RITE AID CORP | 2013 | FY |

16. Retirement Plans

• Defined Contribution Plans

        The Company and its subsidiaries sponsor several retirement plans that are primarily 401(k) defined contribution plans covering nonunion associates and certain union associates. The Company does not contribute to all of the plans. In accordance with those plan provisions, the Company matches 100% of a participant's pretax payroll contributions, up to a maximum of 3% of such participant's pretax annual compensation. Thereafter, the Company will match 50% of the participant's additional pretax payroll contributions, up to a maximum of 2% of such participant's additional pretax annual compensation. Total expense recognized for the above plans was $56,480 in fiscal 2013, $57,036 in fiscal 2012 and $58,035 in fiscal 2011.

        The Company sponsors a Supplemental Executive Retirement Plan ("SERP") for its officers, which is a defined contribution plan that is subject to a five year graduated vesting schedule. The expense recognized for the SERP was $7,469 in fiscal 2013, $4,582 in fiscal 2012, and $9,433 in fiscal 2011.

• Defined Benefit Plans

        The Company and its subsidiaries also sponsor a qualified defined benefit pension plan that requires benefits to be paid to eligible associates based upon years of service and, in some cases, eligible compensation. The Company's funding policy for The Rite Aid Pension Plan (The "Defined Benefit Pension Plan") is to contribute the minimum amount required by the Employee Retirement Income Security Act of 1974. However, the Company may, at its sole discretion, contribute additional funds to the plan. The Company made contributions of $5,583 in fiscal 2013, $14,878 in fiscal 2012, and $13,451 in fiscal 2011.

        The Company also maintains a nonqualified executive retirement plan for certain former employees who, pursuant to their employment agreements, did not participate in the SERP. The Company no longer enrolls new participants into this plan. These participants generally receive an annual benefit payable monthly over fifteen years. This nonqualified defined benefit plan is unfunded.

        Net periodic pension expense and other changes recognized in other comprehensive income for the defined benefit pension plans and the nonqualified executive retirement plan included the following components:

        The table below sets forth reconciliation from the beginning of the year for both the benefit obligation and plan assets of the Company's defined benefit plans, as well as the funded status and amounts recognized in the Company's balance sheet as of March 2, 2013 and March 3, 2012:

        The estimated net actuarial loss and prior service cost amounts that will be amortized from accumulated other comprehensive loss into net periodic pension expense in fiscal 2014 are $4,810 and $240, respectively.

        The accumulated benefit obligation for the defined benefit pension plan was $158,368 and $142,117 as of March 2, 2013 and March 3, 2012, respectively. The accumulated benefit obligation for the nonqualified executive retirement plan was $14,331 and $14,509 as of March 2, 2013 and March 3, 2012, respectively.

        The significant actuarial assumptions used for all defined benefit plans to determine the benefit obligation as of March 2, 2013, March 3, 2012, and February 26, 2011 were as follows:

        Weighted average assumptions used to determine net cost for the fiscal years ended March 2, 2013, March 3, 2012 and February 26, 2011 were:

        To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 7.75% long-term rate of return on plan assets assumption for fiscal 2013, 2012 and 2011.

        The Company's pension plan asset allocations at March 2, 2013 and March 3, 2012 by asset category were as follows:

        The investment objectives of the Defined Benefit Pension Plan, the only defined benefit plan with assets, are to:

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  Achieve a rate of return on investments that exceeds inflation over a full market cycle and is consistent with actuarial assumptions;
  
  

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  Balance the correlation between assets and liabilities by diversifying the portfolio among various asset classes to address return risk and interest rate risk;
  
  

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  Balance the allocation of assets between the investment managers to minimize concentration risk;
  
  

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  Maintain liquidity in the portfolio sufficient to meet plan obligations as they come due; and
  
  

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  Control administrative and management costs.

        The asset allocation established for the pension investment program reflects the risk tolerance of the Company, as determined by:

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  the current and anticipated financial strength of the Company;
  
  

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  the funded status of the plan; and
  
  

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  plan liabilities.

        Investments in both the equity and fixed income markets will be maintained, recognizing that historical results indicate that equities (primarily common stocks) have higher expected returns than fixed income investments. It is also recognized that the correlation between assets and liabilities must be balanced to address higher volatility of equity investments (return risk) and interest rate risk.

        The following targets are to be applied to the allocation of plan assets.

        The Company expects to contribute $833 to the Defined Benefit Pension Plan and make payments of $1,654 to participants of the Nonqualified Executive Retirement Plan during fiscal 2014.

        The following table sets forth by level within the fair value hierarchy a summary of the plan's investments measured at fair value on a recurring basis as of March 2, 2013 and March 3, 2012:

 

        The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Common and Collective Trusts

        Common collective trust funds are stated at fair value as determined by the issuer of the common collective trust funds based on the fair market value of the underlying investments.

        Following are the future benefit payments expected to be paid for the Defined Benefit Pension Plan and the nonqualified executive retirement plan during the years indicated:

• Other Plans

        The Company participates in various multi-employer union pension plans that are not sponsored by the Company. Total expenses recognized for the multi-employer plans were $19,787 in fiscal 2013, $14,594 in fiscal 2012 and $19,053 in fiscal 2011.