Employee Benefit Obligations

Defined Benefit Plans

HRG

HRG has a noncontributory defined benefit pension plan (the “HRG Pension Plan”) covering certain former U.S. employees. During 2006, the HRG Pension Plan was frozen which caused all existing participants to become fully vested in their benefits.

Additionally, HRG has an unfunded supplemental pension plan (the “Supplemental Plan”) which provides supplemental retirement payments to certain former senior executives of HRG. The amounts of such payments equal the difference between the amounts received under the HRG Pension Plan and the amounts that would otherwise be received if HRG Pension Plan payments were not reduced as the result of the limitations upon compensation and benefits imposed by Federal law. Effective December 1994, the Supplemental Plan was frozen.

Spectrum Brands

Spectrum Brands has various defined benefit pension plans (the “Spectrum Brands Pension Plans”) covering some of its employees in the U.S. and certain employees in other countries, primarily the United Kingdom and Germany. The Spectrum Brands Pension Plans generally provide benefits of stated amounts for each year of service. Spectrum Brands funds its U.S. pension plans in accordance with the requirements of the defined benefit pension plans and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws. Additionally, in compliance with Spectrum Brands’ funding policy, annual contributions to non-U.S. defined benefit plans are equal to the actuarial recommendations or statutory requirements in the respective countries.

Spectrum Brands also sponsors or participates in a number of other non-U.S. pension arrangements, including various retirement and termination benefit plans, some of which are covered by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and therefore are not included in the information presented below. Spectrum Brands also has various nonqualified deferred compensation agreements with certain of its employees. Under certain of these agreements, Spectrum Brands has agreed to pay certain amounts annually for the first 15 years subsequent to retirement or to a designated beneficiary upon death. It is management’s intent that life insurance contracts owned by Spectrum Brands will fund these agreements. Under the remaining agreements, Spectrum Brands has agreed to pay such deferred amounts in up to 15 annual installments beginning on a date specified by the employee, subsequent to retirement or disability, or to a designated beneficiary upon death.

The following tables provide additional information on the Company’s pension plans as of September 30, 2015 and 2014, which principally relate to Spectrum Brands:



	U.S. Plans						Non U.S. Plans
	2015			2014			2015			2014
Change in benefit obligation
Projected benefit obligation, beginning of year	$	91.0		$	85.3		$	196.1		$	189.2
Obligations assumed from acquisitions	—			—			0.6			—
Transfer of obligation	—			—			(1.8		)	—
Service cost	0.8			0.5			2.6			3.0
Interest cost	3.7			3.8			6.2			7.4
Actuarial loss (gain)	3.1			6.7			10.6			8.6
Curtailments	—			—			(0.9		)	—
Benefits paid	(5.4		)	(5.3		)	(11.8		)	(6.2		)
Foreign currency exchange rate changes	—			—			(17.3		)	(5.9		)
Projected benefit obligation, end of year	$	93.2		$	91.0		$	184.3		$	196.1
Change in plan assets
Fair value of plan assets, beginning of year	$	78.0		$	73.8		$	126.5		$	117.0
Actual return on plan assets	(1.0		)	6.1			3.6			7.7
Employer contributions	1.0			3.4			7.8			10.4
Benefits paid	(5.4		)	(5.3		)	(11.8		)	(6.2		)
Foreign currency exchange rate changes	—			—			(9.2		)	(2.4		)
Fair value of plan assets, end of year	$	72.6		$	78.0		$	116.9		$	126.5
Accrued Benefit Cost / Funded Status	$	(20.6	)	$	(13.0	)	$	(67.4	)	$	(69.6	)
Weighted average assumptions:
Discount rate	3.4% to 4.3%			3.5% to 4.2%			1.8% to 13.8%			2.0% to 13.5%
Expected return on plan assets	7.0% to 7.3%			7.3% to 7.5%			3.5% to 5.3%			2.0% to 5.3%
Rate of compensation increase	N/A			N/A			2.3% to 5.5%			2.3% to 5.5%

The net underfunded status as of September 30, 2015 and 2014 of $88.0 and $82.6, respectively, is recognized in the accompanying Consolidated Balance Sheets within “Employee benefit obligations.” Included in AOCI as of September 30, 2015 and 2014 were unrecognized net losses of $28.5, net of tax expense of $1.3 and noncontrolling interest of $18.6, and $21.8, net of tax benefit of $0.8 and noncontrolling interest of $13.6, respectively, which have not yet been recognized as components of net periodic pension cost. The net loss in AOCI expected to be recognized during the fiscal year ending September 30, 2016 (“Fiscal 2016”) is $1.4.

The following table contains the components of net periodic benefit costs during Fiscal 2015, 2014 and 2013:



	U.S. Plans									Non U.S. Plans
	Fiscal									Fiscal
	2015			2014			2013			2015			2014			2013
Components of net periodic cost:
Service cost	$	0.8		$	0.5		$	0.6		$	2.6		$	3.0		$	2.8
Interest cost	3.7			3.8			3.5			6.2			7.4			7.1
Expected return on assets	(5.6		)	(5.2		)	(4.7		)	(5.2		)	(5.8		)	(5.0		)
Curtailment gain	—			—			—			0.7			(0.1		)	(0.8		)
Recognized net actuarial loss (gain)	0.2			0.1			1.2			1.3			1.4			0.9
Net periodic cost	$	(0.9	)	$	(0.8	)	$	0.6		$	5.6		$	5.9		$	5.0
Weighted average assumptions:
Discount rate	3.5% to 4.2%			3.6% to 4.7%			3.8% to 4.2%			2.0% to 13.5%			2.3% to 12.5%			1.8% to 13.0%
Expected return on plan assets	7.3% to 7.5%			7.3% to 7.8%			7.3% to 7.8%			2.0% to 5.3%			4.0% to 5.8%			3.6% to 5.0%
Rate of compensation increase	N/A			N/A			N/A			2.0% to 5.5%			2.3% to 5.5%			2.3% to 5.5%

The discount rate is used to calculate the projected benefit obligation. The discount rate used is based on the rate of return on government bonds as well as current market conditions of the respective countries where the plans are established. The expected return on plan assets is based on the Company’s expectation of the long-term average rate of return of the capital market in which the plans invest. The expected return reflects the target asset allocations and considers the historical returns earned for each asset category.

The following benefit payments were expected to be paid as of September 30, 2015 and 2014:



Fiscal Year	U.S. Plans		Non U.S. Plans
2016	$	5.4	$	5.4
2017	5.3		5.7
2018	5.5		6.1
2019	5.6		6.9
2020	5.6		6.8
2021 to 2025	28.1		39.4

The Company has established formal investment policies for the assets associated with these plans. Policy objectives include maximizing long-term return at acceptable risk levels, diversifying among asset classes, if appropriate, and among investment managers, as well as establishing relevant risk parameters within each asset class. Specific asset class targets are based on the results of periodic asset/liability studies. The investment policies permit variances from the targets within certain parameters. The plan assets currently do not include holdings of common stock of HRG or its subsidiaries.

Below is a summary allocation of all pension plan assets as of September 30, 2015 and 2014:



	U.S. Plans				Non U.S. Plans
	2015		2014		2015		2014
Asset Type
Equity securities	62	%	61	%	6	%	6	%
Fixed income securities	35	%	36	%	25	%	22	%
Other	3	%	3	%	69	%	72	%
Total	100	%	100	%	100	%	100	%

The fair value of pension plan assets by asset category as of September 30, 2015 and 2014 were as follows:



	September 30, 2015
	Level 1		Level 2		Level 3		Total
Defined Benefit Plan Assets:
Equity Securities
U.S. equity securities	$	18.6	$	13.0	$	—	$	31.6
Foreign equity securities	10.5		8.4		—		18.9
Debt Securities
U.S. bonds	18.2		6.8		—		25.0
Foreign bonds	3.0		15.1		—		18.1
Foreign government bonds	—		11.2		—		11.2
Real estate	1.2		6.0		—		7.2
Life insurance contracts	—		35.5		—		35.5
Other	—		33.9		—		33.9
Foreign cash & cash equivalents	8.1		—		—		8.1
Total defined benefit plan assets	$	59.6	$	129.9	$	—	$	189.5



	September 30, 2014
	Level 1		Level 2		Level 3		Total
Defined Benefit Plan Assets:
Equity Securities
U.S. equity securities	$	19.9	$	14.3	$	—	$	34.2
Foreign equity securities	11.1		9.7		—		20.8
Debt Securities
U.S. bonds	4.0		20.6		—		24.6
Foreign bonds	3.1		20.5		—		23.6
Foreign government bonds	—		8.6		—		8.6
Real estate	1.2		5.9		—		7.1
Life insurance contracts	—		37.7		—		37.7
Other	—		39.7		—		39.7
Foreign cash & cash equivalents	6.4		1.8		—		8.2
Total defined benefit plan assets	$	45.7	$	158.8	$	—	$	204.5

Defined Contribution Plans

HRG, Spectrum Brands, FGL, Salus and Compass sponsor defined contributions plans in which eligible participants may defer a fixed amount or a percentage of their eligible compensation, subject to limitations. The Company makes discretionary matching contributions of eligible compensation. Spectrum Brands also sponsors defined contribution pension plans for employees of certain foreign subsidiaries. FGL has also established a nonqualified defined contribution plan for independent agents. FGL makes contributions to the plan based on both FGL’s and the agent’s performance. Contributions are discretionary and evaluated annually. Aggregate contributions charged to operations for the defined contribution plans, including discretionary amounts, for Fiscal 2015, 2014 and 2013 were $14.7, $13.9 and $12.1, respectively.