7. Pension and Other Postretirement Benefit Plans

Company-Only Sponsored Plans

We sponsor various defined benefit pension plans covering employees of certain U.S. and international subsidiaries. The pension plans provide pension benefits that are based on the employee’s compensation and years of service. Our funding policy is to fund the actuarially determined accrued benefits where applicable, allowing for projected compensation increases using the projected unit method.

The accounting for pension and other post-retirement benefit plans requires the use of assumptions and estimates in order to calculate periodic benefit cost and the value of the plans’ assets and benefit obligations. These assumptions include discount rates, investment returns, and projected salary increases, among others. The discount rates used in valuing the plans' benefit obligations were determined with reference to high quality corporate and government bonds that are appropriately matched to the duration of each plan's obligations. The expected long-term rate of return on plan assets is generally based on using country-specific simulation models which select a single outcome for expected return based on the target asset allocation. The expected long-term-rates of return used in the valuation are the annual average returns generated by these assumptions over a 20-year period for each asset class based on the expected long-term rate of return of the underlying assets.

The following table sets forth the changes in the plans’ combined net benefit obligation (segregated between plans existing within and outside the U.S.) during each of the fiscal years presented (in thousands):

	U.S. Pension Plans						Non-U.S. Pension Plans
	2016			2015			2016			2015
Net benefit obligation at the beginning of the year	$	533,665		$	495,788		$	1,155,592		$	1,196,520
Service cost		9,875			12,045			14,378			21,374
Interest cost		16,746			20,629			38,892			44,659
Participants’ contributions		1,847			2,743			2,255			4,402
Actuarial (gains)/losses		29,129			42,749			382,691			30,238
Benefits paid		(14,143	)		(40,289	)		(32,277	)		(35,662	)
Curtailments/settlements		(35,224	)		—			(35,375	)		(5,763	)
Plan amendments		—			—			—			(1,612	)
Transfers *		(356,231	)		—			—			—
Effect of exchange rate changes		—			—			(162,374	)		(98,564	)
Net benefit obligation at the end of the year	$	185,664		$	533,665		$	1,363,782		$	1,155,592
* Pension plan transferred to a new service provider for the plan

The following table sets forth the changes in the combined Fair Value of the plans’ assets (segregated between plans existing within and outside the U.S.) during each of the fiscal years presented (in thousands):

	U.S. Pension Plans						Non-U.S. Pension Plans
	2016			2015			2016			2015
Fair value of plan assets at the beginning of the year	$	379,907		$	415,350		$	896,298		$	876,171
Actual return on plan assets		28,835			(1,754	)		242,927			86,411
Employer contributions		10,213			3,857			23,217			39,326
Participants’ contributions		1,847			2,743			2,255			4,402
Gross benefits paid		(14,143	)		(40,289	)		(32,277	)		(35,662	)
Curtailments/settlements		(35,224	)		—			(1,863	)		(1,646	)
Transfers*		(228,971	)		—			—			—
Effect of exchange rate changes		—			—			(126,646	)		(72,704	)
Fair value of plan assets at the end of the year	$	142,464		$	379,907		$	1,003,911		$	896,298
* Pension plan transferred to a new service provider for the plan

During fiscal 2016 we also curtailed our U.K. and French pension plans.

The following table reconciles the combined funded statuses of the plans recognized in the accompanying Consolidated Balance Sheets at September 30, 2016 and October 2, 2015 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	2016		2015		2016		2015
Net benefit obligation at the end of the year	$	185,664	$	533,665	$	1,363,782	$	1,155,592
Fair value of plan assets at the end of the year		142,464		379,907		1,003,911		896,298
Under funded amount recognized at the end of the year	$	43,200	$	153,758	$	359,871	$	259,294

The following table presents the accumulated benefit obligation at September 30, 2016 and October 2, 2015 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	2016		2015		2016		2015
Accumulated benefit obligation at the end of the year		185,664		488,024		1,331,884		1,113,016

The following table presents the amounts recognized in the accompanying Consolidated Balance Sheets at September 30, 2016 and October 2, 2015 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	2016		2015		2016		2015
Prepaid benefit cost included in prepaid assets	$	—	$	—	$	492	$	4,054
Accrued benefit cost included in current liabilities		—		—		608		381
Accrued benefit cost included in noncurrent liabilities		43,200		153,758		359,755		262,967
Net amount recognized at the end of the year	$	43,200	$	153,758	$	359,871	$	259,294

In fiscal 2015 and through June 30, 2016, we were responsible for administering a U.S. pension plan for participating employees of which are assigned to, and worked exclusively on, a specific operating contract with the U.S. federal government. The costs of this pension plan were fully reimbursed by the U.S. federal government pursuant to applicable cost accounting standards. Accordingly, included in “Miscellaneous Noncurrent Assets” in the accompanying Consolidated Balance Sheet at October 2, 2015 was a receivable from the U.S. federal government of approximately $115.5 million representing the underfunded amount for this pension plan. As of June 30, 2016, we ceased performing on this operating contract, and, as such, we are no longer responsible for administering this pension plan. As a result of no longer administering the plan, we derecognized the plan benefit obligation and plan assets pertaining to the plan resulting in a decrease of plan benefit obligation by $356.2 million and plan assets by $229.0 million.

The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s U.S. plans for each fiscal year presented:

	2016			2015			2014
Weighted average discount rates		3.2	%	3.9% to 4.0%			3.9% to 4.4%
Rates of compensation increases		—	%		3.0	%		2.95	%
Return on Assets		7.4	%		7.4	%		7.70	%

The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s non-U.S. pension plans for each fiscal year presented:

	2016	2015	2014
Weighted average discount rates	0.7% to 7.0%	1.6% to 7.8%	1.8% to 8.8%
Rates of compensation increases	2.5% to 7.5%	2.4% to 7.5%	2.6% to 7.5%
Expected long-term rates of return on assets	3.5% to 8.5%	3.5% to 8.5%	4.5% to 8.5%

The following table presents certain amounts relating to our U.S. pension plans recognized in accumulated other comprehensive loss at September 30, 2016, October 2, 2015 and September 26, 2014 (in thousands):

	2016			2015			2014
Arising during the period:
Net actuarial loss	$	4,337		$	12,237		$	1,378
Reclassification adjustments:
Net actuarial gain		(2,312	)		(2,347	)		(2,255	)
Total	$	2,025		$	9,890		$	(877	)

The following table presents certain amounts relating to our non-U.S. pension plans recognized in accumulated other comprehensive loss at September 30, 2016, October 2, 2015 and September 26, 2014(in thousands):

	2016			2015			2014
Arising during the period:
Net actuarial (gain) loss	$	102,925		$	(27,165	)	$	48,752
Prior service cost (benefit)		580			(1,512	)		(1	)
Total		103,505			(28,677	)		48,751
Reclassification adjustments:
Net actuarial gain		(7,508	)		(14,034	)		(12,914	)
Prior service benefit		163			51			(19	)
Total		(7,345	)		(13,983	)		(12,933	)
Total	$	96,160		$	(42,660	)	$	35,818

The following table presents certain amounts relating to our pension plans recorded in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at September 30, 2016, and October 2, 2015 (segregated between U.S. and non-U.S. plans) (in thousands):

	U.S. Pension Plans				Non-U.S. Pension Plans
	2016		2015		2016			2015
Net actuarial loss	$	61,483	$	59,458	$	304,345		$	208,929
Prior service cost		—		—		(1,203	)		(1,947	)
Total	$	61,483	$	59,458	$	303,142		$	206,982

The following table presents the amount of accumulated comprehensive income that will be amortized against earnings as part of our net periodic benefit cost in fiscal 2017 based on 2016 exchange rates (segregated between U.S. and non-U.S. plans) (in thousands):

	U.S. Pension Plans		Non-U.S. Pension Plans
Unrecognized net actuarial loss	$	3,985	$	10,676
Unrecognized prior service cost		—		(313	)
Accumulated comprehensive loss to be recorded against earnings	$	3,985	$	10,363

We consider various factors in developing the estimates for the expected, long-term rates of return on plan assets. These factors include the projected, long-term rates of returns on the various types of assets in which the plans invest, as well as historical returns. In general, investment allocations are determined by each plan’s trustees and/or investment committees. The objectives of the plans’ investment policies are to (i) maximize returns while preserving capital; (ii) provide returns sufficient to meet the current and long-term obligations of the plan as the obligations become due; and (iii) maintain a diversified portfolio of assets so as to reduce the risk associated with having a disproportionate amount of the plans’ total assets invested in any one type of asset, issuer or geography. None of our pension plans hold Jacobs common stock directly (although some plans may hold shares indirectly through investments in mutual funds). The plans’ weighted average asset allocations at September 30, 2016 and October 2, 2015 (the measurement dates used in valuing the plans’ assets and liabilities) were as follows:

	U.S. Pension Plans						Non-U.S. Pension Pans
	2016			2015			2016			2015
Equity securities		71	%		70	%		25	%		25	%
Debt securities		20	%		21	%		32	%		31	%
Real estate investments		2	%		3	%		6	%		7	%
Other		7	%		6	%		37	%		37	%

The following table presents the Fair Value of the Company’s Domestic U.S. plan assets at September 30, 2016, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	85,494	$	—	$	85,494
Overseas equities		15,169		—		15,169
U.S. Domestic bonds		28,886		—		28,886
Cash and equivalents		3,723		—		3,723
Real estate		—		3,477		3,477
Hedge funds		—		5,715		5,715
Total	$	133,272	$	9,192	$	142,464

The following table presents the Fair Value of the Company’s non-U.S. pension plan assets at September 30, 2016, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	31,972	$	—	$	31,972
Overseas equities		220,179		—		220,179
U.S. Domestic bonds		258,949		—		258,949
Overseas bonds		61,974		—		61,974
Cash and equivalents		63,182		—		63,182
Real estate		—		55,665		55,665
Insurance contracts		—		39,473		39,473
Hedge funds		—		272,517		272,517
Total	$	636,256	$	367,655	$	1,003,911

The following table presents the Fair Value of the Company’s U.S. pension plan assets at October 2, 2015, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	225,362	$	—	$	225,362
Overseas equities		41,414		—		41,414
U.S. Domestic bonds		80,804		—		80,804
Cash and equivalents		6,041		—		6,041
Real estate		—		9,914		9,914
Hedge funds		—		16,372		16,372
Total	$	353,621	$	26,286	$	379,907

The following table presents the Fair Value of the Company’s non-U.S. pension plan assets at October 2, 2015, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1		Level 3		Total
U.S. Domestic equities	$	28,007	$	—	$	28,007
Overseas equities		198,309		—		198,309
U.S. Domestic bonds		203,266		—		203,266
Overseas bonds		71,545		—		71,545
Cash and equivalents		39,933		—		39,933
Real estate		—		61,996		61,996
Insurance contracts		—		32,522		32,522
Hedge funds		—		260,720		260,720
Total	$	541,060	$	355,238	$	896,298

At September 30, 2016 and October 2, 2015, the Company holds no assets in the U.S. or non-U.S. pension plans that use Level 2 fair value measurement inputs.

The following table summarizes the changes in the Fair Value of the Company’s U.S. Pension Plans’ Level 3 assets for the year ended September 30, 2016 (in thousands):

	Real Estate			Hedge Funds
Balance, beginning of year	$	9,914		$	16,372
Purchases, sales, and settlements		(6,530	)		(10,788	)
Realized and unrealized gains (losses)		93			131
Balance, end of year	$	3,477		$	5,715

The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the year ended September 30, 2016 (in thousands):

	Real Estate			Insurance Contracts			Hedge Funds
Balance, beginning of year	$	61,996		$	32,522		$	260,720
Purchases, sales, and settlements		(462	)		(165	)		(1,205	)
Realized and unrealized gains		2,572			6,451			57,656
Effect of exchange rate changes		(8,441	)		665			(44,654	)
Balance, end of year	$	55,665		$	39,473		$	272,517

The following table summarizes the changes in the Fair Value of the Company’s U.S. Pension Plans’ Level 3 assets for the year ended October 2, 2015 (in thousands):

	Real Estate			Hedge Funds
Balance, beginning of year	$	-		$	16,304
Purchases		10,616			—
Sales		—			68
Realized and unrealized losses		(702	)		-
Balance, end of year	$	9,914		$	16,372

The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the year ended October 2, 2015 (in thousands):

	Real Estate			Insurance Contracts			Hedge Funds
Balance, beginning of year	$	59,966		$	37,468		$	213,936
Purchases, sales, and settlements		1,271			526			4,760
Realized and unrealized gains		5,390			1,353			54,719
Effect of exchange rate changes		(4,631	)		(6,825	)		(12,695	)
Balance, end of year	$	61,996		$	32,522		$	260,720

The following table presents the amount of cash contributions we anticipate making into the plans during fiscal 2017 (in thousands):

U.S.

Pension Plans

Non-U.S.

Pension Pans

Anticipated cash contributions

—

20,016

The following table presents the total benefit payments expected to be paid to pension plan participants during each of the next five fiscal years, and in total for the five years thereafter (in thousands):

	U.S. Pension Plans		Non-U.S. Pension Pans
2017	$	11,589	$	27,902
2018		11,916		29,627
2019		11,935		31,039
2020		12,009		30,416
2021		12,095		31,933
For the periods 2022 through 2026		59,090		194,569

The following table presents the components of net periodic benefit cost for the Company’s U.S. pension plans recognized in the accompanying Consolidated Statements of Earnings for each of the last three fiscal years (in thousands):

	2016			2015			2014
Service cost	$	9,875		$	12,045		$	12,077
Interest cost		16,746			20,629			22,041
Expected return on plan assets		(22,368	)		(29,526	)		(28,495	)
Actuarial loss		7,512			3,756			3,608
Prior service cost		(176	)		(239	)		(103	)
Net pension cost, before special items		11,589			6,665			9,128
Settlement loss		8,061			—			—
Total net periodic pension cost recognized	$	19,650		$	6,665		$	9,128

The fiscal 2016 settlement loss included in the U.S. pension plan net periodic benefit cost table above related to the previously discussed transfer of a U.S. pension plan to a new service provider.

The following table presents the components of net periodic benefit cost for the Company’s Non-U.S. pension plans recognized in the accompanying Consolidated Statements of Earnings for each of the last three fiscal years (in thousands):

	2016			2015			2014
Service cost	$	14,378		$	21,374		$	25,374
Interest cost		38,892			44,659			54,208
Expected return on plan assets		(50,190	)		(53,052	)		(56,394	)
Actuarial loss		9,092			17,398			15,993
Prior service cost		(260	)		(96	)		(28	)
Net pension cost, before special items		11,912			30,283			39,153
Curtailments and settlements		(7,512	)		255			(15,894	)
Total net periodic pension cost recognized	$	4,400		$	30,538		$	23,259

The fiscal 2016 settlement loss included in the Non-U.S. pension plan net periodic benefit cost table above related to the previously discussed sale of the Company’s French subsidiary.

Multiemployer Plans

In Canada and the U.S., we contribute to various trusteed pension plans covering hourly construction employees under industry-wide agreements. We also contribute to various trusteed plans in Australia and certain countries in Europe covering both hourly and certain salaried employees. Contributions are based on the hours worked by employees covered under these agreements and are charged to direct costs of contracts on a current basis.

The majority of the contributions the Company makes to multiemployer pension plans are outside the U.S. With respect to these multiemployer plans, the Company's liability to fund these plans is generally limited to the contributions we are required to make under collective bargaining agreements.

Based on our review of our multiemployer pension plans under the guidance provided in ASU 2011-09— Compensation-Retirement Benefits-Multiemployer Plans, we have concluded that none of the multiemployer pension plans into which we contribute are individually significant to our Consolidated Financial Statements.

The following table presents the Company’s contributions to these multiemployer plans during each of the last three fiscal years (in thousands):

	2016		2015		2014
Canada	$	44,912	$	42,575	$	56,341
Europe	$	8,771	$	10,902	$	12,693
United States	$	5,058	$	5,968	$	4,485
Contributions to multiemployer pension plans	$	58,741	$	59,445	$	73,519