The following summarizes the company’s balance sheet related pension and other postretirement benefit plan accounts at January 1, 2022 and January 2, 2021 (amounts in thousands):

The company made a contribution of $2.5 million and $7.6 million to the Flowers Foods, Inc. Retirement Plan No. 2 (“Plan No. 2”) during the third quarter of Fiscal 2019 and Fiscal 2020, respectively. There were no contributions to the Flowers Foods, Inc. Plan No. 1 (“Plan No. 1”) during Fiscal 2019 or Fiscal 2020, and there were no contributions made by the company to any plan during Fiscal 2021.

The company maintains a trusted, noncontributory defined benefit pension 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. This qualified plan is 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”). Benefits under the company’s largest pension plan were fully terminated and transferred to an insurance company in the form of a nonparticipating group annuity contract during the first quarter of Fiscal 2020. No cash contributions were required to support the transaction, but the company recorded non-cash settlement and curtailment charges of $108.8 million in Fiscal 2020.

The company recognizes settlement accounting charges, which accelerates recognition of a plan’s unrecognized net gain or loss, when the ongoing lump sum payments from the plan exceed the sum of the plan’s service cost and interest cost. During the fourth quarter of Fiscal 2021, the company determined it was probable a settlement would occur and paid lump sums that exceeded that threshold and, as a result, the company recorded a settlement charge of $0.4 million in the fourth quarter of Fiscal 2021.

The company uses a calendar year end for the measurement date since the plans are based on a calendar year and because it approximates the company’s fiscal year end. As of December 31, 2021 and December 31, 2020, 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 $0.7 million for Fiscal 2022.

The net periodic pension cost (income) for the company’s pension plans includes the following components for Fiscal 2021, 2020, and 2019 (amounts in thousands):

	Fiscal 2021			Fiscal 2020			Fiscal 2019
Service cost	$	971		$	854		$	703
Interest cost		758			2,108			11,930
Expected return on plan assets		(1,867	)		(3,933	)		(17,147	)
Settlement loss		403			104,473			—
Curtailment loss		—			4,284			—
Amortization:
Prior service cost		57			115			387
Actuarial loss		742			1,747			7,098
Net periodic pension cost (income)		1,064			109,648			2,971
Other changes in plan assets and benefit obligations recognized in OCI:
Current year actuarial (gain) loss		(1,288	)		(25,515	)		11,277
Settlement loss		(403	)		(104,473	)		—
Curtailment loss		—			(4,284	)		—
Amortization of prior service cost		(57	)		(115	)		(387	)
Amortization of actuarial loss		(742	)		(1,747	)		(7,098	)
Total recognized in OCI		(2,490	)		(136,134	)		3,792
Total recognized in net periodic (benefit) cost and OCI	$	(1,426	)	$	(26,486	)	$	6,763

Actual return on plan assets for Fiscal 2021, 2020, and 2019 was $1.9 million, $15.8 million, and $51.8 million, respectively.

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

	January 1, 2022			January 2, 2021
Change in benefit obligation:
Benefit obligation at beginning of year	$	37,650		$	396,906
Service cost		971			854
Interest cost		758			2,108
Actuarial gain		(1,228	)		(13,657	)
Benefits paid		(1,662	)		(7,762	)
Settlements		(1,699	)		(340,799	)
Benefit obligation at end of year	$	34,790		$	37,650
Change in plan assets:
Fair value of plan assets at beginning of year	$	34,750		$	360,675
Actual return on plan assets		1,929			15,790
Employer contribution		271			7,871
Benefits paid		(1,662	)		(7,762	)
Transfer payments		—			(1,025	)
Settlements		(1,699	)		(340,799	)
Fair value of plan assets at end of year	$	33,589		$	34,750
Funded status, end of year:
Fair value of plan assets	$	33,589		$	34,750
Benefit obligations		(34,790	)		(37,650	)
Unfunded status and amount recognized at end of year	$	(1,201	)	$	(2,900	)
Amounts recognized in the balance sheet:
Noncurrent asset	$	1,281		$	—
Current liability		(258	)		(259	)
Noncurrent liability		(2,224	)		(2,641	)
Amount recognized at end of year	$	(1,201	)	$	(2,900	)
Amounts recognized in AOCI:
Net actuarial loss before taxes	$	7,913		$	10,347
Prior service cost before taxes		198			255
Amount recognized at end of year	$	8,111		$	10,602

Accumulated benefit obligation at end of year	$	32,950		$	36,104

The actuarial gain/(loss) on defined benefit obligations of the employer due to experience, including any assumption changes, different from assumed, and the reasons for such (gain)/loss, can be found in the table below for Fiscal 2021, 2020 and 2019 (amounts in thousands).

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

	Fiscal 2021			Fiscal 2020			Fiscal 2019
Weighted average assumptions used to determine benefit obligations:
Measurement date	12/31/2021			12/31/2020			12/31/2019
Discount rate		3.06	%		2.78	%		2.54	%
Rate of compensation increase		3.00	%		3.00	%		3.00	%
Weighted average assumptions used to determine net periodic benefit cost/(income):
Measurement date	1/1/2021			1/1/2020			1/1/2019
Discount rate		2.78	%		2.54	%		3.41	%
Expected return on plan assets		5.70	%		4.97	%		5.34	%
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.

Based on these factors the expected long-term rate of return assumption for Plan No. 2 was set at 5.9% for Fiscal 2022. The average annual return on the plan assets over the last 15 years (while the assets were collectively managed) was approximately 6.3% (net of expenses).

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, 2021 and December 31, 2020, by asset class are as follows (amounts in thousands):

	Fair value of Pension Plan Assets as of December 31, 2021
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	$	453	$	—	$	—	$	453
Common stocks:
International common stocks		4,708		—		—		4,708
U.S. common stocks		8,177		—		—		8,177
Fixed income securities:
U.S. government bonds		13,514		—		—		13,514
U.S. government agency bonds		—		—		—		—
U.S. corporate bonds		6,737		—		—		6,737
Pending transactions(*)		—		—		—		—
Accrued (expenses) income(*)		—		—		—		—
Total	$	33,589	$	—	$	—	$	33,589

	Fair value of Pension Plan Assets as of December 31, 2020
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	$	546	$	—	$	—	$	546
Common stocks:
International common stocks		5,223		—		—		5,223
U.S. common stocks		8,587		—		—		8,587
Fixed income securities:
U.S. government bonds		14,577		—		—		14,577
U.S. government agency bonds		—		—		—		—
U.S. corporate bonds		5,877		—		—		5,877
International corporate bonds		—		—		—		—
Pending transactions(*)		—		—		—		—
Other assets and (liabilities)(*)		—		—		—		(35	)
Accrued (expenses) income(*)		—		—		—		(25	)
Total	$	34,810	$	—	$	—	$	34,750

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, 2021 and December 31, 2020, and target asset allocations for Fiscal 2022 are as follows for Plan No. 2:

	Target Allocation	Percentage of Plan Assets at the Measurement Date (As percent)
Asset Category	2022	2021		2020
Equity securities	0-80%		38.0		40.0
Fixed income securities	20-100%		60.0		59.0
Short term investments and cash	0-10%		2.0		1.0
Total			100.0		100.0

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 2021 include $0.3 million in nonqualified pension benefits paid from corporate assets. There were no contributions made to the qualified plans during Fiscal 2021. During Fiscal 2022, the company expects to pay $0.3 million in nonqualified pension benefits from corporate assets. There are no expected contributions to Plan No. 2 that are required under ERISA and the PPA during Fiscal 2022; however, the company expects to make a $1.0 million discretionary contribution to Plan No. 2 in Fiscal 2022. 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 2021, 2020, and 2019 and expected to be paid from Fiscal 2022 through Fiscal 2031. Estimated future payments include qualified pension benefits that will be paid from the plans’ assets and nonqualified pension benefits that will be paid from corporate assets (amounts in thousands):

Year	Pension Benefits
2019	$	29,484	*
2020	$	348,561	^
2021	$	3,361	+
Estimated Future Payments:
2022	$	4,534
2023	$	3,027
2024	$	2,814
2025	$	2,404
2026	$	2,150
2027 – 2031	$	9,423

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 60 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 2021, 2020, and 2019 (amounts in thousands):

	Fiscal 2021			Fiscal 2020			Fiscal 2019
Service cost	$	337		$	285		$	283
Interest cost		119			194			297
Amortization:
Prior service credit		(3	)		(4	)		(41	)
Actuarial gain		(211	)		(300	)		(276	)
Total net periodic benefit cost (income)		242			175			263
Other changes in plan assets and benefit obligations recognized in OCI:
Current year actuarial loss (gain)		238			643			(575	)
Current year prior service credit		(2,214	)		—			—
Amortization of actuarial gain		211			300			276
Amortization of prior service credit		3			4			41
Total recognized in OCI		(1,762	)		947			(258	)
Total recognized in net periodic benefit cost and OCI	$	(1,520	)	$	1,122		$	5

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):

	January 1, 2022			January 2, 2021
Change in benefit obligation:
Benefit obligation at beginning of year	$	8,023		$	7,477
Service cost		337			285
Interest cost		119			194
Participant contributions		453			573
Actuarial loss		238			642
Plan amendments		(2,214	)		—
Benefits paid		(1,384	)		(1,148	)
Benefit obligation at end of year	$	5,572		$	8,023
Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions		931			575
Participant contributions		453			573
Benefits paid		(1,384	)		(1,148	)
Fair value of plan assets at end of year	$	—		$	—
Funded status, end of year:
Fair value of plan assets	$	—		$	—
Benefit obligations		(5,572	)		(8,023	)
Unfunded status and amount recognized at end of year	$	(5,572	)	$	(8,023	)
Amounts recognized in the balance sheet:
Current liability	$	(547	)	$	(615	)
Noncurrent liability		(5,025	)		(7,408	)
Amount recognized at end of year	$	(5,572	)	$	(8,023	)
Amounts recognized in AOCI:
Net actuarial gain before taxes	$	(1,286	)	$	(1,735	)
Prior service credit before taxes		(2,216	)		(5	)
Amounts recognized in AOCI	$	(3,502	)	$	(1,740	)

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

	Fiscal 2021			Fiscal 2020			Fiscal 2019
Weighted average assumptions used to determine benefit obligations:
Measurement date	12/31/2021			12/31/2020			12/31/2019
Discount rate		2.60	%		2.11	%		3.01	%
Health care cost trend rate used to determine benefit obligations:
Initial rate		6.25	%		6.50	%		6.50	%
Ultimate rate		5.00	%		5.00	%		5.00	%
Year trend reaches the ultimate rate	2027			2027			2026
Weighted average assumptions used to determine net periodic cost:
Measurement date	1/1/21			1/1/20			1/1/19
Discount rate		2.11	%		3.01	%		4.07	%
Health care cost trend rate used to determine net periodic cost:
Initial rate		6.50	%		6.50	%		6.50	%
Ultimate rate		5.00	%		5.00	%		5.00	%
Year trend reaches the ultimate rate	2027			2026			2025

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 $0.5 million expected funding for postretirement benefit plans during 2022 will be required to pay for benefits. Contributions by participants to postretirement benefits were $0.5 million, $0.6 million, and $0.7 million for Fiscal 2021, 2020, and 2019, respectively.

The following are benefits paid by the company during Fiscal 2021, 2020, and 2019 and expected to be paid from Fiscal 2022 through Fiscal 2031. All benefits are expected to be paid from the company’s assets (amounts in thousands):

	Postretirement benefits
Year	Employer gross contribution
2019	$	722
2020	$	575
2021	$	931
Estimated Future Payments:
2022	$	548
2023	$	507
2024	$	465
2025	$	486
2026	$	505
2027 – 2031	$	2,355

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 $1.0 million for Fiscal 2021, $1.2 million for Fiscal 2020, and $1.1 million for Fiscal 2019.

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 2021, 2020, and 2019. There are no contractually required minimum contributions to the plans as of January 1, 2022.

On September 22, 2021, the union participants of the Retail, Wholesale and Department Store Union Fund (the “Fund”) at our Birmingham, Alabama plant voted to withdraw from the 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 December 1, 2021. During the third quarter of Fiscal 2021, the company recorded a liability of $2.1 million related to the withdrawal from the Fund. 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. While this is our best estimate of the ultimate cost of the withdrawal from this Fund, additional withdrawal liability may be incurred based on the final Fund assessment or in the event of a mass withdrawal, as defined by statute, occurring anytime within the next three years following our complete withdrawal. Additionally, the company recorded a liability of $1.2 million related to

transition payments, including related tax payments, for the benefit of union participants as part of the collective bargaining agreement. The withdrawal liability charge and the transition payments are recorded in the multi-employer pension plan withdrawal costs line item on our Consolidated Statements of Income. The transition payments were paid during the fourth quarter of Fiscal 2021. The remaining liability associated with the withdrawal is recorded in other accrued current liabilities on the Consolidated Balance Sheets.

The company’s participation in these multiemployer plans for Fiscal 2021 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 2021 and 2020 is for the plan’s year-end at December 31, 2021 and December 31, 2020, 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	2021		2020		2019		Surcharge	Collective Bargaining
Pension Fund	EIN	Plan No.		2021	2020	Pending/Implemented	($)		($)		($)		Imposed	Agreement
IAM National Pension Fund	51-6031295		002	Red	Red	Yes		136		153		111	Yes	4/29/2022
Retail, Wholesale and Department Store International Union and Industry Pension Fund	63-0708442		001	Red	Red	Yes		211		157		160	No	*
Western Conference of Teamsters Pension Trust ^	91-6145047		001	Green	Green	No		266		349		244	No	2/4/2022

The Flowers Foods 401(k) Retirement Savings Plan covers substantially all of the company’s employees who have completed certain service requirements. During Fiscal 2021, 2020, and 2019, the total cost and employer contributions were as follows (amounts in thousands):