17.	RETIREMENT PLANS

The Company has defined benefit and defined contribution retirement plans for its employees, and provides certain health care benefits to eligible retirees and their dependents. Also, the Company contributes to various multiemployer plans under certain of its collective bargaining agreements.

Company Sponsored Defined Benefit Plans —The Company maintains a qualified retirement plan and a nonqualified retirement plan (“Retirement Plans”) that pay benefits to certain employees at retirement, using formulas based on a participant’s years of service and compensation. The Company also maintains postretirement health and welfare plans for certain employees. Amounts related to defined benefit plans and other postretirement plans recognized in the consolidated financial statements are determined on an actuarial basis.

The components of net periodic pension and other postretirement benefit costs for the last three fiscal years were as follows (in thousands):

	Pension Benefits
	2017			2016			2015
Components of net periodic pension costs:
Service cost	$	2,356		$	3,849		$	32,582
Interest cost		39,474			40,459			39,628
Expected return on plan assets		(47,828	)		(48,296	)		(54,881	)
Amortization of prior service cost		138			157			195
Amortization of net loss		3,848			8,255			10,394
Settlements		17,785			4,487			3,358
Curtailment		138			—			—
Special termination benefit		—			—			422
Net periodic pension costs	$	15,911		$	8,911		$	31,698

	Other Postretirement Plans
	2017			2016			2015
Components of net periodic other postretirement benefit costs:
Service cost	$	35		$	37		$	37
Interest cost		283			296			264
Amortization of prior service cost (credit)		6			6			(62	)
Amortization of net (gain) loss		(148	)		(71	)		14
Net periodic other postretirement benefit costs	$	176		$	268		$	253

In the fourth quarter of 2017, lump sum payments were finalized for a voluntary lump sum offer made in September, to certain former employees participating in the Company sponsored defined benefit plan. The Company incurred non-cash settlement charges of $18 million, $4 million and $3 million in fiscal years 2017, 2016 and 2015, respectively, resulting from lump sum payments. All lump sum payments were paid from pension plan assets.

Effective September 30, 2015, non-union participants’ benefits of a USF sponsored defined benefit pension plan were frozen, resulting in a reduction in the benefit obligation included in other long-term liabilities of approximately $91 million, including a $73 million curtailment, with a corresponding decrease to accumulated other comprehensive loss. At the remeasurement date, the plan’s net loss included in accumulated other comprehensive loss exceeded the reduction in the plan’s benefit obligation and, accordingly, no net curtailment gain or loss was recognized in the Consolidated Statements of Comprehensive Income. As a result of the plan freeze, actuarial gains and losses are amortized over the average remaining life expectancy of inactive participants rather than the average remaining service lives of active participants.

In the second quarter of 2016, the Company recorded a $22 million increase to its pension obligation, with a corresponding increase to accumulated other comprehensive loss, to correct a computational error related to the September 30, 2015 USF pension plan freeze discussed above. The Company determined the error did not materially impact the financial statements for any of the periods reported. The fiscal year 2016 decrease in net periodic pension costs is primarily attributable to the September 30, 2015 USF pension plan freeze.

Changes in plan assets and benefit obligations recorded in accumulated other comprehensive loss for pension and other postretirement benefits for the last three fiscal years were as follows (in thousands):

	Pension Benefits
	2017			2016			2015
Changes recognized in accumulated other comprehensive loss:
Actuarial gain (loss)	$	523		$	(64,296	)	$	(3,171	)
Curtailment		138			—			73,191
Prior year correction		—			(21,917	)		—
Amortization of prior service cost		138			157			195
Amortization of net loss		3,848			8,255			10,394
Settlements		17,785			4,487			3,358
Net amount recognized	$	22,432		$	(73,314	)	$	83,967

	Other Postretirement Plans
	2017			2016			2015
Changes recognized in accumulated other comprehensive loss:
Actuarial gain (loss)	$	181		$	(174	)	$	1,035
Prior service cost		—			—			(1,291	)
Amortization of prior service cost (credit)		6			6			(62	)
Amortization of net (gain) loss		(148	)		(71	)		14
Net amount recognized	$	39		$	(239	)	$	(304	)

The funded status of the defined benefit plans for the last three fiscal years was as follows (in thousands):

	Pension Benefits
	2017			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of period	$	966,234		$	862,886		$	970,469
Service cost		2,356			3,849			32,582
Interest cost		39,474			40,459			39,628
Actuarial loss (gain)		76,111			73,855			(73,282	)
Curtailment		—			—			(73,191	)
Prior year correction		—			21,917			—
Settlements		(87,225	)		(16,002	)		(15,287	)
Special termination benefit		—			—			422
Benefit disbursements		(20,655	)		(20,730	)		(18,455	)
Benefit obligation at end of period		976,295			966,234			862,886
Change in plan assets:
Fair value of plan assets at beginning of period		799,166			742,341			749,166
Return on plan assets		124,462			57,855			(21,572	)
Employer contribution		35,535			35,702			48,489
Settlements		(87,225	)		(16,002	)		(15,287	)
Benefit disbursements		(20,655	)		(20,730	)		(18,455	)
Fair value of plan assets at end of period		851,283			799,166			742,341
Net funded status	$	(125,012	)	$	(167,068	)	$	(120,545	)

	Other Postretirement Plans
	2017			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of period	$	6,952		$	6,974		$	6,789
Service cost		35			37			37
Interest cost		283			296			264
Employee contributions		195			204			209
Actuarial (gain) loss		(181	)		174			(1,035	)
Plan amendment		—			—			1,291
Benefit disbursements		(661	)		(733	)		(581	)
Benefit obligation at end of period		6,623			6,952			6,974
Change in plan assets:
Fair value of plan assets at beginning of period		—			—			—
Employer contribution		466			529			372
Employee contributions		195			204			209
Benefit disbursements		(661	)		(733	)		(581	)
Fair value of plan assets at end of period		—			—			—
Net funded status	$	(6,623	)	$	(6,952	)	$	(6,974	)

The fiscal year 2017 and 2016 actuarial losses of $76 million and $74 million, respectively, were primarily due to a decrease in discount rates. The 2015 actuarial gain of $73 million was primarily due to an increase in discount rates.

	Pension Benefits
	2017			2016			2015
Amounts recognized in the consolidated balance sheets consist of the following:
Accrued benefit obligation—current	$	(598	)	$	(549	)	$	(546	)
Accrued benefit obligation—noncurrent		(124,414	)		(166,519	)		(119,999	)
Net amount recognized in the consolidated balance sheets	$	(125,012	)	$	(167,068	)	$	(120,545	)
Amounts recognized in accumulated other comprehensive loss consist of the following:
Prior service cost	$	5		$	281		$	438
Net loss		198,990			221,146			147,675
Net loss recognized in accumulated other comprehensive loss	$	198,995		$	221,427		$	148,113
Additional information:
Accumulated benefit obligation	$	973,946		$	963,008		$	854,858

	Other Postretirement Plans
	2017			2016			2015
Amounts recognized in the consolidated balance sheets consist of the following:
Accrued benefit obligation—current	$	(527	)	$	(576	)	$	(525	)
Accrued benefit obligation—noncurrent		(6,096	)		(6,376	)		(6,449	)
Net amount recognized in the consolidated balance sheets	$	(6,623	)	$	(6,952	)	$	(6,974	)
Amounts recognized in accumulated other comprehensive loss consist of the following:
Gain, net of prior service cost	$	864		$	825		$	1,064
Net gain recognized in accumulated other comprehensive loss	$	864		$	825		$	1,064

	Pension Benefits		Other Postretirement Plans
Amounts expected to be amortized from accumulated other comprehensive loss in the next fiscal year:
Net loss (gain)	$	3,383	$	(156	)
Prior service cost		5		6
Net expected to be amortized	$	3,388	$	(150	)

Weighted average assumptions used to determine benefit obligations at period-end and net pension costs for the last three fiscal years were as follows:

	Pension Benefits
	2017			2016			2015
Benefit obligation:
Discount rate		3.70	%		4.25	%		4.64	%
Annual compensation increase		3.60	%		3.60	%		3.60	%
Net cost:
Discount rate		4.25	%		4.64	%		4.25	%
Expected return on plan assets		6.00	%		6.50	%		7.00	%
Annual compensation increase		3.60	%		3.60	%		3.60	%

	Other Postretirement Plans
	2017			2016			2015
Benefit obligation—discount rate		3.70	%		4.25	%		4.40	%
Net cost—discount rate		4.25	%		4.40	%		4.05	%

The measurement date for the pension and other postretirement benefit plans was December 31 for 2017, 2016, and 2015. The Company applies the practical expedient under ASU No. 2015-04, to measure defined benefit retirement obligations and related plan assets as of the month-end that is closest to its fiscal year-end.

A health care cost trend rate is used in the calculations of postretirement medical benefit plan obligations. The assumed healthcare trend rates for the last three fiscal years were as follows:

	2017			2016			2015
Immediate rate		6.70	%		7.40	%		7.40	%
Ultimate trend rate		4.50	%		4.50	%		4.50	%
Year the rate reaches the ultimate trend rate	2037			2037				2038

A 1% change in the rate would result in a change to the postretirement medical plan obligation of less than $1 million. Retirees covered under these plans are responsible for the cost of coverage in excess of the subsidy, including all future cost increases.

In determining the discount rate, the Company determines the implied rate of return on a hypothetical portfolio of high-quality fixed-income investments, for which the timing and amount of cash outflows approximates the estimated pension plan payouts. The discount rate assumption is reviewed annually and revised as appropriate.

The expected long-term rate of return on plan assets is derived from a mathematical asset model. This model incorporates assumptions on the various asset class returns, reflecting a combination of historical performance analysis and the forward-looking views of the financial markets regarding the yield on long-term bonds and the historical returns of the major stock markets. The rate of return assumption is reviewed annually and revised as deemed appropriate.

The investment objective for our Company sponsored plans is to provide a common investment platform. Investment managers, overseen by the USF Retirement Administration Committee, are expected to adopt and maintain an asset allocation strategy for the plans’ assets designed to address the Retirement Plans’ liability structure. The Company has developed an asset allocation policy and rebalancing policy. We review the major asset classes, through consultation with investment consultants, at least quarterly to determine if the plan assets are performing as expected. The Company’s 2017 strategy targeted a mix of 50% equity securities and 50% long-term debt securities and cash equivalents. The actual mix of investments at December 31, 2017, was 49% equity securities and 51% long-term debt securities and cash equivalents. The Company plans to manage the actual mix of investments to achieve its target mix.

The following table (in thousands) sets forth the fair value of our defined benefit plans’ assets by asset fair value hierarchy level.

	Asset Fair Value as of December 30, 2017
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	7,898	$	—	$	—	$	7,898
Equities:
Domestic		33,967		—		—		33,967
International		1,099		—		—		1,099
Mutual funds:
Domestic equities		37,163		—		—		37,163
International equities		32,033		—		—		32,033
Long-term debt securities:
Corporate debt securities:
Domestic		—		223,604		—		223,604
International		—		26,360		—		26,360
U.S. government securities		—		154,906		—		154,906
Government agencies securities		—		7,517		—		7,517
Other		—		4,437		—		4,437
	$	112,160	$	416,824	$	—		528,984
Common collective trust funds:
Cash equivalents								10,282
Domestic equities								249,366
International equities								62,651
Total investments measured at net asset value as a practical expedient								322,299
Total defined benefit plans’ assets							$	851,283

	Asset Fair Value as of December 31, 2016
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	10,073	$	—	$	—	$	10,073
Equities:
Domestic		30,759		—		—		30,759
International		829		—		—		829
Mutual funds:
Domestic equities		37,711		—		—		37,711
International equities		28,975		—		—		28,975
Long-term debt securities:
Corporate debt securities:
Domestic		—		196,743		—		196,743
International		—		20,120		—		20,120
U.S. government securities		—		154,007		—		154,007
Government agencies securities		—		7,548		—		7,548
Other		—		2,545		—		2,545
	$	108,347	$	380,963	$	—		489,310
Common collective trust funds:
Cash equivalents								6,447
Domestic equities								244,152
International equities								59,257
Total investments measured at net asset value as a practical expedient								309,856
Total defined benefit plans’ assets							$	799,166

A description of the valuation methodologies used for assets measured at fair value is as follows:

•

Cash and cash equivalents are valued at original cost plus accrued interest.

•

Equities are valued at the closing price reported on the active market on which individual securities are traded.

•

Mutual funds are valued at the closing price reported on the active market on which individual funds are traded.

•

Common collective trust funds are valued at the net asset value of the shares held at the December 31, 2017 and 2016 measurement dates. This class represents investments in actively managed, common collective trust funds that invest primarily in equity securities, which may include common stocks, options and futures. Investments are valued at the net asset value per share, multiplied by the number of shares held as of the measurement date.

•

Long-term debt securities are valued at the estimated price a dealer will pay for the individual securities.

Estimated future benefit payments, under Company sponsored plans as of December 30, 2017, were as follows (in thousands):

		Pension Benefits		Other Postretirement Plans
	2018	$	53,888	$	536
	2019		46,852		527
	2020		46,232		539
	2021		45,402		514
	2022		45,136		495
Subsequent five years			224,429		2,368

The Company expects to contribute $36 million to the Retirement Plans in fiscal year 2018.

Other Company Sponsored Benefit Plans —Substantially all employees are eligible to participate in a Company sponsored defined contribution 401(k) Plan, which provides for Company matching on the participant’s contributions of up to 100% of the first 3% of participant’s compensation, and 50% of the next 2% of a participant’s compensation, for a maximum Company matching contribution of 4%. Through the third quarter of 2015, Company matching contributions were 50% of the first 6% of a participant’s compensation. The Company’s contributions to this plan were $46 million, $44 million and $32 million in fiscal years 2017, 2016 and 2015, respectively. The Company, at its discretion, may make additional contributions to the 401(k) Plan. The Company made no discretionary contributions under the 401(k) plan in fiscal years 2017, 2016 and 2015.

Multiemployer Pension Plans —The Company contributes to numerous multiemployer pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees. The Company does not administer these multiemployer pension plans.

The risks of participating in multiemployer pension plans differ from traditional single-employer defined benefit plans as follows:

•

Assets contributed to a multiemployer pension plan by one employer may be used to provide benefits to the employees of other participating employers.

•

If a participating employer stops contributing to a multiemployer pension plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

•

If the Company elects to stop participation in a multiemployer pension plan, or if the number of the Company’s employees participating in a plan is reduced to a certain degree over certain periods of time, the Company may be required to pay a withdrawal liability based upon the underfunded status of the plan.

The Company’s participation in multiemployer pension plans for the year ended December 30, 2017, is outlined in the tables below. The Company considers significant plans to be those plans to which the Company contributed more than 5% of total contributions to the plan in a given plan year, or for which the Company believes its estimated withdrawal liability, should it decide to voluntarily withdraw from the plan, may be material to the Company. For each plan that is considered individually significant to the Company, the following information is provided.

•

The EIN/Plan Number column provides the Employee Identification Number (“EIN”) and the three-digit plan number (“PN”) assigned to a plan by the Internal Revenue Service.

•

The most recent Pension Protection Act (“PPA”) zone status available for 2017 and 2016 is for the plan years beginning in 2017 and 2016, respectively. The zone status is based on information provided to participating employers by each plan and is certified by the plan’s actuary. A plan in the red zone has been determined to be in critical status, or critical and declining status, based on criteria established under the Internal Revenue Code (the “Code”), and is generally less than 65% funded. Plans are generally considered “critical and declining” if they are projected to become insolvent within 20 years. A plan in the yellow zone has been determined to be in endangered status, based on criteria established under the Code, and is generally less than 80% but more than 65% funded. A plan in the green zone has been determined to be neither in critical status nor in endangered status, and is generally at least 80% 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. In addition to regular plan contributions, participating employers may be subject to a surcharge if the plan is in the red zone.

•

The Surcharge Imposed column indicates whether a surcharge has been imposed on participating employers contributing to the plan.

•

The Expiration Dates column indicates the expiration dates of the collective-bargaining agreements to which the plans are subject.

Pension Fund

EIN/

Plan Number

PPA

Zone Status

FIP/RP Status

Pending/

Implemented

Surcharge

Imposed

Expiration Dates

2017

2016

Western Conference of Teamsters

Pension Trust Fund

91-6145047/001

Green

N/A

3/31/18 to 3/31/20

Minneapolis Food Distributing

Industry Pension Plan

41-6047047/001

Green

Implemented

4/1/21

Teamster Pension Trust Fund of

Philadelphia and Vicinity

23-1511735/001

Yellow

Implemented

2/10/18⁽¹⁾

Local 703 I.B. of T. Grocery and

Food Employees’ Pension Plan

36-6491473/001

Green

N/A

6/30/18

United Teamsters Trust Fund A

13-5660513/001

Yellow

Implemented

5/30/19

Warehouse Employees Local

169 and Employers Joint

Pension Fund⁽²⁾

23-6230368/001

Red

Implemented

2/10/18⁽¹⁾

Local 705 I.B. of T. Pension

Trust Fund

36-6492502/001

Yellow

Red

Implemented

12/29/18

(1)

The collective bargaining agreement for this pension fund is operating under an extension through March 2018.

(2)

Local 169 filed a Notice of Critical and Declining Status in 2017.

The following table provides information about the Company’s contributions to its multiemployer pension plans. For plans that are not individually significant to the Company, the total amount of USF contributions is aggregated. Prior year contribution amounts have been reclassified to other funds (below) for plans no longer considered significant in 2017.

							USF Contributions
							Exceed 5% of
	USF Contribution⁽¹⁾⁽²⁾						Total Plan Contributions⁽³⁾
	(in thousands)
	2017		2016		2015		2016		2015
Pension Fund
Western Conference of Teamsters Pension Trust Fund	$	10,780	$	10,104	$	10,227	No		No
Minneapolis Food Distributing Industry Pension Plan		5,399		5,162		5,200	Yes		Yes
Teamster Pension Trust Fund of Philadelphia and Vicinity		3,917		3,442		3,461	No		No
Local 703 I.B. of T. Grocery and Food Employees’ Pension Plan		1,482		1,258		1,366	Yes		Yes
United Teamsters Trust Fund A		1,741		1,668		1,554	Yes		Yes
Warehouse Employees Local 169 and Employers Joint Pension Fund		846		900		897	Yes		Yes
Local 705 I.B. of T. Pension Trust Fund		3,122		2,923		2,729	No		No
Other Funds		6,853		7,179		8,196		—		—
	$	34,140	$	32,636	$	33,630

(1)	Contributions made to these plans during the Company’s fiscal year, which may not coincide with the plans’ fiscal years.

(2)	Contributions do not include payments related to multiemployer pension withdrawals/settlements.

(3)	Indicates whether the Company was listed in the respective multiemployer plan Form 5500 for the applicable plan year as having made more than 5% of total contributions to the plan.

If the Company elects to voluntarily withdraw from multiemployer pension plans, it would be responsible for its proportionate share of the respective plan’s unfunded vested liability. Based on the latest information available from plan administrators, the Company estimates its aggregate withdrawal liability from the multiemployer pension plans in which it participates to be approximately $120 million as of December 30, 2017. Actual withdrawal liabilities incurred by the Company, if it were to withdraw from one or more plans, could be materially different from the estimates noted here, based on better or more timely information from plan administrators or other changes affecting the respective plan’s funded status.