General Mills Defined Benefit Pension Plan General Mills is a leading global manufacturer and marketer of branded consumer foods sold through retail stores.Selected information from
General Mills Defined Benefit Pension Plan
General Mills is a leading global manufacturer and marketer of branded consumer foods sold through retail stores.Selected information from Note 14 on Post Retirement Benefits is available in the attached file.Using this information and our text, answer the following questions.
1. Refer to the footnote information.
A. What is the amount of accumulated benefit obligation on May 31, 2020 for General Mills?
B. What is the amount of projected benefit obligation on May 31, 2020 for General Mills?
2. What is the difference between how compensation levels are estimated for the accumulated vs. the project benefit obligation?
3. Refer to the footnote information on components of benefit expense.How much is the expected return on plan assets?Is this amount based upon the actual amount the plan assets increased, or the anticipated earnings for the plan assets?
4.Refer to the footnote information for the Fair Value of the Plan Assets.For fiscal 2020, were the majority of plan assets invest in Level 1 or Level 2 investments?
5.We learned about the levels of investments in ACC 213. What is a Level 1 investment?
NOTE 14. RETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS Defined Benefit Pension Plans We have defined benefit pension plans covering many employees in the United States, Canada, Switzerland, France, and the United Kingdom. Benefits for salaried employees are based on length of service and final average compensation. Benefits for hourly employees include various monthly amounts for each year of credited service. Our funding policy is consistent with the requirements of applicable laws. We made no voluntary contributions to our principal U.S. plans in fiscal 2020 or fiscal 2019. We do not expect to be required to make any contributions in fiscal 2021. Our principal domestic retirement plan covering salaried employees has a provision that any excess pension assets would be allocated to active participants if the plan is terminated within five years of a change in control. All salaried employees hired on or after June 1, 2013, are eligible for a retirement program that does not include a defined benefit pension plan. In fiscal 2018, we approved an amendment to reorganize the U.S. qualified defined benefit pension plans and the supplemental pension plans that resulted in the spinoff of a portion of the General Mills Pension Plan (the Plan) and the 2005 Supplemental Retirement Plan and the Supplemental Retirement Plan (Grandfathered) (together, the Supplemental Plans) into new plans effective May 31, 2018. The benefits offered to the plans' participants were unchanged. The result of the reorganization was the creation of the General Mills Pension Plan I (Plan D) and the 2005 Supplemental Retirement Plan I and the Supplemental Retirement Plan I (Grandfathered) (together, the Supplemental Plans D). The reorganization was made to facilitate a targeted investment strategy over time and to provide additional flexibility in evaluating opportunities to reduce risk and volatility. Actuarial gains and losses associated with the Plan and the Supplemental Plans are amortized over the average remaining service life of the active participants. Actuarial gains and losses associated with the Plan I and the Supplemental Plans I are amortized over the average remaining life of the participants. Plans with accumulated benefit obligations in excess of plan assets as of May 31, 2020 and May 26, 2019 are as follows: Defined Benefit Pension Plans Fiscal Year In Millions 2020 2019 Projected benefit obligation $ 3,512.9 $ 589.7 Accumulated benefit obligation 3,200.1 552.2 Plan assets at fair value 2,569.9 14.4Components of net periodic benefit expense are as follows: Defined Benefit Pension Plans Fiscal Year In Millions 2020 2019 2018 Service cost $ 92.7 $ 94.6 5 102.9 Interest cost 230.5 248.0 217.9 Expected return on plan assets (449.9) (445.8) (480.2) Amortization of losses gains 106.0 109.8 177.0 Amortization of prior service costs (credits) 1.6 1.5 1.9 Other adjustments Settlement or curtailment losses 0.3 Net (income) expense $ (19.1)$ 8.4 $ 19.5 Assumptions Weighted-average assumptions used to determine fiscal year-end benefit obligations are as follows: Defined Benefit Pension Plans Fiscal Year 2020 2019 Discount rate 3.20 % 3.91 % Rate of salary increases 4.44 4.17 Weighted-average assumptions used to determine fiscal year net periodic benefit expense are as follows: Defined Benefit Pension Plans Fiscal Year 2020 2019 2018 Discount rate 3.91 %4.20 %4.08 % Service cost effective rate 4.19 4.34 4.37 Interest cost effective rate 3.47 3.92 3.45 Rate of salary increases 4.17 4.27 4.25 Expected long-term rate of return on plan assets 6.95 7.25 7.88Fair Value of Plan Assets The fair values of our pension and postretirement benefit plans' assets and their respective levels in the fair value hierarchy by asset category were as follows: Fiscal Year 2020 Fiscal Year 2019 Total Total Level Level In Millions Level 1 Level 2 3 Assets Level 1 Level 2 3 Assets Fair value measurement of pension plan assets: Equity (a) $1,039.6 $ 777.7$ - $1,817.3 $1,226.2 $ 664.6 $ - $1,890.8 Fixed income (b) 1,833.3 1,667.4 - 3,500.7 1,635.5 1,144.9 - 2,780.4 Real asset investments (c) 223.4 0.1 223.5 179.4 59.9 239.3 Other investments (d) 0.2 0.2 0.3 0.3 Cash and accruals 180.3 180.3 186.5 186.5 Fair value measurement of pension plan assets $3,276.6 $2,445.2 $ 0.2 $5,722.0 $3,227.6 $1,869.4 $ 0.3 $5,097.3 Assets measured at net asset value (e) 1,271.2 1,194.3 Total pension plan assets (f) $6,993.2 $6,291.6 (a)Primarily publicly traded common stock for purposes of total return and to maintain equity exposure consistent with policy allocations. Investments include: United States and international equity securities, mutual funds, and equity futures valued at closing prices from national exchanges, and commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments. (b) Primarily government and corporate debt securities and futures for purposes of total return, managing fixed income exposure to policy allocations, and duration targets. Investments include: fixed income securities and bond futures generally valued at closing prices from national exchanges, fixed income pricing models, and independent financial analysts; and fixed income commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments. (c) Publicly traded common stocks in energy, real estate, and infrastructure for the purpose of total return. Investments include: energy, real estate, and infrastructure securities generally valued at closing prices from national exchanges, and commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments. (d)Insurance and annuity contracts to provide a stable stream of income for pension retirees. Fair values are based on the fair value of the underlying investments and contract fair values established by the providers (e)Primarily private investments and common collective trusts that are measured at fair value using the net asset value per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy. (f)Plan assets and obligations are measured as of May 31, 2020 and May 31, 2019. There were no material changes in our level 3 investments in fiscal 2020 and fiscal 2019
