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Foot Locker to kick $128 million into U.S. pension plan this year

Foot Locker Inc., New York, will make a $128 million contribution to its qualified U.S. pension plan this year, according to its 10-K filed Thursday.

It made a $25 million contribution to the plan last year as well as a $4 million contribution to non-qualified pension plans. The U.S. pension plan had $639 million in assets as of Feb. 3, up from $589 million as of Jan. 28, 2017.

The company said in the 10-K that the $128 million contribution was the result of a ruling by a U.S. District Court in New York that the company had violated terms of ERISA with the 1996 conversion of the U.S. plan "to a defined benefit plan with a cash balance formula." In February 2018, the U.S. Supreme Court declined to hear the company's appeal.

Foot Locker "has estimated that the cost of plan reformation is $278 million as of Feb. 3, 2018, and this amount will continue to increase with interest until paid, as required by the provisions of the required plan reformation," the 10-K said. "The previous amount accrued was $150 million. Accordingly, during the fourth quarter of 2017, the company recorded an additional charge of $128 million, bringing the cumulative amount accrued for this matter to $278 million."

The recently announced $128 million contribution represents "a portion of this obligation," the 10-K said.

Foot Locker reported total U.S. and Canadian pension plan assets of $697 million as of Feb. 3, and liabilities of $683 million, for a funding ratio of 102%, up from 97.1% a year earlier.

The aggregate plans' discount rate was 3.7% for the just completed fiscal year vs. 4% the previous year.

The target asset allocation of the U.S. qualified pension plan is 60% fixed income, 36.5% equities and 3.5% real estate, the 10-K said. The target allocation of the Canadian plan is 95% fixed-income securities and 5% equities.