Hormel Foods 2015 Annual Report Download - page 52

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50
Benefi ts expected to be paid over the next ten fi scal years are
as follows:
Post-
Pension retirement
(in thousands) Benefi ts Benefi ts
2016 $ 53,515 $ 22,113
2017 55,661 22,441
2018 58,010 22,612
2019 60,934 22,711
2020 63,916 22,621
2021 – 2025 361,518 108,832
Post-retirement benefi ts are net of expected federal sub-
sidy receipts related to prescription drug benefi ts granted
under the Medicare Prescription Drug, Improvement and
Modernization Act of 2003, which are estimated to be $2.4
million per year through 2025.
Target allocations are established in consultation with outside
advisors through the use of asset-liability modeling to attempt
to match the duration of the plan assets with the duration of
the Company’s projected benefi t liability. The asset allocation
strategy attempts to minimize the long-term cost of pension
benefi ts, reduce the volatility of pension expense, and achieve
a healthy funded status for the plans.
During 2014, the 1.7 million shares of Company common
stock held in plan assets were sold. Dividends paid during
2014 on shares held by the plan were $0.7 million.
Based on the October 25, 2015 measurement date, the
Company anticipates making contributions of $24.1 million to
fund the pension plans during fi scal year 2016. The Company
also expects to make contributions of $27.2 million during
2016 that represent benefi t payments for unfunded plans.
The assumed discount rate, expected long-term rate of return on plan assets, rate of future compensation increase, and health
care cost trend rate have a signifi cant impact on the amounts reported for the benefi t plans. A one-percentage-point change in
these rates would have the following effects:
1-Percentage-Point
Expense Benefi t Obligation
(in thousands) Increase Decrease Increase Decrease
Pension Benefi ts:
Discount rate $ (12,892) $ 16,810 $ (157,394) $ 197,869
Expected long-term rate of return on plan assets (11,629) 11,629 – –
Rate of future compensation increase 461 (442) 2,504 (2,417)
Post-retirement Benefi ts:
Discount rate $ (64) $ 5,035 $ (33,462) $ 40,619
Health care cost trend rate 1,749 (1,451) 38,194 (31,112)
The actual and target weighted-average asset allocations for the Company’s pension plan assets as of the plan measurement
date are as follows:
2015 2014
Asset Category Actual Target Range Actual Target Range
Large Capitalization Equity 38.8% 15-35% 33.0% 15-35%
Small Capitalization Equity 5.4% 5-15% 6.0% 5-15%
International Equity 14.0% 15-25% 20.8% 15-25%
Private Equity 6.1% 0-15% 5.0% 0-15%
Total Equity Securities 64.3% 50-75% 64.8% 55-75%
Fixed Income 34.3% 25-45% 34.0% 25-45%
Real Estate – 0-10% – –
Cash and Cash Equivalents 1.4% – 1.2% –