7. Pension and Other Postretirement Benefit Plans

Company-Only Sponsored Plans

We sponsor various defined benefit pension plans covering employees of certain U.S. and international subsidiaries. The pension plans provide pension benefits that are based on the employee’s compensation and years of service. Our funding policy is to fund the actuarially determined accrued benefits where applicable, allowing for projected compensation increases using the projected unit method.

The accounting for pension and other post-retirement benefit plans requires the use of assumptions and estimates in order to calculate periodic benefit cost and the value of the plans’ assets and benefit obligations. These assumptions include discount rates, investment returns, and projected salary increases, among others. The discount rates used in valuing the plans' benefit obligations were determined with reference to high quality corporate and government bonds that are appropriately matched to the duration of each plan's obligations. The expected long-term rate of return on plan assets is generally based on using country-specific simulation models which select a single outcome for expected return based on the target asset allocation. The expected long-term-rates of return used in the valuation are the annual average returns generated by these assumptions over a 20-year period for each asset class based on the expected long-term rate of return of the underlying assets.

The following table sets forth the changes in the plans’ combined net benefit obligation (segregated between plans existing within and outside the U.S.) for the years ended September 29, 2017 and September 30, 2016 (in thousands):

	U.S. Pension Plans						Non-U.S. Pension Plans
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Net benefit obligation at the beginning of the year	$	185,664		$	533,665		$	1,363,782		$	1,155,592
Service cost		1,000			9,875			7,509			14,378
Interest cost		5,757			16,746			31,205			38,892
Participants’ contributions		—			1,847			250			2,255
Actuarial (gains)/losses		(9,922	)		29,129			(142,273	)		382,691
Benefits paid		(14,338	)		(14,143	)		(40,208	)		(32,277	)
Curtailments/settlements		—			(35,224	)		(1,375	)		(35,375	)
Transfers *		—			(356,231	)		—			—
Effect of exchange rate changes and other, net		1,781			—			87,917			(162,374	)
Net benefit obligation at the end of the year	$	169,942		$	185,664		$	1,306,807		$	1,363,782
* Pension plan transferred to a new sponsor for the plan

The following table sets forth the changes in the combined Fair Value of the plans’ assets (segregated between plans existing within and outside the U.S.) for the year ended September 29, 2017 and September 30, 2016 (in thousands):

	U.S. Pension Plans						Non-U.S. Pension Plans
	September 29, 2017			September 30, 2016			September 29, 2017			October 2, 2016
Fair value of plan assets at the beginning of the year	$	142,464		$	379,907		$	1,003,911		$	896,298
Actual return on plan assets		18,662			28,835			16,789			242,927
Employer contributions		1,000			10,213			21,005			23,217
Participants’ contributions		—			1,847			250			2,255
Gross benefits paid		(14,338	)		(14,143	)		(40,208	)		(32,277	)
Curtailments/settlements		—			(35,224	)		(228	)		(1,863	)
Transfers*		—			(228,971	)		—			—
Effect of exchange rate changes and other, net		—			—			75,409			(126,646	)
Fair value of plan assets at the end of the year	$	147,788		$	142,464		$	1,076,928		$	1,003,911
* Pension plan transferred to a new sponsor for the plan

During fiscal 2017 we curtailed the pension plan in Ireland and in fiscal 2016 we curtailed our U.K. and French pension plans.

The following table reconciles the combined funded statuses of the plans recognized in the accompanying Consolidated Balance Sheets at September 29, 2017 and September 30, 2016 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016
Net benefit obligation at the end of the year	$	169,942	$	185,664	$	1,306,807	$	1,363,782
Fair value of plan assets at the end of the year		147,788		142,464		1,076,928		1,003,911
Under funded amount recognized at the end of the year	$	22,154	$	43,200	$	229,879	$	359,871

The following table presents the accumulated benefit obligation at September 29, 2017 and September 30, 2016 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016
Accumulated benefit obligation at the end of the year	$	169,942	$	185,664	$	1,291,600	$	1,331,884

The following table presents the amounts recognized in the accompanying Consolidated Balance Sheets at September 29, 2017 and September 30, 2016 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016
Prepaid benefit cost included in prepaid assets	$	—	$	—	$	3,035	$	492
Accrued benefit cost included in current liabilities		—		—		585		608
Accrued benefit cost included in noncurrent liabilities		22,154		43,200		232,329		359,755
Net amount recognized at the end of the year	$	22,154	$	43,200	$	229,879	$	359,871

In fiscal 2015 and through June 30, 2016, we were responsible for administering a U.S. pension plan for participating employees who were assigned to, and worked exclusively on, a specific operating contract with the U.S. federal government. The costs of this pension plan were fully reimbursed by the U.S. federal government pursuant to applicable cost accounting standards. As of June 30, 2016, we ceased performing on this operating contract, and, as such, we are no longer responsible for administering this pension plan. As a result of no longer administering the plan, we derecognized the plan benefit obligation and plan assets pertaining to the plan resulting in a decrease of plan benefit obligation by $356.2 million and plan assets by $229.0 million.

The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s U.S. plans for the years ended September 29, 2017, September 30, 2016 and October 2, 2015:

	For the Year Ended
	September 29, 2017			September 30, 2016			October 2, 2015
Weighted average discount rates		3.5	%	3.2			3.9% to 4.0%
Rates of compensation increases		—	%		—	%		3.0	%
Return on Assets		7.5	%		7.4	%		7.4	%

The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s non-U.S. pension plans for the years ended September 29, 2017, September 30, 2016 and October 2, 2015:

	September 29, 2017	September 30, 2016	October 2, 2015
Weighted average discount rates	1.3% to 7.0%	0.7% to 7.0%	1.6% to 7.8%
Rates of compensation increases	2.5% to 7.5%	2.5% to 7.5%	2.4% to 7.5%
Expected long-term rates of return on assets	3.5% to 8.5%	3.5% to 8.5%	3.5% to 8.5%

The following table presents certain amounts relating to our U.S. pension plans recognized in accumulated other comprehensive (gain) loss at September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):

	September 29, 2017			September 30, 2016			October 2, 2015
Arising during the period:
Net actuarial (gain) loss	$	(11,372	)	$	4,337		$	12,237
Reclassification adjustments:
Net actuarial losses		(2,431	)		(2,312	)		(2,347	)
Total	$	(13,803	)	$	2,025		$	9,890

The following table presents certain amounts relating to our non-U.S. pension plans recognized in accumulated other comprehensive (gain) loss at September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):

	September 29, 2017			September 30, 2016			October 2, 2015
Arising during the period:
Net actuarial (gain) loss	$	(76,860	)	$	102,925		$	(27,165	)
Prior service cost (benefit)		119			580			(1,512	)
Total		(76,741	)		103,505			(28,677	)
Reclassification adjustments:
Net actuarial losses		(8,732	)		(7,508	)		(14,034	)
Prior service cost		229			163			51
Total		(8,503	)		(7,345	)		(13,983	)
Total	$	(85,244	)	$	96,160		$	(42,660	)

The following table presents certain amounts relating to our pension plans recorded in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at September 29, 2017, and September 30, 2016 (segregated between U.S. and non-U.S. plans) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	September 29, 2017		September 30, 2016		September 29, 2017			September 30, 2016
Net actuarial loss	$	47,681	$	61,483	$	218,752		$	304,345
Prior service cost		—		—		(855	)		(1,203	)
Total	$	47,681	$	61,483	$	217,897		$	303,142

The following table presents the amount of accumulated comprehensive income that will be amortized against earnings as part of our net periodic benefit cost in fiscal 2018 based on 2017 exchange rates (segregated between U.S. and non-U.S. plans) (in thousands):

	U.S. Pension Plans		Non-U.S. Pension Plans
Unrecognized net actuarial loss	$	3,325	$	6,829
Unrecognized prior service cost		—		(277	)
Accumulated comprehensive loss to be recorded against earnings	$	3,325	$	6,552

We consider various factors in developing the estimates for the expected, long-term rates of return on plan assets. These factors include the projected, long-term rates of returns on the various types of assets in which the plans invest, as well as historical returns. In general, investment allocations are determined by each plan’s trustees and/or investment committees. The objectives of the plans’ investment policies are to (i) maximize returns while preserving capital; (ii) provide returns sufficient to meet the current and long-term obligations of the plan as the obligations become due; and (iii) maintain a diversified portfolio of assets so as to reduce the risk associated with having a disproportionate amount of the plans’ total assets invested in any one type of asset, issuer or geography. None of our pension plans hold Jacobs common stock directly (although some plans may hold shares indirectly through investments in mutual funds). The plans’ weighted average asset allocations at September 29, 2017 and September 30, 2016 (the measurement dates used in valuing the plans’ assets and liabilities) were as follows:

	U.S. Pension Plans						Non-U.S. Pension Pans
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Equity securities		70	%		71	%		24	%		25	%
Debt securities		23	%		20	%		32	%		32	%
Real estate investments		—	%		2	%		5	%		6	%
Other		7	%		7	%		39	%		37	%

The following table presents the Fair Value of the Company’s Domestic U.S. plan assets at September 29, 2017, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 29, 2017
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	103,760	$	—	$	103,760
U.S. Domestic bonds		33,404		—		33,404
Cash and equivalents		4,448		—		4,448
Hedge funds		—		6,176		6,176
Total	$	141,612	$	6,176	$	147,788

The following table presents the Fair Value of the Company’s non-U.S. pension plan assets at September 29, 2017, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 29, 2017
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	30,916	$	—	$	30,916
Overseas equities		229,205		—		229,205
U.S. Domestic bonds		263,145		—		263,145
Overseas bonds		77,682		—		77,682
Cash and equivalents		38,924		—		38,924
Real estate		—		58,974		58,974
Insurance contracts		—		74,353		74,353
Other		—		303,729		303,729
Total	$	639,872	$	437,056	$	1,076,928

The following table presents the Fair Value of the Company’s U.S. pension plan assets at September 30, 2016, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 30, 2016
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	85,494	$	—	$	85,494
Overseas equities		15,169		—		15,169
U.S. Domestic bonds		28,886		—		28,886
Cash and equivalents		3,723		—		3,723
Real estate		—		3,477		3,477
Hedge funds		—		5,715		5,715
Total	$	133,272	$	9,192	$	142,464

The following table presents the Fair Value of the Company’s non-U.S. pension plan assets at September 30, 2016, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 30, 2016
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	31,972	$	—	$	31,972
Overseas equities		220,179		—		220,179
U.S. Domestic bonds		258,949		—		258,949
Overseas bonds		61,974		—		61,974
Cash and equivalents		63,182		—		63,182
Real estate		—		55,665		55,665
Insurance contracts		—		39,473		39,473
Hedge funds		—		272,517		272,517
Total	$	636,256	$	367,655	$	1,003,911

At September 29, 2017 and September 30, 2016, the Company holds no assets in the U.S. or non-U.S. pension plans that use Level 2 fair value measurement inputs.

The following table summarizes the changes in the Fair Value of the Company’s U.S. Pension Plans’ Level 3 assets for the year ended September 29, 2017 (in thousands):

	Real Estate			Hedge Funds
Balance at September 30, 2016	$	3,477		$	5,715
Purchases, sales, and settlements		(3,477	)		(557	)
Realized and unrealized gains		—			1,018
Balance at September 29, 2017	$	—		$	6,176

The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the year ended September 29, 2017 (in thousands):

	Real Estate			Insurance Contracts			Hedge Funds
Balance at September 30, 2016	$	55,665		$	39,473		$	272,517
Purchases, sales, and settlements		(1,199	)		422			(9,022	)
Realized and unrealized gains (losses)		2,642			(7,572	)		19,662
Transfers		—			40,031			11,758
Effect of exchange rate changes		1,866			1,999			8,814
Balance at September 29, 2017	$	58,974		$	74,353		$	303,729

The following table summarizes the changes in the Fair Value of the Company’s U.S. Pension Plans’ Level 3 assets for the year ended September 30, 2016 (in thousands):

	Real Estate			Hedge Funds
Balance at October 2, 2015	$	9,914		$	16,372
Purchases		(6,530	)		(10,788	)
Realized and unrealized gains		93			131
Balance at September 30, 2016	$	3,477		$	5,715

The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the year ended September 30, 2016 (in thousands):

	Real Estate			Insurance Contracts			Hedge Funds
Balance at October 2, 2015	$	61,996		$	32,522		$	260,720
Purchases, sales, and settlements		(462	)		(165	)		(1,205	)
Realized and unrealized gains		2,572			6,451			57,656
Effect of exchange rate changes		(8,441	)		665			(44,654	)
Balance at September 30, 2016	$	55,665		$	39,473		$	272,517

The following table presents the amount of cash contributions we anticipate making into the plans during fiscal 2018 (in thousands):

U.S.

Pension Plans

Non-U.S.

Pension Pans

Anticipated cash contributions

1,300

22,574

The following table presents the total benefit payments expected to be paid to pension plan participants during each of the next five fiscal years, and in total for the five years thereafter (in thousands):

	U.S. Pension Plans		Non-U.S. Pension Pans
2018	$	21,506	$	31,063
2019		11,372		32,509
2020		11,377		32,923
2021		11,472		36,220
2022		11,485		38,086
For the periods 2023 through 2027		54,747		231,183

The following table presents the components of net periodic benefit cost for the Company’s U.S. pension plans recognized in the accompanying Consolidated Statements of Earnings for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):

	September 29, 2017			September 30, 2016			October 2, 2015
Service cost	$	1,000		$	9,875		$	12,045
Interest cost		5,757			16,746			20,629
Expected return on plan assets		(9,942	)		(22,368	)		(29,526	)
Actuarial loss		3,985			7,512			3,756
Prior service cost		—			(176	)		(239	)
Net pension cost, before special items		800			11,589			6,665
Contractual expense/Settlement loss		1,781			8,061			—
Total net periodic pension cost recognized	$	2,581		$	19,650		$	6,665

The fiscal 2016 settlement loss included in the U.S. pension plan net periodic benefit cost table above related to the previously discussed transfer of a U.S. pension plan to a new service provider.

The following table presents the components of net periodic benefit cost for the Company’s Non-U.S. pension plans recognized in the accompanying Consolidated Statements of Earnings for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):

	September 29, 2017			September 30, 2016			October 2, 2015
Service cost	$	7,509		$	14,378		$	21,374
Interest cost		31,205			38,892			44,659
Expected return on plan assets		(56,269	)		(50,190	)		(53,052	)
Actuarial loss		10,616			9,092			17,398
Prior service cost		(329	)		(260	)		(96	)
Net pension cost, before special items		(7,268	)		11,912			30,283
Curtailments and settlements		(298	)		(7,512	)		255
Total net periodic pension cost recognized	$	(7,566	)	$	4,400		$	30,538

The fiscal 2016 settlement loss included in the Non-U.S. pension plan net periodic benefit cost table above related to the sale of the Company’s French subsidiary.

Multiemployer Plans

In Canada and the U.S., we contribute to various trusteed pension plans covering hourly construction employees under industry-wide agreements. We also contribute to various trusteed plans in Australia and certain countries in Europe covering both hourly and certain salaried employees. Contributions are based on the hours worked by employees covered under these agreements and are charged to direct costs of contracts on a current basis.

The majority of the contributions the Company makes to multiemployer pension plans are outside the U.S. With respect to these multiemployer plans, the Company's liability to fund these plans is generally limited to the contributions we are required to make under collective bargaining agreements.

Based on our review of our multiemployer pension plans under the guidance provided in ASU 2011-09— Compensation-Retirement Benefits-Multiemployer Plans, we have concluded that none of the multiemployer pension plans into which we contribute are individually significant to our Consolidated Financial Statements.

The following table presents the Company’s contributions to these multiemployer plans for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):

	September 29, 2017		September 30, 2016		October 2, 2015
Canada	$	35,182	$	44,912	$	42,575
Europe	$	6,212	$	8,771	$	10,902
United States	$	4,548	$	5,058	$	5,968
Contributions to multiemployer pension plans	$	45,942	$	58,741	$	59,445

Other Benefit Plans

During the second fiscal quarter of 2017, the Company restructured certain employee welfare trust plans benefitting certain of its employees within its India operations by moving these plans under the legal ownership and operation of the Company’s legal entity structure in the region. Historically, the Company structured these plans as separate, stand-alone entities outside of the Company’s consolidated legal entity framework. As a result of these changes, the Company has recorded a one-time, non-cash benefit of $9.9 million reported in SG&A expense in its Consolidated Statement of Earnings for the year ended September 29, 2017, with corresponding assets in the plans associated with restricted investments of $7.7 million and employee loans receivable of $2.2 million and both recorded in Total other non-current assets in our Consolidated Balance Sheet at September 29, 2017.