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Postretirement and Other Employee Benefits | 12 Months Ended
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Aug. 31, 2020
Retirement Benefits [Abstract] |
Postretirement and Other Employee Benefits | Postretirement and Other Employee Benefits Postretirement Benefits The Company has a qualified defined benefit pension plan for employees of Jabil Circuit UK Limited (the “UK plan”). The UK plan, which is closed to new participants, provides benefits based on average employee earnings over a three-year service period preceding retirement and length of employee service. The Company’s policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in UK employee benefit and tax laws plus such additional amounts as are deemed appropriate by the Company. As a result of the third closing of the JJMD acquisition, the Company assumed a pension obligation for employees in Switzerland (the “Switzerland plan”). The Switzerland plan, which is a qualified defined benefit pension plan, provides benefits based on average employee earnings over an approximately 8 years service period preceding retirement and length of employee service. The Company’s policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in Switzerland employee benefit and tax laws plus such additional amounts as are deemed appropriate by the Company. Additionally, as a result of acquiring various other operations in Europe, Asia and Mexico the Company assumed both qualified and unfunded nonqualified retirement benefits covering eligible employees who meet age and service requirements (the “other plans”). The UK plan, Switzerland plan and other plans are collectively referred to herein as the “plans.” Benefit Obligation and Plan Assets The benefit obligations and plan assets, changes to the benefit obligation and plan assets and the funded status of the plans as of and for the fiscal years ended August 31 are as follows (in thousands):
| Fiscal Year Ended August 31,
| 2020 |  | 2019
Change in projected benefit obligation |  |  |
Beginning projected benefit obligation | $ | 174,690 |  |  | $ | 161,104 |
Service cost | 24,606 |  |  | 1,437 |
Interest cost | 3,041 |  |  | 3,715 |
Actuarial (gain) loss | (81,409 | ) |  | 19,060 |
Settlements paid from plan assets(1) | (25,749 | ) |  | — |
Total benefits paid | (6,431 | ) |  | (6,568 | )
Plan participants’ contributions | 14,171 |  |  | 35 |
Acquisitions | 404,297 |  |  | 6,040 |
Effect of conversion to U.S. dollars | 51,887 |  |  | (10,133 | )
Ending projected benefit obligation | $ | 559,103 |  |  | $ | 174,690 |
Change in plan assets |  |  |
Beginning fair value of plan assets | 158,101 |  |  | 151,715 |
Actual return on plan assets | 6,952 |  |  | 19,784 |
Acquisitions | 330,793 |  |  | — |
Settlements paid from plan assets(1) | (25,749 | ) |  | — |
Employer contributions | 10,084 |  |  | 1,717 |
Benefits paid from plan assets | (5,765 | ) |  | (5,435 | )
Plan participants’ contributions | 14,171 |  |  | 35 |
Effect of conversion to U.S. dollars | 49,686 |  |  | (9,715 | )
Ending fair value of plan assets | $ | 538,273 |  |  | $ | 158,101 |
Unfunded status | $ | (20,830 | ) |  | $ | (16,589 | )
Amounts recognized in the Consolidated Balance Sheets |  |  |
Accrued benefit liability, current | $ | 646 |  |  | $ | 368 |
Accrued benefit liability, noncurrent | $ | 20,184 |  |  | $ | 16,221 |
Accumulated other comprehensive loss(2) |  |  |
Actuarial (gain) loss, before tax | $ | (49,054 | ) |  | $ | 24,343 |
Prior service cost, before tax | $ | 786 |  |  | $ | 690 |
(1) | The settlements recognized during fiscal year 2020 relate primarily to the Switzerland plan.
(2) | The Company anticipates amortizing $5.1 million and $0.0 million, before tax, of net actuarial gain and prior service costs balances, respectively, to net periodic cost in fiscal year 2021.
Net Periodic Benefit Cost The following table provides information about the net periodic benefit cost for the plans for fiscal years 2020, 2019 and 2018 (in thousands):
| Fiscal Year Ended August 31,
| 2020 |  | 2019 |  | 2018
Service cost | $ | 24,606 |  |  | $ | 1,437 |  |  | $ | 1,063 |
Interest cost | 3,041 |  |  | 3,715 |  |  | 3,807 |
Expected long-term return on plan assets | (14,115 | ) |  | (5,291 | ) |  | (5,954 | )
Recognized actuarial (gain) loss | (4,159 | ) |  | 741 |  |  | 1,127 |
Amortization of prior service credit | (45 | ) |  | (44 | ) |  | (88 | )
Net settlement loss | 230 |  |  | 634 |  |  | 116 |
Net periodic benefit cost | $ | 9,558 |  |  | $ | 1,192 |  |  | $ | 71 |
Assumptions Weighted-average actuarial assumptions used to determine net periodic benefit cost and projected benefit obligation for the plans for the fiscal years 2020, 2019 and 2018 were as follows:
| Fiscal Year Ended August 31,
| 2020 |  | 2019 |  | 2018
Net periodic benefit cost: |  |  |  |  |
Expected long-term return on plan assets(1) | 3.0 | % |  | 3.6 | % |  | 3.8 | %
Rate of compensation increase | 2.0 | % |  | 4.4 | % |  | 3.3 | %
Discount rate | 0.5 | % |  | 2.2 | % |  | 2.1 | %
Projected benefit obligation: |  |  |  |  |
Expected long-term return on plan assets | 2.9 | % |  | 2.0 | % |  | 3.6 | %
Rate of compensation increase | 2.1 | % |  | 4.3 | % |  | 4.4 | %
Discount rate(2) | 0.8 | % |  | 1.7 | % |  | 2.2 | %
(1) | The expected return on plan assets assumption used in calculating net periodic benefit cost is based on historical return experience and estimates of future long-term performance with consideration to the expected investment mix of the plan.
(2) | The discount rate is used to state expected cash flows relating to future benefits at a present value on the measurement date. This rate represents the market rate for high-quality fixed income investments whose timing would match the cash outflow of retirement benefits. Other assumptions include demographic factors such as retirement, mortality and turnover.
Plan Assets The Company has adopted an investment policy for a majority of plan assets, which was set by plan trustees who have the responsibility for making investment decisions related to the plan assets. The plan trustees oversee the investment allocation, including selecting professional investment managers and setting strategic targets. The investment objectives for the assets are (1) to acquire suitable assets that hold the appropriate liquidity in order to generate income and capital growth that, along with new contributions, will meet the cost of current and future benefits under the plan, (2) to limit the risk of the plan assets from failing to meet the plan liabilities over the long-term and (3) to minimize the long-term costs under the plan by maximizing the return on the plan assets. Investment policies and strategies governing the assets of the plans are designed to achieve investment objectives with prudent risk parameters. Risk management practices include the use of external investment managers; the maintenance of a portfolio diversified by asset class, investment approach and security holdings; and the maintenance of sufficient liquidity to meet benefit obligations as they come due. Within the equity securities class, the investment policy provides for investments in a broad range of publicly traded securities including both domestic and international stocks. Within the debt securities class, the investment policy provides for investments in corporate bonds as well as fixed and variable interest debt instruments. The Company currently expects to achieve a target mix of 35% equity and 65% debt securities in fiscal year 2021. Fair Value The fair values of the plan assets held by the Company by asset category are as follows (in thousands):
|  |  | August 31, 2020 |  | August 31, 2019
| Fair Value Hierarchy |  | Fair Value |  | Asset Allocation |  | Fair Value |  | Asset Allocation
Asset Category |  |  |  |  |  |  |  |  |
Cash and cash equivalents(1) | Level 1 |  | $ | 14,900 |  |  | 3 | % |  | $ | 7,705 |  |  | 5 | %
Equity Securities: |  |  |  |  |  |  |  |  |
Global equity securities(2)(3) | Level 2 |  | 208,384 |  |  | 38 | % |  | 20,215 |  |  | 13 | %
Debt Securities: |  |  |  |  |  |  |  |  |
Corporate bonds(3) | Level 2 |  | 237,812 |  |  | 44 | % |  | 42,522 |  |  | 27 | %
Government bonds(3) | Level 2 |  | 58,095 |  |  | 11 | % |  | 69,880 |  |  | 44 | %
Other Investments: |  |  |  |  |  |  |  |  |
Insurance contracts(4) | Level 3 |  | 19,082 |  |  | 4 | % |  | 17,779 |  |  | 11 | %
Fair value of plan assets |  |  | $ | 538,273 |  |  | 100 | % |  | $ | 158,101 |  |  | 100 | %
(1) | Carrying value approximates fair value.
(2) | Investments in equity securities by companies incorporated, listed or domiciled in developed and/or emerging market countries.
(3) | Investments in global equity securities, corporate bonds, government securities and government bonds are valued using the quoted prices of securities with similar characteristics.
(4) | Consist of an insurance contract that guarantees the payment of the funded pension entitlements, as well as provides a profit share to the Company. The profit share in this contract is not based on actual investments, but, instead on a notional investment portfolio that is expected to return a pre-defined rate. Insurance contract assets are recorded at fair value and is determined based on the cash surrender value of the insured benefits which is the present value of the guaranteed funded benefits. Insurance contracts are valued using unobservable inputs (Level 3 inputs), primarily by discounting expected future cash flows relating to benefits paid from a notional investment portfolio in order to determine the cash surrender value of the policy. The unobservable inputs consist of estimated future benefits to be paid throughout the duration of the policy and estimated discount rates, which both have an immaterial impact on the fair value estimate of the contract.
Accumulated Benefit Obligation The following table provides information for the plans with an accumulated benefit obligation for fiscal years 2020 and 2019 (in thousands):
| August 31, 2020 |  | August 31, 2019
Projected benefit obligation | $ | 559,103 |  |  | $ | 174,690 |
Accumulated benefit obligation | $ | 535,513 |  |  | $ | 161,729 |
Fair value of plan assets | $ | 538,273 |  |  | $ | 158,101 |
Cash Flows The Company expects to make cash contributions between $21.7 million and $26.6 million to its funded pension plans during fiscal year 2021. The estimated future benefit payments, which reflect expected future service, are as follows (in thousands):
Fiscal Year Ended August 31, | Amount
2021 | $ | 36,361 |
2022 | 28,541 |
2023 | 27,958 |
2024 | 27,531 |
2025 | 28,942 |
2026 through 2030 | 137,521 |
Profit Sharing, 401(k) Plan and Defined Contribution Plans The Company provides retirement benefits to its domestic employees who have completed a 30-day period of service through a 401(k) plan that provides a matching contribution by the Company. The Company also has defined contribution benefit plans for certain of its international employees. The Company contributed approximately $56.1 million, $49.0 million and $40.5 million for defined contribution plans for the fiscal years ended August 31, 2020, 2019 and 2018, respectively.

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