Note 8 - Pension Plans

12 Months Ended

Jul. 28, 2012

Notes

Note 8 - Pension Plans

NOTE 8 — PENSION PLANS

Company-Sponsored Pension Plans

The Company sponsors four defined benefit pension plans. Two are tax-qualified plans covering members of unions. Benefits under these two plans are based on a fixed amount for each year of service. One is a tax-qualified plan covering nonunion associates. Benefits under this plan are based upon percentages of annual compensation. Funding for these plans is based on an analysis of the specific requirements and an evaluation of the assets and liabilities of each plan. The fourth plan is an unfunded, nonqualified plan providing supplemental pension benefits to certain executives. The Company uses its fiscal year-end date as the measurement date for these plans.

Net periodic pension cost for the four plans include the following components:

	2012	2011	2010
Service cost	$2,694	$2,903	$2,390
Interest cost on projected benefit obligation	2,701	2,575	2,309
Expected return on plan assets	(2,538)	(2,067)	(1,720)
Amortization of gains and losses	1,371	1,709	1,231
Amortization of prior service costs	8	8	8
Net periodic pension cost	$4,236	$5,128	$4,218

The changes in benefit obligations and the reconciliation of the funded status of the Company’s plans to the consolidated balance sheets were as follows:

	2012	2011
Changes in Benefit Obligation:
Benefit obligation at beginning of year	$55,480	$45,855
Service cost	2,694	2,903
Interest cost	2,701	2,575
Benefits paid	(1,023)	(584)
Actuarial loss	7,327	4,731
Benefit obligation at end of year	$67,179	$55,480
Changes in Plan Assets:
Fair value of plan assets at beginning of year	$33,967	$27,556
Actual return on plan assets	1,245	3,880
Employer contributions	3,227	3,115
Benefits paid	(1,023)	(584)
Fair value of plan assets at end of year	37,416	33,967
Funded status at end of year	$(29,763)	$(21,513)
Amounts recognized in the consolidated balance sheets:
Pension liabilities	$(29,763)	$(21,513)
Accumulated other comprehensive loss, net of income taxes	(15,474)	(11,142)
Amounts included in Accumulated other comprehensive loss (pre-tax):
Net actuarial loss	$25,783	$18,533
Prior service cost	8	16
-	$25,791	$18,549

The Company expects approximately $2,118 of the net actuarial loss and $8 of the prior service cost to be recognized as a component of net periodic benefit costs in fiscal 2013.

The accumulated benefit obligations of the four plans were $55,873 and $43,181 at July 28, 2012 and July 30, 2011, respectively.  The following information is presented for those plans with an accumulated benefit obligation in excess of plan assets:

	2012	2011
Projected benefit obligation	$67,179	$14,202
Accumulated benefit obligation	55,873	14,202
Fair value of plan assets	37,416	2,770

Assumptions used to determine benefit obligations and net periodic pension cost for the Company’s defined benefit plans were as follows:

	2012	2011	2010
Assumed discount rate — net periodic pension cost	4.99%	5.19%	5.87%
Assumed discount rate — benefit obligation	3.59%	4.99%	5.19%
Assumed rate of increase in compensation levels	4 - 4.5 %	4 - 4.5 %	4 - 4.5 %
Expected rate of return on plan assets	7.50%	7.50%	7.50%

Investments in the pension trusts are overseen by the trustees of the plans, who are officers of Village. The Company’s overall investment strategy is to maintain a broadly diversified portfolio of stocks, bonds and money market instruments that, along with periodic plan contributions, provide the necessary funds for ongoing benefit obligations. Expected rates of return on plan assets are developed by determining projected stock and bond returns and then applying these returns to the target asset allocations of the trusts, resulting in a weighted-average rate of return on plan assets. Equity returns were based primarily on historical returns of the S&P 500 Index. Fixed-income projected returns were based primarily on historical returns for the broad U.S. bond market. The target allocations for plan assets are 50-70% equity securities, 25-40% fixed income securities, and 0-10% cash. Asset allocations are reviewed periodically and appropriate rebalancing is performed.

Equity securities include investments in large-cap, small-cap and mid-cap companies located both in and outside the United States. Fixed income securities include U.S. treasuries, mortgage-backed securities and corporate bonds of companies from diversified industries. Investments in securities are made both directly and through mutual funds. In addition, one plan held Class A common stock of Village in the amount of $804 and $610 at July 28, 2012 and July 30, 2011, respectively.

Risk management is accomplished through diversification across asset classes and fund strategies, multiple investment portfolios and investment guidelines. The plans do not allow for investments in derivative instruments.

The fair value of the pension assets, all of which are valued on quoted prices in active markets for identical assets (Level 1), were as follows:

	July 28, 2012	July 30, 2011
Asset Category
Cash	$607	$834
Equity securities:
Company stock	804	610
U.S large cap (1)	13,488	11,671
U.S. small/mid cap (2)	5,438	4,823
International (3)	3,697	4,143
Emerging markets (4)	1,010	640
Fixed income securities:
U.S treasuries (5)	7,657	7,382
Mortgage-backed (5)	1,952	1,699
Corporate bonds (5)	2,763	2,165
Total	$37,416	$33,967

(1)           Includes directly owned securities and mutual funds, primarily low-cost equity index funds not actively managed that track the S&P 500.

(2)           Includes directly owned securities and mutual funds, which invest in diversified portfolios of publicly traded U.S. common stocks of small and medium cap companies.

(3)           Includes directly owned securities and mutual funds, which invest in diversified portfolios of publicly traded common stocks of large, non-U.S. companies.

(4)           Consists of mutual and exchange traded funds which invest in non-U.S. stocks in emerging markets.

(5)            Includes directly owned securities and mutual funds.

Based on actuarial assumptions, estimated future defined benefit payments, which may be significantly impacted by participant elections related to retirement dates and forms of payment, are as follows:

Fiscal Year
2013	$729
2014	3,311
2015	999
2016	1,282
2017	1,400
2018 – 2022	18,655

The Company expects to contribute $3,000 in cash to all defined benefit pension plans in fiscal 2013.

Multi-Employer Plans

The Company contributes to three multi-employer pension plans under collective bargaining agreements covering union-represented employees.  These plans provide benefits to participants that are generally based on a fixed amount for each year of service.  Based on the most recent information available, certain of these multi-employer plans are underfunded. The amount of any increase or decrease in Village’s required contributions to these multi- employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations and the actual return on assets held in the plans, among other factors.

The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans in the following respects:

·         Assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

·         If a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to such withdrawing employer may be borne by the remaining participating employers.

·         If the Company stops participating in some of its multi-employer pension plans, the Company may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability.

The Company’s participation in these plans is outlined in the following tables.  The “EIN / Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit pension plan number.  The most recent “Pension Protection Act Zone Status” available in 2011 and 2010 is for the plan’s year-end at December 31, 2011 and December 31, 2010, respectively, unless otherwise noted.  Among other factors, generally, plans in the red zone are less than 65 percent funded, plans in the yellow zone are between 65 and 80 percent funded, and plans in the green zone are at least 80 percent funded.  The “FIP/RP Status Pending / Implemented” column indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.   

		Pension Protection Act Zone Status		FIP/RP Status Pending / Implemented	Contributions for the year ended (4)			Surcharge Imposed (5)	Expiration date of Collective-Bargaining Agreement
Pension Fund	EIN / Pension Plan Number	2011	2010		July 28, 2012	July 30, 2011	July 31, 2010
Pension Plan of Local 464A (1)	226051600	Green	Green	No	$499	$481	$483	No	June 2016
UFCW Local 1262 & Employers Pension Fund (1), (3)	226074414	Red	Red	Implemented	3,463	3,357	3,165	No	October 2013
UFCW Regional Pension Plan (2)	166062287	Red	Red	Implemented	1,466	1,447	1,375	No	August 2013
Total Contributions					$5,428	$5,285	$5,023

(1)           The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at December 31, 2011 and December 31, 2010.

(2)           The information for this fund was obtained from the Form 5500 filed for the plan’s year-end at September 30, 2011 and September 30, 2010.

(3)           This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010.  There were no changes to the plan’s zone status as a result of this election.

(4)           The Company’s contributions represent more than 5% of the total contributions received by each applicable pension fund for all periods presented.

Under the Pension Protection Act, a surcharge may be imposed when employers make contributions under a collective bargaining agreement that is not in compliance with a rehabilitation plan.  As of July 28, 2012, the collective bargaining agreements under which the Company was making contributions were in compliance with rehabilitation plans adopted by each applicable pension fund.

On April 15, 2011, Village, along with all of the other individual employers trading as ShopRite, permanently withdrew from participating in the United Food and Commercial Workers Local 152 Retail Meat Pension Fund (“the Fund”), effective the end of April 2011. The Fund is a multi-employer defined benefit plan that includes other supermarket operators. Village, along with the other affiliated ShopRite operators, determined to withdraw from the Fund due to exposures to market risks associated with all defined benefit plans and the inability to partition ShopRite’s liabilities from those of the other participating supermarket operators. Prior to withdrawal in April 2011, Village contributed $644 and $785 to the Fund in fiscal 2011 and 2010, respectively.  Village now provides affected associates with a defined contribution plan for future service, which eliminates market risks and the exposure to shared liabilities of other operators, and is estimated to be less costly than the defined benefit plan in the future, while ensuring that our associates are provided a secure benefit. The Company recorded a pre-tax charge of $7,028 in fiscal 2011 for this withdrawal liability, which represented our estimate of the liability based on calculations provided by the Fund actuary. The Company settled this obligation in January 2012, resulting in a pre-tax benefit of $646 in fiscal 2012.  Village remains liable for potential additional withdrawal liabilities to the Fund in the event a mass withdrawal, as defined by statute, occurs within two plan years after the plan year of Village’s withdrawal. Such liabilities could be material to the Company’s consolidated financial statements.

Other Postretirement Benefit Plans

The Company also contributes to various other multi-employer benefit plans that provide health and welfare benefits to active and retired participants. Total contributions made by the Company to these other multi-employer benefit plans were approximately $20,062, $18,007 and $17,070 in fiscal 2012, 2011 and 2010, respectively. 

Defined Contribution Plans

The Company sponsors a 401(k) savings plan for certain eligible associates. Company contributions under that plan, which are based on specified percentages of associate contributions, were $331, $309, and $301 in fiscal 2012, 2011, and 2010, respectively.   The Company also contributes to union sponsored defined contribution plans for certain eligible associates.  Company contributions under these plans were $220, $53 and $0 in fiscal 2012, 2011 and 2010, respectively.