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Employee Benefit Plans and Other Postretirement Benefits | 12 Months Ended
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Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract] |
Employee Benefit Plans and Other Postretirement Benefits | Employee Benefit Plans and Other Postretirement Benefits The Company has a qualified defined benefit pension plan and several postretirement healthcare benefit plans, which cover employees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993. Pension benefits are based primarily on years of service and, for certain plans, levels of compensation. Employees are eligible to receive postretirement healthcare benefits upon attaining age 55 after rendering at least 10 years of service to the Company. Some of the plans require employee contributions to partially offset benefit costs. Obligations and Funded Status: The following table provides the changes in the benefit obligations, fair value of plan assets and funded status of the Company’s pension, SERPA and postretirement healthcare plans as of the Company’s December 31, 2016 and 2015 measurement dates (in thousands):
|  | Pension and SERPA Benefits |  | Postretirement Healthcare Benefits
|  | 2016 |  | 2015 |  | 2016 |  | 2015
Change in benefit obligation: |  |  |  |  |  |  |  |
Benefit obligation, beginning of period |  | $ | 2,009,000 |  |  | $ | 2,069,980 |  |  | $ | 354,739 |  |  | $ | 361,006 |
Service cost |  | 33,437 |  |  | 40,039 |  |  | 7,478 |  |  | 8,259 |
Interest cost |  | 90,827 |  |  | 87,345 |  |  | 14,814 |  |  | 14,166 |
Actuarial losses (gains) |  | 13,481 |  |  | (128,082 | ) |  | (4,647 | ) |  | (6,757 | )
Plan participant contributions |  | — |  |  | — |  |  | 2,669 |  |  | 2,587 |
Plan amendments |  | — |  |  | 6,407 |  |  | — |  |  | — |
Special early retirement benefits |  | — |  |  | 10,563 |  |  | — |  |  | 622 |
Benefits paid, net of Medicare Part D subsidy |  | (160,310 | ) |  | (77,252 | ) |  | (28,622 | ) |  | (25,144 | )
Benefit obligation, end of period |  | 1,986,435 |  |  | 2,009,000 |  |  | 346,431 |  |  | 354,739 |
Change in plan assets: |  |  |  |  |  |  |  |
Fair value of plan assets, beginning of period |  | 1,841,967 |  |  | 1,992,646 |  |  | 156,765 |  |  | 156,840 |
Actual return on plan assets |  | 188,376 |  |  | (77,980 | ) |  | 13,327 |  |  | (75 | )
Company contributions |  | 25,000 |  |  | — |  |  | — |  |  | — |
Plan participant contributions |  | — |  |  | — |  |  | 2,669 |  |  | 2,587 |
Benefits paid |  | (155,454 | ) |  | (72,699 | ) |  | (2,669 | ) |  | (2,587 | )
Fair value of plan assets, end of period |  | 1,899,889 |  |  | 1,841,967 |  |  | 170,092 |  |  | 156,765 |
Funded status of the plans, December 31 |  | $ | (86,546 | ) |  | $ | (167,033 | ) |  | $ | (176,339 | ) |  | $ | (197,974 | )
Amounts recognized in the Consolidated Balance Sheets, December 31: |  |  |  |  |  |  |  |
Accrued benefit liability (current liabilities) |  | $ | (2,104 | ) |  | $ | (2,145 | ) |  | $ | (3,072 | ) |  | $ | (4,315 | )
Accrued benefit liability (long-term liabilities) |  | (84,442 | ) |  | (164,888 | ) |  | (173,267 | ) |  | (193,659 | )
Net amount recognized |  | $ | (86,546 | ) |  | $ | (167,033 | ) |  | $ | (176,339 | ) |  | $ | (197,974 | )
Plan asset contributions and payments for 2015 have been adjusted to exclude benefits paid from general Company assets. Benefit Costs: Components of net periodic benefit costs for the years ended December 31 (in thousands):
|  | Pension and SERPA Benefits |  | Postretirement Healthcare Benefits
|  | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Service cost |  | $ | 33,437 |  |  | $ | 40,039 |  |  | $ | 31,498 |  |  | $ | 7,478 |  |  | $ | 8,259 |  |  | $ | 7,015 |
Interest cost |  | 90,827 |  |  | 87,345 |  |  | 86,923 |  |  | 14,814 |  |  | 14,166 |  |  | 16,878 |
Special early retirement benefits |  | — |  |  | 10,563 |  |  | — |  |  | — |  |  | 622 |  |  | — |
Expected return on plan assets |  | (145,781 | ) |  | (144,929 | ) |  | (136,734 | ) |  | (12,069 | ) |  | (11,506 | ) |  | (10,429 | )
Amortization of unrecognized: |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost (credit) |  | 1,019 |  |  | 435 |  |  | 1,119 |  |  | (2,803 | ) |  | (3,217 | ) |  | (3,853 | )
Net loss |  | 46,351 |  |  | 54,709 |  |  | 36,563 |  |  | 3,537 |  |  | 3,971 |  |  | 4,729 |
Settlement loss |  | 1,463 |  |  | 368 |  |  | — |  |  | — |  |  | — |  |  | — |
Net periodic benefit cost |  | $ | 27,316 |  |  | $ | 48,530 |  |  | $ | 19,369 |  |  | $ | 10,957 |  |  | $ | 12,295 |  |  | $ | 14,340 |
Net periodic benefit costs are allocated among selling, administrative and engineering expense, cost of goods sold and inventory. The expected return on plan assets is calculated based on the market-related value of plan assets. The market-related value of plan assets is different from the fair value in that asset gains/losses are smoothed over a five year period. U nrecognized gains and losses related to plan obligations and assets are initially recorded in other comprehensive income and result from actual experience that differs from assumed or expected results, and the impacts of changes in assumptions. Unrecognized plan asset gains and losses not yet reflected in the market-related value of plan assets are not subject to amortization. Remaining unrecognized gains and losses that exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets are amortized to earnings over the estimated future service period of active plan participants. The impacts of plan amendments, if any, are amortized over the estimated future service period of plan participants at the time of the amendment. Amounts included in accumulated other comprehensive income, net of tax, at December 31, 2016 which have not yet been recognized in net periodic benefit cost are as follows (in thousands):
|  | Pension and SERPA Benefits |  | Postretirement Healthcare Benefits |  | Total
Prior service cost (credit) |  | $ | 4,804 |  |  | $ | (7,279 | ) |  | $ | (2,475 | )
Net actuarial loss |  | 464,804 |  |  | 46,250 |  |  | 511,054 |
Total |  | $ | 469,608 |  |  | $ | 38,971 |  |  | $ | 508,579 |
Amounts expected to be recognized in net periodic benefit cost, net of tax, during the year ended December 31, 2017 are as follows (in thousands):
|  | Pension and SERPA Benefits |  | Postretirement Healthcare Benefits |  | Total
Prior service cost (credit) |  | $ | 641 |  |  | $ | (1,367 | ) |  | $ | (726 | )
Net actuarial loss |  | 27,699 |  |  | 2,053 |  |  | 29,752 |
Total |  | $ | 28,340 |  |  | $ | 686 |  |  | $ | 29,026 |
Assumptions: Weighted-average assumptions used to determine benefit obligations and net periodic benefit cost at December 31 were as follows:
|  | Pension and SERPA Benefits |  | Postretirement Healthcare Benefits
|  | 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Assumptions for benefit obligations: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 4.30 | % |  | 4.53 | % |  | 4.21 | % |  | 4.03 | % |  | 4.29 | % |  | 3.99 | %
Rate of compensation |  | 3.50 | % |  | 3.50 | % |  | 4.00 | % |  | n/a |  |  | n/a |  |  | n/a |
Assumptions for net periodic benefit cost: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 4.53 | % |  | 4.21 | % |  | 5.08 | % |  | 4.29 | % |  | 3.99 | % |  | 4.70 | %
Expected return on plan assets |  | 7.50 | % |  | 7.75 | % |  | 7.75 | % |  | 7.50 | % |  | 7.70 | % |  | 7.70 | %
Rate of compensation increase |  | 3.50 | % |  | 4.00 | % |  | 4.00 | % |  | n/a |  |  | n/a |  |  | n/a |
Pension and SERPA Accumulated Benefit Obligation: The Company’s pension and SERPA plans have a separately determined accumulated benefit obligation (ABO) and plan asset value. The ABO is the actuarial present value of benefits based on service rendered and current and past compensation levels. This differs from the projected benefit obligation (PBO) in that it includes no assumption about future compensation levels. The total ABO for all the Company’s pension and SERPA plans combined was $1.90 billion and $1.92 billion as of December 31, 2016 and 2015, respectively. The following table summarizes information related to the Company's qualified pension plan which had a PBO in excess of the fair value of plan assets at December 31 (in millions):
|  | 2016 |  | 2015
Pension plan with PBOs in excess of fair value of plan assets: |  |  |  |
PBO |  | $ | 1,934.1 |  |  | $ | 1,964.0 |
Fair value of plan assets |  | $ | 1,899.9 |  |  | $ | 1,842.0 |
The fair value of the qualified pension plan assets was greater than the plan's ABO at December 31, 2016 and 2015. The Company’s SERPA plans, which can only be funded as claims are paid, had projected and accumulated benefit obligations of $52.3 million and $38.4 million, respectively, as of December 31, 2016 and $45.0 million and $35.8 million, respectively, as of December 31, 2015. Plan Assets: Pension Plan Assets - The Company’s investment objective is to ensure assets are sufficient to pay benefits while mitigating the volatility of retirement plan assets or liabilities recorded in the balance sheet. The Company mitigates volatility through asset diversification and partial asset/liability matching. The investment portfolio for the Company's pension plan assets contains a diversified blend of equity and fixed-income investments. The Company’s current overall targeted asset allocation as a percentage of total market value was approximately 63% equities and 37% fixed-income and cash. Assets are rebalanced regularly to keep the actual allocation in line with targets. Equity holdings primarily include investments in small-, medium- and large-cap companies in the U.S. (including Company stock), investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign obligations. In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews. Postretirement Healthcare Plan Assets - The Company's investment objective is to maximize the return on assets to help pay the benefits by prudently investing in equities, fixed income and alternative assets. The Company's current overall targeted asset allocation as a percentage of total market value was approximately 69% equities and 31% fixed-income and cash. Equity holdings primarily include investments in small-, medium-, and large-cap companies in the U.S., investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign obligations. In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews. The following tables present the fair values of the plan assets related to the Company’s pension and postretirement healthcare plans within the fair value hierarchy as defined in Note 6. The fair values of the Company’s pension plan assets as of December 31, 2016 were as follows (in thousands):
|  | Balance as of December 31, 2016 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents |  | $ | 84,548 |  |  | $ | 1,284 |  |  | $ | 83,264 |
Equity holdings: |  |  |  |  |  |
U.S. companies |  | 603,568 |  |  | 586,302 |  |  | 17,266 |
Foreign companies |  | 50,256 |  |  | 50,256 |  |  | — |
Harley-Davidson common stock |  | 74,301 |  |  | 74,301 |  |  | — |
Pooled equity funds |  | 316,225 |  |  | 316,225 |  |  | — |
Other |  | 105 |  |  | 105 |  |  | — |
Total equity holdings |  | 1,044,455 |  |  | 1,027,189 |  |  | 17,266 |
Fixed-income holdings: |  |  |  |  |  |
U.S. Treasuries |  | 41,089 |  |  | 41,089 |  |  | — |
Federal agencies |  | 36,210 |  |  | — |  |  | 36,210 |
Corporate bonds |  | 418,522 |  |  | — |  |  | 418,522 |
Pooled fixed income funds |  | 170,741 |  |  | 57,543 |  |  | 113,198 |
Foreign bonds |  | 69,871 |  |  | — |  |  | 69,871 |
Municipal bonds |  | 12,509 |  |  | — |  |  | 12,509 |
Total fixed-income holdings |  | 748,942 |  |  | 98,632 |  |  | 650,310 |
Total assets in the fair value hierarchy |  | 1,877,945 |  |  | $ | 1,127,105 |  |  | $ | 750,840 |
Assets measured at net asset value as a practical expedient: |  |  |  |  |  |
Limited partnership interests |  | 9,321 |  |  |  |  |
Real estate investment trust |  | 12,623 |  |  |  |  |
Total pension plan assets |  | $ | 1,899,889 |  |  |  |  |
Included in the pension plan assets are 1,273,592 shares of the Company’s common stock with a market value of $74.3 million at December 31, 2016. The fair values of the Company’s postretirement healthcare plan assets as of December 31, 2016 were as follows (in thousands):
|  | Balance as of December 31, 2016 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents |  | $ | 4,442 |  |  | $ | 1,180 |  |  | $ | 3,262 |
Equity holdings: |  |  |  |  |  |
U.S. companies |  | 84,643 |  |  | 84,643 |  |  | — |
Foreign companies |  | 14,190 |  |  | 13,995 |  |  | 195 |
Pooled equity funds |  | 19,132 |  |  | 19,132 |  |  | — |
Other |  | 9 |  |  | 9 |  |  | — |
Total equity holdings |  | 117,974 |  |  | 117,779 |  |  | 195 |
Fixed-income holdings: |  |  |  |  |  |
U.S. Treasuries |  | 12,262 |  |  | 12,262 |  |  | — |
Federal agencies |  | 7,364 |  |  | — |  |  | 7,364 |
Corporate bonds |  | 11,750 |  |  | — |  |  | 11,750 |
Pooled fixed income funds |  | 9,690 |  |  | — |  |  | 9,690 |
Foreign bonds |  | 633 |  |  | — |  |  | 633 |
Municipal bonds |  | 459 |  |  | — |  |  | 459 |
Total fixed-income holdings |  | 42,158 |  |  | 12,262 |  |  | 29,896 |
Total assets in the fair value hierarchy |  | 164,574 |  |  | $ | 131,221 |  |  | $ | 33,353 |
Assets measured at net asset value as a practical expedient: |  |  |  |  |  |
Real estate investment trust |  | 5,518 |  |  |  |  |
Total postretirement healthcare plan assets |  | $ | 170,092 |  |  |  |  |
The fair values of the Company’s pension plan assets as of December 31, 2015 were as follows (in thousands):
|  | Balance as of December 31, 2015 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents |  | $ | 33,539 |  |  | $ | 1,485 |  |  | $ | 32,054 |
Equity holdings: |  |  |  |  |  |
U.S. companies |  | 574,826 |  |  | 571,949 |  |  | 2,877 |
Foreign companies |  | 113,803 |  |  | 113,803 |  |  | — |
Harley-Davidson common stock |  | 57,808 |  |  | 57,808 |  |  | — |
Pooled equity funds |  | 301,824 |  |  | 301,824 |  |  | — |
Other |  | 109 |  |  | 109 |  |  | — |
Total equity holdings |  | 1,048,370 |  |  | 1,045,493 |  |  | 2,877 |
Fixed-income holdings: |  |  |  |  |  |
U.S. Treasuries |  | 42,827 |  |  | 42,827 |  |  | — |
Federal agencies |  | 43,695 |  |  | — |  |  | 43,695 |
Corporate bonds |  | 388,439 |  |  | — |  |  | 388,439 |
Pooled fixed income funds |  | 184,142 |  |  | 49,271 |  |  | 134,871 |
Foreign bonds |  | 64,533 |  |  | — |  |  | 64,533 |
Municipal bonds |  | 13,090 |  |  | — |  |  | 13,090 |
Total fixed-income holdings |  | 736,726 |  |  | 92,098 |  |  | 644,628 |
Total assets in the fair value hierarchy |  | 1,818,635 |  |  | $ | 1,139,076 |  |  | $ | 679,559 |
Assets measured at net asset value as a practical expedient: |  |  |  |  |  |
Limited partnership interests |  | 10,530 |  |  |  |  |
Real estate investment trust |  | 12,802 |  |  |  |  |
Total pension plan assets |  | $ | 1,841,967 |  |  |  |  |
Included in the pension plan assets are 1,273,592 shares of the Company’s common stock with a market value of $57.8 million at December 31, 2015. The fair values of the Company’s postretirement healthcare plan assets as of December 31, 2015 were as follows (in thousands):
|  | Balance as of December 31, 2015 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents |  | $ | 6,068 |  |  | $ | 2,980 |  |  | $ | 3,088 |
Equity holdings: |  |  |  |  |  |
U.S. companies |  | 74,083 |  |  | 74,083 |  |  | — |
Foreign companies |  | 17,267 |  |  | 16,849 |  |  | 418 |
Pooled equity funds |  | 17,410 |  |  | 17,410 |  |  | — |
Other |  | 11 |  |  | 11 |  |  | — |
Total equity holdings |  | 108,771 |  |  | 108,353 |  |  | 418 |
Fixed-income holdings: |  |  |  |  |  |
U.S. Treasuries |  | 10,531 |  |  | 10,531 |  |  | — |
Federal agencies |  | 6,508 |  |  | — |  |  | 6,508 |
Corporate bonds |  | 10,270 |  |  | — |  |  | 10,270 |
Pooled fixed income funds |  | 8,305 |  |  | — |  |  | 8,305 |
Foreign bonds |  | 890 |  |  | — |  |  | 890 |
Municipal bonds |  | 531 |  |  | — |  |  | 531 |
Total fixed-income holdings |  | 37,035 |  |  | 10,531 |  |  | 26,504 |
Total assets in the fair value hierarchy |  | 151,874 |  |  | $ | 121,864 |  |  | $ | 30,010 |
Assets measured at net asset value as a practical expedient: |  |  |  |  |  |
Real estate investment trust |  | 4,891 |  |  |  |  |
Total postretirement healthcare plan assets |  | $ | 156,765 |  |  |  |  |
No plan assets are expected to be returned to the Company during the fiscal year ending December 31, 2017. For 2017, the Company’s overall expected long-term rate of return is 7.25% for pension assets and 7.25% for postretirement healthcare plan assets. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based on historical returns adjusted to reflect the current view of the long-term investment market. Postretirement Healthcare Cost: The weighted-average healthcare cost trend rate used in determining the accumulated postretirement benefit obligation of the healthcare plans was as follows:
|  | 2016 |  | 2015
Healthcare cost trend rate for next year |  | 7.25 | % |  | 7.50 | %
Rate to which the cost trend rate is assumed to decline (the ultimate rate) |  | 5.00 | % |  | 5.00 | %
Year that the rate reaches the ultimate trend rate |  | 2021 |  |  | 2021 |
This healthcare cost trend rate assumption can have a significant effect on the amounts reported. A one-percentage-point change in the assumed healthcare cost trend rate would have the following effects (in thousands):
|  | One Percent Increase |  | One Percent Decrease
Total of service and interest cost components in 2016 |  | $ | 658 |  |  | $ | (624 | )
Accumulated benefit obligation as of December 31, 2016 |  | $ | 12,670 |  |  | $ | (11,443 | )
Future Contributions and Benefit Payments: In January 2017, the Company voluntarily contributed $25.0 million to further fund its qualified pension plan. No pension plan contributions are required in 2017. The Company expects it will continue to make on-going payments related to current benefits for SERPA and postretirement healthcare plans in 2017. The expected benefit payments for the next five years and thereafter were as follows (in thousands):
|  | Pension Benefits |  | SERPA Benefits |  | Postretirement Healthcare Benefits
2017 |  | $ | 79,907 |  |  | $ | 2,104 |  |  | $ | 30,130 |
2018 |  | $ | 81,133 |  |  | $ | 2,240 |  |  | $ | 29,501 |
2019 |  | $ | 82,979 |  |  | $ | 2,693 |  |  | $ | 28,529 |
2020 |  | $ | 85,528 |  |  | $ | 3,169 |  |  | $ | 27,370 |
2021 |  | $ | 88,174 |  |  | $ | 3,513 |  |  | $ | 26,094 |
2022-2026 |  | $ | 499,403 |  |  | $ | 25,830 |  |  | $ | 124,713 |
Defined Contribution Plans: The Company has various defined contribution benefit plans that in total cover substantially all full-time employees. Employees can make voluntary contributions in accordance with the provisions of their respective plan, which includes a 401(k) tax deferral option. The Company expensed $18.2 million, $18.0 million and $18.1 million for Company contributions during 2016, 2015 and 2014, respectively.

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