(

) Employee Benefit Plans

Retirement plans

We had

one

defined benefit pension plan, the Insteel Wire Products Company Retirement Income Plan for Hourly Employees, Wilmington, Delaware (the “Delaware Plan”). The Delaware Plan provided benefits for eligible employees based primarily upon years of service and compensation levels. The Delaware Plan was frozen effective

September 30, 2008

whereby participants

longer earned additional benefits.

During

2016,

we terminated the Delaware Plan and settled plan liabilities through either lump sum distributions to plan participants or annuity contracts purchased from a

third

-party insurance company that provided for the payment of vested benefits to those participants that did

not

elect the lump sum option. We made contributions totaling

$1.9

million to the Delaware Plan during

2016.

As a result of the pension termination, unrecognized losses, which previously were recorded in accumulated other comprehensive loss on our consolidated balance sheets, were recognized as expense and a pension plan settlement loss of

$2.5

million was recorded on our consolidated statements of operations for the year ended

October 1, 2016.

The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized in our consolidated balance sheets for the Delaware Plan is as follows:

	Year Ended
	October 1,
(In thousands)	2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	3,463
Interest cost		147
Actuarial loss		324
Plan settlement		290
Distributions		(4,224	)
Benefit obligation at end of year	$	-

Change in plan assets:
Fair value of plan assets at beginning of year	$	2,201
Actual return on plan assets		104
Employer contributions		1,919
Plan settlement		(4,003	)
Distributions		(221	)
Fair value of plan assets at end of year	$	-

Reconciliation of funded status to net amount recognized:
Funded status	$	-
Net amount recognized	$	-

Amounts recognized on the consolidated balance sheet:
Accrued benefit liability	$	-
Accumulated other comprehensive loss (net of tax)		-
Net amount recognized	$	-

Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	-
Net amount recognized	$	-

Other changes in plan assets and benefit obligations recognized in other comprehensive loss:
Net loss	$	685
Amortization of net loss		(76	)
Settlement loss		(2,539	)
Total recognized in other comprehensive income loss	$	(1,930	)

Net periodic pension cost for the Delaware Plan includes the following components:

	Year Ended
	October 1,
(In thousands)	2016
Interest cost	$	147
Expected return on plan assets		(175	)
Settlement loss recognized		2,539
Amortization of net loss		76
Net periodic pension cost	$	2,587

The assumed discount rate used for the valuation of the Delaware Plan was

3.75%

as of

October 1, 2016.

In establishing the discount rate, we reviewed published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the Delaware Plan.

Supplemental employee retirement plan.

We have Retirement Security Agreements (each, a “SERP”) with certain of our employees (each, a “Participant”). Under the SERPs, if the Participant remains in continuous service with us for a period of at least

years, we will pay the Participant a supplemental retirement benefit for the

-year period following the Participant’s retirement equal to

50%

of the Participant’s highest average annual base salary for

five

consecutive years in the

-year period preceding the Participant’s retirement. If the Participant retires prior to the later of age

or the completion of

years of continuous service with us, but has completed at least

years of continuous service, the amount of the Participant’s supplemental retirement benefit will be reduced by

1/360th

for each month short of

years that the Participant was employed by us.

The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized for the SERPs in our consolidated balance sheets is as follows:

	Year Ended
	September 29,			September 30,			October 1,
(In thousands)	2018			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	9,389		$	9,159		$	7,821
Service cost		310			344			263
Interest cost		345			338			326
Actuarial loss (gain)		(33	)		(162	)		1,039
Distributions		(262	)		(290	)		(290	)
Benefit obligation at end of year	$	9,749		$	9,389		$	9,159

Change in plan assets:
Actual employer contributions	$	262		$	290		$	290
Actual distributions		(262	)		(290	)		(290	)
Plan assets at fair value at end of year	$	-		$	-		$	-

Reconciliation of funded status to net amount recognized:
Funded status	$	(9,749	)	$	(9,389	)	$	(9,159	)
Net amount recognized	$	(9,749	)	$	(9,389	)	$	(9,159	)

Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	1,966		$	2,149		$	2,485
Net amount recognized	$	1,966		$	2,149		$	2,485

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	(33	)	$	(162	)	$	1,039
Amortization of net loss		(150	)		(174	)		(85	)
Total recognized in other comprehensive income (loss)	$	(183	)	$	(336	)	$	954

Net periodic pension cost for the SERPs includes the following components:

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Service cost	$	310	$	344	$	263
Interest cost		345		338		326
Amortization of net loss		150		174		85
Net periodic pension cost	$	805	$	856	$	674

The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic pension cost during

2019

$140,000.

The assumptions used in the valuation of the SERPs are as follows:

	Measurement Date
	September 29,			September 30,			October 1,
	2018			2017			2016
Assumptions at year-end:
Discount rate		4.00	%		3.75	%		3.75	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

The assumed discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the SERPs. The SERPs expected rate of increase in compensation levels is based on the anticipated increases in annual compensation.

The projected benefit payments under the SERPs are as follows:

Fiscal year(s)	In thousands
2019	$	325
2020		278
2021		278
2022		553
2023		553
2024 - 2028		4,083

Retirement savings plan.

1996,

we adopted the Retirement Savings Plan of Insteel Industries, Inc. (the “Plan”) to provide retirement benefits and stock ownership for our employees. The Plan is an amendment and restatement of our Employee Stock Ownership Plan. As allowed under Sections

401

(a) and

401

(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary deductions for eligible employees.

The Plan allows for discretionary contributions to be made by us as determined by the Board of Directors, which are allocated among eligible participants based on their compensation relative to the total compensation of all participants

Employees are permitted to contribute up to

75%

of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Code. We match employee contributions up to

100%

of the

first

and

50%

of the next

of eligible compensation that is contributed by employees. Our contributions to the Plan were

$1.1

million in

2018

and

2017

and

$1.0

million in

2016.

Voluntary Employee Beneficiary Associations (“

VEBA

”

)

. We have a VEBA which allows both us and our employees to make contributions to pay for medical costs. Our contributions to the VEBA were

$5.1

million in

2018,

$5.6

million in

2017

and

$5.4

million in

2016.

We are primarily self-insured for our employee’s healthcare costs, carrying stop-loss insurance coverage for individual claims in excess of

$175,000

per benefit plan year. Our self-insurance liabilities are based on the total estimated costs of claims filed and claims incurred but

not

reported, less amounts paid against such claims. We review current and historical claims data in developing our estimates.