Kroger 2014 Annual Report Download - page 85

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A-20
Sensitivity to changes in the major assumptions used in the calculation of Kroger’s pension plan liabilities
is illustrated below (in millions).
Percentage
Point Change
Projected Benefit
Obligation
Decrease/(Increase)
Expense
Decrease/(Increase)
Discount Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . +/- 1.0% $500/(613) $30/($40)
Expected Return on Assets . . . . . . . . . . . . . . . . . . +/- 1.0% — $31/($31)
In 2014, we did not contribute to our Company-sponsored defined benefit plans and do not expect to
make any contributions to this plan in 2015. We contributed $100 million in 2013 and $71 million in 2012
to our Company-sponsored defined benefit pension plans. 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 contributions.
We contributed and expensed $177 million in 2014, $148 million in 2013 and $140 million in 2012
to employee 401(k) retirement savings accounts. The increase in 2014 is due to the effect of our merger
with Harris Teeter. 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 contribute to various multi-employer pension plans, including the UFCW Consolidated Pension Plan,
based on obligations arising from collective bargaining agreements. We are designated as the named fiduciary
of the UFCW Consolidated Pension Plan and have sole investment authority over these assets. These multi-
employer pension 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 first quarter of 2014, we incurred a charge of $56 million (after-tax) related to commitments and
withdrawal liabilities associated with the restructuring of pension plan agreements, of which $15 million
was contributed to the UFCW Consolidated Pension Plan in 2014. We are required to contribute an additional
$75 million over the next four years related to the restructuring of these pension plan agreements.
We recognize expense in connection with these plans as contributions are funded or, in the case of the
UFCW Consolidated Pension Plan, when commitments are made, in accordance with GAAP. We made cash
contributions to these plans of $297 million in 2014, $228 million in 2013 and $492 million in 2012. The cash
contributions for 2012 include our $258 million contribution to the UFCW Consolidated Pension Plan in the
fourth quarter of 2012.
Based on the most recent information available to us, we believe that the present value of actuarially
accrued liabilities in most of the multi-employer plans to which we contribute substantially exceeds the
value of the assets held in trust to pay benefits. We have attempted to estimate the amount by which these
liabilities exceed the assets, (i.e., the amount of underfunding), as of December 31, 2014. Because we are
only one of a number of employers contributing to these plans, we also have attempted to estimate the ratio
of our contributions to the total of all contributions to these plans in a year as a way of assessing our “share”
of the underfunding. Nonetheless, the underfunding is not a direct obligation or liability of ours or of any
employer except as noted above. As of December 31, 2014, we estimate that our share of the underfunding
of multi-employer plans to which we contribute was $1.8 billion, pre-tax, or $1.2 billion, after-tax. This
represents an increase in the estimated amount of underfunding of approximately $200 million, pre-tax, or
$130 million, after-tax, as of December 31, 2014, compared to December 31, 2013. The increase in the amount
of underfunding is attributable to lower than expected returns on the assets held in the multi-employer
plans during 2014. Our estimate is based on the most current information available to us including actuarial
evaluations and other data (that include the estimates of others), and such information may be outdated or
otherwise unreliable.