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Pension and Other Postretirement Benefits | 12 Months Ended
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Jun. 30, 2024
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. 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 2024, 2023 and 2022. 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,
| 2024 |  | 2023 |  | 2024 |  | 2023
| (in millions)
Projected benefit obligation, beginning of the year | $ | 1,172 |  |  | $ | 1,203 |  |  | $ | 47 |  |  | $ | 53 |
Service cost | 27 |  |  | 30 |  |  | — |  |  | 1 |
Interest cost | 61 |  |  | 52 |  |  | 2 |  |  | 2 |
Benefits paid | (43) |  |  | (22) |  |  | (3) |  |  | (4) |
Settlements(a) | (50) |  |  | (32) |  |  | — |  |  | — |
Actuarial gains(b) | (48) |  |  | (58) |  |  | (1) |  |  | (5) |
Other | — |  |  | (1) |  |  | — |  |  | — |
Projected benefit obligation, end of the year | 1,119 |  |  | 1,172 |  |  | 45 |  |  | 47 |
Change in the fair value of plan assets for the Company’s benefit plans: |  |  |  |  |  |  |
Fair value of plan assets, beginning of the year | 853 |  |  | 801 |  |  | — |  |  | — |
Actual return on plan assets | 45 |  |  | 53 |  |  | — |  |  | — |
Employer contributions | 86 |  |  | 53 |  |  | 3 |  |  | 4 |
Benefits paid | (43) |  |  | (22) |  |  | (3) |  |  | (4) |
Settlements(a) | (50) |  |  | (32) |  |  | — |  |  | — |
Fair value of plan assets, end of the year | 891 |  |  | 853 |  |  | — |  |  | — |
Funded status(c) | $ | (228) |  |  | $ | (319) |  |  | $ | (45) |  |  | $ | (47) |
Grantor Trust assets(c) | $ | 266 |  |  | $ | 276 |  |  | $ | — |  |  | $ | — |
(a) | Represents the full settlement of former employees’ deferred pension benefit obligations through lump sum payments.
(b) | Actuarial gains for June 30, 2024 and June 30, 2023 were primarily due to higher interest rates utilized in measuring plan obligations.
(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,
| 2024 |  | 2023 |  | 2024 |  | 2023
| (in millions)
Pension assets | $ | 36 |  |  | $ | 8 |  |  | $ | — |  |  | $ | — |
Accrued pension liabilities | (264) |  |  | (327) |  |  | (45) |  |  | (47) |
Net amounts recognized | $ | (228) |  |  | $ | (319) |  |  | $ | (45) |  |  | $ | (47) |
Amounts recognized in Accumulated other comprehensive loss, before tax, consist of:
| Pension benefits |  | Postretirement benefits
| As of June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
| (in millions)
Actuarial losses (gains) | $ | 169 |  |  | $ | 229 |  |  | $ | (30) |  |  | $ | (34) |
Accumulated pension benefit obligations as of June 30, 2024 and 2023 were $1.01 billion and $1.04 billion, respectively. As of June 30, 2024, the fair value of plan assets exceeds the projected benefit obligation and accumulated benefit obligation for each funded plan. As of June 30, 2023, the projected benefit obligation exceeds the fair value of plan assets for the funded plans except for two plans that have assets of $123 million, a projected benefit obligation of $115 million and an accumulated benefit obligation of $112 million. As of June 30, 2024 and 2023, the projected benefit obligation and accumulated benefit obligation exceeds the fair value of plan assets for each unfunded plan. Information about funded and unfunded pension plans is presented below:
| Funded plans |  | Unfunded plans |
| As of June 30, |
| 2024 |  | 2023 |  | 2024 |  | 2023 |
| (in millions) |
Projected benefit obligation | $ | 855 |  |  | $ | 901 |  |  | $ | 264 |  |  | $ | 271 |  |
Accumulated benefit obligation | 747 |  |  | 777 |  |  | 260 |  |  | 267 |  |
Fair value of plan assets | 891 |  |  | 853 |  |  | — |  | (a) | — |  | (a)
(a) | The fair value of the assets in the Grantor Trust as of June 30, 2024 and 2023 was $266 million and $276 million, respectively.
The components of net periodic benefit costs were as follows:
| Pension benefits |  | Postretirement benefits
| For the years ended June 30,
| 2024 |  | 2023 |  | 2022 |  | 2024 |  | 2023 |  | 2022
| (in millions)
Service cost | $ | 27 |  |  | $ | 30 |  |  | $ | 38 |  |  | $ | — |  |  | $ | 1 |  |  | $ | 1 |
Interest cost | 61 |  |  | 52 |  |  | 30 |  |  | 2 |  |  | 2 |  |  | 2 |
Expected return on plan assets | (45) |  |  | (40) |  |  | (50) |  |  | — |  |  | — |  |  | — |
Amortization of deferred losses | 12 |  |  | 23 |  |  | 31 |  |  | (4) |  |  | (4) |  |  | 1 |
Other | — |  |  | — |  |  | 3 |  |  | — |  |  | — |  |  | — |
Net periodic benefit costs | $ | 55 |  |  | $ | 65 |  |  | $ | 52 |  |  | $ | (2) |  |  | $ | (1) |  |  | $ | 4 |
The components of net periodic benefit costs other than the service cost component are included in Non- operating other, net in the Statements of Operations.
| Pension benefits |  | Postretirement benefits
| For the years ended June 30,
| 2024 |  | 2023 |  | 2022 |  | 2024 |  | 2023 |  | 2022
Additional information |  |  |  |  |  |  |  |  |  |  |
Weighted-average assumptions used to determine benefit obligations |  |  |  |  |  |  |  |  |  |  |
Discount rate | 5.5 | % |  | 5.3 | % |  | 4.8 | % |  | 5.4 | % |  | 5.3 | % |  | 4.8 | %
Weighted-average assumptions used to determine net periodic benefit costs |  |  |  |  |  |  |  |  |  |  |
Discount rate for service cost | 5.3 | % |  | 4.8 | % |  | 2.8 | % |  | 5.3 | % |  | 4.8 | % |  | 2.9 | %
Discount rate for interest cost | 5.4 | % |  | 4.5 | % |  | 2.1 | % |  | 5.4 | % |  | 4.5 | % |  | 2.2 | %
Expected return on plan assets | 5.3 | % |  | 5.0 | % |  | 5.1 | % |  | 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 2024 |  | Fiscal 2023
Health care cost trend rate | 6.6 | % |  | 6.1 | %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | 4.9 | % |  | 4.0 | %
Year that the rate reaches the ultimate trend rate | 2031 |  | 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 |  |  |
2025 | $ | 86 |  |  | $ | 4 |
2026 | 86 |  |  | 4 |
2027 | 88 |  |  | 4 |
2028 | 92 |  |  | 4 |
2029 | 95 |  |  | 4 |
2029-2033 | 487 |  |  | 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, 2024 and 2023:
| As of June 30, 2024
|  |  | Fair value measurements at reporting date using |  | Assets measured
| Total |  | Level 1 |  | at NAV(a)
| (in millions)
PENSION PLAN ASSETS |  |  |  |  |
Pooled funds(b) |  |  |  |  |
Money market funds | $ | 12 |  |  | $ | 12 |  |  | $ | — |
Domestic equity funds | 156 |  |  | 156 |  |  | — |
Domestic fixed income funds(c) | 488 |  |  | 488 |  |  | — |
International equity funds | 118 |  |  | 118 |  |  | — |
Balanced funds | 69 |  |  | 69 |  |  | — |
Partnership interests | 48 |  |  | — |  |  | 48 |
Total fair value of plan assets | $ | 891 |  |  | $ | 843 |  |  | $ | 48 |
GRANTOR TRUST ASSETS |  |  |  |  |
Pooled funds(b) |  |  |  |  |
Money market funds | $ | 26 |  |  | $ | 26 |  |  | $ | — |
Domestic fixed income funds(c) | 66 |  |  | 66 |  |  | — |
Balanced funds | 53 |  |  | 53 |  |  | — |
Domestic government obligations(d) | 120 |  |  | 120 |  |  | — |
Other(e) | 1 |  |  | 1 |  |  | — |
Total fair value of Grantor Trust assets | $ | 266 |  |  | $ | 266 |  |  | $ | — |
| As of June 30, 2023
|  |  | Fair value measurements at reporting date using | Assets measured
| Total |  | Level 1 |  | at NAV(a)
| (in millions)
PENSION PLAN ASSETS |  |  |  |  |
Pooled funds(b) |  |  |  |  |
Money market funds | $ | 18 |  |  | $ | 18 |  |  | $ | — |
Domestic equity funds | 189 |  |  | 189 |  |  | — |
Domestic fixed income funds(c) | 383 |  |  | 383 |  |  | — |
International equity funds | 136 |  |  | 136 |  |  | — |
Balanced funds | 78 |  |  | 78 |  |  | — |
Partnership interests | 49 |  |  | — |  |  | 49 |
Total fair value of plan assets | $ | 853 |  |  | $ | 804 |  |  | $ | 49 |
GRANTOR TRUST ASSETS |  |  |  |  |
Pooled funds(b) |  |  |  |  |
Money market funds | $ | 20 |  |  | $ | 20 |  |  | $ | — |
Domestic fixed income funds(c) | 143 |  |  | 143 |  |  | — |
Balanced funds | 112 |  |  | 112 |  |  | — |
Other(e) | 1 |  |  | 1 |  |  | — |
Total fair value of Grantor Trust assets | $ | 276 |  |  | $ | 276 |  |  | $ | — |
(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 consist primarily of investment grade securities.
(d) | Government obligations consist of investment grade securities whose fair value is based on observable market data obtained from dealers and brokers.
(e) | Includes cash and cash equivalents.
The investment objective for the funded pension plans is to grow assets to satisfy future benefit obligations and to maintain 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. Return seeking assets are diversified across equity, fixed income and other investments and liability hedging assets are primarily fixed income investments, which are managed to correlate highly with the pension liabilities to reduce interest rate risk. The target asset allocation on June 30, 2024 is 37% return seeking assets and 63% liability hedging assets. The actual asset allocation on June 30, 2024 is 44% return seeking assets and 56% liability hedging assets. 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,
| 2024 |  | 2023
Asset Category |  |  |
Equity investments | 31 | % |  | 39 | %
Fixed income investments, including cash | 61 |  |  | 51 |
Other | 8 |  |  | 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 $70 million, $68 million and $58 million for fiscal 2024, 2023 and 2022, respectively.

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