Wendy's 2011 Annual Report Download - page 117

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
in accordance with the applicable requirements of the Employee Retirement Income Security Act, as amended, to
reflect this obligation which has been included in “Cost of sales.” In addition, the unionized employees became
eligible to participate in the 401(k) Plan.
In 2010, the terms of a new collective bargaining agreement (the “New CBA”) were agreed to by the Bakery
and Bakers Local No. 57, Bakery, Confectionery, Tobacco Workers & Grain Millers International Union of America,
AFL-CIO. Included in the terms of the New CBA, the Bakery agreed to participate in the Union Pension Fund as if
it had not previously withdrawn its participation and the unionized employees would no longer be eligible to
contribute to the 401(k) Plan. Accordingly, the withdrawal liability recorded in 2009 was reversed in 2010 and
credited to “Cost of sales.” The other terms of the New CBA resulted in additional expense to Wendy’s of
approximately $900 (which includes $600 of contributions reflected in the table below), which is included in “Cost of
sales,” in 2010.
The future cost of the Union Pension Fund depends on a number of factors, including the funding status of the
plan and the ability of other participating companies to meet ongoing funding obligations. Participating employers in
the Union Pension Fund are jointly responsible for any plan underfunding. While Wendy’s pension cost for the
Union Pension Fund is established by the New CBA, the Union Pension Fund may impose increased contribution
rates and surcharges based on the funded status of the plan and in accordance with the provisions of the Pension
Protection Act (the “PPA”), which requires underfunded multiemployer pension plans to implement rehabilitation
plans to improve funded status. Factors that could impact the funded status of the Union Pension Fund include
investment performance, changes in the participant demographics, financial stability of contributing employers and
changes in actuarial assumptions. The Union Pension Fund’s funding status, as defined by the PPA is “green”;
however, the plan is significantly underfunded and the plan’s funding is under a rehabilitation plan as approved by
the PPA. Assets contributed to the Union Pension Fund are not segregated or otherwise restricted to provide benefits
only to the employees of the Bakery.
The Companies could also be obligated to pay additional contributions (known as complete or partial
withdrawal liabilities) due to unfunded vested benefits of the Union Pension Fund. The withdrawal liability (which
could be significant) would equal the Companies’ proportionate share of the unfunded vested benefits based on the
year in which the liability is triggered. A withdrawal liability would be triggered if the Companies (1) cease to make
contributions to the Union Pension Fund, (2) close its bakery facility, or (3) decide not to renew the collective
bargaining agreement. No factors for which the Bakery would incur a withdrawal liability occurred during fiscal 2011.
Further information about the Union Pension Fund is presented in the table below:
Pension Protection
Act Zone Status (a)
Funding
Improvement
Plan/
Rehabilitation
Plan Status
Wendy’s Contributions (b) Surcharge
Imposed
Expiration
Date of
Collective
Bargaining
AgreementPension Fund EIN 2011 2010 2011 2010 2009
Union Pension Fund 52-6118572 Green Green Implemented $781 $766 $641 No 3/31/2013
(a) The Union Pension Fund elected an expanded asset smoothing period of 10 years for the investment loss
incurred in the plan year ended December 31, 2008 and an increase in the limits on the actuarial value of the
assets to 130% of market value for the plan years beginning January 1, 2009 and 2010, as permitted under the
Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010. The Union Pension
Plan certified its zone status after making this election.
(b) In accordance with the terms of the New CBA, the Companies are required to make minimum contributions of
$2.73 per hour of employment for each employee covered under the Union Pension Fund. As of January 1,
2012, based on approximately 308,000 hours of expected employment, the Companies’ minimum annual
contribution to the Union Pension Fund would be $840.
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