Note 11 – Associate Retirement Plans

The Company’s retirement programs include pension plans providing non-contributory benefits and salary deferral defined contribution plans. Substantially all of the Company’s associates not covered by collective bargaining agreements are covered by a frozen non-contributory pension plan, a defined contribution plan, or both. Associates covered by collective bargaining agreements at the Company’s Columbus, Georgia; Norfolk, Virginia; and Landover, Maryland facilities all participate in the Company’s defined contribution plan; the remaining associates covered under collective bargaining agreements participate in a multi-employer pension plan.

Defined Contribution Plans

Expense for employer matching and profit sharing contributions made to defined contribution plans totaled $11.9 million, $21.1 million and $13.6 million in fiscal years end December 31, 2016, January 2, 2016 and January 3, 2015, respectively.

Executive Compensation Plans

The Company has a deferred compensation plan for a select group of management personnel or highly compensated associates. The plan is unfunded and permits participants to defer receipt of a portion of their base salary, annual bonus, or long-term incentive compensation which would otherwise be paid to them. The deferred amounts, plus earnings, are distributed following the associate’s termination of employment. Earnings are based on the performance of hypothetical investments elected by the participant from a portfolio of investment options.

The Company had two separate trusts established for the protection of cash balances owed to participants in its deferred compensation plans. The Company was required, as specified by the plan documents, to fund these trusts with 125% of its pre-merger liability to plan participants. These trusts were terminated in 2015 and the Company received cash proceeds from the liquidation of corporate owned life insurance policies of $5.0 million.

The Company also holds variable universal life insurance policies on certain key associates intended to fund distributions under the deferred compensation plan referenced above. The net cash surrender value of approximately $4.2 million at both December 31, 2016 and January 2, 2016, is recorded in “Other assets, net” in the consolidated balance sheets. These policies have an aggregate amount of life insurance coverage of approximately $15.0 million.

Defined Benefit Plans

The Company sponsors defined benefit pension plans for certain associates. The pension benefits are primarily based on years of service and compensation, with some differences resulting from the nature of how benefits were calculated under the Company’s legacy defined benefit plans, as described below.

The Spartan Stores, Inc. Cash Balance Pension Plan (“Cash Balance Pension Plan”), a non-contributory cash balance pension plan, was frozen effective January 1, 2011. As a result of the freeze, no additional associates were eligible to participate in the plan after January 1, 2011, and additional service credits were no longer added to each participant’s account; however, interest credits continue to accrue. Prior to the plan freeze, the plan benefit formula utilized a cash balance approach whereby credits were added annually to a participant’s account based on compensation and years of vested service, with interest credits also added to the participant’s account at the Company’s discretion.

The Retirement Plan for Employees of Super Food Services, Inc. (“Super Foods Plan”), a qualified non-contributory pension plan offered by one of the Company’s subsidiaries, provides retirement income for certain eligible full-time associates who are not covered by a union retirement plan. Pension benefits under the plan are based on length of service and compensation, and contributions meet the minimum funding requirements. This plan has been curtailed and no new associates can enter the plan. This plan was frozen effective January 1, 1998.

On December 31, 2014, the Super Foods Plan was merged into the Cash Balance Pension Plan and renamed the SpartanNash Company Pension Plan. The merging of the plans resulted in lower administrative fees and reduced cash funding. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act of 1976 (“ERISA”). Plan assets consist principally of U.S. government and corporate obligations and common stocks. The plan does not hold any SpartanNash stock.

If lump sum distributions are made in an amount exceeding annual interest cost, settlement accounting is triggered and the resulting settlement expense is recorded as a component of total pension expense (income). During the fiscal year ended December 31, 2016, lump sum distributions of $2.8 million were made and a resulting pension settlement charge of $0.7 million was incurred. During the fiscal year ended January 3, 2015, terminated vested participants of the Cash Balance Pension Plan and the Super Foods Plan were offered a temporary opportunity to elect to receive a lump sum distribution, and total lump sum distributions of $10.6 million were made. As a result of these distributions, and normal lump sum distributions, a pension settlement charge of $1.6 million was incurred in fiscal 2014.

Postretirement Medical Plans

SpartanNash Company and certain subsidiaries provide healthcare benefits to retired associates who were not covered by collective bargaining arrangements during their employment (“covered associates”) under the SpartanNash Company Retiree Medical Plan (“SpartanNash Medical Plan”). Former Spartan Stores, Inc. associates who have at least 10 years of service and have attained age 55, and who were not covered by collective bargaining arrangements during their employment, qualify as covered associates. Qualified covered associates that retired prior to March 31, 1992 receive major medical insurance with deductible and coinsurance provisions until age 65 and Medicare supplemental benefits thereafter. Covered associates retiring after April 1, 1992 are eligible for monthly postretirement healthcare benefits of $5 multiplied by the associate’s years of service. This benefit is in the form of a credit against the monthly insurance premium. The retiree pays the balance of the premium. Associates hired after December 31, 2001 are not eligible for these benefits.

The following tables set forth the actuarial present value of benefit obligations, funded status, change in benefit obligation, change in plan assets, weighted average assumptions used in actuarial calculations and components of net periodic benefit costs for the Company’s significant pension and postretirement benefit plans, excluding multi-employer plans. The prepaid, current accrued, and noncurrent accrued benefit costs associated with pension and postretirement benefits are reported in “Other assets, net,” “Accrued payroll and benefits,” and “Postretirement benefits,” respectively, in the consolidated balance sheets.

	SpartanNash Company Pension Plan						SpartanNash Medical Plan
	December 31,			January 2,			December 31,			January 2,
(In thousands, except percentages)	2016			2016			2016			2016
Funded Status
Projected/Accumulated benefit obligation:
Balance at beginning of year	$	83,398		$	93,034		$	9,179		$	9,905
Service cost		—			—			187			231
Interest cost		2,977			3,325			345			404
Actuarial loss (gain)		1,598			(4,985	)		213			(1,117	)
Benefits paid		(7,623	)		(7,976	)		(261	)		(244	)
Balance at end of year	$	80,350		$	83,398		$	9,663		$	9,179

Fair value of plan assets:
Balance at beginning of year	$	84,753		$	93,718		$	—		$	—
Actual return on plan assets		4,852			(1,639	)		—			—
Company contributions		—			650			261			244
Benefits paid		(7,623	)		(7,976	)		(261	)		(244	)
Balance at end of year	$	81,982		$	84,753		$	—		$	—
Funded (unfunded) status	$	1,632		$	1,355		$	(9,663	)	$	(9,179	)

Components of net amount recognized in consolidated balance sheets:
Noncurrent assets	$	1,632		$	1,355		$	—		$	—
Current liabilities		—			—			(412	)		(340	)
Noncurrent liabilities		—			—			(9,251	)		(8,839	)
Net asset (liability)	$	1,632		$	1,355		$	(9,663	)	$	(9,179	)

Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	16,938		$	17,322		$	1,434		$	1,263
Prior service credit		—			—			(408	)		(566	)
Accumulated other comprehensive loss	$	16,938		$	17,322		$	1,026		$	697

Weighted average assumptions at measurement date:
Discount rate	3.82%			4.04%			4.26%			4.55%
Expected return on plan assets	4.83%			5.05%			N/A			N/A
Ultimate health care cost trend rate	N/A			N/A			5.00%			5.00%

Components of net periodic benefit cost (income):

	SpartanNash Company Pension Plan									SpartanNash Medical Plan
	December 31,			January 2,			January 3,			December 31,			January 2,			January 3,
	2016			2016			2015			2016			2016			2015
(In thousands, except percentages)	(52 Weeks)			(52 Weeks)			(53 Weeks) (a)			(52 Weeks)			(52 Weeks)			(53 Weeks)
Service cost	$	—		$	—		$	—		$	187		$	231		$	186
Interest cost		2,977			3,325			4,223			345			404			394
Amortization of prior service cost		—			—			—			(158	)		(158	)		(158	)
Expected return on plan assets		(4,269	)		(4,923	)		(5,737	)		—			—			—
Recognized actuarial net loss		706			827			970			42			174			20
Net periodic benefit (income) expense	$	(586	)	$	(771	)	$	(544	)	$	416		$	651		$	442
Settlement expense		692			—			2,588			—			—			—
Total expense (income)	$	106		$	(771	)	$	2,044		$	416		$	651		$	442

Weighted average assumptions used to determine net periodic benefit cost (income):
Discount rate	4.04%			3.75%			4.35%/4.65%			4.55%			4.15%			5.05%
Expected return on plan assets	5.05%			5.50%			5.95%/5.70%			N/A			N/A			N/A

On December 31, 2014, the Super Foods Plan was merged into the Cash Balance Pension Plan and renamed the SpartanNash Company Pension Plan.
(a) Amounts reflect the combined values of the Cash Balance Pension Plan and Super Foods Plan. For weighted average assumptions, these reflect the assumptions used for the Cash Balance Pension Plan and the Super Foods Plan, respectively.

The net actuarial loss and prior service cost included in “Accumulated Other Comprehensive Income” and expected to be recognized in net periodic benefit cost during fiscal year 2017 are as follows:

	SpartanNash
	Company		SpartanNash
(In thousands)	Pension Plan		Medical Plan
Prior service credit	$	—	$	(158	)
Net actuarial loss		222		59

Prior service costs (credits) are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses for the SpartanNash Company Pension Plan are amortized over the average remaining service life of active participants when the accumulation of such gains and losses exceeds 10% of the greater of the projected benefit obligation and the fair value of plan assets.

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the postretirement plan. Assumed healthcare cost trend rates used to determine net periodic benefit cost (income) were as follows:

	December 31,	January 2,	January 3,
	2016	2016	2015
Pre-65	7.50%	7.75%	8.00%
Post-65	8.40%	6.85%	7.00%

The effect of a one-percentage point increase or decrease in assumed healthcare cost trend rates on the total service and interest components and the post-retirement benefit obligations would be less than $0.1 million.

Expected Return on Assets and Investment Strategy

The Company has assumed an average long-term expected return on the SpartanNash Company Pension Plan assets of 4.83% as of December 31, 2016. The expected return assumption was modeled by third-party investment portfolio managers, based on asset allocations and the expected return and risk components of the various asset classes in the portfolio. Determining projected stock and bond returns and then applying these returns to the target asset allocations of the plan assets developed the expected return. Equity returns were based primarily on historical returns of the S&P 500 Index. Fixed-income projected returns were based primarily on historical returns for the broad U.S. bond market. This overall return assumption is believed to be reasonable over a longer-term period that is consistent with the liabilities.

The Company has an investment policy for the SpartanNash Company Pension Plan with a long-term asset allocation mix designed to meet the long-term retirement obligations by investing in equity, fixed income and other securities to cover cash flow requirements of the plan and minimize long-term costs. The asset allocation mix is reviewed periodically and, on a regular basis, actual allocations are rebalanced to approximate the prevailing targets. The following table summarizes both the targeted allocation of the SpartanNash Company Pension Plan’s weighted-average asset allocation by asset category and actual allocations as of December 31, 2016 and January 2, 2016:

	Target (a)			Actual
	December 31,			December 31,			January 2,
Asset Category	2016			2016			2016
Equity securities		20.0	%		20.8	%		30.6	%
Fixed income		80.0			76.9			68.5
Cash equivalents		—			2.3			0.9
Total		100.0	%		100.0	%		100.0	%

(a)

At the end of fiscal 2015, the Company updated the target allocation of the SpartanNash Company Pension Plan investment portfolio to reduce its return-seeking equity securities to approximate a 20% allocation. The Company continually evaluated financial market conditions and prudently transitioned the pension plan assets to approximate the revised target allocation as of December 31, 2016.

The investment policy emphasizes the following key objectives: (1) provide benefit security to participants by maximizing the return on plan assets at an acceptable risk level (2) maintain adequate liquidity for current benefit payments (3) avoid unexpected increases in pension expense and (4) within the scope of the above objectives, minimize long term funding to the plan.

The fair values of the pension plan assets at December 31, 2016 and January 2, 2016, by asset category, are as follows:

	Fair Value of Assets as of December 31, 2016
(In thousands)	Total		Level 1		Level 2		Level 3		NAV (a)
Mutual funds	$	14,178	$	—	$	—	$	—	$	14,178
Pooled funds		50,506		—		—		—		50,506
Money market fund		1,872		—		1,872		—		—
Guaranteed annuity contract		15,426		—		—		15,426		—
Total fair value	$	81,982	$	—	$	1,872	$	15,426	$	64,684

	Fair Value of Assets as of January 2, 2016
(In thousands)	Total		Level 1		Level 2		Level 3		NAV (a)
Mutual funds	$	9,401	$	—	$	—	$	—	$	9,401
Pooled funds		58,355		—		—		—		58,355
Money market fund		799		—		799		—		—
Guaranteed annuity contract		16,198		—		—		16,198		—
Total fair value	$	84,753	$	—	$	799	$	16,198	$	67,756

(a)

Assets are measured at the net asset value (“NAV”) (or its equivalent) on a non-active market, and therefore, have not been classified in the fair value hierarchy.

Level 3 assets consisted of the guaranteed annuity contracts. A reconciliation of the beginning and ending balances for Level 3 assets is as follows:

(In thousands)	December 31, 2016			January 2, 2016
Balance at beginning of year	$	16,198		$	17,749
Purchases, sales, issuances and settlements, net		(1,733	)		(2,227	)
Interest income		631			680
Unrealized gains (losses)		330			(4	)
Balance at end of year	$	15,426		$	16,198

See Note 8 for a discussion of the levels of the fair value hierarchy. The assets’ fair value measurement level above is based on the lowest level of any input that is significant to the fair value measurement.

The following is a description of the valuation methods used for the plans’ assets measured at fair value in the above tables:

Cash & money market funds: The carrying value approximates fair value. Money market funds are valued on a daily basis at the NAV using the amortized cost of the securities held in the fund. Because amortized cost does not meet the criteria for an active market, money market funds are classified within Level 2 of the fair value hierarchy of ASC 820.

Mutual Funds: These investments are valued using the NAV as a practical expedient to estimate fair value and are not classified in the fair value hierarchy. The NAV is determined once a day after the closing of the exchange based upon the underlying assets in the fund, less the fund’s liabilities, expressed on a per-share basis. Mutual funds held by the SpartanNash Company Pension Plan are open end mutual funds that are registered with the Securities and Exchange Commission (“SEC”). These funds are required to publish their daily NAV and to transact at that price. The mutual funds held by the SpartanNash Company Pension Plan are therefore deemed to be actively traded.

Pooled Funds: The plan holds units of various Aon Hewitt Group Trust Funds offered through a private placement. The units are valued daily using the NAV as a practical expedient to estimate fair value. The NAV’s are based on the fair value of each fund’s underlying investments, and are not classified in the fair value hierarchy. The practical expedient is not used when it is determined to be probable that the investment will be sold for an amount different than the reported NAV.

Guaranteed Annuity Contracts: The guaranteed annuity contracts are immediate participation contracts held with insurance companies that act as custodian of the pension plans’ assets. The guaranteed annuity contracts are stated at contract value as determined by the custodians, which approximate fair values. The Company evaluates the general financial condition of the custodians as a component of validating whether the calculated contract value is an accurate approximation of fair value. The review of the general financial condition of the custodians is considered obtainable/observable through the review of readily available financial information the custodians are required to file with the SEC. The group annuity contracts are classified within Level 3 of the valuation hierarchy of ASC 820.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuations methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.

The Company does not expect to make any contributions to the SpartanNash Company Pension Plan in the fiscal year ending December 30, 2017. The Company expects to make contributions of $0.4 million to the SpartanNash Medical Plan in the fiscal year ending December 30, 2017.

The following estimated benefit payments are expected to be paid in the following fiscal years:

(In thousands)	2017		2018		2019		2020		2021		2022 to 2026
Pension benefits	$	8,875	$	8,174	$	7,740	$	7,242	$	7,361	$	27,705
Post-retirement medical benefits		412		453		494		530		562		3,199

Multi-Employer Health and Welfare Plans

In addition to the plans described above, the Company participates in the Michigan Conference of Teamsters and Ohio Conference of Teamsters Health and Welfare plans. The Company contributes to these multi-employer plans under the terms contained in existing collective bargaining agreements and in the amounts set forth within these agreements. The health and welfare plans provide medical, dental, pharmacy, vision, and other ancillary benefits to active associates and retirees, as determined by the trustees of the plan. The vast majority of the Company’s contributions benefit active associates, and as such, may not constitute contributions to a postretirement benefit plan. However, the Company is unable to separate contribution amounts for postretirement benefits from contribution amounts paid for active participants in the plan. These plans have a significant surplus of funds held in reserve in excess of claims incurred, and there is no potential withdrawal liability related to the Company’s participation in the plans. With respect to the Company’s participation in these plans, expense is recognized as contributions are funded. The Company contributed $14.3 million, $15.1 million and $14.3 million to these plans for fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015, respectively.

Multi-Employer Pension Plan

The Company also participates in the Central States Southeast and Southwest Areas Pension Plan (“Central States Plan” or “the Plan”). The Company contributes to this multi-employer pension plan under the terms contained in existing collective bargaining agreements and in the amounts set forth within these agreements. With respect to the Company’s participation in the Central States Plan, expense is recognized as contributions are funded. The Company contributed $13.4 million, $12.9 million and $12.9 million to this plan for fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015, respectively. The risk of participating in a multi-employer pension plan is different from the risk associated with single-employer plans in the following respects:

Assets contributed to the multi-employer plan by one employer may be used to provide benefits to associates of other participating employers.

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

If a company chooses to stop participating in a multi-employer plan, makes market exits such as closing a distribution center without opening another one in the same locale, or otherwise has participation in the plan drop below certain levels, the company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company’s participation in the Central States Plan is outlined in the tables below, which provide additional information about the collective bargaining agreements associated with this multi-employer plan. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) zone status available in 2016 and 2015 relates to the Plan’s two most recent fiscal year-ends. The zone status is based on information that the Company received from the Plan and is certified by each plan’s actuary. Among other factors, red zone status plans are generally less than 65% funded and are considered in critical status. The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented by the trustees of each plan. On December 13, 2014, Congress passed the Multi-employer Pension Reform Act of 2014 (“MPRA”). The MPRA is intended to address funding shortfalls in both multi-employer pension plans and the Pension Benefit Guaranty Corporation. As the Plan’s application to suspend payments of pension benefits under the provisions of the MPRA was denied, the MPRA is unlikely to significantly impact the Plan. See Note 9 for further information regarding the Company’s participation in the Central States Plan.

Percentage of

2016 Company

Plan

Pension

FIP / RP

Associates under

Contributions

Month /

Protection Act

Status

Expiration Dates of

Collective

More Than 5%

EIN - Pension

Day End

Zone Status

Pending /

Collective Bargaining

Bargaining

of Total Plan

Plan Number

Date

2016

2015

Implemented

Agreements

Contributions

36-6044243-001 (a)

12/31

Red

Implemented

10/2017 to 9/2019

(a)

SpartanNash is party to four collective-bargaining agreements that require contributions to the Central States Plan. These agreements cover warehouse personnel and drivers in Grand Rapids, Michigan; Bellefontaine, Ohio; and Lima, Ohio. In the last contract negotiation, the Agreement covering the Bellefontaine warehouse associates was consolidated into the General Merchandise Services (“GMS”) Agreement. The collective-bargaining agreement that covers warehouse personnel and drivers in the Grand Rapids, Michigan distribution center has no surcharges imposed while the agreements that cover warehouse personnel and drivers in the Bellefontaine, Ohio and Lima, Ohio distribution centers do have permanent surcharges imposed due to the failure to adopt the trustee recommended rehabilitation plan.

As of the date the financial statements were issued, Form 5500 was not available for the plan year ended in 2016.