Annual report pursuant to Section 13 and 15(d)

RETIREMENT AND SAVINGS BENEFIT PLANS

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RETIREMENT AND SAVINGS BENEFIT PLANS
 12 Months Ended
Jan. 01, 2022
Retirement Benefits [Abstract]  
RETIREMENT AND SAVINGS BENEFIT PLANS RETIREMENT AND SAVINGS BENEFIT PLANS
Pension Plans
Shared Plans — Prior to the Separation, certain Company employees participated in U.S. and international defined benefit pension plans sponsored by VF (the "Shared Plans"), which included participants of other VF operations. The Company accounted for its participation in the Shared Plans as a multi-employer benefit plan. Accordingly, net pension costs specifically related to Company employees were reflected in the Company's statement of operations and the Company did not record an asset or liability in relation to the funded or unfunded status of the Shared Plans.
The following table presents net pension costs recognized by the Company related to the Shared Plans through the Separation date:
(In thousands) Year Ended December 2019
Service cost $ 726 
Non-service components (3,166)
Net pension benefit $ (2,440)
All components of net pension benefit were recorded in the Company's statements of operations within "selling, general and administrative expenses" for 2019.
International Plans — At the Separation, $11.0 million of net pension obligations related to international employees were transferred to the Company, which consisted of $17.4 million of projected benefit obligations and $6.4 million of plan assets, along with $1.1 million of related accumulated other comprehensive losses.
The Company uses a December 31 measurement date for these plans. Net pension costs and obligations are developed from actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, salary growth, long-term return on plan assets, retirement rates, mortality rates and other factors. The Company's selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation, as well as independent studies of trends performed by actuaries. However, actual results may differ substantially from the estimates that were based on the critical assumptions.
The following tables present key components of pension costs, amounts recorded in the balance sheets and related key assumptions specific to the international plans:
Year Ended December
(In thousands)
2021
2020
2019
Amounts included in the statements of operations:
Net pension costs $ 866  $ 1,027  $ 680 
Actuarial assumptions used to determine pension expense:
Discount rate in effect for determining service cost 0.64  % 0.68  % 1.28  %
Rate of inflation 1.70  % 1.80  % 1.80  %
Expected long-term return on plan assets 3.00  % 3.00  % 3.00  %
Rate of compensation increase 2.90  % 3.00  % 3.00  %
(In thousands)
December 2021
December 2020
Amounts included in the balance sheets:
Projected benefit obligations $ 22,935  $ 22,764 
Fair value of plan assets 9,250  8,708 
Funded status - recorded in other liabilities (Note 11) $ 13,685  $ 14,056 
Accumulated other comprehensive loss, pretax - net deferred amounts (2,904) (2,519)
Actuarial assumptions used to determine pension obligations:
Discount rate 0.64  % 0.64  %
Rate of compensation increase 2.90  % 2.90  %
Accumulated benefit obligations $ 13,514  $ 13,342 
Net pension costs are reflected in the Company's statements of operations primarily within "selling, general and administrative expenses." Plan assets are invested in group insurance contracts, the fair values of which are provided by the insurance companies (Level 2). Refer to Note 13 to the Company's financial statements for a description of the three levels of the fair value hierarchy.
Other Retirement and Savings Plans
The Company sponsors a nonqualified retirement savings plan for employees whose contributions to a 401(k) plan would be limited by provisions of the Internal Revenue Code. This plan allows participants to defer a portion of their compensation and to receive matching contributions for a portion of the deferred amounts. Participants earn a return on their deferred compensation based on their selection of a hypothetical portfolio of publicly traded mutual funds. Changes in the fair value of the participants’ hypothetical investments are recorded as an adjustment to deferred compensation liabilities. Deferred compensation, including accumulated earnings, is distributable in cash at participant-specified dates upon retirement, death, disability or termination of employment. At December 2021, the liability to the Company’s participants was $57.6 million, of which $6.6 million was recorded in "accrued liabilities" (Note 11) and $51.0 million was recorded in "other liabilities" (Note 11). At December 2020, the liability to the Company’s participants was $57.2 million, of which $6.8 million was recorded in "accrued liabilities" (Note 11) and $50.4 million was recorded in "other liabilities" (Note 11). The Company also sponsors a similar nonqualified plan that permits nonemployee members of the Board of Directors to defer their Board compensation. At December 2021, the Company's liability for this plan was $1.2 million, all of which was recorded in "other liabilities" (Note 11). At December 2020, the Company's liability for this plan was $0.8 million, of which $0.1 million was recorded in "accrued liabilities" (Note 11) and $0.7 million was recorded in "other liabilities" (Note 11).
The Company has purchased publicly traded mutual funds in the same amounts as the participant-directed hypothetical investments underlying the employee deferred compensation liabilities. These investment securities and earnings thereon are intended to provide
a source of funds to meet the deferred compensation obligations, and serve as an economic hedge of the financial impact of changes in deferred compensation liabilities. They are held in an irrevocable trust but are subject to claims of creditors in the event of the Company's insolvency. Accordingly, at December 2021, the fair value of these investments was $57.6 million, of which $6.6 million was recorded in "other current assets" and $51.0 million was recorded in "other assets" (Note 9). At December 2020, the fair value of these investments was $57.2 million, of which $6.8 million was recorded in "other current assets" and $50.4 million was recorded in "other assets" (Note 9).
The Company sponsors 401(k) plans as well as other domestic and foreign retirement and savings plans. The Company’s expense under these plans was $8.6 million in 2021, $4.5 million in 2020 and $7.9 million in 2019.