Read the footnote, "Employee Retirement Plans and Post-Retirement Benefit Plan" for the Boston Beer Company. 1. Complete the following schedule. Type of Plan--check one Defined Benefit Defined Contribution Plan Name SABC 401(k) Plan Local 1199 Pension Plan Boston Beer 401(k) Plan Retiree Medical Plan 2. For the defined benefit plans, how much is the unfunded benefit liability at the end of 2015? Plan Name Unfunded Benefit 3. What is the discount rate used by Boston Beer to determine the pension liability at the end of 2015? 4. The footnote indicates that the pension plan is invested in stocks and bonds, "the plan's investments are considered Category 1 assets in the fair value hierarchy". You remember this from ACC 213, or you may need to look this up What are Category 1 assets? Why would Category 1 assets be used to fund a pension plan? THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 26, 2015 A. Organization and Basis of Presentation The Boston Beer Company, Inc. and certain subsidiaries (the "Company") are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trade names "The Boston Beer Company. "Twisted Tea Brewing Company, and "Angry Orchard Cider Company." The Company's Samuel Adams beers are produced and sold under the trade name "The Boston Beer Company. A&S Brewing Collaborative LLC, d/b/a Alchemy & Science (A&S"), a wholly-owned subsidiary of the Company, sells beer under various trade names that is produced under its own license and the Company's licenses. In 2015, sales from A&S brands are less than 7% of net revenues N. Employee Retirement Plans and Post-Retirement Benefit Plan The Company has one retirement plan covering substantially all non-union employees; two retiremer plans, one of which covers substantially all union employees, and the other of which covers employees of a specific union, and post-retirement medical benefits covering substantially all union employees Non-Union Plans The Boston Beer Company 401(k) Plan (the "Boston Beer 401(k) Plan"), which was established by the Company in 1993, is a Company-sponsored defined contribution plan that covers a majority of Company's non-union employees who are employed by Boston Beer Corporation, Samuel Adams Brewery Company, Ltd., Samuel Adams Pennsylvania Brewery Company or A&S Brewing Collaborative LLC. All non-union employees of these entities are eligible to participate in the plan the first day of the first month after commencing employment or, if later, reaching age 21. Participam may make voluntary contributions up to 60% of their annual compensation, subject to IRS limitations After the sixth month of employment, the Company matches each participant's contribution. A maximum of 6 % of compensation is taken into account in determining the amount of the match. The Company matches 100 % of the first $1,000 of the eligible compensation participants contribute. Thereafter, the Company matches 50% of the eligible contribution. The Company's contributions to the Boston Beer 401(k) Plan amounted to $3.0 million and $2.8 million in fiscal years 2015 and 2014 respectively. The basic annual administrative fee for the Boston Beer 401(k) Plan is paid by the Plan's investment fund revenue. In addition, per the Service Provider Payment Agreement, up to a maximum of two basis points multiplied by the total amount of assets under the Plan per year is available for paying eligible Plan expenses. The Company is responsible for the payment of any additional fees related to the management of the Boston Beer 401(k) Plan. Such fees are not materi to the Company Union Plans The defined contribution plan, the Samuel Adams Brewery Company, Ltd. 401 (k) Plan for Represented Employees (the "SABC 401(k) Plan"), is a Company-sponsored plan. It was establishe- in 1997 and is available to all union employees upon commencement of employment or, if later, attaining age 21. Participants may make voluntary contributions up to 60% of their annual compensation to the SABC 401(k) Plan, subject to IRS limitations. Effective July 1, 2007, the Company commenced making a non-elective contribution for eligible employees who are members what is now the Service Employees' International Union, Local 1, Firemen & Oilers Division CLocal #1"). Effective January 1, 2012, the Company commenced making a non-elective contributia for eligible employees who are members of The Intermational Union of Operating Engineers Local #20 ("Local # 20). Company contributions for fiscal 2015 and 2014 were insignificant. The basic annual administrative fee for the SABC 401(k) Plan is paid by the Plan's investment fund revenue. In addition, per the Service Provider Payment Agreement up to a maximum of two basis points multiplied by the total amount of assets under the Plan per year is available for paying eligible Plan expenses. The Company is responsible for the payment of any additional fees related to the management of the SABC 401(k) Plan. Such fees are not material to the Company. The defined benefit plan, the Samuel Adams Brewery Company, Ltd. Local Union No. 1199 Pension Plan (the "Local 1199 Pension Plan"), is a Company-sponsored pension plan. It was established in 1991 and is open to all union employees who are covered by the Company's collective bargaining agreement with Teamsters Local Union No. 1199 (Local Union #1199) and who have completed 12 consecutive months of employment with at least 750 hours worked. The defined benefit is determined based on years of service since July 1991. The Company made contributions of $188,000 and $162,000 in 2015 and 2014 respectively. At December 26, 2015 and December 27, 2014, the unfunded projected pension benefits were $1.6 million and $1.7 million, respectively The Company provides a supplement to eligible retirees from Local # 20 , Local #1 and Local Union #1199 to assist them with the cost of Medicare gap coverage after their retirement on account of age or permanent disability. To qualify for this benefit (collectively, the "Retiree Medical Plan"), an employee must have worked for at least 20 years for the Company or its predecessor at the Company's Cincinnati Brewery, must have been enrolled in the Company's comprehensive medical plan for at least 5 years before retirement and, in the case of retirees from Local # 20, for at least 7 of the last 10 years of their employment, and must be eligible for Medicare benefits under the Social Security Act. The accumulated post-retirement benefit obligation was determined using a discount rate of 4.5% at December 26, 2015 and 4.0% at December 27, 2014 respectively, and a 2.5% health care cost increase based on the Cincinnati Consumer Price Index for the years 2015, 2014, and 2013. The effect of a 1% point increase and the effect of a 1 % point decrease in the assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic post-retirement health care benefit costs and the accumulated post-retirement benefit obligation for health care benefits would not be significant. In addition, the comprehensive medical plans offered to currently employed members of Local # 20 and Local Union # 1199 remain available to them should they retire after reaching age 57 (and before reaching age 65 in the case of a member of Local # 20) with at least 20 years of service (if a Local #20 member) or 10 years of employment (if a Local Union #1199 member) with the Company or its predecessor at the Company's Cincinnati Brewery. These eligible retirees may choose to continue to be covered under the Company's comprehensive medical plan, subject to certain modifications applicable to members of Local Union #1199 , until they reach the age when they are eligible for Medicare under the Social Security Act or (in the case of a Local # 20 member) coverage under a comparable State health benefit plan. Eligible retirees pay 100% of the cost of the coverage. The funded status of the Local 1199 Pension Plan and the Retiree Medical Plan are as follows: Local 1199 Pension Plan Retiree Medical Plan December 27, December 26, 2015 December 27. December 26, 2015 2014 2014 (in thousands) Fair value of plan assets at end of fiscal $ 2,471 2,402 year Benefit obligation at end of fiscal 4,105 4,092 671 720 year (671 Unfunded Status (1,690) (720 (1,634) The Local 1199 Plan invests in a family of funds that are designed to minimize excessive short-term risk and focus on consistent, competitive long-term performance, consistent with the funds investment objectives. The fund-specific objectives vary and include maximizing long-term retums both before and after taxes, maximizing total return from capital appreciation plus income and funds that invest in common stock of companies that cover a broad range of industries. The plan's investments are considered category1 assets in the fair value hierarchy and the fair values were determined by reference to period end quoted market prices. The basis of the long-term rate of return assumption of 6.5% reflects the Local 1199 Plan's current targeted asset mix of approximately 35% debt securities and 65 % equity securities with assumed average annual returns of approximately 3 % to 6 % for debt securities and 8 % to 12% for equity securities. It is assumed that the Local 1199 Plan's investment portfolio will be adjusted periodically maintain the targeted ratios of debt securities and equity securities. Additional consideration is giver to the plan's historical returns as well as future long-range projections of investment returns for eack asset category. The assumed discount rate in estimating the pension obligation was 4.5% and 4.0 % at December 26, 2015 and December 27, 2014, respectively. The Local 1199 Plan's weighted-average asset allocations at the measurement dates by asset category are as follows: December 26, December 27, Asset Category Equity securities Debt securities 2015 2014 66% 67% 33 34 Total 100% 100% Read the footnote, "Employee Retirement Plans and Post-Retirement Benefit Plan" for the Boston Beer Company. 1. Complete the following schedule. Type of Plan--check one Defined Benefit Defined Contribution Plan Name SABC 401(k) Plan Local 1199 Pension Plan Boston Beer 401(k) Plan Retiree Medical Plan 2. For the defined benefit plans, how much is the unfunded benefit liability at the end of 2015? Plan Name Unfunded Benefit 3. What is the discount rate used by Boston Beer to determine the pension liability at the end of 2015? 4. The footnote indicates that the pension plan is invested in stocks and bonds, "the plan's investments are considered Category 1 assets in the fair value hierarchy". You remember this from ACC 213, or you may need to look this up What are Category 1 assets? Why would Category 1 assets be used to fund a pension plan? THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 26, 2015 A. Organization and Basis of Presentation The Boston Beer Company, Inc. and certain subsidiaries (the "Company") are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trade names "The Boston Beer Company. "Twisted Tea Brewing Company, and "Angry Orchard Cider Company." The Company's Samuel Adams beers are produced and sold under the trade name "The Boston Beer Company. A&S Brewing Collaborative LLC, d/b/a Alchemy & Science (A&S"), a wholly-owned subsidiary of the Company, sells beer under various trade names that is produced under its own license and the Company's licenses. In 2015, sales from A&S brands are less than 7% of net revenues N. Employee Retirement Plans and Post-Retirement Benefit Plan The Company has one retirement plan covering substantially all non-union employees; two retiremer plans, one of which covers substantially all union employees, and the other of which covers employees of a specific union, and post-retirement medical benefits covering substantially all union employees Non-Union Plans The Boston Beer Company 401(k) Plan (the "Boston Beer 401(k) Plan"), which was established by the Company in 1993, is a Company-sponsored defined contribution plan that covers a majority of Company's non-union employees who are employed by Boston Beer Corporation, Samuel Adams Brewery Company, Ltd., Samuel Adams Pennsylvania Brewery Company or A&S Brewing Collaborative LLC. All non-union employees of these entities are eligible to participate in the plan the first day of the first month after commencing employment or, if later, reaching age 21. Participam may make voluntary contributions up to 60% of their annual compensation, subject to IRS limitations After the sixth month of employment, the Company matches each participant's contribution. A maximum of 6 % of compensation is taken into account in determining the amount of the match. The Company matches 100 % of the first $1,000 of the eligible compensation participants contribute. Thereafter, the Company matches 50% of the eligible contribution. The Company's contributions to the Boston Beer 401(k) Plan amounted to $3.0 million and $2.8 million in fiscal years 2015 and 2014 respectively. The basic annual administrative fee for the Boston Beer 401(k) Plan is paid by the Plan's investment fund revenue. In addition, per the Service Provider Payment Agreement, up to a maximum of two basis points multiplied by the total amount of assets under the Plan per year is available for paying eligible Plan expenses. The Company is responsible for the payment of any additional fees related to the management of the Boston Beer 401(k) Plan. Such fees are not materi to the Company Union Plans The defined contribution plan, the Samuel Adams Brewery Company, Ltd. 401 (k) Plan for Represented Employees (the "SABC 401(k) Plan"), is a Company-sponsored plan. It was establishe- in 1997 and is available to all union employees upon commencement of employment or, if later, attaining age 21. Participants may make voluntary contributions up to 60% of their annual compensation to the SABC 401(k) Plan, subject to IRS limitations. Effective July 1, 2007, the Company commenced making a non-elective contribution for eligible employees who are members what is now the Service Employees' International Union, Local 1, Firemen & Oilers Division CLocal #1"). Effective January 1, 2012, the Company commenced making a non-elective contributia for eligible employees who are members of The Intermational Union of Operating Engineers Local #20 ("Local # 20). Company contributions for fiscal 2015 and 2014 were insignificant. The basic annual administrative fee for the SABC 401(k) Plan is paid by the Plan's investment fund revenue. In addition, per the Service Provider Payment Agreement up to a maximum of two basis points multiplied by the total amount of assets under the Plan per year is available for paying eligible Plan expenses. The Company is responsible for the payment of any additional fees related to the management of the SABC 401(k) Plan. Such fees are not material to the Company. The defined benefit plan, the Samuel Adams Brewery Company, Ltd. Local Union No. 1199 Pension Plan (the "Local 1199 Pension Plan"), is a Company-sponsored pension plan. It was established in 1991 and is open to all union employees who are covered by the Company's collective bargaining agreement with Teamsters Local Union No. 1199 (Local Union #1199) and who have completed 12 consecutive months of employment with at least 750 hours worked. The defined benefit is determined based on years of service since July 1991. The Company made contributions of $188,000 and $162,000 in 2015 and 2014 respectively. At December 26, 2015 and December 27, 2014, the unfunded projected pension benefits were $1.6 million and $1.7 million, respectively The Company provides a supplement to eligible retirees from Local # 20 , Local #1 and Local Union #1199 to assist them with the cost of Medicare gap coverage after their retirement on account of age or permanent disability. To qualify for this benefit (collectively, the "Retiree Medical Plan"), an employee must have worked for at least 20 years for the Company or its predecessor at the Company's Cincinnati Brewery, must have been enrolled in the Company's comprehensive medical plan for at least 5 years before retirement and, in the case of retirees from Local # 20, for at least 7 of the last 10 years of their employment, and must be eligible for Medicare benefits under the Social Security Act. The accumulated post-retirement benefit obligation was determined using a discount rate of 4.5% at December 26, 2015 and 4.0% at December 27, 2014 respectively, and a 2.5% health care cost increase based on the Cincinnati Consumer Price Index for the years 2015, 2014, and 2013. The effect of a 1% point increase and the effect of a 1 % point decrease in the assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic post-retirement health care benefit costs and the accumulated post-retirement benefit obligation for health care benefits would not be significant. In addition, the comprehensive medical plans offered to currently employed members of Local # 20 and Local Union # 1199 remain available to them should they retire after reaching age 57 (and before reaching age 65 in the case of a member of Local # 20) with at least 20 years of service (if a Local #20 member) or 10 years of employment (if a Local Union #1199 member) with the Company or its predecessor at the Company's Cincinnati Brewery. These eligible retirees may choose to continue to be covered under the Company's comprehensive medical plan, subject to certain modifications applicable to members of Local Union #1199 , until they reach the age when they are eligible for Medicare under the Social Security Act or (in the case of a Local # 20 member) coverage under a comparable State health benefit plan. Eligible retirees pay 100% of the cost of the coverage. The funded status of the Local 1199 Pension Plan and the Retiree Medical Plan are as follows: Local 1199 Pension Plan Retiree Medical Plan December 27, December 26, 2015 December 27. December 26, 2015 2014 2014 (in thousands) Fair value of plan assets at end of fiscal $ 2,471 2,402 year Benefit obligation at end of fiscal 4,105 4,092 671 720 year (671 Unfunded Status (1,690) (720 (1,634) The Local 1199 Plan invests in a family of funds that are designed to minimize excessive short-term risk and focus on consistent, competitive long-term performance, consistent with the funds investment objectives. The fund-specific objectives vary and include maximizing long-term retums both before and after taxes, maximizing total return from capital appreciation plus income and funds that invest in common stock of companies that cover a broad range of industries. The plan's investments are considered category1 assets in the fair value hierarchy and the fair values were determined by reference to period end quoted market prices. The basis of the long-term rate of return assumption of 6.5% reflects the Local 1199 Plan's current targeted asset mix of approximately 35% debt securities and 65 % equity securities with assumed average annual returns of approximately 3 % to 6 % for debt securities and 8 % to 12% for equity securities. It is assumed that the Local 1199 Plan's investment portfolio will be adjusted periodically maintain the targeted ratios of debt securities and equity securities. Additional consideration is giver to the plan's historical returns as well as future long-range projections of investment returns for eack asset category. The assumed discount rate in estimating the pension obligation was 4.5% and 4.0 % at December 26, 2015 and December 27, 2014, respectively. The Local 1199 Plan's weighted-average asset allocations at the measurement dates by asset category are as follows: December 26, December 27, Asset Category Equity securities Debt securities 2015 2014 66% 67% 33 34 Total 100% 100%