Pension and Other Post-retirement Benefits

The Company has several defined benefit plans and defined contribution plans covering most employees. Benefits for defined benefit pension plans covering hourly employees are provided based on stated amounts for each year of service, while plan benefits covering salaried employees are based on final average compensation. In fiscal 2011, an amendment was enacted for a defined benefit plan which included a change in the pension formula effective January 1, 2017. The amended formula remains a defined benefit formula, but bases the accrued benefit credit on age and service and defines the benefit as a lump sum. Effective October 31, 2016, the 401(k) match for these participants was increased. Total costs associated with the Company’s defined contribution benefit plans in fiscal years 2018, 2017, and 2016 were $44.2 million, $45.2 million, and $33.5 million, respectively.

Certain groups of employees are eligible for post-retirement health or welfare benefits. Benefits for retired employees vary for each group depending on respective retirement dates and applicable plan coverage in effect. Contribution requirements for retired employees are governed by the Retiree Health Care Payment Program and may change each year as the cost to provide coverage is determined.

Net periodic cost of defined benefit plans included the following:



	Pension Benefits									Post-retirement Benefits
(in thousands)	2018			2017			2016			2018			2017			2016
Service cost	$	31,612		$	30,256		$	26,951		$	980		$	1,106		$	1,297
Interest cost	56,196			54,263			55,728			11,169			11,630			13,346
Expected return on plan assets	(99,091		)	(90,936		)	(88,681		)	—			—			—
Amortization of prior service cost	(2,468		)	(3,000		)	(4,120		)	(3,111		)	(4,274		)	(4,282		)
Recognized actuarial loss (gain)	18,166			26,166			20,318			179			2,424			1,617
Curtailment (gain) charge	—			—			(4,438		)	—			—			—
Net periodic cost	$	4,415		$	16,749		$	5,758		$	9,217		$	10,886		$	11,978

Actuarial gains and losses and any adjustments resulting from plan amendments are deferred and amortized to expense over periods ranging from 9-23 years for pension benefits and 5-18 years for post-retirement benefits. The following amounts have not been recognized in net periodic pension cost and are included in accumulated other comprehensive loss:



	Pension Benefits						Post-retirement Benefits
(in thousands)	2018			2017			2018			2017
Unrecognized prior service credit	$	8,097		$	10,565		$	6,461		$	4,585
Unrecognized actuarial losses	(336,894		)	(380,114		)	(9,302		)	(30,857		)

The following amounts are expected to be recognized in net periodic benefit expense in fiscal 2019:



(in thousands)	Pension Benefits			Post- retirement Benefits
Amortized prior service credit	$	(2,468	)	$	(2,937	)
Recognized actuarial losses	15,670			—

The following is a reconciliation of the beginning and ending balances of the benefit obligation, the fair value of plan assets, and the funded status of the plans as of the October 28, 2018, and the October 29, 2017, measurement dates:



	Pension Benefits						Post-retirement Benefits
(in thousands)	2018			2017			2018			2017
Change in benefit obligation
Benefit obligation at beginning of year	$	1,460,098		$	1,394,870		$	304,683		$	317,472
Service cost	31,612			30,256			980			1,106
Interest cost	56,196			54,263			11,169			11,630
Actuarial (gain) loss	(134,924		)	35,379			(24,515		)	(10,977		)
Plan amendments	—			3,483			—			4,986
Participant contributions	—			—			2,232			2,661
Medicare Part D subsidy	—			—			768			1,355
Benefits paid	(62,079		)	(58,153		)	(23,045		)	(23,550		)
Benefit obligation at end of year	$	1,350,903		$	1,460,098		$	272,272		$	304,683



	Pension Benefits						Post-retirement Benefits
(in thousands)	2018			2017			2018			2017
Change in plan assets
Fair value of plan assets at beginning of year	$	1,379,953		$	1,232,626		$	—		$	—
Actual return on plan assets	(10,780		)	184,126			—			—
Participant contributions	—			—			2,232			2,661
Employer contributions	6,286			21,354			20,813			20,889
Benefits paid	(62,079		)	(58,153		)	(23,045		)	(23,550		)
Fair value of plan assets at end of year	$	1,313,380		$	1,379,953		$	—		$	—
Funded status at end of year	$	(37,523	)	$	(80,145	)	$	(272,272	)	$	(304,683	)

Amounts recognized in the Consolidated Statements of Financial Position as of October 28, 2018, and October 29, 2017, are as follows:



	Pension Benefits						Post-retirement Benefits
(in thousands)	2018			2017			2018			2017
Pension assets	$	195,153		$	171,990		$	—		$	—
Employee-related expenses	(6,851		)	(5,957		)	(20,540		)	(20,612		)
Pension and post-retirement benefits	(225,825		)	(246,178		)	(251,732		)	(284,071		)
Net amount recognized	$	(37,523	)	$	(80,145	)	$	(272,272	)	$	(304,683	)

The accumulated benefit obligation for all pension plans was $1.3 billion as of October 28, 2018, and $1.4 billion as of October 29, 2017. The following table provides information for pension plans with accumulated benefit obligations in excess of plan assets:



(in thousands)	2018		2017
Projected benefit obligation	$	232,676	$	252,136
Accumulated benefit obligation	227,015		247,687
Fair value of plan assets	—		—

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



	2018		2017
Discount rate	4.55	%	3.91	%
Rate of future compensation increase (for plans that base benefits on final compensation level)	3.96	%	3.95	%

Weighted-average assumptions used to determine net periodic benefit costs are as follows:



	2018		2017		2016
Discount rate	3.91	%	3.94	%	4.50	%
Rate of future compensation increase (for plans that base benefits on final compensation level)	3.95	%	3.96	%	3.92	%
Expected long-term return on plan assets	7.30	%	7.50	%	7.60	%

The expected long-term rate of return on plan assets is based on fair value and is developed in consultation with outside advisors. A range is determined based on the composition of the asset portfolio, historical long-term rates of return, and estimates of future performance.

For measurement purposes, an 8.0% annual rate of increase in the per capita cost of covered health care benefits for pre-Medicare and post-Medicare retirees’ coverage is assumed for 2019. The pre-Medicare and post-Medicare rate is assumed to decrease to 5.0% for 2024, and remain steady thereafter.

The assumed discount rate, expected long-term rate of return on plan assets, rate of future compensation increase, and health care cost trend rate have a significant impact on the amounts reported for the benefit plans. A one-percentage-point change in these rates would have the following effects:



	1-Percentage-Point
	Expense						Benefit Obligation
(in thousands)	Increase			Decrease			Increase			Decrease
Pension benefits
Discount rate	$	(11,445	)	$	14,215		$	(163,270	)	$	203,780
Expected long-term rate of return on plan assets	(12,849		)	12,849			—			—
Rate of future compensation increase	3,421			(2,965		)	5,279			(4,592		)
Post-retirement benefits
Discount rate	$	1,172		$	158		$	(23,946	)	$	28,491
Health care cost trend rate	1,290			(1,104		)	26,017			(22,482		)

The Company’s funding policy is to make annual contributions of not less than the minimum required by applicable regulations. The Company expects to make contributions of $28.0 million during fiscal 2019 that represent benefit payments for unfunded plans.

Benefits expected to be paid over the next ten fiscal years are as follows:



(in thousands)	Pension Benefits		Post-retirement Benefits
2019	$	63,348	$	20,999
2020	65,640		20,880
2021	67,796		20,762
2022	70,275		20,642
2023	74,272		20,397
2024-2028	422,443		94,912

Post-retirement benefits are net of expected federal subsidy receipts related to prescription drug benefits granted under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which are estimated to be $0.5 million per year through 2028.

The actual and target weighted-average asset allocations for the Company’s pension plan assets as of the plan measurement date are as follows:



	2018		2017
Asset Category	Actual %	Target Range %	Actual %	Target Range %
Large capitalization equity	13.7	12-22	22.1	12-22
Small capitalization equity	12.7	3-13	5.4	3-13
International equity	14.9	10-20	15.1	10-20
Global equity	12.4	5-20	12.0	5-20
Private equity	5.8	0-15	5.4	0-15
Total equity securities	59.5	50-75	60.0	50-75
Fixed income	33.6	25-45	33.5	25-45
Real estate	5.7	0-10	5.0	0-10
Cash and cash equivalents	1.2	—	1.5	—

Target allocations are established in consultation with outside advisors through the use of asset-liability modeling to attempt to match the duration of the plan assets with the duration of the Company’s projected benefit liability. The asset allocation strategy attempts to minimize the long-term cost of pension benefits, reduce the volatility of pension expense, and achieve a healthy funded status for the plans.

The following tables show the categories of defined benefit pension plan assets and the level under which fair values were determined in the fair value hierarchy. Assets measured at fair value using the net asset value (NAV) per share practical expedient are not required to be classified in the fair value hierarchy. These amounts are provided to permit reconciliation to the total fair value of plan assets.



	Fair Value Measurements as of October 28, 2018
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Plan assets in fair value hierarchy
Cash equivalents (1)	$	16,129	$	16,129	$	—	$	—
Large capitalization equity (2)
Domestic	113,086		113,086		—		—
Foreign	29,810		29,810		—		—
Small capitalization equity (3)
Domestic	145,872		145,872		—		—
Foreign	21,417		21,417		—		—
Private equity (4)
Domestic	51,377		—		—		51,377
International	24,880		—		—		24,880
Fixed income (5)
US government issues	157,312		153,566		3,746		—
Municipal issues	19,456		—		19,456		—
Corporate issues – domestic	222,617		—		222,617		—
Corporate issues – foreign	42,513		—		42,513		—
Plan assets in fair value hierarchy	$	844,469	$	479,880	$	288,332	$	76,257

Plan assets at net asset value
Large capitalization equity – domestic (6)	$	37,176
International equity – mutual fund (7)	107,956
International equity – collective trust (8)	86,641
Global equity – mutual fund (9)	162,630
Real estate – domestic (10)	74,508
Plan assets at net asset value	$	468,911
Total plan assets at fair value	$	1,313,380



	Fair Value Measurements as of October 29, 2017
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Plan assets in fair value hierarchy
Cash equivalents (1)	$	21,653	$	21,653	$	—	$	—
Large capitalization equity (2)
Domestic	189,536		189,536		—		—
Foreign	47,069		47,069		—		—
Small capitalization equity (3)
Domestic	64,448		64,448		—		—
Foreign	9,486		9,486		—		—
Private equity (4)
Domestic	53,652		—		—		53,652
International	20,552		—		—		20,552
Fixed income (5)
US government issues	159,690		154,977		4,713		—
Municipal issues	21,002		—		21,002		—
Corporate issues – domestic	228,753		—		228,753		—
Corporate issues – foreign	52,610		—		52,610		—
Plan assets in fair value hierarchy	$	868,451	$	487,169	$	307,078	$	74,204

Plan assets at net asset value
Large capitalization equity – domestic (6)	$	68,579
International equity – mutual fund (7)	123,608
International equity – collective trust (8)	85,317
Global equity – mutual fund (9)	165,138
Real estate – domestic (10)	68,860
Plan assets at net asset value	$	511,502
Total plan assets at fair value	$	1,379,953

The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments:

(1) Cash Equivalents: These Level 1 investments consist primarily of highly liquid money market mutual funds traded in active markets.

(2) Large Capitalization Equity: The Level 1 investments include a mix of predominately U.S. common stocks and foreign common stocks, which are valued at the closing price reported on the active market in which the individual securities are traded.

(3) Small Capitalization Equity: The Level 1 investments include a mix of predominately U.S. common stocks and foreign common stocks, which are valued at the closing price reported on the active market in which the individual securities are traded.

(4) Private Equity: These Level 3 investments consist of various collective investment funds, which are managed by a third party, invested in a well-diversified portfolio of equity investments from top performing, high quality firms focused on U.S. and foreign small to mid-markets, venture capitalists, and entrepreneurs with a concentration in areas of innovation. Investment strategies include buyouts, growth capital, buildups, and distressed, as well as early stages of company development mainly in the U.S. The fair value of these funds is based on the fair value of the underlying investments.

(5) Fixed Income: The Level 1 investments include U.S. Treasury bonds and notes, which are valued at the closing price reported on the active market in which the individual securities are traded. The Level 2 investments consist principally of U.S. government securities, which are valued daily using institutional bond quote sources and mortgage-backed securities pricing sources and municipal, domestic, and foreign securities, which are valued daily using institutional bond quote sources.

(6) Large Capitalization Equity – Domestic: The collective investment is valued at the publicly available NAV of shares held by the Master Trust at year end. The investment objective is to maintain a portfolio of equity securities that approximate the weighted total rate of return within the Standard & Poor’s 500 stock index. There are no restrictions on redemptions.

(7) International Equity – Mutual Funds: The mutual funds are valued at the publicly available NAV of shares held by the Master Trust at year end. The investment seeks long term growth of principal and income by investing in medium to large well established companies. There are no restrictions on redemptions.

(8) International Equity – Collective Trust: The collective investment funds are valued at the NAV of shares held by the Master Trust at year end. The investment objective of this fund is to generate a long term return through investments in quoted international equities. Redemptions can be made on a monthly basis as of the first business day of each month.

(9) Global Equity – Mutual Fund: This investment includes an open-ended mutual fund consisting of a mix of U.S. common stocks and foreign common stocks, which is valued at the publicly available NAV of shares held by the Master Trust at year end. The investment strategy is to obtain long term capital appreciation by focusing on companies generating above average earnings growth and are leading growth businesses in the marketplace. There are no restrictions on redemptions.

(10) Real Estate: These investments include ownership in open-ended real estate funds, which manage diversified portfolios of commercial properties within the office, residential, retail, and industrial property sectors. Investment strategies aim to acquire, own, hold, or dispose of investments with the goal of achieving current income and/or capital appreciation. The real estate investments are valued at the NAV of shares held by the Master Trust. Requests to redeem shares are granted on a quarterly basis with either 45 or 90 days advance notice, subject to availability of cash.

A reconciliation of the beginning and ending balance of the investments measured at fair value using significant unobservable inputs (Level 3) is as follows:



(in thousands)	2018			2017
Beginning balance	$	74,204		$	68,102
Purchases, issuances, and settlements (net)	(14,867		)	(8,630		)
Unrealized gains (losses)	3,724			(2,251		)
Realized gains	11,331			15,560
Interest and dividend income	1,865			1,423
Ending balance	$	76,257		$	74,204

The Company has commitments totaling $125.0 million for the private equity investments within the pension plans. The unfunded private equity commitment balance for each investment category as of October 28, 2018, and October 29, 2017 is as follows:



(in thousands)	2018		2017
Domestic equity	$	677	$	1,585
International equity	36,142		41,076
Unfunded commitment balance	$	36,819	$	42,661

Funding for future private equity capital calls will come from existing pension plan asset investments and not from additional cash contributions into the Company’s pension plans.