EMPLOYEE BENEFIT AND RETIREMENT PLANS

During the first quarters of 2018 and 2017, we made the following significant changes to our employee benefit and retirement plans:

First quarter of 2018

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On December 1, 2017, our Management Committee approved the freezing of benefits under our pension plans in Canada. The effective date of this freeze is November 30, 2019. Although those plans will be frozen, employees who are participants in the plans will retain benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans.

First quarter of 2017

•

On December 1, 2016, our Management Committee approved the freezing of benefits under the McCormick U.K. Pension and Life Assurance Scheme (the U.K. plan). The effective date of this freeze was December 31, 2016. Although the U.K. plan has been frozen, employees who are participants in that plan retained benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plan.

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On January 3, 2017, our Management Committee approved the freezing of benefits under the McCormick Pension Plan, the defined benefit pension plan available to U.S. employees hired on or prior to December 31, 2011. The effective date of this freeze is November 30, 2018. Although the U.S. Pension plan will be frozen, employees who are participants in that plan will retain benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plan.

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On January 3, 2017, the Compensation Committee of our Board of Directors approved the freezing of benefits under the McCormick Supplemental Executive Retirement Plan (the “SERP”). The effective date of this freeze was January 31, 2017. Although the SERP has been frozen, executives who were participants in the SERP as of the date of the freeze, including certain named executive officers, retained benefits accumulated up to that date, based on credited service and eligible earnings, in accordance with the SERP’s terms.

As a result of these changes, we remeasured pension assets and benefit obligations as of the dates of the approvals indicated above and: (i) in fiscal year 2018, we reduced the Canadian plan benefit obligations by $17.5 million; and (ii) in fiscal year 2017, we reduced the U.S. and U.K. plan benefit obligations by $69.9 million and $7.8 million, respectively. These remeasurements resulted in non-cash, pre-tax net actuarial gains of $17.5 million and $77.7 million for the nine months ended August 31, 2018 and 2017, respectively. These net actuarial gains consist principally of curtailment gains of $18.0 million and $76.7 million, and are included in our Consolidated Statement of Comprehensive Income for the nine months ended August 31, 2018 and 2017, respectively, as a component of Other comprehensive income (loss) on the line entitled Unrealized components of pension plans. Deferred taxes associated with these actuarial gains, together with other unrealized components of pension plans recognized during the nine months ended August 31, 2018 and 2017, are also included in that statement as a component of Other comprehensive income (loss).

During the third quarter of 2017, we made the following changes to our postretirement medical and life insurance benefits impacting certain U.S. employees:

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On August 23, 2017, our Management Committee approved changes to our postretirement medical benefits plan for eligible U.S. employees and retirees (employees hired after December 31, 2008 are not eligible for the subsidy). These changes included consolidating benefits providers and simplifying and reducing our subsidy for postretirement medical benefits. The effective date of the change in our subsidy was January 1, 2018.

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On August 23, 2017, our Management Committee approved the elimination of life insurance benefits under our other postretirement benefit plan to eligible U.S. active employee (that life insurance benefit was available to U.S. employees hired on or prior to December 31, 2008). The effective date of this plan amendment was January 1, 2018, unless an employee committed to his or her retirement date by December 31, 2017 and retires on or before December 31, 2018.

As a result of these changes, we remeasured the other postretirement benefit obligation as of August 23, 2017, resulting in a reduction of the other postretirement benefit obligation of $27.1 million. These remeasurements resulted in an aggregate non-cash, pre-tax net prior service cost credit of $27.1 million, which is included in our Consolidated Statement of Comprehensive.

Income for the three and nine months ended August 31, 2017, as a component of Other comprehensive income (loss) on the line entitled Unrealized components of pension and other postretirement plans. Deferred taxes associated with this aggregate prior service cost credit, together with other unrealized components of other postretirement benefit plans recognized during the three and nine months ended August 31, 2017, are also included in that statement as a component of Other comprehensive income (loss).

The following table presents the components of our pension expense of the defined benefit plans for the three months ended August 31, 2018 and 2017 (in millions):



	United States						International
	2018			2017			2018			2017
Defined benefit plans
Service cost	$	4.4		$	3.4		$	1.0		$	1.4
Interest costs	8.0			7.8			2.2			2.6
Expected return on plan assets	(10.8		)	(10.3		)	(4.0		)	(3.8		)
Amortization of net actuarial losses	2.4			1.3			0.7			1.0
Total pension expense	$	4.0		$	2.2		$	(0.1	)	$	1.2

The following table presents the components of our pension expense of the defined benefit plans for the nine months ended August 31, 2018 and 2017 (in millions):



	United States						International
	2018			2017			2018			2017
Defined benefit plans
Service cost	$	13.1		$	10.7		$	3.2		$	4.2
Interest costs	23.8			23.5			6.9			7.6
Expected return on plan assets	(32.4		)	(30.8		)	(12.4		)	(11.2		)
Amortization of prior service costs	—			—			0.5			0.6
Amortization of net actuarial losses	7.4			4.5			2.1			3.0
Total pension expense	$	11.9		$	7.9		$	0.3		$	4.2

During the nine months ended August 31, 2018 and 2017, we contributed $12.0 million and $10.9 million, respectively, to our pension plans. Total contributions to our pension plans in fiscal year 2017 were $18.7 million.

The following table presents the components of our other postretirement benefits expense (in millions):



	Three months ended August 31,						Nine months ended August 31,
	2018			2017			2018			2017
Other postretirement benefits
Service cost	$	0.6		$	0.6		$	1.8		$	2.0
Interest costs	0.6			0.9			1.8			2.7
Amortization of prior service credits	(2.2		)	(0.3		)	(6.5		)	(0.3		)
Amortization of gains	—			—			—			(0.1		)
Total other postretirement benefits expense	$	(1.0	)	$	1.2		$	(2.9	)	$	4.3

The reduction in other postretirement benefits expense for the three and nine months ended August 31, 2018 is primarily attributable to plan amendments that were approved by our Management Committee on August 23, 2017 as previously described.