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 29, 2018, the participants in the RSP owned 1,451,069 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
	2018			2017			2018			2017
Change in projected benefit obligation:
Projected benefit obligation at prior year measurement date	$	941,766		$	979,055		$	214,474		$	219,308
Service cost	22,535			24,115			5,738			6,105
Interest cost	32,292			30,573			4,241			3,121
Contributions by plan participants	—			—			918			844
Actuarial (gains) losses	(46,526		)	(30,339		)	(6,679		)	(18,881		)
Foreign currency exchange impact	—			—			(4,670		)	6,222
Benefits paid	(33,941		)	(60,891		)	(6,302		)	(4,703		)
Curtailments	—			—			—			(262		)
Other	(852		)	(747		)	(75		)	2,720
Projected benefit obligation at measurement date	$	915,274		$	941,766		$	207,645		$	214,474
Change in plan assets:
Fair value of assets at prior year measurement date	$	756,274		$	675,018		$	141,906		$	135,439
Actual return on plan assets	8,038			79,419			2,740			(214		)
Employer contributions	149,464			63,597			9,971			7,655
Contributions by plan participants	—			—			918			844
Benefits paid	(33,941		)	(60,891		)	(6,302		)	(4,703		)
Foreign currency exchange impact	—			—			(3,551		)	2,919
Other	(852		)	(869		)	(41		)	(34		)
Fair value of assets at measurement date	$	878,983		$	756,274		$	145,641		$	141,906
Funded status and amount recognized in assets and liabilities	$	(36,291	)	$	(185,492	)	$	(62,004	)	$	(72,568	)
Amount recognized in assets and liabilities:
Long-term assets	$	49,967		$	—		$	7,874		$	1,672
Current and long-term pension liabilities	(86,258		)	(185,492		)	(69,878		)	(74,240		)
Amount recognized in assets and liabilities	$	(36,291	)	$	(185,492	)	$	(62,004	)	$	(72,568	)
Amount recognized in AOCIL, before taxes:
Prior service cost (credit)	$	320		$	507		$	(69	)	$	(83	)
Actuarial losses	332,520			360,391			32,430			40,075
Amount recognized in AOCIL, before taxes	$	332,840		$	360,898		$	32,361		$	39,992

The total accumulated benefit obligation as of the measurement date for all defined benefit pension plans was $1,044,579 in 2018 and $1,064,195 in 2017. At the measurement date in 2018, our plans had fair values of plan assets totaling $1,024,624. The following table provides aggregate information for the pension plans, which have projected benefit obligations or accumulated benefit obligations in excess of plan assets:



	September 29, 2018		September 30, 2017
Projected benefit obligation	$	234,402	$	1,047,605
Accumulated benefit obligation	219,830		969,161
Fair value of plan assets	78,265		793,167

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
	2018		2017		2016		2018		2017		2016
Assumptions for net periodic benefit cost:
Discount rate	n/a		n/a		4.5	%	n/a		n/a		3.0	%
Service cost discount rate	4.2	%	4.0	%	n/a		2.5	%	2.0	%	n/a
Interest cost discount rate	3.5	%	3.2	%	n/a		2.2	%	1.7	%	n/a
Return on assets	7.0	%	7.5	%	7.7	%	3.5	%	3.6	%	4.1	%
Rate of compensation increase	3.5	%	3.5	%	4.1	%	2.5	%	2.3	%	2.6	%
Assumptions for benefit obligations:
Discount rate	4.3	%	4.0	%	3.8	%	2.8	%	2.5	%	1.9	%
Rate of compensation increase	3.5	%	3.5	%	3.5	%	2.5	%	2.5	%	2.3	%

Beginning in 2017, we changed the method used to estimate the service and interest cost components of net periodic pension cost. The new method uses the spot yield curve approach to estimate the service and interest costs by applying the specific spot rates along the yield curve used to determine the benefit obligation to the relevant projected cash outflows. Previously, these cost components were determined using a single-weighted average discount rate. This change does not affect the measurement of the projected benefit obligation.

We have made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. We have accounted for this change as a change in accounting estimate and accordingly have accounted for it prospectively. The more granular application of the spot rates reduced the service and interest cost for the annual net periodic pension expense in 2017 by approximately $7,000.

Pension plan investment policies and strategies are developed on a plan specific basis, which varies by country. 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 sufficient to allow the plan to meet its benefit payment, fee and expense obligations. 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 asset allocation, 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 2018, we assumed an average rate of return on U.S. pension assets of approximately 7.0% measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return was based on the actual asset allocation of 57% in equity securities and 43% in fixed income securities at September 30, 2017. During 2018, we fully funded our U.S defined benefit plan and changed our asset allocation. In determining our non-U.S. pension expense for 2018, we assumed an average rate of return on non-U.S. pension assets of approximately 3.5% measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return assumed an average asset allocation of 30% in equity securities and 70% in fixed income securities and other investments.

Limited partnerships and hedge funds: Valued at net asset value of units held. The NAV is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liability. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different from the reported NAV.

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 Trustee 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.



U.S. Plans, September 29, 2018	Level 1		Level 2		Level 3		Total
Investments at fair value:
Shares of registered investment companies:
Equity funds	$	141,287	$	—	$	—	$	141,287
Fixed income funds	694,837		—		—		694,837
Money market funds	—		6,309		—		6,309
Insurance contract	—		—		484		484
Total investments in fair value hierarchy	836,124		6,309		484		842,917
Investments measured at NAV practical expedient ⁽¹⁾							36,066
Total investments at fair value	$	836,124	$	6,309	$	484	$	878,983



Non-U.S. Plans, September 29, 2018	Level 1		Level 2		Level 3		Total
Investments at fair value:
Mutual funds:
Equity funds	$	—	$	6,223	$	—	$	6,223
Fixed income funds	—		7,630		—		7,630
Equity securities	6,206		—		—		6,206
Fixed income securities	—		16,638		—		16,638
Unit investment trusts	—		17,547		—		17,547
Unit linked life insurance funds	—		50,127		—		50,127
Money market funds	—		560		—		560
Cash and cash equivalents	109		—		—		109
Insurance contracts and other	—		—		40,601		40,601
Total investments in fair value hierarchy	6,315		98,725		40,601		145,641
Investments measured at NAV practical expedient⁽¹⁾							—
Total investments at fair value	$	6,315	$	98,725	$	40,601	$	145,641



U.S. Plans, September 30, 2017	Level 1		Level 2		Level 3		Total
Investments at fair value:
Shares of registered investment companies:
Equity funds	$	302,652	$	—	$	—	$	302,652
Fixed income funds	323,008		—		—		323,008
Employer securities	83,246		—		—		83,246
Money market funds	—		7,372		—		7,372
Cash and cash equivalents	1,260		—		—		1,260
Insurance contract	—		—		464		464
Total investments in fair value hierarchy	710,166		7,372		464		718,002
Investments measured at NAV practical expedient ⁽¹⁾							38,272
Total investments at fair value	$	710,166	$	7,372	$	464	$	756,274



Non-U.S. Plans, September 30, 2017	Level 1		Level 2		Level 3		Total
Investments at fair value:
Mutual funds:
Equity funds	$	—	$	15,529	$	—	$	15,529
Fixed income funds	—		16,440		—		16,440
Equity securities	8,080		—		—		8,080
Fixed income securities	—		14,488		—		14,488
Unit linked life insurance funds	—		41,054		—		41,054
Money market funds	—		814		—		814
Cash and cash equivalents	48		—		—		48
Insurance contracts and other	—		5,492		39,961		45,453
Total investments in fair value hierarchy	8,128		93,817		39,961		141,906
Investments measured at NAV practical expedient ⁽¹⁾							—
Total investments at fair value	$	8,128	$	93,817	$	39,961	$	141,906

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 October 1, 2016	$	589		$	42,614		$	43,203
Return on assets	23			(5,437		)	(5,414		)
Purchases from contributions to Plans	—			2,848			2,848
Settlements paid in cash	(148		)	(1,492		)	(1,640		)
Foreign currency translation	—			1,428			1,428
Balance at September 30, 2017	464			39,961			40,425
Return on assets	20			126			146
Purchases from contributions to Plans	—			2,874			2,874
Settlements paid in cash	—			(1,612		)	(1,612		)
Foreign currency translation	—			(748		)	(748		)
Balance at September 29, 2018	$	484		$	40,601		$	41,085

The following table summarizes investments measured at fair value based on net asset value (NAV) per share as of September 29, 2018:



	Fair Value
	September 29, 2018		September 30, 2017		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Limited partnerships ⁽¹⁾	$	35,931	$	35,821	$	5,219	Varies	10-45 days
Hedge funds ⁽²⁾	135		2,451		—		Quarterly	60 days
Total	$	36,066	$	38,272	$	5,219

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 defined benefit plans is as follows:



	U.S. Plans									Non-U.S. Plans
	2018			2017			2016			2018			2017			2016
Service cost	$	22,535		$	24,115		$	23,637		$	5,738		$	6,105		$	5,204
Interest cost	32,292			30,573			37,659			4,241			3,121			4,928
Expected return on plan assets	(54,302		)	(54,510		)	(50,383		)	(5,001		)	(4,643		)	(4,862		)
Amortization of prior service cost (credit)	187			187			187			(60		)	(106		)	(103		)
Amortization of actuarial loss	27,609			33,738			26,168			2,512			4,581			2,600
Curtailment gain	—			—			—			—			(147		)	—
Settlement loss	—			—			59			—			—			131
Pension expense for defined benefit plans	$	28,321		$	34,103		$	37,327		$	7,430		$	8,911		$	7,898

We provide postretirement health care benefits to certain domestic retirees, who were hired prior to October 1, 1989. There are no plan assets. The changes in the accumulated benefit obligation of this unfunded plan for 2018 and 2017 are shown in the following table:



	September 29, 2018			September 30, 2017
Change in Accumulated Postretirement Benefit Obligation (APBO):
APBO at prior year measurement date	$	10,513		$	12,825
Service cost	84			118
Interest cost	281			288
Contributions by plan participants	629			1,699
Benefits paid	(1,402		)	(2,448		)
Actuarial (gains) losses	(1,248		)	(769		)
Plan amendment	—			(1,200		)
APBO at measurement date	$	8,857		$	10,513
Funded status	$	(8,857	)	$	(10,513	)
Accrued postretirement benefit liability	$	8,857		$	10,513
Amount recognized in AOCIL, before taxes:
Prior service credit	$	729		$	1,200
Actuarial gains	4,915			4,178
Amount recognized in AOCIL, before taxes	$	5,644		$	5,378

As of the measurement date, the assumed discount rate used in the accounting for the postretirement benefit obligation was 4.2% in 2018, 3.6% in 2017 and 3.2% in 2016. The assumed service cost discount rate and interest cost discount rate used in the accounting for the net periodic postretirement benefit cost were 3.7% and 2.8%, respectively, in 2018 and 3.4% and 2.5%, respectively in 2017. The assumed discount rate used in the accounting for the net periodic postretirement benefit cost was 3.9% in 2016.

For measurement purposes, a 8.5% annual per capita rate of increase of medical and drug costs were assumed for 2019, gradually decreasing to 5.0% for 2026 and years thereafter. A one percentage point increase in this rate would increase our accumulated postretirement benefit obligation as of the measurement date in 2018 by $152, while a one percentage point decrease in this rate would decrease our accumulated postretirement benefit obligation by $144. 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.