Snap-on provides health care benefits for certain retired U.S. employees. For comprehensive major medical plans since 1989, benefits are paid based on deductibles and percentages of covered expenses. Plan provisions allow for benefit and coverage changes. Most retirees are required to pay the entire cost of the coverage, but Snap-on may elect to subsidize the cost of coverage under certain circumstances. Additionally, certain eligible retirees have been provided with an account for the reimbursement of qualifying medical expenses during retirement. Upon achieving specific age and service requirements, certain active associates are eligible for this account upon retirement from the company.

Employees retiring prior to 1989 were eligible for retiree medical coverage upon reaching early retirement age, with no retiree contributions required. Benefits are paid based on deductibles and percentages of covered expenses and take into consideration payments made by Medicare and other insurance coverage.

Snap-on has a Voluntary Employees Beneficiary Association (“VEBA”) trust for the funding of existing postretirement health care benefits for certain union retirees in the United States; all other retiree health care plans are unfunded.


(Amounts in millions)	2021		2020
Change in accumulated postretirement benefit obligation:
Benefit obligation at beginning of year	$	50.6	$	49.2
Interest cost	1.1		1.5
Plan participant contributions	0.2		0.2
Benefits paid	(3.6)		(3.6)
Actuarial (gain) loss	(0.8)		3.3
Benefit obligation at end of year	$	47.5	$	50.6



Change in plan assets:
Fair value of plan assets at beginning of year	$	13.3	$	12.8
Actual return on plan assets	1.1		1.4
Employer contributions	2.7		2.5
Plan participant contributions	0.2		0.2
Benefits paid	(3.6)		(3.6)
Fair value of plan assets at end of year	$	13.7	$	13.3
Unfunded status at end of year	$	(33.8)	$	(37.3)


(Amounts in millions)	2021		2020		2019
Net periodic benefit cost:
Interest cost	$	1.1	$	1.5	$	1.9
Expected return on plan assets	(0.6)		(0.6)		(0.7)
Amortization of unrecognized gain	—		—		(0.8)
Net periodic benefit cost	$	0.5	$	0.9	$	0.4

Changes in benefit obligations recognized in OCI, net of tax:
Net (gain) loss	$	(1.0)	$	1.9	$	2.4

The components of net periodic postretirement health care cost, other than the service cost component, are included in “Other income (expense) - net” on the accompanying Consolidated Statements of Earnings. See Note 18 for additional information on Other income (expense) - net.

The methodology for selecting the year-end 2021 and 2020 weighted-average discount rate for the company’s domestic postretirement plans was to match the plans’ yearly projected cash flows for benefits and service costs to those of hypothetical bond portfolios using high-quality, AA rated or better, corporate bonds from either Moody’s Investors Service or Standard & Poor’s credit rating agencies available at the measurement date. As a practical expedient, Snap-on uses the calendar year end as the measurement date for its plans.

For 2022, the actuarial calculations assume a pre-65 health care cost trend rate of 5.4% and a post-65 health care cost trend rate of 5.7%, both decreasing gradually to 4.0% in 2046 and thereafter.

The objective of the VEBA trust is to achieve net of expense returns that meet or exceed the 4.8% long-term return on plan assets assumption used for reporting purposes. Investments are diversified to attempt to minimize the risk of large losses. Since asset allocation is a key determinant of expected investment returns, assets are periodically rebalanced to the targeted allocation to correct significant deviations from the asset allocation policy that are caused by market fluctuations and cash flow.

The basis for determining the overall expected long-term return on plan assets assumption is a nominal returns forecasting method. For each asset class, future returns are estimated by identifying the premium of riskier asset classes over lower risk alternatives. The methodology constructs expected returns using a “building block” approach to the individual components of total return. These forecasts are stated in both nominal and real (after inflation) terms. This process first considers the long-term historical return premium based on the longest set of data available for each asset class. These premiums, which are calculated using the geometric mean, are then adjusted based on current relative valuation levels and macro-economic conditions. The asset return assumption is also adjusted by an implicit expense load for estimated administrative and investment-related expenses.


	Target	2021	2020
Asset category:
Debt securities and cash and cash equivalents	46%	44%	46%
Equity securities	29%	34%	35%
Hedge funds	25%	22%	19%
Total	100%	100%	100%

Fair value of plan assets (Amounts in millions)		$13.7	$13.3

The fair value measurement hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority (Level 1) to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority (Level 3) to unobservable inputs. Fair value measurements primarily based on observable market information are given a Level 2 priority.

Debt securities are valued at quoted per share or unit market prices for which an official close or last trade pricing on an active exchange is available and are categorized as Level 1 in the fair value hierarchy.

Equity securities are valued at the NAV per share or unit multiplied by the number of shares or units held as of the measurement date, as reported by the fund managers. The share or unit price is quoted on a private market and is based on the value of the underlying investments, which are primarily based on observable inputs; such investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

Hedge funds are stated at the NAV per share or unit (based on the estimated fair market value of the underlying investments) multiplied by the number of shares or units held as of the measurement date, as reported by the fund managers. These investments are measured at fair value using the NAV per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy.

The company regularly reviews fund performance directly with its investment advisor and the fund managers, and performs qualitative analysis to corroborate the reasonableness of the reported NAVs. For funds for which the company did not receive a year-end NAV, the company recorded an estimate of the change in fair value for the latest period based on return estimates and other fund activity obtained from the fund managers.

The columns labeled “Investments Measured at NAV” in the following tables are measured at fair value using the NAV per share (or its equivalent) practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in these tables are intended to permit a reconciliation of the fair value hierarchy to the VEBA plan assets.


(Amounts in millions)	Quoted Prices for Identical Assets (Level 1)		Investments Measured at NAV		Total
Asset category:
Cash and cash equivalents	$	0.3	$	—	$	0.3
Debt securities	5.8		—		5.8
Equity securities	—		4.6		4.6
Hedge fund	—		3.0		3.0
Total	$	6.1	$	7.6	$	13.7


(Amounts in millions)	Quoted Prices for Identical Assets (Level 1)		Investments Measured at NAV		Total
Asset category:
Cash and cash equivalents	$	0.3	$	—	$	0.3
Debt securities	5.9		—		5.9
Equity securities	—		4.6		4.6
Hedge fund	—		2.5		2.5
Total	$	6.2	$	7.1	$	13.3