Note 8 - Postretirement and Postemployment Benefits

12 Months Ended

Sep. 27, 2020

Other Postretirement Benefits Plan [Member]

Notes to Financial Statements

Retirement Benefits [Text Block]

8     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, St. Louis Post Dispatch 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.

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

(Thousands of Dollars)	2020			2019			2018
Service cost for benefits earned during the year		500			—			—
Interest cost on projected benefit obligation		869			412			365
Expected return on plan assets		(1,060	)		(1,082	)		(1,080	)
Amortization of net actuarial gain		(743	)		(976	)		(984	)
Amortization of prior service benefit		(647	)		(723	)		(785	)
Curtailment gains		—			—			(2,031	)
Net periodic postretirement benefit		(1,081	)		(2,369	)		(4,515	)

In March 2017, we notified certain participants in one of our postemployment medical plans of changes to their plan, which included notice that the plan will terminate on December 31, 2017. These changes resulted in a non-cash curtailment gain of $2,031,000 in 2018. The curtailment gain is recorded in assets loss (gain) on sales, impairments and other in the Consolidated Statements of Income and Comprehensive Income. These charges also reduced the postemployment benefit obligation by $7,036,000 and reduced accumulated other comprehensive loss by $106,000 in 2018.

Changes in benefit obligations and plan assets are as follows:

(Thousands of Dollars)	2020			2019
Benefit obligation, beginning of year		11,752			11,756
Business combination		36,800			—
Service cost		500			—
Interest cost		869			412
Actuarial loss (gain)		(982	)		1,033
Benefits paid, net of premiums received		(1,374	)		(1,507	)
Medicare Part D subsidies		72			58
Benefit obligation, end of year		47,637			11,752
Fair value of plan assets, beginning of year		24,135			24,647
Business combination		—			—
Actual return on plan assets		1,594			2,097
Employer contributions		646			222
Benefits paid, net of premiums and Medicare Part D subsidies received		(1,077	)		(1,449	)
Benefits paid for active employees		(438	)		(1,382	)
One time asset transfer		846
Fair value of plan assets at measurement date		25,706			24,135
Funded status		(21,931	)		12,383

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

	September 27			September 29
(Thousands of Dollars)	2020			2019
Non-current assets		15,241			12,383
Postretirement benefit obligations		(37,172	)		—
Accumulated other comprehensive income (before income tax benefit)		14,269			14,818

Amounts recognized in accumulated other comprehensive income are as follows:

	September 27		September 29
(Thousands of Dollars)	2020		2019
Unrecognized net actuarial gain	4,826		4,970
Unrecognized prior service benefit	9,443		9,848
		14,269		14,818

We expect to recognize $687,000 and $647,000 of unrecognized net actuarial gain and unrecognized prior service benefit, respectively, in net periodic postretirement benefit in 2021.

Assumptions

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

	September 27	September 29
(Percent)	2020	2019
Discount rate	2.7	2.8
Expected long-term return on plan assets	4.5	4.5

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

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

(Percent)	2020	2019	2018
Discount rate - service cost	3.4	4.0	3.4
Discount rate - interest cost	2.8	3.7	2.8
Expected long-term return on plan assets	4.5	4.5	4.5

For 2020, the expected long-term return on plan assets is 4.5%. The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets.

Assumed health care cost trend rates are as follows:

	September 27	September 29
(Percent)	2020	2019
Health care cost trend rates	6.4	8.5
Rate to which the cost trend rate is assumed to decline (the “Ultimate Trend Rate”)	4.5	4.5
Year in which the rate reaches the Ultimate Trend Rate	2030	2027

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 an 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 2020:

	One Percentage Point
(Thousands of Dollars)	Increase		Decrease
Effect on net periodic postretirement benefit		454		(344	)
Effect on postretirement benefit obligation		6,524		(5,216	)

Plan Assets

Assets of the retiree medical plan are invested in a master trust. The master trust also pays benefits of active employee medical plans for the same union employees. The fair value of master trust assets allocated to the active employee medical plans at  September 27, 2020 and  September 29, 2019 is $671,000 and $1,955,000, respectively, which are included within the tables below.

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.

Our 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)	Policy Allocation	Actual Allocation
		September 27	September 29
Asset Class	September 27 2020	2020	2019
Equity securities	20	20	18
Debt securities	70	70	68
Hedge fund investment	10	10	14
Cash and cash equivalents	—	—	—

Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines. 

Fair Value Measurements

The fair value hierarchy of postretirement assets at  September 27, 2020 is as follows:

(Thousands of Dollars)	NAV	Level 1	Level 2	Level 3
Cash and cash equivalents	—	59	—	—
Domestic equity securities	590	2,868	—	—
Emerging equity securities	—	539	—	—
International equity securities	—	579	759	—
Debt securities	—	18,229	—	—
Hedge fund investment	2,754	—	—	—

The fair value hierarchy of postretirement assets at September 29, 2019 is as follows:

(Thousands of Dollars)	NAV		Level 1		Level 2		Level 3
Cash and cash equivalents		—		—		—		—
Domestic equity securities		778		2,640		—		—
International equity securities		—		628		750		—
Debt securities		—		17,707		—		—
Hedge fund investment		3,587		—		—		—

There were no purchases, sales or transfers of assets classified as Level 3 in 2020 or 2019. Postretirement assets included in the fair value hierarchy at net asset value, or "NAV", include two investments:

•   U.S. small cap value equity common/collective fund for which fund prices are not publicly available. The balance of this investment is $590,000 and $778,000 as of 9/27/2020 and 9/29/2019, respectively. We can redeem this fund on a monthly basis.  

•   Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $2,754,000 and $3,587,000 as of 9/27/2020 and 9/29/2019, respectively. We can redeem up to 90% of our investment in this fund within 90-120 days of notice with the remaining distributed following completion of the audit of the Fund's financial statements for the year.

Cash Flows

Based on our forecast at September 27, 2020, we do not expect to contribute to our postretirement plans in 2021.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (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 Modernization 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:

			Less
			Medicare
	Gross		Part D			Net
(Thousands of Dollars)	Payments		Subsidy			Payments
2021		2,339		(57	)		2,282
2022		2,332		(54	)		2,278
2023		2,328		(51	)		2,277
2024		2,304		(48	)		2,256
2025		2,269		(44	)		2,225
2026-2030		10,908		(166	)		10,742

Postemployment Plan

Our postemployment benefit obligation, which represents certain disability benefits, is $2,371,000 at  September 27, 2020 and $2,550,000 at September 29, 2019.

Subsequent Events (Unaudited)

In October, 2020, we eliminated retiree medical benefits to certain employees. The elimination of postretirement medical coverage resulted in non-cash curtailment gains of $23,800,000, which will be recognized in the 13-weeks ended December 27, 2020. Curtailment gains were calculated by revaluation of plan liabilities after consideration of other plan changes.