverage for active employees and defined pension benefits were frozen. The elimination of postretirement medical coverage resulted in non-cash curtailment gains of $11,878,000, which were recognized in the 13 weeks ended March 28, 2010 and reduced the benefit obligation liability at March 28, 2010 by $6,576,000. The freeze of defined pension benefits resulted in non-cash curtailment gains of $2,004,000, which were recognized in the 13 weeks ended March 28, 2010, reduced 2010 net periodic pension expenses by $668,000 beginning in the 13 weeks ended June 27, 2010, and reduced the benefit obligation liability at March 28, 2010 by $2,004,000.

In December 2009, we notified certain participants in our postretirement medical plans of changes to be made to the plans, including increases in participant premium cost-sharing and elimination of coverage for certain participants. The changes resulted in non-cash curtailment gains of $31,130,000, which were recognized in the 13 weeks ended December 27, 2009, reduced 2010 net periodic postretirement medical cost by $1,460,000 beginning in the 13 weeks ended March 28, 2010, and reduced the benefit obligation liability at December 27, 2009 by $28,750,000.

2009 Changes to Plans

In October and December 2008, we notified certain participants in our postretirement medical plans of administrative changes to be made to the plans, effective in January 2009, including increases in employee premiums, changes in the plans' reimbursement of medical expenses covered by Medicare, elimination of certain coverage options and the establishment of an account-based structure. The changes reduced the benefit obligation by $23,047,000, effective at December 28, 2008.

Increases in participant premium cost-sharing discussed more fully above are treated as negative plan amendments. Curtailment treatment is utilized in situations in which coverage was eliminated. Curtailment gains are calculated by revaluation of plan liabilities after consideration of other plan changes.

The Patient Protection and Affordable Care Act, along with its companion reconciliation legislation (together the “Affordable Care Act”), were enacted into law in 2010. We expect the Affordable Care Act will be supported by a substantial number of underlying regulations, many of which have not been issued. Accordingly, a complete determination of the impact of the Affordable Care Act cannot be made at this time. However, we do not expect the Affordable Care Act will have a significant impact on our postretirement medical benefit obligation liability.

Postemployment Plan

Our postemployment benefit obligation, representing certain disability benefits, is $3,227,000 at September 25, 2011 and $3,304,000 at September 26, 2010.