Pension and Postretirement Benefits

Pension Benefits — We sponsor a number of noncontributory defined benefit pension plans to provide retirement benefits to all eligible U.S. and non-U.S. employees. The benefits provided under these plans are based primarily on years of service and compensation levels. Benefits are paid from funds previously provided to trustees and insurance companies or are paid directly by us from general funds. In 1999, we implemented significant amendments to certain U.S. pension plans. Under a new formula, retirement benefits are determined based on percentages of annual pay and age. To minimize the impact of converting to the new formula, service and earnings credit continued to accrue through the year 2014 for certain active employees participating in the plans under the old formula prior to the amendments. Employees will receive the benefit from either the new or old formula, whichever is higher. Benefits become vested upon the completion of three years of service. Effective as of January 1, 2011, our U.S. pension plans were amended so that employees hired or rehired on or after that date and who are not covered by collective bargaining agreements will not be eligible to participate in the plans.

Postretirement Benefits — We provide postretirement benefits, including health care and life insurance, to substantially all retired U.S. employees and their dependents. We established retiree medical account benefits for eligible U.S. retirees. The accounts were intended to provide reimbursement for eligible health care expenses on a tax-favored basis. Effective as of January 1, 2011, the retirement medical program was amended to eliminate the retiree medical account benefit for employees not covered by collective bargaining agreements. To preserve the benefit for employees close to retirement age, the retiree medical account will be available to employees who were at least age 50 with at least 10 years of service as of December 31, 2010, and who satisfy the other eligibility requirements for the retiree medical program. In July 2016, the retirement medical program was amended and effective as of January 1, 2017, we no longer sponsor our own medical coverage for certain Medicare-eligible retirees. In July 2017, the retirement medical program was once again amended and beginning on January 1, 2018, we no longer sponsor our own medical coverage for certain Medicare-eligible retirees covered by one of our collective bargaining agreements. In July 2018, the retirement medical program was once again amended and beginning on January 1, 2019, we no longer sponsor our own medical coverage for certain Medicare-eligible retirees covered by one of our collective bargaining agreements. Instead, in connection with these amendments, we offer these Medicare-eligible retirees access to health care coverage through a private exchange and offer a health reimbursement account to subsidize benefits for a select group of such retirees.

We use the fiscal year end as the measurement date for the benefit plans.

Components of net benefit expense (income) were as follows:



	Pension
	2018			2017			2016
Service cost	$	24		$	26		$	26
Interest cost	74			86			98
Expected return on plan assets	(144		)	(144		)	(147		)
Recognized net actuarial (gain) loss	(104		)	(198		)	302
Special termination benefits	2			—			—
Curtailment gains	(2		)	—			—
Net periodic benefit expense (income)	$	(150	)	$	(230	)	$	279

The special termination benefits of $2 related to the planned closure of the manufacturing facility in Toronto, Ontario, and were included in Restructuring charges. See Note 7 for additional information.

The components of net periodic benefit expense (income) other than the service cost component are included in Other expenses / (income) in the Consolidated Statements of Earnings. Beginning in 2018, under the revised FASB guidance adopted in the first quarter, only the service cost component of net periodic benefit expense (income) is eligible for capitalization.

Beginning in 2018, we changed the method we use to estimate the service and interest cost components of net periodic benefit expense (income). We elected to use a full yield curve approach to estimate service cost and interest cost by applying the specific spot rates along the yield curve used to determine the benefit obligation of the relevant projected cash flows. Previously, we estimated service cost and interest cost using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. We made this change to provide a more precise measurement of service cost and interest cost by improving the correlation between projected benefit cash flows and the corresponding spot yield curve rates. This change will not affect the measurement of our benefit obligations. We accounted for this change prospectively in 2018 as a change in accounting estimate. As a result of this change, net periodic benefit income increased by approximately $17 in 2018, compared to what the net periodic benefit income would have been under the previous method.



	Postretirement
	2018			2017			2016
Service cost	$	1		$	1		$	1
Interest cost	7			10			15
Amortization of prior service credit	(27		)	(25		)	(1		)
Recognized net actuarial (gain) loss	(16		)	(14		)	23
Net periodic benefit expense (income)	$	(35	)	$	(28	)	$	38

The estimated prior service credit that will be amortized from Accumulated other comprehensive loss into net periodic postretirement expense during 2019 is $29. The prior service credit is primarily related to the amendments in July 2016, July 2017, and July 2018.

Change in benefit obligation:



	Pension						Postretirement
	2018			2017			2018			2017
Obligation at beginning of year	$	2,450		$	2,626		$	276		$	313
Service cost	24			26			1			1
Interest cost	74			86			7			10
Actuarial gain	(110		)	(134		)	(16		)	(14		)
Participant contributions	—			—			1			1
Plan amendments	2			—			(11		)	(12		)
Benefits paid	(165		)	(164		)	(26		)	(26		)
Medicare subsidies	—			—			3			3
Other	(2		)	(3		)	—			—
Special termination benefits	2			—			—			—
Curtailment	(2		)	—			—			—
Foreign currency adjustment	(16		)	13			—			—
Benefit obligation at end of year	$	2,257		$	2,450		$	235		$	276

Change in the fair value of pension plan assets:



	2018			2017
Fair value at beginning of year	$	2,183		$	2,111
Actual return on plan assets	137			208
Employer contributions	5			5
Benefits paid	(155		)	(154		)
Foreign currency adjustment	(16		)	13
Fair value at end of year	$	2,154		$	2,183

Net amounts recognized in the Consolidated Balance Sheets:



	Pension				Postretirement
	2018		2017		2018		2017
Other assets	$	61	$	8	$	—	$	—
Accrued liabilities	14		14		29		29
Other liabilities	150		261		206		247
Net amounts recognized	$	103	$	267	$	235	$	276



Amounts recognized in accumulated other comprehensive income (loss) consist of:	Pension					Postretirement
	2018			2017		2018		2017
Prior service (cost) credit	$	(2	)	$	—	$	67	$	83

The change in amounts recognized in accumulated other comprehensive income (loss) associated with postretirement benefits was due to the plan amendments in July 2017 and July 2018, net of amortization.

The following table provides information for pension plans with accumulated benefit obligations in excess of plan assets:



	2018		2017
Projected benefit obligation	$	249	$	2,270
Accumulated benefit obligation	$	241	$	2,232
Fair value of plan assets	$	85	$	1,995

The accumulated benefit obligation for all pension plans was $2,227 at July 29, 2018, and $2,399 at July 30, 2017.

Weighted-average assumptions used to determine benefit obligations at the end of the year:



	Pension		Postretirement
	2018	2017	2018	2017
Discount rate	4.15%	3.74%	4.06%	3.45%
Rate of compensation increase	3.21%	3.24%	3.25%	3.25%

Weighted-average assumptions used to determine net periodic benefit cost for the years ended:



	Pension
	2018	2017	2016
Discount rate	3.74%	3.39%	4.19%
Expected return on plan assets	6.84%	7.09%	7.35%
Rate of compensation increase	3.24%	3.25%	3.29%

The discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration. In addition, independent actuaries apply high-quality bond yield curves to the expected benefit payments of the plans. The expected return on plan assets is a long-term assumption based upon historical experience and expected future performance, considering our current and projected investment mix. This estimate is based on an estimate of future inflation, long-term projected real returns for each asset class, and a premium for active management.

The discount rate used to determine net periodic postretirement expense was 3.45% in 2018, 3.20% in 2017, and 4.00% in 2016.

Assumed health care cost trend rates at the end of the year:



	2018	2017
Health care cost trend rate assumed for next year	6.75%	7.25%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)	4.50%	4.50%
Year that the rate reaches the ultimate trend rate	2023	2023

A one-percentage-point increase or decrease in assumed health care costs would not significantly impact 2018 reported service and interest cost nor the 2018 accumulated benefit obligation.

Pension Plan Assets

The fundamental goal underlying the investment policy is to ensure that the assets of the plans are invested in a prudent manner to meet the obligations of the plans as these obligations come due. The primary investment objectives include providing a total return which will promote the goal of benefit security by attaining an appropriate ratio of plan assets to plan obligations, to provide for real asset growth while also tracking plan obligations, to diversify investments across and within asset classes, to reduce the impact of losses in single investments, and to follow investment practices that comply with applicable laws and regulations.

The primary policy objectives will be met by investing assets to achieve a reasonable tradeoff between return and risk relative to plan obligations. This includes investing a portion of the assets in funds selected in part to hedge the interest rate sensitivity to plan obligations.

The portfolio includes investments in the following asset classes: fixed income, equity, real estate and alternatives. Fixed income will provide a moderate expected return and partially hedge the exposure to interest rate risk of the plans’ obligations. Equities are used for their high expected return. Additional asset classes are used to provide diversification.

Asset allocation is monitored on an ongoing basis relative to the established asset class targets. The interaction between plan assets and benefit obligations is periodically studied to assist in the establishment of strategic asset allocation targets. The investment policy permits variances from the targets within certain parameters. Asset rebalancing occurs when the underlying asset class allocations move outside these parameters, at which time the asset allocation is rebalanced back to the policy target weight.

Our year-end pension plan weighted-average asset allocations by category were:



	Strategic Target	2018	2017
Equity securities	42%	42%	48%
Debt securities	46%	46%	40%
Real estate and other	12%	12%	12%
Total	100%	100%	100%

Pension plan assets are categorized based on the following fair value hierarchy:


•	Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.


•	Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with observable market data.


•	Level 3: Unobservable inputs, which are valued based on our estimates of assumptions that market participants would use in pricing the asset or liability.

The following table presents our pension plan assets by asset category at July 29, 2018, and July 30, 2017:



	Fair Value as of July 29, 2018			Fair Value Measurements at July 29, 2018 Using Fair Value Hierarchy							Fair Value as of July 30, 2017			Fair Value Measurements at July 30, 2017 Using Fair Value Hierarchy
				Level 1		Level 2			Level 3					Level 1		Level 2			Level 3
Short-term investments	$	61		$	29	$	32		$	—	$	46		$	35	$	11		$	—
Equities:
U.S.	284			284		—			—		338			338		—			—
Non-U.S.	230			230		—			—		290			290		—			—
Corporate bonds:
U.S.	597			—		597			—		537			—		537			—
Non-U.S.	138			—		138			—		123			—		123			—
Government and agency bonds:
U.S.	70			—		70			—		60			—		60			—
Non-U.S.	33			—		33			—		31			—		31			—
Municipal bonds	61			—		61			—		58			—		58			—
Mortgage and asset backed securities	15			—		15			—		8			—		8			—
Real estate	10			4		—			6		17			10		—			7
Hedge funds	34			—		—			34		38			—		—			38
Derivative assets	8			—		8			—		9			—		9			—
Derivative liabilities	(4		)	—		(4		)	—		(10		)	—		(10		)	—
Total assets at fair value	$	1,537		$	547	$	950		$	40	$	1,545		$	673	$	827		$	45
Investments measured at net asset value:
Short-term investments	21										31
Commingled funds:
Equities	310										332
Fixed income	31										30
Blended	85										86
Real estate	89										84
Hedge funds	95										103
Total investments measured at net asset value:	631										666
Other items to reconcile to fair value of plan assets	(14		)								(28		)
Total pension plan assets at fair value	$	2,154									$	2,183

Short-term investments — Investments include cash and cash equivalents, and various short-term debt instruments and short-term investment funds. Institutional short-term investment vehicles valued daily are classified as Level 1 at cost which approximates market value. Short-term debt instruments are classified at Level 2 and are valued based on bid quotations and recent trade data for identical or similar obligations. Other investments valued based upon net asset value are included as a reconciling item to the fair value table.

Equities — Common stocks and preferred stocks are classified as Level 1 and are valued using quoted market prices in active markets.

Corporate bonds — These investments are valued based on quoted market prices, yield curves and pricing models using current market rates.

Government and agency bonds — These investments are generally valued based on bid quotations and recent trade data for identical or similar obligations.

Municipal bonds — These investments are valued based on quoted market prices, yield curves and pricing models using current market rates.

Mortgage and asset backed securities — These investments are valued based on prices obtained from third party pricing sources. The prices from third party pricing sources may be based on bid quotes from dealers and recent trade data. Mortgage backed securities are traded in the over-the-counter market.

Real estate — Real estate investments consist of real estate investment trusts, property funds and limited partnerships. Real estate investment trusts are classified as Level 1 and are valued based on quoted market prices. Property funds are classified as either Level 2 or Level 3 depending upon whether liquidity is limited or there are few observable market participant transactions. Property funds are valued based on third party appraisals. Limited partnerships are valued based upon valuations provided by the general partners of the funds. The values of limited partnerships are based upon an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sales transactions with third parties, expected cash flows, and market-based information, including comparable transactions and performance multiples among other factors. The investments are classified as Level 3 since the valuation is determined using unobservable inputs. Real estate investments valued at net asset value are included as a reconciling item to the fair value table.

Hedge funds — Hedge fund investments include hedge funds valued based upon a net asset value derived from the fair value of underlying securities. Hedge fund investments that are subject to liquidity restrictions or that are based on unobservable inputs are classified as Level 3. Hedge fund investments may include long and short positions in equity and fixed income securities, derivative instruments such as futures and options, commodities and other types of securities. Hedge fund investments valued at net asset value are included as a reconciling item to the fair value table.

Derivatives — Derivative financial instruments include forward currency contracts, futures contracts, options contracts, interest rate swaps and credit default swaps. Derivative financial instruments are classified as Level 2 and are valued based on observable market transactions or prices.

Commingled funds — Investments in commingled funds are not traded in active markets. Blended commingled funds are invested in both equities and fixed income securities. Commingled funds are valued based on the net asset values of such funds and are included as a reconciling item to the fair value table.

Other items to reconcile to fair value of plan assets included amounts due for securities sold, amounts payable for securities purchased, and other payables.

The following table summarizes the changes in fair value of Level 3 investments for the years ended July 29, 2018, and July 30, 2017:



	Real Estate			Hedge Funds			Total
Fair value at July 30, 2017	$	7		$	38		$	45
Actual return on plan assets	2			2			4
Purchases	—			—			—
Sales	(3		)	(6		)	(9		)
Settlements	—			—			—
Transfers out of Level 3	—			—			—
Fair value at July 29, 2018	$	6		$	34		$	40



	Real Estate			Hedge Funds			Total
Fair value at July 31, 2016	$	6		$	45		$	51
Actual return on plan assets	1			2			3
Purchases	1			1			2
Sales	(1		)	(10		)	(11		)
Settlements	—			—			—
Transfers out of Level 3	—			—			—
Fair value at July 30, 2017	$	7		$	38		$	45

The following tables present additional information about the pension plan assets valued using net asset value as a practical expedient within the fair value hierarchy table:



	2018		2017
	Fair Value		Fair Value		Redemption Frequency		Redemption Notice Period Range
Short-term investments	$	21	$	31	Daily		1 Day
Commingled funds:
Equities	310		332		Daily,	Monthly	2	to	60 Days
Fixed income	31		30		Daily		1 Day
Blended	85		86		Primarily Daily		1	to	20 Days
Real estate funds	89		84		Quarterly		45	to	90 Days
Hedge funds⁽¹⁾	95		103		Monthly		5	to	30 Days
Total	$	631	$	666

___________________________________


⁽¹⁾	Includes a fund valued at $2 in 2017 which was substantially liquidated in 2018.

There were no unfunded commitments in 2018 or 2017.

No contributions are expected to be made to U.S. pension plans in 2019. We expect contributions to non-U.S. pension plans to be approximately $4 in 2019.

Estimated future benefit payments are as follows:



	Pension		Postretirement
2019	$	173	$	29
2020	$	167	$	28
2021	$	168	$	26
2022	$	163	$	25
2023	$	159	$	24
2024-2028	$	777	$	97

The estimated future benefit payments include payments from funded and unfunded plans.

Defined Contribution Plans — All Snyder’s-Lance U.S. employees are eligible to participate in a 401(k) Retirement Plan that provides participants with matching contributions equal to 100% of the first 4% of qualified wages and 50% of the next 1% of qualified wages. For substantially all U.S. employees except Snyder's-Lance employees, effective January 1, 2011, we provide a matching contribution of 100% of employee contributions up to 4% of compensation for employees who are not covered by collective bargaining agreements. Employees hired or rehired on or after January 1, 2011, who will not be eligible to participate in the defined benefit plans and who are not covered by collective bargaining agreements receive a contribution equal to 3% of compensation regardless of their participation in the 401(k) Retirement Plan. Amounts charged to Costs and expenses were $45 in 2018, $34 in 2017 and $33 in 2016.