Employee Benefit Plans

12 Months Ended

Dec. 30, 2017

(14) Employee Benefit Plans

Defined Contribution Plan—The Company sponsors employee 401(k) savings plans for its employees, including certain union employees. The plans provide for various required and discretionary Company matches of employees’ eligible compensation contributed to the plans. The expense for the defined contribution plans was $9.3 million, $8.6 million and $7.1 million for the years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively.

Defined Benefit and Other Postretirement Benefits Plans—The Company’s subsidiary, Continental Cement, sponsors two noncontributory defined benefit pension plans for hourly and salaried employees. The salaried plan is closed to new participants and benefits are frozen. The hourly plan is also frozen except that new hourly participants from the Davenport, Iowa location accrue new benefits in the hourly plan. As a result of the collective bargaining unit negotiations in 2017, the hourly defined benefit pension plan was amended to stop future benefit accruals for the Davenport employees effective December 31, 2017. Pension benefits for eligible hourly employees are based on a monthly pension factor for each year of credited service. Pension benefits for eligible salaried employees are generally based on years of service and average eligible compensation.

Continental Cement also sponsors two unfunded healthcare and life insurance benefits plans for certain eligible retired employees. Effective January 1, 2014, the plan covering employees of the Hannibal, Missouri location was amended to eliminate all future retiree health and life coverage for current employees. During 2015, Continental Cement adopted one new unfunded healthcare plan to provide benefits prior to Medicare eligibility for certain hourly employees of the Davenport, Iowa location.

The funded status of the pension and other postretirement benefit plans is recognized in the consolidated balance sheets as the difference between the fair value of plan assets and the benefit obligations. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (“PBO”) and for the healthcare and life insurance benefits plans, the benefit obligation is the accumulated postretirement benefit obligation (“APBO”). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. However, since the plans’ participants are not subject to future compensation increases, the plans’ PBO equals the accumulated benefit obligation (“ABO”). The APBO represents the actuarial present value of postretirement benefits attributed to employee services already rendered. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. The measurement of the benefit obligations are based on the Company’s estimates and actuarial valuations. These valuations reflect the terms of the plan and use participant-specific information, such as compensation, age and years of service, as well as certain assumptions that require significant judgment, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest-crediting rates and mortality rates.

The Company uses December 31 as the measurement date for its defined benefit pension and other postretirement benefit plans.

Obligations and Funded Status—The following information is as of December 31, 2017 and December 31, 2016 and for the years ended December 31, 2017, December 31, 2016 and December 31, 2015:


	2017				2016
	Pension		Healthcare		Pension		Healthcare
	benefits		& Life Ins.		benefits		& Life Ins.
Change in benefit obligations:
Beginning of period	$	27,608	$	12,770	$	27,914	$	13,458
Service cost		285		184		279		230
Interest cost		998		365		1,049		470
Actuarial loss (gain)		1,182		(338)		22		(682)
Curtailments		(430)
Change in plan provision		—		(2,325)		—		65
Benefits paid		(1,659)		(863)		(1,656)		(771)
End of period	$	27,984	$	9,793	$	27,608	$	12,770

Change in fair value of plan assets:
Beginning of period	$	18,395	$	—	$	18,336	$	—
Actual return on plan assets		1,415				719
Employer contributions		861		863		996		771
Benefits paid		(1,659)		(863)		(1,656)		(771)
End of period	$	19,012	$	—	$	18,395	$	—

Funded status of plans	$	(8,972)	$	(9,793)	$	(9,213)	$	(12,770)
Current liabilities	$	—	$	(702)	$	—	$	(844)
Noncurrent liabilities		(8,972)		(9,091)		(9,213)		(11,926)
Liability recognized	$	(8,972)	$	(9,793)	$	(9,213)	$	(12,770)

Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	9,341	$	2,285	$	9,248	$	3,060
Prior service cost		—		(2,413)		—		(1,968)
Total amount recognized	$	9,341	$	(128)	$	9,248	$	1,092

The amount recognized in accumulated other comprehensive income (“AOCI”) is the actuarial loss (credit) and prior service cost, which has not yet been recognized in periodic benefit cost. At December 30, 2017, the actuarial loss (credit) and prior service cost (credit) expected to be amortized from AOCI to benefit cost in 2018 is $0.3 million and $(0.2) million for the pension and postretirement obligations, respectively.


	2017				2016				2015
	Pension		Healthcare		Pension		Healthcare		Pension		Healthcare
	benefits		& Life Ins.		benefits		& Life Ins.		benefits		& Life Ins.
Amounts recognized in other comprehensive (income) loss:
Net actuarial gain (loss)	$	1,068	$	(338)	$	688	$	(682)	$	(16)	$	(1,720)
Prior service cost		—		(572)		—		64		—		—
Amortization of prior year service cost		—		168		—		174		—		174
Curtailment benefit		(429)		—		—		—		—		—
Amortization of gain		(547)		(64)		(463)		(207)		(326)		(235)
Adjustment to plan benefits		—		(414)		—		—		—		—
Total amount recognized	$	92	$	(1,220)	$	225	$	(651)	$	(342)	$	(1,781)

Components of net periodic benefit cost:
Service cost	$	285	$	184	$	279	$	230	$	159	$	149
Interest cost		998		365		1,049		470		1,041		447
Amortization of gain		547		64		463		207		326		235
Expected return on plan assets		(1,302)		—		(1,386)		—		(1,385)		—
Amortization of prior service credit		—		(168)		—		(174)		—		(174)
Net periodic benefit cost	$	528	$	445	$	405	$	733	$	141	$	657

Assumptions—Weighted-average assumptions used to determine the benefit obligations as of year-end 2017 and 2016 are:


	2017		2016
		Healthcare		Healthcare
	Pension benefits	& Life Ins.	Pension benefits	& Life Ins.
Discount rate	3.23% - 3.37%	3.20% - 3.25%	3.61% - 3.81%	3.32% - 3.65%
Expected long-term rate of return on plan assets	7.00%	N/A	7.00%	N/A

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 30, 2017, December 31, 2016 and January 2, 2016:


	2017		2016		2015
		Healthcare		Healthcare		Healthcare
	Pension benefits	& Life Ins.	Pension benefits	& Life Ins.	Pension benefits	& Life Ins.
Discount rate	3.61% - 3.81%	3.54% - 3.65%	3.74% - 3.97%	3.34% - 3.80%	3.50% - 3.98%	3.39% - 3.52%
Expected long-term rate of return on plan assets	7.00%	N/A	7.30%	N/A	7.30%	N/A

The expected long-term return on plan assets is based upon the Plans’ consideration of historical and forward-looking returns and the Company’s estimation of what a portfolio, with the target allocation described below, will earn over a long-term horizon. The discount rate is derived using the Citigroup Pension Discount Curve.

Assumed health care cost trend rates were 8.0% grading to 4.5% as of year-end 2017 and 2016. Assumed health care cost trend rates have a significant effect on the amounts reported for the Company’s healthcare and life insurance benefits plans. A one percentage-point change in assumed health care cost trend rates would have the following effects as of year-end 2017 and 2016:


	2017				2016
	Increase		Decrease		Increase		Decrease
Total service cost and interest cost components	$	39	$	(33)	$	55	$	(47)
APBO		857		(769)		1,197		(1,038)

Plan Assets—The defined benefit pension plans’ (the “Plans”) investment strategy is to minimize investment risk while generating acceptable returns. The Plans currently invest a relatively high proportion of the plan assets in fixed income securities, while the remainder is invested in equity securities, cash reserves and precious metals. The equity securities are diversified into funds with growth and value investment strategies. The target allocation for plan assets is as follows: equity securities—30%; fixed income securities—63%; cash reserves—5%; and precious metals—2%. The Plans’ current investment allocations are within the tolerance of the target allocation. The Company had no Level 3 investments as of or for the years ended December 30, 2017 and December 31, 2016.

At year-end 2017 and 2016, the Plans’ assets were invested predominantly in fixed-income securities and publicly traded equities, but may invest in other asset classes in the future subject to the parameters of the investment policy. The Plans’ investments in fixed-income assets include U.S. Treasury and U.S. agency securities and corporate bonds. The Plans’ investments in equity assets include U.S. and international securities and equity funds. The Company estimates the fair value of the Plans’ assets using various valuation techniques and, to the extent available, quoted market prices in active markets or observable market inputs. The descriptions and fair value methodologies for the Plans’ assets are as follows:

Fixed Income Securities—Corporate and government bonds are classified as Level 2 assets, as they are either valued at quoted market prices from observable pricing sources at the reporting date or valued based upon comparable securities with similar yields and credit ratings.

Equity Securities—Equity securities are valued at the closing market price reported on a U.S. exchange where the security is actively traded and are therefore classified as Level 1 assets.

Cash—The carrying amounts of cash approximate fair value due to the short-term maturity.

Precious Metals—Precious metals are valued at the closing market price reported on a U.S. exchange where the security is actively traded and are therefore classified as Level 1 assets.

The fair value of the Plans’ assets by asset class and fair value hierarchy level as of December 31, 2017 and December 31, 2016 are as follows:


	2017
			Quoted prices in active
	Total fair		markets for identical		Observable
	value		assets (Level 1)		inputs (Level 2)
Fixed income securities:
Intermediate—government	$	3,620	$	3,068	$	552
Intermediate—corporate		3,872		—		3,872
Short-term—government		497		497		—
Short-term—corporate		1,702		—		1,702
Equity securities:
U.S. Large cap value		1,765		1,765		—
U.S. Large cap growth		588		588		—
U.S. Mid cap value		586		586		—
U.S. Mid cap growth		586		586		—
U.S. Small cap value		571		571		—
U.S. Small cap growth		580		580		—
Managed Futures		392		—		392
International		1,547		677		870
Commodities Broad Basket		801		—		801
Cash		1,522		—		1,522
Precious metals		383		383		—
Total	$	19,012	$	9,301	$	9,711


	2016
			Quoted prices in active
	Total fair		markets for identical		Observable
	value		assets (Level 1)		inputs (Level 2)
Fixed income securities:
Intermediate—government	$	1,770	$	—	$	1,770
Intermediate—corporate		2,658		—		2,658
Short-term—government		912		—		912
Short-term—corporate		3,613		—		3,613
Equity securities:
U.S. Large cap value		1,181		1,181		—
U.S. Large cap growth		1,103		1,103		—
U.S. Mid cap value		577		577		—
U.S. Mid cap growth		546		546		—
U.S. Small cap value		551		551		—
U.S. Small cap growth		540		540		—
Managed Futures		366		366		—
International		1,099		1,099		—
Emerging Markets		359		359		—
Commodities Broad Basket		707		707		—
Cash		2,094		2,094		—
Precious metals		319		319		—
Total	$	18,395	$	9,442	$	8,953

Cash Flows—The Company expects to contribute approximately $1.4 million in 2018 to both its pension plans and to its healthcare and life insurance benefits plans.

The estimated benefit payments for each of the next five years and the five-year period thereafter are as follows:


	Pension		Healthcare and Life
	benefits		Insurance Benefits
2018	$	1,835	$	702
2019		1,830		667
2020		1,804		675
2021		1,771		655
2022		1,768		649
2023 - 2027		8,457		3,250

Summit Materials, LLC

Employee Benefit Plans

(13) Employee Benefit Plans