COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

6 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

Sysco has company-sponsored defined benefit and defined contribution retirement plans for its employees. Also, the company provides certain health care benefits to eligible retirees and their dependents.

On October 25, 2022, the Sysco Corporation Retirement Plan (the Plan) executed an agreement with Massachusetts Mutual Life Insurance Company (the Insurer). Under this agreement, the Plan purchased a nonparticipating single premium group annuity contract using Plan assets that transferred to the Insurer $695.0 million of the Plan’s defined benefit pension obligations related to certain pension benefits. The contract covers approximately 10,000 Sysco participants and beneficiaries (the Transferred Participants) in the U.S. pension plan (the U.S. Retirement Plan). Under the group annuity contract, the Insurer has made an unconditional and irrevocable commitment to pay the pension benefits of each Transferred Participant that are due on or after January 1, 2023. The transaction resulted in no changes to the amount of benefits payable to the Transferred Participants.

As a result of the transaction, the company recognized a one-time, non-cash pre-tax pension settlement charge of $315.4 million in the second quarter of fiscal 2023 primarily related to the accelerated recognition of actuarial losses included within accumulated other comprehensive loss in the statement of changes in consolidated shareholders’ equity. The transaction also required the company to remeasure the benefit obligations and plan assets of the U.S. Retirement Plan. The remeasurement

reflects the use of an updated discount rate and an expected rate of return on plan assets as of October 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date.

Funded Status

The following table presents the changes in benefit obligations and plan assets of the U.S. Retirement Plan affected by the interim remeasurements described above for the 26-week period ended December 31, 2022:

	U.S. Retirement Plan
	(In thousands)
Change in benefit obligation:
Benefit obligation at July 2, 2022	$	3,538,232
Service cost	4,357
Interest cost	80,604
Actuarial gain, net	(440,311)
Benefit payments	(71,839)
Settlements	(694,998)
Benefit obligation at December 31, 2022	2,416,045
Change in plan assets:
Fair value of plan assets at July 2, 2022	3,633,167
Actual return on plan assets	(456,202)
Benefit payments	(71,839)
Settlements	(694,998)
Fair value of plan assets at December 31, 2022	2,410,128
Funded status at December 31, 2022	$	(5,917)

Components of Net Benefit Costs

The components of net company-sponsored benefit cost for the U.S. Retirement Plan for the second quarter and first 26 weeks of fiscal 2023 and fiscal 2022 are as follows:

	13-Week Period Ended				26-Week Period Ended
	Dec. 31, 2022		Jan. 1, 2022		Dec. 31, 2022		Jan. 1, 2022
	(In thousands)				(In thousands)
Service cost	$	2,034	$	3,382	$	4,357	$	6,764
Interest cost	38,103		34,792		80,604		69,584
Expected return on plan assets	(36,957)		(51,580)		(76,977)		(103,160)
Amortization of prior service cost	98		99		197		198
Amortization of actuarial loss	7,661		7,304		16,609		14,608
Settlement loss recognized	315,354		—		315,354		—
Net pension (benefits) costs	$	326,293	$	(6,003)	$	340,144	$	(12,006)

The components of net company-sponsored benefit costs other than the service cost component are reported in Other expense (income), net within the consolidated results of operations.

Assumptions

The remeasurement of the benefit obligations and plan assets of the U.S. Retirement Plan that took place on October 31, 2022 reflects an updated discount rate and an updated expected rate of return on plan assets. The discount rate used to determine benefit obligations as of the remeasurement date was 6.07%, as compared to the discount rate of 4.91% that was used to determine benefit obligations as of July 2, 2022. The expected rate of return used to determine net company-sponsored benefit costs for the remainder of fiscal 2023 was updated to 6.00% as of the remeasurement date, as compared to the expected rate of return of 4.50% that was calculated as of July 2, 2022 to determine net company-sponsored benefit costs for fiscal 2023.