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Retirement Plans
 12 Months Ended
Mar. 01, 2014
Retirement Plans  
Retirement Plans

15. Retirement Plans

  • Defined Contribution Plans

        The Company and its subsidiaries sponsor several retirement plans that are primarily 401(k) defined contribution plans covering nonunion associates and certain union associates. The Company does not contribute to all of the plans. In accordance with those plan provisions, the Company matches 100% of a participant's pretax payroll contributions, up to a maximum of 3% of such participant's pretax annual compensation. Thereafter, the Company will match 50% of the participant's additional pretax payroll contributions, up to a maximum of 2% of such participant's additional pretax annual compensation. Total expense recognized for the above plans was $57,857 in fiscal 2014, $56,480 in fiscal 2013 and $57,036 in fiscal 2012.

        The Company sponsors a Supplemental Executive Retirement Plan ("SERP") for its officers, which is a defined contribution plan that is subject to a five year graduated vesting schedule. The expense recognized for the SERP was $11,531 in fiscal 2014, $7,469 in fiscal 2013 and $4,582 in fiscal 2012.

  • Defined Benefit Plans

        The Company and its subsidiaries also sponsor a qualified defined benefit pension plan that requires benefits to be paid to eligible associates based upon years of service and, in some cases, eligible compensation. The Company's funding policy for The Rite Aid Pension Plan (The "Defined Benefit Pension Plan") is to contribute the minimum amount required by the Employee Retirement Income Security Act of 1974. However, the Company may, at its sole discretion, contribute additional funds to the plan. The Company made contributions of $8,000 in fiscal 2014, $5,583 in fiscal 2013 and $14,878 in fiscal 2012.

        The Company also maintains a nonqualified executive retirement plan for certain former employees who, pursuant to their employment agreements, did not participate in the SERP. The Company no longer enrolls new participants into this plan. These participants generally receive an annual benefit payable monthly over fifteen years. This nonqualified defined benefit plan is unfunded.

        Net periodic pension expense and other changes recognized in other comprehensive income for the defined benefit pension plans and the nonqualified executive retirement plan included the following components:

 
   Defined Benefit Pension Plan   Nonqualified Executive
Retirement Plan		  
 
   2014   2013   2012   2014   2013   2012  

Service cost

   $ 3,341   $ 2,908   $ 2,988   $ —   $ —   $ 21  

Interest cost

     6,120     6,128     6,501     541     616     771  

Expected return on plan assets

     (6,738 )   (6,719 )   (6,192 )   —     —     —  

Amortization of unrecognized prior service cost

     240     240     639     —     —     —  

Amortization of unrecognized net loss (gain)

     4,935     3,926     2,435     (351 )   866     (582 )
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net pension expense(income)

   $ 7,898   $ 6,483   $ 6,371   $ 190   $ 1,482   $ 210  

Other changes recognized in other comprehensive loss:

                                      

Unrecognized net (gain) loss arising during period

   $ (18,860 ) $ 12,901   $ 24,664   $ (351 ) $ 866   $ 595  

Prior service cost arising during period          

     —     —     (275 )   —     —     —  

Amortization of unrecognized prior service costs

     (240 )   (240 )   (639 )   —     —     —  

Amortization of unrecognized net (loss) gain

     (4,935 )   (3,926 )   (2,435 )   351     (866 )   582  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net amount recognized in other comprehensive loss

     (24,035 )   8,735     21,315     —     —     1,177  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net amount recognized in pension expense and other comprehensive loss

   $ (16,137 ) $ 15,218   $ 27,686   $ 190   $ 1,482   $ 1,387  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                           

        The table below sets forth reconciliation from the beginning of the year for both the benefit obligation and plan assets of the Company's defined benefit plans, as well as the funded status and amounts recognized in the Company's balance sheet as of March 1, 2014 and March 2, 2013:

 
   Defined Benefit
Pension Plan		   Nonqualified Executive
Retirement Plan		  
 
   2014   2013   2014   2013  

Change in benefit obligations:

                          

Benefit obligation at end of prior year

   $ 158,522   $ 142,310   $ 14,332   $ 14,509  

Service cost

     3,341     2,908     —     —  

Interest cost

     6,120     6,128     541     616  

Distributions

     (7,677 )   (6,644 )   (1,657 )   (1,659 )

Change due to change in assumptions

     —     13,979     —     756  

Actuarial (gain) loss

     (11,710 )   (159 )   (351 )   110  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Benefit obligation at end of year

   $ 148,596   $ 158,522   $ 12,865   $ 14,332  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Change in plan assets:

                          

Fair value of plan assets at beginning of year

   $ 114,773   $ 108,196   $ —   $ —  

Employer contributions

     8,000     5,583     1,655     1,659  

Actual return on plan assets

     13,888     9,067     —     —  

Distributions (including expenses paid by the plan)

     (7,677 )   (8,073 )   (1,655 )   (1,659 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Fair value of plan assets at end of year

   $ 128,984   $ 114,773   $ —   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Funded status

   $ (19,612 ) $ (43,749 ) $ (12,865 ) $ (14,331 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net amount recognized

   $ (19,612 ) $ (43,749 ) $ (12,865 ) $ (14,331 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Amounts recognized in consolidated balance sheets consisted of:

                          

Prepaid pension cost

   $ —   $ —   $ —   $ —  

Accrued pension liability

     (19,612 )   (43,749 )   (12,865 )   (14,331 )
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net amount recognized

   $ (19,612 ) $ (43,749 ) $ (12,865 ) $ (14,331 )

Amounts recognized in accumulated other comprehensive loss consist of:

                          

Net actuarial loss

   $ (35,348 ) $ (59,143 ) $ —   $ —  

Prior service cost

     (307 )   (547 )   —     —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Amount recognized

   $ (35,655 ) $ (59,690 ) $ —   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

        The estimated net actuarial loss and prior service cost amounts that will be amortized from accumulated other comprehensive loss into net periodic pension expense in fiscal 2015 are $2,399 and $240, respectively.

        The accumulated benefit obligation for the defined benefit pension plan was $148,596 and $158,368 as of March 1, 2014 and March 2, 2013, respectively. The accumulated benefit obligation for the nonqualified executive retirement plan was $12,865 and $14,331 as of March 1, 2014 and March 2, 2013, respectively.

        The significant actuarial assumptions used for all defined benefit plans to determine the benefit obligation as of March 1, 2014, March 2, 2013 and March 3, 2012 were as follows:

 
   Defined Benefit
Pension Plan		   Nonqualified
Executive
Retirement Plan		  
 
   2014   2013   2012   2014   2013   2012  

Discount rate

     4.50 %   4.00 %   4.50 %   4.50 %   4.00 %   4.50 %

Rate of increase in future compensation levels

     4.50 %   4.50 %   5.00 %   N/A     N/A     3.00 %

        Weighted average assumptions used to determine net cost for the fiscal years ended March 1, 2014, March 2, 2013 and March 3, 2012 were:

 
   Defined Benefit Pension Plan   Nonqualified
Executive
Retirement Plan		  
 
   2014   2013   2012   2014   2013   2012  

Discount rate

     4.00 %   4.50 %   5.50 %   4.00 %   4.50 %   5.50 %

Rate of increase in future compensation levels

     4.50 %   5.00 %   5.00 %   N/A     N/A     3.00 %

Expected long-term rate of return on plan assets

     7.75 %   7.75 %   7.75 %   N/A     N/A     N/A  

        To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 7.75% long-term rate of return on plan assets assumption for fiscal 2014, 2013 and 2012.

        The Company's pension plan asset allocations at March 1, 2014 and March 2, 2013 by asset category were as follows:

 
   March 1,
2014		   March 2,
2013		  

Equity securities

     62 %   60 %

Fixed income securities

     38 %   40 %
           
​ ​ ​ ​ ​ ​ ​ ​

Total

     100 %   100 %
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

        The investment objectives of the Defined Benefit Pension Plan, the only defined benefit plan with assets, are to:

  • •
    Achieve a rate of return on investments that exceeds inflation over a full market cycle and is consistent with actuarial assumptions;

    •
    Balance the correlation between assets and liabilities by diversifying the portfolio among various asset classes to address return risk and interest rate risk;
  • •
    Balance the allocation of assets between the investment managers to minimize concentration risk;

    •
    Maintain liquidity in the portfolio sufficient to meet plan obligations as they come due; and

    •
    Control administrative and management costs.

        The asset allocation established for the pension investment program reflects the risk tolerance of the Company, as determined by:

  • •
    the current and anticipated financial strength of the Company;

    •
    the funded status of the plan; and

    •
    plan liabilities.

        Investments in both the equity and fixed income markets will be maintained, recognizing that historical results indicate that equities (primarily common stocks) have higher expected returns than fixed income investments. It is also recognized that the correlation between assets and liabilities must be balanced to address higher volatility of equity investments (return risk) and interest rate risk.

        The following targets are to be applied to the allocation of plan assets.

Category
  Target
Allocation		  

U.S. equities

     46 %

International equities

     16 %

U.S. fixed income

     38 %
       
​ ​ ​ ​ ​

Total

     100 %
       
​ ​ ​ ​ ​
​ ​ ​ ​ ​
       

        The Company expects to contribute $0 to the Defined Benefit Pension Plan and make payments of $1,722 to participants of the Nonqualified Executive Retirement Plan during fiscal 2015.

        The following table sets forth by level within the fair value hierarchy a summary of the plan's investments measured at fair value on a recurring basis as of March 1, 2014 and March 2, 2013:

 
   Fair Value Measurements at March 1, 2014  
 
   Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		   Significant
Observable
Inputs (Level 2)		   Significant
Unobservable
Inputs (Level 3)		   Total  

Equity Securities

                          

International equity

   $ —   $ 20,401   $ —   $ 20,401  

Large Cap

     —     40,914     —     40,914  

Small-Mid Cap

     —     18,071     —     18,071  

Fixed Income

                          

Long Term Credit Bond Index

     —     47,360     —     47,360  

Other types of investments

                          

Short Term Investments

     —     2,239     —     2,239  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ —   $ 128,985   $ —   $ 128,985  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   


 

 
   Fair Value Measurements at March 2, 2013  
 
   Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		   Significant
Observable
Inputs (Level 2)		   Significant
Unobservable
Inputs (Level 3)		   Total  

Equity Securities

                          

International equity

   $ —   $ 17,199   $ —   $ 17,199  

Large Cap

     —     35,098     —     35,098  

Mid Cap

     —     12,562     —     12,562  

Small Cap

     —     4,236     —     4,236  

Fixed Income

                          

Long Term Credit Bond Index

     —     45,664     —     45,664  

Other types of investments

                          

Short Term Investments

     —     14     —     14  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

   $ —   $ 114,773   $ —   $ 114,773  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

        The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Common and Collective Trusts

        Common collective trust funds are stated at fair value as determined by the issuer of the common collective trust funds based on the fair market value of the underlying investments.

        Following are the future benefit payments expected to be paid for the Defined Benefit Pension Plan and the nonqualified executive retirement plan during the years indicated:

Fiscal Year
  Defined Benefit
Pension Plan		   Nonqualified
Executive
Retirement Plan		  

2015

   $ 7,378   $ 1,722  

2016

     7,520     1,625  

2017

     7,687     1,599  

2018

     7,829     1,228  

2019

     8,068     1,204  

2020 - 2024

     42,793     4,424  
           
​ ​ ​ ​ ​ ​ ​ ​

Total

   $ 81,275   $ 11,802  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

  • Other Plans

        The Company participates in various multi-employer union pension plans that are not sponsored by the Company. Total expenses recognized for the multi-employer plans were $26,617 in fiscal 2014, $19,787 in fiscal 2013 and $14,594 in fiscal 2012.