Employee Benefit Plans

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

Pension Plans and Post-Retirement Medical Insurance

The company offers certain employees retirement benefits under 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 remaining 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
	2018						2017						2018			2017
(In millions)	Domestic			International			Domestic			International
Change in benefit obligation:
Benefit obligation at beginning of year	$	1.0		$	113.8		$	1.0		$	104.4		$	5.0		$	5.9
Interest cost	0.1			2.7			0.1			2.7			0.1			0.2
Foreign exchange impact	—			4.2			—			(12.5		)	—			—
Actuarial (gain) loss	—			(12.2		)	—			23.4			(0.5		)	(0.4		)
Benefits paid	(0.1		)	(2.6		)	(0.1		)	(4.2		)	(0.6		)	(0.7		)
Benefit obligation at end of year	$	1.0		$	105.9		$	1.0		$	113.8		$	4.0		$	5.0

Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	80.5		$	—		$	85.0		$	—		$	—
Actual return on plan assets	—			1.2			—			9.6			—			—
Foreign exchange impact	—			2.8			—			(10.3		)	—			—
Employer contributions	0.1			12.7			0.1			0.4			0.6			0.7
Benefits paid	(0.1		)	(2.6		)	(0.1		)	(4.2		)	(0.6		)	(0.7		)
Fair value of plan assets at end of year	$	—		$	94.6		$	—		$	80.5		$	—		$	—

Funded status:
Under funded status at end of year	$	(1.0	)	$	(11.3	)	$	(1.0	)	$	(33.3	)	$	(4.0	)	$	(5.0	)

Components of the amounts recognized in the Consolidated Balance Sheets:
Current liabilities	$	(0.1	)	$	—		$	(0.1	)	$	—		$	(0.6	)	$	(0.7	)
Non-current liabilities	$	(0.9	)	$	(11.3	)	$	(0.9	)	$	(33.3	)	$	(3.4	)	$	(4.3	)

Components of the amounts recognized in Accumulated other comprehensive loss before the effect of income taxes:
Unrecognized net actuarial loss (gain)	$	0.3		$	40.8		$	0.3		$	50.9		$	(1.1	)	$	(0.6	)
Accumulated other comprehensive loss	$	0.3		$	40.8		$	0.3		$	50.9		$	(1.1	)	$	(0.6	)

The accumulated benefit obligation for the company's domestic pension benefit plans totaled $1.0 million as of the end of both fiscal 2018 and fiscal 2017. For its international plans, the accumulated benefit obligation totaled $102.2 million and $110.0 million as of fiscal 2018 and fiscal 2017, respectively. The following table summarizes the totals for pension plans with accumulated benefit obligations in excess of plan assets:



Pension Plans with Accumulated Benefit Obligation in Excess of Plan Assets
(In millions)	2018		2017
Projected benefit obligation	$	106.9	$	114.8
Accumulated benefit obligation	$	103.1	$	111.0
Fair value of plan assets	$	94.6	$	80.5

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)	2018			2017			2016			2018		2017		2016
Domestic:
Interest cost	$	0.1		$	0.1		$	—		$	0.1	$	0.2	$	0.2
Net periodic benefit cost	$	0.1		$	0.1		$	—		$	0.1	$	0.2	$	0.2

International:
Interest cost	$	2.7		$	2.7		$	3.8
Expected return on plan assets	(5.6		)	(4.7		)	(5.4		)
Net amortization	4.2			2.2			2.8
Net periodic benefit cost	$	1.3		$	0.2		$	1.2



Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income):
	Pension Benefits						Post-Retirement Benefits
(In millions)	2018			2017			2018			2017
Domestic:
Net actuarial gain	$	—		$	—		$	(0.5	)	$	(0.4	)
Total recognized in other comprehensive loss	$	—		$	—		$	(0.5	)	$	(0.4	)

International:
Net actuarial (gain) loss	$	(7.7	)	$	18.6
Net amortization	(4.2		)	(2.2		)
Total recognized in other comprehensive loss	$	(11.9	)	$	16.4

The net actuarial loss, included in accumulated other comprehensive loss (pretax), expected to be recognized in net periodic benefit cost during fiscal 2019 is $2.9 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:
	2018		2017		2016
(Percentages)	Domestic	International	Domestic	International	Domestic	International
Discount rate	3.53	2.49	3.51	3.43	3.41	3.50
Compensation increase rate	n/a	3.25	n/a	2.95	n/a	3.20
Expected return on plan assets	n/a	6.10	n/a	6.10	n/a	6.10

The weighted-average used in the determination of the projected benefit obligations:
Discount rate	3.99	2.87	3.53	2.49	3.51	3.43
Compensation increase rate	n/a	3.10	n/a	3.25	n/a	2.95

Effective May 28, 2016, the company changed the method it uses to estimate the interest component of net periodic benefit cost for pension and other postretirement benefits. Historically, the company has estimated the interest cost component utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. The company has elected to utilize a full yield curve approach in the estimation of interest cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The company has made this change to provide a more precise measurement of interest cost by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. The company accounted for this change as a change in accounting estimate and accordingly, accounted for it prospectively. The impact of this change on consolidated earnings for fiscal 2018 and 2017 was a reduction of the interest cost component of net periodic benefit cost of approximately $0.3 million and $0.4 million.

In calculating post-retirement benefit obligations for fiscal 2018, a 7.1 percent annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2019, decreasing gradually to 4.3 percent by 2038 and remaining at that level thereafter. For purposes of calculating post-retirement benefit costs, a 7.5 percent annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2018, decreasing gradually to 4.3 percent by 2038 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 2018 service and interest cost components	$	—	$	—
Effect on post-retirement benefit obligation at June 2, 2018	$	0.1	$	(0.1	)

Plan Assets and Investment Strategies

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 2018 and asset categories for the company's primary international pension plan for fiscal 2018 and 2017 are as follows:



Asset Category	Targeted Asset Allocation Percentage			Percentage of Plan Assets at Year End
Asset Category	2018	2017		2018		2017
Fixed income	35	20		36		27
Common collective trusts	65	80		64		73
Total				100		100

(In millions)		International Plan as of June 2, 2018
Asset Category		Level 1		Level 2		Total
Cash and cash equivalents		$	0.2	$	—	$	0.2
Foreign government obligations		—		33.4		33.4
Common collective trusts-balanced		—		61.0		61.0
Total		$	0.2	$	94.4	$	94.6

(In millions)		International Plan as of June 3, 2017
Asset Category		Level 1		Level 2		Total
Cash and cash equivalents		$	0.2	$	—	$	0.2
Foreign government obligations		—		21.4		21.4
Common collective trusts-balanced		—		58.9		58.9
Total		$	0.2	$	80.3	$	80.5

Cash Flows

The company reviews pension funding requirements to determine the contribution to be made in the next year. Actual contributions will be dependent upon investment returns, changes in pension obligations and other economic and regulatory factors. During fiscal 2018, the company made total cash contributions of $13.4 million to its benefit plans. In fiscal 2017, the company made total cash contributions of $1.1 million to its benefit 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 June 2, 2018.



(In millions)	Pension Benefits Domestic		Pension Benefits International		Post-Retirement Benefits
2019	$	0.1	$	2.0	$	0.6
2020	$	0.1	$	2.0	$	0.5
2021	$	0.1	$	2.1	$	0.5
2022	$	0.1	$	2.5	$	0.4
2023	$	0.1	$	2.4	$	0.4
2024-2028	$	0.3	$	16.5	$	1.4

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

Substantially all of the company’s domestic employees are eligible to participate in a defined contribution retirement plan, primarily the Herman Miller, Inc. profit sharing and 401(k) plan (the "plan"). Employees under the plan are eligible to begin participating on their date of hire. Until June 4, 2017, the plan provided for discretionary contributions for eligible participants, payable in the company's common stock, of not more than 6 percent of employees' wages based on the company's financial performance. Effective June 4, 2017, the company discontinued the Employer Profit Sharing Contribution and instead, began allocating those funds to other components of pay and retirement. Under the plan the company matches 100 percent of employee contributions to their 401(k) accounts up to 3 percent of their pay. Effective September 3, 2017, the company increased the Employer Matching Contribution from 3 percent to 4 percent for all eligible employees. A core contribution of 4 percent is also included for most participants of the plan. There was an additional 1 percent contribution added to the quarterly Core Contribution for the quarter prior to the increased Employer Matching Contribution effective September 3, 2017. The company’s other defined contribution retirement plans may provide for matching contributions, non-elective contributions and discretionary contributions as declared by management.

The cost of the Herman Miller, Inc. profit sharing contribution during fiscal 2017 and 2016 was $6.0 million and $10.9 million, respectively. No profit sharing contribution was made in fiscal 2018. The expense recorded for the company's 401(k) matching contributions and core contributions was approximately $24.9 million, $22.8 million and $21.9 million in fiscal years 2018, 2017 and 2016, respectively.