Employee Benefit Plans

12 Months Ended

Oct. 03, 2020

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

Employee Benefit Plans

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"). Effective January 1, 2020, all employees hired prior to January 1, 2019 are eligible to either participate in the new RSP(+) or remain in the existing RSP. All employees hired after January 1, 2019 are automatically enrolled in the new RSP(+). The Company’s contributions to both the RSP and RSP(+) are based on a percentage of the employee’s eligible compensation and age and are in addition to the employer match on voluntary employee contributions. The Company's contributions and the employer match were both enhanced under the new RSP(+).

The RSP and RSP(+) includes an employee stock ownership feature. As one of the investment alternatives, participants in the RSP and RSP(+) can acquire our stock at market value. Shares are allocated and compensation expense is recognized as the employer share match is earned. At October 3, 2020, the participants in the RSP and RSP(+) owned 1,519,892 Class B shares.

On September 16, 2020, we entered into an agreement to purchase a single premium non-participating group annuity contract and transferred the future benefit obligations and annuity administration for certain retirees and beneficiaries in our qualified U.S defined benefit pension plan. This settlement reduced the projected benefit obligation and fair value of assets by $486,615 and resulted in a one-time settlement charge of $121,324.

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
	2020			2019			2020			2019
Change in projected benefit obligation:
Projected benefit obligation at prior year measurement date	$	1,065,937		$	915,274		$	249,575		$	207,645
Service cost	23,033			21,003			6,771			4,988
Interest cost	30,597			36,924			2,785			4,393
Contributions by plan participants	—			—			832			828
Actuarial (gains) losses	97,438			130,377			(3,572		)	48,564
Foreign currency exchange impact	—			—			16,256			(10,878		)
Benefits paid	(40,246		)	(36,455		)	(5,278		)	(6,040		)
Curtailments	—			—			81			—
Settlements	(486,615		)	—			(2,999		)	—
Other	(1,455		)	(1,186		)	(32		)	75
Projected benefit obligation at measurement date	$	688,689		$	1,065,937		$	264,419		$	249,575
Change in plan assets:
Fair value of assets at prior year measurement date	$	1,004,163		$	878,983		$	166,242		$	145,641
Actual return on plan assets	134,871			157,966			(5,088		)	24,623
Employer contributions	5,154			4,855			7,017			7,464
Contributions by plan participants	—			—			832			828
Benefits paid	(40,246		)	(36,455		)	(5,278		)	(6,040		)
Settlements	(486,615		)	—			(2,999		)	—
Foreign currency exchange impact	—			—			10,071			(6,220		)
Other	(1,455		)	(1,186		)	(32		)	(54		)
Fair value of assets at measurement date	$	615,872		$	1,004,163		$	170,765		$	166,242
Funded status and amount recognized in assets and liabilities	$	(72,817	)	$	(61,774	)	$	(93,654	)	$	(83,333	)
Amount recognized in assets and liabilities:
Long-term assets	$	30,887		$	35,429		$	3,862		$	2,575
Current and long-term pension liabilities	(103,704		)	(97,203		)	(97,516		)	(85,908		)
Amount recognized in assets and liabilities	$	(72,817	)	$	(61,774	)	$	(93,654	)	$	(83,333	)
Amount recognized in AOCIL, before taxes:
Prior service cost (credit)	$	—		$	133		$	56		$	82
Actuarial losses	184,156			324,145			60,721			56,411
Amount recognized in AOCIL, before taxes	$	184,156		$	324,278		$	60,777		$	56,493

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 $868,316 in 2020 and $1,235,230 in 2019. At the measurement date in 2020, our plans had fair values of plan assets totaling $786,637. The following table provides aggregate information for the pension plans, which have projected benefit obligations or accumulated benefit obligations in excess of plan assets:

	October 3, 2020		September 28, 2019
Projected benefit obligation	$	312,995	$	278,405
Accumulated benefit obligation	277,404		208,625
Fair value of plan assets	111,776		95,294

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
	2020		2019		2018		2020		2019		2018
Assumptions for net periodic benefit cost:
Service cost discount rate	3.5	%	4.4	%	4.2	%	1.6	%	2.9	%	2.5	%
Interest cost discount rate	2.9	%	4.1	%	3.5	%	1.3	%	2.6	%	2.2	%
Return on assets	4.5	%	5.3	%	7.0	%	2.7	%	3.5	%	3.5	%
Rate of compensation increase	2.9	%	3.5	%	3.5	%	2.1	%	2.5	%	2.5	%
Assumptions for benefit obligations:
Discount rate	3.0	%	3.3	%	4.3	%	1.4	%	1.6	%	2.8	%
Rate of compensation increase	3.3	%	2.9	%	3.5	%	2.2	%	2.1	%	2.5	%

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 2020, we assumed an average rate of return on U.S. pension assets of approximately 4.5% measured over a planning horizon with reasonable and acceptable levels of risk. The rate of return was based on the actual asset allocation of 18% in equity securities and 82% in fixed income securities at September 28, 2019. As a result of the pension settlement transaction, we modified our asset allocation to align our investment portfolio to maintain the funded status of the plan. In determining our non-U.S. pension expense for 2020, we assumed an average rate of return on non-U.S. pension assets of approximately 2.7% 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.

The weighted average asset allocations by asset category for the pension plans as of October 3, 2020 and September 28, 2019 are as follows:

	U.S. Plans			Non-U.S. Plans
	Target	2020 Actual	2019 Actual	Target	2020 Actual	2019 Actual
Asset category:
Equity	35%-45%	37%	18%	20%-40%	24%	25%
Fixed Income	55%-65%	63%	82%	30%-45%	38%	36%
Other	—%	—%	—%	25%-40%	38%	39%

 

The valuation methodologies used for pension plan assets measured at fair value have been applied consistently.

Cash and cash equivalents: Direct cash holdings valued at cost, which approximates fair value.

Money market funds: Institutional short-term investment vehicles valued daily.

Shares of registered investment companies: Consists of both equity and fixed income mutual funds. Valued at quoted market prices that represent the net asset value of shares held by the plan at year end.

Fixed income securities: Valued using methods, such as dealer quotes, available trade information, spreads, bids and offers provided by a pricing vendor.

Equity securities: 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.

Collective investment trust: Net asset value of the fund is calculated daily by the investment manager.

Unit linked life insurance funds: Net asset value of the fund is calculated daily by the investment manager.

Investment in insurance contracts: Valued at contract value, which is the fair value of the underlying investment of the insurance company.

Limited partnerships: 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.

The following tables present the consolidated plan assets using the fair value hierarchy, which is described in Note 12 - Fair Value, as of October 3, 2020 and September 28, 2019.

U.S. Plans, October 3, 2020	Level 1		Level 2		Level 3		Total
Investments at fair value:
Shares of registered investment companies:
Equity funds	$	197,580	$	—	$	—	$	197,580
Fixed income funds	390,695		—		—		390,695
Money market funds	—		6,281		—		6,281
Total investments in fair value hierarchy	588,275		6,281		—		594,556
Investments measured at NAV practical expedient (1)							21,316
Total investments at fair value	$	588,275	$	6,281	$	—	$	615,872

Non-U.S. Plans, October 3, 2020	Level 1		Level 2		Level 3		Total
Investments at fair value:
Mutual funds:
Equity funds	$	—	$	6,159	$	—	$	6,159
Fixed income funds	—		7,558		—		7,558
Equity securities	8,689		—		—		8,689
Fixed income securities	—		17,930		—		17,930
Collective investment trusts	—		19,636		—		19,636
Unit linked life insurance funds	—		53,607		—		53,607
Money market funds	—		576		—		576
Cash and cash equivalents	149		—		—		149
Insurance contracts and other	—		—		56,461		56,461
Total investments at fair value	$	8,838	$	105,466	$	56,461	$	170,765

U.S. Plans, September 28, 2019	Level 1		Level 2		Level 3		Total
Investments at fair value:
Shares of registered investment companies:
Equity funds	$	144,898	$	—	$	—	$	144,898
Fixed income funds	823,008		—		—		823,008
Money market funds	—		6,418		—		6,418
Insurance contract	—		—		505		505
Total investments in fair value hierarchy	967,906		6,418		505		974,829
Investments measured at NAV practical expedient (1)							29,334
Total investments at fair value	$	967,906	$	6,418	$	505	$	1,004,163

 

Non-U.S. Plans, September 28, 2019	Level 1		Level 2		Level 3		Total
Investments at fair value:
Mutual funds:
Equity funds	$	—	$	6,372	$	—	$	6,372
Fixed income funds	—		7,657		—		7,657
Equity securities	7,310		—		—		7,310
Fixed income securities	—		18,740		—		18,740
Collective investment trusts	—		18,118		—		18,118
Unit linked life insurance funds	—		51,062		—		51,062
Money market funds	—		386		—		386
Cash and cash equivalents	384		—		—		384
Insurance contracts and other	—		—		56,213		56,213
Total investments at fair value	$	7,694	$	102,335	$	56,213	$	166,242

⁽¹⁾  Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total retirement plan assets.

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, 2018	$	484		$	40,601		$	41,085
Return on assets	21			16,868			16,889
Purchases from contributions to Plans	—			2,887			2,887
Settlements paid in cash	—			(1,603		)	(1,603		)
Foreign currency translation	—			(2,540		)	(2,540		)
Balance at September 28, 2019	505			56,213			56,718
Return on assets	4			(4,671		)	(4,667		)
Purchases from contributions to Plans	—			2,508			2,508
Settlements paid in cash	(509		)	(1,274		)	(1,783		)
Foreign currency translation	—			3,685			3,685
Balance at October 3, 2020	$	—		$	56,461		$	56,461

The following table summarizes investments measured at fair value based on net asset value (NAV) per share as of October 3, 2020:

	Fair Value
	October 3, 2020		September 28, 2019		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Limited partnerships (1)	$	21,316	$	29,334	$	4,888	Varies	10-45 days
Total	$	21,316	$	29,334	$	4,888

⁽¹⁾  Investments in limited partnerships held by us invest primarily in emerging markets, equity and equity related securities. The strategy for the partnerships is to have exposure to certain markets or to securities that are judged to achieve superior earnings growth and/or judged undervalued relative to intrinsic value.

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.

Expense for all defined benefit plans is as follows:

	U.S. Plans									Non-U.S. Plans
	2020			2019			2018			2020			2019			2018
Service cost	$	23,033		$	21,003		$	22,535		$	6,771		$	4,988		$	5,738
Interest cost	30,597			36,924			32,292			2,785			4,393			4,241
Expected return on plan assets	(44,084		)	(45,054		)	(53,744		)	(4,577		)	(5,182		)	(5,001		)
Amortization of prior service cost (credit)	133			187			187			(3		)	(18		)	(60		)
Amortization of actuarial loss	25,316			26,639			28,709			4,943			2,532			2,512
Curtailment loss	—			—			—			100			—			—
Settlement loss	121,324			—			—			676			—			—
Total expense for defined benefit plans	$	156,319		$	39,699		$	29,979		$	10,695		$	6,713		$	7,430

The estimated net prior service credit and net actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost for pension plans in 2021 are $6 and $19,261, respectively. 

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

	U.S. Plans		Non-U.S. Plans
2021	$	8,587	$	6,206
2022	12,161		7,737
2023	16,205		9,304
2024	20,111		7,615
2025	23,617		7,964
Five years thereafter	167,235		45,256

We presently anticipate contributing approximately $5,200 to the SERP Trust for the non-qualified plan and $8,700 to the non-U.S. plans in 2021.

Expense for all defined contribution plans consists of:

	2020		2019		2018
U.S. defined contribution plans	$	27,698	$	19,848	$	16,568
Non-U.S. defined contribution plans	5,965		5,270		4,821
Total expense for defined contribution plans	$	33,663	$	25,118	$	21,389

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 2020 and 2019 are shown in the following table:

	October 3, 2020			September 28, 2019
Change in Accumulated Postretirement Benefit Obligation (APBO):
APBO at prior year measurement date	$	8,810		$	8,857
Service cost	55			68
Interest cost	211			315
Contributions by plan participants	629			644
Benefits paid	(668		)	(1,134		)
Actuarial (gains) losses	237			60
APBO at measurement date	$	9,274		$	8,810
Funded status	$	(9,274	)	$	(8,810	)
Accrued postretirement benefit liability	$	9,274		$	8,810
Amount recognized in AOCIL, before taxes:
Prior service credit	$	—		$	259
Actuarial gains	3,297			4,142
Amount recognized in AOCIL, before taxes	$	3,297		$	4,401

The cost of the postretirement benefit plan is as follows:

	2020			2019			2018
Service cost	$	55		$	68		$	84
Interest cost	211			315			281
Amortization of prior service credit	(259		)	(471		)	(470		)
Amortization of actuarial gain	(607		)	(713		)	(511		)
Net periodic postretirement benefit cost (income)	$	(600	)	$	(801	)	$	(616	)

As of the measurement date, the assumed discount rate used in the accounting for the postretirement benefit obligation was 2.3% in 2020, 3.0% in 2019 and 4.2% in 2018. The assumed service cost discount rate and interest cost discount rate used in the accounting for the net periodic postretirement benefit cost were 3.1% and 2.5%, respectively in 2020, 4.3% and 3.8%, respectively in 2019 and 3.7% and 2.8%, respectively in 2018.

For measurement purposes, a 8.0% annual per capita rate of increase of medical and drug costs were assumed for 2021, gradually decreasing to 4.5% for 2035 and years thereafter. A one percentage point increase in this rate would increase our accumulated postretirement benefit obligation as of the measurement date in 2020 by $140, while a one percentage point decrease in this rate would decrease our accumulated postretirement benefit obligation by $133. 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 $21,968, $33,250 and $22,524 in 2020, 2019 and 2018, respectively.