EMPLOYEE BENEFIT PLANS

The Company has retirement and pension plans covering a substantial number of its domestic and foreign employees. Most retirement benefits are provided by the Company under separate final-pay noncontributory and contributory defined benefit and defined contribution plans for all salaried and hourly employees (excluding those covered by union-sponsored plans) who meet service and age requirements. Although various defined benefit formulas exist for employees, generally these are based on length of service and earnings patterns during employment. Effective January 1, 2012, the Company's Board of Directors authorized the Company to proceed with the restructuring of its domestic retirement benefit program to include the closing of Darling's domestic salaried and hourly defined benefit plans to new participants as well as the freezing of service and wage accruals thereunder effective December 31, 2011 (a curtailment of these plans for financial reporting purposes) and the enhancing of benefits under the Company's domestic defined contribution plans. The Company-sponsored domestic hourly union plan has not been curtailed; however, several locations of the Company-sponsored domestic hourly union plan have been curtailed as a result of collective bargaining renewals for those sites.

The Company maintains defined contribution plans both domestically and at its foreign entities. The Company's matching portion and annual employer contributions to the Company's domestic defined contribution plans for fiscal 2017, 2016 and 2015 were approximately $9.6 million, $9.2 million and $9.3 million, respectively. The Company's matching portion and annual employer contributions to the Company's foreign defined contribution plans for fiscal 2017, 2016 and 2015 were approximately $7.5 million, $6.2 million and $3.0 million, respectively.

The Company recognizes the over-funded or under-funded status of the Company's defined benefit post-retirement plans as an asset or liability in the Company's balance sheet, with changes in the funded status recognized through comprehensive income in the year in which they occur. The Company uses the month-end date of December 31 as the measurement date for all of the Company's defined benefit plans, which is the closest month-end to the Company's fiscal year-end. The following table sets forth the plans’ funded status for the Company's domestic and foreign defined benefit plans and amounts recognized in the Company's consolidated balance sheets based on the measurement date (December 31, 2017 and December 31, 2016) (in thousands):



	December 30, 2017			December 31, 2016
Change in projected benefit obligation:
Projected benefit obligation at beginning of period	$	189,290		$	182,276
Service cost	3,043			2,549
Interest cost	6,711			6,950
Employee contributions	436			439
Plan amendments	(8		)	101
Actuarial loss/(gain)	8,051			7,905
Benefits paid	(7,063		)	(7,146		)
Effect of curtailment	—			(1,286		)
Effect of settlement	(884		)	(953		)
Other	5,152			(1,545		)
Projected benefit obligation at end of period	204,728			189,290

Change in plan assets:
Fair value of plan assets at beginning of period	134,909			127,970
Actual return on plan assets	19,030			10,138
Employer contributions	4,214			5,250
Employee contributions	436			439
Benefits paid	(7,063		)	(7,146		)
Effect of settlement	(884		)	(953		)
Divestiture	(2,262		)	—
Other	2,137			(789		)
Fair value of plan assets at end of period	150,517			134,909

Funded status	(54,211		)	(54,381		)
Net amount recognized	$	(54,211	)	$	(54,381	)

Amounts recognized in the consolidated balance sheets consist of:
Current liability	$	(1,440	)	$	(1,229	)
Noncurrent liability	(52,771		)	(53,152		)
Net amount recognized	$	(54,211	)	$	(54,381	)

Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss	$	43,651		$	52,525
Prior service cost/(credit)	371			417
Net amount recognized (a)	$	44,022		$	52,942


(a)	Amounts do not include deferred taxes of $16.3 million and $19.4 million at December 30, 2017 and December 31, 2016, respectively.

The amounts included in “Other” in the above table reflect the impact of foreign exchange translation for plans in Argentina, Brazil, Belgium, Canada, France, Germany, Japan, Netherlands and United Kingdom. The Company's domestic pension plan benefits comprise approximately 74% and 75% of the projected benefit obligation for fiscal 2017 and fiscal 2016, respectively. Additionally, the Company has made required and tax deductible discretionary contributions to its domestic pension plans in fiscal 2017 and fiscal 2016 of approximately $1.0 million and approximately $0.6 million, respectively. The Company made required and tax deductible discretionary contributions to its foreign pension plans in fiscal 2017 and fiscal 2016 of approximately $3.3 million and $ 4.7 million, respectively.



	December 30, 2017		December 31, 2016
Projected benefit obligation	$	204,728	$	189,290
Accumulated benefit obligation	192,192		181,340
Fair value of plan assets	150,517		134,909

Net pension cost includes the following components (in thousands):



	December 30, 2017			December 31, 2016			January 2, 2016
Service cost	$	3,043		$	2,549		$	6,638
Interest cost	6,711			6,950			10,536
Expected return on plan assets	(7,181		)	(7,552		)	(12,229		)
Net amortization and deferral	4,821			4,668			5,034
Curtailment	—			(1,285		)	(1,181		)
Settlement	42			(114		)	(2,353		)
Net pension cost	$	7,436		$	5,216		$	6,445

Amounts recognized in accumulated other comprehensive income (loss) for the year ended (in thousands):



	2017		2016
Actuarial (loss)/gain recognized:
Reclassification adjustments	$	2,985	$	2,846
Actuarial (loss)/gain recognized during the period	2,763		(3,861		)
Amortization of settlement	27		(69		)
Prior service (cost) credit recognized:
Reclassification adjustments	24		24
Other	30		44
	$	5,829	$	(1,016	)

The estimated amount that will be amortized from accumulated other comprehensive loss into net periodic pension cost in fiscal 2018 is as follows (in thousands):



	2018
Net actuarial loss	$	3,556
Prior service cost	35
	$	3,591

Weighted average assumptions used to determine benefit obligations were:



	December 30, 2017	December 31, 2016	January 2, 2016

Discount rate	3.40%	3.81%	4.13%
Rate of compensation increase	0.38%	0.38%	0.31%

Weighted average assumptions used to determine net periodic benefit cost for the employee benefit pension plans were:



	December 30, 2017	December 31, 2016	January 2, 2016
Discount rate	3.49%	3.55%	3.47%
Rate of increase in future compensation levels	0.43%	0.84%	0.38%
Expected long-term rate of return on assets	6.17%	6.52%	6.62%

Consideration was made to the long-term time horizon for the (U.S. and Canada's) plans' benefit obligations as well as the related asset class mix in determining the expected long-term rate of return. Historical returns are also considered, over the long-term time horizon, in determining the expected return. Considering the overall asset mix of approximately 60% equity and 40% fixed income with equity exposure on a declining trend since the implementation of the glide path for two of the U.S. plans, the Company believes it is reasonable to expect a long-term rate of return of 6.4% for the (U.S. and Canada's) plans' investments as a whole. The remaining foreign plans' assets are principally invested under insurance contracts arrangements which have weighted average expected long-term rate of returns of 3.3%.

The investment objectives have been established in conjunction with a comprehensive review of the current and projected financial requirements. The primary investment objectives are: 1) to have the ability to pay all benefit and expense obligations when due; 2) to maximize investment returns within reasonable and prudent levels of risk in order to minimize contributions; and 3) to maintain flexibility in determining the future level of contributions.

Investment results and changing discount rates are the most critical elements in achieving funding objectives; however, contributions are used as a supplemental source of funding as deemed appropriate.

The investment guidelines are based upon an investment horizon of greater than ten years; therefore, interim fluctuations are viewed with this perspective. The strategic asset allocation is based on this long-term perspective and the plans' funded status. However, because the participants’ average age is somewhat older than the typical average plan age, consideration is given to retaining some short-term liquidity. Analysis of the cash flow projections of the plans indicates that benefit payments will continue to exceed contributions. The results of a thorough asset-liability study completed during 2012 established a dynamic asset allocation glide path (the “Glide Path”) by which the U.S. plans' asset allocations are determined. The Glide Path designates intervals based on funded status which contain a corresponding allocation to equities/real assets and fixed income. As the U.S. plans' funded status improves, the allocations become more conservative, and the opposite is true when the funded status declines.



Fixed Income	35% - 80%
Equities	20% - 65%

The equity allocation is invested in stocks traded on one of the U.S. stock exchanges or in foreign companies whose stock is traded outside the U.S. and/or companies that conduct the major portion of their business outside the U.S. Securities convertible into such stocks, convertible bonds and preferred stock, may also be purchased. The portfolio may invest in American Depository Receipts (“ADR”). The majority of the equities are invested in mutual funds that are well-diversified among growth and value stocks, as well as large, mid, and small cap assets. This mix is balanced based on the understanding that large cap stocks are historically less volatile than small cap stocks: however, smaller cap stocks have historically outperformed larger cap stocks. The emerging markets portion of the equity allocation is held below 10% due to greater volatility in the asset class. Risk adjusted returns are the primary driver of allocation choices within these asset classes. The portfolio is well-diversified in terms of companies, industries and countries.

The diversified asset portion of the allocation will invest in securities with a goal to out pace inflation and preserve their value. The securities in this allocation may consist of inflation-indexed bonds, securities of real estate companies, commodity index-linked notes, fixed-income securities, securities of natural resource companies, master limited partnerships, publicly-listed infrastructure companies, and floating rate debt.

All investment objectives are expected to be achieved over a market cycle anticipated to be a period of five to seven years. Reallocations are performed on a monthly basis to retain target allocation ranges. On a quarterly basis the plans' funded status will be recalculated to determine which Glide Path interval allocation is appropriate.

The following table presents fair value measurements for the Company's defined benefit plans’ assets as categorized using the fair value hierarchy under FASB authoritative guidance (in thousands):



	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands of dollars)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Balances as December 31, 2016
Fixed Income:
Long Term	$	17,408	$	17,408	$	—	$	—
Short Term	2,825		2,825		—		—
Equity Securities:
Domestic equities	41,300		41,300		—		—
International equities	24,403		24,403		—		—
Insurance contracts	10,670		—		7,887		2,783
Total categorized in fair value hierarchy	96,606		85,936		7,887		2,783
Other investments measured at NAV	38,303
Totals	$	134,909	$	85,936	$	7,887	$	2,783

Balances as December 30, 2017
Fixed Income:
Long Term	$	23,231	$	23,231	$	—	$	—
Short Term	1,869		1,869		—		—
Equity Securities:
Domestic equities	44,173		44,173		—		—
International equities	28,152		28,152		—		—
Insurance contracts	9,876		—		6,501		3,375
Total categorized in fair value hierarchy	107,301		97,425		6,501		3,375
Other investments measured at NAV	43,216
Totals	$	150,517	$	97,425	$	6,501	$	3,375

The majority of the U.S. and Canada plan pension assets are invested in mutual funds; however, some assets are invested in pooled separate accounts (“PSA”) which have similar mutual fund counterparts. PSA accounts are generally used to access lower fund management expenses when compared to their mutual fund counterparts. The mutual funds are generally invested in institutional shares, retirement shares, or A-shares with no loads. The fair value of each mutual fund and PSA is based on the market value of the underlying investments. The U.S. pension plans PSA for fiscal 2017 and fiscal 2016 utilized net asset value (“NAV”) per share (or its equivalent) to measure its investments, as a practical expedient in accordance with ASC Topic 820, Fair Value Measurements and have not been classified in the fair value hierarchy in the above table. The majority of the foreign pension assets are held under insurance contracts where the investment risk for the accumulated benefit obligation rests with the insurer, which the Company has no specific detailed asset information.

The fair value measurement of plan assets using significant unobservable inputs (level 3) changed due to the following:



	Insurance
(in thousands of dollars)	Contracts
Balance as of January 2, 2016	$	2,320
Unrealized gains/(losses) relating to instruments still held in the reporting period.	316
Purchases, sales, and settlements	244
Exchange rate changes	(97		)
Balance as of December 31, 2016	2,783
Unrealized gains/(losses) relating to instruments still held in the reporting period.	203
Purchases, sales, and settlements	—
Exchange rate changes	389
Balance as of December 30, 2017	$	3,375

Contributions

The Company's funding policy for employee benefit pension plans is to contribute annually not less than the minimum amount required nor more than the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.

Based on current actuarial estimates, the Company expects to make payments of approximately $5.0 million to meet funding requirements for its domestic and foreign pension plans in fiscal 2018.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):



Year Ending	Pension Benefits
2018	$	9,780
2019	9,790
2020	9,641
2021	11,385
2022	11,098
Years 2023 – 2027	61,843

Multiemployer Pension Plans

The Company participates in various multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts in the United States. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants. The FASB issued guidance requiring companies to provide additional disclosures related to individually significant multiemployer pension plans. The Company's contributions to each individual multiemployer plan represent less than 5% of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities on two of the plans in which the Company currently participates could be material to the Company. The following table provides more detail on these significant multiemployer plans (contributions in thousands):



											Expiration
Pension	EIN Pension	Pension Protection Act Zone Status		FIP/RP Status Pending/	Contributions						Date of Collective Bargaining
Fund	Plan Number	2017	2016	Implemented	2017		2016		2015		Agreement
Western Conference of Teamsters Pension Plan	91-6145047 / 001	Green	Green	No	$	1,524	$	1,456	$	1,387	April 2020 (b)
Central States, Southeast and Southwest Areas Pension Plan (a)	36-6044243 / 001	Red	Red	Yes	968		934		858		August 2018 (c)
All other multiemployer plans					980		983		986
		Total Company Contributions			$	3,472	$	3,373	$	3,231


(a)	In July 2005 this plan received a 10 year extension from the IRS for amortizing unfunded liabilities. In April 2016 the IRS approved a modification of the amortization extension.


(b)	The Company has several plants that participate in the Western Conference of Teamsters Pension Plan under collective bargaining agreements that require minimum funding contributions. Certain of these agreements have expired and are being renegotiated with others having expiration dates through April 1, 2020.


(c)	The Company has several processing plants that participate in the Central States, Southeast and Southwest Areas Pension Plan under collective bargaining agreements that require minimum funding contributions. Certain of these agreements have expired and are being renegotiated with others having expiration dates through August 6, 2018.

With respect to the other multiemployer pension plans in which the Company participates and which are not individually significant, six plans have certified as critical or red zone, one plan have certified as endangered or yellow zone, as defined by the Pension Protection Act of 2006. The Company's portion of contributions to all plans amounted to $3.5 million, $3.4 million and $3.2 million for the years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively.

The Company has received notices in prior years of withdrawal liability from two U.S. multiemployer plans in which it participated. As of December 30, 2017, the Company has an aggregate accrued liability of approximately $1.7 million representing the present value of scheduled withdrawal liability payments under these multiemployer plans. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the Pension Protection Act of 2006, the amounts could be material.