Pension and Postretirement Benefit Plans

Savings and Investment Plan

Meredith maintains a 401(k) Savings and Investment Plan that permits eligible employees to contribute funds on a pre-tax basis. The plan allows employee contributions of up to 50 percent of eligible compensation subject to the maximum allowed under federal tax provisions. Prior to January 1, 2017, the Company matched 100 percent of the first 3 percent and 50 percent of the next 2 percent of employee contributions. Effective January 1, 2017, the Company matches 100 percent of the first 4 percent and 50 percent of the next 1 percent of employee contributions.

The 401(k) Savings and Investment Plan allows employees to choose among various investment options, including the Company's common stock, for both their contributions and the Company's matching contribution. Company contribution expense under this plan totaled $10.9 million in fiscal 2017, $9.6 million in fiscal 2016, and $9.7 million in fiscal 2015.

Pension and Postretirement Plans

Meredith has noncontributory pension plans covering substantially all employees. These plans include qualified (funded) plans as well as nonqualified (unfunded) plans. These plans provide participating employees with retirement benefits in accordance with benefit provision formulas. The nonqualified plans provide retirement benefits only to certain highly compensated employees. The Company also sponsors defined healthcare and life insurance plans that provide benefits to eligible retirees.

Obligations and Funded Status

The following tables present changes in, and components of, the Company's net assets/liabilities for pension and other postretirement benefits:



	Pension						Postretirement
June 30,	2017			2016			2017			2016
(In thousands)
Change in benefit obligation
Benefit obligation, beginning of year	$	161,892		$	155,427		$	9,666		$	9,408
Service cost	12,545			11,908			92			101
Interest cost	4,900			5,874			321			385
Participant contributions	—			—			787			748
Plan amendments	501			—			—			—
Actuarial loss (gain)	3,600			15,085			(205		)	565
Benefits paid (including lump sums)	(12,520		)	(26,402		)	(1,386		)	(1,541		)
Benefit obligation, end of year	$	170,918		$	161,892		$	9,275		$	9,666

Change in plan assets
Fair value of plan assets, beginning of year	$	122,583		$	141,586		$	—		$	—
Actual return on plan assets	18,527			1,129			—			—
Employer contributions	10,635			6,270			599			793
Participant contributions	—			—			787			748
Benefits paid (including lump sums)	(12,520		)	(26,402		)	(1,386		)	(1,541		)
Fair value of plan assets, end of year	$	139,225		$	122,583		$	—		$	—

Under funded status, end of year	$	(31,693	)	$	(39,309	)	$	(9,275	)	$	(9,666	)

Benefits paid directly from Meredith assets are included in both employer contributions and benefits paid.

Fair value measurements for pension assets as of June 30, 2017, were as follows:



June 30, 2017	Total Fair Value		Quoted Prices (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
(In thousands)
Investments in registered investment companies	$	138,886		$	76,837		$	62,049		$	—
Pooled separate accounts	339			—			339			—
Total assets at fair value	$	139,225		$	76,837		$	62,388		$	—

Fair value measurements for pension assets as of June 30, 2016, were as follows:



June 30, 2016	Total Fair Value		Quoted Prices (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
(In thousands)
Investments in registered investment companies	$	120,996		$	65,376		$	55,620		$	—
Pooled separate accounts	1,587			—			1,587			—
Total assets at fair value	$	122,583		$	65,376		$	57,207		$	—

Refer to Note 14 for a discussion of the three levels in the hierarchy of fair values.

The following amounts are recognized in the Consolidated Balance Sheets:



	Pension						Postretirement
June 30,	2017			2016				2017			2016
(In thousands)
Other assets
Prepaid benefit cost	$	16,901		$	1,458			$	—		$	—
Accrued expenses-compensation and benefits
Accrued benefit liability	(5,776		)	(4,703		)		(657		)	(656		)
Other noncurrent liabilities
Accrued benefit liability	(42,818		)	(36,064		)		(8,618		)	(9,010		)
Net amount recognized, end of year	$	(31,693	)	$	(39,309	)		$	(9,275	)	$	(9,666	)

The accumulated benefit obligation for all defined benefit pension plans was $154.0 million and $144.8 million at June 30, 2017 and 2016, respectively.

The following table provides information about pension plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets:



June 30,	2017		2016
(In thousands)
Projected benefit obligation	$	48,692	$	40,867
Accumulated benefit obligation	42,634		35,225
Fair value of plan assets	98		100

Costs

The components of net periodic benefit costs recognized in the Consolidated Statements of Earnings were as follows:



	Pension									Postretirement
Years ended June 30,	2017			2016			2015				2017			2016			2015
(In thousands)
Components of net periodic benefit costs
Service cost	$	12,545		$	11,908		$	12,173			$	92		$	101		$	117
Interest cost	4,900			5,874			5,582				321			385			407
Expected return on plan assets	(9,191		)	(10,982		)	(11,037		)		—			—			—
Prior service cost (credit) amortization	194			194			225				(393		)	(428		)	(432		)
Actuarial loss (gain) amortization	3,587			628			667				(310		)	(677		)	(433		)
Settlement charge	—			5,586			—				—			—			—
Net periodic benefit costs (credit)	$	12,035		$	13,208		$	7,610			$	(290	)	$	(619	)	$	(341	)

The amortization of amounts related to unrecognized prior service costs/credit and net actuarial gain/loss was reclassified out of other comprehensive income as components of net periodic benefit costs.

The pension settlement charge recorded in fiscal 2016 related to cash distributions paid by the pension plan during fiscal 2016 exceeding a prescribed threshold. This required that a portion of pension losses within accumulated other comprehensive loss be realized in the period that the related pension liabilities were settled.

Amounts recognized in the accumulated other comprehensive loss component of shareholders' equity for Company-sponsored plans were as follows:



	Pension		Postretirement				Total		Pension		Postretirement				Total
June 30,	2017								2016
(In thousands)
Unrecognized net actuarial losses (gains), net of taxes	$	18,524		$	(1,240	)	$	17,284	$	24,267		$	(1,305	)	$	22,962
Unrecognized prior service cost (credit), net of taxes	659			(210		)	449		470			(452		)	18
Total	$	19,183		$	(1,450	)	$	17,733	$	24,737		$	(1,757	)	$	22,980

During fiscal 2018, the Company expects to recognize as part of its net periodic benefit costs $2.1 million of net actuarial losses and $0.3 million of prior service costs for the pension plans, and $0.3 million of net actuarial gains and $0.3 million of prior service credit for the postretirement plan that are included, net of taxes, in the accumulated other comprehensive loss component of shareholders' equity at June 30, 2017.

Assumptions

Benefit obligations were determined using the following weighted average assumptions:



	Pension				Postretirement
June 30,	2017		2016			2017		2016
Weighted average assumptions
Discount rate	3.41	%	2.98	%		3.65	%	3.40	%
Rate of compensation increase	3.50	%	3.50	%		3.50	%	3.50	%
Rate of increase in health care cost levels
Initial level	n/a		n/a			7.00	%	7.00	%
Ultimate level	n/a		n/a			5.00	%	5.00	%
Years to ultimate level	n/a		n/a			4 years		5 years
n/a - Not applicable

Net periodic benefit costs were determined using the following weighted average assumptions:



	Pension						Postretirement
Years ended June 30,	2017		2016		2015			2017		2016		2015
Weighted average assumptions
Discount rate	2.98	%	3.75	%	3.57	%		3.40	%	4.20	%	4.00	%
Expected return on plan assets	8.00	%	8.00	%	8.00	%		n/a		n/a		n/a
Rate of compensation increase	3.50	%	3.50	%	3.50	%		3.50	%	3.50	%	3.50	%
Rate of increase in health care cost levels
Initial level	n/a		n/a		n/a			7.00	%	7.00	%	7.00	%
Ultimate level	n/a		n/a		n/a			5.00	%	5.00	%	5.00	%
Years to ultimate level	n/a		n/a		n/a			5 years		6 years		4 years
n/a - Not applicable

The expected return on plan assets assumption was determined, with the assistance of the Company's investment consultants, based on a variety of factors. These factors include but are not limited to the plans' asset allocations, review of historical capital market performance, historical plan performance, current market factors such as inflation and interest rates, and a forecast of expected future asset returns. The Company reviews this long-term assumption on a periodic basis.

Assumed rates of increase in healthcare cost have a significant effect on the amounts reported for the healthcare plans. A change of one percentage point in the assumed healthcare cost trend rates would have the following effects:



	One Percentage Point Increase			One Percentage Point Decrease
(In thousands)
Effect on service and interest cost components for fiscal 2017		$	25		$	(20	)
Effect on postretirement benefit obligation as of June 30, 2017		401			(329		)

Plan Assets

The targeted and weighted average asset allocations by asset category for investments held by the Company's pension plans are as follows:



	2017 Allocation				2016 Allocation
June 30,	Target		Actual		Target		Actual
Domestic equity securities	35	%	34	%	35	%	30	%
Fixed income investments	30	%	29	%	30	%	32	%
International equity securities	25	%	27	%	25	%	27	%
Global equity securities	10	%	10	%	10	%	11	%
Fair value of plan assets	100	%	100	%	100	%	100	%

Meredith's investment policy seeks to maximize investment returns while balancing the Company's tolerance for risk. The plan fiduciaries oversee the investment allocation process. This includes selecting investment managers, setting long-term strategic targets, and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, and plan fiduciaries may occasionally approve allocations above or below a target range, or elect to rebalance the portfolio within the targeted range. The investment portfolio contains a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across domestic and international stocks and between growth and value stocks and small and large capitalizations. The primary investment strategy currently employed is a dynamic target allocation method that periodically rebalances among various investment categories depending on the current funded position. This program is designed to actively move from return-seeking investments (such as equities) toward liability-hedging investments (such as long-duration fixed-income) as funding levels improve. The reverse effect occurs when funding levels decrease.

Equity securities did not include any Meredith Corporation common or Class B stock at June 30, 2017 or 2016.

Cash Flows

Although we do not have a minimum funding requirement for the pension plans in fiscal 2018, the Company is currently determining what voluntary pension plan contributions, if any, will be made in fiscal 2018. Actual contributions will be dependent upon investment returns, changes in pension obligations, and other economic and regulatory factors. Meredith expects to contribute $0.7 million to its postretirement plan in fiscal 2018.

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:



Years ending June 30,	Pension Benefits			Postretirement Benefits
(In thousands)
2018		$	22,207		$	657
2019		24,165			699
2020		25,726			688
2021		21,562			674
2022		15,723			655
2023-2027		83,584			2,874

Other

The Company maintains collateral assignment split-dollar life insurance arrangements on certain key officers and retirees. The net periodic pension cost for fiscal 2017, 2016, and 2015 was $0.5 million, $0.4 million, and $0.4 million, respectively, and the accrued liability at June 30, 2017 and 2016, was $4.3 million and $4.6 million, respectively.