Employee Benefit Plans

12 Months Ended

May 30, 2020

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

Pension 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 this plan is the last day of the fiscal year and the plan is frozen to new participants.

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 pension plan:



	Pension Benefit
(In millions)	2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	109.1		$	105.9
Interest cost	2.4			2.7
Plan Amendments	—			0.9
Foreign exchange impact	(2.9		)	(6.0		)
Actuarial loss (gain)	21.0			9.7
Benefits paid	(3.1		)	(4.1		)
Benefit obligation at end of year	$	126.5		$	109.1

Change in plan assets:
Fair value of plan assets at beginning of year	$	88.2		$	94.6
Actual return on plan assets	4.7			2.5
Foreign exchange impact	(2.0		)	(5.1		)
Employer contributions	0.3			0.3
Benefits paid	(3.1		)	(4.1		)
Fair value of plan assets at end of year	$	88.1		$	88.2

Funded status:
Under funded status at end of year	$	(38.4	)	$	(20.9	)

Components of the amounts recognized in the Consolidated Balance Sheets:
Current liabilities	$	—		$	—
Non-current liabilities	$	(38.3	)	$	(20.9	)

Components of the amounts recognized in Accumulated other comprehensive loss before the effect of income taxes:
Prior service cost	$	0.7		$	0.8
Unrecognized net actuarial loss (gain)	$	63.2		$	47.3
Accumulated other comprehensive loss	$	63.9		$	48.1

The accumulated benefit obligation for the Company's pension plan totaled $123.9 million and $105.4 million as of fiscal 2020 and fiscal 2019, respectively.

The following table is a summary of the annual cost of the Company's pension plan:



Components of Net Periodic Benefit Costs and Other Changes Recognized in Other Comprehensive Income (Loss):
(In millions)	2020			2019			2018
Interest cost	$	2.4		$	2.7		$	2.7
Expected return on plan assets	(4.4		)	(4.5		)	(5.6		)
Amortization of prior service costs	0.1			0.1			—
Amortization of net (gain)/loss	3.2			2.7			4.2
Net periodic benefit cost	$	1.3		$	1.0		$	1.3



Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):
(In millions)	2020			2019
Net actuarial (gain) loss	$	20.6		$	11.7
Net amortization	(4.8		)	(2.7		)
Total recognized in other comprehensive loss	$	15.8		$	9.0

The net actuarial loss, included in accumulated other comprehensive loss (pretax), expected to be recognized in net periodic benefit cost during fiscal 2021 is $4.9 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 plan are as follows:



Weighted-average assumptions used in the determination of net periodic benefit cost:
(Percentages)	2020	2019	2018
Discount rate	2.39	2.87	2.49
Compensation increase rate	3.20	3.10	3.25
Expected return on plan assets	4.80	4.80	6.10

Weighted-average assumptions used in the determination of the projected benefit obligations:
Discount rate	1.66	2.39	2.87
Compensation increase rate	2.75	3.20	3.10

The Company uses a full yield curve approach to estimate the interest component of net periodic benefit cost for pension benefits. This method applies the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

Plan Assets and Investment Strategies

The Company's 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 2020 and asset categories for the Company's pension plan for fiscal 2020 and 2019 are as follows:



Asset Category	Targeted Asset Allocation Percentage			Percentage of Plan Assets at Year End
Asset Category	2020	2019		2020		2019
Fixed income	35%	35%		37%		33%
Common collective trusts	65%	65%		63%		67%
Total				100%		100%

(In millions)		May 30, 2020
Asset Category		Level 1		Level 2		Total
Foreign government obligations		—		31.4		31.4
Common collective trusts-balanced		—		56.7		56.7
Total		$	—	$	88.1	$	88.1

(In millions)		June 1, 2019
Asset Category		Level 1		Level 2		Total
Foreign government obligations		—		29.3		29.3
Common collective trusts-balanced		—		58.9		58.9
Total		$	—	$	88.2	$	88.2

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 2020 and fiscal 2019, the Company made total cash contributions of $0.9 million to its benefit plans.

The following represents a summary of the benefits expected to be paid by the plan in future fiscal years. These expected benefits were estimated based on the same actuarial valuation assumptions used to determine benefit obligations at May 30, 2020.



(In millions)	Pension Benefits
2021	$	2.4
2022	$	2.4
2023	$	2.5
2024	$	2.5
2025	$	2.6
2026-2030	$	13.9

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. Effective June 2017, the Company matches 100 percent of employee contributions to their 401(k) accounts up to 3 percent of their pay which was subsequently increased to 4 percent in September 2017 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. During the fourth quarter of fiscal 2020, the Company elected to temporarily suspend the Company's Core Contribution and 401(k) matches in order to reduce costs and preserve liquidity.

There were no Herman Miller, Inc. profit sharing contributions made in fiscal 2020, fiscal 2019 or fiscal 2018. The expense recorded for the Company's 401(k) matching and core contributions was $22.2 million, $25.4 million and $24.9 million in fiscal years 2020, 2019 and 2018, respectively.