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RETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS
 12 Months Ended
May 26, 2013
RETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS [Abstract]  
RETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS

NOTE 13. RETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS

Defined Benefit Pension Plans

We have defined benefit pension plans covering most employees in the United States, Canada, France, and the United Kingdom. Benefits for salaried employees are based on length of service and final average compensation. Benefits for hourly employees include various monthly amounts for each year of credited service. Our funding policy is consistent with the requirements of applicable laws. We made $200.0 million of voluntary contributions to our principal U.S. plans in each of fiscal 2013 and fiscal 2012. We do not expect to be required to make any contributions in fiscal 2014. Our principal domestic retirement plan covering salaried employees has a provision that any excess pension assets would be allocated to active participants if the plan is terminated within five years of a change in control. In fiscal 2012, we announced changes to our U.S. defined benefit pension plans. All new salaried employees hired on or after June 1, 2013 are eligible for a new retirement program that does not include a defined benefit pension plan. Current salaried employees remain in the existing defined benefit pension plan with adjustments to benefits.

 

Other Postretirement Benefit Plans

We also sponsor plans that provide health care benefits to the majority of our retirees in the United States, Canada, and Brazil. The United States salaried health care benefit plan is contributory, with retiree contributions based on years of service. We make decisions to fund related trusts for certain employees and retirees on an annual basis. We did not make voluntary contributions to these plans in fiscal 2013 or fiscal 2012.

Health Care Cost Trend Rates

Assumed health care cost trends are as follows:

 Fiscal Year
 2013 2012
Health care cost trend rate for next year8.0% 8.5%
Rate to which the cost trend rate is assumed to decline (ultimate rate)5.2% 5.2%
Year that the rate reaches the ultimate trend rate2019 2019

We review our health care cost trend rates annually. Our review is based on data we collect about our health care claims experience and information provided by our actuaries. This information includes recent plan experience, plan design, overall industry experience and projections, and assumptions used by other similar organizations. Our initial health care cost trend rate is adjusted as necessary to remain consistent with this review, recent experiences, and short-term expectations. Our initial health care cost trend rate assumption is 8.0 percent for all retirees at the end of fiscal 2013. Rates are graded down annually until the ultimate trend rate of 5.2 percent is reached in 2019 for all retirees. The trend rates are applicable for calculations only if the retirees' benefits increase as a result of health care inflation. The ultimate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inflation plus an appropriate health care cost premium. Assumed trend rates for health care costs have an important effect on the amounts reported for the other postretirement benefit plans.

 

A one percentage point change in the health care cost trend rate would have the following effects:

In Millions One Percentage Point Increase One Percentage Point Decrease
Effect on the aggregate of the service and interest cost components in fiscal 2014$ 5.2$ (4.4)
Effect on the other postretirement accumulated benefit obligation as of May 26, 2013  93.8  (82.9)

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Act) was signed into law in March 2010. The Act codifies health care reforms with staggered effective dates from 2010 to 2018. Estimates of the future impacts of several of the Act's provisions are incorporated into our postretirement benefit liabilit

Postemployment Benefit Plans

Under certain circumstances, we also provide accruable benefits to former or inactive employees in the United States, Canada, and Mexico, and members of our Board of Directors, including severance and certain other benefits payable upon death. We recognize an obligation for any of these benefits that vest or accumulate with service. Postemployment benefits that do not vest or accumulate with service (such as severance based solely on annual pay rather than years of service) are charged to expense when incurred. Our postemployment benefit plans are unfunded.

We use our fiscal year end as the measurement date for our defined benefit pension and other postretirement benefit plans.

 

Summarized financial information about defined benefit pension, other postretirement, and postemployment benefit plans is presented below:

  Defined Benefit Pension Plans  Other Postretirement Benefit Plans  Postemployment Benefit Plans
  Fiscal Year  Fiscal Year  Fiscal Year
In Millions 2013  2012  2013  2012  2013  2012
Change in Plan Assets:                 
Fair value at beginning of year$ 4,353.9 $ 4,264.0 $ 358.8 $ 353.8      
Actual return on assets  698.7   56.3   67.9   (4.8)      
Employer contributions  223.1   222.1   0.1   0.1      
Plan participant contributions  15.2   20.3   13.0   12.2      
Benefits payments  (222.6)   (203.3)   (2.9)   (2.5)      
Foreign currency   (2.2)   (5.5)   -   -      
Fair value at end of year$ 5,066.1 $ 4,353.9 $ 436.9 $ 358.8      
Change in Projected Benefit Obligation:                 
Benefit obligation at beginning of year$ 4,991.5 $ 4,458.4 $ 1,129.0 $ 1,065.8 $ 141.3 $ 131.3
Service cost  124.4   114.3   21.6   18.0   7.8   7.5
Interest cost  237.3   237.9   52.1   55.6   4.4   4.8
Plan amendment  0.2   (13.4)   -   -   4.5   -
Curtailment/other  -   (27.1)   -   0.1   11.4   11.9
Plan participant contributions  15.2   20.3   13.0   12.2   -   -
Medicare Part D reimbursements  -   -   4.1   4.7   -   -
Actuarial loss (gain)  237.5   405.7   (23.0)   28.4   (10.4)   5.5
Benefits payments   (222.8)   (203.5)   (58.9)   (55.5)   (13.6)   (19.6)
Foreign currency   (1.9)   (5.9)   (0.1)   (0.3)   -   (0.1)
Acquisitions  -   4.8   10.4   -   -   -
Projected benefit obligation at end of year$ 5,381.4 $ 4,991.5 $ 1,148.2 $ 1,129.0 $ 145.4 $ 141.3
Plan assets less than benefit obligation as of fiscal year end$ (315.3) $ (637.6) $ (711.3) $ (770.2) $ (145.4) $ (141.3)

The accumulated benefit obligation for all defined benefit pension plans was $4,888.8 million as of May 26, 2013, and $4,504.7 million as of May 27, 2012.

 

Amounts recognized in AOCI as of May 26, 2013, and May 27, 2012, are as follows:

   Defined Benefit Pension Plans  Other Postretirement Benefit Plans  Postemployment Benefit Plans  Total
   Fiscal Year Fiscal Year Fiscal Year Fiscal Year
In Millions  2013  2012  2013  2012  2013  2012  2013  2012
Net actuarial loss $ (1,625.1) $ (1,714.1) $ (168.2) $ (215.0) $ (8.2) $ (16.8) $ (1,801.5) $ (1,945.9)
Prior service (costs) credits   (18.5)   (22.0)   16.6   19.0   (5.9)   (4.2)   (7.8)   (7.2)
Amounts recorded in accumulated other comprehensive loss $ (1,643.6) $ (1,736.1) $ (151.6) $ (196.0) $ (14.1) $ (21.0) $ (1,809.3) $ (1,953.1)

Plans with accumulated benefit obligations in excess of plan assets are as follows:

   Defined Benefit Pension Plans  Other Postretirement Benefit Plans  Postemployment Benefit Plans
   Fiscal Year  Fiscal Year  Fiscal Year
In Millions  2013  2012  2013  2012  2013  2012
Projected benefit obligation $ 396.9 $ 423.4 $ - $ - $ - $ -
Accumulated benefit obligation   346.6   361.5   1,132.9   1,129.0   145.4   141.3
Plan assets at fair value   9.5   53.0   436.9   358.8   -   -

Components of net periodic benefit expense are as follows:

  Defined Benefit Pension Plans Other Postretirement Benefit Plans Postemployment Benefit Plans
  Fiscal Year Fiscal Year Fiscal Year
In Millions 2013 2012 2011 2013 2012 2011 2013 2012 2011
Service cost$ 124.4$ 114.3$ 101.4$ 21.6$ 18.0$ 18.7$ 7.8$ 7.5$ 8.0
Interest cost  237.3  237.9  230.9  52.1  55.6  60.1  4.4  4.8  5.1
Expected return on plan assets  (428.0)  (440.3)  (408.5)  (32.1)  (35.5)  (33.2)  -  -  -
Amortization of losses  136.0  108.1  81.4  17.1  14.5  14.4  2.1  1.7  2.1
Amortization of prior service costs (credits)  6.2  8.6  9.0  (3.4)  (3.4)  (0.6)  1.9  2.1  2.4
Other adjustments  -  -  -  -  -  -  11.4  12.0  4.2
Net expense $ 75.9$ 28.6$ 14.2$ 55.3$ 49.2$ 59.4$ 27.6$ 28.1$ 21.8

We expect to recognize the following amounts in net periodic benefit expense in fiscal 2014:

In Millions  Defined Benefit Pension Plans  Other Postretirement Benefit Plans  Postemployment Benefit Plans
Amortization of losses  $ 151.1  $ 15.4  $ 0.6
Amortization of prior service costs (credits)   5.6   (3.4)   2.4

Assumptions

 

Weighted-average assumptions used to determine fiscal year-end benefit obligations are as follows:

 Defined Benefit Pension Plans Other Postretirement Benefit Plans Postemployment Benefit Plans
 Fiscal Year Fiscal Year Fiscal Year
 2013 2012  2013 2012  2013 2012 
Discount rate 4.54% 4.85%  4.50% 4.70%  3.70% 3.86%
Rate of salary increases 4.44  4.44   -  -   4.44  4.45 

Weighted-average assumptions used to determine fiscal year net periodic benefit expense are as follows:

 Defined Benefit Pension Plans  Other Postretirement Benefit Plans Postemployment Benefit Plans
 Fiscal Year  Fiscal Year Fiscal Year
 2013 2012 2011  2013 2012 2011  2013 2012 2011 
Discount rate 4.85% 5.45% 5.85%  4.70% 5.35% 5.80%  3.86% 4.77% 5.12%
Rate of salary increases 4.44  4.92  4.93   -  -  -   4.45  4.92  4.93 
Expected long-term rate of return on plan assets 8.53  9.52  9.53   8.13  9.32  9.33   -  -  - 

Discount Rates

Our discount rate assumptions are determined annually as of the last day of our fiscal year for our defined benefit pension, other postretirement, and postemployment benefit plan obligations. We also use the same discount rates to determine defined benefit pension, other postretirement, and postemployment benefit plan income and expense for the following fiscal year. We work with our outside actuaries to determine the timing and amount of expected future cash outflows to plan participants and, using the Aa Above Median corporate bond yield, to develop a forward interest rate curve, including a margin to that index based on our credit risk. This forward interest rate curve is applied to our expected future cash outflows to determine our discount rate assumptions.

Fair Value of Plan Assets

The fair values of our pension and postretirement benefit plans' assets and their respective levels in the fair value hierarchy at May 26, 2013 and May 27, 2012, by asset category were as follows:

 

 May 26, 2013 May 27, 2012
In Millions Level 1  Level 2  Level 3 Total Assets  Level 1  Level 2  Level 3 Total Assets
Fair value measurement of pension plan assets:                 
Equity (a)$ 1,439.4$ 828.3$ 559.3$ 2,827.0 $ 1,119.2$ 717.6$ 575.4$ 2,412.2
Fixed income (b)  476.6  801.0  -  1,277.6   506.1  647.2  -  1,153.3
Real asset investments (c)   131.1  169.1  430.4  730.6   135.0  88.9  361.2  585.1
Other investments (d)  -  60.9  0.3  61.2   -  49.6  0.3  49.9
Cash and accruals  169.7  -  -  169.7   153.4  -  -  153.4
Total fair value measurement of pension plan assets$ 2,216.8$ 1,859.3$ 990.0$ 5,066.1 $ 1,913.7$ 1,503.3$ 936.9$ 4,353.9
                  
Fair value measurement of postretirement benefit plan assets:                 
Equity (a)$ 93.1$ 92.0$ 20.2$ 205.3 $ 12.6  135.4  22.0  170.0
Fixed income (b)  17.2  50.3  -  67.5   15.7  39.1  -  54.8
Real asset investments (c)   1.8  7.1  14.5  23.4   4.3  5.7  8.4  18.4
Other investments (d)  -  130.9  -  130.9   -  104.9  -  104.9
Cash and accruals  9.8  -  -  9.8   10.7  -  -  10.7
Fair value measurement of postretirement benefit plan assets$ 121.9$ 280.3$ 34.7$ 436.9 $ 43.3$ 285.1$ 30.4$ 358.8

(a)       Primarily publicly traded common stock and private equity partnerships for purposes of total return and to maintain equity exposure consistent with policy allocations. Investments include: United States and international equity securities, mutual funds, and equity futures valued at closing prices from national exchanges; and commingled funds, privately held securities, and private equity partnerships valued at unit values or net asset values provided by the investment managers, which are based on the fair value of the underlying investments. Various methods are used to determine fair values and may include the cost of the investment, most recent financing, and expected cash flows. For some of these investments, realization of the estimated fair value is dependent upon transactions between willing sellers and buyers.

(b)       Primarily government and corporate debt securities for purposes of total return and managing fixed income exposure to policy allocations. Investments include: fixed income securities and bond futures generally valued at closing prices from national exchanges, fixed income pricing models, and independent financial analysts; and fixed income commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments.

(c)        Publicly traded common stock and limited partnerships in the energy and real estate sectors for purposes of total return. Investments include: energy and real estate securities generally valued at closing prices from national exchanges; and commingled funds, private securities, and limited partnerships valued at unit values or net asset values provided by the investment managers, which are generally based on the fair value of the underlying investments.

(d)        Global balanced fund of equity, fixed income, and real estate securities for purposes of meeting Canadian pension plan asset allocation policies, and insurance and annuity contracts to provide a stable stream of income for retirees and to fund postretirement medical benefits. Fair values are derived from unit values provided by the investment managers, which are generally based on the fair value of the underlying investments and contract fair values from the providers.

 

The following table is a roll forward of the Level 3 investments of our pension and postretirement benefit plans' assets during the years ended May 26, 2013 and May 27, 2012:

 Fiscal 2013
In Millions Balance as of May 27, 2012 Net Transfers Out Net Purchases, Sales Issuances, and Settlements Net Gain Balance as of May 26, 2013
Pension benefit plan assets:          
Equity$ 575.4$ (0.1)$ (61.0)$ 45.0$ 559.3
Fixed income  -  -  -  -  -
Real asset investments  361.2  -  48.3  20.9  430.4
Other investments  0.3  -  -  -  0.3
Fair value activity of level 3 pension plan assets$ 936.9$ (0.1)$ (12.7)$ 65.9$ 990.0
           
Postretirement benefit plan assets:          
Equity$ 22.0$ -$ (2.3)$ 0.5$ 20.2
Fixed income  -  -  -  -  -
Real asset investments  8.4  -  4.8  1.3  14.5
Fair value activity of level 3 postretirement benefit plan assets$ 30.4$ -$ 2.5$ 1.8$ 34.7

 Fiscal 2012
In Millions Balance as of May 29, 2011 Net Transfers Out Net Purchases, Sales Issuances, and Settlements Net Gain (Loss) Balance as of May 27, 2012
Pension benefit plan assets:          
Equity$ 568.5$ (1.2)$ (28.4)$ 36.5$ 575.4
Fixed income  0.2  -  (0.2)  -  -
Real asset investments  356.9  (48.9)  32.8  20.4  361.2
Other investments  0.3  -  -  -  0.3
Fair value activity of level 3 pension plan assets$ 925.9$ (50.1)$ 4.2$ 56.9$ 936.9
           
Postretirement benefit plan assets:          
Equity$ 26.3$ -$ (4.1)$ (0.2)$ 22.0
Fixed income  0.2  -  -  (0.2)  -
Real asset investments  13.6  (4.0)  (1.1)  (0.1)  8.4
Fair value activity of level 3 postretirement benefit plan assets$ 40.1$ (4.0)$ (5.2)$ (0.5)$ 30.4

The net change in level 3 assets attributable to unrealized losses at May 26, 2013, was $ 6.3 million for our pension plan assets, and $ 0.9 million for our postretirement benefit plan assets.

Expected Rate of Return on Plan Assets

Our expected rate of return on plan assets is determined by our asset allocation, our historical long-term investment performance, our estimate of future long-term returns by asset class (using input from our actuaries, investment services, and investment managers), and long-term inflation assumptions. We review this assumption annually for each plan, however, our annual investment performance for one particular year does not, by itself, significantly influence our evaluation.

Weighted-average asset allocations for the past two fiscal years for our defined benefit pension and other postretirement benefit plans are as follows:

 Defined Benefit Pension Plans  Other Postretirement Benefit Plans
 Fiscal Year  Fiscal Year
 2013 2012  2013 2012 
Asset category:         
United States equities 29.5% 28.7%  39.4% 38.4%
International equities 17.3  15.7   21.6  19.9 
Private equities 11.2  13.3   4.7  6.2 
Fixed income 27.5  28.6   28.9  30.3 
Real assets 14.5  13.7   5.4  5.2 
Total 100.0% 100.0%  100.0% 100.0%

The investment objective for our defined benefit pension and other postretirement benefit plans is to secure the benefit obligations to participants at a reasonable cost to us. Our goal is to optimize the long-term return on plan assets at a moderate level of risk. The defined benefit pension plan and other postretirement benefit plan portfolios are broadly diversified across asset classes. Within asset classes, the portfolios are further diversified across investment styles and investment organizations. For the defined benefit pension plans, the long-term investment policy allocation is: 25 percent to equities in the United States; 15 percent to international equities; 10 percent to private equities; 35 percent to fixed income; and 15 percent to real assets (real estate, energy, and timber). For other postretirement benefit plans, the long-term investment policy allocations are: 30 percent to equities in the United States; 20 percent to international equities; 10 percent to private equities; 30 percent to fixed income; and 10 percent to real assets (real estate, energy, and timber). The actual allocations to these asset classes may vary tactically around the long-term policy allocations based on relative market valuations.

Contributions and Future Benefit Payments

We do not expect to be required to make contributions to our defined benefit, other postretirement, and postemployment benefit plans in fiscal 2014. Actual fiscal 2014 contributions could exceed our current projections, as influenced by our decision to undertake discretionary funding of our benefit trusts and future changes in regulatory requirements. Estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid from fiscal 2014 to 2023 as follows:

In Millions  Defined Benefit Pension Plans  Other Postretirement Benefit Plans Gross Payments  Medicare Subsidy Receipts  Postemployment Benefit Plans
2014 $ 236.3 $ 56.8 $ 4.7 $ 18.8
2015   243.6   60.4   5.2   17.4
2016   251.6   62.4   5.6   16.3
2017   260.6   63.8   6.1   15.3
2018   270.1   66.7   6.5   14.7
2019-2023   1,512.3   371.3   28.5   66.4

Defined Contribution Plans

The General Mills Savings Plan is a defined contribution plan that covers domestic salaried, hourly, nonunion, and certain union employees. This plan is a 401(k) savings plan that includes a number of investment funds, including a Company stock fund and an Employee Stock Ownership Plan (ESOP). We sponsor another money purchase plan for certain domestic hourly employees with net assets of $19.4 million as of May 26, 2013, and $18.7 million as of May 27, 2012. We also sponsor defined contribution plans in many of our foreign locations. Our total recognized expense related to defined contribution plans was $46.0 million in fiscal 2013, $41.8 million in fiscal 2012, and $41.8 million in fiscal 2011.

 

We matched a percentage of employee contributions to the General Mills Savings Plan. Effective April 1, 2010, the Company match is directed to investment options of the participant's choosing. Prior to April 1, 2010, the Company match was invested in Company stock in the ESOP. The number of shares of our common stock allocated to participants in the ESOP was 9.1 million as of May 26, 2013, and 10.6 million as of May 27, 2012. The ESOP's only assets are our common stock and temporary cash balances.

 

The Company stock fund and the ESOP held $691.9 million and $638.6 million of Company common stock as of May 26, 2013, and May 27, 2012.