Note H - Employee Benefit Plans

12 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Retirement Benefits [Text Block]

H

. Employee Benefit Plans

We have a profit sharing plan pursuant to Section 

401

(k) of the Code, whereby participants

may

contribute a percentage of compensation

not

in excess of the maximum allowed under the Code. All employees with

six

months or longer of continuous employment are eligible to participate in the plan. Under the

401

(k) plan, we match

100%

of the

first

3%

and

50%

of the next

2%

of a participant's compensation contributed to the plan. The total contributions under the plan charged to income from operations totaled

$314,000

for fiscal

2020

and

$283,000

for fiscal

2019.

We have a “Cafeteria Plan” pursuant to Section 

125

of the Code, whereby health care benefits are provided for active employees through insurance companies. Substantially all active full-time employees are eligible for these benefits. We recognize the cost of providing these benefits by expensing the annual premiums, which are based on benefits paid during the year. The premiums expensed to income from operations for these benefits totaled

$1.4

million for the fiscal year ended

June 

30,

2020

and

$1.3

million for the fiscal year ended

June 30, 2019.

Effective

July 16, 2020,

the Board of Directors approved and adopted a Non-Qualified Incentive Plan. The purpose of the Non-Qualified Incentive Plan is to enhance the long-term stockholder value of NAI by offering opportunities to directors, officers, employees and eligible consultants of NAI to receive a cash award that

may

be subject to conditions precedent or subsequent that must be met before the NAI is obligated to make the payment, and to provide to the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards in order to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest.

The Non-Qualified Incentive Plan provides for the Human Resources Committee or the Board of Directors to award and administer unsecured and deferred cash awards subject to whatever conditions are determined by the Human Resources Committee or the Board of Directors with each award. The terms of each award, including the amount and any conditions that must be met to be entitled to payment of the award, are set forth in an Award Agreement. The Non-Qualified Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Non-Qualified Incentive Plan although that has

not

been done to date.

We formerly sponsored a defined benefit pension plan, which provides retirement benefits to employees based generally on years of service and compensation during the last

five

years before retirement. Effective

June 

21,

1999,

we adopted an amendment to freeze benefit accruals to the participants. Annually, we contribute an amount

not

less than the minimum funding requirements of the Employee Retirement Income Security Act of

1974

nor more than the maximum tax-deductible amount.

Disclosure of Funded Status

The following table sets forth the defined benefit pension plan's funded status and amount recognized in our consolidated balance sheets at

June 

30

(in thousands):

	20 20			201 9
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	1,615		$	1,498
Interest cost		46			57
Actuarial loss		380			173
Benefits paid		(6	)		(113	)
Benefit obligation at end of year	$	2,035		$	1,615
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	1,369		$	1,453
Actual return on plan assets		(24	)		69
Employer contributions		—			—
Benefits paid		(6	)		(114	)
Plan expenses		—			(39	)
Fair value of plan assets at end of year	$	1,339		$	1,369
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	$	(696	)	$	(246	)
Unrecognized net actuarial loss in accumulated other comprehensive income		1,087			671
Net amount recognized	$	391		$	425
Projected benefit obligation	$	2,035		$	1,615
Accumulated benefit obligation	$	2,035		$	1,615
Fair value of plan assets	$	1,339		$	1,369

The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was

2.45%

for the year ended

June 30, 2020

and

3.5%

during the year ended

June 

30,

2019.

Net Periodic Benefit Cost

The components included in the defined benefit pension plan's net periodic benefit expense for the fiscal years ended

June 

30

were as follows (in thousands):

	2020			2019
Interest cost	$	46		$	57
Expected return on plan assets		(69	)		(85	)
Recognized actuarial loss		50			38
Settlement loss		—			43
Net periodic benefit expense	$	27		$	53

In the fiscal year ended

June 30, 2020,

we did

not

contribute to our defined benefit pension plan. In the fiscal year ended

June 30, 2019,

we did

not

contribute to our defined benefit pension plan. We contributed

$7,000

during the

first

quarter of the fiscal year ended

June 30, 2021.

The following is a summary of changes in plan assets and benefit obligations recognized in other comprehensive income (in thousands): 

	20 20			2019
Net gain	$	481		$	189
Settlement loss		—			(50	)
Amortization of net loss		(57	)		(37	)
Plan expenses		—			39
Total recognized in other comprehensive income (loss)	$	424		$	141
Total recognized in net periodic benefit cost and other comprehensive income	$	451		$	194

The estimated net gain for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is

$91,000.

We do

not

have any transition obligations or prior service costs recorded in accumulated other comprehensive income.

The following benefit payments are expected to be paid (in thousands):

2021	$	888
2022		62
2023		120
2024		—
2025		333
2026-2030		383
Total benefit payments expected to be paid	$	1,786

The weighted-average rates used for the years ended

June 

30

in determining the defined benefit pension plan's net pension costs, were as follows:

	20 20			2019
Discount rate		2.45	%		3.51	%
Expected long-term rate of return		6.50	%		6.50	%
Compensation increase rate		N/A			N/A

Our expected rate of return is determined based on a methodology that considers historical returns of multiple classes analyzed to develop a risk free real rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk free real rate of return, and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plan.

Our defined benefit pension plan's weighted average asset allocation at

June 

30

and weighted average target allocation were as follows:

	20 20			2019			Target Allocation
Equity securities		52	%		52	%		54	%
Debt securities		32	%		38	%		43	%
Commodities		12	%		2	%		0	%
Cash and money market funds		4	%		8	%		3	%
		100	%		100	%		100	%

The underlying basis of the investment strategy of our defined benefit pension plan is to ensure that pension funds are available to meet the plan's benefit obligations when due. Our investment strategy is a long-term risk controlled approach using diversified investment options with relatively minimal exposure to volatile investment options like derivatives.

The fair values by asset category of our defined benefit pension plan at

June 

30,

2020

were as follows (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and money market funds	$	49	$	49	$	—	$	—
Commodities and other	$	160	$	160	$	—	$	—
Equity securities (1)	$	705	$	705	$	—	$	—
Debt securities (2)	$	425	$	425	$	—	$	—
Total	$	1,339	$	1,339	$	—	$	—

( 1 ) This category is comprised of publicly traded funds, of which 79% are large-cap funds, 13% are developed market funds, and 8% are emerging markets equity funds.

( 2 ) This category is comprised of publicly traded funds, of which 82% are U.S. fixed income funds and 18% are developed market fixed income funds.