17. 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 $60,552 in fiscal 2015, $57,857 in fiscal 2014 and $56,480 in fiscal 2013.

The Company sponsors a Supplemental Executive Retirement Plan ("SERP") for its officers, which is a defined contribution plan that is subject to a five year graduated vesting schedule. The expense recognized for the SERP was $8,748 in fiscal 2015, $11,531 in fiscal 2014 and $7,469 in fiscal 2013.

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 $1,159 in fiscal 2015, $8,000 in fiscal 2014 and $5,583 in fiscal 2013.

The Company also maintains a nonqualified executive retirement plan for certain former employees who, pursuant to their employment agreements, did not participate in the SERP. The Company no longer enrolls new participants into this plan. These participants generally receive an annual benefit payable monthly over fifteen years. This nonqualified defined benefit plan is unfunded.

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

	Defined Benefit Pension Plan									Nonqualified Executive Retirement Plan
	2015			2014			2013			2015			2014			2013
Service cost	$	2,543		$	3,341		$	2,908		$	—		$	—		$	—
Interest cost		6,474			6,120			6,128			542			541			616
Expected return on plan assets		(7,339	)		(6,738	)		(6,719	)		—			—			—
Amortization of unrecognized prior service cost		240			240			240			—			—			—
Amortization of unrecognized net loss (gain)		2,392			4,935			3,926			894			(351	)		866

Net pension expense	$	4,310		$	7,898		$	6,483		$	1,436		$	190		$	1,482
Other changes recognized in other comprehensive loss:
Unrecognized net (gain) loss arising during period	$	17,190		$	(18,860	)	$	12,901		$	894		$	(351	)	$	866
Prior service cost arising during period		—			—			—			—			—			—
Amortization of unrecognized prior service costs		(240	)		(240	)		(240	)		—			—			—
Amortization of unrecognized net (loss) gain		(2,392	)		(4,935	)		(3,926	)		(894	)		351			(866	)

Net amount recognized in other comprehensive loss		14,558			(24,035	)		8,735			—			—			—

Net amount recognized in pension expense and other comprehensive loss	$	18,868		$	(16,137	)	$	15,218		$	1,436		$	190		$	1,482

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 February 28, 2015 and March 1, 2014:

	Defined Benefit Pension Plan						Nonqualified Executive Retirement Plan
	2015			2014			2015			2014
Change in benefit obligations:
Benefit obligation at end of prior year	$	148,596		$	158,522		$	12,865		$	14,332
Service cost		2,543			3,341			—			—
Interest cost		6,474			6,120			542			541
Distributions		(12,190	)		(7,677	)		(1,616	)		(1,657	)
Change due to change in assumptions		—			—			—			—
Actuarial (gain) loss		21,833			(11,710	)		894			(351	)

Benefit obligation at end of year	$	167,256		$	148,596		$	12,685		$	12,865


Change in plan assets:
Fair value of plan assets at beginning of year	$	128,984		$	114,773		$	—		$	—
Employer contributions		1,159			8,000			1,616			1,655
Actual return on plan assets		11,981			13,888			—			—
Distributions (including expenses paid by the plan)		(12,190	)		(7,677	)		(1,616	)		(1,655	)

Fair value of plan assets at end of year	$	129,934		$	128,984		$	—		$	—


Funded status	$	(37,322	)	$	(19,612	)	$	(12,685	)	$	(12,865	)

Net amount recognized	$	(37,322	)	$	(19,612	)	$	(12,685	)	$	(12,865	)


Amounts recognized in consolidated balance sheets consisted of:
Prepaid pension cost	$	—		$	—		$	—		$	—
Accrued pension liability		(37,322	)		(19,612	)		(12,685	)		(12,865	)

Net amount recognized	$	(37,322	)	$	(19,612	)	$	(12,685	)	$	(12,865	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss	$	(50,146	)	$	(35,348	)	$	—		$	—
Prior service cost		(67	)		(307	)		—			—

Amount recognized	$	(50,213	)	$	(35,655	)	$	—		$	—

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 2016 are $3,913 and $67, respectively.

The accumulated benefit obligation for the defined benefit pension plan was $167,256 and $148,596 as of February 28, 2015 and March 1, 2014, respectively. The accumulated benefit obligation for the nonqualified executive retirement plan was $12,685 and $12,865 as of February 28, 2015 and March 1, 2014, respectively.

The significant actuarial assumptions used for all defined benefit plans to determine the benefit obligation as of February 28, 2015, March 1, 2014 and March 2, 2013 were as follows:

	Defined Benefit Pension Plan									Nonqualified Executive Retirement Plan
	2015			2014			2013			2015			2014			2013
Discount rate		4.00	%		4.50	%		4.00	%		4.00	%		4.50	%		4.00	%
Rate of increase in future compensation levels		N/A			4.50	%		4.50	%		N/A			N/A			N/A
Expected long-term rate of return on plan assets		6.50	%		7.75	%		7.75	%		N/A			N/A			N/A

Weighted average assumptions used to determine net cost for the fiscal years ended February 28, 2015, March 1, 2014 and March 2, 2013 were:

	Defined Benefit Pension Plan									Nonqualified Executive Retirement Plan
	2015			2014			2013			2015			2014			2013
Discount rate		4.50	%		4.00	%		4.50	%		4.50	%		4.00	%		4.50	%
Rate of increase in future compensation levels		N/A			4.50	%		5.00	%		N/A			N/A			N/A
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 6.50% long-term rate of return on plan assets assumption for fiscal 2015 and 7.75% for fiscal 2014 and fiscal 2013.

The Company's pension plan asset allocations at February 28, 2015 and March 1, 2014 by asset category were as follows:

	February 28, 2015			March 1, 2014
Equity securities		53	%		62	%
Fixed income securities		47	%		38	%

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		39	%
International equities		13	%
U.S. fixed income		48	%

Total		100	%

The Company expects to contribute $0 to the Defined Benefit Pension Plan and make payments of $1,644 to participants of the Nonqualified Executive Retirement Plan during fiscal 2016.

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 February 28, 2015 and March 1, 2014:

	Fair Value Measurements at February 28, 2015
	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	$	—	$	17,071	$	—	$	17,071
Large Cap		—		35,524		—		35,524
Small-Mid Cap		—		15,977		—		15,977
Fixed Income
Long Term Credit Bond Index		—		47,249		—		47,249
Intermediate Fixed Income		—		13,612		—		13,612
Other types of investments
Short Term Investments		—		501		—		501

Total	$	—	$	129,934	$	—	$	129,934

	Fair Value Measurements at March 1, 2014
	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	$	—	$	20,401	$	—	$	20,401
Large Cap		—		40,913		—		40,913
Small-Mid Cap		—		18,071		—		18,071
Fixed Income
Long Term Credit Bond Index		—		47,360		—		47,360
Other types of investments
Short Term Investments		—		2,239		—		2,239

Total	$	—	$	128,984	$	—	$	128,984

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
2016	$	7,857	$	1,644
2017		7,974		1,619
2018		8,076		1,249
2019		8,155		1,225
2020		8,409		1,142
2021 - 2025		44,902		4,153

Total	$	85,373	$	11,032

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 $24,261 in fiscal 2015, $26,617 in fiscal 2014 and $19,787 in fiscal 2013.