Retiree Benefits

The Company and its subsidiaries have a defined contribution plan (401(k) plan) and defined benefit plans (pension and other postretirement benefit plans). Benefits from these plans are based on factors that include various combinations of years of service, fixed monetary amounts per year of service, employee compensation during the last years of employment, the recipient’s social security benefit and pension freeze dates. For our qualified and non-qualified pension plans and the postretirement benefit plans, we use the last Friday in October as our measurement date, which coincides with our fiscal year end.

Defined contribution plans

Substantially every U.S. employee of the Company is eligible to participate in the Company's 401(k) plan. Under the terms of the plan, for eligible employees, the Company matches 25% to 50% of participant salary deferral contributions up to the first 6% of the participant’s compensation. In addition, for eligible employees, the Company contributes a defined contribution of 1% to 5% of eligible employee compensation depending on the employee group. The Company also makes contributions for certain foreign government-mandated contribution retirement plans. The total defined contribution expense was $63.2 million, $47.8 million and $30.4 million for fiscal 2013, 2012 and 2011, respectively. The fiscal 2013 and 2012 defined contribution expense included $12.6 million and $5.6 million, respectively, of costs associated with transitioning certain defined benefit plan participants to a defined contribution plan.

Defined benefit plans

We have both U.S. and non-U.S. pension plans. Our funding policy with respect to qualified pension plans is to contribute annually not less than the minimum required by applicable law and regulation nor more than the amount which can be deducted for income tax purposes. We also have an unfunded nonqualified supplemental pension plan that is based on credited years of service and compensation during the last years of employment.

Certain plans outside the United States, which supplement or are coordinated with government plans, many of which require funding through mandatory government retirement or insurance company plans, have pension funds or balance sheet accruals which approximate the actuarially computed value of accumulated plan benefits as of October 25, 2013 and October 26, 2012.

Total pension expense for all defined benefit plans is $19.6 million, $46.5 million and $50.3 million for fiscal 2013, 2012 and 2011, respectively.

Other postretirement benefit plans consist of welfare benefits plans. In 1993, our Board of Directors approved a general approach that culminated in the elimination of all Company contributions towards postretirement health care benefits. Increases in costs paid by the Company were capped for certain plans beginning in 1994 and extending through 1998, and Company contributions were eliminated as of January 11, 1999 for most employee groups, excluding certain Underground Mining Machinery employees, certain early retirees and specific discontinued operation groups. For certain Underground Mining Machinery employees, based on existing plan terms, future eligible retirees will participate in a premium cost-sharing arrangement which is based on age as of March 1, 1993 and position at the time of retirement. Active employees under age 45 as of March 1, 1993 and any new hires after April 1, 1993 will be required to pay 100% of the applicable premium.

Net periodic pension costs for U.S. plans and plans of subsidiaries outside the United States include the following components:



	U.S. Pension Plans									Non-U.S. Pension Plans
In thousands	October 25, 2013			October 26, 2012			October 28, 2011			October 25, 2013			October 26, 2012			October 28, 2011
Components of net periodic benefit cost:
Service cost	$	3,794		$	9,975		$	14,438		$	7,491		$	5,878		$	6,099
Interest cost	48,453			52,604			56,268			29,216			29,297			28,715
Expected return on assets	(64,517		)	(61,420		)	(56,269		)	(37,347		)	(36,033		)	(35,529		)
Amortization of:
Prior service cost	610			1,307			1,374			—			—			10,051
Actuarial loss	22,773			20,324			25,179			9,159			13,085			—
Curtailment loss	—			11,491			—			—			—			—
Total net periodic benefit cost	$	11,113		$	34,281		$	40,990		$	8,519		$	12,227		$	9,336

In the second quarter of 2012, a modification was made to the Joy Global Pension Plan freezing benefits for all salaried and non-bargained hourly participants effective May 1, 2012. In addition, in the fourth quarter of 2012, a modification was made to the Joy Global Pension Plan freezing benefits for certain bargained hourly participants effective in 2013. We recorded curtailment charges of $1.1 million and $10.4 million in the second and fourth quarters of fiscal 2012, respectively, in conjunction with the freezes.

The components of the net periodic benefit cost associated with our other postretirement benefit plans, all of which relate to operations in the U.S., are as follows:



	Other Postretirement Benefit Plans
In thousands	October 25, 2013			October 26, 2012			October 28, 2011
Components of net periodic benefit cost:
Service cost	$	1,083		$	960		$	981
Interest cost	1,168			1,371			1,540
Expected return on assets	(427		)	(371		)	(342		)
Amortization of:
Prior service cost	69			52			48
Actuarial gain	(833		)	(1,160		)	(1,308		)
Special termination benefits charge	—			981			—
Total net periodic benefit cost of continuing operations	$	1,060		$	1,833		$	919

In conjunction with the fourth quarter fiscal 2012 modification of the Joy Global Pension Plan, additional postretirement benefits of $1.0 million were recorded as a special termination benefits charge.

For other postretirement benefit obligation measurement purposes, the assumed annual rate of increase in the per capita cost of covered health care benefits is 7.0% for fiscal 2013. The per capita cost of covered health care benefits is assumed to decrease 0.25% per year to an ultimate rate of 5.0%. The effect of one percentage point increase in the assumed health care cost trend rates each year would increase the accumulated postretirement benefit obligation as of October 25, 2013 by $0.8 million. The service cost and interest cost components of the net periodic postretirement benefit cost for the year would increase by less than $0.1 million. A one percentage point decrease in the assumed health care cost trend rates each year would decrease the accumulated postretirement benefit obligation as of October 25, 2013 by $0.7 million. The service cost and interest cost components of the net periodic postretirement benefit cost for the year would decrease by less than $0.1 million. Postretirement life insurance benefits have a minimal effect on the total benefit obligation.

The principal assumptions used in determining the funded status and net periodic benefit cost of our pension plans and other postretirement benefit plans are set forth in the following tables. The assumptions for non-U.S. plans were developed on a basis consistent with that for U.S. plans, adjusted to reflect prevailing economic conditions and interest rate environments.

Significant assumptions used in determining net periodic benefit cost are as follows (in weighted averages):



	U.S. Pension Plans						Non-U.S. Pension Plans						Other Postretirement Benefit Plans
	2013		2012		2011		2013		2012		2011		2013		2012		2011
Discount rate*	3.95	%	5.00	%	5.60	%	4.28	%	5.28	%	5.24	%	3.60	%	4.65	%	4.85	%
Expected return on plan assets**	6.50	%	7.00	%	7.51	%	6.64	%	6.93	%	7.22	%	7.40	%	7.50	%	8.00	%
Rate of compensation increase	—	%	4.25	%	4.25	%	4.23	%	4.22	%	4.36	%	—	%	—	%	—	%

* Due to mid-year curtailment and special termination benefit measurements, the 2012 weighted average discount rate ranged from 3.95% – 5.00% and 3.60% – 4.65% throughout the year for the U.S. pension plans and the other postretirement benefit plans, respectively.

** Due to mid-year curtailment measurements, the 2012 weighted average expected return on plan assets ranged from 6.75% – 7.00% for the U.S. pension plans.

The expected rate of return on pension plan assets for the U.S. pension plans is based on the investment policies adopted by our Pension and Investment Committee. We also used the results from a portfolio simulator as input into our decision. The simulator is based on U.S. capital market conditions as of the valuation date and projects returns based on the U.S. pension plans' current asset allocation. The simulation model calculates an expected rate of return for each asset class by forecasting a range of plausible economic conditions. The model starts with the capital market conditions prevailing at the start of the forecast period and trends the rates of return by asset class to its long-term average. A long-term average return is calculated using a blend of historical capital market data and future expectations.

The expected rate of return on non-U.S. pension plans is based on the plan’s current asset allocation policy. An average long-term rate of return is developed for each asset class and the portfolio return represents the weighted average return based on the current asset allocation.

Significant assumptions used in determining benefit obligations are as follows (in weighted averages):



	U.S. Pension Plans				Non-U.S. Pension Plans				Other Postretirement Benefit Plans
	October 25, 2013		October 26, 2012		October 25, 2013		October 26, 2012		October 25, 2013		October 26, 2012
Discount rate	4.85	%	3.95	%	4.25	%	4.28	%	4.25	%	3.60	%
Rate of compensation increase	—	%	—	%	4.21	%	4.23	%	—	%	—	%

Changes in the projected benefit obligations and pension plan assets relating to the Company’s defined benefit pension plans and other postretirement benefit plans, together with a summary of the amounts recognized in the Consolidated Balance Sheets are set forth in the following tables:



	U.S. Pension Plans						Non -U.S. Pension Plans						Other Postretirement Benefit Plans
In thousands	October 25, 2013			October 26, 2012			October 25, 2013			October 26, 2012			October 25, 2013			October 26, 2012
Change in Benefit Obligations
Net benefit obligations at beginning of year	$	1,250,684		$	1,108,386		$	698,456		$	573,608		$	34,200		$	32,078
Service cost	3,794			9,975			7,491			5,878			1,083			960
Interest cost	48,453			52,604			29,216			29,297			1,168			1,371
Plan participants’ contributions	—			—			1,144			1,164			—			—
Plan amendments	—			7,157			—			—			(580		)	813
Actuarial loss (gain)	(115,528		)	162,370			6,998			114,815			(1,104		)	674
Currency fluctuations	—			—			2,507			2,449			—			—
Curtailments	—			(37,796		)	—			—			—			—
Special termination benefits	—			—			—			—			—			981
Gross benefits paid	(55,129		)	(52,012		)	(33,551		)	(28,755		)	(3,409		)	(2,677		)
Net benefit obligations at end of year	$	1,132,274		$	1,250,684		$	712,261		$	698,456		$	31,358		$	34,200

Change in Plan Assets
Fair value of plan assets at beginning of year	$	1,027,506		$	833,849		$	582,492		$	513,528		$	6,315		$	5,370
Actual return on plan assets	(3,552		)	104,729			4,005			50,986			1,045			526
Currency fluctuations	—			—			2,617			1,644			—			—
Employer contributions	83,829			140,940			81,883			43,925			4,450			3,096
Plan participants’ contributions	—			—			1,144			1,164			—			—
Gross benefits paid	(55,129		)	(52,012		)	(33,551		)	(28,755		)	(3,409		)	(2,677		)
Fair value of plan assets at end of year	$	1,052,654		$	1,027,506		$	638,590		$	582,492		$	8,401		$	6,315

Funded Status
Net amount recognized at end of year	$	(79,620	)	$	(223,178	)	$	(73,671	)	$	(115,964	)	$	(22,957	)	$	(27,885	)

Amounts Recognized in the Consolidated Balance Sheets Consist of:
Current liabilities	(2,755		)	(2,620		)	(731		)	(709		)	(2,234		)	(2,321		)
Non-current liabilities	(76,865		)	(220,558		)	(72,940		)	(115,255		)	(20,723		)	(25,564		)
Net amount recognized at end of year	$	(79,620	)	$	(223,178	)	$	(73,671	)	$	(115,964	)	$	(22,957	)	$	(27,885	)
Accumulated benefit obligation	$	1,132,274		$	1,250,684		$	692,135		$	644,125		$	—		$	—

The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for underfunded and overfunded plans have been combined for disclosure purposes. The projected benefit obligations, accumulated benefit obligations and fair value of assets for pension plans with an accumulated benefit obligation in excess of plan assets are as follows:



	U.S. Pension Plans				Non U.S. Pension Plans
In thousands	October 25, 2013		October 26, 2012		October 25, 2013		October 26, 2012
Projected benefit obligation	$	1,132,274	$	1,250,684	$	649,395	$	655,010
Accumulated benefit obligation	1,132,274		1,250,684		634,509		604,675
Fair value of plan assets	1,052,654		1,027,506		576,016		539,669

Amounts recognized in accumulated other comprehensive loss (income) as of October 25, 2013 consist of:



	Pension Plans						Other Postretirement Benefit Plans
In thousands	U.S.			Non U.S.			Other Postretirement Benefit Plans
Net actuarial loss (gain)	$	388,421		$	302,175		$	(12,857	)
Prior service cost	1,980			—			735
Deferred tax	(94,220		)	(50,626		)	4,514
Total accumulated other comprehensive loss (income)	$	296,181		$	251,549		$	(7,608	)

The estimated amounts that will be amortized from accumulated other comprehensive loss (income) into net periodic benefit cost during fiscal 2014 are as follows:



	Pension Plans				Other Postretirement Benefit Plans
In thousands	U.S.		Non U.S.		Other Postretirement Benefit Plans
Net actuarial loss (gain)	$	13,096	$	8,856	$	(904	)
Prior service cost	531		—		132
	$	13,627	$	8,856	$	(772	)

The defined benefit plans have the following target and actual asset allocations in fiscal 2013:



	U.S. Pension Plan				Non-U.S. Pension Plans
Asset Category	Target Allocation		Actual Allocation		Target Allocation		Actual Allocation
Equity securities	20	%	20	%	30	%	28	%
Debt securities	80	%	79	%	70	%	65	%
Other	—	%	1	%	—	%	7	%
Total	100	%	100	%	100	%	100	%

The U.S. plans' assets are invested to maintain funded ratios over the long-term, while managing the risk that funded ratios fall meaningfully below 100%. The Company has for some time been focused on a plan and objective to achieve an asset and liability duration match so that interim fluctuations in funded status should be limited by increasing the correlation between assets and liabilities. At this time, the plans' portfolio is significantly invested in duration matched fixed income securities.

The Company's objectives with respect to its global pension plans are (1) to acquire suitable assets of appropriate liquidity, which, together with new contributions, will meet the cost of the current and future benefits which the plans provide; (2) to limit the risk of the assets failing to meet the liabilities over the long term; and (3) to minimize the long term costs of the plans by maximizing the correlation with plan liabilities. There is no assurance that these objectives will be met.

The accounting guidance on fair value measurements specifies a fair value hierarchy based on the observability of inputs used in valuation techniques (Level 1, 2 and 3). See Note 17, Fair Value Measurements, for a discussion of the fair value hierarchy.

Fair values are determined as follows:


•	Equity securities are primarily based on the closing price for identical instruments in active markets or at the bid price for identical instruments in instances in which the security has not traded on the valuation date;


•	Fixed income securities are primarily based on models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds; and


•	Cash and cash equivalents, short-term investments, funds and other investments are based on the carrying amount, which approximates fair value, or on the fund’s net asset value.

The following tables summarize the fair value of our pension and other postretirement benefit plan assets by category as of October 25, 2013 and October 26, 2012:



In Thousands	October 25, 2013
	Level 1		Level 2			Level 3		Total Assets at Fair Value
U.S. Pension Plans
Equity securities:
U.S. equities	$	146,927	$	2,590		$	—	$	149,517
Non-U.S. equities	54,502		6,829			—		61,331
Fixed income securities:
U.S. government bonds	—		343,215			—		343,215
Non-U.S. government bonds	—		13,939			—		13,939
U.S. corporate bonds	—		368,469			—		368,469
Non-U.S. corporate bonds	—		68,481			—		68,481
U.S. government mortgage backed securities	—		8,286			—		8,286
U.S. non-government backed collateralized mortgage obligations	—		8,498			—		8,498
U.S. asset backed securities	—		23,227			—		23,227
Other plan assets:
Cash and cash equivalents	5,337		—			—		5,337
Short term bills and notes	—		2,600			—		2,600
Other investments	432		(678		)	—		(246		)
Total U.S. Pension Plans assets	$	207,198	$	845,456		$	—	$	1,052,654

Non-U.S. Pension Plans
Equity securities:
U.S. equities	$	42,940	$	—		$	228	$	43,168
Non-U.S. equities	138,322		—			30		138,352
Fixed income securities:
Non-U.S. government bonds	—		105,583			—		105,583
U.S. corporate bonds	—		21,992			—		21,992
Non-U.S. corporate bonds	—		191,526			—		191,526
Non-U.S. asset backed securities	—		1,141			—		1,141
Non-U.S. annuity insurance products	—		94,315			—		94,315
Other plan assets:
Cash and cash equivalents	46,407		—			—		46,407
Other investments	—		(3,894		)	—		(3,894		)
Total Non-U.S. Pension Plans assets	$	227,669	$	410,663		$	258	$	638,590

Other Postretirement Benefits Plans
Equity securities:
U.S. equities	$	4,461	$	—		$	—	$	4,461
Non-U.S. equities	1,101		—			—		1,101
Fixed income securities:
U.S. corporate bonds	—		2,769			—		2,769
Other plan assets:
Cash and cash equivalents	70		—			—		70
Total Other Postretirement Benefit Plans	$	5,632	$	2,769		$	—	$	8,401



In Thousands	October 26, 2012
	Level 1		Level 2			Level 3		Total Assets at Fair Value
U.S. Pension Plans
Equity securities:
U.S. equities	$	158,095	$	—		$	—	$	158,095
Non-U.S. equities	62,918		—			—		62,918
Fixed income securities:
U.S. government bonds	—		347,981			—		347,981
Non-U.S. government bonds	—		7,450			—		7,450
U.S. corporate bonds	—		360,638			3,340		363,978
Non-U.S. corporate bonds	—		64,819			—		64,819
Other plan assets:
Cash and cash equivalents	22,412		—			—		22,412
Other investments	—		(147		)	—		(147		)
Total U.S. Pension Plans assets	$	243,425	$	780,741		$	3,340	$	1,027,506

Non-U.S. Pension Plans
Equity securities:
U.S. equities	$	2,806	$	—		$	—	$	2,806
Non-U.S. equities	6,705		—			—		6,705
Fixed income securities:
Non-U.S. government bonds	—		219,877			—		219,877
U.S. corporate bonds	—		—			216		216
Non-U.S. corporate bonds	—		2,495			181,821		184,316
Other fixed income securities	—		—			—		—
Other plan assets:
Cash and cash equivalents	6,542		—			—		6,542
Hedge fund	—		—			3,598		3,598
Insurance linked fund	—		—			8,885		8,885
Multi-asset fund	—		—			149,831		149,831
Other investments	—		(284		)	—		(284		)
Total Non-U.S. Pension Plans assets	$	16,053	$	222,088		$	344,351	$	582,492

Other Postretirement Benefits Plans
Equity securities:
U.S. equities	$	3,096	$	—		$	—	$	3,096
Non-U.S. equities	682		—			—		682
Fixed income securities:
U.S. corporate bonds	—		2,397			—		2,397
Other plan assets:
Cash and cash equivalents	140		—			—		140
Total Other Postretirement Benefit Plans	$	3,918	$	2,397		$	—	$	6,315

Below are roll-forwards of assets measured at fair value using Level 3 inputs for the years ended October 25, 2013 and October 26, 2012:



In Thousands
	Equities			Fixed Income			Other
U.S. Pension Plans
Balance as of October 28, 2011	$	—		$	—		$	1,283
Unrealized gains	—			—			841
Realized losses	—			—			(840		)
Sales	—			—			(1,284		)
Purchases	—			3,340			—
Transfers in and/or (out) of Level 3	—			—			—
Balance as of October 26, 2012	$	—		$	3,340		$	—
Unrealized losses	—			(478		)	—
Realized losses	—			—			—
Sales	—			(181		)	—
Purchases	—			—			—
Transfers in and/or (out) of Level 3	—			(2,681		)	—
Balance as of October 25, 2013	$	—		$	—		$	—

Non-U.S. Pension Plans
Balance as of October 28, 2011	$	65,743		$	222,420		$	—
Unrealized (losses) gains	(15,552		)	(12,945		)	60,979
Realized gains	14,401			40,969			214
Sales	(59,191		)	(200,796		)	(3,952		)
Purchases	—			132,147			99,672
Transfers (out) and/or in of Level 3	(5,401		)	242			5,401
Balance as of October 26, 2012	$	—		$	182,037		$	162,314
Unrealized gains (losses)	(22		)	(18,932		)	(8,305		)
Realized gains	—			28,133			21,704
Sales	—			(194,799		)	(175,896		)
Purchases	280			3,561			1,709
Transfers in and/or (out) of Level 3	—			—			(1,526		)
Balance as of October 25, 2013	$	258		$	—		$	—

The following pension and other postretirement benefit payments (which include expected future service) are expected to be paid in each of the following years:



	Pension Plan Payments				Other Postretirement Benefit Plan Payments
In thousands	U.S.		Non-U.S.		Prior to Medicare Part D		After Medicare Part D		Impact of Medicare Part D
2014	$	62,658	$	24,059	$	3,842	$	3,739	$	103
2015	62,891		24,774		3,416		3,318		98
2016	65,201		25,504		3,382		3,291		91
2017	67,767		26,225		3,374		3,290		84
2018	70,307		27,012		2,995		2,919		76
2019 - 2023	459,716		147,273		12,340		12,077		263

On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 became law. This Act introduced a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. We currently sponsor two retiree welfare benefits plans that provide prescription drug benefits to our U.S. retirees.

For fiscal 2014, we expect contributions to our employee pension plans not to exceed $50.0 million.