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Pensions And Other Postretirement Benefits | 12 Months Ended
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Oct. 03, 2015
General Discussion of Pension and Other Postretirement Benefits [Abstract] |
Pensions And Other Postretirement Benefits | PENSIONS AND OTHER POSTRETIREMENT BENEFITS At October 3, 2015, we had nine defined benefit pension plans consisting of six funded qualified plans and three unfunded non-qualified plans. In regards to our qualified plans, five are frozen and noncontributory. The benefits provided under these plans are based on a formula using years of service and either a specified benefit rate or compensation level. The non-qualified defined benefit plans are for certain contracted officers and use a formula based on years of service and final average salary. We also have other postretirement benefit plans for which substantially all of our employees may receive benefits if they satisfy applicable eligibility criteria. The postretirement healthcare plans are contributory with participants’ contributions adjusted when deemed necessary. We have defined contribution retirement programs for various groups of employees. We recognized expenses of $62 million, $53 million and $50 million in fiscal 2015, 2014 and 2013, respectively. We use a fiscal year end measurement date for our defined benefit plans and other postretirement plans. We recognize the effect of actuarial gains and losses into earnings immediately for other postretirement plans rather than amortizing the effect over future periods. Other postretirement benefits include postretirement medical costs and life insurance. Benefit Obligations and Funded Status The following table provides a reconciliation of the changes in the plans’ benefit obligations, assets and funded status at October 3, 2015, and September 27, 2014:
|  |  |  |  |  |  |  |  | in millions |
| Pension Benefits |  | Other Postretirement
| Qualified |  | Non-Qualified |  | Benefits
| 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Change in benefit obligation |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at beginning of year | $ | 1,849 |  |  | $ | 86 |  |  | $ | 182 |  |  | $ | 85 |  |  | $ | 163 |  |  | $ | 71 |
Service cost | 10 |  |  | 1 |  |  | 8 |  |  | 7 |  |  | 5 |  |  | 2 |
Interest cost | 78 |  |  | 10 |  |  | 8 |  |  | 5 |  |  | 7 |  |  | 3 |
Plan amendments | — |  |  | — |  |  | — |  |  | — |  |  | (60 | ) |  | — |
Plan participants’ contributions | — |  |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 1 |
Actuarial (gain)/loss | (50 | ) |  | (37 | ) |  | 11 |  |  | 15 |  |  | 9 |  |  | (8 | )
Benefits paid | (102 | ) |  | (11 | ) |  | (8 | ) |  | (3 | ) |  | (12 | ) |  | (6 | )
Business acquisition | — |  |  | 1,800 |  |  | — |  |  | 73 |  |  | — |  |  | 100 |
Benefit obligation at end of year | 1,785 |  |  | 1,849 |  |  | 201 |  |  | 182 |  |  | 114 |  |  | 163 |
Change in plan assets |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year | 1,647 |  |  | 85 |  |  | 3 |  |  | — |  |  | — |  |  | — |
Actual return on plan assets | 25 |  |  | (36 | ) |  | — |  |  | — |  |  | — |  |  | — |
Employer contributions | 6 |  |  | 6 |  |  | 8 |  |  | 3 |  |  | 10 |  |  | 5 |
Plan participants’ contributions | — |  |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 1 |
Benefits paid | (102 | ) |  | (11 | ) |  | (8 | ) |  | (3 | ) |  | (12 | ) |  | (6 | )
Business acquisition | — |  |  | 1,603 |  |  | — |  |  | 3 |  |  | — |  |  | — |
Other | — |  |  | — |  |  | (3 | ) |  | — |  |  | — |  |  | — |
Fair value of plan assets at end of year | 1,576 |  |  | 1,647 |  |  | — |  |  | 3 |  |  | — |  |  | — |
Funded status | $ | (209 | ) |  | $ | (202 | ) |  | $ | (201 | ) |  | $ | (179 | ) |  | $ | (114 | ) |  | $ | (163 | )
Amounts recognized in the Consolidated Balance Sheets consist of:
|  |  |  |  |  |  |  |  | in millions |
| Pension Benefits |  | Other Postretirement
| Qualified |  | Non-Qualified |  | Benefits
| 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Other current liabilities | $ | — |  |  | $ | — |  |  | $ | (9 | ) |  | $ | (5 | ) |  | $ | (20 | ) |  | $ | (7 | )
Other liabilities | (209 | ) |  | (202 | ) |  | (192 | ) |  | (174 | ) |  | (94 | ) |  | (156 | )
Total liabilities | $ | (209 | ) |  | $ | (202 | ) |  | $ | (201 | ) |  | $ | (179 | ) |  | $ | (114 | ) |  | $ | (163 | )
Amounts recognized in Accumulated Other Comprehensive Income consist of:
|  |  |  |  |  |  |  |  | in millions |
| Pension Benefits |  | Other Postretirement
| Qualified |  | Non-Qualified |  | Benefits
| 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Accumulated other comprehensive (income)/loss: |  |  |  |  |  |  |  |  |  |  |
Actuarial loss | $ | 57 |  |  | $ | 39 |  |  | $ | 43 |  |  | $ | 36 |  |  | $ | — |  |  | $ | — |
Prior service cost/(credit) (a) | — |  |  | — |  |  | — |  |  | — |  |  | (59 | ) |  | (2 | )
Total accumulated other comprehensive (income)/loss: | $ | 57 |  |  | $ | 39 |  |  | $ | 43 |  |  | $ | 36 |  |  | $ | (59 | ) |  | $ | (2 | )
(a) | The change in prior service cost is primarily attributed to the plan amendments to the other postretirement benefits as noted within the change in benefit obligation with remainder of the change being immaterial.
At October 3, 2015, eight pension plans had an accumulated benefit obligation in excess of plan assets. At September 27, 2014, seven pension plans had an accumulated benefit obligation in excess of plan assets. Plans with accumulated benefit obligations in excess of plan assets are as follows:
|  |  |  |  | in millions |
| Pension Benefits
| Qualified |  | Non-Qualified
| 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Projected benefit obligation | $ | 1,781 |  |  | $ | 1,829 |  |  | $ | 201 |  |  | $ | 182 |
Accumulated benefit obligation | 1,781 |  |  | 1,829 |  |  | 193 |  |  | 172 |
Fair value of plan assets | 1,572 |  |  | 1,627 |  |  | — |  |  | 3 |
The accumulated benefit obligation for all qualified pension plans was $1,785 million and $1,849 million at October 3, 2015, and September 27, 2014, respectively. Net Periodic Benefit Cost Components of net periodic benefit cost for pension and postretirement benefit plans recognized in the Consolidated Statements of Income are as follows:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | in millions |
| Pension Benefits |  | Other Postretirement
| Qualified |  | Non-Qualified |  | Benefits
| 2015 |  |  | 2014 |  |  | 2013 |  |  | 2015 |  |  | 2014 |  |  | 2013 |  |  | 2015 |  |  | 2014 |  |  | 2013 |
Service cost | $ | 10 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 8 |  |  | $ | 7 |  |  | $ | 5 |  |  | $ | 5 |  |  | $ | 2 |  |  | $ | 2 |
Interest cost | 78 |  |  | 10 |  |  | 4 |  |  | 8 |  |  | 5 |  |  | 3 |  |  | 7 |  |  | 3 |  |  | 2 |
Expected return on plan assets | (102 | ) |  | (13 | ) |  | (5 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of prior service cost | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | (1 | ) |  | — |  |  | (1 | )
Recognized actuarial (gain) loss, net | 2 |  |  | 2 |  |  | 4 |  |  | 4 |  |  | 2 |  |  | 3 |  |  | 9 |  |  | (8 | ) |  | 7 |
Recognized settlement (gain) loss | 8 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2 | ) |  | — |  |  | — |
Net periodic benefit (credit) cost | $ | (4 | ) |  | $ | — |  |  | $ | 3 |  |  | $ | 20 |  |  | $ | 14 |  |  | $ | 12 |  |  | $ | 18 |  |  | $ | (3 | ) |  | $ | 10 |
As of October 3, 2015, the amounts expected to be reclassified into earnings within the next 12 months related to net periodic benefit cost for the qualified and non-qualified pensions are $2 million and $5 million, respectively. As of October 3, 2015, the amount expected to be reclassified into earnings within the next 12 months related to net periodic benefit credit for the other postretirement benefits is $18 million. Assumptions Weighted average assumptions are as follows:
| Pension Benefits |  | Other Postretirement
| Qualified |  | Non-Qualified |  | Benefits
| 2015 |  |  | 2014 |  |  | 2013 |  |  | 2015 |  |  | 2014 |  |  | 2013 |  |  | 2015 |  |  | 2014 |  |  | 2013 |
Discount rate to determine net periodic benefit cost | 4.32 | % |  | 4.37 | % |  | 4.02 | % |  | 4.36 | % |  | 5.01 | % |  | 4.23 | % |  | 3.97 | % |  | 4.41 | % |  | 3.66 | %
Discount rate to determine benefit obligations | 4.47 | % |  | 4.32 | % |  | 4.77 | % |  | 4.41 | % |  | 4.36 | % |  | 5.09 | % |  | 3.54 | % |  | 3.97 | % |  | 4.48 | %
Rate of compensation increase | 0.01 | % |  | 0.01 | % |  | n/a |  |  | 2.31 | % |  | 2.11 | % |  | 3.50 | % |  | n/a |  |  | n/a |  |  | n/a |
Expected return on plan assets | 4.61 | % |  | 6.37 | % |  | 5.44 | % |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a |
To determine the expected return on plan assets assumption, we first examined historical rates of return for the various asset classes within the plans. We then determined a long-term projected rate-of-return based on expected returns. Our discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates at which the benefit obligations could be effectively settled. These were determined using a cash flow matching technique whereby the rates of a yield curve, developed from high-quality debt securities, were applied to the benefit obligations to determine the appropriate discount rate. As of October 3, 2015 and September 27, 2014, all pension and other postretirement benefit plans used the RP-2014 mortality tables. We have five other postretirement benefit plans which are healthcare and life insurance related. Two of these plans, which benefit obligations totaled $24 million at October 3, 2015, were not impacted by healthcare cost trend rates as one consists of fixed annual payments and one is life insurance related. Two of the healthcare plans, which benefit obligations totaled $23 million at October 3, 2015, were not impacted by healthcare cost trend rates due to plan amendments. The remaining plan, which the benefit obligation totaled $67 million at October 3, 2015, utilized assumed healthcare cost trend rates of 9.0% and 7.6% for retirees who qualify and do not qualify for Medicare, respectively. The healthcare cost trend rate will be grading down to an ultimate rate of 4.5% in 2024/2025. A one-percentage-point change in assumed health-care cost trend rates would have the following effects:
|  |  | in millions |
| One Percentage Point Increase |  | One Percentage Point Decrease
Effect on postretirement benefit obligation | $ | 8 |  |  | $ | 7 |
Effect on total service and interest components | — |  |  | — |
Plan Assets The following table sets forth the actual and target asset allocation for pension plan assets:
| 2015 |  |  | 2014 |  |  | Target Asset Allocation |
Cash | 0.3 | % |  | 4.9 | % |  | — | %
Fixed Income Securities | 85.4 |  |  | 80.5 |  |  | 86.0 |
United States Stock Funds | 3.9 |  |  | 6.0 |  |  | 4.0 |
International Stock Funds | 6.8 |  |  | 6.2 |  |  | 6.5 |
Real Estate | 3.6 |  |  | 2.0 |  |  | 3.5 |
Other | — |  |  | 0.4 |  |  | — |
Total | 100.0 | % |  | 100.0 | % |  | 100.0 | %
Additionally, one of our foreign subsidiary pension plans had $14 million and $15 million in plan assets held in an insurance trust at October 3, 2015, and September 27, 2014, respectively. The plan trustees have established a set of investment objectives related to the assets of the domestic pension plans and regularly monitor the performance of the funds and portfolio managers. Objectives for the pension assets are (i) to provide growth of capital and income, (ii) to achieve a target weighted average annual rate of return competitive with funds with similar investment objectives and (iii) to diversify to reduce risk. The target asset allocations are based upon the funded status of the plans. As pension obligations become better funded, we will lower risk by increasing the allocation to fixed income. As noted in the previous table, on an aggregate fair value basis, the plan assets are currently at approximately 85% fixed income securities and 11% equity securities. Fixed income securities can include, but are not limited to, direct bond investments, and pooled or indirect bond investments. Other investments may include, but are not limited to, international and domestic equities, real estate, commodities and private equity. Derivative instruments may also be used in concert with either fixed income or equity investments to achieve desired exposure or to hedge certain risks. Derivative instruments can include, but are not limited to, futures, options, swaps or swaptions. We believe there are no significant concentrations of risk within our plan assets as of October 3, 2015. The following tables show the categories of pension plan assets and the level under which fair values were determined in the fair value hierarchy, which is described in Note 13: Fair Value Measurements.
| in millions |
October 3, 2015 | Level 1 |  |  | Level 2 (a) |  |  | Level 3 (b) |  |  | Total |
Cash and cash equivalents | $ | 5 |  |  | $ | — |  |  | $ | — |  |  | $ | 5 |
Fixed Income Securities: |  |  |  |  |  |  |
Bond and fixed income funds | — |  |  | 1,334 |  |  | — |  |  | 1,334 |
Total fixed income securities | — |  |  | 1,334 |  |  | — |  |  | 1,334 |
Equity Securities: |  |  |  |  |  |  |  |
United States securities funds | — |  |  | 61 |  |  | — |  |  | 61 |
Non-United States securities funds | — |  |  | 106 |  |  | — |  |  | 106 |
Global real estate funds | — |  |  | 56 |  |  | — |  |  | 56 |
Total equity securities | — |  |  | 223 |  |  | — |  |  | 223 |
Insurance contract at contract value | — |  |  | — |  |  | 14 |  |  | 14 |
Total plan assets | $ | 5 |  |  | $ | 1,557 |  |  | $ | 14 |  |  | $ | 1,576 |
| in millions |
September 27, 2014 | Level 1 |  |  | Level 2 (a) |  |  | Level 3 (b) |  |  | Total |
Cash and cash equivalents | $ | 79 |  |  | $ | — |  |  | $ | — |  |  | $ | 79 |
Fixed Income Securities: |  |  |  |  |  |  |
Bond and fixed income funds | — |  |  | 377 |  |  | — |  |  | 377 |
Corporate bonds | — |  |  | 680 |  |  | — |  |  | 680 |
Government and municipal bonds | — |  |  | 253 |  |  | — |  |  | 253 |
Mortgage backed securities | — |  |  | — |  |  | 7 |  |  | 7 |
Total fixed income securities | — |  |  | 1,310 |  |  | 7 |  |  | 1,317 |
Equity Securities: |  |  |  |  |  |  |
United States securities funds | — |  |  | 84 |  |  | — |  |  | 84 |
Non- United States securities funds | — |  |  | 101 |  |  | — |  |  | 101 |
Commodity funds | — |  |  | 14 |  |  | — |  |  | 14 |
Global real estate funds | — |  |  | 33 |  |  | — |  |  | 33 |
Total equity securities | — |  |  | 232 |  |  | — |  |  | 232 |
Other | — |  |  | 7 |  |  | — |  |  | 7 |
Insurance contract at contract value | — |  |  | — |  |  | 15 |  |  | 15 |
Total plan assets | $ | 79 |  |  | $ | 1,549 |  |  | $ | 22 |  |  | $ | 1,650 |
(a) | We classify our investments in United States government, United States agency, fixed income funds, bond funds, corporate bonds, and other debt securities as Level 2 as fair value is generally estimated using discounted cash flow models that are primarily industry-standard models that consider various assumptions, including time value and yield curve as well as other readily available relevant economic measures. Funds are valued using the net asset value (NAV) provided by the trustee, which is a practical expedient to estimating fair value. The NAV is based on the fair value of the underlying investments within the funds and is determined daily.
(b) | We classify certain mortgage-backed, asset-backed and insurance contracts as Level 3 as there is limited activity or less observable inputs into valuation models, including current interest rates and estimated prepayment, default and recovery rates on the underlying portfolio or structured investment vehicle. The insurance contracts are valued using the plan’s own assumptions about the assumptions market participants would use in pricing the assets based on the best information available, such as investment manager pricing. Significant changes to assumptions or unobservable inputs in the valuation of our Level 3 instruments would not have a significant impact to our consolidated financial statements.
A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) is as follows:
|  |  |  |  | in millions |
| Mortgage backed securities |  |  | Insurance contract |  |  | Total |
Balance at September 27, 2014 | $ | 7 |  |  | $ | 15 |  |  | 22 |
Actual return on plan assets: |  |  |  |  |  |
Assets still held at reporting date | — |  |  | — |  |  | — |
Assets sold during the period | — |  |  | — |  |  | — |
Purchases, sales and settlements, net | (7 | ) |  | (1 | ) |  | (8 | )
Transfers in and/or out of Level 3 | — |  |  | — |  |  | — |
Balance at October 3, 2015 | $ | — |  |  | $ | 14 |  |  | $ | 14 |
Contributions Our policy is to fund at least the minimum contribution required to meet applicable federal employee benefit and local tax laws. In our sole discretion, we may from time to time fund additional amounts. Expected contributions to pension plans for fiscal 2016 are approximately $63 million. For fiscal 2015, 2014 and 2013, we funded $14 million, $9 million and $8 million plans, respectively, to pension plans. Estimated Future Benefit Payments The following benefit payments are expected to be paid:
|  |  |  |  | in millions |
| Pension Benefits |  | Other Postretirement
| Qualified |  | Non-Qualified |  | Benefits
2016 | $ | 81 |  |  | $ | 9 |  |  | $ | 20 |
2017 | 83 |  |  | 9 |  |  | 14 |
2018 | 87 |  |  | 10 |  |  | 10 |
2019 | 89 |  |  | 10 |  |  | 7 |
2020 | 92 |  |  | 10 |  |  | 7 |
2021-2025 | 508 |  |  | 59 |  |  | 33 |
The above benefit payments for other postretirement benefit plans are not expected to be offset by Medicare Part D subsidies in fiscal 2016 or thereafter. The above benefit payments do not include anticipated payments for a partial settlement for deferred vested participants within two of our qualified pension plans. Assuming an election rate of 50% and changes to the benefit obligation and accumulated other comprehensive income due to remeasurement, the partial settlement will include approximate payments of $252 million resulting in $2 million of income to be reclassified into earnings. Actual results may differ from estimated amounts. Multi-Employer Plans Additionally, we participate in a multi-employer plan that provides defined benefits to certain employees covered by collective bargaining agreements. Such plans are usually administered by a board of trustees composed of the management of the participating companies and labor representatives. The risks of participating in multiemployer plans are different from single-employer plans. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligation of the plan may be borne by the remaining participating employers. If we stop participating in a plan, we may be required to pay that plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. Contributions to the pension funds were not in excess of 5% of the total plan contributions for plan year 2015. The net pension cost of the plan is equal to the annual contribution determined in accordance with the provisions of negotiated labor contracts. Contributions to the plan were $1 million in fiscal 2015 and 2014. Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to our employees. The future cost of the plan is dependent on a number of factors including the funded status of the plan and the ability of the other participating companies to meet ongoing funding obligations. Our participation in this multiemployer plan for fiscal 2015 is outlined below. The EIN/Pension Plan Number column provides the Employer Identification Number (EIN) and the three digit plan number. Unless otherwise noted, the most recent Pension Protection Act ("PPA") zone status available in fiscal 2015 and fiscal 2014 is for the plan's year beginning January 1, 2015, and 2014, respectively. The zone status is based on information that we have received from the plan and is certified by the plan's actuaries. For fiscal 2015, the zone status was updated to a secondary classification, critical and declining, within the red zone. Among other factors, plans in the red zone are generally less than 65 percent funded. Plans that are critical and declining status are projected to have an accumulated funding deficiency. The FIP/RP Status column indicates plans for which a financial improvement plan (FIP) or rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreements to which the plan is subject. There have been no significant changes that affect the comparability of contributions from year to year. In addition to regular contributions, we could be obligated to pay additional contributions (known as complete or partial withdrawal liabilities) if it has unfunded vested benefits.
|  |  | PPA Zone Status |  | FIP/RP Status | Contributions (in millions) |  | Surcharge Imposed |  |
Pension Fund Plan Name | EIN/Pension Plan Number |  | 2015 |  | 2014 |  | Implemented | 2015 | 2014 |  | 2015 |  | Expiration Date of Collective Bargaining Agreement(a)
Bakery and Confectionery Union and Industry International Pension Fund | 52-6118572/001 |  | Red |  | Red |  | Nov 2012 |  | $1 | $1 |  | 10% |  | October 2015
(a) Renewal negotiations are in progress.

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