Supplemental Executive Retirement Plan

On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances. Paul Marciano, Chief Executive Officer and Vice Chairman of the Board, is the only active employee participating in the SERP. Maurice Marciano, non-executive Chairman of the Board of Directors, was an active participant in the SERP until his retirement effective on January 28, 2012. Mr. Maurice Marciano will be eligible to receive vested SERP benefits in the future in accordance with the terms of the SERP.

In July 2013, the Company amended the SERP to limit the amount of eligible wages under the plan that count toward the SERP benefit for the active participant. As a result, the projected benefit obligation and unrecognized prior service cost were reduced by $4.5 million during fiscal 2014.

During the year ended January 28, 2012, the Company recorded a SERP curtailment expense of $1.2 million before taxes related to the accelerated amortization of prior service cost resulting from the retirement of Mr. Maurice Marciano as an employee and executive officer, effective upon the expiration of his employment agreement on January 28, 2012. Mr. Maurice Marciano did not receive or earn any additional SERP-related benefits in connection with his retirement and, as of the date of his retirement, ceased vesting or accruing any additional benefits under the terms of the SERP. Mr. Maurice Marciano’s retirement resulted in a significant reduction in the total expected remaining years of future service of all SERP participants combined, resulting in the pension curtailment during fiscal 2012.

As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has made, and expects to continue to make, periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The amount of future payments into the insurance policies may vary, depending on any changes to the estimates of final annual compensation levels and investment performance of the trust. The cash surrender values of the insurance policies were $51.4 million and $47.9 million as of February 1, 2014 and February 2, 2013, respectively, and were included in other assets in the Company’s consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized gains (losses) of $3.6 million, $3.4 million and ($0.2) million in other income and expense during fiscal 2014, fiscal 2013 and fiscal 2012, respectively.

In accordance with authoritative accounting guidance for defined benefit pension and other postretirement plans, an asset for a plan’s overfunded status or a liability for a plan’s underfunded status is recognized in the consolidated balance sheets; plan assets and obligations that determine the plan’s funded status are measured as of the end of the Company’s fiscal year; and changes in the funded status of defined benefit postretirement plans are recognized in the year in which they occur. Such changes are reported in other comprehensive income (loss) and as a separate component of stockholders’ equity.

The components of net periodic pension cost to comprehensive income for fiscal 2014, fiscal 2013 and fiscal 2012 were as follows (in thousands):



	Year Ended			Year Ended			Year Ended
	Feb 1, 2014			Feb 2, 2013			Jan 28, 2012
Interest cost	$	2,345		$	2,392		$	2,641
Net amortization of unrecognized prior service cost	194			620			940
Net amortization of actuarial losses	1,108			3,340			2,048
Curtailment expense	—			—			1,242
Net periodic defined benefit pension cost	$	3,647		$	6,352		$	6,871
Unrecognized prior service cost charged to comprehensive income	$	194		$	620		$	940
Unrecognized net actuarial loss charged to comprehensive income	1,108			3,340			2,048
Actuarial gains (losses)	1,751			3,508			(9,342		)
Plan amendment	4,529			—			—
Curtailment expense	—			—			1,242
Related tax impact	(2,963		)	(2,855		)	2,057
Total periodic costs and other charges to comprehensive income	$	4,619		$	4,613		$	(3,055	)

Included in accumulated other comprehensive income (loss), before tax, as of February 1, 2014 and February 2, 2013 were the following amounts that have not yet been recognized in net periodic benefit cost (in thousands):



	Feb 1, 2014			Feb 2, 2013
Unrecognized prior service (credit) cost (1)	$	(1,981	)	$	2,742
Unrecognized net actuarial loss	12,974			15,832
Total included in accumulated other comprehensive income (loss)	$	10,993		$	18,574

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(1)	During fiscal 2014, the Company amended the SERP to limit the amount of eligible wages under the plan that count toward the SERP benefit for the active participant. As a result, unrecognized prior service cost was reduced by $4.5 million during fiscal 2014.

The following chart summarizes the SERP’s funded status and the amounts recognized in the Company’s consolidated balance sheets (in thousands):



	Feb 1, 2014			Feb 2, 2013
Projected benefit obligation	$	(54,704	)	$	(58,639	)
Plan assets at fair value (1)	—			—
Net liability (included in other long-term liabilities)	$	(54,704	)	$	(58,639	)

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(1)	The SERP is a non-qualified pension plan and hence the insurance policies are not considered to be plan assets. Accordingly, the table above does not include the insurance policies with cash surrender values of $51.4 million and $47.9 million at February 1, 2014 and February 2, 2013, respectively.

A reconciliation of the changes in the projected benefit obligation for fiscal 2014 and fiscal 2013 is as follows (in thousands):



	Projected Benefit Obligation
Balance at January 28, 2012	$	59,755
Interest cost	2,392
Actuarial gains	(3,508		)
Balance at February 2, 2013	$	58,639
Interest cost	2,345
Plan amendment	(4,529		)
Actuarial gains	(1,751		)
Balance at February 1, 2014	$	54,704

The Company assumed a discount rate of approximately 4.3% and 4.0% for the years ended February 1, 2014 and February 2, 2013, respectively, as part of the actuarial valuation performed to calculate the projected benefit obligation disclosed above, based on the timing of cash flows expected to be made in the future to the participants, applied to high quality yield curves. Compensation levels utilized in calculating the projected benefit obligation were derived from expected future compensation as outlined in employment contracts in effect at the time. At February 1, 2014, amounts included in comprehensive income (loss) that are expected to be recognized as components of net periodic defined benefit pension cost in fiscal 2015 consist of amortization of prior service credits of $0.2 million and actuarial losses of $0.9 million. Benefits projected to be paid in the next five fiscal years amount to $8.5 million with equal amounts expected to be paid during each of the years. Aggregate benefits projected to be paid in the following five fiscal years amount to $16.7 million.