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SYSCO CORPORATION-Form10-K66
PARTII
ITEM8Financial Statements and Supplementary Data
NOTE14 Multiemployer Employee Benefi t Plans
Defi ned Benefi t Pension Plans
Sysco contributes to several multiemployer defi ned benefi t pension plans in the UnitedStates and Canada based on obligations arising under collective
bargaining agreements covering union-represented employees. Sysco does not directly manage these multiemployer plans, which are generally managed
by boards of trustees, half of whom are appointed by the unions and the other half by other employers contributing to the plan. Approximately 10% of
Sysco’s current employees are participants in such multiemployer plans as of June30,2012.
The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:
•Assets contributed to the multiemployer plan by one employer may be used to provide benefi ts to employees of other participating employers.
•If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
•
If Sysco chooses to stop participating in some of its multiemployer plans, Sysco may be required to pay those plans an amount based on the underfunded
status of the plan, referred to as a withdrawal liability.
Based upon the information available from plan administrators, management believes that several of these multiemployer plans are underfunded. In addition,
pension-related legislation in the UnitedStates requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the
level of their underfunding. As a result, Sysco expects its contributions to these plans to increase in the future. In addition, if a UnitedStates multiemployer
defi ned benefi t plan fails to satisfy certain minimum funding requirements, the IRS may impose a nondeductible excise tax of 5% on the amount of the
accumulated funding defi ciency for those employers contributing to the fund.
Withdrawal Activity
Sysco has voluntarily withdrawn from various multiemployer pension plans. Total withdrawal liability provisions recorded include $21.9million in fi scal
2012, $41.5million in fi scal 2011 and $2.9million in fi scal 2010. As of June30,2012 and July2,2011, Sysco had approximately $30.7million and
$42.4million, respectively, in liabilities recorded related to certain multiemployer defi ned benefi t plans for which Sysco’s voluntary withdrawal had already
occurred. Recorded withdrawal liabilities are estimated at the time of withdrawal based on the most recently available valuation and participant data for
the respective plans; amounts are subsequently adjusted to the period of payment to refl ect any changes to these estimates. If any of these plans were
to undergo a mass withdrawal, as defi ned by the Pension Benefi t Guaranty Corporation, within a two year time frame from the point of our withdrawal,
Sysco could have additional liability. The company does not currently believe any mass withdrawals are probable to occur in the applicable two year time
frame relating to the plans from which Sysco has voluntarily withdrawn.
Potential Withdrawal Liability
Under current law regarding multiemployer defi ned benefi t plans, a plan’s termination, Sysco’s voluntary withdrawal, or the mass withdrawal of all contributing
employers from any underfunded multiemployer defi ned benefi t plan would require Sysco to make payments to the plan for Sysco’s proportionate share
of the multiemployer plan’s unfunded vested liabilities. Generally, Sysco does not have the greatest share of liability among the participants in any of the
plans in which it participates. Sysco believes that one of the above-mentioned events is reasonably possible with certain plans in which it participates and
estimates its share of withdrawal liability for these plans could have been as much as $100.0million as of June30,2012. This estimate excludes plans
for which Sysco has recorded withdrawal liabilities or where the likelihood of the above-mentioned events is deemed remote. This estimate is based on
the information available from plan administrators, which has valuation dates ranging from December31,2009 to December31,2010. The majority of
these plans have a valuation date of calendar year-end and therefore the estimate results from plans for which the valuation date was December31,2010;
therefore, the company’s estimate refl ects the condition of the fi nancial markets as of that date. Due to the lack of current information, management believes
Sysco’s current share of the withdrawal liability could materially differ from this estimate.
Plan Contributions
Sysco’s contributions to multiemployer defi ned benefi t pension plans were as follows for each fi scal year:
(In thousands)
2012 2011
2010
(53Weeks)
Individually signifi cant plans $ 63,718 $ 30,180 $ 47,483
All other plans 4,390 3,835 4,216
TOTAL CONTRIBUTIONS $ 68,108 $ 34,015 $ 51,699
Payments for voluntary withdrawals included in contributions were $33.6million, zero and $17.4million in fi scal 2012,2011 and 2010, respectively.