10. Employee Post-Employment Benefits

Pension and Postretirement Medical and Life Benefits

We sponsor three defined benefit pension plans for active employees and offer certain postretirement benefits for retirees. A summary of each of these is presented below.

Retirement Plan

RTI sponsors the Morrison Restaurants Inc. Retirement Plan (the "Retirement Plan"). Effective December 31, 1987, the Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the Retirement Plan after that date. Participants receive benefits based upon salary and length of service.

Minimum funding for the Retirement Plan is determined in accordance with the guidelines set forth in employee benefit and tax laws. From time to time we may contribute additional amounts as we deem appropriate. We estimate that we will be required to make a contribution of $0.6 million to the Retirement Plan in fiscal 2014.

The Retirement Plan's assets are held in a trust and were allocated as follows on June 4, 2013 and June 5, 2012, the measurement dates:

	Target Allocation	2013 Allocation	2012 Allocation
Equity securities	60-80%	71%	67%
Fixed income securities	20-40%	27%	31%
Cash and cash equivalents	0%	2%	2%

Total	100%	100%	100%

Retirement Plan fiduciaries set investment policies and strategies for the Retirement Plan's trust. The primary investment objectives are to maximize total return within a prudent level of risk, focus on a 3-5 year time horizon, fully diversify investment holdings, and meet the long-term return target selected as an actuarial assumption (currently 7.3%). The Retirement Plan's fiduciaries oversee the investment allocation process, which includes selecting investment managers, commissioning periodic asset-liability studies, setting long-term strategic targets, and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, and occasionally the Retirement Plan's fiduciaries will approve allocations above or below a target range.

Under the terms of the investment policy statement, plan assets are comprised of two major classes: equity and fixed income securities. The goal of the equity portfolio is to produce a total return that will provide a hedge against inflation. Equity securities can include both domestic and international securities with a long-term goal to maintain an equity allocation of approximately 60-80% of the total market value of plan assets. To be fully invested, the trust's equity portfolio should not contain any domestic stock with value in excess of 10% of the total and the aggregate amount of the international equities should not exceed 30% of the total.

The goal of the fixed income portfolio is to reduce the overall volatility of the Plan, provide a stable stream of income, and provide a hedge against deflation over an investment horizon spanning 5-10 years without exposure to excessive interest rate or credit rate risk. Fixed income securities should be primarily U.S. Treasury or Government Agency securities and investment-grade corporate bonds at the time of purchase with a long-term goal to maintain a fixed income allocation of approximately 20-40% of the total market value of plan assets. Investment grade bonds will include securities rated at least BBB by Standard & Poor's or the equivalent Moody's index. Any single non-government issue is limited to 10% of the portfolio.

The fair values of assets held by the Retirement Plan by asset category are as follows (in thousands):

	Fair Value Measurements
	Total Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	138	$	–	$	138	$	–
Equity securities
U.S.-based companies		4,216		4,216		–		–
International-based companies		431		431		–		–
Fixed income securities		1,721		1,721		–		–
Total	$	6,506	$	6,368	$	138	$	–

Executive Supplemental Pension Plan and Management Retirement Plan

Under these unfunded defined benefit pension plans, eligible employees earn supplemental retirement income based upon salary and length of service, reduced by social security benefits and amounts otherwise receivable under other specified Company retirement plans. Effective June 1, 2001, the Management Retirement Plan was amended so that no additional benefits would accrue and no new participants could enter the plan after that date.

On November 30, 2012, Samuel E. Beall, III, our former Chief Executive Officer ("CEO"), stepped down from management and the Board of Directors. Because he was entitled to receive his entire pension payment in a lump-sum six months following his retirement and he had stated as of June 5, 2012 his intention to step down from management and the Board of Directors once the Company named a successor, we classified an amount representing that pension payment ($8.1 million) into Accrued liabilities – Payroll and related costs in our June 5, 2012 Consolidated Balance Sheet. Mr. Beall was paid the lump-sum pension payment on June 4, 2013. Additionally, during the fourth quarter of fiscal 2013, we recorded a pre-tax curtailment expense of $2.5 million representing the recognition of a pro rata portion (calculated as the percentage reduction in the projected benefit obligation due to Mr. Beall's lump-sum pension payment on June 4, 2013) of the unrecognized loss recorded within accumulated other comprehensive loss.

Although considered to be unfunded, we own whole-life insurance contracts in order to provide a source of funding for benefits due under the terms of the Executive Supplemental Pension Plan and the Management Retirement Plan. Benefits payable under these two plans are paid from a rabbi trust which holds the insurance contracts. We will on occasion contribute additional amounts into the rabbi trust in the event of a liquidity shortfall. We currently project that benefit payments from the rabbi trust for these two plans will approximate $3.2 million in fiscal 2014.

Postretirement Medical and Life Benefits

Our Postretirement Medical and Life Benefits plans provide medical benefits to substantially all retired employees and life insurance benefits to certain retirees. The medical plan requires retiree cost sharing provisions that are more substantial for employees who retire after January 1, 1990.

The following tables detail the components of net periodic benefit cost and the amounts recognized in our Consolidated Financial Statements for the Retirement Plan, Management Retirement Plan, and the Executive Supplemental Pension Plan (collectively, the "Pension Plans") and the Postretirement Medical and Life Benefits plans (in thousands):

	Pension Benefits
	2013			2012			2011

Service cost	$	460		$	545		$	517
Interest cost		2,100			2,346			2,290
Expected return on plan assets		(409	)		(514	)		(392	)
Amortization of prior service cost (a)		106			262			327
Recognized actuarial loss		2,259			1,738			1,593
Curtailment expense		2,481			–			–
Net periodic benefit cost	$	6,997		$	4,377		$	4,335

	Postretirement Medical and Life Benefits
		2013			2012			2011

Service cost	$	11		$	10		$	9
Interest cost		60			71			75
Amortization of prior service cost (a)		(56	)		(55	)		(60	)
Recognized actuarial loss		214			136			112
Net periodic benefit cost	$	229		$	162		$	136

(a) Prior service costs are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits.

The following table details changes in the amounts recognized in accumulated other comprehensive (loss)/income in our 2013 and 2012 Consolidated Financial Statements for the Pension Plans and the Postretirement Medical and Life Benefits plans (in thousands):

Pension Benefits

Postretirement Medical

and Life Benefits

	2013			2012			2013			2012
Prior service cost	$	0		$	0		$	0		$	0
Net actuarial (gain)/loss		(915	)		3,767			426			313
Amortization of prior service cost		(106	)		(262	)		56			55
Amortization of actuarial gain		(4,740	)		(1,738	)		(214	)		(136	)
Total recognized in accumulated
other comprehensive income	$	(5,761	)	$	1,767		$	268		$	232

Total recognized in net periodic
benefit cost and accumulated
other comprehensive income	$	1,236		$	6,144		$	497		$	394

The change in benefit obligation and plan assets and reconciliation of funded status is as follows (in thousands):

Pension Benefits

Postretirement Medical

and Life Benefits

	2013			2012			2013			2012
Change in benefit obligation:
Beginning projected benefit obligation	$	48,592		$	45,636		$	1,614		$	1,406
Service cost		460			545			11			10
Interest cost		2,100			2,346			60			71
Plan participant contributions		–			–			90			102
Actuarial loss		(358	)		2,783			426			313
Benefits paid		(10,486	)		(2,718	)		(305	)		(288	)
Benefit obligation at end of year	$	40,308		$	48,592		$	1,896		$	1,614

Change in plan assets:
Beginning fair value of plan assets	$	5,758		$	6,677		$	–		$	–
Actual return on plan assets		966			(470	)		––			–
Employer contributions		10,268			2,269			215			186
Plan participant contributions		–			–			90			102
Benefits paid		(10,486	)		(2,718	)		(305	)		(288	)
Fair value of plan assets at
end of year	$	6,506		$	5,758		$	–		$	–

Funded status at end of year	$	(33,802	)*	$	(42,834	)*	$	(1,896	)	$	(1,614	)

Amounts recognized in the Consolidated Balance Sheets:
Accrued liabilities – payroll and related
costs	$	(3,206	)	$	(10,481	)	$	(163	)	$	(136	)
Other deferred liabilities		(30,596	)		(32,353	)		(1,733	)		(1,478	)
Net amount recognized at year-end	$	(33,802	)	$	(42,834	)	$	(1,896	)	$	(1,614	)

Amounts recognized in accumulated other comprehensive (loss)/income:
Prior service (cost) credit	$	(2	)	$	(108	)	$	46		$	102
Net actuarial loss		(16,416	)		(22,070	)		(1,776	)		(1,564	)
Total amount recognized	$	(16,418	)	$	(22,178	)	$	(1,730	)	$	(1,462	)

The funded status reflected above includes the liabilities attributable to all of the Pension Plans but only the assets of the Retirement Plan as the other plans are not considered funded for ERISA purposes. To provide a source for the payment of benefits under the Executive Supplemental Pension Plan and the Management Retirement Plan, we own whole-life insurance contracts on some of the participants. The cash value of these policies was $29.2 million and $27.3 million at June 4, 2013 and June 5, 2012, respectively. In addition, we held in trust $0.4 million and $0.5 million of cash and cash equivalents as of June 4, 2013 and June 5, 2012, respectively, relating to these policies. We maintain a rabbi trust to hold the policies and death benefits as they are received.

The estimated prior service cost for the Pension Plans and the Postretirement Medical and Life Benefits plans that will be amortized from accumulated other comprehensive income into net periodic pension cost in fiscal 2014 is insignificant. The estimated net loss for the Pension Plans and the Postretirement Medical and Life Benefits plans that will be amortized from accumulated other comprehensive income into net periodic pension cost in fiscal 2014 is $1.7 million and $0.2 million, respectively.

Additional measurement date information for the pension plans which have benefit obligations in excess of plan assets (in thousands):

	Pension Benefits				Postretirement Medical and Life Benefits
	June 4, 2013		June 5, 2012		June 4, 2013		June 5, 2012
Projected benefit obligation	$	40,308	$	48,592	$	1,896	$	1,614
Accumulated benefit
obligation		39,515		47,435		1,896		1,614
Fair value of plan assets		6,506		5,758		–		–

The weighted-average assumptions used to determine the net periodic benefit cost for fiscal years are set forth below:

	Pension Benefits
	2013	2012	2011
Discount rate	4.5%	5.3%	5.5%
Expected return on plan assets	7.3%	8.0%	7.0%
Rate of compensation increase	2.0%	2.0%	2.0%

	Postretirement Medical and Life Benefits
	2013	2012	2011
Discount rate	3.9%	5.3%	5.5%
Rate of compensation increase	2.0%	2.0%	2.0%

Our estimated long-term rate of return on plan assets represents the weighted-average of expected future returns on the asset categories included in our target investment allocation based primarily on the historical returns for each asset category, adjusted for an assessment of current market conditions.

The weighted average assumptions used to determine benefit obligations at the measurement dates are set forth below:

	Pension Benefits
	2013	2012
Discount rate	4.5%	4.5%
Rate of compensation increase	2.0%	2.0%
	Postretirement Medical and Life Benefits
	2013	2012
Discount rate	3.7%	3.9%
Rate of compensation increase	2.0%	2.0%

We currently are assuming a gross medical trend rate of 7.5% for fiscal 2014. We expect this rate to decrease approximately 0.5% per year from fiscal 2014 to fiscal 2016 and approximately 0.25% each fiscal year thereafter for an ultimate trend rate of 5.0% in fiscal 2022. A change in this rate of 1.0% would have an impact of approximately $0.1 million on our net periodic postretirement benefit expense and no significant effect or our accrued postretirement benefits liability.

The benefits expected to be paid in each of the next five years and in the aggregate for the five years thereafter are set forth below (in thousands):

	Pension Benefits		Postretirement Medical and Life Benefits
2014	$	4,045	$	163
2015		2,393		167
2016		2,339		184
2017		2,501		176
2018		2,423		197
2019-2023		19,298		763

Expected benefits are estimated based on the same assumptions used to measure our benefit obligation on our measurement date of June 4, 2013 and, where applicable, include benefits attributable to estimated further employee service.

Defined Contribution Plans

We sponsor two defined contribution plans for active employees, as summarized below.

Salary Deferral Plan

RTI offers certain employees a 401(k) plan called the Ruby Tuesday, Inc. Salary Deferral Plan ("401(k) Plan"). We make matching contributions to the 401(k) Plan based on each eligible employee's pre-tax contribution and years of service. We match in cash each fiscal quarter a specified percentage of the participating employee's first 6% of pre-tax contribution based on achievement of a same-restaurant sales performance factor. Company matches do not vest until the employees have worked three years for us. Fiscal 2011 401(k) Plan expenses were $0.3 million. Given that the Company did not achieve the 2013 or 2012 same-restaurant sales performance factor in order for there to be an employer match, we had no expense related to the 401(k) Plan for either fiscal 2013 or 2012.

Deferred Compensation Plan

On January 5, 2005, our Board of Directors approved the adoption of the Ruby Tuesday, Inc. 2005 Deferred Compensation Plan (the "Deferred Compensation Plan"), effective as of January 1, 2005, and froze the existing deferred compensation plan, the Ruby Tuesday, Inc. Restated Deferred Compensation Plan (the "Predecessor Plan"), effective as of December 31, 2004, in order to satisfy the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, enacted as part of the American Jobs Creation Act of 2004.

Like the Predecessor Plan, the Deferred Compensation Plan is an unfunded, non-qualified deferred compensation plan for eligible employees. The provisions of the Deferred Compensation Plan are similar to those of the 401(k) Plan. Fiscal 2011 expenses under the Deferred Compensation Plan were insignificant. We had no expenses under the Deferred Compensation Plan for fiscal 2013 or 2012. Assets earmarked to pay benefits under the Deferred Compensation Plan are held by a rabbi trust. Assets and liabilities of a rabbi trust must be accounted for as if they are Company assets or liabilities, therefore, all earnings and expenses are recorded in our consolidated financial statements. The Deferred Compensation Plan's assets and liabilities approximated $9.8 million and $9.0 million as of June 4, 2013 and June 5, 2012, respectively. Of these amounts, $0.7 million and $0.6 million was included in Prepaid and other expenses and Accrued liabilities – Payroll and related costs, and $8.0 million and $7.4 million was included in Other assets, net and Other deferred liabilities in the June 4, 2013 and June 5, 2012 Consolidated Balance Sheets, respectively. The investment in RTI common stock and the related liability payable in RTI common stock, which totaled $1.1 million and $1.0 million as of June 4, 2013 and June 5, 2012, respectively, is reflected in Shareholders' Equity in the Consolidated Balance Sheets.

Executive Retirements

On November 30, 2012, Sandy E. Beall, III, our founder and former President, Chief Executive Officer, and Chairman of the Board of Directors stepped down from management and the Board of Directors. In connection with a transition agreement between the Company and Mr. Beall, the material terms of which were finalized as of June 5, 2012, we accrued $2.2 million of severance during the fourth quarter of fiscal 2012. Mr. Beall's severance was paid during the third quarter of fiscal 2013. As previously mentioned, on June 4, 2013, Mr. Beall received a lump sum payment of $8.1 million, representing the full amount due to him under the Executive Supplemental Pension Plan, six-months following his retirement.

During the fourth quarter of fiscal 2012, each of our then Chief Financial Officer and Chief Technology Officer separated employment with the Company. During fiscal 2012, we recorded severance expense of $1.7 million in connection with separation agreements for these executives, which represents obligations pursuant to the Ruby Tuesday, Inc. Severance Pay Plan of two times base salary for both executives. In addition, we also recorded during fiscal 2012 additional share-based compensation of $0.4 million for these executives due to the accelerated vesting or modification of certain share-based awards in connection with their separation from the Company.