Employee Benefit Plans

The company maintains retirement benefit plans for substantially all of its employees.

Pension Plans and Post-Retirement Medical Insurance

During fiscal 2014, the company settled the remaining obligations associated with its primary domestic defined benefit pension plans. Plan participants received vested benefits from the plan assets by electing either a lump sum distribution, roll-over contribution to other 401(k) or individual retirement plans, or an annuity contract with a qualifying third-party provider. As a result of the settlement, the company was relieved of any further obligation. Pension settlement charges of $158.2 million, before tax, were recorded during the current year. The settlement expenses included the pre-tax reclassifications of actuarial gains and losses from accumulated other comprehensive loss of $137.7 million, cash contributions to the plan of $48.8 million, net of the outstanding pension plan liability prior to settlement. Cost of goods sold included $49.3 million of the settlement expense, while $108.9 million of the expense was included in operating expenses. After the settlement, the remaining pension assets of $0.9 million were transferred to the company's defined contribution 401(k) plan.

The primary domestic defined-benefit plan included benefits determined by a cash balance calculation. Benefits under this plan were based upon an employee's years of service and earnings. The company also offers certain employees retirement benefits under other domestic defined benefit plans. The company provides healthcare benefits to employees who retired from service on or before a qualifying date in 1998. As of the qualifying date, the company discontinued offering post-retirement medical to future retirees. Benefits to qualifying retirees under this plan are based on the employee's years of service and age at the date of retirement. In addition to the domestic pension and retiree healthcare plan, one of the company's wholly owned foreign subsidiaries has a defined-benefit pension plan based upon an average final pay benefit calculation. The measurement date for the company's principal domestic and international pension plans, as well as its post-retirement medical plan, is the last day of the fiscal year.

Benefit Obligations and Funded Status

The following table presents, for the fiscal years noted, a summary of the changes in the projected benefit obligation, plan assets and funded status of the company's domestic and international pension plans and post-retirement plan:



	Pension Benefits												Post-Retirement Benefits
	2014						2013						2014			2013
(In millions)	Domestic			International			Domestic			International
Change in benefit obligation:
Benefit obligation at beginning of year	$	314.7		$	91.2		$	332.7		$	86.1		$	9.0		$	9.8
Service cost	—			—			1.9			—			—			—
Interest cost	5.2			4.2			10.9			3.7			0.3			0.3
Curtailments	—			—			—			—			—			—
Plan settlements	(331.1		)	—			(40.0		)	—			—			—
Foreign exchange impact	—			9.6			—			(1.2		)	—			—
Actuarial (gain)/loss	16.8			2.3			15.6			4.5			(1.0		)	(0.2		)
Employee contributions	—			—			—			—			—			—
Expenses paid	(0.4		)	—			—			—			—			—
Benefits paid	(4.1		)	(1.9		)	(6.4		)	(1.9		)	(0.8		)	(0.9		)
Benefit obligation at end of year	$	1.1		$	105.4		$	314.7		$	91.2		$	7.5		$	9.0

Change in plan assets:
Fair value of plan assets at beginning of year	$	290.0		$	84.2		$	316.9		$	72.6		$	—		$	—
Actual return on plan assets	(2.3		)	2.4			19.5			11.1			—			—
Foreign exchange impact	—			8.6			—			(1.2		)	—			—
Employer contributions	48.8			1.5			—			3.6			0.8			0.9
Employee contributions	—			—			—			—			—			—
Plan settlements	(331.1		)	—			(40.0		)	—			—			—
Expenses paid	(0.4		)	—			—			—			—			—
Benefits paid	(4.1		)	(1.9		)	(6.4		)	(1.9		)	(0.8		)	(0.9		)
Transfers out to 401(k) plan	(0.9		)	—			—			—			—			—
Fair value of plan assets at end of year	$	—		$	94.8		$	290.0		$	84.2		$	—		$	—

Funded status:
Under funded status at end of year	$	(1.1	)	$	(10.6	)	$	(24.7	)	$	(7.0	)	$	(7.5	)	$	(9.0	)

Components of the amounts recognized in the Consolidated Balance Sheets:
Current liabilities	$	(0.1	)	$	—		$	(0.1	)	$	—		$	(0.9	)	$	(1.0	)
Non-current liabilities	$	(1.0	)	$	(10.6	)	$	(24.6	)	$	(7.0	)	$	(6.6	)	$	(8.0	)

Components of the amounts recognized in accumulated other comprehensive loss before the effect of income taxes:
Unrecognized net actuarial loss	$	0.4		$	34.3		$	140.5		$	27.9		$	0.3		$	1.3
Unrecognized prior service cost (credit)	—			—			—			—			—			—
Accumulated other comprehensive loss	$	0.4		$	34.3		$	140.5		$	27.9		$	0.3		$	1.3

The accumulated benefit obligation for the company's domestic pension benefit plans totaled $1.1 million and $314.7 million as of the end of fiscal years 2014 and 2013, respectively. For its international plans, these amounts totaled $102.4 million and $88.3 million as of the same dates, respectively.

The following table is a summary of the annual cost of the company's pension and post-retirement plans:



Components of Net Periodic Benefit Costs and Other Changes Recognized in Other Comprehensive Income:
	Pension Benefits									Post-Retirement Benefits
(In millions)	2014			2013			2012			2014		2013		2012
Domestic:
Service cost	$	—		$	1.9		$	7.0		$	—	$	—	$	—
Interest cost	5.2			10.9			14.4			0.3		0.3		0.4
Expected return on plan assets	(3.6		)	(12.1		)	(19.3		)	—		—		—
Net amortization	4.7			11.8			7.2			—		0.1		0.1
Curtailment (gain)	—			—			(1.7		)	—		—		—
Settlement Loss	158.2			18.8			—			—		—		—
Net periodic benefit cost	$	164.5		$	31.3		$	7.6		$	0.3	$	0.4	$	0.5

International:
Service cost	$	—		$	—		$	1.3
Interest cost	4.2			3.7			3.9
Expected return on plan assets	(5.2		)	(4.9		)	(4.8		)
Net amortization	1.8			1.4			0.3
Net periodic benefit cost	$	0.8		$	0.2		$	0.7



Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income):
	Pension Benefits						Post-Retirement Benefits
(In millions)	2014			2013			2014			2013
Domestic:
Net actuarial (gain) loss	$	22.9		$	8.2		$	(1.0	)	$	(0.3	)
Net amortization, curtailment, and settlements	(163.0		)	(30.6		)	—			(0.1		)
Total recognized in other comprehensive (income) loss	$	(140.1	)	$	(22.4	)	$	(1.0	)	$	(0.4	)

International:
Net actuarial (gain) loss	$	5.2		$	(1.7	)
Effect of exchange rates on amounts included in accumulated other comprehensive income	3.0			(0.2		)
Net amortization	(1.8		)	(1.4		)
Total recognized in other comprehensive (income) loss	$	6.4		$	(3.3	)

The net actuarial loss, included in accumulated other comprehensive loss (pretax), expected to be recognized in net periodic benefit cost during fiscal 2015 is $1.9 million.

Actuarial Assumptions

The weighted-average actuarial assumptions used to determine the benefit obligation amounts and the net periodic benefit cost for the company's pension and post-retirement plans are as follows:



The weighted-average used in the determination of net periodic benefit cost:
	2014		2013		2012
(Percentages)	Domestic	International	Domestic	International	Domestic	International
Discount rate	3.43	4.40	3.34	4.20	4.75	5.40
Compensation increase rate	n/a	3.50	3.00	3.00	3.00	3.50
Expected return on plan assets	n/a	6.00	4.20	6.00	7.00	7.00

The weighted-average used in the determination of the projected benefit obligations:
Discount rate	3.44	4.40	3.43	4.40	3.57	4.20
Compensation increase rate	n/a	3.35	n/a	3.50	3.00	3.00

In calculating post-retirement benefit obligations for fiscal 2014, a 7.2 percent annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2015, decreasing gradually to 4.5 percent by 2029 and remaining at that level thereafter. For purposes of calculating post-retirement benefit costs, a 7.4 percent annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2014, decreasing gradually to 4.5 percent by 2029 and remaining at that level thereafter.

Assumed health care cost-trend rates have a significant effect on the amounts reported for retiree health care costs. A one-percentage-point change in the assumed health care cost-trend rates would have the following effects:



(In millions)	1 Percent Increase		1 Percent Decrease
Effect on total fiscal 2014 service and interest cost components	$	—	$	—
Effect on post-retirement benefit obligation at May 31, 2014	$	0.2	$	(0.2	)

Plan Assets and Investment Strategies

The assets related to the company's primary domestic employee benefit plans were liquidated in connection with the plan termination that occurred during fiscal 2014. Accordingly, plan assets for the primary domestic employee benefit plans were zero as of the end of fiscal 2014.

The company's international employee benefit plan assets consist mainly of listed fixed income obligations and common/collective trusts. The company's primary objective for invested pension plan assets is to provide for sufficient long-term growth and liquidity to satisfy all of its benefit obligations over time. Accordingly, the company has developed an investment strategy that it believes maximizes the probability of meeting this overall objective. This strategy includes the development of a target investment allocation by asset category in order to provide guidelines for making investment decisions. This target allocation emphasizes the long-term characteristics of individual asset classes as well as the diversification among multiple asset classes. In developing its strategy, the company considered the need to balance the varying risks associated with each asset class with the long-term nature of its benefit obligations. The company's strategy moving forward will be to increase the level of fixed income investments as the funding status improves, thereby more closely matching the return on assets with the liabilities of the plans.

The company utilizes independent investment managers to assist with investment decisions within the overall guidelines of the investment strategy.

The target asset allocation at the end of fiscal 2014 and asset categories for the company's primary pension plans for fiscal 2014 and 2013 are as follows:



Primary Domestic Plan
Asset Category	Targeted Asset Allocation Percentage		Percentage of Plan Assets at Year End
Asset Category	Targeted Asset Allocation Percentage		2014		2013
Equities	—		—		10
Fixed Income	—		—		86
Other	—		—		4
Total			—		100

International Plan
Asset Category
Equities	—		—		—
Fixed Income	20		26		26
Common collective trusts	80		74		74
Total			100		100

(In millions)	Domestic Plans as of May 31, 2014
Asset Category	Level 1		Level 2		Total
Cash and cash equivalents	$	—	$	—	$	—
US & international equity securities	—		—		—
Debt securities-corporate	—		—		—
Common collective trust-equities	—		—		—
Common collective trusts-fixed income	—		—		—
Total	$	—	$	—	$	—

(In millions)	International Plan as of May 31, 2014
Asset Category	Level 1		Level 2		Total
Cash and cash equivalents	$	0.2	$	—	$	0.2
Foreign government obligations	—		24.5		24.5
Common collective trusts-balanced	—		70.1		70.1
Total	$	0.2	$	94.6	$	94.8

(In millions)	Domestic Plans as of June 1, 2013
Asset Category	Level 1		Level 2		Total
Cash and cash equivalents	$	12.5	$	—	$	12.5
US & international equity securities	2.2		—		2.2
Debt securities-corporate	7.6		—		7.6
Common collective trust-equities	—		26.5		26.5
Common collective trusts-fixed income	—		241.2		241.2
Total	$	22.3	$	267.7	$	290.0

(In millions)	International Plan as of June 1, 2013
Asset Category	Level 1		Level 2		Total
Cash and cash equivalents	$	0.2	$	—	$	0.2
Foreign government obligations	—		22.0		22.0
Common collective trusts-balanced	—		62.0		62.0
Total	$	0.2	$	84.0	$	84.2

Cash Flows

The company is reviewing whether any additional voluntary pension plan contributions will be made in the next year. Actual contributions will be dependent upon investment returns, changes in pension obligations, and other economic and regulatory factors. In fiscal 2014, the company made total cash contributions of $50.2 million to its benefit plans. Of these cash contributions, $48.8 million were due to the termination of the company’s primary domestic defined benefit pension plans.

The following represents a summary of the benefits expected to be paid by the plans in future fiscal years. These expected benefits were estimated based on the same actuarial valuation assumptions used to determine benefit obligations at May 31, 2014.



(In millions)	Pension Benefits Domestic		Pension Benefits International		Post-Retirement Benefits
2015	$	0.1	$	1.9	$	0.9
2016	$	0.1	$	2.4	$	0.9
2017	$	0.1	$	2.8	$	0.8
2018	$	0.1	$	3.0	$	0.8
2019	$	0.1	$	3.1	$	0.7
2020-2024	$	0.4	$	18.7	$	2.7

Profit Sharing, 401(k) Plan, and Core Contribution

Herman Miller, Inc. has a trusteed profit sharing plan that includes substantially all domestic employees. These employees are eligible to begin participating on their date of hire. The plan provides for discretionary contributions, payable in the company's common stock, of not more than 6 percent of employees' wages based on the company's financial performance. The cost of the profit sharing contribution during fiscal 2014, 2013, and 2012 were $6.4 million, $5.3 million and $3.4 million, respectively.

The company has traditionally matched 50 percent of employee contributions to their 401(k) accounts up to 6 percent of their pay. On September 1, 2012, this was amended to a match of 100 percent up to 3 percent of their pay. A core contribution of 4 percent was also added to the plan. This core contribution was effective as of January 1, 2012 for new employees starting after that date and September 1, 2012 for existing employees. The cost of the company's 401(k) matching contributions and core contributions charged against operations was approximately $20.3 million, $17.0 million, and $6.8 million in fiscal years 2014, 2013 and 2012, respectively.