Pension Plan and Retirement Benefits

12 Months Ended

Sep. 30, 2023

Pension Plan and Retirement Benefits

Pension Plan and Retirement Benefits

Note 9.  Pension Plan and Retirement Benefits

Defined Contribution Plans

The Company sponsors a defined contribution plan (its 401(k) plan) for substantially all U.S. employees. The Company contributes an amount equal to 50% of an employee’s contribution to the plan up to a maximum contribution of 3% of the employee’s salary, except for all salaried employees and certain hourly employees (those hired after June 30, 2007 that are not eligible for the U.S. pension plan). For salary earned through June 30, 2023, the Company contributed an amount equal to 60% of an employee’s contribution to the plan up to a maximum contribution of 6% of the employee’s salary for these groups. Beginning on July 1, 2023, the Company contributes an annual amount equal to 60% of an employee’s contribution to the plan up to a maximum contribution of 8% of the employee’s salary for these groups.  Expenses associated with this plan for the years ended September 30, 2021, 2022 and 2023 totaled $1,748, $2,016 and $2,352, respectively.

The Company sponsors certain profit sharing plans for the benefit of employees meeting certain eligibility requirements. There were no contributions to these plans for the years ended September 30, 2021, 2022 and 2023.

Defined Benefit Plans

The Company has non-contributory defined benefit pension plans which cover certain employees in the U.S. and the U.K.  

Benefits provided under the Company’s U.S. defined benefit pension plan are based on years of service and the employee’s final compensation. The Company’s funding policy is to contribute annually an amount deductible for federal income tax purposes based upon an actuarial cost method using actuarial and economic assumptions designed to achieve adequate funding of benefit obligations.  

The Company has non-qualified pensions for a few former executives of the Company. Non-qualified pension plan expense for the years ended September 30, 2021, 2022 and 2023 was $37, $3 and $57, respectively. Accrued liabilities in the amount of $530 and $492 for these benefits are included in accrued pension and postretirement benefits liability at September 30, 2022 and 2023, respectively.

In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. Certain employees, depending on date of hire, become eligible for health care, and substantially all employees become eligible for life insurance, if they reach normal retirement age while working for the Company.  The Company’s liability related to total retiree health care costs is limited to $5,000 annually.  

The Company made contributions of $21,000, $6,000, and $6,000 to fund its domestic Company-sponsored pension plan for the years ended September 30, 2021, 2022 and 2023, respectively. The Company’s U.K. subsidiary made contributions of $0 for each of the years ended September 30, 2021, 2022 and 2023, respectively, to the U.K. pension plan.

The Company uses a September 30 measurement date for its plans. As of the September 30, 2023 measurement date, the projected benefit obligation for the U.S pension plan and the U.K. pension plan was $217,393 and $7,397, respectively.  The status of employee pension benefit plans and other postretirement benefit plans is summarized below:

	Defined Benefit				Postretirement
	Pension Plans				Health Care Benefits
	Year Ended				Year Ended
	September 30,				September 30,
	2022		2023		2022		2023
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	315,466	$	231,275	$	82,964	$	64,037
Service cost		4,728		2,689		1,825		1,389
Interest cost		7,936		11,548		2,234		3,199
Actuarial (gains) losses		(81,225)		(5,236)		(20,343)		(14,171)
Benefits paid		(15,223)		(14,615)		(2,643)		(2,128)
Administrative expenses		(407)		(871)		—		—
Projected benefit obligation at end of year	$	231,275	$	224,790	$	64,037	$	52,326
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	297,703	$	218,321	$	—	$	—
Actual return on assets		(69,752)		11,136		—		—
Employer contributions		6,000		6,000		2,643		2,128
Benefits paid		(15,223)		(14,615)		(2,643)		(2,128)
Administrative expenses		(407)		(871)		—		—
Fair value of plan assets at end of year	$	218,321	$	219,971	$	—	$	—
Funded Status of Plan:
Unfunded status	$	(12,954)	$	(4,819)	$	(64,037)	$	(52,326)

The actuarial gains incurred during the fiscal years ended September 30, 2022 and 2023 for the Defined Benefit Pension Plans were driven by an increase in the discount rate applied against future expected benefit payments which resulted in a decrease in the defined benefit obligation.  

The actuarial gains incurred during the fiscal years ended September 30, 2022 and 2023, for the Postretirement Health Care Plan were primarily driven by an increase in the discount rate applied against future expected health care benefit payments, which resulted in a decrease in the defined benefit obligation.

Amounts recognized in the consolidated balance sheets are as follows:

	Defined Benefit				Postretirement				Non-Qualified				All Plans
	Pension Plans				Health Care Benefits				Pension Plans				Combined
	September 30,				September 30,				September 30,				September 30,
	2022		2023		2022		2023		2022		2023		2022		2023
Accrued pension and postretirement benefits:
Current	$	—	$	—	$	(3,276)	$	(2,845)	$	(95)	$	(95)	$	(3,371)	$	(2,940)
Non-current		(12,954)		(4,819)		(60,761)		(49,481)		(435)		(397)		(74,150)		(54,697)
Accrued pension and postretirement benefits	$	(12,954)	$	(4,819)	$	(64,037)	$	(52,326)	$	(530)	$	(492)	$	(77,521)	$	(57,637)
Accumulated other comprehensive (income) loss:
Net (income) loss		22,496		20,663		(30,807)		(42,699)		—		—		(8,311)		(22,036)
Prior service cost		1,365		1,130		—		—		—		—		1,365		1,130
Total accumulated other comprehensive (income) loss	$	23,861	$	21,793	$	(30,807)	$	(42,699)	$	—	$	—	$	(6,946)	$	(20,906)

The non-current portion of the defined benefit pension plan portion of accrued pension and postretirement benefits amounted to $12,954 and $4,819 in fiscal 2022 and 2023, respectively.  These amounts included the U.K. pension plan net pension asset of $7,702 and $8,803, respectively, which was included in Other assets on the Consolidated Balance Sheets as well as the U.S. pension plan accrued pension liability of $20,655 and $13,622, respectively, which were recorded in accrued pension benefit (less current portion) on the Consolidated Balance Sheet.  

The accumulated benefit obligation for the pension plans was $227,915 and $216,287 at September 30, 2022 and 2023, respectively.

The cost of the Company’s postretirement benefits is accrued over the years that employees provide service to the date of their full eligibility for such benefits. The Company’s policy is to fund the cost of claims on an annual basis.

The components of net periodic pension cost and postretirement health care benefit cost are as follows:

	Defined Benefit Pension Plans
	Year Ended September 30,
	2021		2022		2023
Service cost	$	5,628	$	4,728	$	2,689
Interest cost		7,481		7,936		11,548
Expected return on assets		(16,356)		(14,818)		(14,570)
Amortization of prior service cost		239		233		236
Recognized actuarial loss		7,721		—		31
Net periodic cost	$	4,713	$	(1,921)	$	(66)

	Postretirement
	Health Care Benefits
	Year Ended September 30,
	2021		2022		2023
Service cost	$	1,095	$	1,825	$	1,389
Interest cost		2,292		2,234		3,199
Recognized actuarial loss		—		(240)		(2,279)
Net periodic cost	$	3,387	$	3,819	$	2,309

Assumptions

A 5.0% annual rate of increase for the costs of covered health care benefits for ages under 65 and a 5.0% annual rate of increase for ages over 65 were assumed for 2022 and increased to 7.0% for the under 65 and over 65 age groups in 2023, 6.5% in 2024, 6.0% in 2025, 5.5% in 2026 and 5.0% in the years thereafter.

The actuarial present value of the projected pension benefit obligation and postretirement health care benefit obligation for the plans at September 30, 2022 and 2023 were determined based on the following assumptions:

	September 30,		September 30,
	2022		2023
Discount rate (postretirement health care)(1)	5.13	%	5.63	%
Discount rate (U.S. pension plan)(1)	5.13	%	5.63	%
Discount rate (U.K. pension plan)	5.90	%	5.70	%
Rate of compensation increase (U.S. pension plan only)	2.50	%	3.50	%

(1) The discount rate for the postretirement health care plan and the U.S. pension plan are derived using the FTSE Pension Discount Curve and projected benefit payments.

	Defined Benefit
	Pension and
	Postretirement Health
	Care Plans
	Year Ended
	September 30,
	2021		2022		2023
Discount rate (postretirement health care plan)	2.50	%	2.75	%	5.13	%
Discount rate (U.S. pension plan)	2.25	%	2.63	%	5.13	%
Discount rate (U.K. pension plan)	1.50	%	2.00	%	5.90	%
Expected return on plan assets (U.S. pension plan)	7.25	%	5.25	%	6.88	%
Expected return on plan assets (U.K. pension plan)	2.00	%	3.00	%	5.50	%
Rate of compensation increase (U.S. pension plan only)	2.50	%	2.50	%	2.50	%

Plan Assets and Investment Strategy

The Company’s pension plan assets by level within the fair value hierarchy at September 30, 2022 and 2023 are presented in the table below. The pension plan assets were accounted for at fair value. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  Investments in U.S and International equities, and Fixed Income securities are held in mutual funds and common / collective funds which are valued using net asset value (NAV) provided by the administrator of the fund, and individual fixed income securities which consists of Level 1 and Level 2 assets.   As of September 30, 2023, the fixed

income portfolio consisted of 301 issuances of fixed income securities from 238 issuers.  For more information on a description of the fair value hierarchy, see Note 16.  

	September 30, 2022
	Level 1
	Active		Level 2
	Markets for		Other
	Identical		Observable
	Assets		Inputs		NAV		Total
U.S. Pension Plan Assets:
U.S. corporate and government bonds	$	15,926	$	158,582	$	—	$	174,508
U.S. common stock mutual funds		—	$	—	$	16,471		16,471
Common /collective funds
Bonds		—		—		—		—
Short-term money market		—		—		—		—
U.S. common stock		—		—		6,847		6,847
International equity		—		—		5,390		5,390
Total U.S.	$	15,926	$	158,582	$	28,708	$	203,216
U.K. Plan Assets:
Equities	$	—	$	—	$	5,135	$	5,135
Bonds		—		—		8,006		8,006
Other		—		—		1,964		1,964
Total U.K.	$	—	$	—	$	15,105	$	15,105
Total pension plan assets	$	15,926	$	158,582	$	43,813	$	218,321

	September 30, 2023
	Level 1
	Active		Level 2
	Markets for		Other
	Identical		Observable
	Assets		Inputs		NAV		Total
U.S. Pension Plan Assets:
U.S. corporate and government bonds	$	26,647	$	154,686	$	—	$	181,333
U.S. common stock mutual funds		—		—		17,900		17,900
International equity		—		—		4,538		4,538
Total U.S.	$	26,647	$	154,686	$	22,438	$	203,771
U.K. Plan Assets:
Bonds		—		—		10,692		10,692
Short-term money market		5,508		—		—		5,508
Total U.K.	$	5,508	$	—	$	10,692	$	16,200
Total pension plan assets	$	32,155	$	154,686	$	33,130	$	219,971

The primary financial objectives of the plans are to maintain asset funding as a percentage of the benefit obligations.  The U.S. pension plan utilized a customized liability driven investment (LDI) strategy, which is designed to match the risk and duration of the fixed income assets in the portfolio with that of the obligation.  

It is the policy of the U.S. pension plan to invest assets with an allocation to equities as shown below based on a matrix which determines the allocation between equities and fixed income based on the funding percentage of the plan. The balance of the assets is maintained in fixed income investments, and in cash holdings, to the extent permitted by the plan documents.

Target asset classes as a percent of total assets as of September 30, 2023:

Asset Class	Target(1)
Equity	11	%
Fixed Income	89	%
Real Estate and Other	—	%

(1) The Company adjusts the target allocation based on the fair value of pension assets as a percentage of the projected pension obligation.  

In choosing the assumption for the expected long-term rate of return on U.S. pension plan assets, the Company takes into account the plan’s target asset allocation as well as capital market assumptions relating to the asset classes. The Company believes that its assumption regarding the long-term rate of return on plan assets is reasonable, and comparable to the asset return assumptions of other companies, given the target allocation of the plan assets. Note that over very long historical periods, the realized return on plan assets has met or exceeded the expected rate of return. Also note that in recognition of the variability of future market returns, it is reasonable to consider a modest range around the expected future return, and there exists the potential for the use of a lower, or higher, expected rate of return in the future.

The U.K. pension plan assets follow a more conservative investment objective due to the higher funding status of the plan.

Contributions and Benefit Payments

The Company has not yet determined the amounts to contribute to its domestic pension plans, domestic other postretirement benefit plans and the U.K. pension plan in fiscal 2024.

Pension and postretirement health care benefits, which include expected future service, are expected to be paid out of the respective plans as follows:

			Postretirement
Fiscal Year Ending September 30	Pension		Health Care
2024	$	16,001	$	3,988
2025		16,308		4,021
2026		16,623		4,124
2027		16,953		4,063
2028		17,002		4,101
2029 - 2033 (in total)		86,225		21,333