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Retirement and Post Retirement Health Care Plans
 12 Months Ended
Dec. 28, 2019
Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]  
Retirement and Post Retirement Health Care Plans Retirement and Post Retirement Health Care Plans
Retirement Plans
The Company's domestic associates are participants in defined benefit pension plans and/or defined contribution plans. The majority of the Company's defined benefit pension plans covering the Company's domestic associates have been closed to new associates and frozen for existing associates. Most foreign associates are covered by government sponsored plans in the countries in which they are employed. The defined contribution plans provide for Company contributions based, depending on the plan, upon one or more of participant contributions, service and profits. Company contributions to domestic defined contribution plans totaled $8.9 million, $10.1 million and $9.3 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively. Company contributions to non-US defined contribution plans were $10.6 million, $11.8 million and $9.4 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively.
Benefits provided under defined benefit pension plans are based, depending on the plan, on associates' average earnings and years of credited service, or a benefit multiplier times years of service. Funding of these qualified defined benefit pension plans is in accordance with federal laws and regulations. The actuarial valuation measurement date for pension plans is the calendar year end of each year.
The Company's target allocation, target return and actual weighted-average asset allocation by asset category are as follows:
 
Target
 
Actual Allocation
 
Allocation
 
Return
 
2019
 
2018
Equity Investments
73.0%
 
6.6 - 8.0%
 
70.0%
 
67.5%
Fixed Income
22.0%
 
2.7 - 5.5%
 
25.0%
 
27.4%
Other
5.0%
 
5.2%
 
5.0%
 
5.1%
Total
100.0%
 
7.0%
 
100.0%
 
100.0%

The Company's investment strategy for its defined benefit pension plans is to achieve moderately aggressive growth, earning a long-term rate of return sufficient to allow the plans to reach fully funded status. Accordingly, allocation targets have been established to fit this strategy, with a heavier long-term weighting of investments in equity securities. The long-term rate of return assumptions consider historic returns and volatilities adjusted for changes in overall economic conditions that may affect future returns and a weighting of each investment class.
The following table presents a reconciliation of the funded status of the defined benefit pension plans (in millions):
 
2019
 
2018
Change in Projected Benefit Obligation:
 
 
 
Obligation at Beginning of Period
$
265.1

 
$
278.0

Service Cost
6.2

 
7.3

Interest Cost
10.6

 
9.3

Actuarial (Gain) Loss
34.9

 
(14.9
)
Curtailment Gain (1)
(19.4
)
 
—

Less: Benefits Paid
14.8

 
13.3

Foreign Currency Translation
0.2

 
(1.3
)
Obligation at End of Period
$
282.8

 
$
265.1

Change in Fair Value of Plan Assets:
 
 
 
Fair Value of Plan Assets at Beginning of Period
174.0

 
185.3

Actual Return on Plan Assets
33.1

 
(8.2
)
Employer Contributions
10.8

 
10.9

Less: Benefits Paid
14.8

 
13.3

Foreign Currency Translation
0.3

 
(0.7
)
Fair Value of Plan Assets at End of Period
$
203.4

 
$
174.0

Funded Status
$
(79.4
)
 
$
(91.1
)
 (1) The curtailment gain is the result of a plan freeze announced to associates during the fourth quarter of fiscal 2019.
 
 

The funded status as of December 28, 2019 included domestic plans of $(71.2) million and international plans of $(8.2) million. The funded status as of December 29, 2018 included domestic plans of $(82.4) million and international plans of $(8.7) million.
Pension Assets
The Company classifies the pension plan investments into Level 1, which refers to securities valued using quoted prices from active markets for identical assets, Level 2, which refers to securities not traded on an active market but for which observable market inputs are readily available, and Level 3, which refers to securities valued based on significant unobservable inputs. Common stocks and mutual funds are valued at the unadjusted quoted market prices for the securities. Real estate fund values are determined using model-based techniques that include relative value analysis and discounted cash flow techniques. Certain common collective trust funds and limited partnership interests are valued based on the net asset value ("NAV") as provided by the administrator of the fund as a practical expedient to estimate fair value. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. Investments in units of short-term investment funds, comprised of cash and money market funds, are valued at their respective NAVs as reported by the funds daily.

Pension assets by type and level are as follows (in millions):
 
December 28, 2019
 
Total
 
Level 1
 
Level 2
 
Level 3
Cash and Cash Equivalents
$
5.1

 
$
5.1

 
$
—

 
$
—

Common Stocks:
 
 
 
 
 
 
 
Domestic Equities
26.4

 
26.4

 
—

 
—

International Equities
19.2

 
19.2

 
—

 
—

Mutual Funds:
 
 
 
 
 
 
 
US Equity Funds
30.1

 
30.1

 
—

 
—

International Equity Funds
3.1

 
3.1

 
—

 
—

Balanced Funds
9.5

 
9.5

 
—

 
—

Fixed Income Funds
18.0

 
18.0

 
—

 
—

Other
1.7

 
1.7

 
—

 
—

Limited Liability Company
8.3

 
—

 
8.3

 
—

Real Estate Fund
9.9

 
—

 
—

 
9.9


$
131.3

 
$
113.1

 
$
8.3

 
$
9.9

Investments Measured at Net Asset Value
72.1

 
 
 
 
 
 
Total
$
203.4

 
 
 
 
 
 

 
December 29, 2018
 
Total
 
Level 1
 
Level 2
 
Level 3
Cash and Cash Equivalents
$
3.9

 
$
3.9

 
$
—

 
$
—

Common Stocks:
 
 
 
 
 
 
 
Domestic Equities
22.4

 
22.4

 
—

 
—

International Equities
13.7

 
13.7

 
—

 
—

Mutual Funds:
 
 
 
 
 
 
 
US Equity Funds
24.8

 
24.8

 
—

 
—

International Equity Funds
2.5

 
2.5

 
—

 
—

Balanced Funds
8.5

 
8.5

 
—

 
—

   Fixed Income Funds
17.3

 
17.3

 
—

 
—

   Other
1.5

 
1.5

 
—

 
—

Real Estate Fund
10.3

 
—

 
—

 
10.3


$
104.9

 
$
94.6

 
$
—

 
$
10.3

Investments Measured at Net Asset Value
69.1

 
 
 
 
 
 
Total
$
174.0

 
 
 
 
 
 


The following table sets forth additional disclosures for the fair value measurement of the fair value of pension plan assets that calculate fair value based on NAV per share practical expedient as of December 28, 2019 and December 29, 2018 (in millions):
 
2019
 
2018
Common Collective Trust Funds
$
72.1

 
$
61.7

Global Emerging Markets Fund Limited Partnership
—

 
7.4

Total
$
72.1

 
$
69.1



The common collective trust funds are investments in the Northern Trust Collective S&P 500 Index Fund, the Northern Trust Collective Aggregate Bond Index Fund and the American Century Non-US Growth Fund. The Northern Trust Collective S&P 500 Index Fund seeks to provide investment results that approximate the overall performance of the common stocks in that index. The Northern Trust Collective Aggregate Bond Index Fund seeks to provide investment results that approximate the overall performance of the Barclays Capital US Aggregate Index by investing primarily, but not exclusively, in securities that comprise that index. The American Century Non-US Growth Fund is broadly invested in a diversified portfolio of non-US stocks. The common collective trust funds are available for immediate redemption. The global emerging markets fund limited partnership interest is an investment in the Vontobel Global Emerging Markets Fund, which seeks to provide capital appreciation by investing in a diversified portfolio consisting primarily of equity based securities. The global emerging markets fund limited partnership interest can be redeemed on a monthly basis with immediate payment.
The Level 3 assets noted below represent investments in real estate funds managed by a major US insurance company and a global emerging markets fund limited partnership. Estimated values provided by fund management approximate the cost of the investments. In determining the reasonableness of the methodology used to value the Level 3 investments, the Company evaluates a variety of factors including reviews of economic conditions, industry and market developments, and overall credit ratings. The real estate fund can be redeemed on a quarterly basis and paid within two weeks of the request for redemption.
The table below sets forth a summary of changes in the Company's Level 3 assets in its pension plan investments as of December 28, 2019 and December 29, 2018 (in millions):
 
 
2019
 
2018
Beginning Balance
 
$
10.3

 
$
9.6

Net Purchases (Sales)
 
(1.6
)
 
0.6

Net Gains
 
1.2

 
0.1

Ending Balance
 
$
9.9

 
$
10.3


The following table sets forth a summary of quantitative information about the significant unobservable inputs used in the fair value measurement of the Level 3 real estate fund as of December 28, 2019 (in millions):
Fair Value
 
Significant Unobservable Inputs
$9.9
 
Exit Capitalization Rate
5.0% to 7.0%
 
 
Discount Rate
6.5% to 8.0%
The following table sets forth a summary of quantitative information about the significant unobservable inputs used in the fair value measurement of the Level 3 real estate fund as of December 29, 2018 (in millions):
Fair Value
 
Significant Unobservable Inputs
$10.3
 
Exit Capitalization Rate
4.9% to 7.0%
 
 
Discount Rate
6.6% to 7.8%

Funded Status and Expense

The Company recognized the funded status of its defined benefit pension plans on the Consolidated Balance Sheets as follows (in millions):
 
 
2019
 
2018
Accrued Compensation and Benefits
 
$
4.0

 
$
3.4

Pension and Other Post Retirement Benefits
 
75.4

 
87.7

Total
 
$
79.4

 
$
91.1

 
 
 
 
 
Amounts Recognized in Accumulated Other Comprehensive Loss
 
 
 
 
Net Actuarial Loss
 
$
45.2

 
$
52.3

Prior Service Cost
 
1.1

 
1.4

Total
 
$
46.3

 
$
53.7


The accumulated benefit obligation for all defined benefit pension plans was $276.3 million and $244.0 million as of December 28, 2019 and December 29, 2018, respectively.
The accumulated benefit obligation exceeded plan assets for all pension plans as of December 28, 2019 and December 29, 2018.
The following weighted average assumptions were used to determine the projected benefit obligation as of December 28, 2019 and December 29, 2018, respectively:
 
2019
 
2018
Discount Rate
3.3%
 
4.4%

The objective of the discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled. In making the determination, the Company takes into account the timing and amount of benefits that would be available under the plans. The methodology for selecting the discount rate was to match the plan's cash flows to that of a theoretical bond portfolio yield curve.
Certain of the Company's defined benefit pension plan obligations are based on years of service rather than on projected compensation percentage increases. For those plans that use compensation increases in the calculation of benefit obligations and net periodic pension cost, the Company used an assumed rate of compensation increase of 3.0% for the fiscal years ended December 28, 2019 and December 29, 2018.
Net periodic pension benefit costs and the net actuarial loss and prior service cost recognized in OCI for the defined benefit pension plans were as follows (in millions):
 
 
2019
 
2018
 
2017
Service Cost
 
$
6.2

 
$
7.3

 
$
7.2

Interest Cost
 
10.6

 
9.3

 
9.3

Expected Return on Plan Assets
 
(12.5
)
 
(11.9
)
 
(11.2
)
Amortization of Net Actuarial Loss
 
2.2

 
3.5

 
2.3

Amortization of Prior Service Cost
 
0.3

 
0.2

 
0.2

Net Periodic Benefit Cost
 
$
6.8

 
$
8.4

 
$
7.8

 
 
 
 
 
 
 
Change in Obligations Recognized in OCI, Net of Tax
 
 
 
 
 
 
    Prior Service Cost
 
$
0.2

 
$
0.2

 
$
0.1

    Net Actuarial Loss
 
1.7

 
2.7

 
1.5

Total Recognized in OCI
 
$
1.9

 
$
2.9

 
$
1.6


The estimated prior service cost and net actuarial loss for the defined benefit pension plans that will be amortized from AOCI into net periodic benefit cost during the 2020 fiscal year are $0.3 million and $1.8 million, respectively.
As permitted under relevant accounting guidance, the amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of associates expected to receive benefits under the plans.
The following weighted average assumptions were used to determine net periodic pension cost for fiscal years 2019, 2018 and 2017, respectively.
 
 
2019
 
2018
 
2017
Discount Rate
 
4.4%
 
3.8%
 
4.3%
Expected Long-Term Rate of Return on Assets
 
7.0%
 
6.9%
 
7.0%


The Company made contributions to its defined benefit plan of $10.8 million and $10.9 million for the fiscal years ended December 28, 2019 and December 29, 2018, respectively.

The Company estimates that in fiscal 2020 it will make contributions in the amount of $10.1 million to fund its defined benefit pension plans.

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in millions):
Year
 
Expected Payments
2020
 
$
16.5

2021
 
16.1

2022
 
15.9

2023
 
16.7

2024
 
16.7

2025-2028
 
82.8



Post Retirement Health Care Plan

In connection with the acquisition of the Power Transmission Solutions business from Emerson Electric Co. in 2015, the Company established an unfunded post retirement health care plan for certain domestic retirees and their dependents.

The following table presents a reconciliation of the accumulated benefit obligation of the post retirement health care plan (in millions):
Change in Accumulated Post Retirement Benefit Obligation
 
2019
 
2018
Obligation at Beginning of Period
 
$
9.2

 
$
12.1

Service Cost
 
—

 
0.1

Interest Cost
 
0.3

 
0.4

Actuarial Gain
 
(0.7
)
 
(2.8
)
Amendments
 
(1.9
)
 
—

Curtailment Gain
 
(0.5
)
 
—

Participant Contributions
 
0.2

 
0.4

Less: Benefits Paid
 
0.7

 
1.0

Obligation at End of Period
 
$
5.9

 
$
9.2



The Company recognized the funded status of its post retirement health care plan on the balance sheet as follows (in millions):


2019

2018
Accrued Compensation and Benefits

$
0.5

 
$
0.7

Pension and Other Post Retirement Benefits

5.4

 
8.5

Total

$
5.9

 
$
9.2

Amounts Recognized in Accumulated Other Comprehensive Loss



 


Net Actuarial Gain

$
(4.1
)
 
$
(3.7
)
Prior Service Cost
 
(1.7
)
 
—

Total
 
$
(5.8
)
 
$
(3.7
)


The following assumptions were used to determine the accumulated post retirement benefit obligation as of December 28, 2019 and December 29, 2018, respectively.
 
 
2019
 
2018
Discount Rate
 
3.2%
 
4.2%


Net periodic post retirement health care benefit costs for the post retirement health care plan were as follows (in millions):


2019

2018
 
2017
Service Cost

$
—

 
$
0.1

 
$
0.1

Interest Cost

0.3

 
0.4

 
0.4

Amortization of Net Actuarial Gain

(0.4
)
 
—

 
—

Amortization of Prior Service Cost
 
(0.1
)
 
—

 
—

Curtailment Gain
 
(0.5
)
 
—

 
—

Net Periodic Post Retirement Health Care Benefit Cost
 
$
(0.7
)
 
$
0.5

 
$
0.5

 
 
 
 
 
 
 
Change in Obligations Recognized in OCI, Net of Tax
 
 
 
 
 
 
    Prior Service Cost
 
$
(0.1
)
 
$
—

 
$
—

    Net Actuarial Gain
 
(0.3
)
 
—

 
—

Total Recognized in OCI
 
$
(0.4
)
 
$
—

 
$
—



The estimated prior service cost and net actuarial gain for the post retirement health care plan that will be amortized from AOCI into net periodic post retirement health care benefit cost during the 2020 fiscal year is $0.9 million and $0.6 million, respectively.

The following assumptions were used to determine net periodic post retirement health care benefit cost for fiscal years 2019, 2018 and 2017, respectively.
 
 
2019
 
2018
 
2017
Discount Rate
 
4.2%
 
3.5%
 
3.9%


The health care cost trend rate for fiscal 2020, 2019 and 2018, respectively, is 6.8%, 7.6% and 8.0% for pre-65 participants and 5.1%, 5.3% and 5.4% for post-65 participants, decreasing to 4.5% for all years in fiscal 2026, the year that the health care cost trend rate reaches the assumed ultimate rate. A one percentage point change in the health care cost trend rate assumption would have an immaterial impact on both the accumulated post retirement benefit obligation and on the net periodic post retirement health care benefit cost.

The Company contributed $0.4 million and $0.6 million to the post retirement health care plan in fiscal 2019 and fiscal 2018, respectively. The Company estimates that in fiscal 2020 it will make contributions of $0.5 million to the post retirement health care plan.

The following post retirement benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in millions):
Year
 
Expected Payments
2020
 
$
0.5

2021
 
0.5

2022
 
0.5

2023
 
0.4

2024
 
0.4

2025-2028
 
1.7