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Employee Benefit Plans | 12 Months Ended
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May 31, 2022
Retirement Benefits [Abstract] |
Employee Benefit Plans | Employee Benefit Plans Pension Plans In conjunction with the acquisition of G&K in fiscal 2017, Cintas assumed the Pension Plan that covers substantially all legacy G&K employees who were employed as of July 1, 2005, except certain employees who were covered by union-administered plans. Benefits are based on the number of years of service and each employee’s compensation near retirement. We will make annual contributions to the Pension Plan consistent with federal funding requirements. The Pension Plan was frozen by G&K effective December 31, 2006. Future growth in benefits will not occur beyond this date. Applicable accounting standards require that the consolidated balance sheets reflect the funded status of the Pension Plan. The funded status of the Pension Plan is measured as the difference between the plan assets at fair value and the PBO. The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The measurement of the PBO is based on the Company’s estimates and actuarial valuations. Unrecognized differences between actual amounts and estimates based on actuarial assumptions are included in accumulated other comprehensive income (loss) on our consolidated balance sheets. The difference between actual amounts and estimates based on actuarial assumptions are recognized in other comprehensive income (loss), net of tax, in the period in which they occur. The estimated amortization from accumulated other comprehensive income (loss) into net periodic benefit cost during fiscal year 2023 is not material.
Obligations and Funded Status at May 31: (In thousands) | 2022 |  | 2021
Change in benefit obligation: |  |  |
Projected benefit obligation, beginning of year | $ | 99,728 |  |  | $ | 105,357 |
Interest cost | 2,148 |  |  | 2,050 |
Actuarial gain | (14,044) |  |  | (4,460) |
Benefits paid | (3,286) |  |  | (3,219) |
Projected benefit obligation, end of year | $ | 84,546 |  |  | $ | 99,728 |
Change in plan assets: |  |  |
Fair value of plan assets, beginning of year | $ | 78,244 |  |  | $ | 68,341 |
Actual (loss) return on plan assets | (8,322) |  |  | 9,509 |
Employer contributions | 87 |  |  | 3,613 |
Benefits paid | (3,286) |  |  | (3,219) |
Fair value of plan assets, end of year | $ | 66,723 |  |  | $ | 78,244 |
Funded status-net amount recognized | $ | (17,823) |  |  | $ | (21,484) |
The net pension liability of $17.8 million and $21.5 million was included in long-term accrued liabilities on the consolidated balance sheets as of May 31, 2022 and 2021, respectively. An unrecognized net actuarial loss of $2.9 million and $5.0 million related to the Pension Plan was included in "other" within the accumulated other comprehensive income (loss) on the consolidated balance sheets at May 31, 2022 and 2021, respectively. The components of net periodic pension benefit are summarized as follows for the fiscal years ended May 31:
(In thousands) | 2022 |  | 2021
Interest cost | $ | 2,148 |  |  | $ | 2,050 |
Expected return on assets | (3,651) |  |  | (2,924) |
Amortization of net loss | — |  |  | 222 |
Net periodic pension benefit | $ | (1,503) |  |  | $ | (652) |
Assumptions The following weighted average assumptions were used to determine benefit obligations for the Pension Plan for the fiscal years ended May 31:
| 2022 |  | 2021
Discount rate | 4.11 | % |  | 2.83 | %
The following weighted average assumptions were used to determine net periodic pension benefit for the Pension Plan for the fiscal years ended May 31:
| 2022 |  | 2021
Discount rate | 2.83 | % |  | 2.54 | %
Expected return on plan assets | 4.80 | % |  | 4.25 | %
Plan Assets The asset allocations in the Pension Plan are as follows at May 31:
| 2022 |  | 2022 |  | 2021
| Target Asset Allocation |  | Actual Asset Allocation |  | Actual Asset Allocation
Large cap equity | 26.0 | % |  | 29.1 | % |  | 29.8 | %
Small cap equity | 5.0 | % |  | 6.2 | % |  | 6.0 | %
International equity | 8.0 | % |  | 8.2 | % |  | 8.3 | %
Fixed income | 45.0 | % |  | 43.2 | % |  | 44.1 | %
Absolute return strategy funds | 16.0 | % |  | 12.7 | % |  | 11.3 | %
Cash | — | % |  | 0.6 | % |  | 0.5 | %
Total | 100.0 | % |  | 100.0 | % |  | 100.0 | %
Our investment committee, assisted by outside consultants, evaluates the objectives and investment policies concerning our long-term investment goals and asset allocation strategies. Pension Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term. To develop the expected long-term rate of return on asset assumptions, we consider the historical returns and future expectations of returns for each asset class, as well as the target asset allocation, changes in investments expenses and investment goals of the pension portfolio. This resulted in the selection of 4.80% expected return on Pension Plan assets for fiscal year 2022 and 4.25% expected return on Pension Plan assets for fiscal year 2021. The investment goals are (1) to meet or exceed the assumed actuarial rate of return over the long term within reasonable and prudent levels of risk, and (2) to preserve the real purchasing power of assets to meet future obligations. The nature and duration of benefit obligations, along with assumptions concerning asset class returns and return correlations, are considered when determining an appropriate asset allocation to achieve the investment objectives. Pension Plan assets for our qualified pension plans are held in a trust for the benefit of the plan participants and are invested in a diversified portfolio of equity investments, fixed income investments and cash. Risk targets are established and monitored against acceptable ranges. All investment policies and procedures are designed to ensure that the plans' investments are in compliance with the Employee Retirement Income Security Act. Guidelines are established defining permitted investments within each asset class. The implementation of the investment strategy discussed above is executed through a variety of investment types, including U.S. government securities, corporate debt and mutual funds. The mutual fund investments are valued at the closing price reported on the active market on which the individual securities are traded and are not adjusted from the quoted active market price at the consolidated balance sheet date. The remaining investments, primarily corporate debt, are valued using unadjusted observable inputs such as third-party quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for the assets or liabilities. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the consolidated balance sheet date. Information on the Pension Plan assets, using the fair value hierarchy discussed in Note 1 entitled Significant Accounting Polices, is as follows as of May 31:
| 2022 |  |  | 2021
(In thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |  |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash equivalents | $ | 503 |  |  | $ | — |  |  | $ | — |  |  | $ | 503 |  |  |  | $ | 556 |  |  | $ | — |  |  | $ | — |  |  | $ | 556 |
U.S. government securities | 2,839 |  |  | 3,178 |  |  | — |  |  | 6,017 |  |  |  | 3,066 |  |  | 4,500 |  |  | — |  |  | 7,566 |
Corporate debt | — |  |  | 22,681 |  |  | — |  |  | 22,681 |  |  |  | — |  |  | 26,762 |  |  | — |  |  | 26,762 |
Mutual funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. securities | 32,016 |  |  | — |  |  | — |  |  | 32,016 |  |  |  | 36,909 |  |  | — |  |  | — |  |  | 36,909 |
International securities | 5,506 |  |  | — |  |  | — |  |  | 5,506 |  |  |  | 6,451 |  |  | — |  |  | — |  |  | 6,451 |
Total | $ | 40,864 |  |  | $ | 25,859 |  |  | $ | — |  |  | $ | 66,723 |  |  |  | $ | 46,982 |  |  | $ | 31,262 |  |  | $ | — |  |  | $ | 78,244 |
We expect to make no contributions to the Pension Plan during the next 12 months. The Pension Plan benefit payments expected to be paid for each of the next five years and thereafter are $4.2 million, $4.4 million, $4.5 million, $4.7 million, $4.8 million and $61.9 million, respectively. Future changes in plan asset returns, assumed discount rates and various other factors related to the Pension Plan will impact future net periodic pension benefit (cost) and liabilities, however, any changes would not have a material impact on our consolidated results of operations and consolidated financial position. Cintas also administers a pension plan that was assumed in a previous acquisition and has historically been deemed immaterial for disclosure purposes. As of May 31, 2022 and 2021, the fair value of this pension plan's total assets was $8.4 million and $9.2 million, respectively, and the PBO was $7.5 million and $8.9 million, respectively. Non-Contributory Retirement Plans Cintas' Partners' Plan (the Plan) is a non-contributory profit sharing plan and Employee Stock Ownership Plan (ESOP) for the benefit of substantially all U.S. Cintas employee-partners who have completed one year of service. The Plan also includes a 401(k) savings feature covering substantially all U.S. employee-partners. The amounts of contributions to the Plan and ESOP, as well as the matching contribution to the 401(k), are made at the discretion of the Board of Directors. Total contributions, including Cintas' matching contributions, which approximate cost, were $85.0 million, $75.6 million and $74.3 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively. The expense associated with these contributions was recorded in selling and administrative expenses on the consolidated statements of income. Cintas has a non-contributory deferred profit sharing plan (DPSP), which covers substantially all Canadian employee-partners. In addition, a registered retirement savings plan (RRSP) is offered to those employees. The amounts of contributions to the DPSP, as well as the matching contribution to the RRSP, are made at the discretion of the Board of Directors. Total contributions, which approximate cost, were $3.4 million, $3.1 million and $2.6 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively. The expense associated with these contributions was recorded in selling and administrative expenses on the consolidated statements of income. Cintas has a supplemental executive retirement plan (SERP) subject to Section 409A of the Internal Revenue Code for the benefit of certain highly compensated Cintas employee-partners. The SERP allows participants to defer the receipt of compensation which would otherwise become payable to them. Matching contributions are made at the discretion of the Board of Directors. Total matching contributions, which approximates cost, were $10.5 million, $9.1 million and $8.4 million for the fiscal years ended May 31, 2022, 2021 and 2020, respectively. The expense associated with these contributions was recorded in selling and administrative expenses on the consolidated statements of income.

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