COMPANY- SPONSORED BENEFIT PLANS

12 Months Ended

Feb. 01, 2025

COMPANY- SPONSORED BENEFIT PLANS

COMPANY- SPONSORED BENEFIT PLANS

14. COMPANY- SPONSORED BENEFIT PLANS

The Company administers non-contributory defined benefit retirement plans for some non-union employees and union-represented employees as determined by the terms and conditions of collective bargaining agreements. These include several qualified pension plans (the “Qualified Plans”) and non-qualified pension plans (the “Non-Qualified Plans”). The Non-Qualified Plans pay benefits to any employee that earns in excess of the maximum allowed for the Qualified Plans by Section 415 of the Internal Revenue Code. The Company only funds obligations under the Qualified Plans. Funding for the company-sponsored pension plans is based on a review of the specific requirements and on evaluation of the assets and liabilities of each plan.

In addition to providing pension benefits, the Company provides certain health care benefits for retired employees. Based on an employee’s age, years of service and position with the Company, the employee may be eligible for retiree health care benefits. Funding of retiree health care benefits occurs as claims or premiums are paid.

The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheets. Actuarial gains or losses and prior service credits that have not yet been recognized as part of net periodic benefit cost are required to be recorded as a component of AOCI. The Company has elected to measure defined benefit plan assets and obligations as of January 31, which is the month-end that is closest to its fiscal year-ends.

Amounts recognized in AOCI as of February 1, 2025 and February 3, 2024 consist of the following (pre-tax):

	Pension Benefits				Other Benefits				Total
	2024		2023		2024		2023		2024		2023
Net actuarial loss (gain)	$	850	$	817	$	(79)	$	(92)	$	771	$	725
Prior service credit		—		—		(10)		(11)		(10)		(11)
Total	$	850	$	817	$	(89)	$	(103)	$	761	$	714

Other changes recognized in other comprehensive income (loss) in 2024, 2023 and 2022 were as follows (pre-tax):

	Pension Benefits						Other Benefits						Total
	2024		2023		2022		2024		2023		2022		2024		2023		2022
Incurred net actuarial loss	$	42	$	42	$	101	$	—	$	4	$	15	$	42	$	46	$	116
Amortization of prior service credit		—		—		—		4		11		13		4		11		13
Amortization of net actuarial (loss) gain		(9)		(10)		(31)		10		13		11		1		3		(20)
Total recognized in other comprehensive income	$	33	$	32	$	70	$	14	$	28	$	39	$	47	$	60	$	109
Total recognized in net periodic benefit cost and other comprehensive income	$	32	$	36	$	58	$	13	$	15	$	25	$	45	$	51	$	83

Information with respect to change in benefit obligation, change in plan assets, the funded status of the plans recorded in the Consolidated Balance Sheets, net amounts recognized at the end of fiscal years, weighted-average assumptions and components of net periodic benefit cost follow:

	Pension Benefits
	Qualified Plans				Non-Qualified Plans				Other Benefits
	2024		2023		2024		2023		2024		2023
Change in benefit obligation:
Benefit obligation at beginning of fiscal year	$	2,368	$	2,463	$	256	$	271	$	168	$	165
Service cost		6		17		—		—		4		4
Interest cost		119		116		13		13		9		8
Plan participants’ contributions		3		4		—		—		9		9
Actuarial (gain) loss		(62)		(42)		(5)		(3)		2		—
Plan settlements		—		(11)		(2)		(1)		—		—
Benefits paid		(175)		(165)		(21)		(24)		(23)		(21)
Other		(9)		(14)		—		—		(2)		3
Benefit obligation at end of fiscal year	$	2,250	$	2,368	$	241	$	256	$	167	$	168
Change in plan assets:
Fair value of plan assets at beginning of fiscal year	$	2,399	$	2,496	$	—	$	—	$	—	$	—
Actual return on plan assets		37		65		—		—		—		—
Employer contributions		—		27		23		26		14		12
Plan participants’ contributions		3		4		—		—		9		9
Plan settlements		—		(11)		(2)		(2)		—		—
Benefits paid		(175)		(165)		(21)		(24)		(23)		(21)
Other		(5)		(17)		—		—		—		—
Fair value of plan assets at end of fiscal year	$	2,259	$	2,399	$	—	$	—	$	—	$	—
Funded (unfunded) status and net asset and liability recognized at end of fiscal year	$	9	$	31	$	(241)	$	(256)	$	(167)	$	(168)

As of February 1, 2025, other assets and other current liabilities include $24 and $36, respectively, of the net asset and liability recognized for the above benefit plans. As of February 3, 2024, other assets and other current liabilities include $44 and $36, respectively, of the net asset and liability recognized for the above benefit plans. Pension plan assets do not include common shares of The Kroger Co.

The following table outlines the weighted average assumptions associated with pension and other benefit costs for 2024, 2023 and 2022:

	Pension Benefits						Other Benefits
Weighted average assumptions	2024		2023		2022		2024		2023		2022
Discount rate — Benefit obligation	5.60	%	5.27	%	4.90	%	5.54	%	5.21	%	4.86	%
Discount rate — Net periodic benefit cost	5.27	%	4.90	%	3.17	%	5.21	%	4.86	%	3.01	%
Expected long-term rate of return on plan assets	5.50	%	5.50	%	5.50	%
Rate of compensation increase — Net periodic benefit cost	2.52	%	2.57	%	3.05	%
Rate of compensation increase — Benefit obligation(1)	—		2.52	%	2.57	%
Cash Balance plan interest crediting rate	3.30	%	3.30	%	3.30	%

(1) The Rate of compensation increase-Benefit obligation assumption is not applicable for 2024 due to negotiated plan freezes related to certain union benefits that were accruing in 2024.

The Company’s discount rate assumptions were intended to reflect the rates at which the pension benefits could be effectively settled.  They take into account the timing and amount of benefits that would be available under the plans. The Company’s policy is to match the plan’s cash flows to that of a hypothetical bond portfolio whose cash flow from coupons and maturities match the plan’s projected benefit cash flows. The discount rates are the single rates that produce the same present value of cash flows. The selection of the 5.60% and 5.54% discount rates as of year-end 2024 for pension and other benefits, respectively, represents the hypothetical bond portfolio using bonds with an AA or better rating constructed with the assistance of an outside consultant.

The Company’s assumed pension plan investment return rate was 5.50% in 2024, 2023, and 2022. The value of all investments in the company-sponsored defined benefit pension plans during the calendar year ended December 31, 2024, net of investment management fees and expenses, increased 0.7% and for fiscal year 2024 investments increased 1.7%. Historically, the Company’s pension plans’ average rate of return was 4.0% for the 10 calendar years ended December 31, 2024, net of all investment management fees and expenses. For the past 20 years, the Company’s pension plans’ average annual rate of return has been 5.8%. To determine the expected rate of return on pension plan assets held by the Company, the Company considers current and forecasted plan asset allocations as well as historical and forecasted rates of return on various asset categories.

The Company calculates its expected return on plan assets by using the market-related value of plan assets. The market-related value of plan assets is determined by adjusting the actual fair value of plan assets for gains or losses on plan assets. Gains or losses represent the difference between actual and expected returns on plan investments for each plan year. Gains or losses on plan assets are recognized evenly over a five-year period. Using a different method to calculate the market-related value of plan assets would provide a different expected return on plan assets.

The pension benefit unfunded status increased in 2024, compared to 2023, due primarily to the qualified plans’ actual return on plan assets being less than the expected rate of return on plan assets, partially offset by an increase in discount rates, which lowered the benefit obligation. The Company’s Qualified Plans were fully funded as of February 1, 2025 and February 3, 2024.

The following table provides the components of the Company’s net periodic benefit costs for 2024, 2023 and 2022:

	Pension Benefits
	Qualified Plans						Non-Qualified Plans						Other Benefits
	2024		2023		2022		2024		2023		2022		2024		2023		2022
Components of net periodic benefit cost:
Service cost	$	6	$	17	$	8	$	—	$	—	$	—	$	4	$	4	$	5
Interest cost		119		116		92		13		13		10		9		8		5
Expected return on plan assets		(148)		(150)		(153)		—		—		—		—		—		—
Amortization of:
Prior service credit		—		—		—		—		—		—		(4)		(11)		(13)
Actuarial loss (gain)		7		5		22		2		4		5		(10)		(13)		(11)
Settlement loss recognized		—		1		4		—		—		—		—		—		—
Other		—		—		—		—		(2)		—		—		(1)		—
Net periodic benefit cost	$	(16)	$	(11)	$	(27)	$	15	$	15	$	15	$	(1)	$	(13)	$	(14)

The following table provides the projected benefit obligation (“PBO”) and the fair value of plan assets for those company-sponsored pension plans with projected benefit obligations in excess of plan assets:

	Qualified Plans				Non-Qualified Plans
	2024		2023		2024		2023
PBO at end of fiscal year	$	196	$	159	$	240	$	256
Fair value of plan assets at end of year	$	180	$	150	$	—	$	—

The following table provides the accumulated benefit obligation (“ABO”) and the fair value of plan assets for those company-sponsored pension plans with accumulated benefit obligations in excess of plan assets:

	Qualified Plans				Non-Qualified Plans
	2024		2023		2024		2023
ABO at end of fiscal year	$	196	$	159	$	240	$	256
Fair value of plan assets at end of year	$	180	$	150	$	—	$	—

The following table provides information about the Company’s estimated future benefit payments:

	Pension		Other
	Benefits		Benefits
2025	$	226	$	13
2026	$	213	$	15
2027	$	212	$	16
2028	$	210	$	16
2029	$	207	$	17
2030 —2034	$	966	$	83

The following table provides information about the target and actual pension plan asset allocations as of February 1, 2025:

			Actual
	Target allocations		Allocations
	2024		2024		2023
Pension plan asset allocation
Global equity securities	5.0	%	6.5	%	5.4	%
Investment grade debt securities	79.5		79.1		78.9
High yield debt securities	3.0		3.5		3.1
Private equity	8.0		7.5		8.5
Hedge funds	3.0		2.0		2.4
Real estate	1.5		1.4		1.7
Total	100.0	%	100.0	%	100.0	%

Investment objectives, policies and strategies are set by the Retirement Benefit Plan Management Committee (the “Committee”).  The primary objectives include holding and investing the assets and distributing benefits to participants and beneficiaries of the pension plans.  Investment objectives have been established based on a comprehensive review of the capital markets and each underlying plan’s current and projected financial requirements.  The time horizon of the investment objectives is long-term in nature and plan assets are managed on a going-concern basis.

Investment objectives and guidelines specifically applicable to each manager of assets are established and reviewed annually.  Derivative instruments may be used for specified purposes, including rebalancing exposures to certain asset classes.  Any use of derivative instruments for a purpose or in a manner not specifically authorized is prohibited, unless approved in advance by the Committee.

The target allocations shown for 2024 were established at the beginning of 2024 based on the Company’s liability-driven investment (“LDI”) strategy. An LDI strategy focuses on maintaining a close to fully-funded status over the long-term with minimal funded status risk. This is achieved by investing more of the plan assets in fixed income instruments to more closely match the duration of the plan liability.

The Company did not make any significant contributions to its company-sponsored pension plans in 2024, and the Company is not required to make any contributions to these plans in 2025. If the Company does make any contributions in 2025, the Company expects these contributions will decrease its required contributions in future years. Among other things, investment performance of plan assets, the interest rates required to be used to calculate the pension obligations and future changes in legislation, will determine the amounts of any contributions. The Company expects 2025 net periodic benefit costs for company-sponsored pension plans to be approximately $13.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.  The Company used a 6.60% initial health care cost trend rate, which is assumed to decrease on a linear basis to a 4.00% ultimate health care cost trend rate in 2046, to determine its expense.

The following tables, set forth by level within the fair value hierarchy, present the Qualified Plans’ assets at fair value as of February 1, 2025 and February 3, 2024:

Assets at Fair Value as of February 1, 2025

	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable		Assets
	Identical Assets		Observable Inputs		Inputs		Measured
	(Level 1)		(Level 2)		(Level 3)		at NAV		Total
Cash and cash equivalents	$	129	$	—	$	—	$	—	$	129
Corporate Stocks		2		—		—		—		2
Corporate Bonds		—		847		—		—		847
U.S. Government Securities		—		151		—		—		151
Mutual Funds		92		—		—		—		92
Collective Trusts		—		—		—		737		737
Hedge Funds		—		—		25		20		45
Private Equity		—		—		—		166		166
Real Estate		—		—		20		13		33
Other		—		57		—		—		57
Total	$	223	$	1,055	$	45	$	936	$	2,259

Assets at Fair Value as of February 3, 2024

	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable		Assets
	Identical Assets		Observable Inputs		Inputs		Measured
	(Level 1)		(Level 2)		(Level 3)		at NAV		Total
Cash and cash equivalents	$	151	$	—	$	—	$	—	$	151
Corporate Stocks		2		—		—		—		2
Corporate Bonds		—		1,092		—		—		1,092
U.S. Government Securities		—		140		—		—		140
Mutual Funds		108		—		—		—		108
Collective Trusts		—		—		—		513		513
Hedge Funds		—		—		29		29		58
Private Equity		—		—		—		203		203
Real Estate		—		—		24		15		39
Other		—		93		—		—		93
Total	$	261	$	1,325	$	53	$	760	$	2,399

Certain investments that are measured at fair value using the NAV per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented for these investments in the preceding tables are intended to permit reconciliation of the fair value hierarchies to the total fair value of plan assets.

For measurements using significant unobservable inputs (Level 3) during 2024 and 2023, a reconciliation of the beginning and ending balances is as follows:

	Hedge Funds		Real Estate
Ending balance, January 28, 2023	$	31	$	28
Contributions into fund		—		1
Realized gains		1		—
Unrealized gains (losses)		1		(3)
Distributions		(4)		(2)
Ending balance, February 3, 2024		29		24
Contributions into fund		—		2
Realized gains (losses)		2		(4)
Unrealized (losses) gains		(1)		2
Distributions		(5)		(4)
Ending balance, February 1, 2025	$	25	$	20

See Note 7 for a discussion of the levels of the fair value hierarchy. The assets’ fair value measurement level above is based on the lowest level of any input that is significant to the fair value measurement.

The following is a description of the valuation methods used for the Qualified Plans’ assets measured at fair value in the above tables:

● Cash and cash equivalents: The carrying value approximates fair value.

● Corporate Stocks: The fair values of these securities are based on observable market quotations for identical assets and are valued at the closing price reported on the active market on which the individual securities are traded.

● Corporate Bonds: The fair values of these securities are primarily based on observable market quotations for similar bonds, valued at the closing price reported on the active market on which the individual securities are traded. When such quoted prices are not available, the bonds are valued using a discounted cash flow approach using current yields on similar instruments of issuers with similar credit ratings, including adjustments for certain risks that may not be observable, such as credit and liquidity risks.

● U.S. Government Securities: Certain U.S. Government securities are valued at the closing price reported in the active market in which the security is traded. Other U.S. government securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for similar securities, the security is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks.

● Mutual Funds: The fair values of these securities are based on observable market quotations for identical assets and are valued at the closing price reported on the active market on which the individual securities are traded.

● Collective Trusts: The collective trust funds are public investment vehicles valued using a Net Asset Value (NAV) provided by the manager of each fund. These assets have been valued using NAV as a practical expedient.

● Hedge Funds: The Hedge funds classified as Level 3 include investments that are not readily tradeable and have valuations that are not based on readily observable data inputs. The fair value of these assets is estimated based on information provided by the fund managers or the general partners. Therefore, these assets are classified as Level 3.  Certain other hedge funds are private investment vehicles valued using a NAV provided by the manager of each fund.  These assets have been valued using NAV as a practical expedient.

● Private Equity: Private Equity investments are valued based on the fair value of the underlying securities within the fund, which include investments both traded on an active market and not traded on an active market. For those investments that are traded on an active market, the values are based on the closing price reported on the active market on which those individual securities are traded. For investments not traded on an active market, or for which a quoted price is not publicly available, a variety of unobservable valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches, are employed by the fund manager to value investments. Fair values of all investments are adjusted annually, if necessary, based on audits of the private equity fund financial statements; such adjustments are reflected in the fair value of the plan’s assets.

● Real Estate: Real estate investments include investments in real estate funds managed by a fund manager. These investments are valued using a variety of unobservable valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches.  The valuations for these investments are not based on readily observable inputs and are classified as Level 3 investments.  Certain other real estate investments are valued using a NAV provided by the manager of each fund.  These assets have been valued using NAV as a practical expedient.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.

The Company contributed and expensed $328, $322 and $315 to employee 401(k) retirement savings accounts in 2024, 2023 and 2022, respectively. The 401(k) retirement savings account plans provide to eligible employees both matching contributions and automatic contributions from the Company based on participant contributions, compensation as defined by the plan and length of service.