Retirement and Other Employee Benefits

We sponsor a number of defined benefit pension plans and post-retirement plans. The most significant of these plans cover employees in the United States, United Kingdom, Costa Rica and Guatemala. These plans are accounted for consistent with the ASC guidance related to “Compensation – Retirement Benefits”.

The benefit obligation is the projected benefit obligation for defined benefit pension plans and the accumulated post-retirement benefit obligation for post-retirement benefit plans other than pensions.

U.S.-Based Defined Benefit Pension Plans

We sponsor a defined benefit pension plan, which covers a portion of our U.S.-based employees under a collective bargaining agreement. As a result of the accelerated closing of our Hawaii facility announced in 2006, the ILWU Local 42 collective bargaining agreement was not re-negotiated and expired in 2009 and as such the U.S.-based defined benefit pension plan has ceased accruing benefits. Our funding policy for this plan is to contribute amounts sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended, or such additional amounts as determined appropriate to assure that the assets of the plan would be adequate to provide benefits. Substantially all of the plan’s assets are invested in mutual funds.

United Kingdom Defined Benefit Pension Plan

We sponsor a defined benefit pension plan, which covers a portion of our employees in the United Kingdom (the “UK plan”). The UK plan provides benefits based on the employees’ years of service and qualifying compensation and has ceased accruing benefits. Benefit payments are based on a final pay calculation as of November 30, 2005 and are adjusted for inflation annually. Our funding policy for the UK plan is to contribute amounts into the plan in accordance with a recovery plan agreed by the Trustees and the Company in order to meet the statutory funding objectives of occupational trust-based arrangements of the United Kingdom or such additional amounts as determined appropriate to assure that assets of the UK plan are adequate to provide benefits. Substantially all of the UK plan’s assets are primarily invested in fixed income and equity funds.

Central American Plans

We provide retirement benefits to a portion of our employees of certain Costa Rican and Guatemalan subsidiaries (“Central American plans”). Generally, benefits under these programs are based on an employee’s length of service and level of compensation. These programs are commonly referred to as termination indemnities, which provide retirement benefits in accordance with regulations mandated by the respective governments. Funding generally occurs when employees cease active service.

14. Retirement and Other Employee Benefits (continued)

The following table sets forth a reconciliation of benefit obligations, plan assets and funded status for our defined benefit pension plans and post-retirement plans as of December 30, 2016 and January 1, 2016, which are also their measurement dates (U.S. dollars in millions):



	Pension plans ⁽¹⁾												Post-retirement plans
	December 30, 2016						January 1, 2016						December 30, 2016			January 1, 2016
	U.S.			U.K.			U.S.			U.K.			Central America			Central America
Change in Benefit Obligation:
Beginning benefit obligation	$	17.6		$	58.8		$	19.3		$	63.7		$	57.8		$	58.1
Service cost	—			—			—			—			5.2			5.8
Interest cost	0.7			1.9			0.7			2.2			3.8			3.7
Actuarial loss (gain)	0.1			10.8			(1.0		)	(1.5		)	1.3			(1.6		)
Benefits paid	(1.4		)	(4.3		)	(1.4		)	(2.3		)	(6.3		)	(8.1		)
Exchange rate changes ⁽²⁾	—			(10.2		)	—			(3.3		)	0.1			(0.1		)
Ending benefit obligation	17.0			57.0			17.6			58.8			61.9			57.8

Change in Plan Assets:
Beginning fair value	13.4			53.4			14.1			55.4			—			—
Actual return on plan assets	0.8			8.7			(0.1		)	1.1			—			—
Company contributions	0.3			1.9			0.8			2.2			6.3			8.1
Benefits paid	(1.4		)	(4.3		)	(1.4		)	(2.3		)	(6.3		)	(8.1		)
Exchange rate changes ⁽²⁾	—			(9.2		)	—			(3.0		)	—			—
Ending fair value	13.1			50.5			13.4			53.4			—			—

Amounts recognized in the Consolidated Balance Sheets:
Accounts payable and accrued expenses (current liability)	—			—			—			—			7.2			6.7
Retirement benefits liability (noncurrent liability)	3.9			6.5			4.1			5.5			54.7			51.1
Net amount recognized in the
Consolidated Balance Sheets	$	3.9		$	6.5		$	4.1		$	5.5		$	61.9		$	57.8

Amounts recognized in Accumulated other comprehensive income (loss)⁽³⁾:
Net actuarial (loss) gain	(9.4		)	(2.8		)	(9.3		)	2.1			(14.6		)	(14.1		)
Net amount recognized in accumulated other comprehensive (loss) income	$	(9.4	)	$	(2.8	)	$	(9.3	)	$	2.1		$	(14.6	)	$	(14.1	)


⁽¹⁾	The accumulated benefit obligation is the same as the projected benefit obligation.

⁽²⁾

The exchange rate difference included in the reconciliation of the change in benefit obligation and the change in plan assets above results from currency fluctuations of the U.S. dollar relative to the British pound for the U.K. plan and the U.S. dollar versus Central American currencies such as the Costa Rican colon and Guatemalan quetzal for the Central American plans as of December 30, 2016 and January 1, 2016, when compared to the previous year.


⁽³⁾	We had accumulated other comprehensive income of $5.2 million as of December 30, 2016 and $4.2 million as of January 1, 2016 related to tax effect of unamortized pension gains.

14. Retirement and Other Employee Benefits (continued)

The following table provides a roll forward of the accumulated other comprehensive income ("AOCI") balances (U.S. dollars in millions):



	Pension plans												Post-retirement plans
	Year ended												Year ended
	December 30, 2016						January 1, 2016						December 30, 2016			January 1, 2016
Reconciliation of AOCI	U.S.			U.K.			U.S.			U.K.			Central America			Central America
AOCI (loss) gain at beginning of plan year	$	(9.3	)	$	2.1		$	(9.7	)	$	2.5		$	(14.1	)	$	(16.9	)
Amortization of net losses recognized during the year	0.3			—			0.4			—			0.8			1.2
Net (losses) gains occurring during the year	(0.4		)	(4.7		)	—			(0.3		)	(1.3		)	1.6
Currency exchange rate changes	—			(0.2		)	—			(0.1		)	—			—
AOCI (loss) gain at end of plan year	$	(9.4	)	$	(2.8	)	$	(9.3	)	$	2.1		$	(14.6	)	$	(14.1	)

The amounts in AOCI expected to be amortized as a component of net period cost in the upcoming year are (U.S. dollars in millions):



	Pension plans				Post-retirement plans
	U.S.		U.K.		Central America
2017 amortization of net losses	$	0.4	$	—	$	0.9

The following table sets forth the net periodic pension cost of our defined benefit pension and post-retirement benefit plans (U.S. dollars in millions):



	Pension plans																		Post-retirement plans
	Year ended																		Year ended
	December 30, 2016						January 1, 2016						December 26, 2014						December 30, 2016		January 1, 2016		December 26, 2014
	U.S.			U.K.			U.S.			U.K.			U.S.			U.K.			Central America		Central America		Central America
Service cost	$	—		$	—		$	—		$	—		$	—		$	—		$	5.2	$	5.8	$	5.2
Interest cost	0.7			1.9			0.7			2.2			0.7			2.7			3.8		3.7		3.6
Expected return on assets	(1.0		)	(2.6		)	(1.0		)	(2.9		)	(0.9		)	(3.5		)	—		—		—
Net amortization	0.3			—			0.4			—			0.3			(0.1		)	0.8		1.1		0.9
Net periodic cost (income)	$	—		$	(0.7	)	$	0.1		$	(0.7	)	$	0.1		$	(0.9	)	$	9.8	$	10.6	$	9.7

There are no amounts of plan assets expected to be refunded to us over the next 12 months.

14. Retirement and Other Employee Benefits (continued)

Actuarial Assumptions

The assumptions used in the calculation of the benefit obligations of our U.S. and U.K defined benefit pension plans and Central American plans consisted of the following:



	December 30, 2016						January 1, 2016							December 26, 2014
	Pension plans				Post- retirement plans		Pension plans				Post- retirement plans			Pension plans				Post- retirement plans
	U.S.		U.K.		Central America		U.S.		U.K.		Central America			U.S.		U.K.		Central America
Weighted average discount rate	3.85	%	2.60	%	7.29	%	4.00	%	3.70	%	7.23	%	⁽¹⁾	3.70	%	3.60	%	6.85	%
Rate of increase in compensation levels	—	%	2.50	%	4.75	%	—	%	2.20	%	4.64	%		—	%	2.20	%	5.20	%

The assumptions used in the calculation of the net periodic pension costs for our U.S. and U.K. defined benefit pension plans and Central American plans consisted of the following:



	December 30, 2016						January 1, 2016							December 26, 2014
	Pension plans				Post- retirement plans		Pension plans				Post- retirement plans			Pension plans				Post- retirement plans
	U.S.		U.K.		Central America		U.S.		U.K.		Central America			U.S.		U.K.		Central America
Weighted average discount rate	4.00	%	3.70	%	7.23	%	3.70	%	3.60	%	6.85	%	⁽¹⁾	4.45	%	4.50	%	7.56	%
Rate of increase in compensation levels	—	%	2.20	%	4.64	%	—	%	2.20	%	5.20	%		—	%	2.50	%	5.39	%
Expected long-term rate of return on assets	7.50	%	5.47	%	—	%	7.50	%	5.36	%	—	%		7.50	%	6.41	%	—	%


⁽¹⁾	The increase or decrease in the weighted average discount rate assumption for the benefit obligation and net periodic pension costs increased due to an increase or decrease in inflation assumptions and country-specific investments.

Effective December 30, 2016, we utilized updated mortality tables for our U.S. Plan. The change related to updated mortality tables has caused a decrease of our projected benefit obligation for this plan by $0.3 million and is included in accumulated other comprehensive income in our Consolidated Balance Sheets. This change is treated as a change in assumption, which affects the net actuarial (loss) gain and is amortized over the remaining service period of the plan participants. The annual amortization will impact net periodic cost in 2017.

14. Retirement and Other Employee Benefits (continued)

Cash Flows



	Pension plans				Post-retirement plans
	U.S.		U.K.		Central America
Expected benefit payments for:
2017	$	1.4	$	1.7	$	7.2
2018	1.4		1.9		6.5
2019	1.3		1.9		6.8
2020	1.3		1.9		6.6
2021	1.3		2.0		6.2
Next 5 years	5.6		11.9		30.5
Expected benefit payments over the next 10 years	$	12.3	$	21.3	$	63.8

For 2017, expected contributions are $0.6 million for the U.S. pensions plans and $1.7 million for the U.K. pensions plans. Contributions for the U.S. and U.K. pension plans are actuarially determined based on funding regulations.

U.S.-Based Defined Benefit Pension Plans

Plan Assets

Our overall investment strategy is to achieve a mix of between 50%-70% equity securities for long-term growth and 30%-50% fixed income securities for near-term benefit payments. Asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the pension plans. Selection of the targeted asset allocation for U.S. plan assets was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes.

The fair values of our U.S. plan assets by asset category are as follows:



			Fair Value Measurements at December 30, 2016 (U.S. dollars in millions)
			Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	Total		(Level 1)		(Level 2)		(Level 3)
Mutual Funds:
Fixed income securities	$	1.8	$	1.8	$	—	$	—
Bond securities	3.6		3.6		—		—
Value securities	4.2		4.2		—		—
Growth securities	3.5		3.5		—		—
Total	$	13.1	$	13.1	$	—	$	—

14. Retirement and Other Employee Benefits (continued)

The fair values of our U.S. plan assets by asset category are as follows:



			Fair Value Measurements at January 1, 2016 (U.S. dollars in millions)
			Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
Asset Category	Total		(Level 1)		(Level 2)		(Level 3)
Mutual Funds:
Fixed income securities	$	2.9	$	2.9	$	—	$	—
Bond securities	2.6		2.6		—		—
Value securities	4.7		4.7		—		—
Growth securities	3.2		3.2		—		—
Total	$	13.4	$	13.4	$	—	$	—

Mutual Funds – This category includes investments in mutual funds that encompass both equity and fixed income securities that are designed to provide a diverse portfolio. The plan’s mutual funds are designed to track exchange indices, and invest in diverse industries. Some mutual funds are classified as regulated investment companies. Investment managers have the ability to shift investments from value to growth strategies, from small to large capitalization funds, and from U.S. to international investments. These investments are valued at the closing price reported on the active market on which the individual securities are traded. These investments are classified within Level 1 of the fair value hierarchy.

Investment managers agree to operate the plan's investments within certain criteria that determine eligible and ineligible securities, diversification requirements and credit quality standards, where applicable. Unless exceptions have been approved, investment managers are prohibited from buying or selling commodities, futures or option contracts, as well as from short selling of securities. Furthermore, investment managers agree to obtain written approval for deviations from stated investment style or guidelines. We considered historical returns and the future expectations for returns for each asset class as well as the target asset allocation of plan assets to develop the expected long-term rate of return on assets assumption.

The expected long-term rate of return assumption for U.S. plan assets is based upon the target asset allocation and is determined using forward-looking assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. We evaluate the rate of return assumption on an annual basis.

14. Retirement and Other Employee Benefits (continued)

United Kingdom Defined Benefit Pension Plan

Plan Assets

The fair values of our U.K. plan assets by asset category are as follows:



			Fair Value Measurements at December 30, 2016 (U.S. dollars in millions)
Asset Category	Total Fair Value at December 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	0.4	$	0.4	$	—	$	—
Equity securities:
United Kingdom companies	4.8				4.8		—
Diversified growth funds	17.4				17.4		—
Other international companies	17.1				17.1		—
Fixed income securities:
United Kingdom government bonds	4.4				4.4		—
Liability-driven investments	6.4				6.4		—
Total	$	50.5	$	0.4	$	50.1	$	—



			Fair Value Measurements at January 1, 2016 (U.S. dollars in millions)
Asset Category	Total Fair Value at January 1, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash	$	0.3	$	0.3	$	—	$	—
Equity securities:
United Kingdom companies	22.1				22.1		—
Other international companies	20.1				20.1		—
Fixed income securities:
United Kingdom government bonds	4.6				4.6		—
United Kingdom corporate bonds	6.3				6.3		—
Total	$	53.4	$	0.3	$	53.1	$	—

Equity securities – This category includes pooled investments in various U.S., U.K. and other international equities over diverse industries. The portfolio of stocks is invested in diverse industries and includes a concentration of 22% in financial institutions, 13% in consumer goods, 13% in industrials, 13% in technology, 11% in health care, 11% in consumer services and the remaining 17% in various other industries. The diversified growth fund includes a portfolio of investment allocations of 35% in equities predominantly in the United States and Asia, 41% in fixed income securities including corporate and government bonds, 10% cash and 14% in other investments such as property and infrastructure. Units of the pooled investment accounts are not traded on an exchange or in an active market; however, valuation is based on the underlying investments of the units and are classified as Level 2 investments of the fair value hierarchy.

14. Retirement and Other Employee Benefits (continued)

Fixed income securities –This category includes pooled investments in U.K. index-linked government bonds, U.K. corporate bonds, U.K. and overseas equity-linked government bonds and liability-driven investments. These investments are valued at the closing price reported on the active market on which the individual securities are traded. Units of the pooled investment accounts are not traded on an exchange or in an active market; however, valuation is based on the underlying investments of the units and are classified as Level 2 investments of the fair value hierarchy.

The expected long-term rate of return assumption for U.K. plan assets is adjusted based on asset allocation and is determined by reference to UK long dated government and corporate bond yields for government and corporate bonds and government bond yields adjusted for out-performance for equities.

According to the plan’s investment policy, approximately 34% of the U.K. plan’s assets are invested in diversified growth funds , 34% are invested in other international equities and 10% are invested in U.K. equity securities. Approximately 13% are invested in liability-driven investments and 9% of the U.K. plan’s assets are invested in U.K. index-lined government bonds. Fund managers have no discretion to make asset allocation decisions with the exception of the diversified growth fund. The trustees try to rebalance any discrepancies through selective allocations of future contributions. Performance benchmarks for each asset class are based on various FTSE indices and inflation measures. Investment performance is reviewed quarterly.

Other Employee Benefits

We also sponsor a defined contribution plan established pursuant to Section 401(k) of the Internal Revenue Code. Subject to certain dollar limits, employees may contribute a percentage of their salaries to the plan, and we will match a portion of each employee’s contribution. This plan is in effect for U.S.-based employees only. The expense pertaining to this plan was $1.1 million for 2016, $1.2 million for 2015 and $1.1 million for 2014.

On August 31, 1997, one of our subsidiaries ceased accruing benefits under its salary continuation plan covering certain of our Central American management personnel. At December 30, 2016 we had $5.4 million accrued for this plan, including $0.8 million in accumulated other comprehensive income (loss) related to unamortized pension gains. At January 1, 2016 we had $5.8 million accrued for this plan, including $0.8 million in accumulated other comprehensive loss related to unamortized pension gains. Net periodic pension costs were $0.1 million for the year ended December 30, 2016, $0.1 million the year ended January 1, 2016 and $0.3 million for the year ended December 26, 2014. Expected benefit payments under the plan for 2017 through 2021 total $3.6 million. For 2022 through 2026 the expected benefit payments under the plan total $2.4 million.

We sponsor a service gratuity plan covering certain of our Kenyan personnel. At December 30, 2016 we had $6.1 million accrued for this plan, including a $1.8 million in accumulated other comprehensive loss related to unamortized pension losses. At January 1, 2016 we had $5.7 million accrued for this plan, including a $1.9 million in accumulated other comprehensive loss related to unamortized pension losses. Net periodic pension costs were $1.1 million for the year ended December 30, 2016, $0.9 million for the year ended January 1, 2016 and $1.1 million for the year ended December 26, 2014. Expected benefit payments under the plan from 2017 through 2021 total $3.8 million. Benefit payments under the plan from 2022 through 2026 are expected to total $4.2 million.

We provide retirement benefits to certain employees who are not U.S.-based. Generally, benefits under these programs are based on an employee’s length of service and level of compensation. Included in retirement benefits on our consolidated balance sheets is $15.5 million at December 30, 2016 and $13.7 million at January 1, 2016. in related to these programs. The unamortized pension losses related to other non-U.S.-based plans included in accumulated other comprehensive income (loss), a component of shareholders’ equity was $2.2 million for the year ending December 30, 2016 and $1.7 million for the year ending January 1, 2016. We also offer certain post-employment benefits to former executives and have $2.7 million at December 30, 2016 and $1.7 million at January 1, 2016 in retirement benefits on our consolidated balance sheets related to these benefits.