Pension and Postretirement Benefits

We have a qualified, noncontributory defined benefit pension plan covering substantially all U.S. associates. Benefits are based on years of service and final average compensation. Our policy is to fund at least the minimum actuarially computed annual contribution required under the Employee Retirement Income Security Act of 1974 (ERISA). Plan assets consist primarily of listed equity and fixed income securities. Effective January 1, 2010, an amendment to the qualified defined benefit pension plan discontinued the benefit accruals for salary increases and credited service rendered after December 31, 2009.

We have historically had in place a noncontributory supplemental executive retirement plan (“SERP”), which was a nonqualified defined benefit plan that essentially mirrored the qualified plan, but provided benefits in excess of certain limits placed on our qualified retirement plan by the Internal Revenue Code. The SERP pays supplemental pension benefits to certain key employees upon retirement. The SERP is being funded through a Rabbi trust with BMO Harris Bank N.A. On October 8, 2013, our Board of Directors approved certain amendments to the SERP Plan which were effective as of December 31, 2013. The SERP Plan provides certain benefits to our executive officers under a defined benefit formula which was designed to provide benefits in addition to the STRATTEC SECURITY CORPORATION Retirement Plan (the “Pension Plan”). We froze our Pension Plan effective as of December 31, 2009 and the SERP Plan provided benefits to participants as if the Pension Plan had not been frozen. Because the Pension Plan was frozen and because new employees do not participate in the Pension Plan our Board of Directors adopted amendments to the SERP Plan on October 8, 2013 that are effective as of December 31, 2013 to simplify the SERP Plan calculation. Under the amended SERP Plan, participants will receive an accrued lump-sum benefit as of December 31, 2013 to be credited to each participant’s account. Going forward after that date, each eligible participant will receive a supplemental retirement benefit equal to the foregoing lump sum benefit, plus an annual benefit accrual equal to 8% of the participant’s base salary and cash bonus, plus annual credited interest on the participant’s account balance. All current participants are fully vested in their account balances with any new individuals participating in the SERP Plan on or after January 1, 2014 being subject to a five year vesting schedule. The SERP Plan, which is considered a defined benefit plan under applicable rules and regulations, will continue to be funded through use of a Rabbi Trust to hold investment assets to be used in part to fund any future required lump sum benefit payments to participants. We do not expect the above amendment to have a material effect on our financial statements.

We also sponsor a postretirement health care plan for all of our U.S. associates hired prior to June 2, 2001. The expected cost of retiree health care benefits is recognized during the years that the associates who are covered under the plan render service. Effective January 1, 2010, an amendment to the postretirement health care plan limited the benefit for future eligible retirees to $4,000 per plan year and is subject to a maximum five year coverage period based on the associate’s retirement date and age. The postretirement health care plan is unfunded.

Net periodic benefit costs are allocated between Cost of Goods Sold and Engineering, Selling and Administrative Expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

The following tables summarize the net periodic benefit cost recognized for each of the periods indicated under these plans (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	December 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Service cost	$	55		$	52		$	3		$	3
Interest cost		1,101			1,123			40			46
Expected return on plan assets		(1,611	)		(1,532	)		-			-
Amortization of prior service cost (credit)		3			3			(191	)		(191	)
Amortization of unrecognized net loss		667			1,131			211			224
Net periodic benefit cost	$	215		$	777		$	63		$	82

	Pension Benefits						Postretirement Benefits
	Six Months Ended						Six Months Ended
	December 29, 2013			December 30, 2012			December 29, 2013			December 30, 2012
Service cost	$	109		$	104		$	7		$	7
Interest cost		2,203			2,246			79			91
Expected return on plan assets		(3,221	)		(3,064	)		-			-
Amortization of prior service cost (credit)		6			6			(382	)		(382	)
Amortization of unrecognized net loss		1,333			2,262			423			449
Net periodic benefit cost	$	430		$	1,554		$	127		$	165

Contributions of $1.5 million were made to the qualified pension plan during the six month period ended December 29, 2013. Contributions of $1.75 million were made to the qualified pension plan during the six month period ended December 30, 2012. Additional voluntary contributions of $1.5 million are anticipated to be made during the remainder of fiscal 2014.