Employee Benefit Plans

We maintain multiple employee benefit plans, covering employees at certain locations.

Our qualified U.S. defined benefit pension plan is not open to new entrants. New employees are not eligible to participate in the pension plan. Instead, we make contributions for those employees to an employee-directed investment fund in the Moog Inc. Retirement Savings Plan ("RSP"). The Company’s contributions are based on a percentage of the employee’s eligible compensation and age. These contributions are in addition to the employer match on voluntary employee contributions.

The RSP includes an Employee Stock Ownership Plan. As one of the investment alternatives, participants in the RSP can acquire our stock at market value. We match 25% of the first 2% of eligible compensation contributed to any investment selection. Shares are allocated and compensation expense is recognized as the employer share match is earned. At September 27, 2014, the participants in the RSP owned 552,011 Class A shares and 1,684,812 Class B shares.

The changes in projected benefit obligations and plan assets and the funded status of the U.S. and non-U.S. defined benefit plans are as follows:



	U.S. Plans						Non-U.S. Plans
	2014			2013			2014			2013
Change in projected benefit obligation:
Projected benefit obligation at prior year measurement date	$	678,063		$	779,977		$	169,980		$	153,089
Service cost	21,571			26,856			5,533			4,874
Interest cost	33,354			28,818			5,984			5,749
Contributions by plan participants	—			—			1,014			970
Actuarial losses (gains)	74,369			(138,603		)	22,702			8,781
Foreign currency exchange impact	—			—			(10,237		)	1,400
Benefits paid from plan assets	(20,032		)	(17,586		)	(2,697		)	(1,903		)
Benefits paid by Moog	(1,883		)	(1,556		)	(2,985		)	(3,162		)
Other	(1,239		)	157			(352		)	182
Projected benefit obligation at measurement date	$	784,203		$	678,063		$	188,942		$	169,980
Change in plan assets:
Fair value of assets at prior year measurement date	$	498,918		$	441,426		$	98,625		$	84,044
Actual return on plan assets	50,630			42,853			11,631			12,147
Employer contributions	59,283			34,584			20,655			8,077
Contributions by plan participants	—			—			1,014			970
Benefits paid	(21,915		)	(19,142		)	(5,682		)	(5,065		)
Foreign currency exchange impact	—			—			(5,425		)	(1,485		)
Other	(1,239		)	(803		)	(64		)	(63		)
Fair value of assets at measurement date	$	585,677		$	498,918		$	120,754		$	98,625
Funded status and amount recognized in assets and liabilities	$	(198,526	)	$	(179,145	)	$	(68,188	)	$	(71,355	)
Amount recognized in assets and liabilities:
Other assets - non-current	$	—		$	—		$	4,191		$	2,043
Accrued and long-term pension liabilities	(198,526		)	(179,145		)	(72,379		)	(73,398		)
Amount recognized in assets and liabilities	$	(198,526	)	$	(179,145	)	$	(68,188	)	$	(71,355	)
Amount recognized in accumulated other comprehensive loss, before taxes:
Prior service cost (credit)	$	846		$	995		$	(363	)	$	(172	)
Actuarial losses	298,534			247,803			40,254			28,550
Amount recognized in accumulated other comprehensive loss, before taxes	$	299,380		$	248,798		$	39,891		$	28,378

Our stock included in U.S. plan assets consisted of 149,022 shares of Class A common stock and 1,001,034 shares

of Class B common stock. Our funding policy is to contribute at least the amount required by law in the respective countries.

The total accumulated benefit obligation as of the measurement date for all defined benefit pension plans was $877,846 in 2014 and $766,870 in 2013. At the measurement date in 2014, our plans had fair values of plan assets totaling $706,431. At the measurement date in 2014, three of our plans had fair values of plan assets totaling $78,643, which exceeded their accumulated benefit obligations of $67,423. At the measurement date in 2013, two of our plans had fair values of plan assets totaling $47,847, which exceeded their accumulated benefit obligations of $40,984. The following table provides aggregate information for the other pension plans, which have projected benefit obligations or accumulated benefit obligations in excess of plan assets:



	September 27, 2014		September 28, 2013
Projected benefit obligation	$	895,302	$	802,239
Accumulated benefit obligation	810,424		725,886
Fair value of plan assets	627,788		549,696

Weighted-average assumptions used to determine benefit obligations as of the measurement dates and weighted-average assumptions used to determine net periodic benefit cost are as follows:



	U.S. Plans						Non-U.S. Plans
	2014		2013		2012		2014		2013		2012
Assumptions for net periodic benefit cost:
Discount rate	5.0	%	3.7	%	4.7	%	3.7	%	4.0	%	4.7	%
Return on assets	8.4	%	8.6	%	8.9	%	4.1	%	4.5	%	5.5	%
Rate of compensation increase	4.1	%	4.1	%	3.8	%	2.8	%	2.9	%	3.0	%
Assumptions for benefit obligations:
Discount rate	4.4	%	5.0	%	3.7	%	3.1	%	3.6	%	3.9	%
Rate of compensation increase	4.1	%	4.1	%	4.1	%	2.7	%	2.8	%	2.9	%

Pension plan investment policies and strategies are developed on a plan specific basis, which varies by country. At September 27, 2014, the U.S. plans represented 83% of consolidated pension assets, while the non-U.S. plans represented 17% of consolidated pension assets, the largest concentration being in the United Kingdom (6%). The overall objective for the long-term expected return on both domestic and international plan assets is to earn a rate of return over time to meet anticipated benefit payments in accordance with plan provisions. The long-term investment objective of both the domestic and international retirement plans is to maintain the economic value of plan assets and future contributions by producing positive rates of investment return after subtracting inflation, benefit payments and expenses. Each of the plan’s strategic asset allocations is based on this long-term perspective and short-term fluctuations are viewed with appropriate perspective.

The U.S. qualified defined benefit plan’s assets are invested for long-term investment results. To accommodate the long-term investment horizon while providing appropriate liquidity, the plan maintains a liquid cash reserve of one-month to three-months of benefit distributions. Its assets are broadly diversified to help alleviate the risk of adverse returns in any one security or investment class. The international plans’ assets are invested in both low-risk and high-risk investments in order to achieve the long-term investment strategy objective. Investment risks for both domestic and international plans are considered within the context of the entire plan, rather than on a security-by-security basis.

The U.S. qualified defined benefit plan and certain international plans have investment committees that are responsible for formulating investment policies, developing manager guidelines and objectives and approving and managing qualified advisors and investment managers. The guidelines established for each of the plans define permitted investments within each asset class and apply certain restrictions such as limits on concentrated holdings in order to meet overall investment objectives.

Pension obligations and the related costs are determined using actuarial valuations that involve several assumptions. The return on assets assumption reflects the average rate of return expected on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. In determining the return on assets assumption, we consider the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and to provide adequate liquidity to meet immediate and future benefit payment requirements.

In determining our U.S. pension expense for 2014, we assumed an average rate of return on U.S. pension assets of approximately 8.4% measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return assumed an average of 60% in equity securities, 30% in fixed income securities and 10% in other securities. In determining our non-U.S. pension expense for 2014, we assumed an average rate of return on non-U.S. pension assets of approximately 4.1% measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return assumed an average asset allocation of 40% in equity securities and 60% in fixed income securities.

The weighted average asset allocations by asset category for the pension plans as of September 27, 2014 and September 28, 2013 are as follows:



	U.S. Plans					Non-U.S. Plans
	Target	2014 Actual		2013 Actual		Target	2014 Actual		2013 Actual
Asset category:
Equity	45%-70%	54	%	60	%	40%-60%	30	%	30	%
Debt	20%-35%	34	%	30	%	40%-60%	41	%	43	%
Real estate and other	10%-20%	12	%	10	%	0%-30%	28	%	27	%

The following tables present the consolidated plan assets using the fair value hierarchy, which is described in Note 9 - Fair Value, as of September 27, 2014 and September 28, 2013.



U.S. Plans, September 27, 2014	Level 1		Level 2		Level 3		Total
Shares of registered investment companies:
Non-investment grade	$	66,201	$	—	$	—	$	66,201
Other	7,442		—		—		7,442
Fixed income funds:
U.S. Government obligations	—		47,275		—		47,275
Corporate and other	—		82,850		—		82,850
Employer securities	78,874		—		—		78,874
Interest in common collective trusts	—		153,183		—		153,183
Money market funds	—		46,135		—		46,135
Limited partnerships	—		—		81,342		81,342
Insurance contracts and other	—		—		22,375		22,375
Fair value	$	152,517	$	329,443	$	103,717	$	585,677



Non-U.S. Plans, September 27, 2014	Level 1		Level 2		Level 3		Total
Shares of registered investment companies	$	—	$	32,819	$	—	$	32,819
Domestic equity	6,731		195		—		6,926
International equity	8,730		—		—		8,730
Fixed income funds	4,976		35,774		—		40,750
Cash and cash equivalents	85		497		—		582
Insurance contracts and other	—		764		30,183		30,947
Fair value	$	20,522	$	70,049	$	30,183	$	120,754



U.S. Plans, September 28, 2013	Level 1		Level 2		Level 3		Total
Shares of registered investment companies:
Non-investment grade	$	61,133	$	—	$	—	$	61,133
Real assets	17,916		—		—		17,916
Other	16,487		—		—		16,487
Fixed income funds:
U.S. Government obligations	—		40,173		—		40,173
Corporate and other	—		27,418		—		27,418
Employer securities	67,163		—		—		67,163
Interest in common collective trusts	—		152,355		—		152,355
Money market funds	—		23,938		—		23,938
Cash and cash equivalents	68		—		—		68
Limited partnerships	—		—		71,072		71,072
Insurance contracts and other	—		—		21,195		21,195
Fair value	$	162,767	$	243,884	$	92,267	$	498,918



Non-U.S. Plans, September 28, 2013	Level 1		Level 2		Level 3		Total
Shares of registered investment companies	$	—	$	26,520	$	—	$	26,520
Domestic equity	4,493		169		—		4,662
International equity	9,784		—		—		9,784
Fixed income funds	4,430		23,658		—		28,088
Cash and cash equivalents	96		3,107		—		3,203
Insurance contracts and other	—		548		25,820		26,368
Fair value	$	18,803	$	54,002	$	25,820	$	98,625

The following is a roll forward of the consolidated plan assets classified as Level 3 within the fair value hierarchy:



	U.S. Plans			Non-U.S. Plans			Total
Balance at September 29, 2012	$	13,604		$	19,852		$	33,456
Return on assets	7,653			3,670			11,323
Purchases from contributions to Plans	81,045			2,229			83,274
Proceeds from sales of investments	(3,000		)	—			(3,000		)
Settlements paid in cash	(7,035		)	(164		)	(7,199		)
Foreign currency translation	—			233			233
Balance at September 28, 2013	92,267			25,820			118,087
Return on assets	8,852			4,689			13,541
Purchases from contributions to Plans	14,426			2,086			16,512
Proceeds from sales of investments	(3,511		)	—			(3,511		)
Settlements paid in cash	(8,317		)	(250		)	(8,567		)
Foreign currency translation	—			(2,162		)	(2,162		)
Balance at September 27, 2014	$	103,717		$	30,183		$	133,900

The valuation methodologies used for pension plan assets measured at fair value have not changed in the past two years. Cash and cash equivalents consist of direct cash holdings and institutional short-term investment vehicles. Direct cash holdings are valued at cost, which approximates fair value. Institutional short-term investment vehicles are valued daily. Investments in U.S. Government obligations are valued by a pricing service based upon closing market prices at year end. Shares of registered investment companies are valued at net asset value of shares held by the plan at year end. Common stocks traded on national exchanges are valued at the last reported sales price. Investments denominated in foreign currencies are translated into U.S. dollars using the last reported exchange rate. Fixed income funds are valued using methods, such as dealer quotes, available trade information, spreads, bids and offers provided by a pricing vendor. Investments in limited partnerships are valued based on the net asset value of our share in the fair value of the investments at year end. The limited partnerships have unfunded commitments of $20,743 at September 27, 2014. Common collective trust funds consist of pools of investments used by institutional investors to obtain exposure to equity and fixed income markets. Common collective trust funds held by us invest primarily in investment grade fixed income securities, common stock and real property assets. The common collective trusts have no unfunded commitments at September 27, 2014, and there are no significant restrictions on redemptions. Shares held in common collective trust funds are reported at the net unit value of units held by the trust at year end. The unit value is determined by the total value of fund assets divided by the total number of units of the fund owned. Investments in insurance contracts are valued at contract value, which is the fair value of the underlying investment of the insurance company. Securities or other assets for which market quotations are not readily available or for which market quotations do not represent the value at the time of pricing (including certain illiquid securities) are fair valued in accordance with procedures established under the supervision and responsibility of the Custodian of that investment.

Such procedures may include the use of independent pricing services or affiliated advisor pricing, which use prices based upon yields or prices of securities of comparable quality, coupon, maturity and type, indications as to values from dealers, operating data and general market conditions.

The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although we believe the 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.

Pension expense for all plans, including costs for various defined contribution plans, is as follows:



	U.S. Plans									Non-U.S. Plans
	2014			2013			2012			2014			2013			2012
Service cost	$	21,571		$	26,856		$	23,347		$	5,533		$	4,874		$	4,046
Interest cost	33,354			28,818			29,786			5,984			5,750			5,864
Expected return on plan assets	(43,374		)	(41,340		)	(41,970		)	(4,487		)	(3,789		)	(3,832		)
Amortization of prior service cost (credit)	149			8			9			(57		)	(51		)	(62		)
Amortization of actuarial loss	16,346			27,604			17,024			1,398			1,589			875
Settlement loss	37			—			—			—			245			—
Pension expense for defined benefit plans	28,083			41,946			28,196			8,371			8,618			6,891
Pension expense for defined contribution plans	13,196			11,223			9,114			6,458			5,672			5,105
Total pension expense	$	41,279		$	53,169		$	37,310		$	14,829		$	14,290		$	11,996

The estimated net prior service cost and net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost for pension plans in 2015 are $92 and $24,782, respectively.

Benefits expected to be paid to the participants of the plans are:



	U.S. Plans		Non-U.S. Plans
2015	$	24,970	$	5,830
2016	27,335		5,796
2017	30,149		5,998
2018	32,756		6,062
2019	35,500		6,670
Five years thereafter	227,600		39,578

We presently anticipate contributing approximately $52,500 to the U.S. plans and $9,000 to the non-U.S. plans in 2015.

We provide postretirement health care benefits to certain domestic retirees, who were hired prior to October 1, 1989. There are no plan assets. The transition obligation was being expensed over 20 years and was fully amortized in 2013. The changes in the accumulated benefit obligation of this unfunded plan for 2014 and 2013 are shown in the following table:



	September 27, 2014			September 28, 2013
Change in Accumulated Postretirement Benefit Obligation (APBO):
APBO at prior year measurement date	$	14,370		$	17,456
Service cost	225			292
Interest cost	624			549
Contributions by plan participants	1,725			1,550
Benefits paid	(2,513		)	(2,617		)
Actuarial losses (gains)	900			(2,860		)
APBO at measurement date	$	15,331		$	14,370
Funded status	$	(15,331	)	$	(14,370	)
Accrued postretirement benefit liability	$	15,331		$	14,370
Amount recognized in accumulated other comprehensive loss, before taxes:
Actuarial gains	(2,303		)	(3,464		)
Amount recognized in accumulated other comprehensive loss, before taxes	$	(2,303	)	$	(3,464	)

The cost of the postretirement benefit plan is as follows:



	2014			2013		2012
Service cost	$	225		$	292	$	330
Interest cost	624			549		785
Amortization of transition obligation	—			361		394
Amortization of actuarial gain	(261		)	—		—
Net periodic postretirement benefit cost	$	588		$	1,202	$	1,509

As of the measurement date, the assumed discount rate used in the accounting for the postretirement benefit obligation was 3.9% in 2014, 4.5% in 2013 and 3.3% in 2012. As of the measurement date, the assumed discount rate used in the accounting for the net periodic postretirement benefit cost was 4.5% in 2014, 3.3% in 2013 and 4.5% in 2012.

For measurement purposes, a 7.2%, 6.7% and 7.5% annual per capita rate of increase of medical and drug costs before age 65, medical costs after age 65 and drug costs after age 65, respectively, were assumed for 2015, all gradually decreasing to 4.5% for 2028 and years thereafter. A one percentage point increase in this rate would increase our accumulated postretirement benefit obligation as of the measurement date in 2014 by $515, while a one percentage point decrease in this rate would decrease our accumulated postretirement benefit obligation by $480. There would be no material effect on the total service cost and interest cost components of the net periodic postretirement benefit cost given a one percentage point increase or decrease in this rate.

Employee and management profit sharing reflects a discretionary payment based on our financial performance. Profit share expense was $22,030, $14,950 and $25,100 in 2014, 2013 and 2012, respectively.