Pension and Other Postretirement Benefits

12 Months Ended

Jun. 30, 2023

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits

PENSION AND OTHER POSTRETIREMENT BENEFITSThe Company participates in and/or sponsors various pension, savings and postretirement benefit plans. Pension plans and postretirement benefit plans are closed to new participants with the exception of a small group covered by collective bargaining agreements. The Company has a legally enforceable obligation to contribute to some plans and is not required to contribute to others. The plans include both defined benefit pension plans and employee non-contributory and employee contributory accumulation plans covering all eligible employees. The Company makes contributions in accordance with applicable laws or contract terms.

Pension and postretirement plans that are sponsored by the Company are accounted for as defined benefit pension plans. Accordingly, the funded and unfunded position of each plan is recorded in the Balance Sheets. Actuarial gains and losses that have not yet been recognized through income are recorded in Accumulated other comprehensive loss net of taxes, and they are systematically amortized as a component of net periodic benefit cost. The Company’s benefit obligation for the plans is calculated using assumptions which the Company reviews on a regular basis. The funded status of the plans can change from year to year, but the assets of the funded plans have been sufficient to pay all benefits that came due in each of fiscal 2023, 2022 and 2021.

The Company uses a June 30 measurement date for all pension and postretirement benefit plans. The following table sets forth the change in the projected benefit obligation, change in the fair value of plan assets and funded status for the Company’s pension and postretirement benefit plans:

	Pension benefits				Postretirement benefits
	As of June 30,
	2023		2022		2023		2022
	(in millions)
Projected benefit obligation, beginning of the year	$	1,203	$	1,468	$	53	$	98
Service cost	30		38		1		1
Interest cost	52		30		2		2
Benefits paid	(22)		(22)		(4)		(4)
Settlements(a)	(32)		(56)		—		—
Actuarial gains(b)	(58)		(256)		(5)		(46)
Other	(1)		1		—		2
Projected benefit obligation, end of the year	1,172		1,203		47		53
Change in the fair value of plan assets for the Company’s benefit plans:
Fair value of plan assets, beginning of the year	801		972		—		—
Actual return on plan assets	53		(152)		—		—
Employer contributions	53		59		4		4
Benefits paid	(22)		(22)		(4)		(4)
Settlements(a)	(32)		(56)		—		—
Fair value of plan assets, end of the year	853		801		—		—
Funded status(c)	$	(319)	$	(402)	$	(47)	$	(53)
Grantor Trust assets(c)	$	276	$	270	$	—	$	—

(a)	Represents the full settlement of former employees’ deferred pension benefit obligations through lump sum payments.
(b)	Actuarial gains for June 30, 2023 and June 30, 2022 were primarily due to a change in the discount rate assumption utilized in measuring plan obligations.
(c)	The Company has established an irrevocable grantor trust (the “Grantor Trust”), administered by an independent trustee, with the intention of making cash contributions to the Trust to fund certain future pension benefit obligations of the Company. The assets in the Grantor Trust are unsecured funds of the Company and can be used to satisfy the Company’s obligations in the event of bankruptcy or insolvency.

Amounts recognized in the Balance Sheets consist of:

	Pension benefits				Postretirement benefits
	As of June 30,
	2023		2022		2023		2022
	(in millions)
Pension assets	$	8	$	6	$	—	$	—
Accrued pension liabilities	(327)		(408)		(47)		(53)
Net amounts recognized	$	(319)	$	(402)	$	(47)	$	(53)

Amounts recognized in Accumulated other comprehensive loss, before tax, consist of:

	Pension benefits				Postretirement benefits
	As of June 30,
	2023		2022		2023		2022
	(in millions)
Actuarial losses (gains)	$	228	$	322	$	(34)	$	(33)
Prior service cost	1		3		—		—
Net amounts recognized	$	229	$	325	$	(34)	$	(33)

Accumulated pension benefit obligations as of June 30, 2023 and 2022 were $1.04 billion and $1.07 billion, respectively. For the funded plans, as of June 30, 2023, the projected benefit obligation exceeds the fair value of plan assets except for two plans that have assets of $123 million, a projected benefit obligation of $115 million and an accumulated benefit obligation of $112 million. Information about funded and unfunded pension plans is presented below:

	Funded plans				Unfunded plans
	As of June 30,
	2023		2022		2023			2022
	(in millions)
Projected benefit obligation	$	901	$	930	$	271		$	273
Accumulated benefit obligation	777		801		267			268
Fair value of plan assets	853		801		—		(a)	—		(a)

(a) The fair value of the assets in the Grantor Trust as of June 30, 2023 and 2022 was $276 million and $270 million, respectively.

Information about funded and unfunded pension plans in which the accumulated benefit obligation exceeds fair value of the plan assets is presented below:

	Funded plans					Unfunded plans
	As of June 30,
	2023			2022		2023			2022
	(in millions)
Projected benefit obligation	$	—		$	807	$	271		$	273
Accumulated benefit obligation	—		(a)	683		267			268
Fair value of plan assets	—		(a)	675		—		(b)	—		(b)

(a)	As of June 30, 2023, the fair value of plan assets exceeded the accumulated benefit obligation for the funded plans.
(b)	The fair value of the assets in the Grantor Trust as of June 30, 2023 and 2022 was $276 million and $270 million, respectively.

The components of net periodic benefit costs were as follows:

	Pension benefits						Postretirement benefits
	For the years ended June 30,
	2023		2022		2021		2023		2022		2021
	(in millions)
Service cost	$	30	$	38	$	38	$	1	$	1	$	2
Interest cost	52		30		30		2		2		2
Expected return on plan assets	(40)		(50)		(50)		—		—		—
Amortization of deferred losses	23		31		44		(4)		1		1
Other	—		3		2		—		—		—
Net periodic benefit costs	$	65	$	52	$	64	$	(1)	$	4	$	5

The components of net periodic benefit costs other than the service cost component are included in Other, net in the Statements of Operations.

	Pension benefits						Postretirement benefits
	For the years ended June 30,
	2023		2022		2021		2023		2022		2021
Additional information
Weighted-average assumptions used to determine benefit obligations
Discount rate	5.3	%	4.8	%	2.7	%	5.3	%	4.8	%	2.7	%
Weighted-average assumptions used to determine net periodic benefit costs
Discount rate for service cost	4.8	%	2.8	%	2.9	%	4.8	%	2.9	%	3.0	%
Discount rate for interest cost	4.5	%	2.1	%	2.2	%	4.5	%	2.2	%	2.2	%
Expected return on plan assets	5.0	%	5.1	%	6.5	%	N/A		N/A		N/A

N/A – not applicable.

The Company utilizes a full yield curve approach in the estimation of the service and interest components of net periodic benefit costs for pension and postretirement benefits by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The Company utilizes the latest mortality table released by the Society of Actuaries.

The following assumed health care cost trend rates as of June 30 were also used in accounting for postretirement benefits:

	Postretirement benefits
	Fiscal 2023		Fiscal 2022
Health care cost trend rate	6.1	%	5.8	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.0	%	4.0	%
Year that the rate reaches the ultimate trend rate	2047		2047

The following table sets forth the estimated benefit payments and estimated settlements for the next five fiscal years and in aggregate for the five fiscal years thereafter. These payments are estimated based on the same assumptions used to measure the Company’s benefit obligation at the end of the fiscal year and include benefits attributable to estimated future employee service:

	Expected benefit payments
	Pension benefits		Postretirement benefits
	(in millions)
Fiscal year
2024	$	68	$	4
2025	66		4
2026	64		4
2027	69		4
2028	74		4
2029-2033	409		18

The above table presents expected benefit payments for the postretirement benefits net of a nominal amount of U.S. Medicare subsidy receipts per year.

Plan Assets and Grantor Trust

The following tables present Plan assets for the Company’s funded pension plans and Grantor Trust assets to fund certain future unfunded pension benefit obligations of the Company. The assets are classified by level within the fair value hierarchy, as described in Note 6—Fair Value, as of June 30, 2023 and 2022:

	As of June 30, 2023
			Fair value measurements at reporting date using		Assets measured
	Total		Level 1		at NAV(a)
	(in millions)
PENSION PLAN ASSETS
Pooled funds(b)
Money market funds	$	18	$	18	$	—
Domestic equity funds	189		189		—
Domestic fixed income funds(c)	383		383		—
International equity funds	136		136		—
Balanced funds	78		78		—
Partnership interests	49		—		49
Total fair value of plan assets	$	853	$	804	$	49
GRANTOR TRUST ASSETS
Pooled funds(b)
Money market funds	$	20	$	20	$	—
Domestic fixed income funds(c)	143		143		—
Balanced funds	112		112		—
Other(e)	1		1		—
Total fair value of Grantor Trust assets	$	276	$	276	$	—

	As of June 30, 2022
			Fair value measurements at reporting date using		Assets measured
	Total		Level 1		at NAV(a)
	(in millions)
PENSION PLAN ASSETS
Pooled funds(b)
Money market funds	$	20	$	20	$	—
Domestic equity funds	82		82		—
Domestic fixed income funds(c)	381		381		—
International equity funds	133		133		—
Balanced funds	78		78		—
U.S. common stocks(d)	43		43		—
Partnership interests	33		—		33
Exchange traded funds(d)	32		32		—
Other(e)	(1)		(1)		—
Total fair value of plan assets	$	801	$	768	$	33
GRANTOR TRUST ASSETS
Balanced funds(b)	$	234	$	234	$	—
Partnership interests	16		—		16
Other(e)	20		20		—
Total fair value of Grantor Trust assets	$	270	$	254	$	16

(a)	Investments that are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) as a practical expedient are excluded from the fair value hierarchy disclosure. These investments have monthly liquidity.
(b)	Pooled funds that have a readily determinable fair value are valued at the regularly published NAV.
(c)	Domestic fixed income funds consist primarily of investment grade securities.
(d)	Exchange traded funds and common stock investments that are publicly traded are valued at the closing price reported on active markets in which the securities are traded.
(e)	Includes cash and cash equivalents and plan receivables and payables.

The investment objective for the funded pension plans is to grow assets to decrease the deficit and protect improvements in funded status. The asset allocation strategy will change over time by shifting assets from return seeking assets to liability hedging assets upon the achievement of certain funding milestones. The target asset allocation on June 30, 2023 is 50% return seeking assets and 50% liability hedging assets which approximates the actual asset allocation as of June 30, 2023. Return seeking assets are diversified across multiple asset classes and liability hedging assets are managed to correlate highly with the pension liabilities to reduce interest rate risk. Assets are generally managed by external investment managers. The expected long-term rate of return on asset assumption is determined using the current target asset allocation and applying expected future returns for the various asset classes and correlations amongst the asset classes.

The funded plans weighted-average asset allocation, by asset category, are as follows:

	Pension benefits
	As of June 30,
	2023		2022
Asset Category
Equity investments	39	%	37	%
Fixed income investments, including cash	51		52
Other	10		11
Total	100	%	100	%

Required pension plan contributions for the next fiscal year are not expected to be material; however, actual contributions may be affected by pension asset and liability valuation changes during the year. The Company will continue to make voluntary contributions as necessary to improve funded status.

Defined Contribution Plans

The Company has defined contribution plans for the benefit of substantially all employees meeting certain eligibility requirements. Employer contributions to such plans were $68 million, $58 million and $49 million for fiscal 2023, 2022 and 2021, respectively.