<?php
$menu['parent'][] = array('label'=>'test', 'id' = 2);
$menu['parent'][] = array('label'=>'test', 'id' = 4);
$menu['children'][2]  = array(...);
$menu['children'][4]  = array(...);
 $smarty->assign(array('menu' => $menu));

<ul>        
    {foreach from=$menu.parent  item=elem}
    <li>
        <div>
            {$elem.label}
        </div>
        <ul>
            {foreach from=$menu.children... [ $elem.id ].... item=subelem}
                <li>{$subelem.label}</li>
            {/foreach}
        </ul>

    </li>
    {/foreach}
</ul>