The Company sponsors a number of U.S. and foreign pension plans to provide retirement benefits for its employees. The majority of these plans are funded or unfunded defined benefit plans, although the Company does participate in a limited number of multiemployer or other defined contribution plans for certain employee groups. See Note 12 for more information regarding the Company’s participation in multiemployer plans. Defined benefits for salaried employees are generally based on salary and years of service, while union employee benefits are generally a negotiated amount for each year of service. The Company uses a December 31 measurement date for these plans and, when necessary, adjusts for plan contributions and significant events between December 31 and its fiscal year-end.

In September 2019, the Company provided a voluntary one-time lump-sum cash settlement offer to certain eligible terminated vested participants in our U.S. pension plans in order to reduce pension obligations and administrative costs. In December 2019, approximately $174 million was distributed from pension plan assets in connection with this offer.

In conjunction with the completion of the sale of selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses on July 28, 2019, the Company recognized a curtailment gain in its U.S. pension plans of $11 million.

In September 2017, the Company amended certain defined benefit pension plans in the U.S. and Canada for salaried employees. As of December 31, 2018, the amendment froze compensation and service periods used to calculate pension benefits for active salaried employees who participate in the affected pension plans. During the third quarter of 2017, the Company recognized related pension curtailment gains totaling $136 million included within Project K restructuring activity.

Beginning January 1, 2019, impacted employees will not accrue additional benefits for future service and eligible compensation received under these plans. Concurrently, the Company also amended its 401(k) savings plans effective January 1, 2019, to make previously ineligible salaried U.S. and Canada employees eligible for Company retirement contributions, which range from 3% to 7% of eligible compensation based on the employee’s length of employment.



(millions)	2019			2018
Change in projected benefit obligation
Beginning of year	$	5,117		$	5,648
Service cost	36			87
Interest cost	172			165
Plan participants’ contributions	1			1
Amendments	3			6
Actuarial (gain)loss	766			(384		)
Benefits paid	(458		)	(280		)
Curtailment and special termination benefits	(13		)	(36		)
Other	—			1
Foreign currency adjustments	30			(91		)
End of year	$	5,654		$	5,117
Change in plan assets
Fair value beginning of year	$	4,677		$	5,043
Actual return on plan assets	874			(299		)
Employer contributions	10			270
Plan participants’ contributions	1			1
Benefits paid	(426		)	(236		)
Other	—			(1		)
Foreign currency adjustments	34			(101		)
Fair value end of year	$	5,170		$	4,677
Funded status	$	(484	)	$	(440	)
Amounts recognized in the Consolidated Balance Sheet consist of
Other assets	$	241		$	228
Other current liabilities	(20		)	(17		)
Other liabilities	(705		)	(651		)
Net amount recognized	$	(484	)	$	(440	)
Amounts recognized in accumulated other comprehensive income consist of
Prior service cost	$	37		$	41
Net amount recognized	$	37		$	41

The accumulated benefit obligation for all defined benefit pension plans was $5.6 billion and $5.0 billion at December 28, 2019 and December 29, 2018, respectively. Information for pension plans with accumulated benefit obligations in excess of plan assets were:

The components of pension expense are presented in the following table. Service cost is recorded in COGS and SGA expense. All other components of net periodic benefit cost are included in OIE. Pension expense for defined contribution plans relates to certain foreign-based defined contribution plans and multiemployer plans in the United States in which the Company participates on behalf of certain unionized workforces.



(millions)	2019			2018			2017
Service cost	$	36		$	87		$	96
Interest cost	172			165			164
Expected return on plan assets	(340		)	(361		)	(371		)
Amortization of unrecognized prior service cost	7			8			9
Recognized net (gain) loss	235			269			(36		)
Net periodic benefit cost	110			168			(138		)
Curtailment and special termination benefits	(13		)	(30		)	(151		)
Pension (income) expense:
Defined benefit plans	97			138			(289		)
Defined contribution plans	20			27			34
Total	$	117		$	165		$	(255	)

The Company and certain of its subsidiaries sponsor 401(k) or similar savings plans for active employees. Expense related to these plans was (in millions): 2019 – $39 million; 2018 – $38 million; 2017 – $41 million. These amounts are not included in the preceding expense table. Company contributions to these savings plans approximate annual expense. Company contributions to multiemployer and other defined contribution pension plans approximate the amount of annual expense presented in the preceding table.

To determine the overall expected long-term rate of return on plan assets, the Company models expected returns over a 20-year investment horizon with respect to the specific investment mix of its major plans. The return assumptions used reflect a combination of rigorous historical performance analysis and forward-looking views of the financial markets including consideration of current yields on long-term bonds, price-earnings ratios of the major stock market indices, and long-term inflation. The U.S. model, which corresponds to approximately 72% of consolidated pension and other postretirement benefit plan assets, incorporates a long-term inflation assumption of 2.5% and an active management premium of 0.8% (net of fees) validated by historical analysis. Similar methods are used for various foreign plans with invested assets, reflecting local economic conditions. The expected rate of

In 2019, the Society of Actuaries (SOA) published updated mortality tables and an updated improvement scale. The expectations of future mortality rates in the new SOA tables were consistent with prior Kellogg mortality assumptions. In determining the appropriate mortality assumptions as of 2019 fiscal year-end, the Company adopted the new SOA tables with collar adjustments based on Kellogg’s current population. In addition, based on mortality information available from the Social Security Administration and other sources, the Company developed assumptions for future mortality improvement in line with our expectations for future experience. The change to the mortality assumption increased year-end pension obligations by $77 million.

To conduct the annual review of discount rates, the Company selected the discount rate based on a cash-flow matching analysis using Towers Watson’s proprietary RATE:Link tool and projections of the future benefit payments that constitute the projected benefit obligation for the plans. RATE:Link establishes the uniform discount rate that produces the same present value of the estimated future benefit payments, as is generated by discounting each year’s benefit payments by a spot rate applicable to that year. The measurement dates for the defined benefit plans are consistent with the Company’s fiscal year end. Accordingly, the Company selects yield curves to measure benefit obligations consistent with market indices during December of each year.

Real estate: Value based on the net asset value of units held at year end. The fair value of real estate holdings is based on market data including earnings capitalization, discounted cash flow analysis, comparable sales transactions or a combination of these methods.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The Company’s practice regarding the timing of transfers between levels is to measure transfers in at the beginning of the month and transfers out at the end of the month. For the year ended December 28, 2019, the Company had no transfers between Levels 1 and 2.



(millions)	Total Level 1		Total Level 2		Total Level 3		Total NAV (practical expedient)(a)		Total
Cash and cash equivalents	$	14	$	—	$	—	$	—	$	14
Corporate stock, common:
Domestic	338		—		—		—		338
International	16		—		—		—		16
Mutual funds:
International equity	—		—		—		36		36
Domestic debt	—		4		—		—		4
Collective trusts:
Domestic equity	—		—		—		498		498
International equity	—		117		—		816		933
Other international debt	—		718		—		378		1,096
Limited partnerships	—		—		—		228		228
Bonds, corporate	—		443		—		211		654
Bonds, government	—		774		—		—		774
Bonds, other	—		70		—		—		70
Real estate	—		—		—		412		412
Other	—		61		—		36		97
Total	$	368	$	2,187	$	—	$	2,615	$	5,170

(a) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.



(millions)	Total Level 1		Total Level 2		Total Level 3		Total NAV (practical expedient)(a)		Total
Cash and cash equivalents	$	75	$	—	$	—	$	—	$	75
Corporate stock, common:
Domestic	412		—		—		—		412
International	10		1		—		—		11
Mutual funds:
International equity	—		7		—		34		41
Domestic debt	—		53		—		—		53
Collective trusts:
Domestic equity	—		—		—		437		437
International equity	—		92		—		1,330		1,422
Other international debt	—		—		—		331		331
Limited partnerships	—		—		—		283		283
Bonds, corporate	—		498		—		—		498
Bonds, government	—		562		—		—		562
Bonds, other	—		62		—		—		62
Real estate	—		—		—		378		378
Other	—		55		—		57		112
Total	$	497	$	1,330	$	—	$	2,850	$	4,677

(a) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The Company’s investment strategy for its major defined benefit plans is to maintain a diversified portfolio of asset classes with the primary goal of meeting long-term cash requirements as they become due. Assets are invested in a prudent manner to maintain the security of funds while maximizing returns within the Plan’s investment policy. The investment policy specifies the type of investment vehicles appropriate for the Plan, asset allocation guidelines, criteria for the selection of investment managers, procedures to monitor overall investment performance as well as investment manager performance. Derivatives, including swaps, forward and futures contracts, may be used as

The current weighted-average target asset allocation reflected by this strategy is: equity securities–42%; debt securities–31%; real estate and other–27%. Investment in Company common stock represented 1.2% and 1.0% of consolidated plan assets at December 28, 2019 and December 29, 2018, respectively. Plan funding strategies are influenced by tax regulations and funding requirements. The Company currently expects to contribute, before consideration of incremental discretionary contributions, approximately $7 million to its defined benefit pension plans during 2020.