Defined Benefit Plans

The Company maintains two defined benefit plans for certain employees in the U.S. and Switzerland. In accordance with authoritative guidance for defined benefit pension and other postretirement plans, an asset for a plan’s overfunded status or a liability for a plan’s underfunded status is recognized in the consolidated balance sheets; plan assets and obligations that determine the plan’s funded status are measured as of the end of the Company’s fiscal year; and changes in the funded status of defined benefit postretirement plans are recognized in the year in which they occur. Such changes are reported in other comprehensive income (loss) and as a separate component of stockholders’ equity.

The Company’s pension obligations and related costs are calculated using actuarial concepts, within the authoritative guidance framework, and are considered Level 3 inputs as defined in Note 20. The life expectancy, estimated retirement age, discount rate, estimated future compensation and expected return on plan assets are important elements of expense and/or liability measurement. These critical assumptions are evaluated annually which enables expected future payments for benefits to be stated at present value on the measurement date. If actual results are not consistent with actuarial assumptions, the amounts recognized for the defined benefit plans could change significantly.

Supplemental Executive Retirement Plan

On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances. Paul Marciano, Chief Executive Officer and Vice Chairman of the Board, is the only active employee participating in the SERP.

In July 2013, the Company amended the SERP to limit the amount of eligible wages under the plan that count toward the SERP benefit for the active participant. As a result, the projected benefit obligation and unrecognized prior service cost were reduced by $4.5 million during fiscal 2014.

As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has made, and may continue to make, periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The amount of any future payments into the insurance policies may vary, depending on any changes to the estimates of final annual compensation levels and investment performance of the trust. The cash surrender values of the insurance policies were $53.6 million and $51.4 million as of January 31, 2015 and February 1, 2014, respectively, and were included in other assets in the Company’s consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized gains of $2.2 million, $3.6 million and $3.4 million in other income during fiscal 2015, fiscal 2014 and fiscal 2013, respectively.

The components of net periodic defined benefit pension cost to comprehensive income (loss) for fiscal 2015, fiscal 2014 and fiscal 2013 related to the SERP were as follows (in thousands):



	Year Ended			Year Ended			Year Ended
	Jan 31, 2015			Feb 1, 2014			Feb 2, 2013
Interest cost	$	2,289		$	2,345		$	2,392
Net amortization of unrecognized prior service (credit) cost	(233		)	194			620
Net amortization of actuarial losses	938			1,108			3,340
Net periodic defined benefit pension cost	$	2,994		$	3,647		$	6,352
Unrecognized prior service (credit) cost charged to comprehensive income (loss)	$	(233	)	$	194		$	620
Unrecognized net actuarial loss charged to comprehensive income (loss)	938			1,108			3,340
Actuarial gains (losses)	(6,142		)	1,751			3,508
Plan amendment	—			4,529			—
Related tax impact	2,080			(2,963		)	(2,855		)
Total periodic defined benefit pension cost and other charges to comprehensive income (loss)	$	(3,357	)	$	4,619		$	4,613

Included in accumulated other comprehensive income (loss), before tax, as of January 31, 2015 and February 1, 2014 were the following amounts that have not yet been recognized in net periodic defined benefit pension cost (in thousands):



	Jan 31, 2015			Feb 1, 2014
Unrecognized prior service credit (1)	$	(1,748	)	$	(1,981	)
Unrecognized net actuarial loss	18,178			12,974
Total included in accumulated other comprehensive loss	$	16,430		$	10,993

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(1)	During fiscal 2014, the Company amended the SERP to limit the amount of eligible wages under the plan that count toward the SERP benefit for the active participant. As a result, unrecognized prior service cost was reduced by $4.5 million during fiscal 2014.

The following chart summarizes the SERP’s funded status and the amounts recognized in the Company’s consolidated balance sheets (in thousands):



	Jan 31, 2015			Feb 1, 2014
Projected benefit obligation (1)	$	(61,862	)	$	(54,704	)
Plan assets at fair value (2)	—			—
Net liability	$	(61,862	)	$	(54,704	)

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(1)	The projected benefit obligation was included in accrued expenses and other long-term liabilities in the Company’s consolidated balance sheets depending on the expected timing of payments.


(2)	The SERP is a non-qualified pension plan and hence the insurance policies are not considered to be plan assets. Accordingly, the table above does not include the insurance policies with cash surrender values of $53.6 million and $51.4 million as of January 31, 2015 and February 1, 2014, respectively.

A reconciliation of the changes in the projected benefit obligation for fiscal 2015 and fiscal 2014 is as follows (in thousands):



	Projected Benefit Obligation
Balance at February 2, 2013	$	58,639
Interest cost	2,345
Plan amendment	(4,529		)
Actuarial gains	(1,751		)
Balance at February 1, 2014	$	54,704
Interest cost	2,289
Actuarial losses	6,142
Payments	(1,273		)
Balance at January 31, 2015	$	61,862

The Company assumed a discount rate of approximately 3.3% and 4.3% for the years ended January 31, 2015 and February 1, 2014, respectively, as part of the actuarial valuation performed to calculate the projected benefit obligation disclosed above, based on the timing of cash flows expected to be made in the future to the participants, applied to high quality yield curves. Compensation levels utilized in calculating the projected benefit obligation were derived from expected future compensation as outlined in employment contracts in effect at the time. In October 2014, the Society of Actuaries issued new mortality tables which reflected longer life expectancies than the previous tables. The Company considered these new tables in developing its best estimate of the expected mortality rates for its plan participants.

As of January 31, 2015, amounts included in comprehensive income (loss) that are expected to be recognized as components of net periodic defined benefit pension cost in fiscal 2016 consist of amortization of prior service credits of $0.2 million and actuarial losses of $1.7 million. Aggregate benefits projected to be paid in the next five fiscal years amount to $8.5 million with equal amounts expected to be paid during each of the years. Aggregate benefits projected to be paid in the following five fiscal years amount to $18.6 million.

Swiss Pension Plan

In accordance with local regulations, the Company also maintains a pension plan in Switzerland for certain of its employees. The plan is a government-mandated defined contribution plan that provides employees with a minimum investment return determined annually by the Swiss government, and as such, is treated under pension accounting in accordance with authoritative guidance. The minimum investment return was 1.75% during calendar 2014. Under the plan, both the Company and certain of its employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary. The Company’s contributions must be made in an amount at least equal to the employee’s contribution. Minimum employee contributions are based on the respective employee’s age, salary and gender. As of January 31, 2015, the plan had a projected benefit obligation of CHF13.9 million (US$15.1 million) and plan assets held at the independent investment fiduciary of CHF11.5 million (US$12.5 million). The net liability of CHF2.4 million (US$2.6 million) was included in other long-term liabilities in the Company’s consolidated balance sheet as of January 31, 2015. Actuarial assumptions used by the Company to calculate the projected benefit obligation and the fair value of the plans assets as of January 31, 2015 included a discount rate of 0.5% and an expected return on plan assets of 1.25%. During fiscal 2015, the Company recognized net periodic defined benefit pension cost of CHF1.4 million (US$1.6 million) and included a pre-tax net unrealized loss and related amortization of approximately CHF2.5 million (US$2.8 million) in accumulated other comprehensive loss related to the Swiss pension plan. As of January 31, 2015, amounts included in comprehensive income (loss) that are expected to be recognized as components of net periodic defined benefit pension cost in fiscal 2016 consist of amortization of actuarial losses of CHF0.2 million (US$0.2 million).