RETIREMENT AND OTHER BENEFIT PLANS

The Company sponsors pension plans in both the United States and Canada. The Company’s domestic pension plans cover substantially all United States employees. Under the domestic plans, salaried, management and certain hourly employees’ pension benefits are based on a two-rate formula applied to each year of service. Participants receive the larger of the accrued benefit as of December 31, 2015 (based on service commencing at the date of hire and a 35-year service cap and an average annual salary for the five highest consecutive years during the last 10 year period) and the benefit calculated under the current plan provisions using pay and service from the date of hire. Generally, under the current plan provisions, a participant receives credit for one year of service for each 365 days of employment as an eligible employee with the Company commencing after the employee's date of participation in the plan, up to 30 years. A service credit of 0.825% is applied to that portion of the average annual salary for the last 10 years that does not exceed “covered compensation,” which is the 35-year average compensation subject to FICA tax based on a participant’s year of birth, and a service credit of 1.425% is applied to that portion of the average salary during those 10 years that exceeds said level.

The Company’s Canadian pension plans cover certain employees based on plan specifications. Under the Canadian plans, employees’ pension benefits are based on the employee’s highest consecutive five years of compensation during the 10 years before retirement. The Company’s funding policy for all plans is to make the minimum annual contributions required by applicable regulations. The Company also maintains an unfunded Supplemental Executive Retirement Plan (“SERP”).

In addition to providing pension benefits, the Company sponsors unfunded defined benefit postretirement life insurance plans that cover both salaried and hourly employees who became eligible for benefits by January 1, 1995. The life insurance plans provide coverage of up to $20 thousand dollars for qualifying retired employees.

Benefit Obligations

The following table sets forth changes in benefit obligations, including all domestic and Canadian plans:



	Pension Benefits						Other Postretirement Benefits
($ thousands)	2015			2014			2015			2014
Benefit obligation at beginning of year	$	362,340		$	279,964		$	1,512		$	1,119
Service cost	12,639			9,650			—			—
Interest cost	14,321			14,230			56			49
Plan participants’ contribution	11			12			9			4
Plan amendments	91			(11,671		)	—			—
Actuarial (gain) loss	(49,318		)	83,105			(31		)	483
Benefits paid	(13,490		)	(11,814		)	(135		)	(143		)
Curtailments	(120		)	—			—			—
Foreign exchange rate changes	(397		)	(1,136		)	—			—
Benefit obligation at end of year	$	326,077		$	362,340		$	1,411		$	1,512

The accumulated benefit obligation for the United States pension plans was $311.6 million and $342.6 million as of January 30, 2016 and January 31, 2015, respectively. The accumulated benefit obligation for the Canadian pension plans was $3.5 million and $4.3 million as of January 30, 2016 and January 31, 2015, respectively.



	Pension Benefits				Other Postretirement Benefits
Weighted–average assumptions used to determine benefit obligations, end of year	2015		2014		2015		2014
Discount rate	4.70	%	3.90	%	4.70	%	3.90	%
Rate of compensation increase	3.00	%	3.00	%	N/A		N/A

As of January 30, 2016, the Company is using the RP-2014 Bottom Quartile tables, projected using generational scale MP-2015, an updated projection scale issued by the Society of Actuaries in 2015, to estimate the actuarial gain or loss. Actuarial gains, related to the change in mortality tables, reduced the projected benefit obligation by approximately $7.9 million as of January 30, 2016.

During 2014, the Company announced amendments to the domestic qualified pension plan and the SERP, including certain changes to eligibility and service period requirements as well as changes to the benefit formula, including the calculation of participants' final average compensation. Certain changes became effective in January 2015, while other changes became effective in January 2016. These plan amendments increased the pension liability by $0.1 million as of January 30, 2016 and decreased the pension liability by $11.7 million as of January 31, 2015.

Plan Assets

Pension assets are managed in accordance with the prudent investor standards of the Employee Retirement Income Security Act (“ERISA”). The plan’s investment objective is to earn a competitive total return on assets, while also ensuring plan assets are adequately managed to provide for future pension obligations. This results in the protection of plan surplus and is accomplished by matching the duration of the projected benefit obligation using leveraged fixed income instruments and, while maintaining an equity commitment, managing an equity overlay strategy. The overlay strategy is intended to protect the managed equity portfolios against adverse stock market environments. The Company delegates investment management of the plan assets to specialists in each asset class and regularly monitors manager performance and compliance with investment guidelines. The Company’s overall investment strategy is to achieve a mix of approximately 97% of investments for long-term growth and 3% for near-term benefit payments with a wide diversification of asset types, fund strategies and fund managers. The target allocations for plan assets for 2015 were 70% equities and 30% debt securities. Allocations may change periodically based upon changing market conditions. Equities did not include any Company stock at January 30, 2016 or January 31, 2015.

Assets of the Canadian pension plans, which total approximately $4.0 million at January 30, 2016, were invested 61% in equity funds, 36% in bond funds and 3% in money market funds. The Canadian pension plans did not include any Company stock as of January 30, 2016 or January 31, 2015.

A financial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Refer to further discussion on the fair value hierarchy in Note 13 to the consolidated financial statements. Following is a description of the pension plan investments measured at fair value, including the general classification of such investments pursuant to the valuation hierarchy.


•	Cash and cash equivalents include cash collateral and margin as well as money market funds. The fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency and therefore are classified within Level 1 of the fair value hierarchy.


•	Investments in corporate stocks – common, U.S. government securities, mutual funds, preferred securities, real estate investment trusts and S&P 500 Index put and call options (traded on security exchanges) are classified within Level 1 of the fair value hierarchy because the fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency.


•	Interest rate swap agreements are valued at fair value based on vendor-quoted pricing for which inputs are observable and can be corroborated; therefore, these are classified within Level 2 of the fair value hierarchy.

•

The alternative investment fund, with a fair value of $10.9 million and $10.7 million as of January 30, 2016 and January 31, 2015, respectively, is an investment in a pool of long-duration domestic investment grade assets. This investment is valued at fair value based on vendor-quoted pricing for which inputs are observable and can be corroborated and therefore, are classified within Level 2 of the fair value hierarchy.


•	The unallocated insurance contract is valued at contract value, which approximates fair value; therefore, this contract is classified within Level 3 of the fair value hierarchy. The unallocated insurance contract fair value was $0.1 million as of both January 30, 2016 and January 31, 2015.

The fair values of the Company’s pension plan assets at January 30, 2016 by asset category are as follows:



				Fair Value Measurements at January 30, 2016
($ thousands)	Total			Level 1		Level 2			Level 3
Asset
Cash and cash equivalents	$	42,881		$	42,881	$	—		$	—
U.S. government securities	129,846			129,846		—			—
Mutual fund	27,662			27,662		—			—
Corporate stocks – common	171,898			171,898		—			—
Preferred securities	657			657		—			—
S&P 500 Index options	1,742			1,742		—			—
Interest rate swap agreements	(6,028		)	—		(6,028		)	—
Alternative investment fund	10,901			—		10,901			—
Unallocated insurance contract	79			—		—			79
Total	$	379,638		374,686		$	4,873		$	79

The fair values of the Company’s pension plan assets at January 31, 2015 by asset category are as follows:



			Fair Value Measurements at January 31, 2015
($ thousands)	Total		Level 1		Level 2		Level 3
Asset
Cash and cash equivalents	$	95,560	$	95,560	$	—	$	—
U.S. government securities	84,141		84,141		—		—
Mutual fund	29,240		29,240		—		—
Corporate stocks – common	184,486		184,486		—		—
S&P 500 Index options	11,731		11,731		—		—
Preferred securities	286		286		—		—
Interest rate swap agreements	7,268		—		7,268		—
Alternative investment fund	10,733		—		10,733		—
Unallocated insurance contract	89		—		—		89
Total	$	423,534	$	405,444	$	18,001	$	89

The following table sets forth changes in the fair value of plan assets, including all domestic and Canadian plans:



	Pension Benefits						Other Postretirement Benefits
($ thousands)	2015			2014			2015			2014
Fair value of plan assets at beginning of year	$	423,534		$	356,320		$	—		$	—
Actual return on plan assets	(30,091		)	79,986			—			—
Employer contributions	90			206			126			139
Plan participants’ contributions	11			12			9			4
Benefits paid	(13,490		)	(11,814		)	(135		)	(143		)
Foreign exchange rate changes	(416		)	(1,176		)	—			—
Fair value of plan assets at end of year	$	379,638		$	423,534		$	—		$	—

Funded Status

The over-funded status as of January 30, 2016 and January 31, 2015 for pension benefits was $53.6 million and $61.2 million, respectively. The under-funded status as of January 30, 2016 and January 31, 2015 for other postretirement benefits was $1.4 million and $1.5 million, respectively.

Amounts recognized in the consolidated balance sheets consist of:



	Pension Benefits						Other Postretirement Benefits
($ thousands)	2015			2014			2015			2014
Prepaid pension costs (noncurrent assets)	$	64,890		$	73,324		$	—		$	—
Accrued benefit liabilities (current liability)	(3,512		)	(2,675		)	(141		)	(142		)
Accrued benefit liabilities (noncurrent liability)	(7,817		)	(9,455		)	(1,270		)	(1,370		)
Net amount recognized at end of year	$	53,561		$	61,194		$	(1,411	)	$	(1,512	)

The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets, which includes only the Company’s SERP, were as follows:



	Projected Benefit Obligation Exceeds the Fair Value of Plan Assets				Accumulated Benefit Obligation Exceeds the Fair Value of Plan Assets


($ thousands)	2015		2014		2015		2014
End of Year
Projected benefit obligation	$	11,326	$	12,130	$	11,326	$	12,130
Accumulated benefit obligation	10,747		10,770		10,747		10,770
Fair value of plan assets	—		—		—		—

The accumulated postretirement benefit obligation exceeds assets for all of the Company’s other postretirement benefit plans.

The amounts in accumulated other comprehensive (loss) income that have not yet been recognized as components of net periodic benefit (income) cost at January 30, 2016 and January 31, 2015, and the expected amortization of the January 30, 2016 amounts as components of net periodic benefit (income) cost for fiscal year 2016 are as follows:



	Pension Benefits						Other Postretirement Benefits
($ thousands)	2015			2014			2015			2014
Components of accumulated other comprehensive (loss) income, net of tax:
Net actuarial loss (gain)	$	11,976		$	4,872		$	(947	)	$	(1,068	)
Net prior service (credit) cost	(5,673		)	(7,037		)	—			—
	$	6,303		$	(2,165	)	$	(947	)	$	(1,068	)



	Pension Benefits				Other Postretirement Benefits
($ thousands)		2016				2016
Expected amortization, net of tax:
Amortization of net actuarial loss (gain)		$	590			$	(217	)
Amortization of net prior service cost		(2,090		)		—
		$	(1,500	)		$	(217	)

Net Periodic Benefit (Income) Cost

Net periodic benefit (income) cost for 2015, 2014 and 2013 for all domestic and Canadian plans included the following components:



	Pension Benefits									Other Postretirement Benefits
($ thousands)	2015			2014			2013			2015			2014			2013
Service cost	$	12,639		$	9,650		$	10,638		$	—		$	—		$	—
Interest cost	14,321			14,230			13,241			56			49			55
Expected return on assets	(31,682		)	(24,757		)	(24,773		)	—			—			—
Amortization of:
Actuarial loss (gain)	604			201			954			(220		)	(432		)	(351		)
Prior service (credit) cost	(1,906		)	27			13			—			—			—
Curtailments	(184		)	—			—			—			—			—
Total net periodic benefit (income) cost	$	(6,208	)	$	(649	)	$	73		$	(164	)	$	(383	)	$	(296	)

Weighted-average assumptions used to determine net periodic benefit (income) cost:



	Pension Benefits						Other Postretirement Benefits
	2015		2014		2013		2015		2014		2013
Discount rate	3.90	%	5.00	%	4.50	%	3.90	%	5.00	%	4.50	%
Rate of compensation increase	3.00	%	3.00	%	3.50	%	N/A		N/A		N/A
Expected return on plan assets	8.25	%	8.25	%	8.25	%	N/A		N/A		N/A

The net actuarial loss (gain) subject to amortization is amortized on a straight-line basis over the average future service of active plan participants as of the measurement date. The prior service (credit) cost is amortized on a straight-line basis over the average future service of active plan participants benefiting under the plan at the time of each plan amendment.

The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the plan’s investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each asset class.

Expected Cash Flows

Information about expected cash flows for all pension and postretirement benefit plans follows:



	Pension Benefits
($ thousands)	Funded Plan		SERP		Total		Other Postretirement Benefits
Employer Contributions
2016 expected contributions to plan trusts	$	101	$	—	$	101	$	—
2016 expected contributions to plan participants	—		3,510		3,510		141
Expected Benefit Payments
2016	$	11,440	$	3,510	$	14,950	$	141
2017	12,207		1,174		13,381		132
2018	12,995		1,778		14,773		123
2019	13,744		945		14,689		114
2020	14,461		2,211		16,672		106
2021 – 2025	81,154		2,276		83,430		404

Defined Contribution Plans

The Company’s domestic defined contribution 401(k) plan covers salaried and certain hourly employees. Company contributions represent a partial matching of employee contributions, generally up to a maximum of 3.5% of the employee’s salary and bonus. The Company’s expense for this plan was $3.6 million in 2015, $3.0 million in 2014, and $3.4 million in 2013.

The Company’s Canadian defined contribution plan covers certain salaried and hourly employees. The Company makes contributions for all eligible employees, ranging from 3% to 5% of the employee’s salary. In addition, eligible employees may voluntarily contribute to the plan. The Company’s expense for this plan was $0.2 million in 2015, 2014 and 2013.

Deferred Compensation Plan

The Company has a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan. The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Deferred Compensation Plan of $3.4 million and $2.9 million as of January 30, 2016 and January 31, 2015, respectively, are presented in employee compensation and benefits in the accompanying consolidated balance sheets. The assets held by the trust of $3.4 million as of January 30, 2016 and $2.9 million as of January 31, 2015 are classified as trading securities within prepaid expenses and other current assets in the accompanying consolidated balance sheets, with changes in the deferred compensation charged to selling and administrative expenses in the accompanying consolidated statements of earnings.

Deferred Compensation Plan for Non-Employee Directors

Non-employee directors are eligible to participate in a deferred compensation plan, whereby deferred compensation amounts are valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the fair value (as determined based on the average of the high and low prices) of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The PSUs are payable in cash based on the number of PSUs credited to the participating director’s account, valued on the basis of the fair value at fiscal quarter-end on or following termination of the director’s service. The liabilities of the plan of $1.7 million as of January 30, 2016 and $2.1 million as of January 31, 2015 are based on 56,629 and 67,488 outstanding PSUs, respectively, and are presented in other liabilities in the accompanying consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are charged to selling and administrative expenses in the accompanying consolidated statements of earnings.