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Pension and retirement plan | 12 Months Ended
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Jun. 27, 2020
Pension and retirement plan |
Pension and retirement plans | 10. Pension and retirement plans Pension Plan The Company has a noncontributory defined benefit pension plan that covers substantially all current or former U.S. Employees (the “Plan”). The Company’s Plan meets the definition of a defined benefit plan and as a result, the Company applies ASC 715 pension accounting to the Plan. The Plan is a cash balance plan that is similar in nature to a defined contribution plan in that a participant’s benefit is defined in terms of stated account balances. The Plan provides the Company with the benefit of applying any earnings on the Plan’s investments beyond the fixed return provided to participants, toward the Company’s future cash funding obligations. Employees are eligible to participate in the Plan following the first year of service during which they worked at least 1,000 hours. The Plan provides defined benefits pursuant to a cash balance feature whereby a participant accumulates a benefit based upon a percentage of current salary, which varies with age, and interest credits. The Company uses its fiscal year end as the measurement date for determining pension expense and benefit obligations for each fiscal year. ​ The following table outlines changes in benefit obligations, plan assets and the funded status of the Plan as of the end of fiscal 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | June 27, |  | June 29, |
​ | ​ | 2020 | ​ | 2019 |
​ |  | (Thousands) | ​
Changes in benefit obligations: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Benefit obligations at beginning of year | ​ | $ | 731,695 | ​ | $ | 685,160 | ​
Service cost | ​ |  | 15,145 | ​ |  | 14,631 | ​
Interest cost | ​ |  | 22,552 | ​ |  | 26,354 | ​
Actuarial loss | ​ |  | 72,144 | ​ |  | 55,118 | ​
Benefits paid | ​ |  | (51,357) | ​ |  | (49,610) | ​
Plan amendments | ​ | ​ | — | ​ | ​ | 42 | ​
Benefit obligations at end of year | ​ | $ | 790,179 | ​ | $ | 731,695 | ​
Changes in plan assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value of plan assets at beginning of year | ​ | $ | 664,063 | ​ | $ | 659,038 | ​
Actual return on plan assets | ​ |  | 87,094 | ​ |  | 46,635 | ​
Benefits paid | ​ |  | (51,357) | ​ |  | (49,610) | ​
Contributions | ​ |  | 8,000 | ​ |  | 8,000 | ​
Fair value of plan assets at end of year | ​ | $ | 707,800 | ​ | $ | 664,063 | ​
Funded status of the plan recognized as a non-current liability | ​ | $ | (82,379) | ​ | $ | (67,632) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amounts recognized in accumulated other comprehensive loss: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Unrecognized net actuarial losses | ​ | $ | 256,477 | ​ | $ | 235,384 | ​
Unamortized prior service cost | ​ |  | 332 | ​ |  | 2,470 | ​
​ | ​ | $ | 256,809 | ​ | $ | 237,854 | ​
Other changes in plan assets and benefit obligations recognized in other comprehensive income: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net actuarial loss | ​ | $ | 35,721 | ​ | $ | 62,002 | ​
Net prior service cost | ​ | ​ | — | ​ | ​ | 42 | ​
Amortization of net actuarial losses | ​ |  | (14,629) | ​ |  | (9,251) | ​
Amortization of prior service (costs) credits | ​ |  | (2,137) | ​ |  | 1,571 | ​
​ | ​ | $ | 18,955 | ​ | $ | 54,364 | ​
​ Included in accumulated other comprehensive loss at June 27, 2020, is a before tax expense of $256.5 million of net actuarial losses that have not yet been recognized in net periodic pension cost, of which $20.6 million is expected to be recognized as a component of net periodic pension cost during fiscal 2021. Also included is a before tax net cost of $0.3 million of prior service costs that have not yet been recognized in net periodic pension costs, of which $0.3 million is expected to be recognized as a component of net periodic pension costs during fiscal 2021. Assumptions used to calculate actuarial present values of benefit obligations are as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019 |
Discount rate | ​ | 2.7 | % | 3.5 | %
​ The discount rate selected by the Company for the Plan reflects the current rate at which the underlying liability could be settled at the measurement date as of June 27, 2020. The estimated discount rate in fiscal 2020 and fiscal 2019 was based on the spot yield curve approach, which applies the individual spot rates from a highly rated bond yield curve to each future year’s estimated cash flows. Assumptions used to determine net benefit costs are as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019 |
Discount rate | ​ | 3.3 | % | 4.1 | %
Expected return on plan assets | ​ | 7.7 | % | 8.0 | %
​ Components of net periodic pension cost for the Plan during the last three fiscal years are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Years Ended | ​
​ | ​ | June 27, |  | June 29, |  | June 30, | ​
​ | ​ | 2020 | ​ | 2019 | ​ | 2018 | ​
​ | ​ | (Thousands) | ​
Service cost | ​ | $ | 15,145 | ​ | $ | 14,631 | ​ | $ | 15,834 | ​
Total net periodic pension cost within selling, general and administrative expenses | ​ | ​ | 15,145 | ​ | ​ | 14,631 | ​ | ​ | 15,834 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest cost | ​ |  | 22,552 | ​ |  | 26,354 | ​ |  | 23,732 | ​
Expected return on plan assets | ​ |  | (50,671) | ​ |  | (53,518) | ​ |  | (54,686) | ​
Amortization of prior service cost (credit) | ​ |  | 2,137 | ​ |  | (1,571) | ​ |  | (1,573) | ​
Recognized net actuarial loss | ​ |  | 14,629 | ​ |  | 9,251 | ​ |  | 14,404 | ​
Total net periodic pension benefit within other (expense) income, net | ​ | ​ | (11,353) | ​ | ​ | (19,484) | ​ | ​ | (18,123) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net periodic pension cost (benefit) | ​ | $ | 3,792 | ​ | $ | (4,853) | ​ | $ | (2,289) | ​
​ The Company made $8.0 million and $8.0 million of contributions in fiscal 2020 and fiscal 2019, respectively, and expects to make approximately $16.0 million of contributions in fiscal 2021. ​ Benefit payments are expected to be paid to Plan participants as follows for the next five fiscal years and the aggregate for the five years thereafter (in thousands):
​ | ​ | ​ | ​
2021 | $ | 49,144 | ​
2022 |  | 41,897 | ​
2023 |  | 44,868 | ​
2024 |  | 46,817 | ​
2025 |  | 48,149 | ​
2026 through 2030 |  | 259,412 | ​
​ The Plan’s assets are held in trust and were allocated as follows as of the measurement date at the end of fiscal 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019 |
Return seeking investments |  | 62 | % | 58 | %
Fixed income investments |  | 36 | % | 42 | %
Cash and cash equivalents |  | 2 | % | — | ​
​ The general investment objectives of the Plan are to maximize returns through a diversified investment portfolio in order to earn annualized returns that exceed the long-term cost of funding the Plan’s pension obligations while maintaining reasonable and prudent levels of risk. The expected return on the Plan’s assets in fiscal 2021 is currently 7.4%, which represents the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the benefit obligation based upon the targeted investment allocations. This assumption has been determined by combining expectations regarding future rates of return for the investment portfolio along with the historical and expected distribution of investments by asset class and the historical rates of return for each of those asset classes. The mix of return seeking and fixed income investments is typically diversified. The Plan’s assets do not include any investments in Avnet common stock. As of June 27, 2020, the Company’s target allocation for the Plan’s investment portfolio is for return seeking investments to represent approximately 65% of the investment portfolio. The majority of the remaining portfolio of investments is to be invested in fixed income investments, which typically have lower risks, but also lower returns. The following table sets forth the fair value of the Plan’s investments as of June 27, 2020:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Level 1 |  | Level 2 |  | Level 3 |  | Net Asset Value |  | Total |
​ | ​ | (Thousands) |
Cash and cash equivalents | ​ | $ | 13,243 | ​ | $ | — | ​ | $ | — | ​ | $ | — | ​ | $ | 13,243 | ​
Return Seeking Investments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Common stocks | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 254,917 | ​ |  | 254,917 | ​
Real estate | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 81,817 | ​ | ​ | 81,817 | ​
High yield credit and bonds | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 103,925 | ​ | ​ | 103,925 | ​
Fixed Income Investments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 218,573 | ​ |  | 218,573 | ​
Corporate | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 35,325 | ​ |  | 35,325 | ​
Total | ​ | $ | 13,243 | ​ | $ | — | ​ | $ | — | ​ | $ | 694,557 | ​ | $ | 707,800 | ​
​ Certain investments included in the table above are measured at fair value using the net asset value per share (or its equivalent) practical expedient and are not included in the three levels of the fair value hierarchy. The following table sets forth the fair value of the Plan’s investments as of June 29, 2019:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
​ | ​ | (Thousands) |
Cash and cash equivalents | ​ | $ | 2,441 | ​ | $ | — | ​ | $ | — | ​ | $ | 2,441 | ​
Equities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. common stocks | ​ |  | — | ​ |  | 254,139 | ​ |  | — | ​ |  | 254,139 | ​
International common stocks | ​ |  | — | ​ |  | 131,847 | ​ |  | — | ​ |  | 131,847 | ​
Fixed Income: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. government agencies | ​ | ​ | — | ​ |  | 97,015 | ​ |  | — | ​ |  | 97,015 | ​
U.S. and international corporate bonds | ​ |  | — | ​ |  | 153,891 | ​ |  | — | ​ |  | 153,891 | ​
Other | ​ | ​ | — | ​ |  | 24,730 | ​ |  | — | ​ |  | 24,730 | ​
Total | ​ | $ | 2,441 | ​ | $ | 661,622 | ​ | $ | — | ​ | $ | 664,063 | ​
​ Each of these investments may be redeemed without restrictions in the normal course of business and there were no material unfunded commitments as of June 27, 2020.

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
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