Pension and Other Postretirement Benefits

9 Months Ended

Apr. 30, 2020

Defined Benefit Plan [Abstract]

Pension and Other Postretirement Benefits Disclosure

PENSION AND OTHER POSTRETIREMENT BENEFITS

Pension and Postretirement Health Benefits

The Oil-Dri Corporation of America Pension Plan (“Pension Plan”) is a defined benefit pension plan for eligible salaried and hourly employees. Pension benefits are based on a formula of years of credited service and levels of compensation or stated amounts for each year of credited service. On January 9, 2020, we amended the Pension Plan to freeze participation, all future benefit accruals and accrual of benefit service, including consideration of compensation increases, effective March 1, 2020. Consequently, the Pension Plan is closed to new participants and current participants will no longer earn additional benefits on or after March 1, 2020.

The amendment of the Pension Plan triggered a pension curtailment, which required a remeasurement of the Pension Plan's obligation. The remeasurement resulted in a decrease in the benefit obligation of approximately $6,632,000, which was recorded in Other Comprehensive Income, net of taxes of $1,592,000 in the second quarter of fiscal year 2020.

The components of net periodic pension and postretirement health benefit costs were as follows:

    

	Pension Benefits
	(in thousands)
	For the Three Months Ended April 30,						For the Nine Months Ended April 30,
	2020			2019			2020			2019
Service cost	$	122		$	407		$	973		$	1,220
Interest cost	444			529			1,456			1,586
Expected return on plan assets	(688		)	(702		)	(2,102		)	(2,107		)
Amortization of:
Prior service costs	—			—			—			1
Other actuarial loss	167			192			837			578
Net periodic benefit cost	$	45		$	426		$	1,164		$	1,278
	Postretirement Health Benefits
	(in thousands)
	For the Three Months Ended April 30,						For the Nine Months Ended April 30,
	2020			2019			2020			2019
Service cost	$	29		$	27		$	87		$	79
Interest cost	20			24			61			73
Amortization of:
Prior service costs	(2		)	(2		)	(5		)	(5		)
Net periodic benefit cost	$	47		$	49		$	143		$	147

The non-service cost components of net periodic benefit cost are included in Other Income (Expense) in the line item Other, net on the unaudited Condensed Consolidated Statements of Income.

The Pension Plan is funded based upon actuarially determined contributions that take into account the amount deductible for income tax purposes, the normal cost and the minimum contribution required and the maximum contribution allowed under applicable regulations. We were not required to make, but did make a $5,000,000 voluntary contribution to the Pension Plan during the second quarter of fiscal year 2020. We have no minimum funding requirements for the remainder of fiscal year 2020 but we may consider making an additional voluntary contribution.

The postretirement health plan is an unfunded plan. We pay insurance premiums and claims from our assets.

Assumptions used in the previous calculations were as follows:

    

	Pension Benefits				Postretirement Health Benefits
	For the Three and Nine Months Ended April 30,
	2020		2019		2020		2019
Discount rate for net periodic benefit cost	3.35	%	4.04	%	2.93	%	3.81	%
Rate of increase in compensation levels	3.50	%	3.50	%	—		—
Long-term expected rate of return on assets	7.00	%	7.00	%	—		—

The medical cost trend assumption for postretirement health benefits was 7.35%. The graded trend rate is expected to decrease to an ultimate rate of 4.50% in fiscal year 2038.

Supplemental Executive Retirement Plan

The Oil-Dri Corporation of America Supplemental Executive Retirement Plan (“SERP”) provides certain retired participants in the Pension Plan with the amount of benefits that would have been provided under the Pension Plan but for: (1) the limitations on benefits imposed by Section 415 of the Internal Revenue Code (“Code”) and/or (2) the limitation on compensation for purposes of calculating benefits under the Pension Plan imposed by Section 401(a)(17) of the Code. The SERP liability is actuarially determined at the end of each fiscal year using assumptions similar to those used for the Pension Plan. The SERP is unfunded and benefits will be funded when payments are made.

On January 9, 2020, we amended the SERP to freeze participation and any excess benefit, supplemental benefit or additional benefit effective March 1, 2020. Consequently, the SERP is closed to new participants and current participants no longer earn additional benefits on or after March 1, 2020.

The amendment of the SERP triggered a pension curtailment which required a remeasurement of the SERP's obligation. The remeasurement resulted in a decrease in the SERP liability of approximately $1,296,000, which was recorded in SG&A in the second quarter of fiscal year 2020.