Employee Pension Plans—In connection with the establishment of an employee stock ownership plan in 1988,
Tribune Company amended its company-sponsored pension plan for employees not covered by a collective bargaining agreement. The Tribune Company pension plan continued to provide substantially the same pension benefits as under the pre-amended plan until December 1998. After that date, Tribune Company pension benefits were frozen in terms of pay and service. The employee stock ownership plan established in 1988 was fully allocated at the end of 2003 and was replaced by an enhanced 401(k) plan in 2004.
In connection with the Times Mirror acquisition, the Company assumed defined benefit pension plans and various other contributory and non-contributory retirement plans covering substantially all of Times Mirror’s former employees. In general, benefits under the Times Mirror defined benefit plans were based on the employee’s years of service and compensation during the last five years of employment. In December 2005, the pension plan benefits for former Times Mirror non-union and non-Newsday employees were frozen. In March 2006, the pension plan benefits for Newsday union and non-union employees were frozen. Benefits provided by Times Mirror’s Employee Stock Ownership Plan (“Times Mirror ESOP”), which was fully allocated as of Dec. 31, 1994, are used to offset certain pension plan benefits and, as a result, the defined benefit plan obligations are net of the actuarially equivalent value of the benefits earned under the Times Mirror ESOP. The maximum offset is equal to the value of the benefits earned under the defined benefit plan.
Effective Jan. 1, 2008, the Tribune Company pension plan was amended to provide a tax-qualified, non- contributory guaranteed cash balance benefit for eligible employees. In addition, effective Dec. 31, 2007, the Tribune Company pension plan was amended to provide a special one-time initial cash balance benefit for eligible employees. On Nov. 3, 2009, the Company announced that participant cash balance accounts in the Tribune Company pension plan would be frozen after an allocation equal to 3% of eligible compensation for the 2009 plan year was made to the accounts of eligible employees. Such an allocation was made during the first quarter of 2010 and totaled $19 million.
The Company also maintains several small defined benefit pension plans for other employees and participates in several multiemployer pension plans on behalf of employees represented by certain unions. During 2011, two of the Company-sponsored defined benefit pension plans were frozen. In March 2011, the pension plan benefits of The Baltimore Sun Company Retirement Plan for Mailers (the “Baltimore Mailers Plan”) were frozen in terms of pay and service for employees covered under the collective bargaining agreement between the Company and the Baltimore Mailers Union Local No. 888. In June 2011, the pension plan benefits of The Baltimore Sun Company Employees’ Retirement Plan were frozen in terms of pay and service for employees covered under the collective bargaining agreement between the Company and the Washington-Baltimore Newspaper Guild. See “Multiemployer Pension Plans” section of this Note 15 for further discussion of the Company’s participation in multiemployer pension plans.
As a result of the filing of the Chapter 11 Petitions, the Company was not allowed to make postpetition benefit payments under its non-qualified pension plans unless otherwise approved by the Bankruptcy Court. The
Company’s obligations under these plans were subject to compromise as part of the Debtors’ Chapter 11 cases. Accordingly, the liabilities under these plans are classified as liabilities subject to compromise in the Company’s consolidated balance sheets at Dec. 30, 2012 and Dec. 25, 2011 at the amounts expected to be allowed by the
In the third quarter of 2012, the Plan was confirmed which, among other things, resulted in adjustments to certain claims related to the Company’s non-qualified pension plans that were otherwise contingent upon the confirmation of the Plan. As a result, the Debtors recorded losses totaling approximately $19 million related to increasing the Company’s liabilities under its non-qualified pension plans pursuant to a settlement agreement. Such losses were included in reorganization costs, net in the Company’s consolidated statement of operations for 2012.
Multiemployer Pension Plans—The Company contributes to a number of multiemployer defined benefit
pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer withdraws from or otherwise ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. Alternatively, if the Company chooses to stop participating in one of its multiemployer plans, it may incur a withdrawal liability based on the unfunded status of the plan.
The Company's participation in these multiemployer pension plans at Dec. 30, 2012 and Dec. 25, 2011, is outlined in the table below. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) Zone Status available in 2012 and 2011 is for the plan's year-end at Dec. 31, 2011 and Dec. 31, 2010, respectively. The PPA Zone Status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded (as determined in accordance with the PPA). The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial
improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.
PPA Zone Status
Expiration Date of EIN/Pension
FIP/RP Status Pending/
Company Contributions (in thousands) Surcharge
Collective Bargaining Pension Fund Plan Number 2012 2011 Implemented 2012 2011 2010 Imposed Agreement
GCIU – Employer Retirement
Benefit Plan ... 91-6024903 Red Red Implemented $ 944 $ 892 $ 757 Yes (1)
May 31, 2012 to April 30, 2014 (1) Chicago Newspaper Publishers
Drivers’ Union Pension Plan 36-6019539 Red Red Implemented 2,353 1,990 1,643 No Dec. 31, 2014 AFTRA Retirement Plan ... 13-6414972 Green (2) Green (2) N/A 2,005 1,982 1,817 N/A March 30, 2009 to Aug. 31, 2014 (3)
Truck Drivers and Helpers
Local No. 355 Pension Plan 52-6043608 Yellow Yellow Implemented 126 107 116 No Dec. 31, 2013 Other Plans ... — — — 400 390 363 — —
$ 5,828 $ 5,361 $ 4,696
(1) The Company is party to two collective bargaining agreements that require contributions to the GCIU – Employer Retirement Benefit Plan. Surcharges were imposed by only one agreement which expired on April 30, 2012. During 2012, the parties entered into a new collective bargaining agreement, which expires on April 30, 2014. The other collective bargaining agreement expired on May 31, 2012. The parties are operating under the terms of this agreement while the terms of a successor collective bargaining agreement are negotiated.
(2) The most recent PPA Zone Status available in 2012 and 2011 is for the plan’s year end at Nov. 30, 2011 and Nov. 30, 2010, respectively. (3) The Company is party to three collective bargaining agreements that require contributions to the AFTRA Retirement Plan. One of the agreements
expired on March 30, 2009 with the parties mutually agreeing to an indefinite extension with a 30-day right of termination clause. The other two agreements expire on May 31, 2014 and Aug. 31, 2014.
For the plan years ended Dec. 31, 2011, Dec. 31, 2010 and Dec. 31, 2009, the Company was listed in the Chicago Newspaper Publishers Drivers’ Union Pension Plan’s (the “Drivers’ Plan”) Form 5500 as providing more than five percent of the total contributions for the plan. The Company did not provide more than five percent of the total contributions for any of the other multiemployer pension plans in which it participated in those years. At the date the financial statements were issued, Forms 5500 were not available for the plan years ending in 2012.
In 2009, the Drivers’ Plan was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning Jan. 1, 2009. However, pursuant to the Worker, Retiree, and Employer Recovery Act of 2008, the trustees of the Drivers’ Plan elected to apply the 2008 actuarial certification for the plan year beginning Jan. 1, 2009. As a result, the Drivers’ Plan was not in critical status (or in endangered or seriously endangered status) for its plan year beginning Jan. 1, 2009. On March 31, 2010, the Drivers’ Plan was certified by its actuary to be in critical status for the plan year beginning Jan. 1, 2010. As a result, the trustees of the Drivers’ Plan were required to adopt and implement a rehabilitation plan as of Jan. 1, 2011 designed to enable the Drivers’ Plan to cease being in critical status within the period of time stipulated by the IRC. The terms of the rehabilitation plan adopted by the trustees require the Company to make increased contributions beginning on Jan. 1, 2011 through Dec. 31, 2025, and the trustees of the Drivers’ Plan project that it will emerge from critical status on Jan. 1, 2026. Based on the actuarial assumptions utilized as of Jan. 1, 2010 to develop the rehabilitation plan, it is estimated that the Company’s remaining share of the funding obligations to the Drivers’ Plan during the rehabilitation plan period is approximately $96 million as of Dec. 30, 2012. The funding obligation is subject to change based on a number of factors, including actual returns on plan assets as compared to assumed returns, changes in the number of plan participants and changes in the rate used for discounting future benefit obligations.
Postretirement Benefits Other Than Pensions—The Company provides postretirement health care and life
insurance benefits to eligible employees under a variety of plans. There is some variation in the provisions of these plans, including different provisions for lifetime maximums, prescription drug coverage and certain other benefits.
Obligations and Funded Status—As discussed in Note 3, the Company recognizes the overfunded or
underfunded status of its defined benefit pension and other postretirement plans as an asset or liability in its
consolidated balance sheets and recognizes changes in that funded status in the year in which changes occur through comprehensive income (loss).
Summarized information for the Company’s defined benefit pension plans and other postretirement plans is provided below (in thousands):
Pension Plans Other Postretirement Plans
Dec. 30, 2012 Dec. 25, 2011 Dec. 30, 2012 Dec. 25, 2011
Change in benefit obligations:
Projected benefit obligations, beginning of year . . . $ 2,000,414 $ 1,735,521 $ 83,054 $ 95,473 Service cost . . . 877 1,418 890 950 Interest cost . . . 77,846 84,590 2,654 3,512 Plan amendments . . . — 1,315 — — Impact of Medicare Reform Act . . . — — 312 80 Actuarial (gain) loss. . . 100,411 265,928 (15,341 ) (8,784 ) Benefits paid . . . (92,332 ) (88,358 ) (5,486 ) (8,177 ) Adjustments to non-qualified pension plans (1) . . . 19,094 — — — Projected benefit obligations, end of year . . . 2,106,310 2,000,414 66,083 83,054
Change in plans’ assets:
Fair value of plans’ assets, beginning of year . . . 1,421,757 1,437,733 — — Actual return on plans’ assets . . . 178,661 69,759 — — Employer contributions . . . 15,045 2,623 5,486 8,177 Benefits paid . . . (92,332 ) (88,358 ) (5,486 ) (8,177 ) Fair value of plans’ assets, end of year . . . 1,523,131 1,421,757 — — Funded (under funded) status of the plans . . . $ (583,179 ) $ (578,657 ) $ (66,083 ) $ (83,054 ) (1) In the third quarter of 2012, the Plan was confirmed which, among other things, resulted in adjustments to certain claims related to the
Company’s non-qualified pension plans. As a result, the Debtors recorded losses totaling approximately $19 million related to increasing the Company’s liabilities under its non-qualified pension plans pursuant to a settlement agreement that was contingent upon the confirmation of the Plan. Such losses were included in reorganization costs, net in the Company’s consolidated statement of operations for 2012.
Amounts recognized in the Company’s consolidated balance sheets consisted of (in thousands):
Pension Plans Other Postretirement Plans
Dec. 30, 2012 Dec. 25, 2011 Dec. 30, 2012 Dec. 25, 2011
Employee compensation and benefits . . . $ — $ — $ (6,573 ) $ (7,579 ) Pension obligations, net . . . (508,033 ) (522,605 ) — — Postretirement medical, life and other benefits . . . . — — (59,510 ) (75,475 ) Liabilities subject to compromise (1) . . . (75,146 ) (56,052 ) — — Net amount recognized . . . $ (583,179 ) $ (578,657 ) $ (66,083 ) $ (83,054 ) (1) In the third quarter of 2012 and upon confirmation of the Plan, the Debtors recorded losses totaling approximately $19 million to increase the
Company’s liabilities under its non-qualified pension plans pursuant to the amount of the expected allowed claims pursuant to a settlement agreement.
The accumulated benefit obligation, which excludes the impact of future compensation increases, for all defined benefit pension plans was $2,105 million and $1,999 million at Dec. 30, 2012 and Dec. 25, 2011, respectively. The accumulated benefit obligation and projected benefit obligation at Dec. 30, 2012 and Dec. 25, 2011 included $75 million and $56 million, respectively related to the Company’s non-qualified plans, which are not funded.
The components of net periodic benefit cost for Company-sponsored plans were as follows (in thousands):
Pension Plans Other Postretirement Plans
2012 2011 2010 2012 2011 2010
Service cost . . . $ 877 $ 1,418 $ 1,459 $ 890 $ 950 $ 1,969 Interest cost . . . 77,846 84,590 87,067 2,654 3,512 5,516 Expected return on plans’ assets . . . . (104,056 ) (117,673 ) (131,026 ) — — — Recognized actuarial loss (gain) . . . . 126,898 92,344 59,170 (5,343 ) (4,767 ) (1,523 ) Amortization of prior service costs
(credits) . . . 208 109 157
(1,132 ) (1,117 ) (1,117 ) Curtailment loss (1) . . . — 131 — — — — Net periodic benefit cost (credit) . . . $ 101,773 $ 60,919 $ 16,827 $ (2,931 ) $ (1,422 ) $ 4,845 (1) The pension plan curtailment loss in 2011 resulted from the Company’s decision to freeze the benefits in terms of service and pay of the
Baltimore Mailers Plan and was recorded as an adjustment to accumulated other comprehensive income (loss).
Amounts included in the accumulated other comprehensive income (loss) component of shareholder’s equity (deficit) for Company-sponsored plans were as follows (in thousands):
Pension Plans Other Postretirement Plans Total
Dec. 30, 2012 Dec. 25, 2011 Dec. 30, 2012 Dec. 25, 2011 Dec. 30, 2012 Dec. 25, 2011
Unrecognized net actuarial
gains (losses), net of tax . . . . $ (983,222 ) $ (1,083,120 ) $ 44,371 $ 34,490 $ (938,851 ) $ (1,048,630 ) Unrecognized prior service
credits, net of tax . . . (68 ) (273 ) (1,960 ) (841 ) (2,028 ) (1,114 ) Total . . . $ (983,290 ) $ (1,083,393 ) $ 42,411 $ 33,649 $ (940,879 ) $ (1,049,744 )
In accordance with ASC Topic 715, unrecognized net actuarial gains and losses were recognized in net periodic pension expense over approximately eight years, which represented the estimated average remaining service period of active employees expected to receive benefits, with corresponding adjustments made to accumulated other comprehensive income (loss). The Company’s policy was to incorporate asset-related gains and losses into the asset value used to calculate the expected return on plan assets and into the calculation of amortization of unrecognized net actuarial loss over a four-year period. As a result of the adoption of fresh-start reporting, unamortized amounts previously charged to accumulated other comprehensive income (loss) were eliminated on the Effective Date. See Note 2 for a pro forma presentation of the anticipated impact of the Plan and the adoption of fresh-start reporting on the Company’s consolidated balance sheet as of the Effective Date.
Assumptions—Weighted average assumptions used each year in accounting for pension benefits and other
postretirement benefits were as follows:
Pension Plans Other Postretirement Plans 2012 2011 2012 2011
Discount rate for expense . . . 4.10% 5.20% 3.65% 4.55% Discount rate for obligations . . . 3.85% 4.10% 3.15% 3.65% Increase in future salary levels for expense . . . 3.50% 3.50% — — Increase in future salary levels for obligations . . . 3.50% 3.50% — — Long-term rate of return on plans’ assets for expense . . . 7.50% 8.00% — —
Effective Dec. 30, 2012, the Company began utilizing the Aon Hewitt AA-Only Bond Universe Yield Curve for discounting future benefit obligations and calculating interest cost. The Aon Hewitt yield curves represent yields on high quality (AA and above) corporate bonds that closely match the cash flows of the estimated payouts for the Company’s benefit obligations. Prior to Dec. 30, 2012, the Company had utilized the Citigroup Pension Discount Curve for discounting future benefit obligations and calculating interest cost.
The Company used a building block approach to determine its current 7.5% assumption for the long-term expected rate of return on pension plan assets. This approach included a review of actual historical returns achieved and anticipated long-term performance of each asset class. See the “Plan Assets” section below for further
information.
For purposes of measuring postretirement health care costs for 2012, the Company assumed a 7.5% annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease gradually to 5% for 2017 and remain at that level thereafter. For purposes of measuring postretirement health care obligations at Dec. 30, 2012, the Company assumed a 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed. The rate was assumed to decrease gradually to 5% for 2019 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. As of Dec. 30, 2012, a 1% change in assumed health care cost trend rates would have the following effects (in
thousands):
1% Increase 1% Decrease
Service cost and interest cost . . . $ 177 $ (157 ) Projected benefit obligation . . . $ 3,319 $ (2,974 )
Plan Assets—The Company’s investment strategy with respect to the Company’s pension plan assets is to
invest in a variety of investments for long-term growth in order to satisfy the benefit obligations of the Company’s pension plans. Accordingly, when making investment decisions, the Company endeavors to strategically allocate assets within asset classes in order to enhance long-term real investment returns and reduce volatility.
The actual allocations for the pension assets at Dec. 30, 2012 and Dec. 25, 2011 and target allocations by asset class were as follows:
Percentage of Plan Assets
Actual Allocations Target Allocations
Asset category: 2012 2011 2012 2011
Equity securities . . . 50.1% 41.8% 50.0% 50.0% Fixed income securities . . . 44.2% 53.0% 45.0% 45.0% Cash and other short-term investments . . . 1.0% 0.6% — — Other alternative investments . . . 4.7% 4.6% 5.0% 5.0% Total . . . 100.0% 100.0% 100.0% 100.0%
Actual allocations to each asset class varied from target allocations due to market value fluctuations, timing, and overall market volatility during the year. The asset allocation is monitored on a quarterly basis and rebalanced as necessary.
Equity securities are invested broadly in U.S. and non-U.S. companies and are diversified across countries, currencies, market capitalizations and investment styles. These securities use the S&P 500 (U.S. large cap), Russell 2000 (U.S. small cap) and MSCI All Country World Index ex-U.S. (non-U.S.) as their benchmarks.
Fixed income securities are invested in diversified portfolios that invest across the maturity spectrum and include primarily investment-grade securities with a minimum average quality rating of A and insurance annuity contracts. These securities use the Barclays Capital Aggregate (intermediate term bonds) and Barclays Capital Long Government/Credit (long bonds) U.S. Bond Indexes as their benchmarks.
Alternative investments include investments in private real estate assets, private equity funds and venture capital funds. The private equity and venture capital investments use the median internal rate of return for the given strategy and vintage year in the VentureXpert database as their benchmarks. The real estate assets use the National Council of Real Estate Investment Fiduciaries Property Index as their benchmark.
The following tables set forth, by asset category, the Company’s pension plan assets as of Dec. 30, 2012 and Dec. 25, 2011, using the fair value hierarchy established under ASC Topic 820 and described in Note 12 (in thousands):
Pension Plan Assets as of Dec. 30, 2012
Level 1 Level 2 Level 3 Total
Pension plan assets measured at fair value:
Registered investment companies . . . $ 601,614 $ — $ — $ 601,614 Common/collective trusts . . . — 97,729 — 97,729 103-12 investment entity . . . — 152,363 — 152,363 International equity limited partnership . . . — 50,254 — 50,254
Fixed income:
U.S. government securities . . . — 191,539 — 191,539 Corporate bonds . . . — 203,387 — 203,387 Mortgage-backed and asset-backed securities . . . — 26,737 — 26,737 Other . . . — 19,919 — 19,919 Pooled separate account . . . — 56,379 — 56,379 Loan fund limited partnership . . . — 28,616 — 28,616 Real estate . . . — — 66,270 66,270 Private equity limited partnerships . . . — — 2,519 2,519 Venture capital limited partnerships . . . — — 2,246 2,246 Total pension plan assets measured at fair value . $ 601,614 $ 826,923 $ 71,035 1,499,572
Pension plan assets measured at contract value:
Insurance contracts . . . 23,559 Total pension plan assets . . . $ 1,523,131
Pension Plan Assets as of Dec. 25, 2011
Level 1 Level 2 Level 3 Total
Pension plan assets measured at fair value:
Registered investment companies . . . $ 496,104 $ — $ — $ 496,104 Common/collective trusts . . . — 181,125 — 181,125 103-12 investment entity . . . — 127,167 — 127,167 International equity limited partnership . . . — 41,173 — 41,173
Fixed income:
U.S. government securities . . . — 171,126 — 171,126 Corporate bonds . . . — 186,939 — 186,939 Mortgage-backed and asset-backed securities . . . — 30,578 — 30,578 Other . . . — 17,403 — 17,403 Pooled separate account . . . — 55,374 — 55,374 Loan fund limited partnership . . . — 26,482 — 26,482 Real estate . . . — — 56,334 56,334 Private equity limited partnerships . . . — — 5,072 5,072 Venture capital limited partnerships . . . — — 3,559 3,559 Total pension plan assets measured at fair value . $ 496,104 $ 837,367 $ 64,965 1,398,436
Pension plan assets measured at contract value:
Insurance contracts . . . 23,321 Total pension plan assets . . . $ 1,421,757
Registered investment companies are valued at exchange listed prices for exchange traded registered investment companies, which are classified in Level 1 of the fair value hierarchy.
Common/collective trusts are valued on the basis of the relative interest of each participating investor in the fair