PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Pension and Other Post-Retirement Benefit Plans

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS We sponsor a number of defined benefit pension plans. The primary plans are The Hershey Company Retirement Plan and The Hershey Company Retirement Plan for Hourly Employees. These are cash balance plans that provide pension benefits for most domestic employees hired prior to January 1, 2007. We also sponsor two post-retirement benefit plans: health care and life insurance. The health care plan is contributory, with participants’ contributions adjusted annually. The life insurance plan is non-contributory.

Obligations and Funded Status

A summary of the changes in benefit obligations, plan assets and funded status of these plans is as follows:

	Pension Benefits				Other Benefits
December 31,	2020		2019		2020		2019
Change in benefit obligation
Projected benefit obligation at beginning of year	$	1,105,206	$	1,031,206	$	230,457	$	214,719
Service cost	21,734		20,878		159		151
Interest cost	26,112		35,756		6,029		7,837
Actuarial loss	90,140		89,092		15,218		23,635
Settlement	(52,938)		(21,445)		—		—
Currency translation and other	1,822		2,956		254		589
Benefits paid	(23,238)		(53,237)		(8,809)		(16,474)
Projected benefit obligation at end of year	1,168,838		1,105,206		243,308		230,457
Change in plan assets
Fair value of plan assets at beginning of year	1,053,438		963,861		—		—
Actual return on plan assets	118,812		157,931		—		—
Employer contributions	2,862		3,660		8,809		16,474
Settlement	(52,938)		(21,445)		—		—
Currency translation and other	1,309		2,668		—		—
Benefits paid	(23,238)		(53,237)		(8,809)		(16,474)
Fair value of plan assets at end of year	1,100,245		1,053,438		—		—
Funded status at end of year	$	(68,593)	$	(51,768)	$	(243,308)	$	(230,457)
Amounts recognized in the Consolidated Balance Sheets:
Other assets	$	8,308	$	10,481	$	—	$	—
Accrued liabilities	(6,174)		(3,476)		(19,801)		(19,251)
Other long-term liabilities	(70,727)		(58,773)		(223,507)		(211,206)
Total	$	(68,593)	$	(51,768)	$	(243,308)	$	(230,457)
Amounts recognized in Accumulated Other Comprehensive Income (Loss), net of tax:
Actuarial net (loss) gain	$	(205,193)	$	(216,443)	$	(10,718)	$	444
Net prior service credit (cost)	21,706		27,031		—		(219)
Net amounts recognized in AOCI	$	(183,487)	$	(189,412)	$	(10,718)	$	225

The project benefit obligation during 2020 was impacted by actuarial loss of $90,140 which was the result of the discount rate assumption decreasing from 3.1% at December 31, 2019 to 2.3% at December 31, 2020. The accumulated benefit obligation for all defined benefit pension plans was $1,123,102 as of December 31, 2020 and $1,063,955 as of December 31, 2019.

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

December 31,	2020		2019
Projected benefit obligation	$	759,200	$	709,651
Accumulated benefit obligation	718,335		674,017
Fair value of plan assets	682,299		647,402

Net Periodic Benefit Cost

The components of net periodic benefit cost were as follows:  

	Pension Benefits						Other Benefits
For the years ended December 31,	2020		2019		2018		2020		2019		2018
Amounts recognized in net periodic benefit cost
Service cost	$	21,734	$	20,878	$	21,223	$	159	$	151	$	230
Interest cost	26,112		35,756		31,943		6,029		7,837		6,923
Expected return on plan assets	(52,907)		(54,520)		(58,612)		—		—		—
Amortization of prior service (credit) cost	(7,308)		(7,230)		(7,202)		300		811		836
Amortization of net loss (gain)	26,952		32,647		26,875		(39)		(385)		—
Curtailment credit	—		—		(299)		—		—		—
Settlement loss	13,421		5,498		20,211		—		—		—
Total net periodic benefit cost	$	28,004	$	33,029	$	34,139	$	6,449	$	8,414	$	7,989
Change in plan assets and benefit obligations recognized in AOCI, pre-tax
Actuarial net (gain) loss	$	(15,606)	$	(52,028)	$	3,715	$	15,266	$	23,956	$	(10,771)
Prior service cost (credit)	7,310		7,232		7,198		(300)		(810)		(838)
Total recognized in other comprehensive (income) loss, pre-tax	$	(8,296)	$	(44,796)	$	10,913	$	14,966	$	23,146	$	(11,609)
Net amounts recognized in periodic benefit cost and AOCI	$	19,708	$	(11,767)	$	45,052	$	21,415	$	31,560	$	(3,620)

The non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans is reflected within other (income) expense, net in the Consolidated Statements of Income (see Note 17).

Assumptions

The weighted-average assumptions used in computing the year end benefit obligations were as follows:

	Pension Benefits				Other Benefits
December 31,	2020		2019		2020		2019
Discount rate	2.3	%	3.1	%	2.5	%	3.2	%
Rate of increase in compensation levels	3.5	%	3.6	%	N/A		N/A
Interest crediting rate	4.7	%	4.7	%	N/A		N/A

The weighted-average assumptions used in computing net periodic benefit cost were as follows:  

	Pension Benefits						Other Benefits
For the years ended December 31,	2020		2019		2018		2020		2019		2018
Discount rate	3.1	%	4.1	%	3.4	%	3.2	%	4.2	%	3.5	%
Expected long-term return on plan assets	5.3	%	5.9	%	5.8	%	N/A		N/A		N/A
Rate of compensation increase	3.6	%	3.6	%	3.8	%	N/A		N/A		N/A

The Company’s discount rate assumption is determined by developing a yield curve based on high quality corporate bonds with maturities matching the plans’ expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates. We base the asset return assumption on current and expected asset allocations, as well as historical and expected returns on the plan asset categories.

We utilize a full yield curve approach in the estimation of service and interest costs by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. This approach provides a more precise measurement of service and interest costs by improving the correlation between the projected cash flows to the corresponding spot rates along the yield curve. This approach does not affect the measurement of our pension and other post-retirement benefit liabilities but generally results in lower benefit expense in periods when the yield curve is upward sloping.

For purposes of measuring our post-retirement benefit obligation at December 31, 2020, we assumed a 6.1% annual rate of increase in the per capita cost of covered health care benefits for 2021, grading down to 5.0% by 2025. For purposes of measuring our post-retirement benefit obligation at December 31, 2019, we assumed a 6.4% annual rate of increase in the per capita cost of covered health care benefits for 2020, grading down to 5.0% by 2025.

The valuations and assumptions reflect adoption of the Society of Actuaries updated Pri-2012 mortality tables with MP-2020 and MP-2019 generational projection scales, which we adopted as of December 31, 2020 and 2019, respectively. Adoption of the updated scales did not have a significant impact on our current pension obligations or net period benefit cost since our primary plans are cash balance plans and most participants take lump-sum settlements upon retirement.

Plan Assets

We broadly diversify our pension plan assets across public equity, fixed income, diversified credit strategies and diversified alternative strategies asset classes. Our target asset allocation for our major domestic pension plans as of December 31, 2020 was as follows:

Asset Class	Target Asset Allocation
Cash	1%
Equity securities	24%
Fixed income securities	51%
Alternative investments, including real estate, listed infrastructure and other	24%

As of December 31, 2020, actual allocations were consistent with the targets and within our allowable ranges. We expect the level of volatility in pension plan asset returns to be in line with the overall volatility of the markets within each asset class.

The following table sets forth by level, within the fair value hierarchy (as defined in Note 6), pension plan assets at their fair values as of December 31, 2020:

	Quoted prices in active markets of identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant other unobservable inputs (Level 3)		Investments Using NAV as a Practical Expedient (1)		Total
Cash and cash equivalents	$	613	$	21,287	$	—	$	576	$	22,476
Equity securities:
Global all-cap (a)	—		—		—		264,909		264,909
Fixed income securities:
U.S. government/agency	—		—		—		215,573		215,573
Corporate bonds (b)	—		—		—		155,648		155,648
International government/corporate bonds (c)	—		—		—		32,586		32,586
Diversified credit (d)	—		—		—		160,829		160,829
Alternative investments:
Global diversified assets (e)	—		—		—		117,290		117,290
Global real estate investment trusts (f)	—		—		—		60,083		60,083
Global infrastructure (g)	—		—		—		70,851		70,851
Total pension plan assets	$	613	$	21,287	$	—	$	1,078,345	$	1,100,245

The following table sets forth by level, within the fair value hierarchy, pension plan assets at their fair values as of December 31, 2019:

	Quoted prices in active markets of identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant other unobservable inputs (Level 3)		Investments Using NAV as a Practical Expedient (1)		Total
Cash and cash equivalents	$	365	$	13,194	$	—	$	629	$	14,188
Equity securities:
Global all-cap (a)	—		—		—		248,222		248,222
Fixed income securities:
U.S. government/agency	—		—		—		264,066		264,066
Corporate bonds (b)	—		—		—		136,896		136,896
International government/corporate bonds (c)	—		—		—		32,407		32,407
Diversified credit (d)	—		—		—		103,793		103,793
Alternative investments:
Global diversified assets (e)	—		—		—		146,681		146,681
Global real estate investment trusts (f)	—		—		—		53,159		53,159
Global infrastructure (g)	—		—		—		54,026		54,026
Total pension plan assets	$	365	$	13,194	$	—	$	1,039,879	$	1,053,438

(1)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in our Obligations and Funded Status table.

(a)	This category comprises equity funds that primarily track the MSCI World Index or MSCI All Country World Index.
(b)	This category comprises fixed income funds primarily invested in investment grade and high yield bonds.
(c)	This category comprises fixed income funds primarily invested in Canadian and other international bonds.
(d)	This category comprises fixed income funds primarily invested in high yield bonds, loans, securitized debt, and emerging market debt.
(e)	This category comprises diversified funds invested across alternative asset classes.
(f)	This category comprises equity funds primarily invested in publicly traded real estate securities.
(g)	This category comprises equity funds primarily invested in publicly traded listed infrastructure securities.

The fair value of the Level 1 assets was based on quoted prices in active markets for the identical assets. The fair value of the Level 2 assets was determined by management based on an assessment of valuations provided by asset management entities and was calculated by aggregating market prices for all underlying securities.

Investment objectives for our domestic plan assets are:

•To ensure high correlation between the value of plan assets and liabilities;

•To maintain careful control of the risk level within each asset class; and

•To focus on a long-term return objective.

We believe that there are no significant concentrations of risk within our plan assets as of December 31, 2020. We comply with the rules and regulations promulgated under the Employee Retirement Income Security Act of 1974 (“ERISA”) and we prohibit investments and investment strategies not allowed by ERISA. We do not permit direct purchases of our Company’s securities or the use of derivatives for the purpose of speculation. We invest the assets of non-domestic plans in compliance with laws and regulations applicable to those plans.

Cash Flows and Plan Termination

Our policy is to fund domestic pension liabilities in accordance with the limits imposed by the ERISA, federal income tax laws and the funding requirements of the Pension Protection Act of 2006. We fund non-domestic pension liabilities in accordance with laws and regulations applicable to those plans.

We made total contributions to the pension plans of $2,862 during 2020. In 2019, we made total contributions of $3,660 to the pension plans. For 2021, minimum funding requirements for our pension plans are approximately $1,611.

Total benefit payments expected to be paid to plan participants, including pension benefits funded from the plans and other benefits funded from Company assets, are as follows:

	Expected Benefit Payments
	2021		2022		2023		2024		2025		2026-2030
Pension Benefits	$	116,050	$	101,245	$	98,348	$	94,155	$	90,546	$	369,540
Other Benefits	19,769		18,174		17,167		16,244		15,227		64,235

Savings Plans

The Company sponsors several defined contribution plans to provide retirement benefits to employees. Contributions to The Hershey Company 401(k) Plan and similar plans for non-domestic employees are based on a portion of eligible pay up to a defined maximum. All matching contributions were made in cash. Expense associated with the defined contribution plans was $52,793 in 2020, $47,651 in 2019 and $47,959 in 2018.