EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 30, 2023

Retirement Benefits [Abstract]

EMPLOYEE BENEFIT PLANS

NOTE 13. EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS — NORTH AMERICA

The Company has retirement obligations under OfficeMax’s U.S. pension plans. The Company sponsors these defined benefit pension plans covering certain terminated employees, vested employees, retirees and some active employees. In 2004 or earlier, OfficeMax’s pension plans were closed to new entrants and the benefits of eligible participants were frozen. Under the terms of these plans, the pension benefit for employees was based primarily on the employees’ years of service and benefit plan formulas that varied by plan. The Company’s general funding policy is to make contributions to the plans in amounts that are within the limits of deductibility under current tax regulations, and not less than the minimum contribution required by law.

Additionally, under previous OfficeMax arrangements, the Company has responsibility for sponsoring retiree medical benefit and life insurance plans including plans related to operations in the U.S. and Canada (referred to as “Other Benefits” in the tables below). The type of retiree benefits and the extent of coverage vary based on employee classification, date of retirement, location, and other factors. All of these postretirement medical plans are unfunded. The Company explicitly reserves the right to amend or terminate its retiree medical and life insurance plans at any time, subject only to constraints, if any, imposed by the terms of collective bargaining agreements. Amendment or termination may significantly affect the amount of expense incurred.

Obligations and Funded Status

The following table provides a reconciliation of changes in the projected benefit obligation and the fair value of plan assets, as well as the funded status of the plans to amounts recognized on the Company’s Consolidated Balance Sheets.

	Pension Benefits						Other Benefits
(In millions)	2023			2022			2023			2022
Changes in projected benefit obligation:
Obligation at beginning of period	$	627		$	830		$	9		$	13
Interest cost		32			21			—			—
Assumption changes		3			(144	)		—			(3	)
Actuarial gain		(2	)		(9	)		—			—
Benefits paid		(68	)		(71	)		(1	)		(1	)
Obligation at end of period	$	592		$	627		$	8		$	9
Change in plan assets:
Fair value of plan assets at beginning of period	$	625		$	836		$	—		$	—
Actual return on plan assets		48			(142	)		—			—
Employer contribution		2			2			1			1
Benefits paid		(68	)		(71	)		(1	)		(1	)
Fair value of plan assets at end of period		607			625			—			—
Net asset (liability) recognized at end of period	$	15		$	(2	)	$	(8	)	$	(9	)

The following table shows the amounts recognized in the Consolidated Balance Sheets related to the Company’s North America defined benefit pension and other postretirement benefit plans as of year-ends:

	Pension Benefits						Other Benefits
(In millions)	2023			2022			2023			2022
Noncurrent assets	$	23		$	7		$	—		$	—
Current liabilities		(1	)		(1	)		(1	)		(1	)
Noncurrent liabilities		(7	)		(8	)		(7	)		(8	)
Net amount recognized	$	15		$	(2	)	$	(8	)	$	(9	)

The following table provides the accumulated benefit obligation for the Company’s North America defined benefit pension and other postretirement benefit plans with a projected benefit obligation and an accumulated benefit obligation in excess of plan assets as of year ends:

	Pension Benefits						Other Benefits
(In millions)	2023			2022			2023			2022
Accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation at end of period	$	(8	)	$	(9	)	$	(8	)	$	(9	)
Fair value of plan assets at end of period		—			—			—			—
Projected benefit obligation in excess of plan assets
Benefit obligation at end of period		(8	)		(9	)
Fair value of plan assets at end of period		—			—

Components of Net Periodic Cost

The components of net periodic benefit are as follows:

	Pension Benefits									Other Benefits
(In millions)	2023			2022			2021			2023		2022		2021
Interest cost	$	32		$	21		$	20		$	—	$	—	$	—
Expected return on plan assets		(34	)		(26	)		(29	)		—		—		—
Amortization of net gains		(6	)		—			—			—		—		—
Net periodic benefit	$	(8	)	$	(5	)	$	(9	)	$	—	$	—	$	—

Other changes in plan assets and benefit obligations recognized in other comprehensive income are as follows:

	Pension Benefits									Other Benefits
(In millions)	2023			2022			2021			2023			2022			2021
Accumulated other comprehensive loss (income) at    beginning of year	$	(31	)	$	(46	)	$	(21	)	$	(2	)	$	—		$	1
Net loss (gain)		(13	)		15			(25	)		(1	)		(2	)		(1	)
Amortization of net losses		6			—			—			—			—			—
Accumulated other comprehensive income at    end of year	$	(38	)	$	(31	)	$	(46	)	$	(3	)	$	(2	)	$	—

Accumulated other comprehensive income as of year-ends 2023 and 2022 consist of net losses (gains).

Assumptions

The assumptions used in accounting for the Company’s plans are estimates of factors including, among other things, the amount and timing of future benefit payments. The following table presents the key weighted average assumptions used in the measurement of the Company’s benefit obligations as of year-ends:

										Other Benefits
	Pension Benefits									United States									Canada
	2023			2022			2021			2023			2022			2021			2023			2022			2021
Discount rate		5.14	%		5.37	%		2.69	%		4.70	%		4.90	%		2.40	%		4.60	%		5.10	%		2.90	%

The following table presents the weighted average assumptions used in the measurement of net periodic benefit:

										Other Benefits
	Pension Benefits									United States									Canada
	2023			2022			2021			2023			2022			2021			2023			2022			2021
Discount rate		5.37	%		2.69	%		2.27	%		4.90	%		2.40	%		1.90	%		5.10	%		2.90	%		2.50	%
Expected long-term rate of return    on plan assets		5.17	%		3.64	%		4.31	%		—	%		—	%		—	%		—	%		—	%		—	%

For pension benefits, the selected discount rates (which are required to be the rates at which the projected benefit obligations could be effectively settled as of the measurement date) are based on the rates of return for a theoretical portfolio of high-grade corporate bonds (rated AA- or better) with cash flows that generally match expected benefit payments in future years. In selecting bonds for this theoretical portfolio, the Company focuses on bonds that match cash flows to benefit payments and limit the concentration of bonds by issuer. To the extent scheduled bond proceeds exceed the estimated benefit payments in a given period, the yield calculation assumes those excess proceeds are reinvested at an assumed forward rate. The implied forward rate used in the bond model is based on the FTSE (formerly Citigroup) Pension Discount Curve as of the last day of the year. The selected discount rate for other benefits is from a discount rate curve matched to the assumed payout of related obligations. In 2023, as a result of a decrease in the discount rate assumption, pension plan obligations and other postretirement benefit plan obligations increased by $9 million and less than $1 million, respectively. In 2022, as a result of an increase in the discount rate assumption, pension and other postretirement plan obligations decreased by $144 million and $3 million, respectively.

The expected long-term rates of return on plan assets assumptions are based on the weighted average of expected returns for the major asset classes in which the plans’ assets are held. Asset-class expected returns are based on long-term historical returns, inflation expectations, forecasted gross domestic product and earnings growth, as well as other economic factors. The weights assigned to each asset class are based on the Company’s investment strategy. The weighted average expected return on plan assets used in the calculation of net periodic pension cost for 2024 is 4.99%.

Obligation and costs related to the Canadian retiree health plan are impacted by changes in trend rates.

The following table presents the assumed healthcare cost trend rates used in measuring the Company’s postretirement benefit obligations at year-ends:

	2023			2022			2021
Weighted average assumptions as of year-end:
Healthcare cost trend rate assumed for next year		5.30	%		6.10	%		6.20	%
Rate to which the cost trend rate is assumed to decline (the ultimate    trend rate)		4.30	%		4.00	%		4.00	%
Year that the rate reaches the ultimate trend rate	2037			2041			2041

The Company reassessed the assumptions, including those related to mortality, to measure the North American pension and other postretirement benefit plan obligations at year end 2023. In 2023, as a result of an update in the mortality assumption, pension and other postretirement benefit plan obligations decreased by $6 million and less than $1 million, respectively. The mortality assumption was not updated in 2022.

For pension benefits, most of the obligation is based on participant data from the beginning of the year, which is rolled forward using standard actuarial techniques to the end of the year. Therefore, most actuarial (gains) losses that arise from demographic experience of participants varying from the selected assumptions, are not recognized until the following year. In 2023, pension plan obligations decreased by $2 million due to actuarial gains (actual demographic experience varying from actuarial assumptions). In 2022, pension plan obligations decreased by $9 million due to actuarial gains (actual demographic experience varying from actuarial assumptions).

Plan Assets

The allocation of pension plan assets by category at year-ends is as follows:

	2023			2022
Cash		1	%		1	%
Common collective trust funds		99	%		99	%
		100	%		100	%

The Employee Benefit Committee is responsible for establishing and overseeing the implementation of the investment policy for the Company’s pension plans. The investment policy is structured to optimize growth of the pension plan trust assets, while minimizing the risk of significant losses, in order to enable the plans to satisfy their benefit payment obligations over time. The Company uses a glide path investment strategy and Company contributions as its primary rebalancing mechanisms to maintain the asset class exposures within the guideline ranges established under the investment policy.

In the second quarter of 2017, the Company reinvested substantially all of the assets attributable to the U.S. pension plans in common collective trust funds. The common collective trust funds are comprise a diversified portfolio of investments across various asset classes, including U.S. and international equities and fixed-income securities. The common collective trust funds are valued at the net asset value (“NAV”) provided by the administrator of the fund. The net asset value is based on the value of the underlying assets owned by the fund, minus its liabilities, divided by the number of units outstanding.

The investment policy for the pension plan assets allows for a broad range of asset allocations that permit the plans to de-risk in response to changes in funded position and market risks. The current investment policy includes a target asset allocation of 10% equity securities and 90% fixed income securities. Occasionally, the Company may utilize futures or other financial instruments to alter the pension trust’s exposure to various asset classes in a lower-cost manner than trading securities in the underlying portfolios.

The following table presents the pension plan assets by level within the fair value hierarchy at year-ends.

(In millions)	Fair Value Measurements 2023
Asset Category	Total		Assets Measured at NAV (a)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Plan assets measured at net asset value: (a)
Common collective trust funds:
U.S. small and mid-cap equity securities	$	5	$	5	$	—	$	—	$	—
U.S. large cap equity securities		21		21		—		—		—
International equity securities		32		32		—		—		—
Corporate bonds		282		282		—		—		—
Government securities		241		241		—		—		—
Cash		21		21		—		—		—
Total common collective trust funds		602		602		—		—		—
Total plan assets measured at net asset value		602		602		—		—		—
Plan assets measured in the fair value    hierarchy:
Cash		5		—		5		—		—
Total plan assets measured in the fair value    hierarchy		5		—		5		—		—
Total plan assets	$	607	$	602	$	5	$	—	$	—

(a)Fair values of Common collective trust funds are estimated using net asset value per unit as a practical expedient which are excluded from the disclosure requirement to classify amounts in the fair value hierarchy in connection with the adoption of Accounting Standards Update (ASU) 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).

(In millions)	Fair Value Measurements 2022
Asset Category	Total		Assets Measured at NAV (a)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Plan assets measured at net asset value: (a)
Common collective trust funds:
U.S. small and mid-cap equity securities	$	5	$	5	$	—	$	—	$	—
U.S. large cap equity securities		20		20		—		—		—
International equity securities		31		31		—		—		—
Corporate bonds		281		281		—		—		—
Government securities		254		254		—		—		—
Cash		29		29		—		—		—
Total common collective trust funds		620		620		—		—		—
Total plan assets measured at net asset value		620		620		—		—		—
Plan assets measured in the fair value    hierarchy:
Cash		5		—		5		—		—
Total plan assets measured in the fair value    hierarchy		5		—		5		—		—
Total plan assets	$	625	$	620	$	5	$	—	$	—

(a)Fair values of Common collective trust funds are estimated using net asset value per unit as a practical expedient which are excluded from the disclosure requirement to classify amounts in the fair value hierarchy in connection with the adoption of Accounting Standards Update (ASU) 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Cash Flows

Pension plan contributions include required statutory minimum amounts and, in some years, additional discretionary amounts. In 2023, the Company contributed $2 million to these pension plans. Pension contributions for the full year of 2024 are estimated to be $2 million. The Company may elect at any time to make additional voluntary contributions.

Qualified pension benefit payments are paid from the assets held in the plan trust, while nonqualified pension and other benefit payments are paid by the Company. Anticipated benefit payments by year are as follows:

(In millions)	Pension Benefits		Other Benefits
2024	$	67	$	1
2025		64		1
2026		61		1
2027		58		1
2028		55		1
Next five years		230		3

PENSION PLAN — UNITED KINGDOM

The Company has a frozen defined benefit pension plan in the United Kingdom. In July 2023, in accordance with applicable UK pension regulations, Trustees of the UK pension plan entered into an agreement with an insurer for the bulk annuity purchase of the plan, covering 100% of the plan’s members. The insurer was selected after careful consideration of offers received from multiple independent insurers. This agreement, or buy-in, resulted in an exchange of plan assets for an annuity that covers the plan’s future projected benefit obligations. The initial value of the asset associated with this contract is equal to the premium paid to the insurer to secure the insurance policy. In accordance with US GAAP, the Company has set the value of its liability obligations covered by the annuity buy-in contract to be equal to the fair value of the buy-in contract. This has resulted in a reduction of the net asset position of the UK pension plan and a corresponding charge of $44 million to other comprehensive income during the third quarter of 2023. The Company anticipates the buyout of the plan and transfer of future benefit obligations of plan participants to be completed with existing plan funds in 2025. Accordingly, the Company does not expect the transaction to result in material cash inflows or outflows. At the completion of the buy-out, the Company will remove the assets and liabilities of the UK pension plan from its Consolidated Balance Sheet and a final non-cash plan settlement loss will be included in net periodic pension cost.

Obligations and Funded Status

The following table provides a reconciliation of changes in the projected benefit obligation, the fair value of plan assets and the funded status of the plan to amounts recognized on the Company’s Consolidated Balance Sheets.

(In millions)	2023			2022
Changes in projected benefit obligation:
Obligation at beginning of period	$	141		$	257
Interest cost		8			4
Benefits paid		(7	)		(8	)
Actuarial loss/(gain)		17			(89	)
Currency translation		8			(23	)
Obligation at end of period		167			141
Changes in plan assets:
Fair value of plan assets at beginning of period		189			358
Actual return on plan assets		(24	)		(130	)
Company contributions		—			1
Benefits paid		(7	)		(8	)
Currency translation		9			(32	)
Fair value of plan assets at end of period		167			189
Net asset recognized at end of period	$	—		$	48

There was no net funded amount as of December 30, 2023. The net funded amount as of December 31, 2022 is classified as a non-current asset in the caption Other assets in the Consolidated Balance Sheets.

Components of Net Periodic Benefit

The components of net periodic benefit are presented below:

(In millions)	2023			2022			2021
Interest cost	$	8		$	4		$	4
Expected return on plan assets		(8	)		(6	)		(6	)
Settlement gain		—			—			(1	)
Net periodic pension benefit	$	—		$	(2	)	$	(3	)

Included in Accumulated other comprehensive loss was deferred loss of $76 million and $25 million in 2023 and 2022, respectively.

Assumptions

Assumptions used in calculating the funded status and net periodic benefit included:

	2023			2022			2021
Expected long-term rate of return on plan assets		3.20	%		3.47	%		2.03	%
Discount rate		4.00	%		5.00	%		1.80	%
Inflation		2.90	%		3.00	%		3.20	%

Following the buy-in, the 2023 long-term rate of return on assets assumption is based on the liability discount rate and adjusted for expense assumptions of the plan. The discount rate used represents the annualized yield based on a cash flow matched methodology with reference to UK government securities of appropriate duration with regards to the UK pension plan’s liabilities. The 2022 and 2021 long-term rate of return on assets assumptions have been derived based on long-term UK government fixed income yields, having regard to the proportion of assets in each asset class.

Plan Assets

The allocation of Plan assets is as follows:

	2023			2022
Cash		1	%		—	%
Insurance contract		99	%		—	%
Equity securities		—	%		5	%
Fixed-income securities		—	%		95	%
Total		100	%		100	%

A Trustee committee, which comprises representatives appointed by the Company and members of this plan, is responsible for establishing and overseeing the implementation of the investment policy for this plan. Prior to the buy-in, the plan’s investment policy and strategy were to ensure assets were available to meet the obligations to the beneficiaries and to adjust plan contributions accordingly. This investment policy and strategy aimed to reduce the level of risk in the plan over the long term, while retaining a return above that of the growth of liabilities. Until the buy-in, the asset allocation was in accordance with the target investment strategy and asset-class allocations within the ranges were continually evaluated based on expectations for future returns, the funded position of the plan and market risks. Following the buy-in, the UK pension plan’s investment strategy is to hold the annuity contract.

The following table presents the pension plan assets by level within the fair value hierarchy.

(In millions)	Fair Value Measurements 2023
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	2	$	2	$	—	$	—
Insurance contract		165		—		—		165
Total	$	167	$	2	$	—	$	165

(In millions)	Fair Value Measurements 2022
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	1	$	1	$	—	$	—
Equity securities
Mutual funds		9		—		9		—
Total equity securities		9		—		9		—
Fixed-income securities
UK debt funds		86		—		86		—
Liability term matching debt funds		76		—		76		—
High yield debt		17		—		17		—
Total fixed-income securities		179		—		179		—
Total	$	189	$	1	$	188	$	—

The following is a reconciliation of the change in fair value of the pension plan assets calculated based on Level 3 inputs:

(In millions)	Total
Balance at December 31, 2022	$	—
Purchases		165
Balance at December 30, 2023	$	165

Cash Flows

Anticipated benefit payments for the UK pension plan, at 2023 year-end exchange rates, are as follows:

(In millions)	Benefit Payments
2024	$	7
2025		8
2026		8
2027		8
2028		8
Next five years		45

RETIREMENT SAVINGS PLANS

The Company also sponsors defined contribution plans for most of its employees. Eligible Company employees may participate in the Office Depot, Inc. Retirement Savings Plans (a plan for U.S. employees and a plan for Puerto Rico employees). All of the Company’s defined contribution plans (the “401(k) Plans”) allow eligible employees to contribute a percentage of their salary, commissions and bonuses in accordance with plan limitations and provisions of Section 401(k) of the Internal Revenue Code and the Company makes partial matching contributions to each plan subject to the limits of the respective 401(k) Plans. Matching contributions are invested in the same manner as the participants’ pre-tax contributions. The 401(k) Plans also allow for a discretionary matching contribution in addition to the normal match contributions if approved by the Board of Directors.

ODP and OfficeMax previously sponsored non-qualified deferred compensation plans that allowed certain employees, who were limited in the amount they could contribute to their respective 401(k) plans, to defer a portion of their earnings and receive a Company matching amount. Both plans are closed to new contributions.

Compensation expense for the Company’s contributions to these retirement savings plans was $16 million in 2023, $17 million in 2022 and $16 million in 2021.