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Retirement, Pension and Other Postretirement Plans
12 Months Ended
Oct. 31, 2014
Compensation and Retirement Disclosure [Abstract]  
Retirement, Pension and Other Postretirement Plans

Note 6 Retirement, pension and other postretirement plans

Retirement plans — We have funded contributory retirement plans covering certain employees. Our contributions are primarily determined by the terms of the plans, subject to the limitation that they shall not exceed the amounts deductible for income tax purposes. We also sponsor unfunded contributory supplemental retirement plans for certain employees. Generally, benefits under these plans vest gradually over a period of approximately three years from date of employment, and are based on the employee’s contribution. The expense applicable to retirement plans for 2014, 2013 and 2012 was approximately $14,423, $12,955 and $10,827, respectively.

Pension plans — We have various pension plans covering a portion of our United States and international employees. Pension plan benefits are generally based on years of employment and, for salaried employees, the level of compensation. Actuarially determined amounts are contributed to United States plans to provide sufficient assets to meet future benefit payment requirements. We also sponsor an unfunded supplemental pension plan for certain employees. International subsidiaries fund their pension plans according to local requirements.

 

A reconciliation of the benefit obligations, plan assets, accrued benefit cost and the amount recognized in financial statements for pension plans is as follows:

 

     United States     International  
     2014     2013     2014     2013  

Change in benefit obligation:

        

Benefit obligation at beginning of year

   $ 299,716      $ 326,792      $ 85,543      $ 83,433   

Service cost

     8,071        8,896        2,597        2,098   

Interest cost

     13,921        12,314        3,185        2,872   

Participant contributions

                   137        132   

Plan amendments

     186        1,667        (419       

Foreign currency exchange rate change

                   (5,343     (279

Actuarial (gain) loss

     34,610        (40,996     13,293        (54

Benefits paid

     (11,025     (8,957     (2,162     (2,659
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit obligation at end of year

   $ 345,479      $ 299,716      $ 96,831      $ 85,543   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in plan assets:

        

Beginning fair value of plan assets

   $ 243,506      $ 214,128      $ 37,078      $ 34,217   

Actual return on plan assets

     25,535        20,951        1,627        2,102   

Company contributions

     19,896        17,384        4,009        3,501   

Participant contributions

                   137        132   

Foreign currency exchange rate change

                   (1,071     (215

Benefits paid

     (11,025     (8,957     (2,162     (2,659
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending fair value of plan assets

   $ 277,912      $ 243,506      $ 39,618      $ 37,078   
  

 

 

   

 

 

   

 

 

   

 

 

 

Funded status at end of year

   $ (67,567   $ (56,210   $ (57,213   $ (48,465
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts recognized in financial statements:

        

Noncurrent asset

   $      $      $ 17      $ 22   

Accrued benefit liability

     (709     (938     (6     (5

Long-term pension and retirement obligations

     (66,858     (55,272     (57,224     (48,482
  

 

 

   

 

 

   

 

 

   

 

 

 

Total amount recognized in financial statements

   $ (67,567   $ (56,210   $ (57,213   $ (48,465
  

 

 

   

 

 

   

 

 

   

 

 

 

 

    United States     International  
    2014     2013     2014     2013  

Amounts recognized in accumulated other comprehensive (gain) loss:

       

Net actuarial loss

  $ 111,337      $ 93,537      $ 34,683      $ 24,392   

Prior service cost (credit)

    (47     4        (995     (798
 

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated other comprehensive loss

  $ 111,290      $ 93,541      $ 33,688      $ 23,594   
 

 

 

   

 

 

   

 

 

   

 

 

 

Amounts expected to be recognized during next fiscal year:

       

Amortization of net actuarial loss

  $ 8,694      $ 8,260      $ 2,459      $ 1,531   

Amortization of prior service cost (credit)

    121        237        (97     (82
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 8,815      $ 8,497      $ 2,362      $ 1,449   
 

 

 

   

 

 

   

 

 

   

 

 

 

The following table summarizes the changes in accumulated other comprehensive (gain) loss:

 

     United States     International  
     2014     2013     2014     2013  

Balance at beginning of year

   $ 93,541      $ 152,732      $ 23,594      $ 25,230   

Net (gain) loss arising during the year

     26,372        (46,707     13,438        (642

Prior service cost (credit) arising during the year

     186        1,668        (419       

Net gain (loss) recognized during the year

     (7,940     (13,995     (1,233     (1,406

Prior service (cost) credit recognized during the year

     (237     (157     101        81   

Settlement loss

     (632                     

Exchange rate effect during the year

                   (1,793     331   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of year

   $ 111,290      $ 93,541      $ 33,688      $ 23,594   
  

 

 

   

 

 

   

 

 

   

 

 

 

Information regarding the accumulated benefit obligation is as follows:

 

     United States      International  
     2014      2013      2014      2013  

For all plans:

           

Accumulated benefit obligation

   $ 336,464       $ 291,310       $ 75,305       $ 67,647   

For plans with benefit obligations in excess of plan assets:

           

Projected benefit obligation

     345,479         299,716         87,128         71,788   

Accumulated benefit obligation

     336,464         291,310         73,135         59,589   

Fair value of plan assets

     277,912         243,506         37,415         29,000   

 

Net pension benefit costs include the following components:

 

     United States     International  
     2014     2013     2012     2014     2013     2012  

Service cost

   $ 8,071      $ 8,896      $ 7,488      $ 2,597      $ 2,098      $ 1,504   

Interest cost

     13,921        12,314        12,137        3,185        2,872        3,002   

Expected return on plan assets

     (17,297     (15,241     (14,901     (1,772     (1,512     (1,547

Amortization of prior service cost (credit)

     237        157        342        (101     (81     (97

Amortization of net actuarial (gain) loss

     7,940        13,995        11,672        1,233        1,406        564   

Settlement loss

     632               682                        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total benefit cost

   $ 13,504      $ 20,121      $ 17,420      $ 5,142      $ 4,783      $ 3,426   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost for 2014 included a settlement loss of $632 due to a lump sum retirement payment. Net periodic pension cost for 2012 included a settlement loss of $682, due to a plan termination.

The weighted average assumptions used in the valuation of pension benefits were as follows:

 

     United States     International  
     2014     2013     2012     2014     2013     2012  

Assumptions used to determine benefit obligations at October 31:

            

Discount rate

     4.29     4.75     3.85     2.94     3.72     3.52

Rate of compensation increase

     3.49        3.30        3.30        3.19        3.18        3.13   

Assumptions used to determine net benefit costs for the years ended October 31:

            

Discount rate

     4.75        3.85        4.46        3.72        3.52        4.43   

Expected return on plan assets

     7.24        7.24        7.75        4.60        4.43        4.85   

Rate of compensation increase

     3.30        3.30        3.20        3.18        3.13        3.16   

The amortization of prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the plans.

The discount rate reflects the current rate at which pension liabilities could be effectively settled at the end of the year. The discount rate used considers a yield derived from matching projected pension payments with maturities of a portfolio of available bonds that receive the highest rating given from a recognized investments ratings agency. The decrease in the discount rate in 2014 and increase in 2013 are due to changes in yields for these types of investments as a result of the economic environment.

In determining the expected return on plan assets, we consider both historical performance and an estimate of future long-term rates of return on assets similar to those in our plans. We consult with and consider the opinions of financial and other professionals in developing appropriate return assumptions. The rate of compensation increase is based on managements’ estimates using historical experience and expected increases in rates.

The measurement of domestic pension plans’ projected benefit obligations included the effects of adopting the Society of Actuaries’ release of final RP2014 / MP2014 mortality tables. The adoption of these new tables resulted in an increase of $28,554 to our domestic pension plans’ projected benefit obligations.

Economic assumptions have a significant effect on the amounts reported. The effect of a one percent change in the discount rate, expected return on assets and compensation increase is shown in the table below. Bracketed numbers represent decreases in expense and obligation amounts.

 

     United States     International  
     1% Point
Increase
    1% Point
Decrease
    1% Point
Increase
    1% Point
Decrease
 

Discount rate:

        

Effect on total service and interest cost components
in 2014

   $ (4,527   $ 5,514      $ (1,235   $ 1,561   

Effect on pension obligation as of October 31, 2014

   $ (44,353   $ 55,900      $ (15,756   $ 19,996   

Expected return on assets:

        

Effect on total service and interest cost components
in 2014

   $ (2,582   $ 2,582      $ (375   $ 375   

Compensation increase:

        

Effect on total service and interest cost components
in 2014

   $ 4,257      $ (2,490   $ 934      $ (1,088

Effect on pension obligation as of October 31, 2014

   $ 21,915      $ (12,788   $ 7,729      $ (6,999

The allocation of pension plan assets as of October 31, 2014 and 2013 is as follows:

 

     United States      International  
     2014      2013      2014      2013  

Asset Category

           

Equity securities

     23  %         27  %         —  %         —  %   

Debt securities

     29               29               —               —         

Insurance contracts

     —               —               58               60         

Pooled investment funds

     47               43               42               39         

Other

     1               1               —               1         
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     100  %         100  %         100  %         100  %   
  

 

 

    

 

 

    

 

 

    

 

 

 

Our investment objective for defined benefit plan assets is to meet the plans’ benefit obligations, while minimizing the potential for future required plan contributions.

Our United States plans comprise 88 percent of the worldwide pension assets. In general, the investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by dynamically matching the actuarial projections of the plans’ future liabilities and benefit payments with expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. The current target in “return-seeking assets” is 45 percent and 55 percent in fixed income. Plan assets are diversified across several investment managers and are invested in liquid funds that are selected to track broad market indices. Investment risk is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and continual monitoring of investment managers’ performance relative to the investment guidelines established with each investment manager.

Our international plans comprise 12 percent of the worldwide pension assets. Asset allocations are developed on a country-specific basis. Our investment strategy is to cover pension obligations with insurance contracts or to employ independent managers to invest the assets.

 

The fair values of our pension plan assets at October 31, 2014 by asset category are in the table below:

 

     United States      International  
     Total      Level 1      Level 2      Level 3      Total      Level 1      Level 2      Level 3  

Cash

   $ 1,617       $ 1,617       $       $       $ 8       $ 8       $       $   

Money market funds

     2,820         2,820                                                   

Equity securities:

                       

Basic materials

     3,224         3,224                                                   

Consumer goods

     5,114         5,114                                                   

Financial

     8,036         8,036                                                   

Healthcare

     4,372         4,372                                                   

Industrial goods

     3,527         3,527                                                   

Technology

     4,226         4,226                                                   

Utilities

     1,084         1,084                                                   

Mutual funds

     31,255         31,255                                                   

Fixed income securities:

                       

U.S. Government

     26,447         7,877         18,570                                           

Corporate

     50,720                 50,720                                           

Other

     2,486                 2,486                                           

Other types of investments:

                       

Insurance contracts

                                     23,174                         23,174   

Real estate collective funds

     16,495                         16,495                                   

Pooled investment funds

     115,877                 115,877                 16,436                 16,436           

Other

     612         612                                                   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 277,912       $ 73,764       $ 187,653       $ 16,495       $ 39,618       $ 8       $ 16,436       $ 23,174   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

The fair values of our pension plan assets at October 31, 2013 by asset category are in the table below:

 

     United States      International  
     Total      Level 1      Level 2      Level 3      Total      Level 1      Level 2      Level 3  

Cash

   $ 2,811       $ 2,811       $       $       $ 321       $ 321       $       $   

Money market funds

     2,783         2,783                                                   

Equity securities:

                       

Basic materials

     3,834         3,834                                                   

Consumer goods

     4,958         4,958                                                   

Financial

     7,825         7,825                                                   

Healthcare

     4,109         4,109                                                   

Industrial goods

     3,255         3,255                                                   

Technology

     4,159         4,159                                                   

Utilities

     988         988                                                   

Mutual funds

     32,617         32,617                                                   

Fixed income securities:

                       

U.S. Government

     26,892         10,715         16,177                                           

Corporate

     43,367                 43,367                                           

Other

     1,356                 1,356                                           

Other types of investments:

                       

Insurance contracts

                                     22,093                         22,093   

Real estate collective funds

     14,958                         14,958                                   

Pooled investment funds

     88,973                 88,973                 14,664                 14,664           

Other

     621         621                                                   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 243,506       $ 78,675       $ 149,873       $ 14,958       $ 37,078       $ 321       $ 14,664       $ 22,093   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

These investment funds did not own a significant number of shares of Nordson Corporation common stock for any year presented.

The inputs and methodology used to measure fair value of plan assets are consistent with those described in Note 12. Following are the valuation methodologies used to measure these assets:

 

   

Money market funds — Money market funds are public investment vehicles that are valued with a net asset value of one dollar. This is a quoted price in an active market and is classified as Level 1.

 

   

Equity securities — Common stocks are valued at the closing price reported on the active market on which the individual securities are traded and are classified as Level 1. Mutual funds are valued at the net asset values of the shares at year-end, as determined by the closing price reported on the active market on which the individual securities are traded and are classified as Level 1.

 

   

Fixed income securities — U.S. Treasury bills reflect the closing price on the active market in which the securities are traded and are classified as Level 1. Securities of U.S. agencies are valued using bid evaluations and a classified as Level 2. Corporate fixed income securities are valued using evaluated prices, such as dealer quotes, bids and offers and are therefore classified as Level 2.

 

   

Insurance contracts — Insurance contracts are investments with various insurance companies. The contract value represents the best estimate of fair value. These contracts do not hold any specific assets. These investments are classified as Level 3.

 

   

Real estate collective funds — These funds are valued at the estimated fair value of the underlying properties. Estimated fair value is calculated using a combination of key inputs, such as revenue and expense growth rates, terminal capitalization rates and discount rates. These investments are classified as Level 3.

 

   

Pooled investment funds — These are public investment vehicles valued using the net asset value. The net asset value is based on the value of the assets owned by the plan, less liabilities. These investments are not quoted on an active exchange and are classified as Level 2.

The following tables present an analysis of changes during the years ended October 31, 2014 and 2013 in Level 3 plan assets, by plan asset class, for U.S. and International pension plans using significant unobservable inputs to measure fair value:

 

     Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
 
     Real estate
collective funds
    Insurance
contracts
    Total  

Beginning balance at October 31, 2013

   $ 14,958      $ 22,093      $ 37,051   

Actual return on plan assets:

      

Assets held, end of year

     1,667        771        2,438   

Assets sold during the period

     25               25   

Purchases

            2,816        2,816   

Sales

     (155     (1,529     (1,684

Foreign currency translation

            (977     (977
  

 

 

   

 

 

   

 

 

 

Ending balance at October 31, 2014

   $ 16,495      $ 23,174      $ 39,669   
  

 

 

   

 

 

   

 

 

 
     Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
 
     Real estate
collective funds
    Insurance
contracts
    Total  

Beginning balance at October 31, 2012

   $ 13,110      $ 19,046      $ 32,156   

Actual return on plan assets:

      

Assets held, end of year

     1,970        1,025        2,995   

Assets sold during the period

     13        —          13   

Purchases

     —          4,242        4,242   

Sales

     (135     (2,093     (2,228

Foreign currency translation

     —          (127     (127
  

 

 

   

 

 

   

 

 

 

Ending balance at October 31, 2013

   $ 14,958      $ 22,093      $ 37,051   
  

 

 

   

 

 

   

 

 

 

Contributions to pension plans in 2015 are estimated to be approximately $26,000.

Retiree pension benefit payments, which reflect expected future service, are anticipated to be paid as follows:

 

Year

   United States      International  

2015

   $ 10,922       $ 4,833   

2016

     11,637         2,300   

2017

     12,721         2,166   

2018

     13,661         2,984   

2019

     14,853         5,014   

2020-2024

     92,418         17,392   

 

Other postretirement plans — We have an unfunded postretirement benefit plan covering certain of our United States employees. Employees hired after January 1, 2002, are not eligible to participate in this plan. The plan provides medical and life insurance benefits. The plan is contributory, with retiree contributions in the form of premiums that are adjusted annually, and contains other cost-sharing features, such as deductibles and coinsurance. We also sponsor an unfunded, non-contributory postretirement benefit plan that provides medical and life insurance benefits for certain international employees.

A reconciliation of the benefit obligations, accrued benefit cost and the amount recognized in financial statements for other postretirement plans is as follows:

 

     United States     International  
     2014     2013     2014     2013  

Change in benefit obligation:

        

Benefit obligation at beginning of year

   $ 61,004      $ 71,228      $ 768      $ 851   

Service cost

     1,037        1,145        28        35   

Interest cost

     3,062        2,598        38        38   

Participant contributions

     431        600                 

Foreign currency exchange rate change

                   (63     (34

Actuarial (gain) loss

     6,015        (11,619     130        (118

Benefits paid

     (2,070     (2,948     (4     (4
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit obligation at end of year

   $ 69,479      $ 61,004      $ 897      $ 768   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in plan assets:

        

Beginning fair value of plan assets

   $      $      $      $   

Company contributions

     1,639        2,348        4        4   

Participant contributions

     431        600                 

Benefits paid

     (2,070     (2,948     (4     (4
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending fair value of plan assets

   $      $      $      $   
  

 

 

   

 

 

   

 

 

   

 

 

 

Funded status at end of year

   $ (69,479   $ (61,004   $ (897   $ (768
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts recognized in financial statements:

        

Accrued benefit liability

   $ (2,069   $ (1,974   $ (7   $ (4

Long-term postretirement obligations

     (67,410     (59,030     (890     (764
  

 

 

   

 

 

   

 

 

   

 

 

 

Total amount recognized in financial statements

   $ (69,479   $ (61,004   $ (897   $ (768
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     United States     International  
     2014     2013     2014     2013  

Amounts recognized in accumulated other comprehensive (gain) loss:

        

Net actuarial (gain) loss

   $ 22,434      $ 17,854      $ (86   $ (243

Prior service cost (credit)

     (1,012     (1,461              
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated other comprehensive (gain) loss

   $ 21,422      $ 16,393      $ (86   $ (243
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts expected to be recognized during next fiscal year:

        

Amortization of net actuarial (gain) loss

   $ 1,187      $ 1,139      $      $ (14

Amortization of prior service cost (credit)

     (438     (449              
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 749      $ 690      $      $ (14
  

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table summarizes the changes in accumulated other comprehensive (gain) loss:

 

     United States     International  
     2014     2013     2014     2013  

Balance at beginning of year

   $ 16,393      $ 29,651      $ (243   $ (138

Net (gain) loss arising during the year

     6,015        (11,619     130        (117

Net gain (loss) recognized during the year

     (1,435     (2,112     13        4   

Prior service credit (cost) recognized during the year

     449        473                 

Exchange rate effect during the year

                   14        8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of year

   $ 21,422      $ 16,393      $ (86   $ (243
  

 

 

   

 

 

   

 

 

   

 

 

 

Net postretirement benefit costs include the following components:

 

     United States     International  
     2014     2013     2012     2014     2013     2012  

Service cost

   $ 1,037      $ 1,145      $ 1,183      $ 28      $ 35      $ 28   

Interest cost

     3,062        2,598        2,759        38        38        41   

Amortization of prior service cost (credit)

     (449     (473     (584                     

Amortization of net actuarial (gain) loss

     1,435        2,112        1,789        (13     (4     (14
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total benefit cost

   $ 5,085      $ 5,382      $ 5,147      $ 53      $ 69      $ 55   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The weighted average assumptions used in the valuation of postretirement benefits were as follows:

 

     United States     International  
     2014     2013     2012     2014     2013     2012  

Assumptions used to determine benefit obligations at October 31:

            

Discount rate

     4.40     4.80     3.85     4.25     4.95     4.40

Health care cost trend rate

     3.93        4.12        4.90        6.48        6.65        6.83   

Rate to which health care cost trend rate is assumed to decline (ultimate trend rate)

     3.41        3.47        3.60        3.50        3.50        3.50   

Year the rate reaches the ultimate trend rate

     2024        2021        2017        2031        2031        2031   

Assumption used to determine net benefit costs for the years ended October 31:

            

Discount rate

     4.80      3.85      4.50      4.95      4.40      5.85 

The decrease in the weighted-average United States health care cost trend rate beginning in 2013 relates to a change in the plan design of the retiree medical plan effective January 1, 2013 moving to a Health Reimbursement Arrangement for post-65 coverage.

The measurement of domestic other post employment benefit (OPEB) plan’s projected benefit obligation included the effect of adopting the Society of Actuaries’ release of final RP2014 / MP2014 mortality tables. The adoption of these new tables resulted in an increase of $4,878 to our domestic OPEB plan’s projected benefit obligation.

 

The discount rate and the health care cost trend rate assumptions have a significant effect on the amounts reported. For example, a one-percentage point change in the discount rate and the assumed health care cost trend rate would have the following effects. Bracketed numbers represent decreases in expense and obligation amounts.

 

     United States     International  
     1% Point
Increase
    1% Point
Decrease
    1% Point
Increase
    1% Point
Decrease
 

Discount rate:

        

Effect on total service and interest cost components in 2014

   $ (770   $ 938      $ (7   $ 6   

Effect on postretirement obligation as of October 31, 2014

   $ (9,992   $ 12,790      $ (173   $ 229   

Health care trend rate:

        

Effect on total service and interest cost components in 2014

   $ 589      $ (479   $ 14      $ (14

Effect on postretirement obligation as of October 31, 2014

   $ 11,302      $ (9,001   $ 174      $ (208

Contributions to postretirement plans in 2015 are estimated to be approximately $2,100.

Retiree postretirement benefit payments are anticipated to be paid as follows:

 

Year

   United States        International    

2015

   $ 2,069       $ 7   

2016

     2,242         8   

2017

     2,420         9   

2018

     2,614         12   

2019

     2,743         13   

2020-2024

     16,609         107