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Retirement Plans
 12 Months Ended
Sep. 27, 2019
Defined Contribution Plan [Abstract]  
Retirement Plans RETIREMENT PLANS
The Company sponsors the Varian Medical Systems, Inc. Retirement Plan (the “Retirement Plan”) — a defined contribution plan that is available to substantially all of its employees in the United States. Under Section 401(k) of the Internal Revenue Code, the Retirement Plan allows for tax-deferred salary contributions by eligible employees. Participants can contribute from 1% to 25% of their eligible compensation to the Retirement Plan on a pre-tax or Roth basis (plus up to an additional 15% on an after-tax basis if they have more than one year of service with the Company) and all or a portion of their bonuses under the Employee Incentive Plan. However, participant contributions are limited to a maximum annual amount as determined periodically by the Internal Revenue Service. The Company matches eligible participant contributions dollar for dollar for the first 6% of eligible base compensation or bonus without a waiting period. Employees are immediately vested in their own contributions to the Retirement Plan. Employees hired on or after July 1, 2017 are 100% vested in the company matching contributions after one year of service. All matching contributions vest immediately upon satisfaction of the service requirement.
The Company also has a defined contribution plan that is available to regular full-time employees in the United Kingdom (the “U.K. Savings Plan”). Participants can contribute from 4% to 100% of their eligible compensation to the U.K. Savings Plan subject to a maximum annual amount determined by certain tax rules. The Company matches participant contributions up to 6% of participants’ eligible compensation, based on the participants’ level of contributions under this U.K. Savings Plan. All matching contributions vest immediately.
The Company sponsors multiple defined benefit pension plans for regular full-time employees in Germany, Japan, Switzerland and the United Kingdom. The Company also sponsors a post-retirement benefit plan that provides healthcare benefits to certain eligible retirees in the United States.
The Company recognizes the funded status of its defined benefit pension and post-retirement benefit plans on its Consolidated Balance Sheets. Each overfunded plan is recognized as an asset, and each underfunded plan is recognized as a liability. Unrecognized prior service costs or credits and net actuarial gains or losses, as well as subsequent changes in the funded status are recognized as a component of accumulated other comprehensive loss within Stockholders’ equity.
Total retirement, post-retirement benefit plan and defined benefit plan expense for all retirement plans amounted to $33.2 million, $30.2 million and $30.1 million for fiscal years 2019, 2018 and 2017, respectively. The Company's post-retirement benefit plan is not presented in any of the following information as it is not material.
Obligations and Funded Status
The following table presents the funded status of the defined benefit pension plans:
(In millions)
September 27,
2019
 
September 28,
2018
Change in benefit obligation:
 
 
 
Benefit obligation - beginning of fiscal year
$
225.7

 
$
230.7

Service cost
7.2

 
7.1

Interest cost
3.7

 
3.2

Plan participants’ contributions
12.2

 
13.0

Plan amendments
0.8

 
(2.2
)
Plan settlements
(4.2
)
 
(6.5
)
Actuarial (gain) loss
54.5

 
(10.1
)
Foreign currency changes
(6.4
)
 
(3.5
)
Benefit and expense payments
(6.1
)
 
(6.0
)
Benefit obligation - end of fiscal year
$
287.4

 
$
225.7

Change in plan assets:
 
 
 
Plan assets - beginning of fiscal year
$
224.7

 
$
215.1

Employer contributions
8.7

 
9.0

Actual return on plan assets
28.5

 
3.6

Plan participants’ contributions
12.2

 
13.0

Plan settlements
(4.2
)
 
(6.5
)
Foreign currency changes
(6.2
)
 
(3.5
)
Benefit and expense payments
(5.9
)
 
(6.0
)
Plan assets - end of fiscal year
$
257.8

 
$
224.7

Funded status
$
(29.6
)
 
$
(1.0
)
Amounts recognized within the consolidated balance sheet:
 
 
 
Other assets
$
1.5

 
$
7.6

Other long-term liabilities
(31.1
)
 
(8.6
)
Net amount recognized
$
(29.6
)
 
$
(1.0
)

 

The following table presents the amounts recognized in accumulated other comprehensive loss, before tax, for the defined benefit pension plans: 
(In millions)
September 27,
2019
 
September 28,
2018
Prior service credit
$
6.2

 
$
7.7

Net loss
(81.0
)
 
(51.8
)
Accumulated other comprehensive loss
$
(74.8
)
 
$
(44.1
)

 
 
The following table presents the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for those defined benefit pension plans where accumulated benefit obligations exceeded the fair value of plan assets: 
(In millions)
September 27,
2019
 
September 28,
2018
Projected benefit obligation
$
20.2

 
$
15.4

Accumulated benefit obligation
$
18.4

 
$
14.3

Fair value of plan assets
$
12.4

 
$
13.0


 
 
The accumulated benefit obligation for all defined benefit pension plans was $232.3 million and $203.3 million at September 27, 2019 and September 28, 2018, respectively.
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Earnings (Loss)
The following table shows the components of the Company’s net periodic benefit costs and the other amounts recognized in other comprehensive earnings (loss), before tax, for the Company’s defined benefit pension plans:
 
 
Fiscal Years
(In millions)
 
2019
 
2018
 
2017
Net Periodic Benefit Costs:
 
 
 
 
 
 
Service cost
 
$
7.2

 
$
7.1

 
$
7.1

Interest cost
 
3.7

 
3.2

 
2.4

Loss due to settlement
 
0.9

 
1.0

 
1.4

Expected return on assets
 
(6.3
)
 
(7.9
)
 
(7.1
)
Amortization of prior service cost
 
(0.9
)
 
(0.7
)
 
(0.5
)
Recognized actuarial loss
 
2.2

 
2.9

 
4.3

Net periodic benefit cost
 
6.8

 
5.6

 
7.6

Other Amounts Recognized in Other Comprehensive (Earnings) Loss:
 
 
 
 
 
 
New prior service cost (credit)
 
0.8

 
(2.2
)
 
(5.0
)
Net (gain) loss arising during the year
 
32.3

 
(5.8
)
 
(12.2
)
Amortization of prior service cost
 
0.8

 
0.7

 
0.5

Amortization or settlement of net actuarial loss
 
(3.1
)
 
(4.0
)
 
(5.7
)
Total recognized in other comprehensive (earnings) loss
 
30.8

 
(11.3
)
 
(22.4
)
Total recognized in net periodic benefit cost and other comprehensive (earnings) loss
 
$
37.6

 
$
(5.7
)
 
$
(14.8
)

 
The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost during fiscal year 2020 for the Company’s defined benefit pension plans are as follows: 
(In millions)
 
Total
Prior service credit
 
$
0.7

Net loss
 
(4.2
)
Total
 
$
(3.5
)

 
Assumptions
The assumptions used to determine net periodic benefit cost and to compute the expected long-term return on assets for the Company’s defined benefit pension plans were as follows:
 
 
 
Fiscal Years
Net Periodic Benefit Cost
 
2019
 
2018
 
2017
Discount rate
 
1.69
%
 
1.40
%
 
1.03
%
Rate of compensation increase
 
2.37
%
 
2.40
%
 
2.33
%
Expected long-term return on assets
 
2.85
%
 
3.66
%
 
3.56
%

 
The assumptions used to measure the benefit obligation for the Company’s defined benefit pension plans were as follows: 
Benefit Obligation
 
September 27, 2019
 
September 28, 2018
Discount rate
 
0.63
%
 
1.69
%
Rate of compensation increase
 
2.27
%
 
2.37
%

 
 
The benefit obligation of defined benefit pension plans was measured as of September 27, 2019. The discount rate was adjusted as of September 27, 2019 to a range of 0.10% to 1.80%, primarily based on the current effective yield of long-term corporate bonds that are of high quality with satisfactory liquidity and credit rating with durations corresponding to the expected duration of the benefit obligations. Additionally, the rate of projected compensation increase was adjusted as of September 27, 2019 to a range of 1.75% to 3.50%, reflecting expected inflation levels and the Company’s future outlook.
During the fourth quarter of fiscal year 2019, the Company reviewed the expected long-term rate of return on defined benefit pension plan assets. This review consisted of forward-looking projections for the risk-free rate of return, inflation rate and implied equity risk premiums for particular asset classes. The results of this review were applied to the target asset allocation in accordance with the Company’s planned investment strategies, which are implemented by outside investment managers. The expected long-term rate of return on plan assets was determined based on the weighted average of projected returns on each asset class.
Plan Assets
For the defined benefit pension plans, the investment objectives of the Company are to generate returns that will enable the defined benefit pension plans to meet their future obligations. The precise amount of these obligations depends on future events, including the life expectancies of the pension plans’ members and the level of salary increases. The obligations are estimated using actuarial assumptions, based on the current economic environment. The investment strategy depends on the country in which the defined benefit pension plan applies. The investment objectives of some defined benefit pension plans are more conservative than others. In general, the investment strategy of the defined benefit pension plans is to balance the requirement to generate return using higher-returning assets such as equity securities, with the need to control risk with less volatile assets, such as fixed-income securities. Risks include, among others, the likelihood of the defined benefit pension plans becoming underfunded, thereby increasing their dependence on contributions from the Company. Within each asset class, investment managers give consideration to balancing the portfolio among industry sectors, geographies, interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The target allocation as of the end of fiscal year 2019 was 22% equities, 51% debt and fixed income assets, 15% real estate, and 12% other.
 
The following table presents the Company’s defined benefit pension plans’ major asset categories, their associated fair values, as well as the actual allocation of equity, debt and fixed income, real estate and all other types of investments: 
(In millions)
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
 
Total
As of September 27, 2019:
 
 
 
 
 
 
 
 
Investment funds:
 
 
 
 
 
 
 
 
Mutual funds - equities
 
$
—

 
$
51.9

 
$
—

 
$
51.9

Mutual funds - debt
 
—

 
112.5

 
—

 
112.5

Hedge funds
 
—

 
4.0

 
—

 
4.0

Mutual funds - real estate
 
—

 
43.9

 
—

 
43.9

Other
 
—

 
27.1

 
—

 
27.1

Assets held by insurance company:
 
 
 
 
 
 
 
 
Insurance contracts
 
—

 
13.0

 
—

 
13.0

Cash and cash equivalents
 
1.8

 
—

 
—

 
1.8

Total
 
$
1.8

 
$
252.4

 
$
—

 
$
254.2

As of September 28, 2018:
 
 

 
 
 
 
 
 
Investment funds:
 
 

 
 
 
 
 
 
Mutual funds - equities
 
$
—

 
$
29.5

 
$
—

 
$
29.5

Mutual funds - debt
 
—

 
45.2

 
—

 
45.2

Mutual funds - real estate
 
—

 
9.0

 
—

 
9.0

Other
 
—

 
23.7

 
—

 
23.7

Assets held by insurance company:
 
 
 
 
 
 
 
 
Insurance contracts
 
—

 
116.1

 
—

 
116.1

Cash and cash equivalents
 
1.2

 
—

 
—

 
1.2

Total
 
$
1.2

 
$
223.5

 
$
—

 
$
224.7


Valuation Techniques
Debt securities are valued at the closing price reported on the stock exchange on which the individual securities are traded. Mutual funds held in trust or similar entities include investments in publicly traded mutual funds and are typically valued using the net asset value provided by the administrator of the fund. Insurance contracts are valued by the insurer using the cash surrender value, which is the amount a plan would receive if a contract was terminated. Cash includes deposits and money market accounts, which are valued at their cost plus interest on a daily basis, which approximates fair value. There were no significant changes in valuation techniques during fiscal years 2019 and 2018.
Estimated Contributions and Future Benefit Payments
The Company made contributions of $8.7 million to the defined benefit pension plans during fiscal year 2019, compared to $9.0 million in fiscal year 2018 and $8.2 million in fiscal year 2017. The Company expects total contributions to the defined benefit pension plans for fiscal year 2020 will be approximately $9.2 million.
 
Estimated future benefit payments to the defined benefit pension plans at September 27, 2019 were as follows:
 
(In millions)
 
Future Benefit Payments
Fiscal Years:
 
 

2020
 
$
7.0

2021
 
8.4

2022
 
8.2

2023
 
7.6

2024
 
9.3

Thereafter
 
45.6

Total
 
$
86.1