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Pensions And Other Postretirement Benefits
 12 Months Ended
Sep. 28, 2019
Retirement Benefits, Description [Abstract]  
Pensions And Other Postretirement Benefits PENSIONS AND OTHER POSTRETIREMENT BENEFITS
At September 28, 2019, we had nine defined benefit pension plans consisting of five funded qualified plans, which are all frozen and noncontributory, and four unfunded non-qualified plans. 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 $97 million, $84 million and $78 million in fiscal 2019, 2018 and 2017, 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.
During fiscal 2017, we issued a notice of intent to terminate two of our qualified pension plans with a termination date of April 30, 2017. The settlements of the terminated plans occurred during fiscal 2019, through purchased annuities, and we incurred a $19 million settlement charge at final liquidation.
During fiscal 2019, we issued a notice of intent to terminate three other qualified pension plans. The settlements of these plans are expected to occur in fiscal 2020, through purchased annuities. Since the amount of the settlements depends on a number of factors determined as of the liquidation date, including the annuity pricing, interest rates and investment performance, we are currently unable to determine the ultimate cost of the settlements. However, based on current market rates, we estimate that we will incur settlement gains at final liquidation in the range of approximately $40 million to $60 million. Contributions to purchase annuities at the time of settlement are expected to be in the range of approximately $10 million to $30 million based on current market conditions of each plan at September 28, 2019.
Benefit Obligations and Funded Status
The following table provides a reconciliation of the changes in the plans’ benefit obligations, assets and funded status at September 28, 2019, and September 29, 2018:
 
 
 
 
 
 
 
 
 
in millions
 
 
Pension Benefits
 
Other Postretirement
 
Qualified
 
Non-Qualified
 
Benefits
 
2019

 
2018

 
2019

 
2018

 
2019

 
2018

Change in benefit obligation
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
1,392

 
$
1,477

 
$
220

 
$
230

 
$
28

 
$
33

Service cost
—

 
—

 
1

 
7

 
2

 
1

Interest cost
56

 
55

 
9

 
8

 
1

 
1

Curtailment
—

 
—

 
—

 
(5
)
 
—

 
—

Plan amendments
—

 
—

 
—

 
5

 
4

 
—

Actuarial (gain)/loss
154

 
(60
)
 
17

 
(10
)
 
6

 
(5
)
Benefits paid
(77
)
 
(80
)
 
(12
)
 
(15
)
 
(4
)
 
(2
)
Business Acquisition
2

 
—

 
4

 
—

 
13

 
—

Plan Terminations
(49
)
 
—

 
—

 
—

 
—

 
—

Other
—

 
—

 
—

 
—

 
27

 
—

Benefit obligation at end of year
1,478

 
1,392

 
239

 
220

 
77

 
28

Change in plan assets
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
1,450

 
1,512

 
—

 
—

 
—

 
—

Actual return on plan assets
146

 
4

 
—

 
—

 
—

 
—

Employer contributions
1

 
14

 
12

 
15

 
4

 
2

Benefits paid
(77
)
 
(80
)
 
(12
)
 
(15
)
 
(4
)
 
(2
)
Business Acquisition
2

 
—

 
—

 
—

 
—

 
—

Plan Terminations
(45
)
 
—

 
—

 
—

 
—

 
—

Fair value of plan assets at end of year
1,477

 
1,450

 
—

 
—

 
—

 
—

Funded status
$
(1
)
 
$
58

 
$
(239
)
 
$
(220
)
 
$
(77
)
 
$
(28
)

Amounts recognized in the Consolidated Balance Sheets consist of:
 
 
 
 
 
 
 
 
 
in millions
 
 
Pension Benefits
 
Other Postretirement
 
Qualified
 
Non-Qualified
 
Benefits
 
2019

 
2018

 
2019

 
2018

 
2019

 
2018

Other assets
$
16

 
$
61

 
$
—

 
$
—

 
$
—

 
$
—

Other current liabilities
—

 
(3
)
 
(12
)
 
(12
)
 
(3
)
 
(3
)
Other liabilities
(17
)
 
—

 
(227
)
 
(208
)
 
(74
)
 
(25
)
Total assets (liabilities)
$
(1
)
 
$
58

 
$
(239
)
 
$
(220
)
 
$
(77
)
 
$
(28
)

Amounts recognized in Accumulated Other Comprehensive Income consist of:
 
 
 
 
 
 
 
 
 
in millions
 
 
Pension Benefits
 
Other Postretirement
 
Qualified
 
Non-Qualified
 
Benefits
 
2019

 
2018

 
2019

 
2018

 
2019

 
2018

Accumulated other comprehensive (income)/loss:
 
 
 
 
 
 
 
 
 
 
 
   Actuarial (gain) loss
$
(53
)
 
$
(96
)
 
$
46

 
$
31

 
$
27

 
$
—

   Prior service (credit) cost
—

 
—

 
4

 
5

 
(42
)
 
(49
)
Total accumulated other comprehensive (income)/loss:
$
(53
)
 
$
(96
)
 
$
50

 
$
36

 
$
(15
)
 
$
(49
)

We had five pension plans at September 28, 2019, and September 29, 2018, that 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
 
2019

 
2018

 
2019

 
2018

Projected benefit obligation
$
381

 
$
49

 
$
239

 
$
220

Accumulated benefit obligation
381

 
49

 
239

 
219

Fair value of plan assets
364

 
45

 
—

 
—


The accumulated benefit obligation for all qualified pension plans was $1,478 million and $1,392 million at September 28, 2019, and September 29, 2018, respectively.
Net Periodic Benefit Cost (Credit)
Components of net periodic benefit cost (credit) 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
 
2019

 
2018

 
2017

 
2019

 
2018

 
2017

 
2019

 
2018

 
2017

Service cost
$
—

 
$
—

 
$
2

 
$
1

 
$
7

 
$
11

 
$
2

 
$
1

 
$
1

Interest cost
56

 
55

 
57

 
9

 
8

 
8

 
1

 
1

 
1

Expected return on plan assets
(57
)
 
(62
)
 
(59
)
 
—

 
—

 
—

 
—

 
—

 
—

Amortization of prior service cost
—

 
1

 
—

 
1

 
1

 
—

 
(2
)
 
(25
)
 
(25
)
Recognized actuarial loss (gain), net
(1
)
 
—

 
1

 
2

 
3

 
6

 
5

 
(5
)
 
(1
)
Recognized settlement loss (gain)
19

 
—

 
2

 
—

 
—

 
—

 
—

 
—

 
—

Net periodic benefit cost (credit)
$
17

 
$
(6
)
 
$
3

 
$
13

 
$
19

 
$
25

 
$
6

 
$
(28
)
 
$
(24
)

As of September 28, 2019, we expect no amounts to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the qualified pension plans, excluding pending settlements. As of September 28, 2019, the amounts expected to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the non-qualified pension plans and the other postretirement benefit plans are not significant.
Assumptions
Weighted average assumptions are as follows:
 
Pension Benefits
 
Other Postretirement
 
Qualified
 
Non-Qualified
 
Benefits
 
2019

 
2018

 
2017

 
2019

 
2018

 
2017

 
2019

 
2018

 
2017

Discount rate to determine net periodic benefit cost
4.26
%
 
3.85
%
 
3.72
%
 
4.31
%
 
3.88
%
 
3.77
%
 
3.99
%
 
3.39
%
 
3.09
%
Discount rate to determine benefit obligations
3.23
%
 
4.26
%
 
3.85
%
 
3.16
%
 
4.31
%
 
3.88
%
 
2.68
%
 
4.11
%
 
3.39
%
Rate of compensation increase
n/a

 
n/a

 
n/a

 
n/a

 
2.53
%
 
2.44
%
 
n/a

 
n/a

 
n/a

Expected return on plan assets
3.50
%
 
4.20
%
 
4.21
%
 
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. The discount rates for two of our plans that are expected to settle in fiscal 2020 were determined using a composite rate comprised of an annuity purchase rate and a lump sum conversion discount rate based on the portions of the populations that are assumed to be purchased under the annuity contract with the insurance company versus those who will elect lump sums, respectively. The discount rates for our other plans 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. For all periods presented, all pension and other postretirement benefit plans used the RP-2014 mortality tables.
We have eight other postretirement benefit plans, of which five are healthcare and life insurance related. Two of these plans, with benefit obligations totaling $17 million at September 28, 2019, were not impacted by healthcare cost trend rates as one consists of fixed annual payments and one is life insurance related. One of the healthcare plans, with benefit obligations less than $1 million at September 28, 2019, was not impacted by healthcare cost trend rates due to previous plan amendments. The remaining two plans, with benefit obligations totaling $11 million and $9 million, at September 28, 2019, utilized assumed healthcare cost trend rates of 7.3% and 7.0%, respectively. The healthcare cost trend rates will be grading down to an ultimate rate of 5% in 2026 and 4.5% in 2027. A one-percentage-point change in assumed health-care cost trend rates would not have a significant effect on the postretirement benefit obligation.
Plan Assets
The asset allocation for pension plan assets at September 28, 2019 was approximately 73% fixed income securities and approximately 27% cash. The increased allocation to cash is due to the intent to terminate these plans in the next year. The target asset allocation is 100% fixed income securities. Additionally, one of our foreign subsidiary pension plans had $31 million in plan assets held in an insurance trust at September 28, 2019. 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. The 100% target asset allocation to fixed income securities is based upon the intent to terminate these plans.
Our domestic plan assets consist mainly of common collective trusts which are primarily comprised of fixed income funds and equity securities. Fixed income securities can include, but are not limited to, direct bond investments, and pooled or indirect bond investments. 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. Our domestic plan assets also include mutual funds. We believe there are no significant concentrations of risk within our plan assets as of September 28, 2019.
At September 28, 2019, 36% of plan assets were held in cash and cash equivalents (Level 1), 61% in corporate and municipal bonds (Level 2). The fair value of plan assets using Level 3 inputs was not significant at September 28, 2019. At September 29, 2018, 97% of plan assets were invested in common collective trusts measured at net asset value. The fair value of plan assets using Level 2 and Level 3 inputs was not significant at September 29, 2018.
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 2020 are approximately $33 million. For fiscal 2019, 2018 and 2017, we funded $13 million, $29 million and $53 million, 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
2020
$
1

 
$
12

 
$
4

2021
—

 
12

 
4

2022
1

 
13

 
4

2023
—

 
13

 
4

2024
2

 
13

 
4

2024-2028
4

 
66

 
14


The above benefit payments for other postretirement benefit plans are not expected to be offset by Medicare Part D subsidies in fiscal 2020.
The above 2020 benefit payments do not include anticipated accelerated payments for a plan termination within three of our qualified pension plans. The plan termination process for one of these plans began on October 1, 2018 and for the remaining two plans began on December 31, 2018. Full settlement is expected to occur in fiscal 2020.
Multi-Employer Plans
Additionally, we participate in three multi-employer plans that provide 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 multi-employer plans are different from single-employer plans. Assets contributed to the multi-employer 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.
The net pension cost of the plans is equal to the annual contributions determined in accordance with the provisions of negotiated labor contracts. Contributions to the plans were $2 million in fiscal 2019 and 2018. Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to our employees. The future cost of the plans is dependent on a number of factors including the funded status of the plans and the ability of the other participating companies to meet ongoing funding obligations.
Our participation in these multi-employer plans for fiscal 2019 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 2019 and fiscal 2018 is for the plan's year beginning January 1, 2019, and 2018, respectively. The zone status is based on information that we have received from the plan and is certified by the plan's actuaries. 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 of the collective-bargaining agreements to which the plan is subject. During fiscal 2019, as part of our acquisition of Keystone Foods, we acquired an interest in four multi-employer plans. Our interest in two of these plans was subsequently disposed of in conjunction with the divestiture of a chicken further processing facility acquired during the Keystone Foods acquisition. See Note 3: Acquisitions and Divestitures for additional information on these transactions. Additionally, during fiscal 2019, we initiated our withdrawal from the Retail, Wholesale and Department Store International Union and Industry Pension Fund ("RWDSU Fund"). As a result of our anticipated withdrawal from the RWDSU Fund, we recorded a $15 million termination liability.
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
 
2019
 
2018
 
Implemented
2019
2018
2017
 
2019
 
Expiration Date of Collective Bargaining Agreement(a)
Bakery and Confectionery Union and Industry International Pension Fund
52-6118572/001
 
Red
 
Red
 
Nov 2012
 
$1
$2
$2
 
10%
 
2015-10-10
Pension Fund of Local 227 (b)
61-6054018/001
 
Green
 
n/a
 
n/a
 
$0.2
n/a
n/a
 
None
 
2019-11-09
Retail, Wholesale and Department Store International Union and Industry Pension Fund (c)
63-0708442/001
 
Red
 
n/a
 
Nov 2015
 
$0.5
n/a
n/a
 
9%
 
2021-11-07

(a)
Renewal negotiations for the Bakery and Confectionery Union and Industry International Pension Fund are in progress.
(b)
Contributions in fiscal 2019 exceeded 5% of plan contributions for the plan year ended October 31, 2018.
(c)
Contributions in fiscal 2019 exceeded 5% of plan contributions for the plan year ended December 31, 2018.