Note 8 - Employee Post-employment Benefits

12 Months Ended

Jun. 02, 2015

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

8. Employee Post-Employment Benefits

In April 2015, the FASB issued ASU 2015-04, Compensation – Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets (“ASU 2015-04”). The guidance permits entities with a fiscal year-end that does not coincide with a month-end to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and to apply that practical expedient consistently from year to year. ASU 2015-04 is to be applied on a prospective basis and to all plans if an entity has more than one plan. The guidance is effective for the annual periods beginning after December 15, 2015, and for interim periods within those fiscal years (our fiscal year 2016). Early application of this guidance is permitted, and we early adopted ASU 2015-04 during the fourth quarter of our fiscal year 2015. As a result of our early adoption, the date used to measure our fiscal year 2015 plan assets and obligations for all plans was May 31, 2015. The adoption of ASU 2015-04 did not have a significant impact on our Consolidated Financial Statements.

Pension and Postretirement Medical and Life Benefits

We sponsor three defined benefit pension plans for active employees and offer certain postretirement benefits for retirees. A summary of each of these is presented below.

Retirement Plan
RTI sponsors the Morrison Restaurants Inc. Retirement Plan (the "Retirement Plan"). Effective December 31, 1987, the Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the Retirement Plan after that date. Participants receive benefits based upon salary and length of service.

Minimum funding for the Retirement Plan is determined in accordance with the guidelines set forth in employee benefit and tax laws. From time to time we may contribute additional amounts as we deem appropriate. We estimate that we will be required to make contributions totaling $0.2 million to the Retirement Plan in fiscal year 2016.

The Retirement Plan’s assets are held in a trust and were allocated as follows on the measurement dates:

	2015						2014
	Target Allocation			Actual Allocation			Target Allocation			Actual Allocation
Equity securities		39-69	%		58	%		60-80	%		71	%
Fixed income securities		12-42	%		23	%		20-40	%		22	%
Public real estate investment trusts		0-10	%		5	%		0-10	%		4	%
Cash and cash equivalents		0-20	%		1	%		0	%		2	%
Other		0-24	%		13	%		0-10	%		1	%
Total					100	%					100	%

The Retirement Plan fiduciaries set investment policies and strategies for the Retirement Plan’s trust. The overall investment objective is to invest the Retirement Plan’s assets in a structure designed to produce returns, over a long-term horizon (greater than 10 years), that meets the actuarially assumed rate of return. The Retirement Plan’s fiduciaries oversee the investment allocation process, which includes selecting investment managers, commissioning periodic asset-liability studies, setting long-term strategic targets, and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, and occasionally the Retirement Plan’s fiduciaries will approve allocations above or below a target range. In fiscal year 2015, we changed our target allocation to reduce the Retirement Plan’s exposure to equity securities risk. The target allocation percentages presented above reflect an objective focused on capital appreciation with a secondary focus on current income through a higher allocation to equities than fixed income, and where appropriate, other asset classes.

Under the terms of the investment policy statement, plan assets are comprised of two major classes: equity and fixed income securities. The goal of the equity portfolio is to produce a total return that will provide a hedge against inflation. Equity securities can include both domestic and international securities with a long-term strategic target to maintain an equity allocation of approximately 54% of the total market value of plan assets.

The goal of the fixed income portfolio is to reduce the overall volatility of the Retirement Plan, provide a stable stream of income, and provide a hedge against deflation without exposure to excessive interest rate or credit rate risk. Fixed income securities should be primarily U.S. Treasury or Government Agency securities and investment-grade corporate bonds at the time of purchase with a long-term strategic target to maintain a fixed income allocation of approximately 27% of the total market value of plan assets.

Aside from equity and fixed income securities, the trust may also invest in alternative investments, such as public real estate investment trusts and mutual funds investing in hedge funds and commodities, with a long-term strategic target to maintain an allocation of approximately 19% of the total market value of plan assets.

The fair values of assets held by the Retirement Plan by asset category are as follows (in thousands):

	2015			2014
Level 2:
Cash and cash equivalents	$	78		$	108
Level 1:
Equity securities
U.S.-based companies		2,701			3,798
International-based companies		1,277			1,161
Fixed income securities		1,584			1,546
Public real estate investment trusts		328			303
Other		883			104
Fair value of plan assets as of measurement date	$	6,851		$	7,020
Benefit payments after measurement date		(65	)		–
Total assets reported as of fiscal year end	$	6,786		$	7,020

Executive Supplemental Pension Plan and Management Retirement Plan
Under these unfunded defined benefit pension plans, eligible employees earn supplemental retirement income based upon salary and length of service, reduced by social security benefits and amounts otherwise receivable under other specified Company retirement plans. Effective June 1, 2001, the Management Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the plan after that date.

On November 30, 2012, Samuel E. Beall, III, our former Chief Executive Officer (“CEO”), stepped down from management and the Board of Directors. Mr. Beall was paid a lump-sum pension payment of $8.1 million on June 4, 2013. Additionally, we recorded a pre-tax curtailment expense of $2.5 million during fiscal year 2013 representing the recognition of a pro rata portion (calculated as the percentage reduction in the projected benefit obligation due to Mr. Beall’s lump-sum pension payment on June 4, 2013) of the unrecognized loss recorded within accumulated other comprehensive loss.

Although considered to be unfunded, we own whole-life insurance contracts in order to provide a source of funding for benefits due under the terms of the Executive Supplemental Pension Plan and the Management Retirement Plan. Benefits payable under these two plans are paid from a rabbi trust which holds the insurance contracts. We will on occasion contribute additional amounts into the rabbi trust in the event of a liquidity shortfall. We currently project that benefit payments from the rabbi trust for these two plans will approximate $3.2 million in fiscal year 2016.

Postretirement Medical and Life Benefits
Our Postretirement Medical and Life Benefits plans provide medical benefits to substantially all retired employees and life insurance benefits to certain retirees. The medical plan requires retiree cost sharing provisions that are more substantial for employees who retire after January 1, 1990.

The following tables detail the components of net periodic benefit cost for the Retirement Plan, Management Retirement Plan, and the Executive Supplemental Pension Plan (collectively, the "Pension Plans") and the Postretirement Medical and Life Benefits plans, which is recorded as a component of Selling, general, and administrative expense, net in our Consolidated Statements of Operations and Comprehensive Loss (in thousands):

	Pension Plans
	2015			2014			2013
Service cost	$	301		$	356		$	460
Interest cost		1,773			1,737			2,100
Expected return on plan assets		(498	)		(444	)		(409	)
Amortization of prior service cost (a)		1			1			106
Recognized actuarial loss		1,718			1,711			2,259
Curtailment expense		–			–			2,481
Net periodic benefit cost	$	3,295		$	3,361		$	6,997

	Postretirement Medical and Life Benefits
	2015		2014			2013
Service cost	$	4	$	13		$	11
Interest cost		46		67			60
Amortization of prior service cost (a)		–		(46	)		(56	)
Recognized actuarial loss		134		244			214
Net periodic benefit cost	$	184	$	278		$	229

(a) Prior service costs are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits.

The following table details changes in the amounts recognized in accumulated other comprehensive loss in our 2015 and 2014 Consolidated Financial Statements for the Pension Plans and the Postretirement Medical and Life Benefits plans (in thousands):

	Pension Plans						Postretirement Medical and Life Benefits
	2015			2014			2015			2014
Beginning of year	$	(17,086	)	$	(16,419	)	$	(1,017	)	$	(1,729	)
Net actuarial loss/(gain)		(1,782	)		(2,379	)		(111	)		514
Amortization of prior service (cost)/credit		1			1			–			(46	)
Amortization of actuarial gain		1,718			1,711			134			244
End of year	$	(17,149	)	$	(17,086	)	$	(994	)	$	(1,017	)

The change in benefit obligation and plan assets and reconciliation of funded status is as follows (in thousands):

	Pension Plans						Postretirement Medical and Life Benefits
	2015			2014			2015			2014
Change in benefit obligation:
Beginning projected benefit obligation	$	42,774		$	40,308		$	1,376		$	1,896
Service cost		301			356			4			13
Interest cost		1,773			1,737			46			67
Plan participant contributions		–			–			78			91
Actuarial loss/(gain)		1,620			2,736			111			(514	)
Benefits paid		(2,625	)		(2,363	)		(211	)		(177	)
Benefit obligation at end of year	$	43,843		$	42,774		$	1,404		$	1,376
Change in plan assets:
Beginning fair value of plan assets	$	7,020		$	6,506			–			–
Actual return on plan assets		336			800			–			–
Employer contributions		2,055			2,077			133			86
Plan participant contributions		–			–			78			91
Benefits paid		(2,625	)		(2,363	)		(211	)		(177	)
Fair value of plan assets at end of year	$	6,786		$	7,020			–			–
Funded status at end of year	$	(37,057	)*	$	(35,754	)*	$	(1,404	)	$	(1,376	)
Amounts recognized in the Consolidated Balance Sheets:
Accrued liabilities – payroll and related costs	$	(3,185	)	$	(3,277	)	$	(137	)	$	(128	)
Other deferred liabilities		(33,872	)		(32,477	)		(1,267	)		(1,248	)
Net amount recognized at year-end	$	(37,057	)	$	(35,754	)	$	(1,404	)	$	(1,376	)
Amounts recognized in accumulated other comprehensive loss:
Prior service cost	$	(1	)	$	(2	)		–			–
Net actuarial loss		(17,148	)		(17,084	)		(994	)		(1,017	)
Total amount recognized	$	(17,149	)	$	(17,086	)	$	(994	)	$	(1,017	)

* The funded status reflected above includes the liabilities attributable to all of the Pension Plans but only the assets of the Retirement Plan as the other plans are not considered funded for Employee Retirement Income Security Act purposes. To provide a source for the payment of benefits under the Executive Supplemental Pension Plan and the Management Retirement Plan, we own whole-life insurance contracts on some of the participants. The cash value of these policies, which are included within the Other Assets caption in our Consolidated Balance Sheets, was $29.5 million and $29.7 million at June 2, 2015 and June 3, 2014, respectively. In addition, we held in trust a negligible amount and $0.2 million of cash and cash equivalents as of June 2, 2015 and June 3, 2014, respectively, relating to these policies. We maintain a rabbi trust to hold the policies and death benefits as they are received.

During fiscal years 2015, 2014, and 2013, we reclassified the following items out of accumulated other comprehensive loss and into Pension and Postretirement Medical and Life Benefits expense, which is included in Selling, general and administrative, net within our Consolidated Statements of Operations and Comprehensive Loss, as follows (in thousands):

	2015		2014			2013
Recognized actuarial loss	$	1,852	$	1,955		$	2,473
Amortization of prior service cost/(credit)		1		(46	)		50
Curtailment expense		–		–			2,481
		1,853		1,909			5,004
Income taxes		–		–			(1,986	)
Pension reclassification, net of tax	$	1,853	$	1,909		$	3,018

The estimated prior service cost for the Pension and the Postretirement Medical and Life Benefits plans that will amortized from accumulated other comprehensive income into net periodic pension cost in fiscal year 2016 is insignificant. The estimated net loss for the Pension and the Postretirement Medical and Life Benefits plans that will be amortized from accumulated other comprehensive loss into net periodic pension cost in fiscal year 2016 is $2.0 million.

Additional measurement date information for the Pension and Postretirement Medical and Life Benefits plans which have benefit obligations in excess of plan assets (in thousands):

	Pension Plans						Postretirement Medical and Life Benefits
	June 2, 2015		June 3, 2014		June 2, 2015		June 3, 2014
Projected benefit obligation	$	43,843	$	42,774	$	1,404	$	1,376
Accumulated benefit obligation		43,518		42,002		1,404		1,376
Fair value of plan assets		6,786		7,020		–		–

The weighted average assumptions used to determine the net periodic benefit cost for fiscal years are set forth below:

	Pension Plans
	2015			2014			2013
Discount rate		4.4	%		4.5	%		4.5	%
Expected return on plan assets		7.0	%		7.0	%		7.3	%
Rate of compensation increase		2.0	%		2.0	%		2.0	%

	Postretirement Medical and Life Benefits
	2015			2014			2013
Discount rate		3.5	%		3.7	%		3.9	%
Rate of compensation increase		2.0	%		2.0	%		2.0	%

Our estimated long-term rate of return on plan assets represents the weighted average of expected future returns on the asset categories included in our target investment allocation based primarily on the historical returns for each asset category, adjusted for an assessment of current market conditions.

The weighted average assumptions used to determine benefit obligations at the measurement dates are set forth below:

	Pension Plans
	2015			2014
Discount rate		4.2	%		4.4	%
Rate of compensation increase		2.0	%		2.0	%

	Postretirement Medical and Life Benefits
	2015			2014
Discount rate		3.6	%		3.5	%
Rate of compensation increase		2.0	%		2.0	%

We currently are assuming a gross medical trend rate of 7.0% for fiscal 2016. We expect this rate to decrease approximately 0.25% per year for an ultimate trend rate of 5.0% in fiscal 2024. A change in this rate of 1.0% would have no significant impact on our net periodic postretirement benefit expense or our accrued postretirement benefits liability.

The benefits expected to be paid in each of the next five years and in the aggregate for the five years thereafter are set forth below (in thousands):

	Pension Plans		Postretirement Medical and Life Benefits
2016	$	3,911	$	137
2017		2,425		132
2018		2,368		147
2019		2,318		129
2020		2,276		122
2021-2025		20,126		568

Expected benefits are estimated based on the same assumptions used to measure our benefit obligation on our measurement date of May 31, 2015 and, where applicable, include benefits attributable to estimated further employee service.

Defined Contribution Plans

We sponsor two defined contribution plans for active employees, as summarized below.

Salary Deferral Plan
RTI offers certain employees a 401(k) plan called the Ruby Tuesday, Inc. Salary Deferral Plan (“401(k) Plan”). We make matching contributions to the 401(k) Plan based on each eligible employee's pre-tax contribution and years of service. We match in cash each fiscal quarter a specified percentage of the participating employee's first 6% of pre-tax contribution based on achievement of a same-restaurant sales performance factor. Company matches do not vest until the employees have worked for us three years. Given that the Company did not achieve the 2015, 2014, or 2013 same-restaurant sales performance factor in order for there to be an employer match, we had no expense related to the 401(k) Plan for fiscal years 2015, 2014, or 2013.

Deferred Compensation Plan
On January 5, 2005, our Board of Directors approved the adoption of the Ruby Tuesday, Inc. 2005 Deferred Compensation Plan (the “Deferred Compensation Plan”), effective as of January 1, 2005, and froze the existing deferred compensation plan, the Ruby Tuesday, Inc. Restated Deferred Compensation Plan (the “Predecessor Plan”), effective as of December 31, 2004, in order to satisfy the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, enacted as part of the American Jobs Creation Act of 2004.

Like the Predecessor Plan, the Deferred Compensation Plan is an unfunded, non-qualified deferred compensation plan for eligible employees. The Company matching provisions of the Deferred Compensation Plan are similar to those of the 401(k) Plan. We had no expenses for Company match under the Deferred Compensation Plan for fiscal years 2015, 2014, or 2013. Assets earmarked to pay benefits under the Deferred Compensation Plan are held by a rabbi trust. Assets and liabilities of a rabbi trust must be accounted for as if they are Company assets or liabilities and are therefore reported on our Consolidated Balance Sheets. Furthermore, all Deferred Compensation Plan earnings and expenses are recorded in our Consolidated Statements of Operations and Comprehensive Loss. The Deferred Compensation Plan’s assets and liabilities approximated $8.0 million and $ 9.6 million as of June 2, 2015 and June 3, 2014, respectively. Of these amounts, $0.7 million and $0.5 million was included in Prepaid and other expenses and Accrued liabilities – Payroll and related costs, and $7.3 million and $8.4 million was included in Other assets, net and Other deferred liabilities in the June 2, 2015 and June 3, 2014 Consolidated Balance Sheets, respectively. The investment in RTI common stock and the related liability payable in RTI common stock, which totaled $0.7 million and $0.6 million as of June 2, 2015 and June 3, 2014, respectively, is reflected in Shareholders’ Equity in the Consolidated Balance Sheets.

Executive Separations and Corporate Support Services Restructuring

Fiscal 2015

On June 26, 2014, our then Executive Vice President, Chief Financial Officer stepped down as Chief Financial Officer and subsequently retired from the Company on August 4, 2014. Additionally, three Senior Vice Presidents, our Chief Development Officer, Chief Legal Officer and Secretary, and Chief Marketing Officer left the Company on July 24, 2014, December 12, 2014, and April 27, 2015, respectively. During the year ended June 2, 2015, we recorded severance expense and made severance payments of $0.3 million in connection with the separation agreements for certain of these former executives.

Fiscal 2014

On June 7, 2013, our then President, Ruby Tuesday Concept, Chief Operations Officer left the Company. During fiscal 2014, we recorded severance expense of $0.9 million in connection with the separation agreement for the former executive, which represents obligations pursuant to the Ruby Tuesday, Inc. Severance Pay Plan (the “Severance Plan”) of two times base salary. The Severance Plan was subsequently terminated on October 7, 2013.

On October 30, 2013, our then Senior Vice President, Chief People Officer left the Company. During the second quarter of fiscal 2014, we recorded severance expense of $0.4 million in connection with his separation agreement, an amount representing one year of his annual base salary plus his remaining vacation for fiscal 2014.

Between November 20, 2013 and June 3, 2014, we eliminated approximately 82 management and staff personnel, respectively, at our Restaurant Support Services Center in Maryville, Tennessee. These reductions occurred in connection with an ongoing comprehensive review of our cost structure. These executive and other employee separations resulted in transition-related costs during the year ended June 3, 2014 of $4.3 million for employee severance and unused vacation.

Fiscal 2013

On November 30, 2012, Sandy E. Beall, III, our founder and former President, CEO, and Chairman of the Board of Directors stepped down from management and the Board of Directors. In connection with a transition agreement between the Company and Mr. Beall, the material terms of which were finalized as of June 5, 2012, we accrued $2.2 million of severance during the fourth quarter of fiscal 2012. Mr. Beall’s severance was paid during the third quarter of fiscal 2013. As previously mentioned, on June 4, 2013, Mr. Beall received a lump sum payment of $8.1 million, representing the full amount due to him under the Executive Supplemental Pension Plan, six-months following his retirement.

As of June 2, 2015, liabilities of $0.3 million, representing unpaid obligations in connection with the separations and restructurings, were included within Accrued liabilities: Payroll and related costs in our Consolidated Balance Sheet. Costs reflected in the table below related to employee severance and unused vacation accruals are included within Selling, general, and administrative, net in our Consolidated Statements of Operations and Comprehensive Loss. A roll forward of our obligations in connection with employee separations is as follows (in thousands):

Balance at June 4, 2013	$	310
Employee severance and unused vacation accruals		4,294
Cash payments		(3,549	)
Balance at June 3, 2014	$	1,055
Employee severance and unused vacation accruals		1,211
Cash payments		(1,953	)
Balance at June 2, 2015	$	313

See Note 10 to the Consolidated Financial Statements for discussion of the impact of executive separations to our share-based employee compensation costs.