EMPLOYEE BENEFIT PLANS

Defined Contribution Plan — We have a 401(k) profit sharing plan (the “Savings Plan”) that allows participation for all eligible employees. The Savings Plan allows us to match between 50% and 100% of the participant’s contributions up to 6% of a participant’s pre-tax deferrals, based on a calculation of the Company’s annual return-on-assets. Contributions expense for the fiscal years ended October 28, 2018, October 29, 2017 and October 30, 2016 was $7.6 million, $6.1 million and $5.7 million, respectively, for matching contributions to the Savings Plan.

Deferred Compensation Plan — We have an Amended and Restated Deferred Compensation Plan (as amended and restated, the “Deferred Compensation Plan”) that allows our officers and key employees to defer up to 80% of their annual salary and up to 90% of their bonus on a pre-tax basis until a specified date in the future, including at or after retirement. Additionally, the Deferred Compensation Plan allows our directors to defer up to 100% of their annual fees and meeting attendance fees until a specified date in the future, including at or after retirement. The Deferred Compensation Plan also permits us to make contributions on behalf of our key employees who are impacted by the federal tax compensation limits under the NCI 401(k) plan, and to receive a restoration matching amount which, under the current NCI 401(k) terms, mirrors our 401(k) profit sharing plan matching levels based on our Company’s performance. The Deferred Compensation Plan provides for us to make discretionary contributions to employees who have elected to defer compensation under the plan. Deferred Compensation Plan participants will vest in our discretionary contributions ratably over three years from the date of each of our discretionary contributions.

On February 26, 2016, the Company amended its Deferred Compensation Plan, with an effective date of January 31, 2016, to require that amounts deferred into the Company Stock Fund remain invested in the Company Stock Fund until distribution. In accordance with the terms of the Deferred Compensation Plan, the deferred compensation obligation related to the Company’s stock may only be settled by the delivery of a fixed number of the Company’s common shares held on the participant’s behalf. The deferred compensation obligation related to the Company Stock Fund recorded within equity in additional paid-in capital on the consolidated balance sheet was $0.7 million and $1.3 million as of October 28, 2018 and October 29, 2017, respectively. Subsequent changes in the fair value of the deferred compensation obligation classified within equity are not recognized. Additionally, the Company currently holds 60,813 shares in treasury shares, relating to deferred, vested awards, until participants are eligible to receive benefits under the terms of the Deferred Compensation Plan.

As of October 28, 2018 and October 29, 2017, the liability balance of the Deferred Compensation Plan was $4.6 million and $4.9 million, respectively, and was included in accrued compensation and benefits on the consolidated balance sheets. We have not made any discretionary contributions to the Deferred Compensation Plan.

A rabbi trust is used to fund the Deferred Compensation Plan and an administrative committee manages the Deferred Compensation Plan and its assets. The investments in the rabbi trust were $5.3 million and $6.5 million as of October 28, 2018 and October 29, 2017, respectively. The rabbi trust investments include debt and equity securities as well as cash equivalents and are accounted for as trading securities.

Defined Benefit Plans — With the acquisition of RCC on April 7, 2006, we assumed a defined benefit plan (the “RCC Pension Plan”). Benefits under the RCC Pension Plan are primarily based on years of service and the employee’s compensation. The RCC Pension Plan is frozen and, therefore, employees do not accrue additional service benefits. Plan assets of the RCC Pension Plan are invested in broadly diversified portfolios of government obligations, mutual funds, stocks, bonds, fixed income securities, master limited partnerships and hedge funds. In accordance with ASC Topic 805, we quantified the projected benefit obligation and fair value of the plan assets of the RCC Pension Plan and recorded the difference between these two amounts as an assumed liability.

As a result of the CENTRIA Acquisition on January 16, 2015, we assumed noncontributory defined benefit plans covering certain hourly employees (the “CENTRIA Benefit Plans”). Benefits under the CENTRIA Benefit Plans are calculated based on fixed amounts for each year of service rendered. CENTRIA also sponsors postretirement medical and life insurance plans that cover certain of its employees and their spouses (the “OPEB Plans”). The contributions to the OPEB Plans by retirees vary from none to 25% of the total premiums paid. Plan assets of the CENTRIA Benefit Plans are invested in broadly diversified portfolios of equity mutual funds, international equity mutual funds, bonds, mortgages and other funds. Currently, our policy is to fund the CENTRIA Benefit Plans as required by minimum funding standards of the Internal Revenue Code. In accordance with ASC Topic 805, we remeasured the projected benefit obligation and fair value of the plan assets of the CENTRIA Benefits Plans and OPEB Plans. The difference between the two amounts was recorded as an assumed liability.

In addition to the CENTRIA Benefit Plans, CENTRIA contributes to a multi-employer plan, the Steelworkers Pension Trust. The minimum required annual contribution to this plan is $0.3 million. The current contract expires on June 1, 2019. If we were to withdraw our participation from this multi-employer plan, CENTRIA may be required to pay a withdrawal liability representing an amount based on the underfunded status of the plan. The plan is not significant to the Company’s consolidated financial statements.

We refer to the RCC Pension Plan and the CENTRIA Benefit Plans collectively as the “Defined Benefit Plans” in this Note.

Assumptions—Weighted average actuarial assumptions used to determine benefit obligations were as follows:



	October 28, 2018				October 29, 2017
	Defined Benefit Plans		OPEB Plans		Defined Benefit Plans		OPEB Plans
Discount rate	4.40	%	4.20	%	3.64	%	3.40	%

Weighted average actuarial assumptions used to determine net periodic benefit cost (income) were as follows:



	October 28, 2018				October 29, 2017
	Defined Benefit Plans		OPEB Plans		Defined Benefit Plans		OPEB Plans
Discount rate	3.64	%	3.40	%	3.64	%	3.25	%
Expected return on plan assets	6.19	%	n/a		6.18	%	n/a
Health care cost trend rate-initial	n/a		7.50	%	n/a		7.00	%
Health care cost trend rate-ultimate	n/a		4.00	%	n/a		5.00	%

The basis used to determine the overall expected long-term asset return assumption for the Defined Benefit Plans was a 10-year forecast of expected return based on the target asset allocation for the plans. The weighted average expected return for the portfolio over the forecast period is 6.19%, net of investment related expenses, and taking into consideration historical experience, anticipated asset allocations, investment strategies and the views of various investment professionals.

The health care cost trend rate for the OPEB Plans was assumed at 6.5% for years 2019 to 2024, 5.5% for years 2025 to 2035, 5.0% for years 2036 to 2051 and approximately 4.0% per year thereafter.

Funded status—The changes in the projected benefit obligation, plan assets and funded status, and the amounts recognized on our consolidated balance sheets were as follows (in thousands):



	October 28, 2018									October 29, 2017
Change in projected benefit obligation	Defined Benefit Plans			OPEB Plans			Total			Defined Benefit Plans			OPEB Plans			Total
Accumulated benefit obligation	$	51,032		$	7,354		$	58,386		$	56,378		$	7,698		$	64,076
Projected benefit obligation – beginning of fiscal year	$	56,378		$	7,698		$	64,076		$	58,551		$	8,347		$	66,898
Interest cost	1,976			247			2,223			2,055			257			2,312
Service cost	87			28			115			97			36			133
Benefit payments	(3,838		)	(822		)	(4,660		)	(3,681		)	(546		)	(4,227		)
Plan amendments	—			—			—			275			—			275
Actuarial (gains) losses	(3,571		)	203			(3,368		)	(919		)	(396		)	(1,315		)
Projected benefit obligation – end of fiscal year	$	51,032		$	7,354		$	58,386		$	56,378		$	7,698		$	64,076



	October 28, 2018									October 29, 2017
Change in plan assets	Defined Benefit Plans			OPEB Plans			Total			Defined Benefit Plans			OPEB Plans			Total
Fair value of assets – beginning of fiscal year	$	49,564		$	—		$	49,564		$	46,160		$	—		$	46,160
Actual return on plan assets	(263		)	—			(263		)	5,041			—			5,041
Company contributions	2,262			822			3,084			2,044			546			2,590
Benefit payments	(3,838		)	(822		)	(4,660		)	(3,681		)	(546		)	(4,227		)
Fair value of assets – end of fiscal year	$	47,725		$	—		$	47,725		$	49,564		$	—		$	49,564



	October 28, 2018									October 29, 2017
Funded status	Defined Benefit Plans			OPEB Plans			Total			Defined Benefit Plans			OPEB Plans			Total
Fair value of assets	$	47,725		$	—		$	47,725		$	49,564		$	—		$	49,564
Benefit obligation	51,032			7,354			58,386			56,378			7,698			64,076
Funded status	$	(3,307	)	$	(7,354	)	$	(10,661	)	$	(6,814	)	$	(7,698	)	$	(14,512	)

Benefit obligations in excess of fair value of assets of $10.7 million and $14.5 million as of October 28, 2018 and October 29, 2017, respectively, are included in other long-term liabilities on the consolidated balance sheets.

Plan assets—The investment policy is to maximize the expected return for an acceptable level of risk. Our expected long-term rate of return on plan assets is based on a target allocation of assets, which is based on our goal of earning the highest rate of return while maintaining risk at acceptable levels.

As of October 28, 2018 and October 29, 2017, the weighted average asset allocations by asset category for the Defined Benefit Plans were as follows (in thousands):



Investment type	October 28, 2018		October 29, 2017
Equity securities	55	%	58	%
Debt securities	7	%	35	%
Master limited partnerships	3	%	3	%
Cash and cash equivalents	31	%	1	%
Real estate	3	%	2	%
Other	1	%	1	%
Total	100	%	100	%

The principal investment objectives are to ensure the availability of funds to pay pension and postretirement benefits as they become due under a broad range of future economic scenarios, to maximize long-term investment return with an acceptable level of risk based on our pension and postretirement obligations, and to be sufficiently diversified across and within the capital markets to mitigate the risk of adverse or unexpected results from one security class will not have an unduly detrimental. Each asset class has broadly diversified characteristics. Decisions regarding investment policy are made with an understanding of the effect of asset allocation on funded status, future contributions and projected expenses.

The plans strive to have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio. We regularly review our actual asset allocation and the investments are periodically rebalanced to our target allocation when considered appropriate. We have set the target asset allocation for the RCC Pension Plan as follows: 45% US bonds, 17% large cap US equities, 13% foreign equity, 5% master limited partnerships, 2% commodity futures, 4% real estate investment trusts, 8% emerging markets and 6% small cap US equities. The CENTRIA Benefit Plans have a target asset allocation of approximately 80%-85% equities and 15%-20% fixed income.

The fair values of the assets of the Defined Benefit Plans at October 28, 2018 and October 29, 2017, by asset category and by levels of fair value, as further defined in Note 14 — Fair Value of Financial Instruments and Fair Value Measurements were as follows (in thousands):



	October 28, 2018						October 29, 2017
Asset category	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash and cash equivalents	$	14,774	$	—	$	14,774	$	463	$	—	$	463
Mutual funds:
Growth funds	7,235		—		7,235		7,262		—		7,262
Real estate funds	1,245		—		1,245		1,236		—		1,236
Commodity linked funds	528		—		528		544		—		544
Equity income funds	5,043		—		5,043		4,767		—		4,767
Index funds	3,036		35		3,071		2,763		110		2,873
International equity funds	253		1,543		1,796		260		1,726		1,986
Fixed income funds	1,745		1,518		3,263		1,742		1,739		3,481
Master limited partnerships	1,448		—		1,448		1,506		—		1,506
Government securities	—		—		—		—		6,400		6,400
Corporate bonds	—		—		—		—		7,301		7,301
Common/collective trusts	—		9,322		9,322		—		11,745		11,745
Total	$	35,307	$	12,418	$	47,725	$	20,543	$	29,021	$	49,564

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



	October 28, 2018					October 29, 2017					October 30, 2016
	Defined Benefit Plans			OPEB Plans		Defined Benefit Plans			OPEB Plans		Defined Benefit Plans			OPEB Plans
Interest cost	$	1,976		$	247	$	2,055		$	257	$	2,354		$	261
Service cost	87			28		97			36		137			34
Expected return on assets	(2,916		)	—		(2,798		)	—		(2,979		)	—
Amortization of prior service credit	58			—		(9		)	—		(9		)	—
Amortization of net actuarial loss	991			—		1,374			—		1,170			—
Net periodic benefit cost	$	196		$	275	$	719		$	293	$	673		$	295

The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit income are as follows (in thousands):



	October 28, 2018						October 29, 2017
	Defined Benefit Plans		OPEB Plans		Total		Defined Benefit Plans		OPEB Plans		Total
Unrecognized net actuarial loss	$	10,083	$	578	$	10,661	$	11,468	$	375	$	11,843
Unrecognized prior service credit	195		—		195		252		—		252
Total	$	10,278	$	578	$	10,856	$	11,720	$	375	$	12,095

Unrecognized actuarial gains, net of income tax, of $0.9 million and $2.8 million during fiscal 2018 and 2017, respectively, are included in other comprehensive income (loss) in the consolidated statements of comprehensive income.

The changes in plan assets and benefit obligation recognized in other comprehensive income are as follows (in thousands):



	October 28, 2018					October 29, 2017					October 30, 2016
	Defined Benefit Plans		OPEB Plans			Defined Benefit Plans			OPEB Plans		Defined Benefit Plans			OPEB Plans
Net actuarial gain (loss)	$	392	$	(203	)	$	3,144		$	396	$	(3,443	)	$	(911	)
Amortization of net actuarial loss	991		—			1,374			—		1,170			—
Amortization of prior service cost (credit)	58		—			(9		)	—		(9		)	—
New prior service cost	—		—			(276		)	—		—			—
Total recognized in other comprehensive income (loss)	$	1,441	$	(203	)	$	4,233		$	396	$	(2,282	)	$	(911	)

The estimated amortization for the next fiscal year for amounts reclassified from accumulated other comprehensive income into the consolidated income statement is as follows (in thousands):



	October 28, 2018
	Defined Benefit Plans			OPEB Plans		Total
Amortization of prior service credit	$	(143	)	$	—	$	(143	)
Amortization of net actuarial loss	1,111			—		1,111
Total estimated amortization	$	968		$	—	$	968

Actuarial gains and losses are amortized using the corridor method based on 10% of the greater of the projected benefit obligation or the market related value of assets over the average remaining service period of active employees.

We expect to contribute $1.2 million to the Defined Benefit Plans in fiscal 2019. We expect the following benefit payments to be made (in thousands):



Fiscal years ending	Defined Benefit Plans		OPEB Plans		Total
2019	$	4,222	$	875	$	5,097
2020	3,954		798		4,752
2021	3,923		704		4,627
2022	3,847		600		4,447
2023	4,053		609		4,662
2024 - 2028	17,883		2,134		20,017