Employee Benefit Plans

We maintain multiple employee benefit plans, covering employees at certain locations.

Our qualified U.S. defined benefit pension plan is not open to new entrants. New employees are not eligible to participate in the pension plan. Instead, we make contributions for those employees to an employee-directed investment fund in the Moog Inc. Retirement Savings Plan ("RSP"). The Company’s contributions are based on a percentage of the employee’s eligible compensation and age. These contributions are in addition to the employer match on voluntary employee contributions.

The RSP includes an Employee Stock Ownership Plan. As one of the investment alternatives, participants in the RSP can acquire our stock at market value. We match 25% of the first 2% of eligible compensation contributed to any investment selection. Shares are allocated and compensation expense is recognized as the employer share match is earned. At September 28, 2013, the participants in the RSP owned 600,840 Class A shares and 1,781,712 Class B shares.

The changes in projected benefit obligations and plan assets and the funded status of the U.S. and non-U.S. defined benefit plans are as follows:



	U.S. Plans						Non-U.S. Plans
	2013			2012			2013			2012
Change in projected benefit obligation:
Projected benefit obligation at prior year measurement date	$	779,977		$	635,798		$	153,089		$	131,914
Service cost	26,856			23,347			4,874			4,046
Interest cost	28,818			29,786			5,749			5,864
Contributions by plan participants	—			—			970			900
Actuarial losses (gains)	(138,603		)	108,095			8,781			16,557
Foreign currency exchange impact	—			—			1,400			(1,995		)
Benefits paid from plan assets	(17,586		)	(15,926		)	(1,903		)	(1,430		)
Benefits paid by Moog	(1,556		)	(1,123		)	(3,162		)	(2,700		)
Other	157			—			182			(67		)
Projected benefit obligation at measurement date	$	678,063		$	779,977		$	169,980		$	153,089
Change in plan assets:
Fair value of assets at prior year measurement date	$	441,426		$	389,286		$	84,044		$	68,991
Actual return on plan assets	42,853			68,074			12,147			11,086
Employer contributions	34,584			1,115			8,077			6,842
Contributions by plan participants	—			—			970			900
Benefits paid	(19,142		)	(17,049		)	(5,065		)	(4,130		)
Foreign currency exchange impact	—			—			(1,485		)	422
Other	(803		)	—			(63		)	(67		)
Fair value of assets at measurement date	$	498,918		$	441,426		$	98,625		$	84,044
Funded status and amount recognized in assets and liabilities	$	(179,145	)	$	(338,551	)	$	(71,355	)	$	(69,045	)
Amount recognized in assets and liabilities:
Other assets - non-current	$	—		$	—		$	2,043		$	—
Accrued and long-term pension liabilities	(179,145		)	(338,551		)	(73,398		)	(69,045		)
Amount recognized in assets and liabilities	$	(179,145	)	$	(338,551	)	$	(71,355	)	$	(69,045	)
Amount recognized in accumulated other comprehensive loss, before taxes:
Prior service cost (credit)	$	995		$	42		$	(172	)	$	(305	)
Actuarial losses	247,803			415,524			28,550			29,775
Amount recognized in accumulated other comprehensive loss, before taxes	$	248,798		$	415,566		$	28,378		$	29,470

Our stock included in U.S. plan assets consisted of 149,022 shares of Class A common stock and 1,001,034 shares

of Class B common stock. Our funding policy is to contribute at least the amount required by law in the respective countries.

The total accumulated benefit obligation as of the measurement date for all defined benefit pension plans was $766,870 in 2013 and $832,303 in 2012. At the measurement date in 2013, our plans had fair values of plan assets totaling $597,543. At the measurement date in 2013, two of our plans had fair values of plan assets totaling $47,847, which exceeded their accumulated benefit obligations of $40,984. At the measurement date in 2012, three of our plans had fair values of plan assets totaling $37,798, which exceeded their accumulated benefit obligations of $33,438. The following table provides aggregate information for the other pension plans, which have projected benefit obligations or accumulated benefit obligations in excess of plan assets:



	September 28, 2013		September 29, 2012
Projected benefit obligation	$	802,239	$	892,005
Accumulated benefit obligation	725,886		798,865
Fair value of plan assets	549,696		487,673

Weighted-average assumptions used to determine benefit obligations as of the measurement dates and weighted-average assumptions used to determine net periodic benefit cost are as follows:



	U.S. Plans						Non-U.S. Plans
	2013		2012		2011		2013		2012		2011
Assumptions for net periodic benefit cost:
Discount rate	3.7	%	4.7	%	5.2	%	4.0	%	4.7	%	4.6	%
Return on assets	8.6	%	8.9	%	8.9	%	4.5	%	5.5	%	5.1	%
Rate of compensation increase	4.1	%	3.8	%	3.8	%	2.9	%	3.0	%	3.1	%
Assumptions for benefit obligations:
Discount rate	5.0	%	3.7	%	4.7	%	3.6	%	3.9	%	4.7	%
Rate of compensation increase	4.1	%	4.1	%	3.8	%	2.8	%	2.9	%	3.0	%

Pension plan investment policies and strategies are developed on a plan specific basis, which varies by country. At September 28, 2013, the U.S. plans represented 84% of consolidated pension assets, while the non-U.S. plans represented 16% of consolidated pension assets, the largest concentration being in the United Kingdom (6%). The overall objective for the long-term expected return on both domestic and international plan assets is to earn a rate of return over time to meet anticipated benefit payments in accordance with plan provisions. The long-term investment objective of both the domestic and international retirement plans is to maintain the economic value of plan assets and future contributions by producing positive rates of investment return after subtracting inflation, benefit payments and expenses. Each of the plan’s strategic asset allocations is based on this long-term perspective and short-term fluctuations are viewed with appropriate perspective.

The U.S. qualified defined benefit plan’s assets are invested for long-term investment results. To accommodate the long-term investment horizon while providing appropriate liquidity, the plan maintains a liquid cash reserve of one-month to three-months of benefit distributions. Its assets are broadly diversified to help alleviate the risk of adverse returns in any one security or investment class. The international plans’ assets are invested in both low-risk and high-risk investments in order to achieve the long-term investment strategy objective. Investment risks for both domestic and international plans are considered within the context of the entire plan, rather than on a security-by-security basis.

The U.S. qualified defined benefit plan and certain international plans have investment committees that are responsible for formulating investment policies, developing manager guidelines and objectives and approving and managing qualified advisors and investment managers. The guidelines established for each of the plans define permitted investments within each asset class and apply certain restrictions such as limits on concentrated holdings in order to meet overall investment objectives.

Pension obligations and the related costs are determined using actuarial valuations that involve several assumptions. The return on assets assumption reflects the average rate of return expected on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. In determining the return on assets assumption, we consider the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and to provide adequate liquidity to meet immediate and future benefit payment requirements.

In determining our U.S. pension expense for 2013, we assumed an average rate of return on U.S. pension assets of approximately 8.6% measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return assumed an average of 60% in equity securities, 30% in fixed income securities and 10% in other securities. In determining our non-U.S. pension expense for 2013, we assumed an average rate of return on non-U.S. pension assets of approximately 4.5% measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return assumed an average asset allocation of 40% in equity securities and 60% in fixed income securities.

The weighted average asset allocations by asset category for the pension plans as of September 28, 2013 and September 29, 2012 are as follows:



	U.S. Plans					Non-U.S. Plans
	Target	2013 Actual		2012 Actual		Target	2013 Actual		2012 Actual
Asset category:
Equity	45%-70%	60	%	82	%	40%-60%	30	%	35	%
Debt	20%-35%	30	%	15	%	40%-60%	43	%	44	%
Real estate and other	10%-20%	10	%	3	%	0%-30%	27	%	21	%

The following tables present the consolidated plan assets using the fair value hierarchy, which is described in Note 9 - Fair Value, as of September 28, 2013 and September 29, 2012.



U.S. Plans, September 28, 2013	Level 1		Level 2		Level 3		Total
Shares of registered investment companies:
Non-investment grade	$	61,133	$	—	$	—	$	61,133
Real assets	17,916		—		—		17,916
Other	16,487		—		—		16,487
Fixed income funds:
U.S. Government obligations	—		40,173		—		40,173
Corporate and other	—		27,418		—		27,418
Employer securities	67,163		—		—		67,163
Interest in common collective trusts	—		152,355		—		152,355
Money market funds	—		23,938		—		23,938
Cash and cash equivalents	68		—		—		68
Limited partnerships	—		—		71,072		71,072
Insurance contracts and other	—		—		21,195		21,195
Fair value	$	162,767	$	243,884	$	92,267	$	498,918



Non-U.S. Plans, September 28, 2013	Level 1		Level 2		Level 3		Total
Shares of registered investment companies	$	—	$	26,520	$	—	$	26,520
Domestic equity	4,493		169		—		4,662
International equity	9,784		—		—		9,784
Fixed income funds	4,430		23,658		—		28,088
Cash and cash equivalents	96		3,107		—		3,203
Insurance contracts and other	—		548		25,820		26,368
Fair value	$	18,803	$	54,002	$	25,820	$	98,625



U.S. Plans, September 29, 2012	Level 1		Level 2		Level 3		Total
Shares of registered investment companies:
Large growth stocks	$	87,062	$	—	$	—	$	87,062
International equity	72,763		—		—		72,763
Emerging markets	18,566		—		—		18,566
Common stock:
International equity	28,774		—		—		28,774
Large value stocks	17,454		—		—		17,454
Large core stocks	18,409		—		—		18,409
Large growth stocks	19,411		—		—		19,411
Other	16,950		—		—		16,950
Fixed income funds:
Intermediate-term core fixed income	67,046		—		—		67,046
Employer securities	43,893		—		—		43,893
Interest in common collective trusts	—		29,105		—		29,105
Money market funds	—		6,630		—		6,630
Cash and cash equivalents	1,759		—		—		1,759
Limited partnerships	—		—		13,604		13,604
Fair value	$	392,087	$	35,735	$	13,604	$	441,426



Non-U.S. Plans, September 29, 2012	Level 1		Level 2		Level 3		Total
Shares of registered investment companies	$	—	$	30,700	$	—	$	30,700
Domestic equity	3,161		142		—		3,303
International equity	9,866		—		—		9,866
Fixed income funds	2,157		16,765		—		18,922
Cash and cash equivalents	748		—		—		748
Insurance contracts and other	—		653		19,852		20,505
Fair value	$	15,932	$	48,260	$	19,852	$	84,044

The following is a roll forward of the consolidated plan assets classified as Level 3 within the fair value hierarchy:



	U.S. Plans			Non-U.S. Plans			Total
Balance at October 1, 2011	$	8,633		$	11,378		$	20,011
Return on assets	3,026			3,769			6,795
Purchases from contributions to Plans	5,344			5,420			10,764
Proceeds from sales of investments	(3,399		)	—			(3,399		)
Settlements paid in cash	—			(160		)	(160		)
Foreign currency translation	—			(555		)	(555		)
Balance at September 29, 2012	13,604			19,852			33,456
Return on assets	7,653			3,670			11,323
Purchases from contributions to Plans	81,045			2,229			83,274
Proceeds from sales of investments	(3,000		)	—			(3,000		)
Settlements paid in cash	(7,035		)	(164		)	(7,199		)
Foreign currency translation	—			233			233
Balance at September 28, 2013	$	92,267		$	25,820		$	118,087

The valuation methodologies used for pension plan assets measured at fair value have not changed in the past two years. Cash and cash equivalents consist of direct cash holdings and institutional short-term investment vehicles. Direct cash holdings are valued at cost, which approximates fair value. Institutional short-term investment vehicles are valued daily. Investments in U.S. Government obligations are valued by a pricing service based upon closing market prices at year end. Shares of registered investment companies are valued at net asset value of shares held by the plan at year end. Common stocks traded on national exchanges are valued at the last reported sales price. Investments denominated in foreign currencies are translated into U.S. dollars using the last reported exchange rate. Fixed income funds are valued using methods, such as dealer quotes, available trade information, spreads, bids and offers provided by a pricing vendor. Investments in limited partnerships are valued based on the net asset value of our share in the fair value of the investments at year end. Common collective trust funds consist of pools of investments used by institutional investors to obtain exposure to equity and fixed income markets. Common collective trust funds held by us invest primarily in investment grade fixed income securities, common stock and real property assets. The common collective trusts have no unfunded commitments at September 28, 2013, and there are no significant restrictions on redemptions. Shares held in common collective trust funds are reported at the net unit value of units held by the trust at year end. The unit value is determined by the total value of fund assets divided by the total number of units of the fund owned. Investments in insurance contracts are valued at contract value, which is the fair value of the underlying investment of the insurance company. Securities or other assets for which market quotations are not readily available or for which market quotations do not represent the value at the time of pricing (including certain illiquid securities) are fair valued in accordance with procedures established under the supervision and responsibility of the Custodian of that investment.

Such procedures may include the use of independent pricing services or affiliated advisor pricing, which use prices based upon yields or prices of securities of comparable quality, coupon, maturity and type, indications as to values from dealers, operating data and general market conditions.

The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although we believe the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Pension expense for all plans, including costs for various defined contribution plans, is as follows:



	U.S. Plans									Non-U.S. Plans
	2013			2012			2011			2013			2012			2011
Service cost	$	26,856		$	23,347		$	22,566		$	4,874		$	4,046		$	4,804
Interest cost	28,818			29,786			28,683			5,750			5,864			6,260
Expected return on plan assets	(41,340		)	(41,970		)	(39,089		)	(3,789		)	(3,832		)	(3,900		)
Amortization of prior service cost (credit)	8			9			9			(51		)	(62		)	(60		)
Amortization of actuarial loss	27,604			17,024			11,292			1,589			875			1,546
Settlement loss	—			—			16			245			—			275
Pension expense for defined benefit plans	41,946			28,196			23,477			8,618			6,891			8,925
Pension expense for defined contribution plans	11,223			9,114			7,674			5,672			5,105			4,765
Total pension expense	$	53,169		$	37,310		$	31,151		$	14,290		$	11,996		$	13,690

The estimated net prior service cost and net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost for pension plans in 2014 are $101 and $17,734, respectively.

Benefits expected to be paid to the participants of the plans are:



	U.S. Plans		Non-U.S. Plans
2014	$	21,953	$	4,936
2015	24,811		5,833
2016	26,878		5,949
2017	29,651		6,306
2018	32,258		6,194
Five years thereafter	209,198		39,215

We presently anticipate contributing approximately $44,000 to the U.S. plans and $7,300 to the non-U.S. plans in 2014.

We provide postretirement health care benefits to certain domestic retirees, who were hired prior to October 1, 1989. There are no plan assets. The transition obligation was being expensed over 20 years and was fully amortized in 2013. The changes in the accumulated benefit obligation of this unfunded plan for 2013 and 2012 are shown in the following table:



	September 28, 2013			September 29, 2012
Change in Accumulated Postretirement Benefit Obligation (APBO):
APBO at prior year measurement date	$	17,456		$	18,025
Service cost	292			330
Interest cost	549			785
Contributions by plan participants	1,550			1,510
Benefits paid	(2,617		)	(2,634		)
Actuarial gains	(2,860		)	(656		)
Retiree drug subsidy receipts	—			96
APBO at measurement date	$	14,370		$	17,456
Funded status	$	(14,370	)	$	(17,456	)
Accrued postretirement benefit liability	$	14,370		$	17,456
Amount recognized in accumulated other comprehensive loss, before taxes:
Transition obligation	$	—		$	361
Actuarial gains	(3,464		)	(604		)
Amount recognized in accumulated other comprehensive loss, before taxes	$	(3,464	)	$	(243	)

The cost of the postretirement benefit plan is as follows:



	2013		2012		2011
Service cost	$	292	$	330	$	491
Interest cost	549		785		1,103
Amortization of transition obligation	361		394		394
Amortization of actuarial loss	—		—		579
Net periodic postretirement benefit cost	$	1,202	$	1,509	$	2,567

As of the measurement date, the assumed discount rate used in the accounting for the postretirement benefit obligation was 4.5% in 2013, 3.3% in 2012 and 4.5% in 2011. As of the measurement date, the assumed discount rate used in the accounting for the net periodic postretirement benefit cost was 3.3% in 2013, 4.5% in 2012 and 4.8% in 2011.

For measurement purposes, a 7.4%, 6.8% and 7.8% annual per capita rate of increase of medical and drug costs before age 65, medical costs after age 65 and drug costs after age 65, respectively, were assumed for 2013, all gradually decreasing to 4.5% for 2028 and years thereafter. A one percentage point increase in this rate would increase our accumulated postretirement benefit obligation as of the measurement date in 2013 by $520, while a one percentage point decrease in this rate would decrease our accumulated postretirement benefit obligation by $483. A one percentage point increase or decrease in this rate would not have a material effect on the total service cost and interest cost components of the net periodic postretirement benefit cost.

Activity in AOCI related to U.S. pension plans, non-U.S. pension plans and post-retirement health care benefit plans is summarized below:



	September 28, 2013			September 29, 2012
Balance at beginning of period	$	(280,424	)	$	(234,128	)
Net deferral in AOCI of actuarial loss:
Net actuarial gain (loss) during period	141,806			(90,463		)
Tax effect	(53,532		)	32,990
	88,274			(57,473		)
Net reclassification from AOCI into earnings:
Reclassification from AOCI into earnings	29,427			17,969
Tax effect	(10,972		)	(6,792		)
	18,455			11,177
Balance at end of period	$	(173,695	)	$	(280,424	)

Employee and management profit sharing reflects a discretionary payment based on our financial performance. Profit share expense was $14,950, $25,100 and $30,025 in 2013, 2012 and 2011, respectively.