Kroger 2011 Annual Report Download - page 70

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A-15
S&P 500 over the same period of time has been 8.7%. Based on the above information and forward looking
assumptions for investments made in a manner consistent with our target allocations, we believe an 8.5% rate
of return assumption is reasonable. See Note 13 to the Consolidated Financial Statements for more information
on the asset allocations of pension plan assets.
Sensitivity to changes in the major assumptions used in the calculation of Kroger’s pension plan liabilities
for the qualified plans is illustrated below (in millions).
Percentage
Point Change
Projected Benefit
Obligation
Decrease/(Increase)
Expense
Decrease/(Increase)
Discount Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +/- 1.0% $406/(494) $30/($34)
Expected Return on Assets ................... +/- 1.0% — $25/($25)
We contributed $52 million in 2011, $141 million in 2010 and $265 million in 2009 to our Company-
sponsored defined benefit pension plans. Although we are not required to make cash contributions to our
Company-sponsored defined benefit pension plans during 2012, we expect to contribute approximately
$75 million to these plans in 2012. Additional contributions may be made if required under the Pension
Protection Act to avoid any benefit restrictions. We expect any contributions made during 2012 will decrease
our required contributions in future years. Among other things, investment performance of plan assets, the
interest rates required to be used to calculate the pension obligations, and future changes in legislation, will
determine the amounts of any contributions.
We contributed and expensed $130 million in 2011, $119 million in 2010 and $115 million in 2009 to
employee 401(k) retirement savings accounts. The 401(k) retirement savings account plans provide to eligible
employees both matching contributions and automatic contributions from the Company based on participant
contributions, plan compensation, and length of service.
Multi-Employer Pension Plans
We also contribute to various multi-employer pension plans based on obligations arising from collective
bargaining agreements. These plans provide retirement benefits to participants based on their service to
contributing employers. The benefits are paid from assets held in trust for that purpose. Trustees are appointed
in equal number by employers and unions. The trustees typically are responsible for determining the level
of benefits to be provided to participants as well as for such matters as the investment of the assets and the
administration of the plans.
In the fourth quarter of 2011, we entered into a memorandum of understanding (“MOU”) with 14 locals
of the UFCW that participated in four multi-employer pension funds. The MOU established a process that
amended each of the collective bargaining agreements between Kroger and the UFCW locals under which
we made contributions to these funds and consolidated the four multi-employer pension funds into one multi-
employer pension fund.
Under the terms of the MOU, the locals of the UFCW agreed to a future pension benefit formula through
2021. We were designated as the named fiduciary of the new consolidated plan with sole investment authority
over its assets. We committed to contribute sufficient funds to cover the actuarial cost of current accruals and
to fund the pre-consolidation Unfunded Actuarial Accrued Liability (“UAAL”) that existed as of December 31,
2011, in a series of installments on or before March 31, 2018. At January 1, 2012, the UAAL was estimated to
be $911 million (pre-tax). In accordance with GAAP, we expensed $911 million in 2011 related to the UAAL.
The expense was based on a preliminary estimate of the contractual commitment. As the estimate is updated,
we may incur additional expense. We do not expect any adjustments to be material. In the fourth quarter of
2011, we contributed $650 million to the consolidated multi-employer pension plan of which $600 million
was allocated to the UAAL and $50 million was allocated to service and interest costs and expensed in 2011.
Future contributions will be dependent, among other things, on the investment performance of assets in the
plan. The funding commitments under the MOU replace the prior commitments under the four existing funds
to pay an agreed upon amount per hour worked by eligible employees.