Note H - Employee Benefit Plans

12 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Retirement Benefits [Text Block]

H. Employee Benefit Plans

401(k) Plan

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. Effective January 1, 2022 all employees are eligible to participate in the plan the first of the month following 30 days of employment. Also effective, January 1, 2022, we match 100% of the first 5% of a participant’s compensation contributed to the plan under the 401(k) plan. The total contributions under the plan charged to income from operations totaled $0.5 million for fiscal 2022 and $0.4 million for fiscal 2021.

Additionally, we have a discretionary profit-sharing plan pursuant to Section 401(k) of the Code, whereby we may contribute an additional percentage of compensation. Employees are not required to contribute to the plan to receive the discretionary profit-sharing contribution. The total 401(k) profit sharing contributions under the plan charged to income from operations totaled $0.5 million for fiscal 2022 and zero for fiscal 2021.

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, 2022 and $1.2 million for the fiscal year ended June 30, 2021.

Deferred Compensation Plan

Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI, (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards 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 Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. 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 between each Participant and NAI. The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date.

During the year ended June 30, 2022, we granted a total of $0.3 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the year ended June 30, 2021, we granted a total of $1.5 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. Each deferred cash award provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since Award Date, and continues to be through the Payment Date, a member of our Board of Directors or an employee of NAI. In the event a Participant ceases to be an employee of NAI or a member of our Board of Directors prior to any Payment Date, no further payments shall be made in connection with the Award.

Defined Benefit Pension Plan

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):

	2022			2021
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	1,820		$	2,035
Interest cost		39			39
Actuarial loss		(276	)		(43	)
Benefits paid		(145	)		(211	)
Benefit obligation at end of year	$	1,438		$	1,820
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	1,429		$	1,339
Actual return on plan assets		(190	)		294
Employer contributions		—			7
Benefits paid		(145	)		(211	)
Plan expenses		—			—
Fair value of plan assets at end of year	$	1,094		$	1,429
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	$	(344	)	$	(391	)
Unrecognized net actuarial loss in accumulated other comprehensive income		495			626
Net amount recognized	$	151		$	235
Projected benefit obligation	$	1,438		$	1,820
Accumulated benefit obligation	$	1,438		$	1,820
Fair value of plan assets	$	1,094		$	1,429

The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was 4.39% for the year ended June 30, 2022 and 2.74% during the year ended June 30, 2021.

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):

	2022			2021
Interest cost	$	39		$	39
Expected return on plan assets		(69	)		(59	)
Recognized actuarial loss		63			110
Settlement loss		50			73
Net periodic benefit expense	$	83		$	163

In the fiscal year ended June 30, 2022, we did not contribute to our defined benefit pension plan. In the fiscal year ended June 30, 2021, we contributed $7,000 to our defined benefit pension plan.

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

	2022			2021
Net loss	$	(17	)	$	(277	)
Settlement loss		(50	)		(73	)
Amortization of net loss		(63	)		(110	)
Plan expenses		—			—
Total recognized in other comprehensive income (loss)	$	(130	)	$	(460	)
Total recognized in net periodic benefit cost and other comprehensive loss	$	(47	)	$	(297	)

The estimated net loss 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 $50,000. 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):

2023	$	799
2024		—
2025		276
2026		14
2027		110
2028-2032		67
Total benefit payments expected to be paid	$	1,266

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:

	2022			2021
Discount rate		4.39	%		2.74	%
Expected long-term rate of return		6.10	%		6.60	%
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:

	2022			2021			Target Allocation
Equity securities		49	%		62	%		55	%
Debt securities		20	%		25	%		41	%
Commodities		0	%		12	%		0	%
Other		31	%		1	%		4	%
		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, 2022 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)
Equity securities(1)	$	590	$	590	$	—	$	—
Debt securities(2)	$	217	$	217	$	—	$	—
Other(3)	$	287	$	287	$	—	$	—
Total	$	1,094	$	1,094	$	—	$	—

(1) This category is comprised of publicly traded funds, of which 51% are large-cap funds, 24% are developed market funds, 19% are mid-cap funds, and 6% are small-cap funds.

(2) This category is comprised of publicly traded funds, of which 42% are U.S. fixed income funds and 58% are corporate and foreign market fixed income funds.

(3) This category is comprised of commodities and cash alternatives.