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Pension and Other Post-retirement Benefits
 12 Months Ended
Oct. 31, 2021
Retirement Benefits [Abstract]  
Pension and Other Post-retirement Benefits
Pension and Other Post-retirement Benefits
The Company has several defined benefit plans and defined contribution plans covering most employees. Benefits for defined benefit pension plans covering hourly employees are provided based on stated amounts for each year of service, while plan benefits covering salaried employees are based on final average compensation. Total costs associated with the Company’s defined contribution benefit plans in fiscal years 2021, 2020, and 2019 were $46.7 million, $44.5 million, and $43.0 million, respectively.
 
Certain groups of employees are eligible for post-retirement health or welfare benefits. Benefits for retired employees vary for each group depending on respective retirement dates and applicable plan coverage in effect. Contribution requirements for retired employees are governed by the Retiree Health Care Payment Program and may change each year as the cost to provide coverage is determined.
 
Net periodic cost of defined benefit plans included the following: 
 Pension BenefitsPost-retirement Benefits
(in thousands)202120202019202120202019
Service Cost$37,127 $35,584 $26,042 $533 $770 $690 
Interest Cost50,399 53,642 60,385 7,945 9,306 12,016 
Expected Return on Plan Assets(102,693)(101,283)(92,492)— — — 
Amortization of Prior Service Cost(1,496)(2,168)(2,795)(669)(2,651)(2,675)
Recognized Actuarial Loss (Gain)22,742 22,383 14,805 2,020 1,045 — 
Curtailment (Gain) Charge— — 2,825 — — 1,219 
Net Periodic Cost$6,080 $8,158 $8,770 $9,830 $8,470 $11,250 

Non-service cost components of net pension and post-retirement benefit cost are presented within Interest and Investment Income on the Consolidated Statements of Operations.

Actuarial gains and losses and any adjustments resulting from plan amendments are deferred and amortized over periods ranging from 8-20 years for pension benefits and 4-15 years for post-retirement benefits. The following amounts have not been recognized in net periodic pension cost and are included in Accumulated Other Comprehensive Loss: 
 Pension BenefitsPost-retirement Benefits
(in thousands)2021202020212020
Unrecognized Prior Service Credit$(3,624)$(2,128)$(154)$514 
Unrecognized Actuarial Losses(305,433)(402,289)(35,616)(36,144)
 
The following is a reconciliation of the beginning and ending balances of the benefit obligation, fair value of plan assets, and funded status of the plans as of the October 31, 2021, and the October 25, 2020, measurement dates: 
Pension BenefitsPost-retirement Benefits
(in thousands)2021202020212020
Change in Benefit Obligation
Benefit Obligation at Beginning of Year$1,666,886 $1,616,177 $285,293 $290,946 
Service Cost37,127 35,584 533 770 
Interest Cost50,399 53,642 7,945 9,306 
Actuarial (Gain) Loss 34,247 77,447 1,539 2,362 
Participant Contributions— — 2,113 2,344 
Medicare Part D Subsidy— — 461 555 
Benefits Paid(76,702)(115,965)(23,218)(20,990)
Benefit Obligation at End of Year$1,711,958 $1,666,886 $274,666 $285,293 
 
Pension BenefitsPost-retirement Benefits
(in thousands)2021202020212020
Change in Plan Assets
Fair Value of Plan Assets at Beginning of Year$1,553,532 $1,477,288 $— $— 
Actual Return on Plan Assets211,054 183,647 — — 
Participant Contributions— — 2,113 2,344 
Employer Contributions10,712 8,562 21,105 18,646 
Benefits Paid(76,702)(115,965)(23,218)(20,990)
Fair Value of Plan Assets at End of Year$1,698,596 $1,553,532 $— $— 
Funded Status at End of Year$(13,362)$(113,354)$(274,666)$(285,293)
 
Amounts recognized in the Consolidated Statements of Financial Position as of October 31, 2021, and October 25, 2020, are as follows:
 Pension BenefitsPost-retirement Benefits
(in thousands)2021202020212020
Pension Assets$289,096 $183,232 $— $— 
Employee-related Expenses(11,173)(9,332)(19,589)(19,669)
Pension and Post-retirement Benefits(291,285)(287,254)(255,077)(265,624)
Net Amount Recognized$(13,362)$(113,354)$(274,666)$(285,293)

The accumulated benefit obligation for all pension plans was $1.7 billion and $1.6 billion as of October 31, 2021, and October 25, 2020, respectively. The following table provides information for pension plans with projected and accumulated benefit obligations in excess of plan assets: 
(in thousands)20212020
Projected Benefit Obligation$302,458 $296,585 
Accumulated Benefit Obligation292,877 288,359 
Fair Value of Plan Assets— — 

Weighted-average assumptions used to determine benefit obligations are as follows: 
 20212020
Discount Rate3.00 %3.06 %
Rate of Future Compensation Increase (For Plans that Base Benefits on
Final Compensation Level)
4.14 %4.09 %

Weighted-average assumptions used to determine net periodic benefit costs are as follows: 
 202120202019
Discount Rate3.06 %3.37 %4.55 %
Rate of Future Compensation Increase (For Plans
that Base Benefits on Final Compensation Level)
4.09 %4.06 %3.96 %
Expected Long-term Return on Plan Assets
6.75 %7.00 %7.15 %

The expected long-term rate of return on plan assets is based on fair value and developed in consultation with outside advisors. A range is determined based on the composition of the asset portfolio, historical long-term rates of return, and estimates of future performance.

For measurement purposes, an 8 percent annual rate of increase in the per capita cost of covered health care benefits for pre-Medicare and post-Medicare retirees’ coverage is assumed for 2022. The pre-Medicare and post-Medicare rate is assumed to decrease to 5 percent for 2027 and remain steady thereafter.
 
The Company’s funding policy is to make annual contributions of not less than the minimum required by applicable regulations. The Company expects to make contributions of $31.1 million during fiscal 2022 that represent benefit payments for unfunded plans.
 
Benefits expected to be paid over the next ten fiscal years are as follows: 
(in thousands)
Pension Benefits
Post-retirement Benefits
2022$75,704 $19,832 
202377,767 19,760 
202479,870 19,445 
202582,118 18,901 
202686,066 18,265 
2027-2031459,902 80,310 
 
Plan assets for certain defined benefit pension plans are held in the Hormel Foods Corporation Master Trust (Master Trust). The investment strategy for the Master Trust attempts to minimize the long-term cost of pension benefits, reduce the volatility of pension expense, and achieve a healthy funded status for the plans. The Company establishes target allocations in consultation with outside advisors through the use of asset-liability modeling in an effort to match the duration of the plan assets with the duration of the Company’s projected benefit liability.

The actual and target weighted-average asset allocations for the Company’s pension plan assets as of the plan measurement date are as follows: 
20212020
Asset CategoryActual %Target
Range %		Actual %Target
Range %
Fixed Income43.8 
35-60
46.3 
35-60
Global Stocks40.7 
20-55
39.2 
20-55
Private Equity6.4 
0-10
5.4 
0-10
Real Estate5.3 
0-10
5.2 
0-10
Hedge Funds2.6 
0-10
2.4 
0-10
Cash and Cash Equivalents1.1 
—
1.5 —

The following tables show the categories of defined benefit pension plan assets and the level under which fair values were determined pursuant to the provisions of ASC 820. Assets measured at fair value using the net asset value (NAV) per share practical expedient are not required to be classified in the fair value hierarchy. These amounts are provided to permit reconciliation to the total fair value of plan assets.    
Fair Value Measurements as of October 31, 2021
(in thousands)Total
Fair Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Plan Assets in Fair Value Hierarchy    
Cash Equivalents(1)
$19,328 $— $19,328 $— 
Private Equity(2)
Domestic53,229 — — 53,229 
International56,190 — — 56,190 
Fixed Income(3)
U.S. Government Issues262,181 164,357 97,824 — 
Municipal Issues14,024 — 14,024 — 
Corporate Issues – Domestic321,639 — 321,639 — 
Corporate Issues – Foreign56,102 — 56,102 — 
Global Stocks - Mutual Funds(4)
94,115 94,115 — — 
Plan Assets in Fair Value Hierarchy$876,808 $258,472 $508,917 $109,419 
Plan Assets at Net Asset Value
Real Estate – Domestic(5)
$90,106 
Global Stocks - Collective Investment Funds(6)
596,985 
Hedge Funds(7)
44,848 
 Fixed Income - Hedge Funds(8)
62,609 
 Fixed Income - Collective Investment Funds(9)
27,239 
Plan Assets at Net Asset Value$821,787 
Total Plan Assets at Fair Value$1,698,596 
 Fair Value Measurements as of October 25, 2020
(in thousands)Total
Fair Value		Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Plan Assets in Fair Value Hierarchy    
Cash Equivalents(1)
$23,392 $1,294 $22,098 $— 
Private Equity(2)
Domestic43,479 — — 43,479 
International40,359 — — 40,359 
Fixed Income(3)
U.S. Government Issues239,239 158,525 80,714 — 
Municipal Issues15,768 — 15,768 — 
Corporate Issues – Domestic323,070 — 323,070 — 
Corporate Issues – Foreign52,132 — 52,132 — 
Global Stocks - Mutual Funds(4)
151,175 151,175 — — 
Plan Assets in Fair Value Hierarchy$888,614 $310,994 $493,782 $83,838 
Plan Assets at Net Asset Value
Real Estate – Domestic(5)
$81,015 
Global Stocks - Collective Investment Funds(6)
457,713 
Hedge Funds(7)
37,293 
 Fixed Income - Hedge Funds(8)
51,956 
 Fixed Income - Collective Investment Funds(9)
36,941 
Plan Assets at Net Asset Value$664,918 
Total Plan Assets at Fair Value$1,553,532 
 
The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments:
 
(1) Cash Equivalents: These Level 1 and Level 2 investments consist primarily of highly liquid money market mutual funds traded in active markets in addition to highly liquid futures and T-bills with an observable daily settlement price.

(2) Private Equity: These Level 3 investments consist of various collective investment funds, which are managed by a third party, invested in a well-diversified portfolio of equity investments from top performing, high quality firms focused on U.S. and foreign small to mid-markets, venture capitalists, and entrepreneurs with a concentration in areas of innovation. Investment strategies include buyouts, growth capital, buildups, and distressed, as well as early stages of company development mainly in the U.S. The fair value of these funds is based on the fair value of the underlying investments.

(3) Fixed Income: The Level 1 investments include U.S. Treasury bonds and notes, which are valued at the closing price reported on the active market in which the individual securities are traded. The Level 2 investments consist principally of U.S. government securities, which are valued daily using institutional bond quote sources and mortgage-backed securities pricing sources, and municipal, domestic, and foreign securities, which are valued daily using institutional bond quote sources.

(4) Global Stocks - Mutual Fund: These Level 1 investments include open-ended mutual funds consisting of a mix of U.S. common stocks and foreign common stocks, which are valued at closing price reported on the active market in which the fund is traded. The investment strategy is to obtain long term capital appreciation by focusing on companies generating above average earnings growth and are leading growth businesses in the marketplace. There are no restrictions on redemptions.

(5) Real Estate - Domestic: These investments include ownership in open-ended real estate funds, which manage diversified portfolios of commercial properties within the office, residential, retail, and industrial property sectors. Investment strategies aim to acquire, own, hold, or dispose of investments with the goal of achieving current income and/or capital appreciation. The real estate investments are valued at the NAV of shares held by the Master Trust. Requests to redeem shares are granted on a quarterly basis with either 45 or 90 days advance notice, subject to availability of cash.

(6) Global Stocks - Collective Investment Funds: These investments include commingled funds consisting of a mix of U.S. common stocks and foreign common stocks. The collective investment funds are valued at the NAV of shares held by the Master Trust. The investment strategy is to obtain long term capital appreciation by focusing on companies generating above average earnings growth and are leading growth businesses in the marketplace. All funds are daily liquid with the exception of one that is available on the first business day of the month for subscriptions and withdrawals.

(7) Hedge Funds: These investments are designed to provide diversification to an overall institutional portfolio and, in particular, provide protection against equity market downturns. They are comprised of Commodity Trading Advisor Managed Futures, Global Macro (Discretionary and/or Quant) and Long Volatility/Tail Risk Hedging strategies. The hedge funds are valued at the NAV of shares held by the Master Trust. Requests to redeem shares are granted daily, monthly or quarterly.

(8) Fixed Income - Hedge Funds: These investments target absolute, risk-adjusted returns by taking advantage of price dislocations and inconsistencies within credit markets. Funds are comprised primarily of U.S. and European corporate credit and structured credit. The investments are valued at the NAV of shares held by the Master Trust. Requests to redeem shares are granted on a quarterly basis on the three year fund anniversary with a ninety day notice period.
 
(9) Fixed Income - Collective Investment Funds: These investments include commingled funds consisting of a mix of U.S. government and investment grade corporate bonds. The collective investment funds are valued at NAV of the shares held by the Master Trust. The investment strategy is to achieve an investment return that approximates as closely to the Bloomberg Barclays U.S. Aggregate Bond Index over the long term by investing in the securities that comprise the benchmark. There are no restrictions on redemptions.
A reconciliation of the beginning and ending balance of the investments measured at fair value using significant unobservable inputs (Level 3) is as follows:
(in thousands)20212020
Beginning Balance$83,838 $84,901 
Purchases, Issuances, and Settlements (Net)(23,151)(10,151)
Unrealized Gains (Losses)(1)
26,879 (4,577)
Realized Gains604 8,130 
Interest and Dividend Income21,248 5,535 
Ending Balance$109,419 $83,838 
 (1) Included in Accumulated Other Comprehensive Loss in the Consolidated Statements of Financial Position.

During fiscal 2021, the value of the Level 3 investments ranged from $83.8 million to $109.4 million, with an average value of $97.6 million.

The Company has commitments totaling $125.0 million for the private equity investments within the pension plans. The unfunded private equity commitment balance for each investment category as of October 31, 2021, and October 25, 2020, is as follows: 
(in thousands)20212020
Domestic Equity$81 $203 
International Equity9,794 15,919 
Unfunded Commitment Balance$9,875 $16,122 
 
Funding for future private equity capital calls will come from existing pension plan assets and not from additional cash contributions by the Company.