RETIREMENT AND SAVINGS BENEFIT PLANS |
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| Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RETIREMENT AND SAVINGS BENEFIT PLANS | RETIREMENT AND SAVINGS BENEFIT PLANS
Pension Plans — Pre-Separation
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 statements of income and the Company did not record an asset or liability in relation to the funded or unfunded status of the Shared Plans.
Prior to 2018, VF used a December 31 measurement date for the Shared Plans. Due to the change in VF’s fiscal year-end, VF changed the measurement date for all plans to March 31. Additionally, VF obtained interim remeasurements due to the curtailment and settlement transactions described further below.
The following table presents net pension costs recognized by the Company related to the Shared Plans through the Separation date:
All components of net pension (benefit) costs were recorded in the Company's statements of income within "selling, general and administrative expenses" for all periods presented.
During 2018, VF approved a freeze of all future benefit accruals under the U.S. Shared Plans, effective December 31, 2018. Accordingly, the Company recognized a $3.5 million pension curtailment loss during 2018. Additionally, the Company recorded $1.2 million in settlement charges during 2018 related to the recognition of deferred actuarial losses resulting from lump sum payments of retirement benefits under the U.S. Shared Plans.
Pension Plans — Post-Separation
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.
Kontoor uses a December 31 measurement date for these plans. Kontoor's 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 table presents key components of pension costs, amounts recorded in the balance sheet and related key assumptions:
Net pension costs are reflected in the Company's statements of income within "selling, general and administrative expenses." Plan assets are invested in group insurance contracts, the fair value 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
Kontoor 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. Certain of the Company’s employees participate in this plan. Participants earn a return on their deferred compensation based on their selection of a hypothetical portfolio of publicly traded mutual funds and a separately managed fixed-income fund. 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 2019, the liability to the Company’s participants was $59.9 million, of which $6.5 million was recorded in "accrued liabilities" (Note 11) and $53.4 million was recorded in "other liabilities" (Note 11). At December 2018, the liability to the Company’s participants was $46.7 million, of which $11.7 million was recorded in "accrued liabilities" (Note 11) and $35.0 million was recorded in "other liabilities" (Note 11). Beginning in 2019, the Company also sponsors a similar nonqualified plan that permits nonemployee members of the Board of Directors to defer their Board compensation. At December 2019, the Company's liability for this plan was $0.2 million and was recorded in "other liabilities" (Note 11).
Kontoor has purchased publicly traded mutual funds and a separately managed fixed-income fund 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 Kontoor’s insolvency. Accordingly, at December 2019, the fair value of investments attributable to the Company’s participants was $59.9 million, of which $6.5 million was recorded in "other current assets" and $53.4 million was recorded in "other assets" (Note 9). At December 2018, the fair value of investments attributable to the Company’s participants was $46.7 million, of which $11.7 million was recorded in "other current assets" and $35.0 million was recorded in "other assets" (Note 9).
Kontoor sponsors 401(k) plans as well as other domestic and foreign retirement and savings plans. The Company’s expense under these plans was $7.9 million in 2019, $11.0 million in 2018 and $10.2 million in 2017.
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