Note H - Employee Benefit Plans

12 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Retirement Benefits [Text Block]

H. Employee Benefit Plans

401(k) Plan

We have a profit-sharing plan pursuant to Section 401(k) of the Code, whereby participants may contribute a percentage of compensation not in excess of the maximum allowed under the Code. Effective January 1, 2022, all employees are eligible to participate in the plan the first of the month following 30 days of employment. Also effective, January 1, 2022, we match 100% of the first 5% of a participant’s compensation contributed to the plan under the 401(k) plan. The total contributions under the plan charged to income from operations totaled $0.6 million for fiscal 2024 and $0.7 million for fiscal 2023.

Additionally, we have a discretionary profit-sharing plan pursuant to Section 401(k) of the Code, whereby we may contribute an additional percentage of compensation. Employees are not required to contribute to the plan to receive the discretionary profit-sharing contribution. We did not make any discretionary profit-sharing contributions in fiscal 2024 or in fiscal 2023. 

We have a “Cafeteria Plan” pursuant to Section 125 of the Code, whereby health care benefits are provided for active employees through insurance companies. Substantially all active full-time employees are eligible for these benefits. We recognize the cost of providing these benefits by expensing the annual premiums, which are based on benefits paid during the year. The premiums expensed to results from operations for these benefits totaled $1.4 million for the fiscal year ended June 30, 2024 and $1.7 million for the fiscal year ended June 30, 2023.

Deferred Compensation Plan

Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI, (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest.

The Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. The terms of each Award, including the amount and any conditions that must be met to be entitled to payment of the Award are set forth in an Award Agreement between each Participant and NAI. The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date.

During the year ended June 30, 2024, we granted a total of $0.9 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the year ended June 30, 2023, we granted a total of $0.6 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. Each deferred cash award provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since the Award Date, and continues to be through the Payment Date, a member of our Board of Directors or an employee of NAI. In the event a Participant ceases to be an employee of NAI or a member of our Board of Directors prior to any Payment Date, no further payments shall be made in connection with the Award.

Defined Benefit Pension Plan

We formerly sponsored a defined benefit pension plan, which provides retirement benefits to employees based generally on years of service and compensation during the last five years before retirement. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. Annually, we contribute an amount not less than the minimum funding requirements of the Employee Retirement Income Security Act of 1974 nor more than the maximum tax-deductible amount.

Disclosure of Funded Status

The following table sets forth the defined benefit pension plan’s funded status and amount recognized in our consolidated balance sheets at June 30 (in thousands):

	2024			2023
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	1,364		$	1,438
Interest cost		49			46
Actuarial loss		(39	)		(29	)
Benefits paid		—			(91	)
Benefit obligation at end of year	$	1,374		$	1,364
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	1,025		$	1,094
Actual return on plan assets		91			22
Employer contributions		116			—
Benefits paid		—			(91	)
Fair value of plan assets at end of year	$	1,232		$	1,025
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	$	(142	)	$	(339	)
Unrecognized net actuarial loss in accumulated other comprehensive income		282			409
Net amount recognized	$	140		$	70
Projected benefit obligation	$	1,374		$	1,364
Accumulated benefit obligation	$	1,374		$	1,364
Fair value of plan assets	$	1,232		$	1,025

The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was 5.28% for the year ended June 30, 2024 and 4.89% during the year ended June 30, 2023.

Net Periodic Benefit Cost

The components included in the defined benefit pension plan’s net periodic benefit expense for the fiscal years ended June 30 were as follows (in thousands):

	2024			2023
Interest cost	$	49		$	46
Expected return on plan assets		(42	)		(42	)
Recognized actuarial loss		39			50
Settlement loss		-			27
Net periodic benefit expense	$	46		$	81

In the fiscal year ended June 30, 2024, we contributed $0.1 million to our defined benefit pension plan, and in the fiscal year ended  June 30, 2023, we did not contribute to the plan.

The following is a summary of changes in plan assets and benefit obligations recognized in other comprehensive income (loss) (in thousands): 

	2024			2023
Net loss	$	(88	)	$	(8	)
Settlement loss		—			(28	)
Amortization of net loss		(39	)		(50	)
Total recognized in other comprehensive loss	$	(127	)	$	(86	)
Total recognized in net periodic benefit cost and other comprehensive loss	$	(81	)	$	(5	)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is approximately $24,000. We do not have any transition obligations or prior service costs recorded in accumulated other comprehensive income.

The following benefit payments are expected to be paid (in thousands):

2025	$	1,009
2026		13
2027		101
2028		29
2029		32
2030-2034		199
Total benefit payments expected to be paid	$	1,383

The weighted-average rates used for the years ended June 30 in determining the defined benefit pension plan’s net pension costs, were as follows:

	2024			2023
Discount rate		5.28	%		4.89	%
Expected long-term rate of return		6.70	%		6.24	%
Compensation increase rate		N/A			N/A

Our expected rate of return is determined based on a methodology that considers historical returns of multiple classes analyzed to develop a risk-free real rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plan.

Our defined benefit pension plan’s weighted average asset allocation at June 30 and weighted average target allocation were as follows:

							Target
	2024			2023			Allocation
Equity securities		72	%		64	%		53	%
Debt securities		14	%		14	%		41	%
Commodities		0	%		12	%		4	%
Cash alternatives		14	%		10	%		2	%
		100	%		100	%		100	%

The underlying basis of the investment strategy of our defined benefit pension plan is to ensure that pension funds are available to meet the plan’s benefit obligations when due. Our investment strategy is a long-term risk controlled approach using diversified investment options with relatively minimal exposure to volatile investment options like derivatives.

The fair values by asset category of our defined benefit pension plan at June 30, 2024 were as follows (in thousands):

			Quoted
			Prices in
			Active
			Markets for		Significant		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Equity securities(1)	$	889	$	889	$	—	$	—
Debt securities(2)	$	173	$	173	$	—	$	—
Cash alternatives(3)	$	170	$	170	$	—	$	—
Total	$	1,232	$	1,232	$	—	$	—

(1) This category is comprised of publicly traded funds of which 72% are U.S. large-cap funds, 24% emerging market funds, and 4% non-U.S. developed market funds.

(2) This category is comprised of publicly traded funds, of which 77% are U.S. fixed income funds and 23% are corporate fixed income funds.

(3) This category is comprised of money market funds.