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Retirement Benefits
 12 Months Ended
Jun. 30, 2023
Retirement Benefits [Abstract]  
Retirement Benefits Retirement Benefits
Pensions - The Company has noncontributory defined benefit pension plans covering eligible employees, including certain employees in foreign countries. Our largest plans are generally closed to new participants. Plans for most salaried employees provide pay-related benefits based on years of service. Plans for hourly employees generally provide benefits based on flat-dollar amounts and years of service. We also have arrangements for certain key employees, which provide for supplemental retirement benefits. In general, the Company's policy is to fund these plans based on legal requirements, tax considerations, local practices and investment opportunities. We also sponsor defined contribution plans and participate in government-sponsored programs in certain foreign countries.
A summary of the Company's defined benefit pension plans follows:
202320222021
Benefit cost
Service cost$57,418 $76,638 $84,188 
Interest cost225,468 110,250 102,475 
Expected return on plan assets(311,145)(267,888)(267,579)
Amortization of prior service cost931 4,103 5,325 
Amortization of unrecognized actuarial loss17,178 157,288 207,897 
Amortization of transition obligation— 8 18 
One-time charges related to divestitures(2,480)— — 
Net periodic benefit cost$(12,630)$80,399 $132,324 

Components of net pension benefit cost, other than service cost, are included in other expense (income), net in the Consolidated Statement of Income.
20232022
Change in benefit obligation
Benefit obligation at beginning of year$4,959,319 $6,323,003 
Service cost57,418 76,638 
Interest cost225,468 110,250 
Acquisition1,181,139 — 
Plan amendments2,521 (5,691)
Divestiture(1,779)— 
Actuarial gain(349,476)(1,097,053)
Benefits paid(312,758)(256,868)
Foreign currency translation and other73,839 (190,960)
Benefit obligation at end of year$5,835,691 $4,959,319 
Change in plan assets
Fair value of plan assets at beginning of year$4,362,153 $5,305,577 
Actual gain (loss) on plan assets31,399 (605,642)
Acquisition1,140,707 — 
Employer contributions153,038 96,717 
Benefits paid(312,758)(256,868)
Foreign currency translation and other80,756 (177,631)
Fair value of plan assets at end of year$5,455,295 $4,362,153 
Funded status$(380,396)$(597,166)
Amounts recognized on the Consolidated Balance Sheet
Investments and other assets$145,809 $103,632 
Other accrued liabilities(57,783)(19,307)
Pensions and other postretirement benefits(468,422)(681,491)
Net amount recognized$(380,396)$(597,166)
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial loss$593,937 $672,775 
Prior service cost6,489 4,901 
Net amount recognized$600,426 $677,676 

The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss) is on a debit (credit) basis and excludes the effect of income taxes.

As of the date of the Acquisition, the Meggitt plans were remeasured at fair value using accounting policies consistent with Parker plans.

At June 30, 2023, the benefit obligation increased primarily due to plans acquired with the Acquisition partially offset by increased discount rates. At June 30, 2022, the benefit obligation decreased primarily due to significantly higher discount rates.
The plans acquired with the Acquisition are the primary contributing factor for the increase in plan assets' fair value during 2023. In 2022, investment (losses) were the largest driver for the decrease in plan assets.
The accumulated benefit obligation for all defined benefit plans was $5.7 billion and $4.8 billion at June 30, 2023 and 2022, respectively.
Information for pension plans with accumulated benefit obligations in excess of plan assets:
20232022
Accumulated benefit obligation
$4,352,952 $4,284,601 
Fair value of plan assets
3,955,284 3,742,513 
Information for pension plans with projected benefit obligations in excess of plan assets:
20232022
Projected benefit obligation
$4,545,650 $4,483,486 
Fair value of plan assets
4,019,445 3,782,688 
We expect to make cash contributions of approximately $171 million to our defined benefit pension plans in 2024, the majority of which relates to our non-U.S. plans. Estimated future benefit payments in the five years ending June 30, 2024 through 2028 are $413 million, $413 million, $380 million, $387 million and $388 million, respectively, and $2.0 billion in the aggregate for the five years ending June 30, 2029 through June 30, 2033.
The assumptions used to measure net periodic benefit cost for the Company's significant defined benefit plans are:
202320222021
U.S. defined benefit plan
Discount rate4.36 %2.55 %2.36 %
Average increase in compensation3.35 %3.05 %2.98 %
Expected return on plan assets6.50 %6.50 %6.75 %
Non-U.S. defined benefit plans
Discount rate
0.60 to 5.06%
0.25 to 2.95%
0.20 to 3.03%
Average increase in compensation
1.75 to 4.00%
1.75 to 4.50%
1.75 to 4.50%
Expected return on plan assets
1.00 to 5.10%
1.00 to 4.50%
1.00 to 5.40%
The assumptions used to measure the benefit obligation for the Company's significant defined benefit plans are:
20232022
U.S. defined benefit plan
Discount rate4.88 %4.36 %
Average increase in compensation3.81 %3.81 %
Non-U.S. defined benefit plans
Discount rate
0.90 to 5.20%
0.60 to 5.06%
Average increase in compensation
2.00 to 4.40%
1.75 to 4.00%

The discount rate assumption is based on current rates of high-quality, long-term corporate bonds over the same estimated time period that benefit payments will be required to be made. The expected return on plan assets assumption is based on the weighted-average expected return of the various asset classes in the plans' portfolio. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance.

The weighted-average allocation of the majority of the assets related to defined benefit plans is as follows:
20232022
Equity securities30 %31 %
Debt securities45 %43 %
Other investments25 %26 %
100 %100 %
The weighted-average target asset allocation as of June 30, 2023 is 39 percent equity securities, 45 percent debt securities and 16 percent other investments. The investment strategy for the Company's worldwide defined benefit pension plan assets focuses on achieving prudent actuarial funding ratios while maintaining acceptable levels of risk in order to provide adequate liquidity to meet immediate and future benefit requirements. This strategy requires investment portfolios that are broadly diversified across various asset classes and external investment managers. Assets held in the U.S. defined benefit plan account for approximately 65 percent of our total defined benefit plan assets. The overall investment strategy with respect to our U.S. defined benefit plan is to use a funding strategy more heavily weighted toward liability-hedging assets as the funded status improves. Over time, we will continue to add long duration fixed income investments to the portfolio. These securities are highly correlated with our pension liabilities and will be managed in a liability framework.
The fair values of pension plan assets at June 30, 2023 and at June 30, 2022, by asset class, are as follows:
June 30, 2023Quoted Prices In
 Active Markets
 (Level 1)		Significant Other
 Observable Inputs
 (Level 2)		Significant
 Unobservable
 Inputs
 (Level 3)
Cash and cash equivalents$341,812 $333,978 $7,834 $— 
Equity securities
U.S. based companies538,118 523,649 14,469 — 
Non-U.S. based companies152,354 76,173 76,181 — 
Fixed income securities
Corporate debt securities464,056 118,536 345,520 — 
Government issued securities610,326 570,368 39,958 — 
Mutual funds
Equity funds11,406 11,406 — — 
Fixed income funds357 357 — — 
Mutual funds measured at net asset value264,346 
Common/Collective trusts measured at net asset value2,626,832 
Limited Partnerships measured at net asset value137,077 
Miscellaneous308,610 — 308,610 — 
Total at June 30, 2023$5,455,294 $1,634,467 $792,572 $— 
June 30, 2022Quoted Prices In
 Active Markets
 (Level 1)		Significant Other
 Observable Inputs
 (Level 2)		Significant
 Unobservable
 Inputs
 (Level 3)
Cash and cash equivalents$201,053 $190,616 $10,437 $— 
Equity securities
U.S. based companies327,122 327,122 — — 
Non-U.S. based companies8,700 8,700 — — 
Fixed income securities
Corporate debt securities380,694 1,309 379,385 — 
Government issued securities87,650 55,201 32,449 — 
Mutual funds
Equity funds9,085 9,085 — — 
Fixed income funds9,679 9,679 — — 
Mutual funds measured at net asset value279,849 
Common/Collective trusts measured at net asset value2,718,445 
Limited Partnerships measured at net asset value133,026 
Miscellaneous206,850 — 206,850 — 
Total at June 30, 2022$4,362,153 $601,712 $629,121 $— 
Cash and cash equivalents are valued at cost, which approximates fair value. During 2021, the U.S. defined benefit plan implemented a new liability-hedging initiative that requires the plan to maintain a certain cash balance. At June 30, 2023, this required cash balance totaled approximately $49 million.
Equity securities are valued at the closing price reported on the active market on which the individual securities are traded. U.S. based companies include Parker stock with a fair value of $519 million and $327 million as of June 30, 2023 and 2022, respectively.
Fixed income securities are valued using both market observable inputs for similar assets that are traded on an active market and the closing price on the active market on which the individual securities are traded.
Mutual funds are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share and primarily consist of equity and fixed income funds. The equity funds primarily provide exposure to U.S. and international equities, real estate and commodities. The fixed income funds primarily provide exposure to high-yield securities and emerging market fixed income instruments. Mutual funds measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value hierarchy to total pension plan assets. Redemption of a certain mutual fund is subject to a lock-up period, lasting throughout its duration, scheduled to terminate July 2026. However, this mutual fund may extend its duration up to an additional two years under certain conditions.
Common/Collective trusts primarily consist of equity, fixed income and real estate funds and are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share. Common/Collective trust investments can be redeemed without restriction after giving appropriate notice to the issuer. Generally, redemption of the entire investment balance of all common/collective trusts requires no more than a 90-day notice period. The equity funds provide exposure to large, mid and small cap U.S. equities, international large and small cap equities and emerging market equities. The fixed income funds provide exposure to U.S., international and emerging market debt securities. Common/Collective trusts measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value hierarchy to total pension plan assets.
Limited Partnerships' interest in venture capital investments are measured at fair value based on net asset value as determined by the respective fund investment. A certain limited partnership investment, for which the lock-up period expired June 30, 2022, is restricted to a maximum redemption of 20 percent of its account balance every six months upon a 90-day notification period. Limited Partnerships measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value hierarchy to total pension plan assets.
Miscellaneous primarily includes insurance contracts held in the asset portfolio of the Company's non-U.S. defined benefit pension plans and net payables for securities purchased but not settled in the asset portfolio of the Company's U.S. defined benefit pension plan. Insurance contracts are valued at the present value of future cash flows promised under the terms of the insurance contracts.
The primary investment objective of equity securities and equity funds, within both the mutual fund and common/collective trust asset class, is to obtain capital appreciation in an amount that at least equals various market-based benchmarks. The primary investment objective of fixed income securities and fixed income funds, within both the mutual fund and common/collective trust asset class, is to provide for a constant stream of income while preserving capital. The primary investment objective of limited partnerships is to achieve capital appreciation through an investment program focused on specialized investment strategies. The primary investment objective of the investments in the miscellaneous category is to provide a stable rate of return over a specified period of time.
Employee Savings Plan - We sponsor an employee stock ownership plan ("ESOP") as part of our legacy savings and investment 401(k) plan. The ESOP is available to eligible domestic employees. Effective January 1, 2022, the Company matching contributions were increased, up to a maximum of five percent of eligible compensation from the previous maximum of four percent of eligible compensation. These contributions are recorded as compensation expense. Participants may direct company matching contributions to any investment option within the savings and investment 401(k) plan.
202320222021
Shares held by ESOP3,779,985 4,125,214 4,497,902 
Company matching contributions$104,237 $87,554 $66,249 
In addition to shares within the ESOP, as of June 30, 2023, employees have elected to invest in 1,115,612 shares of common stock within a company stock fund of the savings and investment 401(k) plan.
The Company has a retirement income account ("RIA") within our legacy savings and investment 401(k) plan. We make a cash contribution to the participant's RIA each year and participants do not contribute to the RIA. Prior to January 1, 2021, the amount of the annual contribution was based on the participant's age and years of service. Beginning January 1, 2021, we amended the RIA ensuring most participants receive a flat three percent annual contribution of eligible compensation with some grandfathered participants receiving annual contributions calculated at a higher percent of eligible compensation. Under the amended RIA, no participant will receive less than the flat three percent contribution. The Company recognized $63 million, $57 million and $42 million in expense related to the RIA in 2023, 2022 and 2021, respectively.
In September 2023, we acquired several defined contribution plans, relating to the Meggitt acquisition, which are comprised of similar company matching contributions and RIA features as our legacy plan. During the year we recorded additional company matching expense of $9 million and additional RIA type expense of $11 million for the acquired plan.
Other Postretirement Benefits - The Company provides postretirement medical and life insurance benefits to certain retirees and eligible dependents. Most plans are contributory, with retiree contributions adjusted annually. The plans are unfunded and pay stated percentages of covered medically necessary expenses incurred by retirees after subtracting payments by Medicare or other providers and after stated deductibles have been met. For most plans, the Company has established cost maximums to more effectively control future medical costs. We have reserved the right to change these benefit plans.
The Company recognized $2 million, $1 million and $1 million in expense related to other postretirement benefits in 2023, 2022 and 2021, respectively. Components of net other postretirement benefit cost, other than service cost, are included in other expense (income), net in the Consolidated Statement of Income.
20232022
Change in benefit obligation
Benefit obligation at beginning of year$48,876 $63,739 
Service cost330 206 
Interest cost3,004 982 
Acquisition39,112 — 
Actuarial gain(4,403)(11,220)
Benefits paid(8,352)(4,831)
Benefit obligation at end of year$78,567 $48,876 
Funded status$(78,567)$(48,876)
Amounts recognized on the Consolidated Balance Sheet
Other accrued liabilities$(7,831)$(4,971)
Pensions and other postretirement benefits(70,736)(43,905)
Net amount recognized$(78,567)$(48,876)
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial gain$(17,952)$(15,154)
The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss) is on a debit (credit) basis and is before the effect of income taxes.
As of the date of the Acquisition, the Meggitt plans were remeasured at fair value using accounting policies consistent with Parker plans.
The increase in the benefit obligation is due to the Acquisition in 2023. The decrease in the benefit obligation in 2022 is due to significantly higher discount rates and updated census data and actuarial assumptions.
The assumptions used to measure the net periodic benefit cost for postretirement benefit obligations are:
202320222021
Discount rate4.26 %2.36 %2.14 %
Current medical cost trend rate (Pre-65 participants)6.73 %6.45 %6.73 %
Current medical cost trend rate (Post-65 participants)6.81 %6.72 %7.03 %
Ultimate medical cost trend rate 4.50 %4.50 %4.50 %
Medical cost trend rate decreases to ultimate in year203120292028
The discount rate assumption used to measure the benefit obligation was 4.86 percent and 4.26 percent in 2023 and 2022, respectively.
Estimated future benefit payments for other postretirement benefits in the five years ending June 30, 2024 through 2028 are $8 million, $7 million, $7 million, $7 million and $7 million, respectively, and $29 million in the aggregate for the five years ending June 30, 2029 through June 30, 2033.
Other - The Company has established nonqualified deferred compensation programs, which permit officers, directors and certain management employees to annually elect to defer a portion of their compensation, on a pre-tax basis, until their retirement. The retirement benefit to be provided is based on the amount of compensation deferred, company matching contributions and earnings on the deferrals. In addition, we maintain a defined contribution nonqualified supplemental executive pension plan in which the Company is the only contributor. During 2023, 2022 and 2021, we recorded expense (income) relating to these programs of $20 million, $(21) million and $45 million, respectively.
The Company has invested in corporate-owned life insurance policies to assist in meeting the obligations under these programs. The policies are held in a rabbi trust and are recorded as assets of the Company.