Red Lobster 2015 Annual Report Download - page 54

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DARDEN
NOTE 17
RETIREMENT PLANS
DEFINED BENEFIT PLANS AND POSTRETIREMENT BENEFIT PLAN
Certain of our employees are eligible to participate in a retirement plan. We sponsor non-contributory defined benefit pension plans, which have been frozen, for
a group of salaried employees in the United States, in which benefits are based on various formulas that include years of service and compensation factors; and
for a group of hourly employees in the United States, in which a fixed level of benefits is provided. Pension plan assets are primarily invested in U.S. and International
equities as well as long-duration bonds and real estate investments. Our policy is to fund, at a minimum, the amount necessary on an actuarial basis to provide
for benefits in accordance with the requirements of the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code (IRC), as
amended by the Pension Protection Act of 2006. We also sponsor a non-contributory postretirement benefit plan that provides health care benefits to our salaried
retirees. Fundings related to the defined benefit pension plans and postretirement benefit plans, which are funded on a pay-as-you-go basis, were as follows:
Fiscal Year
(in millions) 2015 2014 2013
Defined benefit pension plans funding $0.4 $0.4 $2.4
Postretirement benefit plan funding 1.1 0.9 0.8
We expect to contribute approximately $0.4 million to our defined benefit pension plans and approximately $1.1 million to our postretirement benefit plan
during fiscal 2016.
We are required to recognize the over-or-under-funded status of the plans as an asset or liability as measured by the difference between the fair value
of the plan assets and the benefit obligation and any unrecognized prior service costs and actuarial gains and losses as a component of accumulated other
comprehensive income (loss), net of tax.
During the second quarter of fiscal 2015, the postretirement benefit plan was changed from a self-insured plan to a retiree health exchange with a subsidy
to eligible participants through a Health Reimbursement Account (HRA). As a result of these changes, the plan was remeasured resulting in a $23.7 million pre-tax
reduction in the accumulated postretirement benefit obligation which is reflected as a prior year service credit. This credit is being amortized into expense over
the expected remaining service period of the fully eligible active participant population and is expected to reduce fiscal 2015 expense by $3.4 million.
Additionally, during the fourth quarter of fiscal 2015, the defined benefit pension plan recognized $6.1 million of unrecognized loss in net periodic benefit
cost due to a settlement charge triggered by lump sum payouts during the fiscal year exceeding the sum of service and interest costs.
The following provides a reconciliation of the changes in the plan benefit obligation, fair value of plan assets and the funded status of the plans as of May 31,
2015 and May 25, 2014:
Defined Benefit Plans Postretirement Benefit Plan
(in millions) 2015 2014 2015 2014
Change in Benefit Obligation:
Benefit obligation at beginning of period $283.9 $276.8 $ 38.5 $ 29.9
Service cost 1.1 4.4 0.5 0.7
Interest cost 10.0 10.2 1.0 1.4
Plan amendments — (0.6) (26.9) —
Plan curtailments — (6.4) — (4.8)
Plan settlements (15.8) — — —
Participant contributions — — 0.4 0.5
Benefits paid (8.6) (13.3) (1.5) (1.4)
Actuarial loss 17.8 12.8 6.0 12.2
Benefit obligation at end of period $288.4 $283.9 $ 18.0 $ 38.5
Change in Plan Assets:
Fair value at beginning of period $243.9 $234.1 $ — $ —
Actual return on plan assets 16.7 22.7 — —
Employer contributions 0.4 0.4 1.1 0.9
Plan settlements (15.8) — — —
Participant contributions — — 0.4 0.5
Benefits paid (8.6) (13.3) (1.5) (1.4)
Fair value at end of period $236.6 $243.9 $ — $ —
Reconciliation of the Plans’ Funded Status:
Unfunded status at end of period $ (51.8) $ (40.0) $(18.0) $(38.5)