7EMPLOYEE BENEFITS

The Company has non-contributory defined benefit pension plans covering certain U.S. employees. Retirement benefits are generally provided based on employees’ years of service and average earnings. Normal retirement age is 65, with provisions for earlier retirement. The Company elected to freeze its U.S. defined benefit pension plans as of September 30, 2009 and as a result, there are no benefit accruals related to service performed after that date.

The financial position of the Company’s non-contributory defined benefit plans as of fiscal year end 2014 and 2013 was as follows:



	2014		2013
Projected benefit obligation:
Projected benefit obligation, beginning of year	$	22,051	$	25,516
Interest cost		1,078		997
Actuarial (gain) loss		3,012		(3,649)
Benefits paid		(840)		(813)
Projected benefit obligation, end of year		25,301		22,051
Fair value of plan assets:
Fair value of plan assets, beginning of year		15,864		13,673
Actual gain on plan assets		1,795		1,861
Company contributions		732		1,143
Benefits paid		(840)		(813)
Fair value of plan assets, end of year		17,551		15,864
Funded status of the plans		(7,750)		(6,187)
Amounts recognized in the Consolidated Balance Sheets consist of:
Current pension liabilities		189		191
Non-current pension liabilities		7,561		5,996
Accumulated other comprehensive loss		(6,981)		(5,008)
Components of accumulated other comprehensive loss:
Net actuarial loss		(6,981)		(5,008)
Accumulated other comprehensive loss	$	(6,981)	$	(5,008)

Net periodic benefit cost for the non-contributory defined benefit pension plans for the respective years included the following pre-tax amounts:



	2014		2013		2012
Interest cost	$	1,078	$	997	$	1,036
Expected return on plan assets		(1,097)		(977)		(942)
Amortization of unrecognized net actuarial loss		341		666		335
Net periodic pension cost		322		686		429
Other changes in benefit obligations recognized in other comprehensive income (loss), (OCI):
Net actuarial (gain) loss		1,974		(5,199)		2,571
Total recognized in net periodic pension cost and OCI	$	2,296	$	(4,513)	$	3,000

The Company expects to recognize $512 of unrecognized loss amortization as a component of net periodic benefit cost in 2015. This amount is included in accumulated other comprehensive income as of October 3, 2014.

At October 3, 2014, the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with benefit obligations in excess of plan assets was $25,301 and $17,550, respectively, and there were no plans with plan assets in excess of benefit obligations. At September 27, 2013, the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with benefit obligations in excess of plan assets was $22,051 and $15,864, respectively, and there were no plans with plan assets in excess of benefit obligations.

The Company anticipates making contributions to the defined benefit pension plans of $663 through October 2, 2015.

Estimated benefit payments from the defined benefit plans to participants for each of the five years ending September 27, 2019 and the five years thereafter are as follows:



2015	$	945
2016		1,003
2017		1,006
2018		1,049
2019		1,086
Five years thereafter		5,971

Actuarial assumptions used to determine the projected benefit obligation and net periodic pension cost as of the following fiscal years were as follows:



	Projected Benefit Obligation			Net Periodic Pension Cost
	2014	2013	2012	2014	2013	2012
Discount rate	4.25%	5.00%	4.00%	5.00%	4.00%	5.00%
Long-term rate of return	N/A	N/A	N/A	7.50%	7.50%	7.50%
Average salary increase rate	N/A	N/A	N/A	N/A	N/A	N/A

The change in discount rates in 2014 and 2012 resulted in actuarial losses of approximately $2,640 and $3,600, respectively. The remainder of the actuarial losses for 2014 and 2012 resulted from mortality experience and other demographic changes. The change in discount rates in 2013 resulted in an actuarial gain of approximately $3,500. The remainder of the actuarial gain for 2013 was related to adjustments to mortality tables and other modifications to actuarial assumptions.

To determine the discount rate assumption used in the Company’s pension valuation, the Company identified a benefit payout stream based on the demographics of the pension plans and constructed a hypothetical bond portfolio using high-quality corporate bonds with cash flows that matched that benefit payout stream. A yield curve was calculated based on this hypothetical portfolio which was used for the discount rate determination.

The Company determines the long-term rate of return assumption for plan assets by using the historical asset returns for various investment asset classes and adjusting them to reflect future expectations. The expected asset class returns are weighted by the targeted asset allocations, resulting in a weighted average return which is rounded to the nearest quarter percent.

The Company uses measurement dates of October 1 to determine pension expenses for each year and the last day of the fiscal year to determine the fair value of the pension assets.

The Company’s pension plans’ weighted average asset allocations at October 3, 2014 and September 27, 2013, by asset category were as follows:



	2014	2013
Equity securities	74%	76%
Fixed income securities	24%	23%
Other securities	2%	1%
	100%	100%

The Company’s primary investment objective for the plans’ assets is to maximize the probability of meeting the plans’ actuarial target rate of return of 7.5%, with a secondary goal of returning 4% above the rate of inflation. These return objectives are targeted while simultaneously striving to minimize risk of loss to the plans’ assets. The investment horizon over which the investment objectives are expected to be met is a full market cycle or five years, whichever is greater.

The Company’s investment strategy for the plans is to invest in a diversified portfolio that will generate average long-term returns commensurate with the aforementioned objectives while minimizing risk.

The following table summarizes the Company’s pension plan assets measured at fair value as of October 3, 2014:



		Level 1		Level 2		Level 3		Total
Description:
Mutual fund	$	17,299	$	-	$	-	$	17,299
Money market funds		36		-		-		36
Group annuity contract		-		-		216		216
Total	$	17,335	$	-	$	216	$	17,551

The following table summarizes the Company’s pension plan assets measured at fair value as of September 27, 2013:



		Level 1		Level 2		Level 3		Total
Description:
Mutual fund	$	15,560	$	-	$	-	$	15,560
Money market funds		34		-		-		34
Group annuity contract		-		-		270		270
Total	$	15,594	$	-	$	270	$	15,864

The tables below set forth a summary of changes in fair value of the Company’s Level 3 pension plan assets for the years ended October 3, 2014 and September 27, 2013:



	2014		2013
Level 3 assets, beginning of year	$	270	$	331
Purchases		7		6
Unrealized (loss) gain		(15)		1
Sales		(46)		(68)
Level 3 assets, end of year	$	216	$	270

The fair values of the money market fund and mutual fund were derived from quoted market prices as substantially all of these instruments have active markets. The fair value of the group annuity contract was derived using a discounted cash flow model with inputs based on current yields of similar instruments with comparable durations. The asset allocation of the mutual fund is a U.S. large-cap blend based on a moderate allocation style, generally investing approximately 70% to 75% in equity securities and the remainder in fixed income securities. The annuity contract consists of high quality bonds.

The Company also has a non-qualified deferred compensation plan that provides certain officers and employees the ability to defer a portion of their compensation until a later date. The deferred amounts and earnings thereon are payable to participants, or designated beneficiaries, at specified future dates upon retirement, death or termination of employment from the Company. The deferred compensation liability, which is classified as Other liabilities on our accompanying Consolidated Balance Sheets, was approximately $10,938 and $8,946 as of October 3, 2014 and September 27, 2013, respectively.

A majority of the Company’s full-time employees are covered by defined contribution programs. Expense attributable to the defined contribution programs was approximately $1,061, $931 and $882 for 2014, 2013 and 2012 respectively.