Re: Compensation-Retirement Benefits-Multiemployer Plans (Subtopic ) Issued September 1, 2010 File Reference No

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1 BY TO: SAFEWAY ~ November 1,2010 Technical Director Financial Accounting Standards Board 401 Merritt 7 PO Box 5116 Norwalk, CT Re: Compensation-Retirement Benefits-Multiemployer Plans (Subtopic ) Issued September 1, 2010 File Reference No Dear Technical Director, This letter is a response by Safeway Inc. ("Safeway") to the invitation of the Financial Accounting Standards Board ("FASB") to comment on its Proposed Accounting Standards Update, "Compensation-Retirement Benefits-Multiemployer Plans (Subtopic )" relating to Disclosure about an Employer's Participation in a Multiemployer Plan ("Exposure Draft"). General Information Safeway is a publicly-traded Fortune 100 retail food company with over 1,700 stores in 21 states, the District of Columbia and five Canadian provinces. Safeway has over 180,000 employees, approximately 80% of whom are covered by approximately 430 collective bargaining agreements ("Agreements"). The Agreements provide for contributions by Safeway to multiemployer pension plans and multiemployer health and welfare plans some of which provide postretirement health and welfare benefits. Safeway contributes to over 30 multiemployer pension plans and to over 50 multiemployer health and welfare plans in the United States and Canada. Statement of Position Safeway supports the FASB's objective of enhancing the transparency of an employer's risk to commitments and cash flow arising from its participation in multiemployer pension and other postretirement benefit plans. However, as discussed below, Safeway has significant reservations about the ability of the proposed amendments set forth in the Exposure Draft to effectively accomplish the FASB's objective. Safeway Inc Stoneridge Mall Road Pleasanton, CA

2 The Proposed Effective Date Does Not Allow Employers Sufficient Time to Respond As currently proposed by the FASB, Safeway would be required to make the extensive disclosures set forth in the Exposure Draft during the first quarter of2011 in conjunction with its 2010 annual report. Assuming the final amendments were to be issued shortly after the end of the comment period, Safeway and all other similarly-situated employers would have approximately 90 days to prepare the extensive response required. This does not allow sufficient time to respond. After receiving the final amendments, Safeway and other employers will need adequate time to comply. Specifically they will need time to: 1. collect information internally and from the multiemployer plans; 2. verify, evaluate, and audit the information; 3. organize the information; and 4. report the information in an understandable way. If the current Exposure Draft disclosures do not change materially, the foregoing process will take at least 18 months. In other words, the earliest Safeway could comply with the exposure draft would be for the fiscal year ended If the disclosures are modified substantially to make compliance simpler, but still provide useful information to the users, the effective date for compliance could be earlier. The Proposed Effective Date Does Not Allow Sufficient Time to Consider All of the Issues Safeway believes the proposed effective date does not permit sufficient time to study the significant and complex issues raised by the exposure draft. A threshold issue is that the update amendments need to be modified significantly. Even in final form, the amendments require substantial interpretation. The process of modification and interpretation will require at least six months, making July 1, 2011 the earliest realistic date for issuance of final update amendments with relevant interpretations, instructions and examples. The FASB should create an advisory task force made up of interested parties, including experts, employers and users of financial statements, to work out what an efficient disclosure should contain. The Difficulties Posed by the Required Disclosures Are Extensive The difficulties posed by compliance with the proposed disclosures are extensive. Safeway would need to obtain extensive information relating to over 400 collective bargaining agreements and over 80 multiemployer pension and health and welfare plans at the same time as many other employers are seeking similar information from the same plans. Since this would be the first time such information is required, it will take additional time for employers and plans to develop systems for obtaining required information. 2

3 Information Collection Multiemployer plans are not organized to provide the required information, and will be required to establish systems for obtaining, verifying and reporting the information on an employer-by-employer basis. In some cases, plan information is not available by employer. Also, many plans do not separate retiree health contribution income, benefit expense and assets from active employee income, benefit expense and assets. Information Location The FASB should consider a dialog with the SEC. There are elements of this exposure draft that may complement existing footnote disclosure and the FASB should pursue that level of disclosure. However, much of the proposed disclosure is better suited to inclusion in Management's Discussion and Analysis, or Risk Factors. Broader discussion of how management views any obligations or contingent obligations, particularly where data is not under the control of the company, present significant audit issues, as noted below. Therefore, such discussion is better suited outside the audited financial statements. Information Verification - The Audit Problem Verification ofcompany and plan information raises a number ofdifficult issues at both the company level and the plan level. In addition to assuring that information is accurate and complete, the required information must be audited. It is not sufficient that plan information be audited by plan auditors and other professionals; company and plan information also must be audited by employer auditors, which in many cases may not be possible or, if it is possible, the auditors may be required to audit data that is more than one or two years old. By way of example, in order to comply with existing accounting principles and disclosures for pension plans and postretirement benefits, Safeway accumulates actuarial reports for seven different non-union single employer plans from two different actuaries. The accounting and disclosure is then audited by Safeway's independent auditors who must test actuarial data such as participant date ofhire, salary, and age. The independent auditors also review each actuarial report. It is a complex and time-consuming process and due to the timing of the receipt of the reports is frequently is the final step before Safeway files its annual report on Form 10-K. The proposed amendments call for the disclosure of total assets, accumulated benefit obligation, potential withdrawal liability, and other information which will come from over 80 multi employer pension and health and welfare plans and many different sources. Safeway believes it is impractical to audit this volume of data in the short period oftime before its Form 10-K is due. Indeed, it may not be possible to audit some of the information collected from the plans at all. Most of the participant data used to calculate accumulated benefit obligation comes from other employers, not 3

4 Safeway, and could not be tested by Safeway's independent auditors. Similarly, the actuarial assumptions used to develop the accumulated benefit obligation are selected by plan actuaries, and Safeway may be unable to represent to its auditors that those assumptions are reasonable. Information Organization and Reporting Poses Many Difficulties Organizing extensive information from many different sources poses many difficulties. Decisions concerning how to aggregate data alone are complex. The circumstances of plans differ, so solutions to aggregation of information problems are likely to be difficult, or in some cases, impossible to resolve. Similarly, information reporting raises numerous issues. In many cases, the clearest reporting will involve sophisticated graphic display ofdata. Narrative quantitative and qualitative information disclosures will require extensive descriptive summaries. For example, the Implementation Guidance Illustration Example 1 provided by the FASB for a single employer and a single multiemployer pension plan is nearly two single-spaced pages long. Even if Safeway only responded with narrative disclosures for its largest multiemployer pension plans, its disclosures would cover 30 pages or more, adding almost 40% to the length of our 10-K. Reporting on the remaining pension plans and the other postretirement benefit plans would add further to the volume ofthe required response. Availability of Expert Advice Is Limited Unavailability of expert advice relating to multiemployer plans also is a problem both for Safeway and the multiemployer plans to which it contributes. Relatively few consulting, accounting and actuarial firms have the necessary expertise to provide required advice concerning the proposed disclosures to employers or plans. With many employers and plans all seeking immediate advice, these firms will be unable to respond in a timely fashion, particularly given the interpretive, analytical, and audit problems described above. The Proposed Quantitative and Qualitative Disclosures Will Not Result in a More Useful and Transparent Disclosure of Safeway's Obligations Arising from Its Participation in Multiemployer Pension and Other Postretirement Benefit Plans A detailed discussion of all of the issues relating to the substantive value of the proposed quantitative and qualitative disclosures with respect to employer participation in multiemployer plans is beyond the scope ofthis comment letter. As previously stated, Safeway believes that dealing appropriately with the analytical, interpretive and usefulness issues raised by the proposed disclosures will take an extended period, and that final issuance ofthe proposed amendments should be delayed until this is done. 4

5 Much of the information concerning the multiemployer plans to which Safeway contributes and Safeway's participation in these plans that would be relevant and useful to the users of financial statements can be provided with significant efforts by Safeway and the plans. However, Safeway believes such information should be provided only for the plans which comprise most ofits participation in such plans i.e. for larger plans which comprise 80% to 90% of its contributions. A central issue requiring extensive further analysis relates to whether plan data should be shown in aggregated or disaggregated form, or both. In some cases, differences among funds may make aggregation of information difficult, but may be done using common analytical assumptions to provide useful information. Disaggregated information about individual plans may be useful if the format used allows meaningful comparisons to be made over many plans. The reality is that some of the information sought is voluminous, but of little value in assessing multiemployer plans' potential impact on an employer. Further concerns include: Plan information is likely to be dated. Benefit calculation data is likely to be voluminous and complex for most plans given they have multiple contribution rates and benefit levels. Rehabilitation Plan/Funding Improvement Plan information is voluminous and complex. Projections ofcontribution rates and benefits levels subject to change through current collective bargaining and/or annual changes in Rehabilitation Plans/Funding Improvement Plans may be difficult or impossible, particularly for multi-year periods or periods in which major agreements are being bargained. Safeway believes it is possible for the FASB working in conjunction with employers and those with multiemployer plan expertise to develop reasonable disclosure requirements which will provide pertinent information about plans and employer participation in plans, but that further work needs to be done to accomplish this objective. Determination of What Information Should Be Provided by an Employer About Cash Flow Implications Arising from an Employer's Participation in Multiemployer Plans Needs Extensive Further Consideration The FASB seeks voluminous disclosures of a wide range of information about an employer's participation in multiemployer plans. With the exception of the disclosure required by B.c.1. which asks for a narrative description ofthe employer's exposure to significant risks and commitments arising from its participation in multiemployer plans, the information required covering a wide range of topics appears to be intended to provide information enabling users of an 5

6 employer's financial statements to independently assess the cash flow implications of an employer's participation in multiemployer plans. Safeway doubts that simply providing the information required by the proposed disclosures will enable users of financial statements to make such assessments accurately. It is likely that assessments based on the required disclosures will vary significantly by user and that misapplication of the information will cause some users to draw unwarranted conclusions. The solution to this problem is not simply to provide more information, but to provide reliable information and analysis which assists users in understanding the historical and probable near-term impact of employer participation in multiemployer plans on its cash flows. In this regard, the focus should be on an employer providing information and analysis which reasonably assesses probable anticipated outcomes in the immediate future based on its knowledge of circumstances of its collective bargaining and of the multiemployer plans in which it participates. Disclosing contributions to these plans for the current year as well as a one year projection and any relevant narrative with respect to contribution trends in the future would be useful in assessing the cash flow impact to contributing employers to these plans. It also is worth noting that multiemployer pension and retiree health and welfare plans costs do not exist in isolation from other labor costs, including wage and active employee health and welfare costs. When multiemployer plan costs increase significantly, other cost increases may be reduced though collective bargaining. If multiemployer pension plan and retiree health plan costs rise, benefit levels may decrease and employee and/or retiree contributions to health care costs may increase. These balancing cost changes need to be factored into the impact ofmultiemployer plan cost increases to obtain an accurate picture of the effects of such increases on an employer's cash flow. Safeway urges that the complexity of making assessments of the effects on an employer's cash flows from its participation in multiemployer plans be taken fully into account in determining the disclosures required, and that the primary focus of such disclosures be on the employer's own assessment of the probable impact of its multiemployer plan participation on its cash flows in the near term. Disclosures Relating to an Employer's Withdrawal Liability to the Multiemployer Pension Plans in Which It Participates Should Be Limited Existing accounting principles relating to disclosure of an employer's estimated withdrawal liability to a multiemployer pension plan should continue to apply. Disclosure should be limited to a probable complete or partial withdrawal, as is currently required. Anything else is largely speculative, and likely to be misleading, since it applies to withdrawals that are highly unlikely to occur. To the extent further information is required, it should be limited to the emplo yer's share of underfunding on the multiemployer pension plans which comprise most of its participation in such plans. 6

7 The actual cost to an employer of withdrawal from a plan may differ significantly from the amount ofwithdrawal liability assumed by the plan. Plan withdrawal liability calculation methods can change significantly, making year-to-year comparisons misleading without extensive explanation. Many plans had little to no withdrawal liability at the end of2006, which would be available (but not necessarily auditable) for an employer disclosure at the end of2007, and many plans had little to no withdrawal liability at the end of2007, which would be available for an employer disclosure at the end of2008. But by the end of2008, withdrawal liability had increased, but an employer's disclosure may have shown comparatively little withdrawal liability. By 2009, the withdrawal liability calculation captured 2008 market losses, and this would have been reflected in an employer's disclosure at the end of2009, by which time the market had recovered significantly. Different assumptions used by plans make comparing withdrawal liability among funds difficult, and may provide misleading results. Current, comparable information is not available. More useful information about an employer's withdrawal liability situation than its overall withdrawal liability can be provided. A more appropriate disclosure than an employer's overall withdrawal liability or its annual withdrawal liability payment amount is the present value of an employer's annual payment amount. The present value of the annual payment amount takes into account the duration of time the annual payments are required and is capped by the amount of the company's withdrawal liability. The present value of the annual payment amount is the amount that would be disclosed in the event a withdrawal becomes probable or reasonably possible. Safeway's principal concern with the withdrawal liability disclosures required by the proposed amendments covering all plans and its theoretical obligation to each is that such disclosures do not provide meaningful information about its obligations to multiemployer pension plans, or about any cash flow risks associated with such plans. However, the proposed disclosures pose a real possibility that users of its financial statements will misunderstand and overestimate the obligations and risks involved, adversely affecting Safeway's financial status without any factual basis. The disclosures it has suggested above provide meaningful, usable information, and should be adopted by the FASB. Proposed Disclosures Relating to Other Postretirement Benefit Plans Requires Further Consideration Safeway contributes to over 50 multiemployer health and welfare plans, many of which provide benefits to both active employees and retirees. Most such plans do not have a separate employer contribution for retirees, so accurately determining plan income and assets attributable to retirees may be impos sible. Similarly, many health and welfare plans do not track retiree expenses separately. Accordingly, providing separate retiree health income, expense and asset information may be difficult, and in some cases impossible, at least until plan information systems are revised. 7

8 The retiree health benefits provided by multiemployer health and welfare plans to which Safeway contributes are not vested and may be reduced or eliminated through collective bargaining. Withdrawal liability does not exist on these funds. Disclosures which show liabilities as if such benefits are vested and not subject to reduction or elimination overstate future obligations. The cost of retiree health benefits is a serious issue, but it is not correct to assume retiree health benefits will continue indefinitely. Please do not hesitate to request any additional information with regard to Safeway's comments concerning the FASB's Exposure Draft. Safeway would be pleased to meet with FASB or its staff to discuss the issues raised by the Exposure Draft. Sincerely yours, David Bond Se. r Vice President, Finance and Control 'chard Cox, Senior Vice President, Labor Relations 8