RETIREMENT AND BENEFIT PLANS

The Company has five noncontributory defined benefit pension plans covering substantially all employees resident in the United States who meet certain age and service requirements as of February 2, 2014. As part of the Warnaco acquisition, the Company acquired a frozen noncontributory defined benefit pension plan. Such plan was merged with an existing plan during 2013. For those vested (after five years of service), the plans provide monthly benefits upon retirement based on career compensation and years of credited service. The Company refers to these five plans as its “Pension Plans.”

The Company also has for certain members of Tommy Hilfiger’s domestic senior management a supplemental executive retirement plan, which is an unfunded non-qualified supplemental defined benefit pension plan. Such plan is frozen and, as a result, participants do not accrue additional benefits. In addition, the Company has a capital accumulation program, which is an unfunded non-qualified supplemental defined benefit plan covering three current and 15 retired executives as of February 2, 2014. Under the individual participants’ agreements, the participants in this plan will receive a predetermined amount during the 10 years following the attainment of age 65, provided that prior to the termination of employment with the Company, the participant has been in the plan for at least 10 years and has attained age 55. The Company also has for certain employees resident in the United States who meet certain age and service requirements an unfunded non-qualified supplemental defined benefit pension plan, which provides benefits for compensation in excess of Internal Revenue Service earnings limits and requires payments to vested employees upon, or shortly after, employment termination or retirement. The Company refers to these three plans as its “SERP Plans.”

The Company also provides certain postretirement health care and life insurance benefits to certain retirees resident in the United States. Retirees contribute to the cost of this plan, which is unfunded. During 2002, the postretirement plan was amended to eliminate the Company contribution, which partially subsidized benefits, for active participants who, as of January 1, 2003, had not attained age 55 and 10 years of service. As a result of the Company’s acquisition of Warnaco, the Company also provides certain postretirement health care and life insurance benefits to certain Warnaco retirees resident in the United States. Retirees contribute to the cost of this plan, which is unfunded. This plan was frozen on January 1, 2014. The Company refers to these two plans as its “Postretirement Plans.”

Reconciliations of the changes in the projected benefit obligation (Pension Plans and SERP Plans) and the accumulated benefit obligation (Postretirement Plans) for each of the last two years were as follows:



	Pension Plans						SERP Plans						Postretirement Plans
	2013			2012			2013			2012			2013			2012
Balance at beginning of year	$	406,395		$	359,727		$	74,861		$	71,717		$	16,036		$	18,247
Acquisition of Warnaco	182,379			—			165			—			4,472			—
Service cost	18,721			15,315			4,415			3,579			83			—
Interest cost	26,395			17,974			3,619			3,366			863			798
Benefit payments	(30,541		)	(14,456		)	(4,392		)	(2,674		)	—			—
Benefit payments, net of retiree contributions	—			—			—			—			(2,150		)	(1,959		)
Plan curtailments	—			—			—			—			(2,172		)	—
Plan settlements	—			—			—			(6,977		)	—			—
Medicare subsidy	—			—			—			—			14			56
Actuarial (gain) loss	(31,838		)	27,835			2,120			5,850			(1,046		)	(1,106		)
Balance at end of year	$	571,511		$	406,395		$	80,788		$	74,861		$	16,100		$	16,036

Reconciliations of the fair value of the assets held by the Company’s Pension Plans and the plans’ funded status for each of the last two years were as follows:



	2013			2012
Fair value of plan assets at beginning of year	$	384,022		$	268,505
Acquisition of Warnaco	143,547			—
Actual return, net of plan expenses	58,572			24,973
Benefit payments	(30,541		)	(14,456		)
Company contributions	60,000			105,000
Fair value of plan assets at end of year	$	615,600		$	384,022
Funded status at end of year	$	44,089		$	(22,373	)

Amounts recognized in the Company’s Consolidated Balance Sheets were as follows:



	Pension Plans						SERP Plans						Postretirement Plans
	2013			2012			2013			2012			2013			2012
Non-current assets	$	49,505		$	—		$	—		$	—		$	—		$	—
Current liabilities	—			—			(6,508		)	(7,021		)	(2,103		)	(1,965		)
Non-current liabilities	(5,416		)	(22,373		)	(74,280		)	(67,840		)	(13,997		)	(14,071		)
Net amount recognized	$	44,089		$	(22,373	)	$	(80,788	)	$	(74,861	)	$	(16,100	)	$	(16,036	)

Pre-tax amounts in AOCI that, as of the end of each applicable fiscal year, had not yet been recognized as components of net benefit cost were as follows:



	Pension Plans						SERP Plans				Postretirement Plans
	2013			2012			2013		2012		2013		2012
Prior service (cost) credit	$	(10	)	$	(16	)	$	204	$	272	$	1,438	$	2,255

Pre-tax amounts in AOCI as of February 2, 2014 expected to be recognized as components of net benefit cost in 2014 were as follows:



	Pension Plans			SERP Plans		Postretirement Plan
Prior service (cost) credit	$	(5	)	$	68	$	775

The assets of the Pension Plans are invested with the objective of being able to meet current and future benefit payment needs, while controlling future contributions. The assets of the Pension Plans are diversified among United States equities, international equities, fixed income investments and cash. The strategic target allocation for the majority of the Pension Plans as of February 2, 2014 was approximately 40% United States equities, 20% international equities and 40% fixed income investments. Equity securities primarily include investments in large-, mid- and small-cap companies located in the United States and abroad. Fixed income securities include corporate bonds of companies from diversified industries, municipal bonds, collective funds and United States Treasury bonds. Actual investment allocations may vary from the Company’s target investment allocations due to prevailing market conditions.

In accordance with the fair value hierarchy described in Note 10, “Fair Value Measurements,” the following tables show the fair value of the total assets of the Company’s Pension Plans for each major category as of February 2, 2014 and February 3, 2013:



			Fair Value Measurements as of February 2, 2014⁽¹¹⁾
Asset Category	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities:
United States equities⁽¹⁾	$	244,700	$	244,700	$	—	$	—
International equities⁽¹⁾	23,991		23,991		—		—
United States equity fund⁽²⁾	19,298		—		19,298		—
International equity fund⁽³⁾	63,433		63,433		—		—
Fixed income securities:
Government securities⁽⁴⁾	51,592		—		51,592		—
Corporate securities⁽⁴⁾	168,560		—		168,560		—
Asset and mortgage-backed securities⁽⁴⁾	10,331		—		10,331		—
Short-term investment funds⁽⁵⁾	27,002		—		27,002		—
Total return mutual fund⁽⁶⁾	5,312		5,312		—		—
Subtotal	$	614,219	$	337,436	$	276,783	$	—
Other assets and liabilities⁽⁷⁾	1,381
Total	$	615,600



			Fair Value Measurements as of February 3, 2013⁽¹¹⁾
Asset Category	Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities:
United States equities⁽¹⁾	$	65,101	$	65,101	$	—	$	—
International equities⁽¹⁾	1,266		1,266		—		—
Global equity mutual fund⁽⁸⁾	16,373		16,373		—		—
United States equity fund⁽⁹⁾	42,183		42,183		—		—
International equity commingled fund⁽¹⁰⁾	46,976		—		46,976		—
Fixed income securities:
Government securities⁽⁴⁾	19,356		—		19,356		—
Corporate securities⁽⁴⁾	86,982		—		86,982		—
Short-term investment funds⁽⁵⁾	99,297		—		99,297		—
Total return mutual fund⁽⁶⁾	4,784		4,784		—		—
Subtotal	$	382,318	$	129,707	$	252,611	$	—
Other assets and liabilities⁽⁷⁾	1,704
Total	$	384,022

⁽¹⁾Valued at the closing price or unadjusted quoted price in the active market in which the individual securities are traded.


⁽²⁾	Valued at the net asset value of the fund, as determined by a pricing vendor or the fund family. The Company has the ability to redeem these investments at net asset value within the near term and therefore classifies these investments within Level 2. This commingled fund invests in United States large cap equities that track the Russell 1000 Index.


⁽³⁾	Valued at the net asset value of the fund, as determined by the closing price in the active market in which the individual fund is traded. This mutual fund invests in a portfolio of equities outside the United States.


⁽⁴⁾	Valued with bid evaluation pricing where the inputs are based on actual trades in active markets, when available, as well as observable market inputs that include actual and comparable trade data, market benchmarks, broker quotes, trading spreads and/or other applicable data.


⁽⁵⁾	Valued at the net asset value of the funds, as determined by a pricing vendor or the fund family. The Company has the ability to redeem these investments at net asset value within the near term and therefore classifies these investments within Level 2. These funds invest in high-grade, short-term, money market instruments.


⁽⁶⁾	Valued at the net asset value of the fund, as determined by the closing price in the active market in which the individual fund is traded. This fund invests in both equity securities and fixed income securities seeking a high total return.


⁽⁷⁾	This category includes other pension assets and liabilities such as pending trades and accrued income.


⁽⁸⁾	Valued at the net asset value of the fund, as determined by the closing price in the active market in which the individual fund is traded. This fund invests in a portfolio of United States and international equities seeking long-term growth of principal and income.


⁽⁹⁾	Valued at the closing price in the active market in which this fund is traded. This fund invests in United States large cap equities that track the Russell 1000 Index.


⁽¹⁰⁾	Valued at the net asset value of the fund, as determined by a pricing vendor or the fund family. The Company has the ability to redeem these investments at net asset value within the near term and therefore classifies these investments within Level 2. This fund invests primarily in equities outside the United States seeking long-term capital appreciation.

⁽¹¹⁾

The Company uses third-party pricing services to determine the fair values of the financial instruments held by the Pension Plans. The Company obtains an understanding of the pricing services’ valuation methodologies and related inputs and validates a sample of prices provided by the pricing services by reviewing prices from other pricing sources and analyzing pricing data in certain instances. The Company has not adjusted any prices received from the third-party pricing services.

The Company believes that there are no significant concentrations of risk within its plan assets at February 2, 2014.

In 2013, two of the Company’s Pension Plans had projected benefit obligations and accumulated benefit obligations in excess of plan assets. In 2012, all of the Company’s Pension Plans had projected benefit obligations in excess of plan assets and three of the Company’s Pension Plans had accumulated benefit obligations in excess of plan assets. The balances were as follows:



	2013		2012
Number of plans with projected benefit obligations in excess of plan assets	2		5
Aggregate projected benefit obligation	$	27,735	$	406,395
Aggregate fair value of related plan assets	$	22,319	$	384,022

Number of plans with accumulated benefit obligations in excess of plan assets	2		3
Aggregate accumulated benefit obligation	$	25,391	$	33,730
Aggregate fair value of related plan assets	$	22,319	$	30,583

The components of net benefit cost and other pre-tax amounts recognized in other comprehensive income (loss) in each of the last three years were as follows:



Net Benefit Cost Recognized in Selling, General and Administrative Expenses

	Pension Plans									SERP Plans									Postretirement Plans
	2013			2012			2011			2013			2012			2011			2013			2012			2011
Service cost, including plan expenses	$	19,201		$	15,729		$	11,550		$	4,415		$	3,579		$	3,069		$	83		$	—		$	—
Interest cost	26,395			17,974			17,391			3,619			3,366			3,602			863			798			1,018
Actuarial (gain) loss	(51,441		)	23,398			64,683			2,120			5,850			10,296			(1,046		)	(1,106		)	1,141
Expected return on plan assets	(39,449		)	(20,950		)	(20,514		)	—			—			—			—			—			—
Amortization of prior service cost (credit)	6			6			6			(68		)	(68		)	(68		)	(817		)	(817		)	(817		)
Curtailment gain	—			—			—			—			—			—			(2,172		)	—			—
Total	$	(45,288	)	$	36,157		$	73,116		$	10,086		$	12,727		$	16,899		$	(3,089	)	$	(1,125	)	$	1,342



Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

	Pension Plans									SERP Plans						Postretirement Plans
	2013			2012			2011			2013		2012		2011		2013		2012		2011
Prior service cost	$	—		$	1		$	—		$	—	$	—	$	—	$	—	$	—	$	—
Amortization of prior service (cost) credit	(6		)	(6		)	(6		)	68		68		68		817		817		817
(Income) loss recognized in other comprehensive income	$	(6	)	$	(5	)	$	(6	)	$	68	$	68	$	68	$	817	$	817	$	817

Currently, the Company expects to make contributions of approximately $2,500 to its Pension Plans in 2014. The Company’s actual contributions may differ from planned contributions due to many factors, including changes in tax and other benefit laws, or significant differences between expected and actual pension asset performance or interest rates. The expected benefit payments associated with the Company’s Pension Plans and SERP Plans, and expected benefit payments, net of retiree contributions, associated with the Company’s Postretirement Plans are as follows:



					Postretirement Plans
	Pension Plans		SERP Plans		Excluding Medicare Subsidy Receipts		Expected Medicare Subsidy Receipts
2014	$	27,547	$	6,508	$	2,103	$	73
2015	28,358		6,436		1,981		68
2016	28,851		6,257		1,830		63
2017	29,561		5,704		1,704		58
2018	30,608		6,131		1,598		53
2019-2023	170,170		49,511		6,233		192

The medical health care cost trend rate assumed for 2014 is 6.17% and is assumed to decrease by approximately 0.14% per year through 2023. Thereafter, the rate assumed is 4.95%. If the assumed health care cost trend rate increased or decreased by 1%, the aggregate effect on the service and interest cost components of the net postretirement benefit cost for 2013 and on the accumulated postretirement benefit obligation at February 2, 2014 would be as follows:



	1% Increase		1% Decrease
Impact on service and interest cost	$	81	$	(69	)
Impact on year end accumulated postretirement benefit obligation	1,060		(970		)

Significant weighted average rate assumptions used in determining the projected and accumulated benefit obligations at the end of each year and benefit cost in the following year were as follows:



	2013		2012		2011
Discount rate	5.07	%	4.67	%	5.06	%
Rate of increase in compensation levels (applies to Pension Plans only)	4.33	%	4.34	%	4.31	%
Long-term rate of return on assets (applies to Pension Plans only)	7.25	%	7.25	%	7.75	%

To develop the expected weighted average long-term rate of return on assets assumption, the Company considered the historical level of the risk premium associated with the asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio.

The Company has savings and retirement plans and a supplemental savings plan for the benefit of its eligible employees who elect to participate. The Company matches a portion of employee contributions to the plans. The Company also has a defined contribution plan for certain employees associated with certain businesses acquired in the Tommy Hilfiger acquisition, whereby the Company pays a percentage of the contribution for the employee. The Company’s contributions to these plans were $21,849, $15,114 and $12,664 in 2013, 2012 and 2011, respectively.