Note H - Employee Benefit Plans

12 Months Ended

Jun. 30, 2023

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 $0.7 million for fiscal 2023 and $0.5 million for fiscal 2022.

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. We did not make a discretionary profit-sharing contribution in fiscal 2023. In fiscal 2022, we made a discretionary profit-sharing contribution of $0.3 million. 

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 $1.7 million for the fiscal year ended June 30, 2023 and $1.4 million for the fiscal year ended June 30, 2022.

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, 2023, we granted a total of $0.6 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, 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. 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 the 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):

	2023			2022
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	1,438		$	1,820
Interest cost		46			39
Actuarial loss		(29	)		(276	)
Benefits paid		(91	)		(145	)
Benefit obligation at end of year	$	1,364		$	1,438
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	1,094		$	1,429
Actual return on plan assets		22			(190	)
Employer contributions		—			—
Benefits paid		(91	)		(145	)
Plan expenses		—			—
Fair value of plan assets at end of year	$	1,025		$	1,094
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	$	(339	)	$	(344	)
Unrecognized net actuarial loss in accumulated other comprehensive income		409			495
Net amount recognized	$	70		$	151
Projected benefit obligation	$	1,364		$	1,438
Accumulated benefit obligation	$	1,364		$	1,438
Fair value of plan assets	$	1,025		$	1,094

The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was 4.89% for the year ended June 30, 2023 and 4.39% during the year ended June 30, 2022.

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):

	2023			2022
Interest cost	$	46		$	39
Expected return on plan assets		(42	)		(69	)
Recognized actuarial loss		50			63
Settlement loss		27			50
Net periodic benefit expense	$	81		$	83

In the fiscal years ended June 30, 2023 and June 30, 2022, we did not contribute 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): 

	2023			2022
Net loss	$	(8	)	$	(17	)
Settlement loss		(28	)		(50	)
Amortization of net loss		(50	)		(63	)
Plan expenses		—			—
Total recognized in other comprehensive loss	$	(86	)	$	(130	)
Total recognized in net periodic benefit cost and other comprehensive loss	$	(5	)	$	(47	)

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 approximately $40,000. 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):

2024	$	739
2025		264
2026		13
2027		106
2028		30
2029-2033		105
Total benefit payments expected to be paid	$	1,257

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:

	2023			2022
Discount rate		4.89	%		4.39	%
Expected long-term rate of return		6.24	%		6.10	%
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:

							Target
	2023			2022			Allocation
Equity securities		64	%		49	%		53	%
Debt securities		14	%		20	%		41	%
Commodities		12	%		0	%		0	%
Other		10	%		31	%		6	%
		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, 2023 were as follows (in thousands):

			Quoted
			Prices in
			Active
			Markets for		Significant		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Equity securities(1)	$	653	$	653	$	—	$	—
Debt securities(2)	$	141	$	141	$	—	$	—
Other(3)	$	231	$	231	$	—	$	—
Total	$	1,025	$	1,025	$	—	$	—

(1) This category is comprised of publicly traded funds, of which 50% are large-cap funds, 26% are developed and emerging market funds, 18% are mid-cap funds, and 6% are small-cap funds.

(2) This category is comprised of publicly traded funds, of which 34% are U.S. fixed income funds and 66% are corporate and foreign market fixed income funds.

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