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Postretirement and Other Employee Benefits
 12 Months Ended
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.