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Pension and Other Postretirement Benefits | 12 Months Ended
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Jun. 30, 2022
Retirement Benefits [Abstract] |
Pension and Other Postretirement Benefits | PENSION AND OTHER POSTRETIREMENT BENEFITS The Company participates in and/or sponsors various pension, savings and postretirement benefit plans. Pension plans and postretirement benefit plans are closed to new participants with the exception of a small group covered by collective bargaining agreements. The Company has a legally enforceable obligation to contribute to some plans and is not required to contribute to others. The plans include both defined benefit pension plans and employee non-contributory and employee contributory accumulation plans covering all eligible employees. The Company makes contributions in accordance with applicable laws or contract terms. Pension and postretirement plans that are sponsored by the Company are accounted for as defined benefit pension plans. Accordingly, the funded and unfunded position of each plan is recorded in the Balance Sheets. Actuarial gains and losses that have not yet been recognized through income are recorded in Accumulated other comprehensive loss net of taxes, and they are systematically amortized as a component of net periodic benefit cost in accordance with ASC 715. The Company's benefit obligation for the plans is calculated using assumptions which the Company reviews on a regular basis. The funded status of the plans can change from year to year, but the assets of the funded plans have been sufficient to pay all benefits that came due in each of fiscal 2022, 2021 and 2020. The Company uses a June 30 measurement date for all pension and postretirement benefit plans. The following table sets forth the change in the projected benefit obligation, change in the fair value of plan assets and funded status for the Company's pension and postretirement benefit plans:
| Pension benefits |  | Postretirement benefits
| As of June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| (in millions)
Projected benefit obligation, beginning of the year | $ | 1,468 |  |  | $ | 1,409 |  |  | $ | 98 |  |  | $ | 104 |
Service cost | 38 |  |  | 38 |  |  | 1 |  |  | 2 |
Interest cost | 30 |  |  | 30 |  |  | 2 |  |  | 2 |
Benefits paid | (22) |  |  | (23) |  |  | (4) |  |  | (4) |
Settlements(a) | (56) |  |  | (51) |  |  | — |  |  | — |
Actuarial (gains) losses(b) | (256) |  |  | 65 |  |  | (46) |  |  | (6) |
Other | 1 |  |  | — |  |  | 2 |  |  | — |
Projected benefit obligation, end of the year | 1,203 |  |  | 1,468 |  |  | 53 |  |  | 98 |
Change in the fair value of plan assets for the Company's benefit plans: |  |  |  |  |  |  |
Fair value of plan assets, beginning of the year | 972 |  |  | 788 |  |  | — |  |  | — |
Actual return on plan assets | (152) |  |  | 195 |  |  | — |  |  | — |
Employer contributions | 59 |  |  | 63 |  |  | 4 |  |  | 4 |
Benefits paid | (22) |  |  | (23) |  |  | (4) |  |  | (4) |
Settlements(a) | (56) |  |  | (51) |  |  | — |  |  | — |
Fair value of plan assets, end of the year | 801 |  |  | 972 |  |  | — |  |  | — |
Funded status(c) | $ | (402) |  |  | $ | (496) |  |  | $ | (53) |  |  | $ | (98) |
Grantor Trust assets(c) | $ | 270 |  |  | $ | 304 |  |  | $ | — |  |  | $ | — |
(a) | Represents the full settlement of former employees' deferred pension benefit obligations through lump sum payments.
(b) | Actuarial (gains) for June 30, 2022 were mainly due to a change in the discount rate assumption utilized in measuring plan obligations. Actuarial losses for June 30, 2021 were mainly due to a change in the discount rate assumption utilized in measuring plan obligations and changes to other economic assumptions and demographic experience.
(c) | The Company has established an irrevocable grantor trust (the "Grantor Trust"), administered by an independent trustee, with the intention of making cash contributions to the Trust to fund certain future pension benefit obligations of the Company. The assets in the Grantor Trust are unsecured funds of the Company and can be used to satisfy the Company's obligations in the event of bankruptcy or insolvency.
Amounts recognized in the Balance Sheets consist of:
| Pension benefits |  | Postretirement benefits
| As of June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| (in millions)
Pension assets | $ | 6 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Accrued pension liabilities | (408) |  |  | (500) |  |  | (53) |  |  | (98) |
Net amount recognized | $ | (402) |  |  | $ | (496) |  |  | $ | (53) |  |  | $ | (98) |
Amounts recognized in Accumulated other comprehensive loss, before tax, consist of:
| Pension benefits |  | Postretirement benefits
| As of June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| (in millions)
Actuarial losses (gains) | $ | 322 |  |  | $ | 409 |  |  | $ | (33) |  |  | $ | 13 |
Prior service cost | 3 |  |  | 2 |  |  | — |  |  | — |
Net amounts recognized | $ | 325 |  |  | $ | 411 |  |  | $ | (33) |  |  | $ | 13 |
Accumulated pension benefit obligations as of June 30, 2022 and 2021 were $1,069 million and $1,319 million, respectively. For the funded plans, as of June 30, 2022, the projected benefit obligation exceeds the fair value of plan assets except for one plan that has assets of $81 million, a projected benefit obligation of $75 million and an accumulated benefit obligation of $75 million. Information about funded and unfunded pension plans is presented below:
| Funded plans |  | Unfunded plans |
| As of June 30, |
| 2022 |  | 2021 |  | 2022 |  |  | 2021 |
| (in millions) |
Projected benefit obligation | $ | 930 |  |  | $ | 1,150 |  |  | $ | 273 |  |  |  | $ | 318 |  |
Accumulated benefit obligation | 801 |  |  | 1,010 |  |  | 268 |  |  |  | 309 |  |
Fair value of plan assets | 801 |  |  | 972 |  |  | — |  |  | (a) | — |  | (a)
(a) | The fair value of the assets in the Grantor Trust as of June 30, 2022 and 2021 was $270 million and $304 million, respectively.
Information about funded and unfunded pension plans in which the accumulated benefit obligation exceeds fair value of the plan assets is presented below.
| Funded plans |  | Unfunded plans |
| As of June 30, |
| 2022 |  | 2021 |  | 2022 |  |  | 2021 |
| (in millions) |
Projected benefit obligation | $ | 807 |  |  | $ | 990 |  |  | $ | 273 |  |  |  | $ | 318 |  |
Accumulated benefit obligation | 683 |  |  | 854 |  |  | 268 |  |  |  | 309 |  |
Fair value of plan assets | 675 |  |  | 811 |  |  | — |  |  | (a) | — |  | (a)
(a) | The fair value of the assets in the Grantor Trust as of June 30, 2022 and 2021 was $270 million and $304 million, respectively.
The components of net periodic benefit costs were as follows:
| Pension benefits |  | Postretirement benefits
| For the years ended June 30,
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
| (in millions)
Service cost | $ | 38 |  |  | $ | 38 |  |  | $ | 35 |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 2 |
Interest cost | 30 |  |  | 30 |  |  | 39 |  |  | 2 |  |  | 2 |  |  | 3 |
Expected return on plan assets | (50) |  |  | (50) |  |  | (55) |  |  | — |  |  | — |  |  | — |
Amortization of deferred losses | 31 |  |  | 44 |  |  | 28 |  |  | 1 |  |  | 1 |  |  | 1 |
Other | 3 |  |  | 2 |  |  | 1 |  |  | — |  |  | — |  |  | — |
Net periodic benefit costs | $ | 52 |  |  | $ | 64 |  |  | $ | 48 |  |  | $ | 4 |  |  | $ | 5 |  |  | $ | 6 |
The components of net periodic benefit costs other than the service cost component are included in Other, net in the Statements of Operations.
| Pension benefits |  | Postretirement benefits
| For the years ended June 30,
| 2022 |  | 2021 |  | 2020 |  | 2022 |  | 2021 |  | 2020
Additional information |  |  |  |  |  |  |  |  |  |  |
Weighted-average assumptions used to determine benefit obligations |  |  |  |  |  |  |  |  |  |  |
Discount rate | 4.8 | % |  | 2.7 | % |  | 2.8 | % |  | 4.8 | % |  | 2.7 | % |  | 2.8 | %
Weighted-average assumptions used to determine net periodic benefit costs |  |  |  |  |  |  |  |  |  |  |
Discount rate for service cost | 2.8 | % |  | 2.9 | % |  | 3.7 | % |  | 2.9 | % |  | 3.0 | % |  | 3.8 | %
Discount rate for interest cost | 2.1 | % |  | 2.2 | % |  | 3.2 | % |  | 2.2 | % |  | 2.2 | % |  | 3.2 | %
Expected return on plan assets | 5.1 | % |  | 6.5 | % |  | 7.0 | % |  | N/A |  | N/A |  | N/A
N/A – not applicable.
The Company utilizes a full yield curve approach in the estimation of the service and interest components of net periodic benefit costs for pension and postretirement benefits by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The Company utilizes the latest mortality table released by the Society of Actuaries. The following assumed health care cost trend rates as of June 30 were also used in accounting for postretirement benefits:
| Postretirement benefits
| Fiscal 2022 |  | Fiscal 2021
Health care cost trend rate | 5.8 | % |  | 6.0 | %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | 4.0 | % |  | 4.0 | %
Year that the rate reaches the ultimate trend rate | 2047 |  | 2047
The following table sets forth the estimated benefit payments and estimated settlements for the next five fiscal years and in aggregate for the five fiscal years thereafter. These payments are estimated based on the same assumptions used to measure the Company's benefit obligation at the end of the fiscal year and include benefits attributable to estimated future employee service:
| Expected benefit payments
| Pension benefits |  | Postretirement benefits
| (in millions)
Fiscal year |  |  |
2023 | $ | 61 |  |  | $ | 4 |
2024 | 64 |  |  | 4 |
2025 | 65 |  |  | 4 |
2026 | 65 |  |  | 4 |
2027 | 69 |  |  | 4 |
2028-2032 | 395 |  |  | 19 |
The above table presents expected benefit payments for the postretirement benefits net of a nominal amount of U.S. Medicare subsidy receipts per year. Plan Assets and Grantor Trust The following tables present Plan assets for the Company's funded pension plans and Grantor Trust assets to fund certain future unfunded pension benefit obligations of the Company. The assets are classified by level within the fair value hierarchy, as described in Note 6—Fair Value, as of June 30, 2022 and 2021:
| As of June 30, 2022
|  |  | Fair value measurements at reporting date using |  | Assets measured
| Total |  | Level 1 |  | Level 2 |  | at NAV(a)
| (in millions)
PENSION PLAN ASSETS |  |  |  |  |  |  |
Pooled funds(b) |  |  |  |  |  |  |
Money market funds | $ | 20 |  |  | $ | 20 |  |  | $ | — |  |  | $ | — |
Domestic equity funds | 82 |  |  | 82 |  |  | — |  |  | — |
Domestic fixed income funds(c) | 381 |  |  | 381 |  |  | — |  |  | — |
International equity funds | 133 |  |  | 133 |  |  | — |  |  | — |
Balanced funds | 78 |  |  | 78 |  |  | — |  |  | — |
U.S. common stocks(d) | 43 |  |  | 43 |  |  | — |  |  | — |
Partnership interests | 33 |  |  | — |  |  | — |  |  | 33 |
Exchange traded equity funds(d) | 32 |  |  | 32 |  |  | — |  |  | — |
Other(e) | (1) |  |  | (1) |  |  | — |  |  | — |
Total fair value of plan assets | $ | 801 |  |  | $ | 768 |  |  | $ | — |  |  | $ | 33 |
GRANTOR TRUST ASSETS |  |  |  |  |  |  |
Balanced funds(b) | $ | 234 |  |  | $ | 234 |  |  | $ | — |  |  | $ | — |
Partnership interests | 16 |  |  | — |  |  | — |  |  | 16 |
Other(e) | 20 |  |  | 20 |  |  | — |  |  | — |
Total fair value of Grantor Trust assets | $ | 270 |  |  | $ | 254 |  |  | $ | — |  |  | $ | 16 |
| As of June 30, 2021
|  |  | Fair value measurements at reporting date using |  | Assets measured
| Total |  | Level 1 |  | Level 2 |  | at NAV(a)
| (in millions)
PENSION PLAN ASSETS |  |  |  |  |  |  |
Pooled funds(b) |  |  |  |  |  |  |
Money market funds | $ | 22 |  |  | $ | 22 |  |  | $ | — |  |  | $ | — |
Domestic equity funds | 67 |  |  | 67 |  |  | — |  |  | — |
Domestic fixed income funds(c) | 355 |  |  | 355 |  |  | — |  |  | — |
International equity funds | 193 |  |  | 193 |  |  | — |  |  | — |
International fixed income funds(c) | 28 |  |  | 28 |  |  | — |  |  | — |
Balanced funds | 93 |  |  | 93 |  |  | — |  |  | — |
U.S. common stocks(d) | 136 |  |  | 136 |  |  | — |  |  | — |
Partnership interests | 10 |  |  | — |  |  | — |  |  | 10 |
Exchange traded funds(d) | 67 |  |  | 67 |  |  | — |  |  | — |
Other(e) | 1 |  |  | — |  |  | 1 |  |  | — |
Total fair value of plan assets | $ | 972 |  |  | $ | 961 |  |  | $ | 1 |  |  | $ | 10 |
GRANTOR TRUST ASSETS |  |  |  |  |  |  |
Balanced funds(b) | $ | 267 |  |  | $ | 267 |  |  | $ | — |  |  | $ | — |
Partnership interests | 17 |  |  | — |  |  | — |  |  | 17 |
Other(e) | 20 |  |  | 20 |  |  | — |  |  | — |
Total fair value of Grantor Trust assets | $ | 304 |  |  | $ | 287 |  |  | $ | — |  |  | $ | 17 |
(a) | Investments that are measured at fair value using the net asset value ("NAV") per share (or its equivalent) as a practical expedient are excluded from the fair value hierarchy disclosure. These investments have monthly liquidity.
(b) | Pooled funds that have a readily determinable fair value are valued at the regularly published NAV.
(c) | Domestic fixed income funds and international fixed income funds consist primarily of investment grade securities.
(d) | Exchange traded funds and common stock investments that are publicly traded are valued at the closing price reported on active markets in which the securities are traded.
(e) | Includes cash and cash equivalents, plan receivables and payables and certain other fixed income investments.
The investment objective for the funded pension plans is to grow assets to decrease the deficit and protect improvements in funded status. The asset allocation strategy will change over time by shifting assets from return seeking assets to liability hedging assets upon the achievement of certain funding milestones. The target asset allocation on June 30, 2022 is 50% return seeking assets and 50% liability hedging assets which is consistent with the actual asset allocation as of June 30, 2022. Return seeking assets are diversified across multiple asset classes and liability hedging assets are managed to correlate highly with the pension liabilities to reduce interest rate risk. Assets are generally managed by external investment managers. The expected long-term rate of return on asset assumption is determined using the current target asset allocation and applying expected future returns for the various asset classes and correlations amongst the asset classes. The funded plans weighted-average asset allocation, by asset category, are as follows:
| Pension benefits
| As of June 30,
| 2022 |  | 2021
Asset Category |  |  |
Equity investments | 37 | % |  | 48 | %
Fixed income investments, including cash | 52 |  |  | 42 |
Other | 11 |  |  | 10 |
Total | 100 | % |  | 100 | %
Required pension plan contributions for the next fiscal year are not expected to be material; however, actual contributions may be affected by pension asset and liability valuation changes during the year. The Company will continue to make voluntary contributions as necessary to improve funded status. Defined Contribution Plans The Company has defined contribution plans for the benefit of substantially all employees meeting certain eligibility requirements. Employer contributions to such plans were $58 million, $49 million and $44 million for fiscal 2022, 2021 and 2020, respectively.

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