EMPLOYEE BENEFIT PLANS

The Company has retirement and pension plans covering a substantial number of its domestic and foreign employees. Most retirement benefits are provided by the Company under separate final-pay noncontributory and contributory defined benefit and defined contribution plans for all salaried and hourly employees (excluding those covered by union-sponsored plans) who meet service and age requirements. Although various defined benefit formulas exist for employees, generally these are based on length of service and earnings patterns during employment. Effective January 1, 2012, the Company's Board of Directors authorized the Company to proceed with the restructuring of its domestic retirement benefit program to include the closing of Darling's domestic salaried and hourly defined benefit plans to new participants as well as the freezing of service and wage accruals thereunder effective December 31, 2011 (a curtailment of these plans for financial reporting purposes) and the enhancing of benefits under the Company's domestic defined contribution plans. The Company-sponsored domestic hourly union plan has not been curtailed; however, several locations of the Company-sponsored domestic hourly union plan have been curtailed as a result of collective bargaining renewals for those sites.

As a result of the VION Acquisition, employees of VION Ingredients became employees of Darling Ingredients International. Pursuant to the terms of the Sale and Purchase Agreement dated October 3, 2013, as amended, between Darling and VION, Darling assumed approximately $28.9 million of unfunded pension and insignificant postretirement benefit plan obligations.

Effective on December 31, 2015, the largest foreign defined benefit plan was terminated. As a result of the terminated plan, all future accruals ceased, representing a curtailment of the future accruals. As part of the termination, the Company's subsidiary transferred all past service benefits and all assets in the plan to a third party insurance provider as a settlement of the plan. In place of this defined benefit plan, future benefits are now being provided for through a multiemployer plan that will be accounted for as a defined contribution plan. In fiscal 2016, two additional immaterial foreign defined benefit plans were amended and terminated resulting in curtailment and settlement gains.

The Company maintains defined contribution plans both domestically and at its foreign entities. The Company's matching portion and annual employer contributions to the Company's domestic defined contribution plans for fiscal 2016, 2015 and 2014 were approximately $9.2 million, $9.3 million and $9.2 million, respectively. The Company's matching portion and annual employer contributions to the Company's foreign defined contribution plans for fiscal 2016, 2015 and 2014 were approximately $6.2 million, $3.0 million and $3.5 million, respectively.

The Company recognizes the over-funded or under-funded status of the Company's defined benefit post-retirement plans as an asset or liability in the Company's balance sheet, with changes in the funded status recognized through comprehensive income in the year in which they occur.

In April 2015, the FASB issued ASU No. 2015-04, Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets. The ASU amends ASC Topic 715, Compensation-Retirement Benefits. The new standard permits a reporting entity with a fiscal year-end that does not coincide with a month-end to measure defined benefit plan assets and obligations using the month-end that is closest to the entity's fiscal year-end and apply that expedient consistently from year to year. The practical expedient should be applied consistently to all plans if an entity has more than one plan. This ASU is effective for public entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those years with early adoption permitted. The Company has elected to early adopt in 2015 the month-end date of December 31 as the measurement date for all of the Company's defined benefit plans, which is the closest month-end to the Company's fiscal year-end. The following table sets forth the plans’ funded status for the Company's domestic and foreign defined benefit plans and amounts recognized in the Company's consolidated balance sheets based on the measurement date (December 31, 2016 and December 31, 2015) (in thousands):



	December 31, 2016			January 2, 2016
Change in projected benefit obligation:
Projected benefit obligation at beginning of period	$	182,276		$	395,142
Acquisitions	—			—
Service cost	2,549			6,638
Interest cost	6,950			10,536
Employee contributions	439			1,862
Plan amendments	101			90
Actuarial loss/(gain)	7,905			(24,436		)
Benefits paid	(7,146		)	(11,197		)
Effect of curtailment	(1,286		)	(9,545		)
Effect of settlement	(953		)	(162,600		)
Other	(1,545		)	(24,214		)
Projected benefit obligation at end of period	189,290			182,276

Change in plan assets:
Fair value of plan assets at beginning of period	127,970			328,220
Acquisitions	—			—
Actual return on plan assets	10,138			(17,888		)
Employer contributions	5,250			9,612
Employee contributions	439			1,862
Benefits paid	(7,146		)	(11,197		)
Effect of settlement	(953		)	(162,600		)
Other	(789		)	(20,039		)
Fair value of plan assets at end of period	134,909			127,970

Funded status	(54,381		)	(54,306		)
Net amount recognized	$	(54,381	)	$	(54,306	)

Amounts recognized in the consolidated balance sheets consist of:
Noncurrent assets	$	—		$	—
Current liability	(1,229		)	(1,086		)
Noncurrent liability	(53,152		)	(53,220		)
Net amount recognized	$	(54,381	)	$	(54,306	)

Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss	$	52,525		$	51,921
Prior service cost/(credit)	417			359
Net amount recognized (a)	$	52,942		$	52,280


(a)	Amounts do not include deferred taxes of $19.4 million and $19.7 million at December 31, 2016 and January 2, 2016, respectively.

The amounts included in “Other” in the above table reflect the impact of foreign exchange translation for plans in Argentina, Brazil, Belgium, Canada, France, Germany, Japan, Netherlands and United Kingdom. The Company's domestic pension plan benefits comprise approximately 75% and 76% of the projected benefit obligation for fiscal 2016 and fiscal 2015, respectively. Additionally, the Company has made required and tax deductible discretionary contributions to its domestic pension plans in fiscal 2016 and fiscal 2015 of approximately $0.6 million and approximately $0.4 million, respectively. The Company made required and tax deductible discretionary contributions to its foreign pension plans in fiscal 2016 and fiscal 2015 of approximately $4.7 million and $ 9.2 million, respectively.



	December 31, 2016		January 2, 2016
Projected benefit obligation	$	189,290	$	182,276
Accumulated benefit obligation	181,340		171,530
Fair value of plan assets	134,909		127,970

Net pension cost includes the following components (in thousands):



	December 31, 2016			January 2, 2016			January 3, 2015
Service cost	$	2,549		$	6,638		$	5,208
Interest cost	6,950			10,536			13,214
Expected return on plan assets	(7,552		)	(12,229		)	(14,439		)
Net amortization and deferral	4,668			5,034			2,094
Curtailment	(1,285		)	(1,181		)	7
Settlement	(114		)	(2,353		)	—
Net pension cost	$	5,216		$	6,445		$	6,084

Amounts recognized in accumulated other comprehensive income (loss) for the year ended (in thousands):



	2016			2015
Actuarial (loss)/gain recognized:
Reclassification adjustments	$	2,846		$	3,115
Actuarial (loss)/gain recognized during the period	(3,861		)	(2,323		)
Amortization of settlement	(69		)	3,823
Prior service (cost) credit recognized:
Reclassification adjustments	24			(31		)
Prior service cost arising during the period	—			—
Amortization of curtailment	—			(853		)
Other	44			471
	$	(1,016	)	$	4,202

The estimated amount that will be amortized from accumulated other comprehensive loss into net periodic pension cost in fiscal 2017 is as follows (in thousands):



	2017
Net actuarial loss	$	4,754
Prior service cost	33
	$	4,787

Weighted average assumptions used to determine benefit obligations were:



	December 31, 2016	January 2, 2016	January 3, 2015

Discount rate	3.81%	4.13%	2.79%
Rate of compensation increase	0.38%	0.31%	1.82%

Weighted average assumptions used to determine net periodic benefit cost for the employee benefit pension plans were:



	December 31, 2016	January 2, 2016	January 3, 2015
Discount rate	3.55%	3.47%	4.15%
Rate of increase in future compensation levels	0.84%	0.38%	1.70%
Expected long-term rate of return on assets	6.52%	6.62%	5.06%

Consideration was made to the long-term time horizon for the (U.S. and Canada's) plans' benefit obligations as well as the related asset class mix in determining the expected long-term rate of return. Historical returns are also considered, over the long-term time horizon, in determining the expected return. Considering the overall asset mix of approximately 60% equity and 40% fixed income with equity exposure on a declining trend since the implementation of the glide path for two of the U.S. plans, the Company believes it is reasonable to expect a long-term rate of return of 6.9% for the (U.S. and Canada's) plans' investments as a whole. The remaining foreign plans' assets are principally invested under insurance contracts arrangements which have weighted average expected long-term rate of returns of 2.7%.

The investment objectives have been established in conjunction with a comprehensive review of the current and projected financial requirements. The primary investment objectives are: 1) to have the ability to pay all benefit and expense obligations when due; 2) to maximize investment returns within reasonable and prudent levels of risk in order to minimize contributions; and 3) to maintain flexibility in determining the future level of contributions.

Investment results and changing discount rates are the most critical elements in achieving funding objectives; however, contributions are used as a supplemental source of funding as deemed appropriate.

The investment guidelines are based upon an investment horizon of greater than ten years; therefore, interim fluctuations are viewed with this perspective. The strategic asset allocation is based on this long-term perspective and the plans' funded status. However, because the participants’ average age is somewhat older than the typical average plan age, consideration is given to retaining some short-term liquidity. Analysis of the cash flow projections of the plans indicates that benefit payments will continue to exceed contributions. The results of a thorough asset-liability study completed during 2012 established a dynamic asset allocation glide path (the “Glide Path”) by which the U.S. plans' asset allocations are determined. The Glide Path designates intervals based on funded status which contain a corresponding allocation to equities/real assets and fixed income. As the U.S. plans' funded status improves, the allocations become more conservative, and the opposite is true when the funded status declines.



Fixed Income	35% - 80%
Equities	20% - 65%

The equity allocation is invested in stocks traded on one of the U.S. stock exchanges or in foreign companies whose stock is traded outside the U.S. and/or companies that conduct the major portion of their business outside the U.S. Securities convertible into such stocks, convertible bonds and preferred stock, may also be purchased. The portfolio may invest in American Depository Receipts (“ADR”). The majority of the equities are invested in mutual funds that are well-diversified among growth and value stocks, as well as large, mid, and small cap assets. This mix is balanced based on the understanding that large cap stocks are historically less volatile than small cap stocks: however, smaller cap stocks have historically outperformed larger cap stocks. The emerging markets portion of the equity allocation is held below 10% due to greater volatility in the asset class. Risk adjusted returns are the primary driver of allocation choices within these asset classes. The portfolio is well-diversified in terms of companies, industries and countries.

The diversified asset portion of the allocation will invest in securities with a goal to out pace inflation and preserve their value. The securities in this allocation may consist of inflation-indexed bonds, securities of real estate companies, commodity index-linked notes, fixed-income securities, securities of natural resource companies, master limited partnerships, publicly-listed infrastructure companies, and floating rate debt.

All investment objectives are expected to be achieved over a market cycle anticipated to be a period of five to seven years. Reallocations are performed on a monthly basis to retain target allocation ranges. On a quarterly basis the plans' funded status will be recalculated to determine which Glide Path interval allocation is appropriate.

The following table presents fair value measurements for the Company's defined benefit plans’ assets as categorized using the fair value hierarchy under FASB authoritative guidance (in thousands):



	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands of dollars)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Balances as January 2, 2016
Fixed Income:
Long Term	$	21,079	$	21,079	$	—	$	—
Short Term	1,341		1,341		—		—
Equity Securities:
Domestic equities	34,864		34,864		—		—
International equities	21,190		21,190		—		—
Insurance contracts	8,121		—		5,801		2,320
Total categorized in fair value hierarchy	86,595		78,474		5,801		2,320
Other investments measured at NAV	41,375
Totals	$	127,970	$	78,474	$	5,801	$	2,320

Balances as December 31, 2016
Fixed Income:
Long Term	$	17,408	$	17,408	$	—	$	—
Short Term	2,825		2,825		—		—
Equity Securities:
Domestic equities	41,300		41,300		—		—
International equities	24,403		24,403		—		—
Insurance contracts	10,670		—		7,887		2,783
Total categorized in fair value hierarchy	96,606		85,936		7,887		2,783
Other investments measured at NAV	38,303
Totals	$	134,909	$	85,936	$	7,887	$	2,783

The majority of the U.S. and Canada plan pension assets are invested in mutual funds; however, some assets are invested in pooled separate accounts (“PSA”) which have similar mutual fund counterparts. PSA accounts are generally used to access lower fund management expenses when compared to their mutual fund counterparts. The mutual funds are generally invested in institutional shares, retirement shares, or A-shares with no loads. The fair value of each mutual fund and PSA is based on the market value of the underlying investments. The U.S. pension plans PSA for fiscal 2016 utilized net asset value (“NAV”) per share (or its equivalent) to measure its investments, as a practical expedient in accordance with ASC Topic 820, Fair Value Measurements and have not been classified in the fair value hierarchy in the above table. The majority of the foreign pension assets are held under insurance contracts where the investment risk for the accumulated benefit obligation rests with the insurer, which the Company has no specific detailed asset information.

The fair value measurement of plan assets using significant unobservable inputs (level 3) changed due to the following:



	Insurance
(in thousands of dollars)	Contracts
Balance as of January 3, 2015	$	194,909
Unrealized gains/(losses) relating to instruments still held in the reporting period.	(12,601		)
Purchases, sales, and settlements	(161,402		)
Exchange rate changes	(18,586		)
Balance as of January 2, 2016	2,320
Unrealized gains/(losses) relating to instruments still held in the reporting period.	316
Purchases, sales, and settlements	244
Exchange rate changes	(97		)
Balance as of December 31, 2016	$	2,783

Contributions

The Company's funding policy for employee benefit pension plans is to contribute annually not less than the minimum amount required nor more than the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.

Based on current actuarial estimates, the Company expects to make payments of approximately $4.3 million to meet funding requirements for its domestic and foreign pension plans in fiscal 2017.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):



Year Ending	Pension Benefits
2017	$	9,854
2018	8,438
2019	9,307
2020	9,849
2021	10,931
Years 2022 – 2026	58,887

Multiemployer Pension Plans

The Company participates in various multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts in the United States. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants. The FASB issued guidance requiring companies to provide additional disclosures related to individually significant multiemployer pension plans. The Company's contributions to each individual multiemployer plan represent less than 5% of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities on two of the plans in which the Company currently participates could be material to the Company. The following table provides more detail on these significant multiemployer plans (contributions in thousands):



											Expiration
Pension	EIN Pension	Pension Protection Act Zone Status		FIP/RP Status Pending/	Contributions						Date of Collective Bargaining
Fund	Plan Number	2016	2015	Implemented	2016		2015		2014		Agreement
Western Conference of Teamsters Pension Plan	91-6145047 / 001	Green	Green	No	$	1,456	$	1,387	$	1,384	April 2020 (b)
Central States, Southeast and Southwest Areas Pension Plan (a)	36-6044243 / 001	Red	Red	Yes	934		858		876		August 2018 (c)
All other multiemployer plans					983		986		1,042
		Total Company Contributions			$	3,373	$	3,231	$	3,302


(a)	In July 2005 this plan received a 10 year extension from the IRS for amortizing unfunded liabilities. In April 2016 the IRS approved a modification of the amortization extension.


(b)	The Company has several plants that participate in the Western Conference of Teamsters Pension Plan under collective bargaining agreements that require minimum funding contributions. Certain of these agreements have expired and are being renegotiated with others having expiration dates through April 1, 2020.


(c)	The Company has several processing plants that participate in the Central States, Southeast and Southwest Areas Pension Plan under collective bargaining agreements that require minimum funding contributions. Certain of these agreements have expired and are being renegotiated with others having expiration dates through August 6, 2018.

With respect to the other multiemployer pension plans in which the Company participates and which are not individually significant, six plans have certified as critical or red zone, one plan have certified as endangered or yellow zone, as defined by the Pension Protection Act of 2006. The Company's portion of contributions to all plans amounted to $3.4 million, $3.2 million and $3.3 million for the years ended December 31, 2016, January 2, 2016 and January 3, 2015, respectively.

The Company has received notices in prior years of withdrawal liability from two U.S. multiemployer plans in which it participated. As of December 31, 2016, the Company has an aggregate accrued liability of approximately $1.8 million representing the present value of scheduled withdrawal liability payments under these multiemployer plans. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the Pension Protection Act of 2006, the amounts could be material.