RETIREMENT PLANS

We sponsor programs that provide retirement benefits to most of our employees. These programs include defined contribution plans, defined benefit pension plans and postretirement healthcare plans.

Defined contribution plans — We maintain a qualified savings plan pursuant to Section 401(k) of the Internal Revenue Code, which allow administrative and clerical employees who have satisfied the service requirements and reached age 21 to defer a percentage of their pay on a pre-tax basis. We match 50% of the first 4% of compensation deferred by the participant. Our contributions under these plans were $1.0 million in 2013, and $1.2 million in both 2012 and 2011. We also maintain an unfunded, non-qualified deferred compensation plan for key executives and other members of management who are excluded from participation in the qualified savings plans. This plan allows participants to defer up to 50% of their salary and 85% of their bonus, on a pre-tax basis. We match 100% of the first 3% contributed by the participant. To compensate executives no longer eligible to participate in our supplemental defined benefit pension plan, we also contribute a supplemental amount equal to 4% of an eligible employee’s salary and bonus for a period of ten years in such eligible position. Our contributions under the non-qualified deferred compensation plan were $1.1 million in 2013, 2012, and 2011. In all plans, a participant’s right to Company contributions vest at a rate of 25% per year of service.

Defined benefit pension plans — We sponsor two defined benefit pension plans, a “Qualified Plan” covering substantially all full-time employees hired prior to January 1, 2011, and an unfunded supplemental executive retirement plan (“SERP”) which provides certain employees additional pension benefits and was closed to new participants effective January 1, 2007. In fiscal 2011, the Board of Directors approved changes to our Qualified Plan whereby participants no longer accrue benefits effective December 31, 2015. This change was accounted for as a plan “curtailment” in accordance with the authoritative guidance issued by the FASB. Benefits under both plans are based on the employees’ years of service and compensation over defined periods of employment.

In April 2012, we announced a voluntary early retirement program to eligible employees. The offering period for participation in the VERP ended during the third quarter of fiscal 2012. In connection with the VERP, we were required to re-measure the liability for our Qualified Plan as of June 30, 2012. As a result, we incurred a charge and an increase to our pension benefit obligation (“PBO”) in fiscal 2012 of $6.2 million for enhanced retirement benefits under our Qualified Plan.

Postretirement healthcare plans — We also sponsor two healthcare plans closed to new participants that provide postretirement medical benefits to certain employees who have met minimum age and service requirements. The plans are contributory; with retiree contributions adjusted annually, and contain other cost-sharing features such as deductibles and coinsurance.

Obligations and funded status — The following table provides a reconciliation of the changes in benefit obligations, plan assets and funded status of our retirement plans as of September 29, 2013 and September 30, 2012 (in thousands):



	Qualified Plan						SERP						Postretirement Health Plans
	2013			2012			2013			2012			2013			2012
Change in benefit obligation:
Obligation at beginning of year	$	466,097		$	354,472		$	63,156		$	55,604		$	37,307		$	29,578
Service cost	10,210			9,068			543			466			—			61
Interest cost	19,964			19,891			2,664			3,056			1,586			1,617
Participant contributions	—			—			—			—			131			134
Actuarial (gain) loss	(85,578		)	98,120			1,773			6,767			(4,612		)	6,574
Benefits paid	(28,625		)	(21,621		)	(3,419		)	(3,404		)	(1,331		)	(1,512		)
Other	—			—			—			667			162			855
Cost of VERP	—			6,167			—			—			—			—
Obligation at end of year	$	382,068		$	466,097		$	64,717		$	63,156		$	33,243		$	37,307
Change in plan assets:
Fair value at beginning of year	$	311,988		$	261,835		$	—		$	—		$	—		$	—
Actual return on plan assets	33,062			53,174			—			—			—			—
Participant contributions	—			—			—			—			131			134
Employer contributions	20,000			18,600			3,419			3,404			1,038			523
Benefits paid and other	(28,625		)	(21,621		)	(3,419		)	(3,404		)	(1,169		)	(657		)
Fair value at end of year	$	336,425		$	311,988		$	—		$	—		$	—		$	—
Funded status at end of year	$	(45,643	)	$	(154,109	)	$	(64,717	)	$	(63,156	)	$	(33,243	)	$	(37,307	)
Amounts recognized on the balance sheet:
Current liabilities	$	—		$	—		$	(4,392	)	$	(3,411	)	$	(1,438	)	$	(1,440	)
Noncurrent liabilities	(45,643		)	(154,109		)	(60,325		)	(59,745		)	(31,805		)	(35,867		)
Total liability recognized	$	(45,643	)	$	(154,109	)	$	(64,717	)	$	(63,156	)	$	(33,243	)	$	(37,307	)
Amounts in AOCI not yet reflected in net periodic benefit cost:
Unamortized actuarial loss, net	$	68,454		$	180,044		$	21,632		$	22,029		$	9,024		$	14,427
Unamortized prior service cost	—			—			1,349			1,618			—			—
Total	$	68,454		$	180,044		$	22,981		$	23,647		$	9,024		$	14,427
Other changes in plan assets and benefit obligations recognized in OCI:
Net actuarial (gain) loss	$	(95,925	)	$	65,278		$	1,773		$	6,767		$	(4,612	)	$	6,574
Amortization of actuarial loss	(15,665		)	(11,871		)	(2,170		)	(1,140		)	(791		)	(89		)
Amortization of prior service cost	—			—			(269		)	(432		)	—			—
Total recognized in OCI	(111,590		)	53,407			(666		)	5,195			(5,403		)	6,485
Net periodic benefit cost and other losses	23,124			26,665			5,646			5,094			2,377			1,767
Total recognized in comprehensive income	$	(88,466	)	$	80,072		$	4,980		$	10,289		$	(3,026	)	$	8,252
Amounts in AOCI expected to be amortized in fiscal 2014 net periodic benefit cost:
Net actuarial loss	$	3,574					$	859					$	542
Prior service cost	—						269						—
Total	$	3,574					$	1,128					$	542

Additional year-end pension plan information — The pension benefit obligation (“PBO”) is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases. The accumulated benefit obligation (“ABO”) also reflects the actuarial present value of benefits attributable to employee service rendered to date but does not include the effects of estimated future pay increases. Therefore, the ABO as compared to plan assets is an indication of the assets currently available to fund vested and nonvested benefits accrued through the end of the fiscal year. The funded status is measured as the difference between the fair value of a plan’s assets and its PBO.

As of September 29, 2013 and September 30, 2012, the Qualified Plan’s ABO exceeded the fair value of its plan assets. The SERP is an unfunded plan and, as such, had no plan assets as of September 29, 2013 and September 30, 2012. The following sets forth the PBO, ABO and fair value of plan assets of our pension plans as of the measurement date in each year (in thousands):



	2013		2012
Qualified Plan:
Projected benefit obligation	$	382,068	$	466,097
Accumulated benefit obligation	$	377,800	$	458,493
Fair value of plan assets	$	336,425	$	311,988
SERP:
Projected benefit obligation	$	64,717	$	63,156
Accumulated benefit obligation	$	64,385	$	60,602
Fair value of plan assets	$	—	$	—

Net periodic benefit cost — The components of the fiscal year net periodic benefit cost were as follows (in thousands):



	2013			2012			2011
Qualified Plan:
Service cost	$	10,210		$	9,068		$	9,982
Interest cost	19,964			19,891			18,557
Expected return on plan assets	(22,715		)	(20,332		)	(20,732		)
Actuarial loss	15,665			11,871			8,518
Cost of VERP	—			6,167			—
Net periodic benefit cost	$	23,124		$	26,665		$	16,325
SERP:
Service cost	$	543		$	466		$	806
Interest cost	2,664			3,056			3,023
Actuarial loss	2,170			1,140			1,305
Amortization of unrecognized prior service cost	269			432			488
Net periodic benefit cost	$	5,646		$	5,094		$	5,622
Postretirement health plans:
Service cost	$	—		$	61		$	80
Interest cost	1,586			1,617			1,585
Actuarial loss	791			89			202
Amortization of unrecognized prior service cost	—			—			31
Net periodic benefit cost	$	2,377		$	1,767		$	1,898

Prior service costs are amortized on a straight-line basis from date of participation to full eligibility. Unrecognized gains or losses are amortized using the “corridor approach.” Under the corridor approach, the net gain or loss in excess of 10% of the greater of the PBO or the market-related value of the assets, if applicable, is amortized on a straight-line basis over the remaining service period of plan participants expected to receive benefits.

Assumptions — We determine our actuarial assumptions on an annual basis. In determining the present values of our benefit obligations and net periodic benefit costs as of and for the fiscal years ended September 29, 2013, September 30, 2012 and October 2, 2011, respectively, we used the following weighted-average assumptions:



	2013		2012		2011
Assumptions used to determine benefit obligations (1):
Qualified Plan:
Discount rate	5.37	%	4.34	%	5.60	%
Rate of future pay increases	3.50	%	3.50	%	3.50	%
SERP:
Discount rate	4.88	%	4.34	%	5.60	%
Rate of future pay increases	3.50	%	3.50	%	3.50	%
Postretirement health plans:
Discount rate	5.04	%	4.34	%	5.60	%
Assumptions used to determine net periodic benefit cost:
Qualified Plan (2):
Discount rate	4.34	%	4.78	%	5.82	%
Long-term rate of return on assets	7.25	%	7.25	%	7.75	%
Rate of future pay increases	3.50	%	3.50	%	3.50	%
SERP (3):
Discount rate	4.34	%	5.60	%	5.82	%
Rate of future pay increases	3.50	%	3.50	%	3.50	%
Postretirement health plans (3):
Discount rate	4.34	%	5.60	%	5.82	%

____________________________


(1)	Determined as of end of year.


(2)	During fiscal year 2012, the discount rate and long-term rate of return on plan assets used to determine net period benefit costs were updated as of June 30, 2012, in connection with the VERP re-measurement from the rates determined at the beginning of the year of 5.60% and 7.75%, respectively.


(3)	Determined as of beginning of year.

The assumed discount rates were determined by considering the average of pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better whose cash flow from coupons and maturities match the year-by-year projected benefit payments from the plans. Since benefit payments typically extend beyond the date of the longest maturing bond, cash flows beyond 30 years were discounted back to the 30th year and then matched like any other payment.

The assumed expected long-term rate of return on assets is the weighted average rate of earnings expected on the funds invested or to be invested to provide for the pension obligations. The long-term rate of return on assets was determined taking into consideration our projected asset allocation and economic forecasts prepared with the assistance of our actuarial consultants.

The assumed discount rate and expected long-term rate of return on assets have a significant effect on amounts reported for our pension and postretirement plans. A quarter percentage point decrease in the discount rate and long-term rate of return used would have decreased fiscal 2013 earnings before income taxes by $2.8 million and $0.8 million, respectively.

The assumed average rate of compensation increase is the average annual compensation increase expected over the remaining employment periods for the participating employees.

For measurement purposes, the weighted-average assumed health care cost trend rates for our postretirement health plans were as follows for each fiscal year:



	2013		2012		2011
Healthcare cost trend rate for next year:
Participants under age 65	8.50	%	8.50	%	7.70	%
Participants age 65 or older	8.00	%	8.00	%	7.00	%
Rate to which the cost trend rate is assumed to decline:
Participants under age 65 (1)	4.80% / 4.90%		4.50	%	5.10	%
Participants age 65 or older (1)	4.80% / 4.90%		4.50	%	4.50	%
Year the rate reaches the ultimate trend rate:
Participants under age 65 (1)	2038 / 2045		2029		2040
Participants age 65 or older (1)	2037 / 2045		2027		2028

____________________________


(1)	In fiscal 2013, rates and years are stated for the two post retirement health plans sponsored by The Company. In 2012 and 2011, rates and years were the same for both plans.

The assumed healthcare cost trend rate represents our estimate of the annual rates of change in the costs of the healthcare benefits currently provided by our postretirement plans. The healthcare cost trend rate implicitly considers estimates of healthcare inflation, changes in healthcare utilization and delivery patterns, technological advances and changes in the health status of the plan participants. The healthcare cost trend rate assumption has a significant effect on the amounts reported. For example, a 1.0% change in the assumed healthcare cost trend rate would have the following effect (in thousands):



	1% Point Increase		1% Point Decrease
Total interest and service cost	$	206	$	(176	)
Postretirement benefit obligation	$	4,046	$	(3,452	)

Plan assets — Our investment philosophy is to (1) protect the corpus of the fund; (2) establish investment objectives that will allow the market value to exceed the present value of the vested and unvested liabilities over time; while (3) obtaining adequate investment returns to protect benefits promised to the participants and their beneficiaries. Our asset allocation strategy utilizes multiple investment managers in order to maximize the plan’s return while minimizing risk. We regularly monitor our asset allocation, and senior financial management and the Finance Committee of the Board of Directors review performance results at least semi-annually. In August 2012, we adjusted our target asset allocation for our Qualified Plan and we plan to reallocate our plan assets over a period of time, as deemed appropriate by senior financial management, to achieve our target asset allocation. Our plan asset allocation at the end of fiscal 2013 and target allocations were as follows:



	2013		Target		Minimum		Maximum
Domestic equity	32	%	25	%	15	%	35	%
International equity	24		25		15		35
Core fixed funds	24		25		20		30
Real return bonds	3		3		—		10
Alternative investments	5		5		—		10
Real estate	9		8		—		10
High yield	1		5		—		10
Commodities	2		4		—		10
	100	%	100	%

The fair values of the Qualified Plan’s assets at September 29, 2013 and September 30, 2012 by asset category are as follows (in thousands):



			Total		Quoted Prices in Active Markets for Identical (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Items Measured at Fair Value at September 29, 2013:
Asset Category:
Cash and cash equivalents	(1	)	$	4,344	$	4,344	$	—	$	—
Equity:
U.S	(2	)	26,317		26,317		—		—
Commingled	(3	)	159,612		159,612		—		—
Fixed income:
Corporate bonds	(5	)	4,017		—		4,017		—
Government and mortgage securities	(7	)	9,121		9,121		—		—
Other	(8	)	98,654		16,553		82,101		—
Real estate	(10	)	29,352		—		—		29,352
Diversified funds	(11	)	5,008		5,008		—		—
			$	336,425	$	220,955	$	86,118	$	29,352
Items Measured at Fair Value at September 30, 2012:
Asset Category:
Cash and cash equivalents	(1	)	$	2,689	$	2,689	$	—	$	—
Equity:
U.S.	(2	)	44,103		44,103		—		—
Commingled	(3	)	128,919		128,919		—		—
Fixed income:
Asset-backed securities	(4	)	5,406		—		5,406		—
Corporate bonds	(5	)	9,621		—		9,621		—
Non-government-backed C.M.O.’s	(6	)	4,234		—		4,234		—
Government and mortgage securities	(7	)	74,925		51,439		23,486		—
Other	(8	)	16,185		16,185		—		—
Interest rate swaps	(9	)	121		—		121		—
Real estate	(10	)	25,785		—		—		25,785
			$	311,988	$	243,335	$	42,868	$	25,785

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(1)	Cash and cash equivalents are comprised of commercial paper, short-term bills and notes, and short-term investment funds, which are valued at unadjusted quoted market prices.


(2)	U.S. equity securities are comprised of investments in common stock of U.S. companies for total return purposes. These investments are valued by the trustee at closing prices from national exchanges on the valuation date.


(3)	Commingled equity securities are comprised of investments in mutual funds, the fair value of which is determined by reference to the fund’s underlying assets, which are primarily marketable equity securities that are traded on national exchanges and valued at unadjusted quoted market prices.


(4)	Asset-backed securities are comprised of collateralized obligations and mortgage-backed securities, which are valued by the trustee using observable, market-based inputs.


(5)	Corporate bonds are comprised of mutual funds traded on national securities exchanges, valued at unadjusted quoted market prices, as well as securities traded in markets that are not considered active, which are valued based on quoted market prices, broker/dealer quotations, or alternative pricing sources with reasonable levels of price transparency.


(6)	Non-government backed securities are comprised of collateralized obligations and mortgage-back securities, which the trustee values using observable, market-based inputs.


(7)	Government and mortgage securities are comprised of government and municipal bonds, including treasury bills, notes and index linked bonds which are valued using an unadjusted quoted price in an active market or observable, market-based inputs.

(8)

Other fixed income securities are comprised of other commingled funds invested in registered securities which are valued at the unadjusted quoted price in an active market or exchange and long-duration US government/credit funds which are valued based on observable inputs, which include quoted market prices in active markets for similar securities, valuations based on commonly quoted benchmark interest rates, maturities, ratings and/or securities indices.


(9)	Interest rate swaps are derivative instruments used to reduce exposure to the impact of changing interest rates and are valued using observable, market-based inputs.


(10)	Real estate is investments in a real estate investment trust for purposes of total return. These investments are valued at unit values provided by the investment managers and their consultants.


(11)	Diversified funds are comprised of exchange-traded commodities futures and treasury bills, which are valued at unadjusted quoted market prices.

The following table presents the changes in Level 3 investments for the qualified plan during 2012 and 2013 (in thousands):



	Real Estate
Balance at October 2, 2011	$	8,415
Actual return on plan assets:
Relating to assets still held at the reporting date	2,513
Relating to assets sold during the period	(15		)
Purchases, sales and settlements	14,872
Balance at September 30, 2012	$	25,785
Actual return on plan assets:
Relating to assets still held at the reporting date	$	3,831
Relating to assets sold during the period	(6		)
Purchases, sales and settlements	(258		)
Balance at September 29, 2013	$	29,352

Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of the date of our last actuarial funding valuation, there was no minimum requirement. Contributions expected to be paid in the next fiscal year and the projected benefit payments for each of the next five fiscal years and the total aggregate amount for the subsequent five fiscal years are as follows (in thousands):



	Pension Plans		Postretirement Health Plans
Estimated net contributions during fiscal 2014	$	24,392	$	1,438
Estimated future year benefit payments during fiscal years:
2014	$	15,785	$	1,438
2015	$	15,959	$	1,470
2016	$	16,028	$	1,518
2017	$	16,237	$	1,617
2018	$	16,941	$	1,788
2019-2023	$	101,388	$	11,199

We will continue to evaluate contributions to our Qualified Plan based on changes in pension assets as a result of asset performance in the current market and economic environment. Expected benefit payments are based on the same assumptions used to measure our benefit obligation at September 29, 2013 and include estimated future employee service.