Postretirement and Other Employee Benefits

12 Months Ended

Aug. 31, 2023

Retirement Benefits [Abstract]

Postretirement and Other Employee Benefits

Postretirement and Other Employee Benefits

Postretirement Benefits

The Company has a qualified defined benefit pension plan for employees of Jabil Circuit UK Limited (the “UK plan”). The UK plan, which is closed to new participants, provides benefits based on average employee earnings over a three-year service period preceding retirement and length of employee service. The Company’s policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in UK employee benefit and tax laws plus such additional amounts as are deemed appropriate by the Company.

The Company also has a qualified defined benefit pension plan for employees in Switzerland (the “Switzerland plan”). The Switzerland plan provides benefits based on average employee earnings over an approximately 8 year service period preceding retirement and length of employee service. The Company’s policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in Switzerland employee benefit and tax laws plus such additional amounts as are deemed appropriate by the Company.

Additionally, as a result of acquiring various other operations in Europe, Asia and Mexico the Company assumed both qualified and unfunded nonqualified retirement benefits covering eligible employees who meet age and service requirements (the “other plans”).

The UK plan, Switzerland plan and other plans are collectively referred to herein as the “plans.”

Benefit Obligation and Plan Assets

The projected benefit obligations (“PBO”) and plan assets, changes to the PBO and plan assets and the funded status of the plans as of and for the fiscal years ended August 31 are as follows (in millions):

	Fiscal Year Ended August 31,
	2023		2022
Change in PBO
Beginning PBO	$	432	$	587
Service cost	18		25
Interest cost	12		4
Actuarial gain	(23)		(119)
Settlements paid from plan assets(1)	(27)		(28)
Total benefits paid	(16)		(13)
Plan participants’ contributions	22		21
Effect of conversion to U.S. dollars	43		(45)
Ending PBO	$	461	$	432
Change in plan assets
Beginning fair value of plan assets	459		576
Actual return on plan assets	(16)		(68)
Settlements paid from plan assets(1)	(27)		(28)
Employer contributions	18		16
Benefits paid from plan assets	(15)		(12)
Plan participants’ contributions	22		21
Effect of conversion to U.S. dollars	45		(46)
Ending fair value of plan assets	$	486	$	459
Funded status	$	25	$	27
Amounts recognized in the Consolidated Balance Sheets
Accrued benefit liability, current	$	1	$	1
Accrued benefit asset, noncurrent	$	26	$	28
Accumulated other comprehensive loss(2)
Actuarial gain, before tax	$	(71)	$	(85)
Prior service cost, before tax	$	16	$	18

(1)The settlements recognized during fiscal years 2023 and 2022 relate primarily to the Switzerland plan.

(2)The Company anticipates amortizing $10 million and $4 million, before tax, of net actuarial gain and prior service costs balances, respectively, to net periodic cost in fiscal year 2024.

Accumulated Benefit Obligation

The following table summarizes the total accumulated benefit obligations (“ABO”), the ABO and fair value of plan assets for defined benefit pension plans with ABO in excess of plan assets, and the PBO and fair value of plan assets for defined benefit pension plans with PBO in excess of plan assets for fiscal years 2023 and 2022 (in millions):

	August 31, 2023		August 31, 2022
ABO	$	441	$	417
Plans with ABO in excess of plan assets
ABO	$	41	$	41
Fair value of plan assets	$	15	$	19
Plans with PBO in excess of plan assets
PBO	$	52	$	51
Fair value of plan assets	$	15	$	19

Net Periodic Benefit Cost

The following table provides information about the net periodic benefit cost for the plans for fiscal years 2023, 2022 and 2021 (in millions):

	Fiscal Year Ended August 31,
	2023		2022		2021
Service cost(1)	$	18	$	25	$	25
Interest cost(2)	12		4		5
Expected long-term return on plan assets(2)	(17)		(17)		(16)
Recognized actuarial gain(2)	(7)		(6)		(10)
Amortization of actuarial gains(2)(3)	(7)		(8)		(6)
Net settlement loss(2)	—		1		1
Amortization of prior service costs(2)	4		4		1
Net periodic benefit cost	$	3	$	3	$	—

(1)Service cost is recognized in cost of revenue in the Consolidated Statements of Operations.

(2)Components are recognized in other expense in the Consolidated Statements of Operations.

(3)Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10 percent of the greater of the projected benefit obligation and the fair value of plan assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the plan participants.

Assumptions

Weighted-average actuarial assumptions used to determine net periodic benefit cost and PBO for the plans for the fiscal years 2023, 2022 and 2021 were as follows:

	Fiscal Year Ended August 31,
	2023		2022		2021
Net periodic benefit cost:
Expected long-term return on plan assets(1)	3.6	%	3.0	%	2.9	%
Rate of compensation increase	2.1	%	2.2	%	2.1	%
Discount rate	2.6	%	0.7	%	0.8	%
PBO:
Expected long-term return on plan assets	3.7	%	3.6	%	3.0	%
Rate of compensation increase	1.9	%	2.1	%	2.2	%
Discount rate(2)	2.8	%	2.6	%	0.7	%

(1)The expected return on plan assets assumption used in calculating net periodic benefit cost is based on historical return experience and estimates of future long-term performance with consideration to the expected investment mix of the plan.

(2)The discount rate is used to state expected cash flows relating to future benefits at a present value on the measurement date. This rate represents the market rate for high-quality fixed income investments whose timing would match the cash outflow of retirement benefits. Other assumptions include demographic factors such as retirement, mortality and turnover.

Plan Assets

The Company has adopted an investment policy for a majority of plan assets, which was set by plan trustees who have the responsibility for making investment decisions related to the plan assets. The plan trustees oversee the investment allocation, including selecting professional investment managers and setting strategic targets. The investment objectives for the assets are (1) to acquire suitable assets that hold the appropriate liquidity in order to generate income and capital growth that, along with new contributions, will meet the cost of current and future benefits under the plan, (2) to limit the risk of the plan assets from failing to meet the plan liabilities over the long-term and (3) to minimize the long-term costs under the plan by maximizing the return on the plan assets.

Investment policies and strategies governing the assets of the plans are designed to achieve investment objectives with prudent risk parameters. Risk management practices include the use of external investment managers; the maintenance of a portfolio diversified by asset class, investment approach and security holdings; and the maintenance of sufficient liquidity to meet benefit obligations as they come due. Within the equity securities class, the investment policy provides for investments in a broad range of publicly traded securities including both domestic and international stocks. Within the debt securities class, the investment policy provides for investments in corporate bonds as well as fixed and variable interest debt instruments. The Company currently expects to achieve a target mix of 40% equity and 60% debt securities in fiscal year 2024.

Fair Value

The fair values of the plan assets held by the Company by asset category are as follows (in millions):

		August 31, 2023				August 31, 2022
	Fair Value Hierarchy	Fair Value		Asset Allocation		Fair Value		Asset Allocation
Asset Category
Cash and cash equivalents(1)	Level 1	$	17	3	%	$	13	3	%
Equity Securities:
Global equity securities(2)(3)	Level 2	213		44	%	197		43	%
Debt Securities:
Corporate bonds(3)	Level 2	216		45	%	203		44	%
Government bonds(3)	Level 2	30		6	%	34		7	%
Other Investments:
Insurance contracts(4)	Level 3	10		2	%	12		3	%
Fair value of plan assets		$	486	100	%	$	459	100	%

(1)Carrying value approximates fair value.

(2)Investments in equity securities by companies incorporated, listed or domiciled in developed and/or emerging market countries.

(3)Investments in global equity securities, corporate bonds, government securities and government bonds are valued using the quoted prices of securities with similar characteristics.

(4)Consist of an insurance contract that guarantees the payment of the funded pension entitlements, as well as provides a profit share to the Company. The profit share in this contract is not based on actual investments, but, instead on a notional investment portfolio that is expected to return a pre-defined rate. Insurance contract assets are recorded at fair value and is determined based on the cash surrender value of the insured benefits which is the present value of the guaranteed funded benefits. Insurance contracts are valued using unobservable inputs (Level 3 inputs), primarily by discounting expected future cash flows relating to benefits paid from a notional investment portfolio in order to determine the cash surrender value of the policy. The unobservable inputs consist of estimated future benefits to be paid throughout the duration of the policy and estimated discount rates, which both have an immaterial impact on the fair value estimate of the contract.

Cash Flows

The Company expects to make cash contributions between $25 million and $30 million to its funded pension plans during fiscal year 2024. The estimated future benefit payments, which reflect expected future service, are as follows (in millions):

Fiscal Year Ended August 31,	Amount
2024	$	34
2025	$	29
2026	$	29
2027	$	33
2028	$	31
2029 through 2033	$	156

Profit Sharing, 401(k) Plan and Defined Contribution Plans

The Company provides retirement benefits to its domestic employees who have completed a 30-day period of service through a 401(k) plan that provides a matching contribution by the Company. The Company also has defined contribution benefit plans for certain of its international employees. The Company contributed approximately $74 million, $63 million and $56 million for defined contribution plans for the fiscal years ended August 31, 2023, 2022 and 2021, respectively.