The following summarizes the company’s balance sheet related pension and other postretirement benefit plan accounts at December 28, 2019 and December 29, 2018 (amounts in thousands):

On September 28, 2018, the Board of Directors approved a resolution to terminate the Flowers Foods, Inc. Retirement Plan No. 1 (“Plan No. 1”), effective December 31, 2018. The company has commenced the plan termination process and distributed a portion of the pension plan assets as lump sum payments in January 2020 with the remaining balance to be transferred to an insurance company in the form of a nonparticipating group annuity contract during the first quarter of fiscal 2020. The total payments distributed will depend on the lump sum offer participation rate of eligible participants. Based on the estimated value of assets held in the plan, the company currently estimates that a cash contribution of approximately $17.0 million to $35.0 million will be required to fully fund the plan’s liabilities at termination. In addition, based on current assumptions, the company estimates a final non-cash settlement charge of approximately $125.0 million to $143.0 million.

The company recognizes settlement accounting charges when the ongoing lump sum payments from the plan exceed the interest cost of the plan. Settlement accounting, which accelerates recognition of a plan’s unrecognized net gain or loss, is triggered if the lump sums paid during a year exceeds the sum of the plan’s service and interest cost. The company determined it was probable a settlement would occur and paid lump sums that exceeded that threshold during our first quarter of fiscal 2018 and, as a result, recorded settlement charges in each quarter of fiscal 2018. There were no settlement charges during fiscal 2019. The table below presents the recognized settlement charges by quarter for fiscal years 2018 and 2017 (amounts in thousands):

The company voluntarily contributed $10.0 million during our first quarter of fiscal 2018, an additional $30.0 million during our second quarter of fiscal 2018, and $0.1 million during our third quarter of fiscal 2018 to Plan No. 1. A voluntary contribution of $0.6 million was made by the company to Plan No. 2 during the third quarter of fiscal 2018. There were no contributions made by the company to either plan during the first or second quarters of fiscal 2019. The company made a contribution of $2.5 million to Plan No. 2 during the third quarter of fiscal 2019. There were no contributions to Plan No. 1 during fiscal 2019.

The company has trusteed, noncontributory defined benefit pension plans covering certain current and former employees. Benefits under the company’s largest pension plan are frozen. The company continues to maintain an ongoing plan that covers a small number of certain union employees. The benefits in this plan are based on years of service and the employee’s career earnings. The qualified plans are funded at amounts deductible for income tax purposes but not less than the minimum funding required by the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Pension Protection Act of 2006 (“PPA”). The company uses a calendar year end for the measurement date since the plans are based on a calendar year end and because it approximates the company’s fiscal year end. As of December 31, 2019 and December 31, 2018, the assets of the qualified plans included certificates of deposit, marketable equity securities, mutual funds, corporate and government debt securities, other diversifying strategies and annuity contracts. The company expects pension cost of approximately $2.0 million for fiscal 2020.

The net periodic pension cost (income) for the company’s pension plans includes the following components for fiscal years 2019, 2018, and 2017 (amounts in thousands):

	Fiscal 2019			Fiscal 2018			Fiscal 2017
Service cost	$	703		$	937		$	755
Interest cost		11,930			12,513			12,852
Expected return on plan assets		(17,147	)		(18,831	)		(25,669	)
Settlement loss		—			7,781			4,649
Amortization:
Prior service cost		387			387			387
Actuarial loss		7,098			5,811			6,355
Net periodic pension cost (income)		2,971			8,598			(671	)
Other changes in plan assets and benefit obligations recognized in OCI:
Current year actuarial loss (gain)		11,277			25,492			4,119
Settlement loss		—			(7,781	)		(4,649	)
Amortization of prior service cost		(387	)		(387	)		(387	)
Amortization of actuarial loss		(7,098	)		(5,811	)		(6,355	)
Total recognized in OCI		3,792			11,513			(7,272	)
Total recognized in net periodic benefit cost (benefit) and OCI	$	6,763		$	20,111		$	(7,943	)

Actual return on plan assets for fiscal years 2019, 2018, and 2017 was $51.8 million, $2.4 million, and $42.1 million, respectively.

Approximately $7.8 million will be amortized from AOCI into net periodic benefit cost in fiscal 2020 relating to the company’s pension plans. The funded status and the amounts recognized in the Consolidated Balance Sheets for the company’s pension plans are as follows (amounts in thousands):

	December 28, 2019			December 29, 2018
Change in benefit obligation:
Benefit obligation at beginning of year	$	367,778		$	393,952
Service cost		703			937
Interest cost		11,930			12,513
Actuarial loss		45,979			9,098
Benefits paid		(29,484	)		(23,843	)
Settlements		—			(24,879	)
Benefit obligation at end of year	$	396,906		$	367,778
Change in plan assets:
Fair value of plan assets at beginning of year	$	335,540		$	340,854
Actual return on plan assets		51,848			2,437
Employer contribution		2,771			40,971
Benefits paid		(29,484	)		(23,843	)
Settlements		—			(24,879	)
Fair value of plan assets at end of year	$	360,675		$	335,540
Funded status, end of year:
Fair value of plan assets	$	360,675		$	335,540
Benefit obligations		(396,906	)		(367,778	)
Unfunded status and amount recognized at end of year	$	(36,231	)	$	(32,238	)
Amounts recognized in the balance sheet:
Current liability		(28,711	)		(258	)
Noncurrent liability		(7,520	)		(31,980	)
Amount recognized at end of year	$	(36,231	)	$	(32,238	)
Amounts recognized in AOCI:
Net actuarial loss before taxes	$	142,082		$	137,903
Prior service cost before taxes		4,653			5,039
Amount recognized at end of year	$	146,735		$	142,942

Accumulated benefit obligation at end of year	$	395,676		$	366,709

Assumptions used in accounting for the company’s pension plans at each of the respective fiscal years ending are as follows:

	Fiscal 2019			Fiscal 2018			Fiscal 2017
Weighted average assumptions used to determine benefit obligations:
Measurement date	12/31/2019			12/31/2018			12/31/2017
Discount rate		2.54	%		3.41	%		3.58	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%
Weighted average assumptions used to determine net periodic benefit cost/(income):
Measurement date	1/1/2019			1/1/2018			1/1/2017
Discount rate		3.41	%		3.58	%		4.00	%
Expected return on plan assets		5.34	%		5.34	%		8.00	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%

In developing the expected long-term rate of return on plan assets at each measurement date, the company considers the plan assets’ historical actual returns, targeted asset allocations, and the anticipated future economic environment and long-term performance of individual asset classes, based on the company’s investment strategy. While appropriate consideration is given to recent and historical investment performance, the assumption represents management’s best estimate of the long-term prospective return. Further, pension costs do not include an explicit expense assumption, and therefore the return on assets rate reflects the long-term expected return, net of expenses.

The plan administrator separated the assets of Plan No. 1 and Plan No. 2 at December 31, 2018 and manages the assets with different investment objectives. Historically, these assets were collectively managed. The termination path for Plan No. 1 results in a short term conservative investment outlook while Plan No. 2 is still managed with a long-term investment outlook.

Based on these factors the expected long-term rate of return assumption for Plan No. 1 was set at 4.8% for fiscal 2020. The expected long-term rate of return assumption for Plan No. 2 was set at 7.1% for fiscal 2020. The average annual return on the plan assets over the last 15 years (while the assets were collectively managed) was approximately 7.1% (net of expenses).

Effective January 1, 2014, the finance committee of the Board of Directors delegated its fiduciary and other responsibilities with respect to the plans to the newly established investment committee. The investment committee, which consists of certain members of management, establishes investment guidelines and strategies and regularly monitors the performance of the plans’ assets. The investment committee is responsible for executing these strategies and investing the pension assets in accordance with ERISA and fiduciary standards. The investment objective of the pension plans is to preserve the plans’ capital and maximize investment earnings within acceptable levels of risk and volatility. The investment committee meets on a regular basis with its investment advisors to review the performance of the plans’ assets. Based upon performance and other measures and recommendations from its investment advisors, the investment committee rebalances the plans’ assets to the targeted allocation when considered appropriate. The fair values of all of the company pension plan assets at December 31, 2019 and December 31, 2018, by asset class are as follows (amounts in thousands):

	Fair value of Pension Plan Assets as of December 31, 2019
Asset Class	Quoted prices in active markets for identical assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Short term investments and cash	$	103,212	$	3,798	$	—	$	107,010
Common stocks:
International common stocks		6,844		—		—		6,844
U.S. common stocks		11,990		—		—		11,990
Fixed income securities:
U.S. government bonds		14,911		—		—		14,911
U.S. government agency bonds		—		3,806		—		3,806
U.S. corporate bonds		—		150,840		—		150,840
International corporate bonds		—		63,050		—		63,050
Pending transactions(2)		—		—		—		(13	)
Other assets and (liabilities)(2)		—		—		—		(52	)
Accrued (expenses) income(2)		—		—		—		2,289
Total	$	136,957	$	221,494	$	—	$	360,675

	Fair value of Pension Plan Assets as of December 31, 2018
Asset Class	Quoted prices in active markets for identical assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Short term investments and cash	$	—	$	34,118	$	—	$	34,118
Fixed income securities:
U.S. government bonds		—		4,581		—		4,581
U.S. government agency bonds		—		3,561		—		3,561
International corporate bonds		—		53,709		—		53,709
U.S. corporate bonds		—		166,670		—		166,670
Other types of investments measured at contract value:
Guaranteed insurance contracts(1)		—		—		—		10,853
Pending transactions(2)		—		—		—		59,452
Other assets and (liabilities)(2)		—		—		—		2,636
Accrued (expenses) income(2)		—		—		—		(40	)
Total	$	—	$	262,639	$	—	$	335,540

The company’s investment policy includes various guidelines and procedures designed to ensure the plan’s assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. The plan asset allocation as of the measurement dates December 31, 2019 and December 31, 2018, and target asset allocations for fiscal year 2020 are as follows for Plan No. 1:

	Target Allocation		Percentage of Plan Assets at the Measurement Date (As percent)
Asset Category	2020		2019		2018
Equity securities		—		—		2.5
Fixed income securities	90-100%			100.0		73.7
Other diversifying strategies(1)		—		—		15.0
Short term investments and cash	0-10%			—		8.8
Total				100.0		100.0

The plan asset allocation as of the measurement dates December 31, 2019 and December 31, 2018, and target asset allocations for fiscal year 2020 are as follows for Plan No. 2:

	Target Allocation	Percentage of Plan Assets at the Measurement Date (As percent)
Asset Category	2020	2019		2018
Equity securities	0-80%		70.0		—
Fixed income securities	20-100%		28.0		—
Short term investments and cash	0-10%		2.0		—
Total			100.0		—

Equity securities at December 31, 2017 include 2,030,363 shares of the company’s common stock in the amount of $39.2 million (11.5% of total plan assets). The plan sold all the company’s common stock during fiscal 2018. The total proceeds were $41.0 million to the plans.

The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans’ actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.

Company contributions to qualified and nonqualified plans are as follows (amounts in thousands):

All contributions are made in cash. The required contributions made during fiscal 2019 include $0.3 million in nonqualified pension benefits paid from corporate assets and a required contribution to Plan No. 2. The discretionary contributions of $1.7 million made to qualified plans during fiscal 2019 were not required to be made by the minimum funding requirements of ERISA, but the company believed, due to its strong cash flow and financial position, this was an appropriate time at which to make the contribution to reduce the impact of future contributions. During fiscal 2020, the company expects to make a $30.0 million contribution to Plan No. 1, equal to the estimated cash amount required to settle the plan. In addition, the company expects to make a $2.5 million contribution to Plan No. 2 and expects to pay $0.3 million in nonqualified pension benefits from corporate assets. These amounts represent estimates that are based on assumptions that are subject to change.

The following are benefits paid under the plans (including settlements) during fiscal years 2019, 2018, and 2017 and expected to be paid from fiscal 2020 through fiscal 2029. Estimated future payments include qualified pension benefits that will be paid from the plans’ assets (including potential payments related to the termination of Plan No. 1 discussed above) and nonqualified pension benefits that will be paid from corporate assets (amounts in thousands):

Year	Pension Benefits
2017	$	38,776	*
2018	$	48,722	^
2019	$	29,484	+
Estimated Future Payments:
2020	$	368,851
2021	$	2,813
2022	$	2,942
2023	$	2,755
2024	$	2,675
2025 – 2029	$	10,878

The company sponsors postretirement benefit plans that provide health care and life insurance benefits to retirees who meet certain eligibility requirements. Generally, this includes employees with at least 10 years of service who have reached age 55 and participate in a Flowers retirement plan. Retiree medical coverage is provided for a period of three to five years, depending on the participant’s age and service at retirement. Participant premiums are determined using COBRA premium levels. Retiree life insurance benefits are offered to a closed group of retirees. The company also sponsors a medical, dental, and life insurance benefits plan to a limited and closed group of participants.

The company delivers retiree medical and dental benefits for Medicare eligible retirees through a health-care reimbursement account. The company no longer sponsors a medical plan for Medicare eligible retirees and does not file for a Medicare Part D subsidy.

The net periodic benefit (income) cost for the company’s postretirement benefit plans includes the following components for fiscal years 2019, 2018, and 2017 (amounts in thousands):

	Fiscal 2019			Fiscal 2018			Fiscal 2017
Service cost	$	283		$	288		$	256
Interest cost		297			234			227
Amortization:
Prior service credit		(41	)		(212	)		(212	)
Actuarial gain		(276	)		(431	)		(497	)
Total net periodic benefit cost (income)		263			(121	)		(226	)
Other changes in plan assets and benefit obligations recognized in OCI:
Current year actuarial (gain) loss		(575	)		1,036			188
Amortization of actuarial gain		276			431			497
Amortization of prior service credit		41			212			212
Total recognized in OCI		(258	)		1,679			897
Total recognized in net periodic benefit cost and OCI	$	5		$	1,558		$	671

Approximately $(0.3) million will be amortized from AOCI into net periodic benefit cost in fiscal year 2020 relating to the company’s postretirement benefit plans.

The unfunded status and the amounts recognized in the Consolidated Balance Sheets for the company’s postretirement benefit plans are as follows (amounts in thousands):

	December 28, 2019			December 29, 2018
Change in benefit obligation:
Benefit obligation at beginning of year	$	8,194		$	7,943
Service cost		283			288
Interest cost		297			234
Participant contributions		662			823
Actuarial (gain) loss		(575	)		1,037
Benefits paid		(1,384	)		(2,131	)
Benefit obligation at end of year	$	7,477		$	8,194
Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions		722			1,308
Participant contributions		662			823
Benefits paid		(1,384	)		(2,131	)
Fair value of plan assets at end of year	$	—		$	—
Funded status, end of year:
Fair value of plan assets	$	—		$	—
Benefit obligations		(7,477	)		(8,194	)
Unfunded status and amount recognized at end of year	$	(7,477	)	$	(8,194	)
Amounts recognized in the balance sheet:
Current liability	$	(669	)	$	(1,025	)
Noncurrent liability		(6,808	)		(7,169	)
Amount recognized at end of year	$	(7,477	)	$	(8,194	)
Amounts recognized in AOCI:
Net actuarial gain before taxes	$	(2,677	)	$	(2,379	)
Prior service credit before taxes		(9	)		(50	)
Amounts recognized in AOCI	$	(2,686	)	$	(2,429	)

Assumptions used in accounting for the company’s postretirement benefit plans at each of the respective fiscal years ending are as follows:

	Fiscal 2019			Fiscal 2018			Fiscal 2017
Weighted average assumptions used to determine benefit obligations:
Measurement date	12/31/2019			12/31/2018			12/31/2017
Discount rate		3.01	%		4.07	%		3.36	%
Health care cost trend rate used to determine benefit obligations:
Initial rate		6.50	%		6.50	%		6.00	%
Ultimate rate		5.00	%		5.00	%		5.00	%
Year trend reaches the ultimate rate	2026			2025			2022
Weighted average assumptions used to determine net periodic cost:
Measurement date	1/1/19			1/1/2018			1/1/2017
Discount rate		4.07	%		3.36	%		3.66	%
Health care cost trend rate used to determine net periodic cost:
Initial rate		6.50	%		6.00	%		6.50	%
Ultimate rate		5.00	%		5.00	%		5.00	%
Year trend reaches the ultimate rate	2025			2022			2023

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects for fiscal years 2019, 2018, and 2017 (amounts in thousands):

	One-Percentage-Point Decrease									One-Percentage-Point Increase
	For the Year Ended									For the Year Ended
	Fiscal 2019			Fiscal 2018			Fiscal 2017			Fiscal 2019		Fiscal 2018		Fiscal 2017
Effect on total of service and interest cost	$	(54	)	$	(52	)	$	(47	)	$	63	$	61	$	55
Effect on postretirement benefit obligation	$	(460	)	$	(467	)	$	(473	)	$	519	$	524	$	533

Company contributions to postretirement plans are as follows (amounts in thousands):

The table above reflects only the company’s share of the benefit cost. Since the company no longer receives reimbursement for Medicare Part D subsidies, the entire $0.7 million expected funding for postretirement benefit plans during 2020 will be required to pay for benefits. Contributions by participants to postretirement benefits were $0.7 million, $0.8 million, and $0.3 million for fiscal years 2019, 2018, and 2017, respectively.

The following are benefits paid by the company during fiscal years 2019, 2018, and 2017 and expected to be paid from fiscal 2020 through fiscal 2029. All benefits are expected to be paid from the company’s assets (amounts in thousands):

	Postretirement benefits
Year	Employer gross contribution
2017	$	376
2018	$	1,308
2019	$	722
Estimated Future Payments:
2020	$	675
2021	$	653
2022	$	638
2023	$	617
2024	$	644
2025 – 2029	$	3,240

The company contributes to various multiemployer pension plans. Benefits provided under the multiemployer pension plans are generally based on years of service and employee age. Expense under these plans was $1.1 million for fiscal 2019, $1.0 million for fiscal 2018, and $2.1 million for fiscal 2017.

The company contributes to several multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover various union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans. Assets contributed to the multiemployer 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 may be borne by the remaining participating employers. If we choose to stop participating in some of these multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. None of the contributions to the pension funds was in excess of 5% or more of the total contributions for plan years 2019, 2018, and 2017. There are no contractually required minimum contributions to the plans as of December 28, 2019.

On August 18, 2017, the union participants of the Bakery and Confectionary Union and Industry International Pension Fund (the “MEPP Fund”) at our Lakeland, Florida plant voted to withdraw from the MEPP Fund in the most recent collective bargaining agreement. The withdrawal was effective, and the union participants were eligible to participate in the 401(k) plan, on November 1, 2017. During the third quarter of fiscal 2017, the company recorded a liability of $15.2 million related to the withdrawal from the MEPP Fund. During the first quarter of fiscal 2018, the company recorded an additional liability of $2.3 million for the final settlement amount of the withdrawal liability. The withdrawal liability was computed as the net present value of 20 years of monthly payments derived from the company’s share of unfunded vested benefits. The company began making payments during the first quarter of fiscal 2018. While this is our best estimate of the ultimate cost of the withdrawal from the MEPP Fund, additional withdrawal liability may be incurred in the event of a mass withdrawal, as defined by statute following our complete withdrawal. Transition payments, including related tax payments, were made on November 3, 2017 to, and for the benefit of, union participants as part of the collective bargaining agreement. An additional $3.1 million was recorded for these transition payments. The withdrawal liability charge and the transition payments were recorded in the multi-employer pension plan withdrawal costs line item on our Consolidated Statements of Income. The liability on December 30, 2017 was recorded in other accrued current liabilities on the Consolidated Balance Sheets. We paid $0.2 million during the first quarter of fiscal 2018 and the balance was paid early in the second quarter of fiscal 2018.

The company’s participation in these multiemployer plans for fiscal 2019 is outlined in the table below. The EIN/Pension Plan Number column provides the Employer Identification Number (“EIN”) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent PPA zone status available in 2019 and 2018 is for the plan’s year-end at December 31, 2019 and December 31, 2018, respectively. The zone status is based on information that the company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 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 financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreements to which the plans are subject. Finally, there have been no significant changes that affect the comparability of contributions.

In December 2014, the Consolidated and Further Continuing Appropriations Act of 2015 (the “2015 Appropriations Act”) was signed into law and materially amended the PPA funding rules. In general, the PPA funding rules were made more flexible in order to make more manageable the steps necessary for multi-employer plans to become or remain economically viable in the future. While in previous years we have been informed that several of the multi-employer pension plans to which our subsidiaries contribute have been labeled with a “critical” or “endangered” status as defined by the PPA, the changes made by the 2015 Appropriations Act will materially impact, on a going forward basis, these prior funding status assessments. In any event, it is unclear at this time what impact, if any, the 2015 Appropriations Act will have on our future obligations to the multi-employer pension plans in which we participate.

				Pension Protection Act			Contributions (Amounts in
				Zone Status			thousands)							Expiration Date of
		Pension				FIP/RP Status	2019		2018		2017		Surcharge	Collective Bargaining
Pension Fund	EIN	Plan No.		2019	2018	Pending/Implemented	($)		($)		($)		Imposed	Agreement
IAM National Pension Fund	51-6031295		002	Red	Green	Yes		111		108		139	Yes	4/30/2021
Retail, Wholesale and Department Store International Union and Industry Pension Fund	63-0708442		001	Red	Red	Yes		160		159		157	No	8/14/2021
Western Conference of Teamsters Pension Trust	91-6145047		001	Green	Green	No		244		293		276	No	2/4/2022
BC&T International Pension Fund*	52-6118572		001	*	*	*		—		220		965	*	10/25/2020

The Flowers Foods 401(k) Retirement Savings Plan covers substantially all of the company’s employees who have completed certain service requirements. During fiscal years 2019, 2018, and 2017, the total cost and employer contributions were as follows (amounts in thousands):