EMPLOYEE BENEFIT PLANS

Retirement Income Plans

The Company has various retirement income plans for eligible domestic and international employees. As of June 30, 2017 and 2016, the domestic retirement income plans are frozen for most participants, and the benefits of the domestic retirement income plans are generally based on either employee years of service and compensation or a stated dollar amount per year of service.

The Company contributed $31, $31 and $13 to its domestic retirement income plans during fiscal years 2017, 2016 and 2015, respectively. The Company's funding policy is to contribute amounts sufficient to meet benefit payments and minimum funding requirements as set forth in employee benefit tax laws plus additional amounts as the Company may determine to be appropriate.

Retirement Health Care Plans

The Company provides certain health care benefits for employees who meet age, participation and length of service requirements at retirement. The plans pay stated percentages of covered expenses after annual deductibles have been met or stated reimbursements up to a specified dollar subsidy amount. Benefits paid take into consideration payments by Medicare for the domestic plan. The plans are funded as claims are paid, and the Company has the right to modify or terminate certain plans.

The assumed domestic health care cost trend rate used in measuring the accumulated benefit obligation (ABO) was 6.50% for both medical and prescription drugs for fiscal year 2017. These rates have been assumed to gradually decrease each year until an assumed ultimate trend of 4.5% is reached in 2037. The health care cost trend rate assumption has a minimal effect on the amounts reported due primarily to the existence of benefit cap provisions in the Company’s domestic plan. As such, the effect of a hypothetical 100 basis point increase or decrease in the assumed domestic health care cost trend rate on the total service and interest cost components as well as the postretirement benefit obligation would have been immaterial for each of the fiscal years ended June 30, 2017, 2016 and 2015.

Benefit Obligation and Funded Status

Summarized information for the Company’s retirement income and retirement health care plans as of and for the fiscal years ended June 30 is as follows:



	Retirement Income						Retirement Health Care
	2017			2016			2017			2016
Change in benefit obligations:
Benefit obligation as of beginning of year	$	673		$	639		$	47		$	45
Service cost	1			1			—			—
Interest cost	22			26			2			2
Actuarial loss (gain)	(21		)	51			(4		)	2
Plan amendments	—			(1		)	—			—
Translation and other adjustments	—			(1		)	—			—
Benefits paid	(42		)	(42		)	(3		)	(2		)
Benefit obligation as of end of year	633			673			42			47
Change in plan assets:
Fair value of assets as of beginning of year	$	423		$	409		$	—		$	—
Actual return on plan assets	22			26			—			—
Employer contributions	31			31			3			2
Benefits paid	(42		)	(42		)	(3		)	(2		)
Translation and other adjustments	—			(1		)	—			—
Fair value of plan assets as of end of year	434			423			—			—
Accrued benefit cost, net funded status	$	(199	)	$	(250	)	$	(42	)	$	(47	)



Amount recognized in the balance sheets consists of:
Pension benefit assets	$	2		$	1		$	—		$	—
Current accrued benefit liability	(15		)	(14		)	(3		)	(3		)
Non-current accrued benefit liability	(186		)	(237		)	(39		)	(44		)
Accrued benefit cost, net	$	(199	)	$	(250	)	$	(42	)	$	(47	)

For the retirement income plans, the benefit obligation is the projected benefit obligation (PBO). For the retirement health care plan, the benefit obligation is the ABO.

The ABO for all retirement income plans was $632, $596 and $559 as of June 30, 2017, 2016 and 2015, respectively.

Retirement income plans with ABO in excess of plan assets as of June 30 were as follows:



	ABO Exceeds the Fair Value of Plan Assets
	2017		2016
Projected benefit obligation	$	611	$	651
Accumulated benefit obligation	610		650
Fair value of plan assets	409		399

Net Periodic Benefit Cost

The net cost of the retirement income and health care plans for the fiscal years ended June 30 included the following components:



	Retirement Income									Retirement Health Care
	2017			2016			2015			2017			2016			2015
Service cost	$	1		$	1		$	2		$	—		$	—		$	—
Interest cost	22			26			25			2			2			2
Expected return on plan assets	(20		)	(17		)	(20		)	—			—			—
Amortization of unrecognized items	11			10			12			(2		)	(3		)	2
Total	$	14		$	20		$	19		$	—		$	(1	)	$	4

Items not yet recognized as a component of postretirement expense as of June 30, 2017, consisted of:



	Retirement Income			Retirement Health Care
Net actuarial loss (gain)	$	262		$	(16	)
Prior service benefit	—			(5		)
Net deferred income tax (assets) liabilities	(98		)	7
Accumulated other comprehensive loss (income)	$	164		$	(14	)

Net actuarial loss (gain) recorded in Accumulated other comprehensive net (losses) income for the fiscal year ended June 30, 2017, included the following:



	Retirement Income			Retirement Health Care
Net actuarial loss (gain) as of beginning of year	$	296		$	(13	)
Amortization during the year	(11		)	1
Loss (gain) during the year	(23		)	(4		)
Net actuarial loss (gain) as of end of year	$	262		$	(16	)

The Company uses the straight-line amortization method for unrecognized prior service costs and benefits. In fiscal year 2018, the Company expects to recognize, on a pre-tax basis, $7 of the net actuarial loss as a component of net periodic benefit cost for the retirement income plans. In addition, in fiscal year 2018, the Company expects to recognize, on a pre-tax basis, $3 of the net actuarial gain as a component of net periodic benefit cost for the retirement health care plans.

Assumptions

Weighted-average assumptions used to estimate the actuarial present value of benefit obligations as of June 30 were as follows:



	Retirement Income				Retirement Health Care
	2017		2016		2017		2016
Discount rate	3.70	%	3.42	%	3.66	%	3.42	%
Rate of compensation increase	2.83	%	2.92	%	n/a		n/a

Weighted-average assumptions used to estimate the retirement income and retirement health care costs as of June 30 were as follows:



	Retirement Income
	2017		2016		2015
Discount rate	3.42	%	4.20	%	4.05	%
Rate of compensation increase	2.92	%	3.37	%	4.46	%
Expected return on plan assets	4.73	%	4.34	%	5.28	%

	Retirement Health Care
	2017		2016		2015
Discount rate	3.42	%	4.16	%	4.00	%

The expected long-term rate of return assumption is based on an analysis of historical experience of the portfolio and the summation of prospective returns for each asset class in proportion to the fund’s current asset allocation.

Expected Benefit Payments

Expected benefit payments for the Company’s retirement income and retirement health care plans as of June 30, 2017, were as follows:



	Retirement Income		Retirement Health Care
2018	$	40	$	3
2019	51		3
2020	38		3
2021	37		3
2022	37		3
Fiscal years 2023 through 2027	190		12

Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.

Plan Assets

The target allocations and weighted average asset allocations by asset category of the investment portfolio for the Company’s domestic retirement income plans as of June 30 were:



	% Target Allocation				% of Plan Assets
	2017		2016		2017		2016
U.S. equity	11	%	11	%	11	%	11	%
International equity	12	%	12	%	12	%	11	%
Fixed income	74	%	74	%	73	%	74	%
Other	3	%	3	%	4	%	4	%
Total	100	%	100	%	100	%	100	%

The target asset allocation is determined based on the optimal balance between risk and return and, at times, may be adjusted to achieve the plan’s overall investment objective to generate sufficient resources to pay current and projected plan obligations over the life of the domestic retirement income plan.

The following table sets forth by level within the fair value hierarchy, the retirement income plans’ assets carried at fair value as of June 30:



	2017
	Level 1		Level 2		Total
Cash equivalents	$	2	$	—	$	2
Total assets in the fair value hierarchy	2		—		2

Common collective trusts measured at net asset value
Bond funds					$	310
International equity funds					64
Domestic equity funds					46
Real estate fund					12
Total common collective trusts measured at net asset value					432
Total assets at fair value					$	434



	2016
	Level 1		Level 2		Total
Cash equivalents	$	2	$	—	$	2
Total assets in the fair value hierarchy	2		—		2

Common collective trusts measured at net asset value
Bond funds					$	307
International equity funds					56
Domestic equity funds					44
Real estate fund					14
Total common collective trusts measured at net asset value					421
Total assets at fair value					$	423

The carrying value of cash equivalents approximates its fair value as of June 30, 2017 and 2016.

Common collective trust funds are not publicly traded and are valued at a net asset value unit price determined by the portfolio’s sponsor based on the fair value of underlying assets held by the common collective trust fund on June 30, 2017 and 2016.

The common collective trusts are invested in various trusts that attempt to achieve their investment objectives by investing primarily in other collective investment funds which have characteristics consistent with each trust’s overall investment objective and strategy.

Defined Contribution Plans

The Company has various defined contribution plans for eligible domestic and international employees. The aggregate cost of the domestic defined contribution plans was $47, $45 and $45 in fiscal years 2017, 2016 and 2015, respectively. The aggregate cost of the international defined contribution plans was $3 for the fiscal years ended June 30, 2017, 2016 and 2015.