Employee Benefit Plans

We maintain pension plans, which are frozen, covering our eligible employees. We provide an unfunded postretirement health care benefit plan for 12 retirees and their dependents. The measurement date for our employee benefit plans coincides with our fiscal year end.

Obligations and Funded Status of U.S. Plans at October 31:



	Pension Benefits						Other Post Retirement Benefits
	2019			2018			2019			2018
Change in benefit obligation:
Benefit obligation at beginning of year	$	(79,898	)	$	(89,063	)	$	(283	)	$	(313	)
Interest cost	(3,366		)	(3,166		)	(11		)	(11		)
Actuarial gain/(loss)	(12,995		)	7,849			(21		)	12
Benefits paid	5,062			4,482			32			29
Benefit obligation at end of year	(91,197		)	(79,898		)	(283		)	(283		)
Change in plan assets:
Fair value of plan assets at beginning of year	65,646			69,215			—			—
Actual return on plan assets	6,672			468			—			—
Employer contributions	1,351			445			32			29
Benefits paid	(5,062		)	(4,482		)	(32		)	(29		)
Fair value of plan assets at end of year	68,607			65,646			—			—
Funded status, benefit obligations in excess of plan assets	$	(22,590	)	$	(14,252	)	$	(283	)	$	(283	)

The following amounts are recorded in the liabilities section of the consolidated balance sheets as follows:



	Pension Benefits						Other Post Retirement Benefits
	2019			2018			2019			2018
Other accrued expenses (1)	$	—		$	—		$	(39	)	$	(39	)
Long-term benefit liabilities	(22,590		)	(14,252		)	(244		)	(244		)
Total	$	(22,590	)	$	(14,252	)	$	(283	)	$	(283	)

(1) As pension assets exceed expected benefit payments over the next year, liabilities for the pension plan are considered long-term.



Components of Net Periodic Benefit Cost U.S. Plans
	Pension Benefits									Other Post Retirement Benefits
	2019			2018			2017			2019		2018		2017
Interest cost	$	3,366		$	3,166		$	3,282		$	11	$	11	$	13
Expected return on plan assets	(3,341		)	(3,357		)	(3,455		)	—		—		—
Amortization of net actuarial loss	1,150			1,311			1,508			6		7		10
Net periodic benefit cost	$	1,175		$	1,120		$	1,335		$	17	$	18	23

We expect to recognize in the consolidated statements of operations the following amounts that will be amortized from accumulated other comprehensive loss in fiscal 2020.




	Pension Benefits		Other Post Retirement Benefits
Amortization of net actuarial loss	$	1,497	$	8

We have recognized the following cumulative pre-tax actuarial losses, prior service costs and transition obligations in accumulated other comprehensive loss:



	Pension Benefits				Other Post Retirement Benefits
	2019		2018		2019		2018

Net actuarial loss	$	46,224	$	37,710	$	80	$	64

Recognized in accumulated other comprehensive loss	$	46,224	$	37,710	$	80	$	64

Additional Information on U.S. Plans



	Pension Benefits					Other Post Retirement Benefits
	2019		2018			2019		2018
Increase (decrease) in minimum liability included in other comprehensive income (loss)	$	8,514	$	(6,272	)	$	15	$	(20	)

Assumptions for U.S. Plans:



Weighted-average assumptions used to determine benefit obligations at October 31	Pension Benefits						Other Post Retirement Benefits
	2019		2018		2017		2019		2018		2017
Discount rate	3.05	%	4.35	%	3.65	%	3.05	%	4.35	%	3.65	%



	Pension Benefits						Other Post Retirement Benefits
Weighted-average assumptions used to determine net periodic benefit costs for years ended October 31	2019		2018		2017		2019		2018		2017
Discount rate	4.35	%	3.65	%	3.70	%	4.35	%	3.65	%	3.70	%
Expected long-term return on plan assets	6.50	%	6.50	%	6.50	%	—		—		—

These assumptions are used to develop the projected obligation at fiscal year end and to develop net periodic benefit cost for the subsequent fiscal year. Therefore, the assumptions used to determine the net periodic benefit costs in fiscal 2019 were established at October 31, 2018, while the assumptions used to determine the benefit obligations were established at October 31, 2019.

We use the Principal Pension Discount Yield Curve ("Principal Curve") for the U.S. Plans as the basis for determining the discount rate for reporting pension and retiree medical liabilities. The Principal Curve has several advantages to other methods, including: transparency of construction, lower statistical errors and continuous forward rates for all years.

We determine the annual rate of return for the U.S. pension plan assets by analyzing the composition of its asset portfolio and applying historical rates of return to the portfolio. Our outside investment advisors and actuaries review the computed rate of return. Industry comparables and other outside guidance are also considered in the annual selection of the expected rates of return on pension assets. The long-term expected rate of return on plan assets takes into account years with exceptional gains and years with exceptional losses.



	October 31,
Assumed health care trend rates	2019	2018
Health care cost trend rate assumed for next year	6.8%	7.0%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.5%	4.5%
Year that the rate reaches the ultimate trend rate	2030	2027

The aforementioned assumed health care cost trend rates will have a significant effect on the amounts reported for the health care plan. The Company's assumed health care trend rate was based on reduced health care claims experienced by a small and declining retiree population. A one-percentage point change in assumed health care cost trend rates would have the following effects at October 31, 2019:



	One-Percentage Point Increase		One-Percentage Point Decrease
Effect on total of service and interest cost components	$	3	$	(2	)
Effect on post retirement obligation	$	20	$	(18	)

Plan Assets - U.S. Plan Assets

The Company has established a targeted asset allocation percentage by asset category that re-balances the assets of each U.S. plan when pension contributions are funded. Our pension plan weighted-average asset allocations at October 31, 2019 and 2018, by asset category and comparison to the target allocation percentage are as follows:



	Target Allocation Percentage	Plan Assets at October 31,
	Target Allocation Percentage	2019	2018
Asset Category
Equity securities	30-70%	62%	59%
Debt securities	30-70%	33%	35%
Real estate	0-10%	5%	6%
Total		100%	100%

The investment policy for assets of the U.S. plans is to obtain a reasonable long-term return consistent with the level of risk assumed. Also, we seek to control the cost of funding the plans within prudent levels of risk through the investment of plan assets. Lastly, in an effort to avoid the risk of large losses and maximize the return of the Company's plans with market and economic risk in mind, we seek to provide diversification of assets.

Fair Value

The plans' investments are reported at fair value. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date.

FASB ASC Topic 820, Fair Value Measurements and Disclosures ("FASB ASC 820"), clarifies fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions market participants would use in pricing an asset or liability. As a basis for considering such assumptions, FASB ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the plans have the ability to access as of the measurement date.

Level 2: Other significant observable inputs other than level 1 prices. These could be quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

Level 3: Unobservable significant inputs that reflect the plans' own assumptions about the assumptions market participants would use in pricing an asset or liability.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in FASB ASC 820:


•	Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.


•	Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).


•	Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

The following descriptions of the valuation methods and assumptions used by the plans to estimate the fair values of investments apply to investments held directly by the plans.

Mutual funds: The fair values of mutual fund investments are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs).

Pooled separate accounts: The fair values of participation units held in pooled separate accounts are based on their net asset values, as reported by the managers of the pooled separate accounts as supported by the unit prices of actual purchase and sale transactions occurring as of or close to the financial statement date (level 2 inputs). Each of the pooled separate accounts in a fund sponsored by Principal Financial Group, investment and actuarial advisors of the Company, invests in multiple securities. Each pooled separate account provides for daily redemptions by the plans with no advance notice requirements, and has redemption prices that are determined by the fund's net asset value per unit.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Investments totaling $68,607 and $65,646 at October 31, 2019 and 2018 measured at fair value on a recurring basis are summarized below:



			Fair Value Measurements				Fair Value Measurements
			October 31, 2019				October 31, 2018
			Quoted Prices in Active Markets for Identical Assets (Level 1) Market Valuation Technique		Plan Assets Measured at Net Asset Value		Quoted Prices in Active Markets for Identical Assets (Level 1) Market Valuation Technique		Plan Assets Measured at Net Asset Value

U.S. Plans
Investments
	Equity
		Large U.S. Equity	$	15,382	$	5,545	$	14,269	$	5,131
		Small/Mid U.S. Equity	8,371		665		7,540		601
		International Equity	11,363		—		10,062		—
	Fixed Income
		Money Market	—		868		—		754
		Corporate	18,544		3,782		18,963		4,144
	Real Estate (Primarily Commercial)		—		4,087		—		4,182
Total Investments			$	53,660	$	14,947	$	50,834	$	14,812

Cash Flows

Contributions

We expect to contribute $1,290 to our U.S. pension plan in fiscal 2020. We contributed $1,351 to fund the plan in fiscal 2019.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans:



	Pension Benefits			Other Benefits
2020		$	5,220		$	39
2021		4,210			29
2022		4,590			27
2023		5,010			24
2024		4,870			23
2025-2029		25,700			91

Non-U.S. Plans

For our Swedish operations, the majority of the pension obligations are covered by insurance policies with insurance companies. Pension commitments in our Polish operations were $1,267 at the end of fiscal 2019 and $1,081 at the end of fiscal 2018. The liability represents the present value of future obligations and is calculated on an actuarial basis. The Polish operations recognized expense of $799, $215 and $148 for the fiscal years ended October 31, 2019, 2018 and 2017, respectively.

The insurance contracts guarantee a minimum rate of return. We have no input into the investment strategy of the assets underlying the contracts, but they are typically heavily invested in active bond markets and are highly regulated by local law.

Defined Contribution Plans

In addition to the defined benefit plans described above, we maintain a number of defined contribution plans for our U.S. locations. Under the terms of the plans, eligible employees may contribute a selected percentage of their base pay. We match a percentage of the employees' contributions up to a stated percentage, subject to statutory limitations. We recorded an expense related to the matching program for the fiscal years ended 2019, 2018 and 2017 of $5,731, $5,307 and $4,310, respectively.

Labor Agreements

As of October 31, 2019, we had approximately 3,600 employees. Organized labor unions represent 15% of the Company's U.S. hourly employees and 99% of the Company's non-U.S. employees.

Each of our unionized manufacturing facilities has its own labor agreement with its own expiration date. As a result, no contract expiration date affects more than one facility.