Employee Benefit Plans |
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| Compensation and Retirement Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Employee Benefit Plans |
Note 9. Employee Benefit Plans
U.S. Defined Benefit Pension Plans
All of the U.S. defined benefit pension plans are frozen, and as a result, plan participants no longer earn additional benefits. The following table provides detail of changes in the projected benefit obligations, the fair value of plan assets and the funded status of the Company’s U.S. defined benefit pension plans as of the respective August 31 measurement date (in thousands):
The following table provides detail on the Company’s domestic net periodic benefit costs (in thousands):
At August 31, 2016 and 2015, $18.4 million and $15.2 million, respectively, of pension plan actuarial losses, which have not yet been recognized in net periodic benefit cost, were included in accumulated other comprehensive loss, net of income taxes. During fiscal 2017, $0.7 million of these actuarial losses are expected to be recognized in net periodic benefit cost.
Weighted-average assumptions used to determine U.S. pension plan obligations as of August 31 and weighted-average assumptions used to determine net periodic benefit cost for the years ended August 31 are as follows:
The Company employs a total return on investment approach for its pension plan assets whereby a mix of equity and fixed income investments are used to maximize the long-term return for plan assets, at a prudent level of risk. The investment portfolio contains a blend of equity and fixed income investments. Within the equity allocation, a blend of growth and value investments is maintained in a variety of market capitalizations and diversified between U.S. and non-U.S. stocks. The Company’s targeted asset allocation as a percentage of total plan assets is 60% - 80% in equity securities, with the remainder invested in fixed income securities and cash. Cash balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis. At August 31, 2016, the Company’s overall expected long-term rate of return for assets in U.S. pension plans was 7.15%. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The target return is based on historical returns adjusted to reflect the current view of the long-term investment market.
The fair value of all U.S. pension plan assets is determined based on quoted market prices and therefore all plan assets are determined based on Level 1 inputs, except for fixed income securities which are valued based on Level 2 inputs, as defined in Note 6, “Fair Value Measurements.” The U.S. pension plan investment allocations by asset category were as follows (in thousands):
Projected benefit payments from plan assets to participants in the Company’s U.S. pension plans are $2.8 million for fiscal 2017, $2.9 million for both fiscal 2018 and 2019, $3.0 million for both fiscal 2020 and 2021 and $15.0 million in aggregate for the following five years.
Foreign Defined Benefit Pension Plans
The Company has ten foreign defined benefit pension plans which cover certain existing and former employees of businesses outside the U.S. Most of the participants in the foreign defined benefit pension plans are current employees and are earning additional benefits. The funded status of these plans is summarized as follows (in thousands):
Net periodic benefit cost for these foreign plans was $0.7 million, $1.0 million and $1.3 million in fiscal 2016, 2015 and 2014, respectively. The weighted average discount rate utilized for determining the benefit obligation at August 31, 2016 and 2015 was 1.9% and 3.1%, respectively. The plan assets of these foreign pension plans consist primarily of participating units in fixed income and equity securities and insurance contracts. The Company’s overall expected long-term rate of return on these investments is 4.6%. During fiscal 2017, the Company anticipates contributing $0.4 million to these pension plans.
Projected benefit payments from plan assets to participants in the these foreign plans are $0.5 million for fiscal 2017, $1.3 million for fiscal 2018, $0.3 million for fiscal 2019, $1.0 million for fiscal 2020, $0.9 million for fiscal 2021 and $3.3 million in aggregate for the following five years.
Other Postretirement Health Benefit Plans
The Company provides other postretirement health benefits (“OPEB”) to certain existing and former employees of domestic businesses it acquired, who were entitled to such benefits prior to acquisition. These unfunded plans had a benefit obligation of $4.0 million and $3.5 million at August 31, 2016 and 2015, respectively. These obligations are determined utilizing assumptions consistent with those used for U.S. pension plans and a health care cost trend rate of 7.5%, trending downward to 5.0% by the year 2022, and remaining level thereafter. Net periodic benefit (income) costs for the other postretirement benefits was less than $0.1 million for each of the fiscal years ended August 31, 2016, 2015 and 2014. Benefit payments from the plan are funded through participant contributions and Company contributions and are projected to be $0.3 million in fiscal 2017.
Defined Contribution Benefit Plans
The Company maintains a 401(k) plan for substantially all full time U.S. employees (the “401(k) Plan”). Under plan provisions, the Company can fund either cash or issue new shares of Class A common stock for its contributions. Amounts are allocated to accounts set aside for each employee’s retirement. Employees generally may contribute up to 50% of their compensation to individual accounts within the 401(k) Plan. While contributions vary, the Company generally makes core contributions to employee accounts equal to 3% of each employee’s eligible annual cash compensation, subject to IRS limitations. In addition, the Company matches approximately 25% of each employee’s contribution up to 6% of the employee’s eligible compensation. The Company also maintains a Restoration Plan that allows eligible highly compensated employees (as defined by the Internal Revenue Code) to receive a core contribution as if no IRS limits were in place. Company contributions to the Restoration Plan are made in the form of Actuant common stock and are contributed into each eligible participant’s deferred compensation plan account. Expense recognized related to the 401(k) plan totaled $4.4 million, $4.3 million and $4.5 million for the years ended August 31, 2016, 2015 and 2014, respectively.
In addition to the 401(k) plan, the Company sponsors a nonqualified supplemental executive retirement plan (“the SERP Plan”). The unfunded SERP Plan is an unfunded defined contribution plan that covers certain executive employees and has an annual contribution formula based on age and years of service (with Company contributions ranging from 3% to 6% of eligible wages). This unfunded plan had a $1.6 million obligation at both August 31, 2016 and 2015, respectively. Expense recognized in fiscal 2016, 2015 and 2014 for the SERP Plan was $0.3 million, $0.3 million, and $0.4 million respectively.
Deferred Compensation Plan
The Company maintains a deferred compensation plan to allow eligible U.S. employees to defer receipt of current cash compensation in order to provide future savings benefits. Eligibility is limited to employees that earn compensation that exceeds certain pre-defined levels. Participants have the option to invest their deferrals in a fixed income investment, in Company common stock, or a combination of the two. The fixed income portion of the plan is unfunded, and therefore all compensation deferred under the plan is held by the Company and commingled with its general assets. Liabilities of $22.2 million and $22.7 million are included in the consolidated balance sheets at August 31, 2016 and 2015, respectively, to reflect the unfunded portion of the deferred compensation liability. The Company recorded expense in "Financing costs, net" of $1.6 million, $1.8 million and $1.7 million for the years ended August 31, 2016, 2015 and 2014, respectively, for non-funded interest on participant deferrals in the fixed income investment option. Company common stock contributions to fund the plan are held in a rabbi trust, accounted for in a manner similar to treasury stock and are recorded at cost in “Stock held in trust” within shareholders’ equity with the corresponding deferred compensation liability also recorded within shareholders’ equity. Since no investment diversification is permitted within the trust, changes in fair value of Actuant common stock are not recognized.
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