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Employee Pension and Profit Sharing Plans | 12 Months Ended
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Oct. 02, 2020
Retirement Benefits [Abstract] |
Employee Pension and Profit Sharing Plans | EMPLOYEE PENSION AND PROFIT SHARING PLANS: In the United States, the Company maintains qualified contributory and non-contributory defined contribution retirement plans for eligible employees, with Company contributions to the plans based on earnings performance or salary level. The Company also has a non-qualified retirement savings plan for certain employees. The total expense of the above plans for fiscal 2020, fiscal 2019 and fiscal 2018 was $17.4 million, $41.5 million and $22.5 million, respectively. The increase in the expense in fiscal 2019 was due to additional employer matching contributions as a result of cash tax savings from U.S. tax reform. The Company also maintains similar contributory and non-contributory defined contribution retirement plans at several of its international operations, primarily in Canada and the United Kingdom. The total expense of these international plans for fiscal 2020, fiscal 2019 and fiscal 2018 was $13.7 million, $11.7 million and $8.6 million, respectively. The following table sets forth the components of net periodic pension cost for the Company's single-employer defined benefit pension plans for fiscal 2020, fiscal 2019 and fiscal 2018 (in thousands):
|  | Fiscal Year Ended
|  | October 2, 2020 |  | September 27, 2019 |  | September 28, 2018
Service cost |  | $ | 2,996 |  |  | $ | 6,391 |  |  | $ | 7,121 |
Interest cost |  | 9,180 |  |  | 11,287 |  |  | 10,579 |
Expected return on plan assets |  | (18,883) |  |  | (22,970) |  |  | (22,864) |
Settlements and curtailments |  | — |  |  | 283 |  |  | 3,312 |
Amortization of prior service cost |  | 26 |  |  | 104 |  |  | 116 |
Recognized net loss |  | 2,324 |  |  | 1,094 |  |  | 1,646 |
Net periodic pension income |  | $ | (4,357) |  |  | $ | (3,811) |  |  | $ | (90) |
The following table sets forth changes in the projected benefit obligation and the fair value of plan assets for these plans (in thousands):
Change in benefit obligation: |  | October 2, 2020 |  | September 27, 2019
Benefit obligation, beginning |  | $ | 401,207 |  |  | $ | 366,426 |
Foreign currency translation |  | 6,067 |  |  | (13,097) |
Service cost |  | 2,996 |  |  | 6,391 |
Interest cost |  | 9,180 |  |  | 11,287 |
Employee contributions |  | 853 |  |  | 2,249 |
Actuarial loss |  | 32,769 |  |  | 49,707 |
Benefits paid |  | (16,739) |  |  | (16,681) |
Settlements and curtailments(1) |  | — |  |  | (5,075) |
Benefit obligation, ending |  | $ | 436,333 |  |  | $ | 401,207 |
Change in plan assets: |  |  |  |
Fair value of plan assets, beginning |  | $ | 425,967 |  |  | $ | 409,826 |
Foreign currency translation |  | 5,980 |  |  | (14,360) |
Employer contributions |  | 4,152 |  |  | 10,520 |
Employee contributions |  | 853 |  |  | 2,249 |
Actual return on plan assets |  | 18,840 |  |  | 39,280 |
Benefits paid |  | (16,739) |  |  | (16,681) |
Settlements(1) |  | — |  |  | (4,867) |
Fair value of plan assets, end |  | 439,053 |  |  | 425,967 |
Funded Status at end of year |  | $ | 2,720 |  |  | $ | 24,760 |
(1) | Fiscal 2019 includes the impact of closing two of the AmeriPride plans.
Amounts recognized in the Consolidated Balance Sheets consist of the following (in thousands):
|  | October 2, 2020 |  | September 27, 2019
Noncurrent benefit asset (included in Other Assets) |  | $ | 16,617 |  |  | $ | 35,459 |
Noncurrent benefit liability (included in Other Noncurrent Liabilities) |  | (13,897) |  |  | (10,699) |
Net actuarial loss (included in Accumulated other comprehensive loss before taxes) |  | 111,035 |  |  | 77,204 |
The following weighted average assumptions were used to determine pension expense of the respective fiscal years:
|  | October 2, 2020 |  | September 27, 2019
Discount rate |  | 2.5 | % |  | 3.3 | %
Rate of compensation increase |  | 1.9 | % |  | 2.1 | %
Long-term rate of return on assets |  | 4.3 | % |  | 5.7 | %
The following weighted average assumptions were used to determine the funded status of the respective fiscal years:
|  | October 2, 2020 |  | September 27, 2019
Discount rate |  | 2.4 | % |  | 2.5 | %
Rate of compensation increase |  | 2.0 | % |  | 2.1 | %
Assumptions, including discount rate, expected return on assets, compensation increases and health care trends, are adjusted annually, as necessary, based on prevailing market conditions and actual experience. The Company applies a spot-rate approach for the discount rate used in the calculation of pension interest and service cost. The spot-rate approach applies separate discount rates for each projected benefit payment in the calculation. The accumulated benefit obligation as of October 2, 2020 was $435.1 million. During fiscal 2020, settlement gains and actuarial losses of approximately $0.2 million and $33.1 million, respectively, were recognized in other comprehensive loss (before taxes) and $2.3 million of actuarial losses were recognized as net periodic pension cost during such period. The estimated portion of net actuarial loss included in accumulated other comprehensive loss as of October 2, 2020 expected to be recognized in net periodic pension cost during fiscal 2021 is approximately $2.7 million (before taxes). The accumulated benefit obligation as of September 27, 2019 was $398.8 million. During fiscal 2019, settlement gains and actuarial losses of approximately $0.1 million and $32.9 million, respectively, were recognized in other comprehensive loss (before taxes) and $1.2 million of amortization of actuarial losses was recognized as net periodic pension cost during such period. The following table sets forth information for the Company's single-employer pension plans with an accumulated benefit obligation in excess of plan assets as of October 2, 2020 and September 27, 2019 (in thousands):
|  | October 2, 2020 |  | September 27, 2019
Projected benefit obligation(1) |  | $ | 153,338 |  |  | $ | 10,699 |
Accumulated benefit obligation(1) |  | 152,729 |  |  | 10,506 |
(1) | Increase driven by the UK and AmeriPride U.S. plans switching from asset positions in fiscal 2019 to liability positions in fiscal 2020.
Assets of the plans are generally invested with the goal of principal preservation and enhancement over the long-term. The primary goal is total return, consistent with prudent investment management. The Company's investment policies also require an appropriate level of diversification across the asset categories. As the Company contemplates or moves toward the wind down of plans, it may shift toward a more conservative investment approach with a higher proportion of fixed income and cash investments to ensure adequate liquidity at the time of wind down. The current overall capital structure and targeted ranges for asset classes are 10-30% invested in equity securities, 50-80% invested in debt securities and 10-20% in real estate investments and cash and cash equivalents. Performance of the plans is monitored on a regular basis and adjustments of the asset allocations are made when deemed necessary. The weighted-average long-term rate of return on assets has been determined based on an estimated weighted-average of long-term returns of major asset classes, taking into account historical performance of plan assets, the current interest rate environment, plan demographics, acceptable risk levels and the estimated value of active asset management. The fair value of plan assets for the Company's defined benefit pension plans as of October 2, 2020 and September 27, 2019 is as follows (see Note 17 for a description of the fair value levels) (in thousands):
|  | October 2, 2020 |  | Quoted prices in active markets Level 1 |  | Significant other observable inputs Level 2 |  | Significant unobservable inputs Level 3
Cash and cash equivalents and other |  | $ | 76,072 |  |  | $ | 76,072 |  |  | $ | — |  |  | $ | — |
Equity securities: |  |  |  |  |  |  |  |
Investment trusts |  | 4,717 |  |  | 4,717 |  |  | — |  |  | — |
Investment funds: |  |  |  |  |  |  |  |
Equity funds |  | 74,852 |  |  | — |  |  | 74,852 |  |  | — |
Fixed income funds |  | 272,349 |  |  | — |  |  | 272,349 |  |  | — |
Real estate |  | 11,063 |  |  | — |  |  | — |  |  | 11,063 |
Total |  | $ | 439,053 |  |  | $ | 80,789 |  |  | $ | 347,201 |  |  | $ | 11,063 |
|  | September 27, 2019 |  | Quoted prices in active markets Level 1 |  | Significant other observable inputs Level 2 |  | Significant unobservable inputs Level 3
Cash and cash equivalents and other |  | $ | 19,396 |  |  | $ | 19,396 |  |  | $ | — |  |  | $ | — |
Equity securities: |  |  |  |  |  |  |  |
Investment trusts |  | 4,677 |  |  | $ | 4,677 |  |  | — |  |  | — |
Investment funds: |  |  |  |  |  |  |  |
Equity funds |  | 72,074 |  |  | — |  |  | 72,074 |  |  | — |
Fixed income funds |  | 319,395 |  |  | — |  |  | 319,395 |  |  | — |
Real estate |  | 10,425 |  |  | — |  |  | — |  |  | 10,425 |
Total |  | $ | 425,967 |  |  | $ | 24,073 |  |  | $ | 391,469 |  |  | $ | 10,425 |
The fair value of the investment funds is based on the value of the underlying assets, as reported to the Plan by the trustees. They are comprised of a portfolio of underlying securities that can be valued based on trading information on active markets. Cash and cash equivalents include direct cash holdings, which are valued based on cost, and short-term deposits and investments in money market funds, for which fair value measurements are all based on quoted prices for similar assets or liabilities in markets that are active. Investments in equity securities and equity funds include publicly-traded domestic companies (approximately 36%) and international companies (approximately 64%) that are diversified across industry, country and stock market capitalization. Investments in fixed income funds primarily consist of international corporate bonds and government securities. For equity securities, the investments are predominantly valued using a market approach based on the closing fair market prices of identical instruments in the principal market on which they are traded. For investment funds, fair value is calculated by applying the Plan's percentage ownership in the fund to the total market value of the account's underlying securities and is therefore categorized as Level 2, as the Plan does not directly own shares in these underlying investments. Substantially all of the real estate investments are in international markets. During fiscal 2019, in conjunction with the planned wind down of certain Canadian plans, the Company reallocated the plan assets to be entirely invested in debt securities. During fiscal 2020, the Company reallocated plan assets related to the Canadian plans to be a mix of debt securities and cash and cash equivalents in anticipation of the payout of certain plans in fiscal 2021. It is the Company's policy to fund at least the minimum required contributions as outlined in the required statutory actuarial valuation for each plan. The following table sets forth the benefits expected to be paid in the next five fiscal years and in aggregate for the five fiscal years thereafter by the Company's defined benefit pension plans (in thousands):
Fiscal 2021(1) | $ | 224,264 |
Fiscal 2022 | 7,418 |
Fiscal 2023 | 7,650 |
Fiscal 2024 | 7,799 |
Fiscal 2025 | 8,212 |
Fiscal 2026 – 2030 | 44,006 |
(1) | Increase driven by expected payout of certain Canadian plans.
The estimated benefit payments above are based on assumptions about future events. Actual benefit payments may vary significantly from these estimates. The expected contributions to be paid to the Company's defined benefit pension plans during fiscal 2021 are approximately $3.4 million. Multiemployer Defined Benefit Pension Plans The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements ("CBA") that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following respects: a.Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. b.If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. c.If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The Company's participation in these plans for fiscal 2020 is outlined in the table below. The "EIN/Pension Plan Number" column provides the Employee Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2020 and 2019 is for the plans' two most recent fiscal year-ends. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the critical and declining zone are generally less than 65% funded and projected to become insolvent in the next 15 or 20 years depending on the ratio of active to inactive participants, plans in the critical zone are generally less than 65% funded, plans in the seriously endangered zone are less than 80% funded and are projected to have an accumulated deficiency in the current plan year or the next six plan years, plans in the endangered zone are less than 80% funded or are projected to have an accumulated funding deficiency in the current plan year or the next six plan years and plans in the green zone are at least 80% funded. The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the CBA(s) to which the plans are subject. There have been no significant changes that affect the comparability of fiscal 2020, fiscal 2019 and fiscal 2018 contributions.
Pension Fund | EIN/Pension Plan Number | Pension Protection Act Zone Status | FIP/RP Status Pending/ Implemented | Contributions by the Company (in thousands) |  | Range of Expiration Dates of CBAs
2020 | 2019 | 2020 | 2019 | 2018 | Surcharge Imposed
National Retirement Fund | 13-6130178/ 001 | Critical | Critical | Implemented | $ | 3,574 |  | $ | 4,130 |  | $ | 4,147 |  | No | 3/6/2020 - 10/1/2023
UNITE HERE Retirement Fund | 82-0994119/ 001 | Critical | Critical | Implemented | 3,392 |  | 4,531 |  | 3,686 |  | No | 12/15/2019 - 6/30/2023
Local 1102 Retirement Trust | 13-1847329/ 001 | Seriously Endangered | Endangered | Implemented | 66 |  | 110 |  | 1,206 |  | No | 10/31/2020
Central States SE and SW Areas Pension Plan | 36-6044243/ 001 | Critical and Declining | Critical and Declining | Implemented | 4,422 |  | 4,282 |  | 4,128 |  | No | 1/31/2007 - 3/31/2023
Pension Plan for Hospital & Health Care Employees Philadelphia & Vicinity | 23-2627428/ 001 | Critical | Critical | Implemented | 325 |  | 361 |  | 319 |  | No | 1/31/2023
SEIU National Industry Pension Fund (1) | 52-6148540/ 001 | Critical | Critical | Implemented | 685 |  | 623 |  | 501 |  | No | 4/14/2022 - 12/31/2023
LIUNA National Industrial Pension Fund | 52-6074345/ 001 | Green | Critical | Implemented | 674 |  | 678 |  | 620 |  | No | 12/31/2020
Other funds |  |  |  |  | 17,073 |  | 18,846 |  | 18,016 |  |  |
Total contributions |  |  |  |  | $ | 30,211 |  | $ | 33,561 |  | $ | 32,623 |  |  |
(1) | Over 75% of the Company's participants in this fund are covered by a single CBA that expires on 12/31/2023.
The Company provided more than 5 percent of the total contributions for the following plans and plan years:
Pension Fund |  | Contributions to the plan exceeded more than 5% of total contributions (as of the plan's year-end)
Local 1102 Retirement Trust |  | 12/31/2018 and 12/31/2017
National Retirement Fund |  | 12/31/2018
At the date the Company's financial statements were issued, Forms 5500 were not available for the plan years ending in 2020.

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