Retirement Plans

12 Months Ended

Mar. 03, 2012

Retirement Plans

Retirement Plans

14. Retirement Plans

• Defined Contribution Plans

        The Company and its subsidiaries sponsor several retirement plans that are primarily 401(k) defined contribution plans covering nonunion associates and certain union associates. The Company does not contribute to all of the plans. In accordance with those plan provisions, the Company matches 100% of a participant's pretax payroll contributions, up to a maximum of 3% of such participant's pretax annual compensation. Thereafter, the Company will match 50% of the participant's additional pretax payroll contributions, up to a maximum of 2% of such participant's additional pretax annual compensation. Total expense recognized for the above plans was $57,036 in fiscal 2012, $58,035 in fiscal 2011 and $59,531 in fiscal 2010.

        The Chairman of the Board is entitled to supplemental retirement defined contribution arrangements in accordance with her employment agreement, which vests immediately. The Company makes investments to fund this obligation. Other officers, who are not participating in the defined benefit nonqualified executive retirement plan, are included in a supplemental retirement plan, which is a defined contribution plan that is subject to a five year graduated vesting schedule. The expense recognized for these plans was $4,582 in fiscal 2012, $9,433 in fiscal 2011, and $10,989 in fiscal 2010.

• Defined Benefit Plans

        The Company and its subsidiaries also sponsor a qualified defined benefit pension plan that requires benefits to be paid to eligible associates based upon years of service and, in some cases, eligible compensation. The Company's funding policy for The Rite Aid Pension Plan (The "Defined Benefit Pension Plan") is to contribute the minimum amount required by the Employee Retirement Income Security Act of 1974. However, the Company may, at its sole discretion, contribute additional funds to the plan. The Company made contributions of $14,878 in fiscal 2012, $13,451 in fiscal 2011, and $2,681 in fiscal 2010.

        The Company has established the nonqualified executive retirement plan for certain officers who, pursuant to their employment agreements, are not participating in the defined contribution supplemental retirement plan. Generally, eligible participants receive an annual benefit, payable monthly over fifteen years, equal to a percentage of the average of the three highest annual base salaries paid or accrued for each participant within the ten fiscal years prior to the date of the event giving rise to payment of the benefit. This defined benefit plan is unfunded.

        Net periodic pension expense and other changes recognized in other comprehensive income for the defined benefit plans included the following components:

	Defined Benefit Pension Plan									Nonqualified Executive Retirement Plan
	2012			2011			2010			2012			2011			2010
Service cost	$	2,988		$	2,972		$	2,603		$	21		$	72		$	54
Interest cost		6,501			6,124			6,032			771			847			1,130
Expected return on plan assets		(6,192	)		(4,819	)		(2,637	)		—			—			—
Amortization of unrecognized prior service cost		639			861			861			—			—			—
Amortization of unrecognized net loss (gain)		2,435			2,114			3,037			(582	)		(926	)		651
Net pension expense(income)	$	6,371		$	7,252		$	9,896		$	210		$	(7	)	$	1,835
Other changes recognized in other comprehensive loss:
Unrecognized net (gain) loss arising during period	$	24,664		$	279		$	(4,339	)	$	595		$	593		$	(1,572	)
Prior service cost arising during period		(275	)		—			—			—			—			—
Amortization of unrecognized prior service costs		(639	)		(861	)		(860	)		—			—			—
Amortization of unrecognized net (loss) gain		(2,435	)		(2,114	)		(3,037	)		582			925			(651	)
Net amount recognized in other comprehensive loss		21,315			(2,696	)		(8,236	)		1,177			1,518			(2,223	)
Net amount recognized in pension expense and other comprehensive loss	$	27,686		$	4,556		$	1,660		$	1,387		$	1,511		$	(388	)

        The table below sets forth reconciliation from the beginning of the year for both the benefit obligation and plan assets of the Company's defined benefit plans, as well as the funded status and amounts recognized in the Company's balance sheet as of March 3, 2012 and February 26, 2011:

	Defined Benefit Pension Plan						Nonqualified Executive Retirement Plan
	2012			2011			2012			2011
Change in benefit obligations:
Benefit obligation at end of prior year	$	115,499		$	103,876		$	14,822		$	14,878
Service cost		2,988			2,972			21			72
Interest cost		6,501			6,124			771			847
Distributions		(6,957	)		(6,353	)		(1,700	)		(1,568	)
Change due to change in assumptions		23,574			7,357			823			426
Change due to Plan amendments		(275	)		—			—			—
Actuarial (gain) loss		980			1,523			(228	)		167
Benefit obligation at end of year	$	142,310		$	115,499		$	14,509		$	14,822
Change in plan assets:
Fair value of plan assets at beginning of year	$	94,195		$	73,676		$	—		$	—
Employer contributions		14,878			13,451			1,700			1,568
Actual return on plan assets		7,507			14,858			—			—
Distributions (including expenses paid by the plan)		(8,384	)		(7,790	)		(1,700	)		(1,568	)
Fair value of plan assets at end of year	$	108,196		$	94,195		$	—		$	—
Funded status	$	(34,114	)	$	(21,304	)	$	(14,509	)	$	(14,822	)
Net amount recognized	$	(34,114	)	$	(21,304	)	$	(14,509	)	$	(14,822	)
Amounts recognized in consolidated balance sheets consisted of:
Prepaid pension cost	$	—		$	—		$	—		$	—
Accrued pension liability		(34,114	)		(21,304	)		(14,509	)		(14,822	)
Net amount recognized	$	(34,114	)	$	(21,304	)	$	(14,509	)	$	(14,822	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial (loss) gain	$	(50,168	)	$	(28,029	)	$	—		$	1,177
Prior service cost		(787	)		(1,700	)		—			—
Amount recognized	$	(50,955	)	$	(29,729	)	$	—		$	1,177

        The estimated net actuarial loss and prior service cost amounts that will be amortized from accumulated other comprehensive loss into net periodic pension expense in fiscal 2012 are $3,839 and $240, respectively.

        The accumulated benefit obligation for the defined benefit pension plan was $142,117 and $114,845 as of March 3, 2012 and February 26, 2011, respectively. The accumulated benefit obligation for the nonqualified executive retirement plan was $14,509 and $14,731 as of March 3, 2012 and February 26, 2011, respectively.

        The significant actuarial assumptions used for all defined benefit plans to determine the benefit obligation as of March 3, 2012, February 26, 2011, and February 27, 2010 were as follows:

	Defined Benefit Pension Plan									Nonqualified Executive Retirement Plan
	2012			2011			2010			2012			2011			2010
Discount rate		4.50	%		5.50	%		6.00	%		4.50	%		5.50	%		6.00	%
Rate of increase in future compensation levels		5.00	%		5.00	%		5.00	%		3.00	%		3.00	%		3.00	%

        Weighted average assumptions used to determine net cost for the fiscal years ended March 3, 2012, February 26, 2011 and February 27, 2010 were:

	Defined Benefit Pension Plan									Nonqualified Executive Retirement Plan
	2012			2011			2010			2012			2011			2010
Discount rate		5.50	%		6.00	%		7.00	%		5.50	%		6.00	%		7.00	%
Rate of increase in future compensation levels		5.00	%		5.00	%		5.00	%		3.00	%		3.00	%		3.00	%
Expected long-term rate of return on plan assets		7.75	%		7.75	%		7.75	%		N/A			N/A			N/A

        To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 7.75% long-term rate of return on plan assets assumption for fiscal 2012, 2011 and 2010.

        The Company's pension plan asset allocations at March 3, 2012 and February 26, 2011 by asset category were as follows:

	March 3, 2012			February 26, 2011
Equity securities		60	%		58	%
Fixed income securities		40	%		42	%
Total		100	%		100	%

        The investment objectives of the Defined Benefit Pension Plan, the only defined benefit plan with assets, are to:

• •

  Achieve a rate of return on investments that exceeds inflation over a full market cycle and is consistent with actuarial assumptions;

  •

  Balance the correlation between assets and liabilities by diversifying the portfolio among various asset classes to address return risk and interest rate risk;

• •

  Balance the allocation of assets between the investment managers to minimize concentration risk;

  •

  Maintain liquidity in the portfolio sufficient to meet plan obligations as they come due; and

  •

  Control administrative and management costs.

        The asset allocation established for the pension investment program reflects the risk tolerance of the Company, as determined by:

• •

  the current and anticipated financial strength of the Company;

  •

  the funded status of the plan; and

  •

  plan liabilities.

        Investments in both the equity and fixed income markets will be maintained, recognizing that historical results indicate that equities (primarily common stocks) have higher expected returns than fixed income investments. It is also recognized that the correlation between assets and liabilities must be balanced to address higher volatility of equity investments (return risk) and interest rate risk.

        The following targets are to be applied to the allocation of plan assets.

Category	Target Allocation
U.S. equities		45	%
International equities		15	%
U.S. fixed income		40	%
Total		100	%

        The Company expects to contribute $11,500 to the Deferred Benefit Plan and $1,662 to the nonqualified executive retirement plan during fiscal 2013.

        The following table sets forth by level within the fair value hierarchy a summary of the plan's investments measured at fair value on a recurring basis as of March 3, 2012 and February 26, 2011:

	Fair Value Measurements at March 3, 2012
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Equity Securities
International equity	$	—	$	16,265	$	—	$	16,265
Large Cap		—		33,350		—		33,350
Mid Cap		—		11,765		—		11,765
Small Cap		—		3,733		—		3,733
Fixed Income
Long Term Credit Bond Index		—		42,924		—		42,924
Other types of investments
Short Term Investments		—		159		—		159
Total	$	—	$	108,196	$	—	$	108,196

	Fair Value Measurements at February 26, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Equity Securities
International equity	$	—	$	13,479	$	—	$	13,479
Large Cap		—		27,743		—		27,743
Mid Cap		—		10,191		—		10,191
Small Cap		—		3,434		—		3,434
Fixed Income
Long Term Credit Bond Index		—		38,514		—		38,514
Other types of investments
Short Term Investments		—		834		—		834
Total	$	—	$	94,195	$	—	$	94,195

        The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Common and Collective Trusts

        Common collective trust funds are stated at fair value as determined by the issuer of the common collective trust funds based on the fair market value of the underlying investments.

        Following are the future benefit payments expected to be paid for the Defined Benefit Pension Plan and the nonqualified executive retirement plan during the years indicated:

Fiscal Year	Defined Benefit Pension Plan		Nonqualified Executive Retirement Plan
2013	$	6,273	$	1,662
2014		6,440		1,641
2015		6,650		1,581
2016		6,849		1,520
2017		7,084		1,321
2018 - 2022		40,149		4,683
Total	$	73,445	$	12,408

• Other Plans

        The Company participates in various multi-employer union pension plans that are not sponsored by the Company. Total expenses recognized for the multi-employer plans were $14,594 in fiscal 2012, $19,053 in fiscal 2011 and $19,328 in fiscal 2010.