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RETIREMENT AND BENEFIT PLANS
 12 Months Ended
Feb. 02, 2020
Retirement Benefits [Abstract]  
RETIREMENT AND BENEFIT PLANS RETIREMENT AND BENEFIT PLANS

The Company, as of February 2, 2020, has five noncontributory qualified defined benefit pension plans covering substantially all employees resident in the United States who meet certain age and service requirements. The plans provide monthly benefits upon retirement generally based on career average compensation and years of credited service. Vesting in plan benefits generally occurs after five years of service. The Company refers to these five plans as its “Pension Plans.”

The Company also has three noncontributory unfunded non-qualified supplemental defined benefit pension plans, including:

–
A plan for certain current and former members of Tommy Hilfiger’s domestic senior management. The plan is frozen and, as a result, participants do not accrue additional benefits.
–
A capital accumulation program for certain current and former senior executives. Under the individual participants’ agreements, the participants in the program will receive a predetermined amount during the ten 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 ten years and has attained age 55.
–
A plan for certain employees resident in the United States who meet certain age and service requirements that 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. As a result of the Company’s acquisition of The Warnaco Group, Inc. (“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 the applicable plan, both of which are unfunded and frozen. 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) were as follows:

 
Pension Plans
 
SERP Plans
 
Postretirement Plans
(In millions)
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Balance at beginning of year
$
651.0

 
$
648.0

 
$
99.2

 
$
96.9

 
$
8.4

 
$
10.5

Service cost, net of plan expenses
31.2

 
31.4

 
5.8

 
5.8

 
—

 
—

Interest cost
27.9

 
26.0

 
4.3

 
3.9

 
0.3

 
0.4

Benefit payments
(29.2
)
 
(26.0
)
 
(7.9
)
 
(6.1
)
 
—

 
—

Benefit payments, net of retiree contributions
—

 
—

 
—

 
—

 
(1.0
)
 
(1.4
)
Actuarial loss (gain)
149.2

 
(28.4
)
 
23.1

 
(1.3
)
 
0.5

 
(1.1
)
Balance at end of year
$
830.1

 
$
651.0

 
$
124.5

 
$
99.2

 
$
8.2

 
$
8.4



The actuarial losses in 2019 were due principally to decreases in the discount rates. The actuarial gains in 2018 were due principally to increases in the discount rates.

    

Reconciliations of the fair value of the assets held by the Pension Plans and the funded status were as follows:
(In millions)
2019
 
2018
Fair value of plan assets at beginning of year
$
636.8

 
$
660.6

Actual return, net of plan expenses
112.9

 
(7.8
)
Benefit payments
(29.2
)
 
(26.0
)
Company contributions
0.7

 
10.0

Fair value of plan assets at end of year
$
721.2

 
$
636.8

Funded status at end of year
$
(108.9
)
 
$
(14.2
)


Amounts recognized in the Company’s Consolidated Balance Sheets were as follows:
 
Pension Plans
 
SERP Plans
 
Postretirement Plans
(In millions)
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Non-current assets
$
1.7

 
$
1.8

 
$
—

 
$
—

 
$
—

 
$
—

Current liabilities
—

 
—

 
(9.3
)
 
(7.4
)
 
(1.1
)
 
(1.1
)
Non-current liabilities
(110.6
)
 
(16.0
)
 
(115.2
)
 
(91.8
)
 
(7.1
)
 
(7.3
)
Net amount recognized
$
(108.9
)
 
$
(14.2
)
 
$
(124.5
)
 
$
(99.2
)
 
$
(8.2
)
 
$
(8.4
)


The components of net benefit cost recognized were as follows:
 
 
Pension Plans
 
SERP Plans
 
Postretirement Plans
(In millions)
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Service cost
 
$
33.5

 
$
33.7

 
$
27.3

 
$
5.8

 
$
5.8

 
$
4.5

 
$
—

 
$
—

 
$
—

Interest cost
 
27.9

 
26.0

 
25.7

 
4.3

 
3.9

 
3.8

 
0.3

 
0.4

 
0.4

Actuarial loss (gain)
 
74.2

 
17.4

 
(3.9
)
 
23.1

 
(1.3
)
 
6.1

 
0.5

 
(1.1
)
 
0.3

Expected return on plan assets
 
(40.3
)
 
(40.3
)
 
(38.6
)
 
—

 
—

 
—

 
—

 
—

 
—

Amortization of prior service cost
 
—

 
0.1

 
0.1

 
—

 
—

 
—

 
—

 
—

 
—

Curtailment gain
 
—

 
—

 
(0.3
)
 
—

 
—

 
—

 
—

 
—

 
—

Settlement loss
 
—

 
—

 
9.4

 
—

 
—

 
—

 
—

 
—

 
—

Total
 
$
95.3

 
$
36.9

 
$
19.7

 
$
33.2

 
$
8.4

 
$
14.4

 
$
0.8

 
$
(0.7
)
 
$
0.7


The service cost component of net benefit cost is recorded in SG&A expenses and the other components of net benefit cost are recorded in non-service related pension and postretirement cost in the Company’s Consolidated Income Statements.

The actuarial losses in 2019 were due principally to decreases in the discount rates. For the Pension Plans, these losses were partially offset by an actuarial gain as a result of the difference between the actual and expected returns on plan assets.
    
In 2017, the Company completed the purchase of a group annuity using assets from the Pension Plans. Under the group annuity, the accrued pension obligations for approximately 4,000 retiree participants who had deferred vested benefits under the Pension Plans were transferred to an insurer. As a result, the Company recognized a loss of $9.4 million, which was recorded in non-service related pension and postretirement cost in the Company’s Consolidated Income Statement for 2017. The amount of the pension benefit obligation settled was $65.3 million.

Amortization of prior service cost recognized in other comprehensive (loss) income for Pension Plans, SERP Plans, and Postretirement Plans was immaterial during 2019, 2018 and 2017.

Pre-tax amounts in AOCL that had not yet been recognized as components of net benefit cost in the Pension Plans, SERP Plans and Postretirement Plans were immaterial as of February 2, 2020 and February 3, 2019.

Pre-tax amounts in AOCL as of February 2, 2020 expected to be recognized as components of net benefit cost in 2020 in the Pension Plans, SERP Plans and Postretirement Plans were immaterial.

The accumulated benefit obligation (Pension Plans and SERP Plans) were as follows:
 
Pension Plans
 
SERP Plans
(In millions)
2019
 
2018
 
2019
 
2018
Accumulated benefit obligation
$
751.3

 
$
598.9

 
$
99.9

 
$
81.5



In 2019, three of the Company’s Pension Plans had projected benefit obligations and accumulated benefit obligations in excess of plan assets. In 2018, three of the Company’s Pension Plans had projected benefit obligations in excess of plan assets and two of the Company’s Pension Plans had accumulated benefit obligations in excess of plan assets. The balances were as follows:
(In millions, except plan count)
2019
 
2018
Number of plans with projected benefit obligations in excess of plan assets
3

 
3

Aggregate projected benefit obligation
$
811.9

 
$
634.7

Aggregate fair value of related plan assets
$
701.3

 
$
618.8

 
 
 
 
Number of plans with accumulated benefit obligations in excess of plan assets
3

 
2

Aggregate accumulated benefit obligation
$
733.3

 
$
38.5

Aggregate fair value of related plan assets
$
701.3

 
$
38.0


In 2019 and 2018, all of the Company’s SERP Plans had projected benefit obligations and accumulated benefit obligations in excess of plan assets as the plans are unfunded.

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:
 
2019
 
2018
 
2017
Discount rate (applies to Pension Plans and SERP Plans)
3.15
%
 
4.35
%
 
4.08
%
Discount rate (applies to Postretirement Plans)

2.70
%
 
4.16
%
 
3.91
%
Rate of increase in compensation levels (applies to Pension Plans)
4.23
%
 
4.24
%
 
4.24
%
Expected long-term rate of return on assets (applies to Pension Plans)
6.25
%
 
6.50
%
 
6.25
%

To develop the expected 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.

The assets of the Pension Plans are invested with the objective of being able to meet current and future benefit payment needs, while managing future contributions. The investment policy aims to earn a reasonable rate of return while minimizing the risk of large losses. Assets are diversified by asset class in order to reduce volatility of overall results from year to year and to take advantage of various investment opportunities. 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, 2020 was approximately 40% United States equities, 20% international equities and 40% fixed income investments and cash. 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 12, “Fair Value Measurements,” the following tables show the fair value of the total assets of the Pension Plans for each major category as of February 2, 2020 and February 3, 2019:
(In millions)
 
 
 
Fair Value Measurements as of
February 2, 2020(1) 
Asset Category
 
Total
 
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
 
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
Equity securities:
 
 
 
 
 
 
 
 
United States equities(2)
 
$
182.2

 
$
182.2

 
$
—

 
$
—

International equities(2)
 
10.7

 
10.7

 
—

 
—

United States equity fund(3)
 
66.3

 
—

 
66.3

 
—

International equity funds(4)
 
135.1

 
65.4

 
69.7

 
—

Fixed income securities:
 
 

 
 

 
 

 
 

Government securities(5)
 
74.0

 
—

 
74.0

 
—

Corporate securities(5)
 
225.9

 
—

 
225.9

 
—

Short-term investment funds(6)
 
18.6

 
—

 
18.6

 
—

Total return mutual fund(7)
 
6.9

 
6.9

 
—

 
—

Subtotal
 
$
719.7

 
$
265.2

 
$
454.5

 
$
—

Other assets and liabilities(8)
 
1.5

 
 

 
 

 
 

Total
 
$
721.2

 
 

 
 

 
 



(In millions)
 
 
 
Fair Value Measurements as of
February 3, 2019(1)
Asset Category
 
Total
 
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
 

Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
Equity securities:
 
 
 
 
 
 
 
 
United States equities(2)
 
$
170.9

 
$
170.9

 
$
—

 
$
—

International equities(2)
 
12.2

 
12.2

 
—

 
—

United States equity fund(3)
 
58.9

 
—

 
58.9

 
—

International equity funds(4)
 
126.5

 
60.3

 
66.2

 
—

Fixed income securities:
 
 

 
 

 
 

 
 

Government securities(5)
 
70.3

 
—

 
70.3

 
—

Corporate securities(5)
 
173.7

 
—

 
173.7

 
—

Short-term investment funds(6)
 
16.7

 
—

 
16.7

 
—

Total return mutual fund(7)
 
6.3

 
6.3

 
—

 
—

Subtotal
 
$
635.5

 
$
249.7

 
$
385.8

 
$
—

Other assets and liabilities(8)
 
1.3

 
 

 
 

 
 

Total
 
$
636.8

 
 

 
 

 
 

(1) 
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 by reviewing prices from other sources. The Company has not adjusted any prices received from the third party pricing services.
(2) 
Valued at the closing price or unadjusted quoted price in the active market in which the individual securities are traded.
(3) 
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 this investment at net asset value within the near term and therefore classifies this investment within Level 2. This commingled fund invests in United States large cap equities that track the Russell 1000 Index.
(4) 
Valued at the net asset value of the fund, either as determined by the closing price in the active market in which the individual fund is traded and classified within Level 1, or as determined by a pricing vendor or the fund family and classified within Level 2. This category includes funds that invest in equities of companies outside of the United States.
(5) 
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.
(6) 
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.
(7) 
Valued at the net asset value of this fund, as determined by the closing price in the active market in which the individual fund is traded. This mutual fund invests in both equity securities and fixed income securities.
(8) 
This category includes other pension assets and liabilities such as pending trades and accrued income.

The Company believes that there are no significant concentrations of risk within the plan assets as of February 2, 2020.

Currently, the Company does not expect to make material contributions to the Pension Plans in 2020. The Company’s actual contributions may differ from planned contributions due to many factors, including changes in tax and other laws, as well as significant differences between expected and actual pension asset performance or interest rates. The expected benefit payments associated with the Pension Plans and SERP Plans, and expected benefit payments, net of retiree contributions, associated with the Postretirement Plans are as follows:
(In millions)
 
 
 
 
 
 
Fiscal Year
 
Pension Plans
 
SERP Plans
 
Postretirement Plans
2020
 
$
37.2

 
$
9.2

 
$
1.0

2021
 
39.0

 
10.1

 
1.0

2022
 
41.1

 
13.3

 
0.9

2023
 
42.3

 
12.2

 
0.8

2024
 
44.2

 
10.0

 
0.7

2025-2029
 
240.6

 
59.1

 
2.7



A 1% change in the assumed medical health care cost trend rate for the Postretirement Plans would not have a material impact on the Company’s net benefit cost for 2019 or the accumulated benefit obligation at February 2, 2020.

The Company has savings and retirement plans and a supplemental savings plan for the benefit of its eligible employees in the United States who elect to participate. The Company matches a portion of employee contributions to the plans. The Company also has defined contribution plans for certain employees associated with certain businesses acquired in the Tommy Hilfiger, Warnaco and Australia acquisitions, whereby the Company pays a percentage of the contribution for the employee. The Company’s contributions to these plans were $29.9 million, $25.4 million and $22.1 million in 2019, 2018 and 2017, respectively.