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Pensions and Other Post-retirement Benefit Plans
 12 Months Ended
Jul. 03, 2020
Retirement Benefits [Abstract]  
Pensions and Other Post-retirement Benefit Plans Pension and Other Post-Retirement Benefit Plans
The Company has pension and other post-retirement benefit plans in various countries. The Company’s principal pension plans are in Japan, Thailand and the Philippines. All pension and other post-retirement benefit plans outside of the Company’s Japan, Thailand and the Philippines defined benefit pension plans (the “Pension Plans”) are immaterial to the Consolidated Financial Statements.

Obligations and Funded Status

The following table presents the unfunded status of the benefit obligations for the Pension Plans:
202020192018
(in millions)
Change in benefit obligation:
Projected benefit obligation at beginning of period$352 $300 $285 
Service cost13 10 10 
Interest cost4 4 4 
Plan amendments— 13 — 
Actuarial loss (gain)3 26 7 
Benefits paid(8)(9)(9)
Settlement/curtailment— (3)— 
Other— — — 
Non-U.S. currency movement2 11 3 
Projected benefit obligation at end of period366 352 300 
Change in plan assets:
Fair value of plan assets at beginning of period209 200 189 
Actual return on plan assets4 2 8 
Employer contributions9 10 10 
Benefits paid(8)(9)(9)
Non-U.S. currency movement1 6 2 
Fair value of plan assets at end of period215 209 200 
Unfunded status$151 $143 $100 

The following table presents the unfunded amounts related to the Pension Plans as recognized on the Company’s Consolidated Balance Sheets:
July 3,
2020		June 28,
2019
(in millions)
Current liabilities$1 $1 
Non-current liabilities150 142 
Net amount recognized$151 $143 

The accumulated benefit obligation for the Pension Plans was $366 million at July 3, 2020. As of July 3, 2020, actuarial losses for the Pension Plans of $67 million are included in Accumulated other comprehensive loss in the Consolidated Balance Sheet. There were no material prior service credits for the defined benefit pension plans recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheet as of July 3, 2020.

Net periodic benefit costs were not material for 2020, 2019, and 2018.
Assumptions

Weighted-Average Assumptions

The weighted-average actuarial assumptions used to determine the projected benefit obligations for the Pension Plans were as follows:
202020192018
Discount rate1.1 %1.1 %1.3 %
Rate of compensation increase2.0 %1.7 %1.4 %

The weighted-average actuarial assumptions used to determine benefit costs for the Pension Plans were as follows:
202020192018
Discount rate1.1 %1.3 %0.5 %
Expected long-term rate of return on plan assets2.5 %2.5 %2.5 %
Rate of compensation increase1.7 %1.2 %1.5 %

The Company develops a discount rate by calculating when the estimated benefit payments will be due. Management then matches the benefit payments to high quality bonds which match the timing of the expected benefit payments to determine the appropriate discount rate.

The Company develops the expected long-term rate of return on plan assets by analyzing rates of return in each plan as well as the investment portfolio applicable to the plan depending on each plan’s economic environment. The Company’s estimates of future rates of return on assets is based in large part on the projected rate of return from the respective investment managers using a long-term view of historical returns, as well as actuarial recommendations using the most current generational and mortality tables and rates. As of July 3, 2020, Pension Plan assets materially consisted of plan assets related to the Japan Pension Plan and as such the assumption used herein is primarily related to the Japan Pension Plan.

The Company develops the rate of compensation increase assumptions using local compensation practices and historical rates of increases.

Plan Assets

Investment Policies and Strategies

The investment policy in the Pension Plans is to generate a stable return on investments over a long-term horizon in order to have adequate pension funds to meet the Company’s future obligations. In order to achieve this investment goal, a diversified portfolio with target asset allocation and expected rate of return is established by considering factors such as composition of participants, level of funded status, capacity to absorb risks and the current economic environment. The target asset allocation is 62% in debt securities, 35% in equity securities, and the remaining 3% in other assets. Risk management is accomplished through diversification, periodic review of plan asset performance and appropriate realignment of asset allocation. Assumptions regarding the expected long-term rate of return on plan assets are periodically reviewed and are based on the historical trend of returns, the risk and correlation of each asset and the latest economic environment.

The expected long-term rate of return is estimated based on many factors, including expected forecast for inflation, risk premiums for each asset class, expected asset allocation, current and future financial market conditions and diversification and rebalancing strategies. Historical return patterns and correlations, consensus return forecasts and other relevant financial factors are analyzed periodically by the investment advisor so as to ensure that the expected long-term rate of return is reasonable and appropriate.
Fair Value Measurements

The following tables present the Pension Plans’ major asset categories and their associated fair values as of July 3, 2020 and June 28, 2019:
July 3, 2020
Level 1Level 2Level 3Total
(in millions)
Equity:
Equity commingled/mutual funds(1)(2)
$— $72 $— $72 
Fixed income:
Fixed income commingled/mutual funds(1)(3)
— 131 — 131 
Cash equivalents and short-term investments12 — — 12 
Fair value of plan assets$12 $203 $— $215 

June 28, 2019
Level 1Level 2Level 3Total
(in millions)
Equity:
Equity commingled/mutual funds(1)(2)
$— $68 $— $68 
Fixed income:
Fixed income commingled/mutual funds(1)(3)
— 132 — 132 
Cash equivalents and short-term investments9 — — 9 
Fair value of plan assets$9 $200 $— $209 

(1) Commingled funds represent pooled institutional investments.
(2) Equity mutual funds invest primarily in equity securities.
(3) Fixed income mutual funds invest primarily in fixed income securities.

There were no significant movements of assets between any level categories in 2020 or 2019.

Fair Value Valuation Techniques

Equity securities are valued at the closing price reported on the stock exchange on which the individual securities are traded. Equity commingled/mutual funds are typically valued using the net asset value (“NAV”) provided by the investment manager or administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of shares or units outstanding. These assets are classified as either Level 1 or Level 2, depending on availability of quoted market prices for identical or similar assets.

If available, fixed income securities are valued using the close price reported on the major market on which the individual securities are traded and are classified as Level 1. The fair value of other fixed income securities is typically estimated using pricing models and quoted prices of securities with similar characteristics, and is generally classified as Level 2.

Cash equivalents includes money market accounts that are valued at their cost plus interest on a daily basis, which approximates fair value. Short-term investments represent securities with original maturities of one year or less. These assets are classified as either Level 1 or Level 2.
Cash Flows

The Company’s expected employer contributions for 2021 and annual benefit payments over the next five years for its Pension Plans are not expected to be material.