Big Lots 2011 Annual Report Download - page 178

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 8 — Employee Benefit Plans (Continued)
We elected not to make a discretionary contribution to the Pension Plan in 2011 or in 2010. Our funding policy
of the Pension Plan is to make annual contributions based on advice from our actuaries and the evaluation of
our cash position, but not less than the minimum required by applicable regulations. Currently, we expect no
required contributions to the Pension Plan during 2012, however, discretionary contributions could be made
depending upon further analysis.
Using the same assumptions as those used to measure our benefit obligations, the Pension Plan and the
Supplemental Pension Plan benefits expected to be paid in each of the following fiscal years are as follows:
Fiscal Year
(In thousands)
2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,355
2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,330
2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,418
2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,553
2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,649
2017 — 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,160
Our overall investment strategy is to earn a long-term rate of return sufficient to meet the liability needs of
the Pension Plan, within prudent risk constraints. In order to develop the appropriate asset allocation and
investment strategy, an actuarial review of the Pension Plan’s expected future distributions was completed.
The strategy provides a well-defined risk management approach designed to reduce risks based on the Pension
Plan’s funded status.
Assets can generally be considered as filling one of the following roles within the strategy: (1) Liability-hedging
assets, which are designed to meet the cash payment needs of the plan’s obligation and provide downside
protection, primarily invested in intermediate and long maturity investment grade bonds; or (2) Return-
seeking assets, which are designed to deliver returns in excess of the Pension Plan’s obligation growth rates,
with broadly diversified assets including U.S. and non-U.S. equities, real estate, and high yield bonds. The
current target allocation is approximately 80% liability-hedging assets and 20% return-seeking assets. Target
allocations may change over time due to changes in the plan’s funded status, or in response to changes in plan
or market conditions. All assets must have readily ascertainable market values and be easily marketable. The
portfolio of assets maintains a high degree of liquidity in order to meet benefit payment requirements and to
allow responsiveness to evolving Pension Plan and market conditions.
Previously, our pension investment policy allowed ownership of our common shares. At January 28, 2012 and
January 29, 2011, the Pension Plan owned zero and 1,081 of our common shares, respectively.
The investment managers have the discretion to invest within sub-classes of assets within the parameters of
their investment guidelines. Fixed income managers can adjust duration exposure as deemed appropriate given
current or expected market conditions. Additionally, the investment managers have the authority to invest in
financial futures contracts and financial options contracts for the purposes of implementing hedging strategies.
There were no futures contracts owned directly by the Pension Plan at January 28, 2012 and January 29, 2011.
The primary benchmark for assessing the effectiveness of the Pension Plan investments is that of the plan’s
liabilities themselves. Asset class returns are also judged relative to common benchmark indices such as the
Russell 3000 and Barclay’s Capital Long Credit Bond. Investment results and plan funded status are monitored
daily, with a detailed performance review completed on a quarterly basis.