Pension and Other Postretirement Benefit Plans | Pension and Other Postretirement Benefit Plans Company-Only Sponsored Plans We sponsor various defined benefit pension plans covering employees of certain U.S. and international subsidiaries. The pension plans provide pension benefits that are based on the employee’s compensation and years of service. Our funding policy is to fund the actuarially determined accrued benefits where applicable, allowing for projected compensation increases using the projected unit method. The accounting for pension and other post-retirement benefit plans requires the use of assumptions and estimates in order to calculate periodic benefit cost and the value of the plans’ assets and benefit obligations. These assumptions include discount rates, investment returns, and projected salary increases, amongt others. The discount rates used in valuing the plans' benefit obligations were determined with reference to high quality corporate and government bonds that are appropriately matched to the duration of each plan's obligations. The expected long-term rate of return on plan assets is generally based on using country-specific simulation models which select a single outcome for expected return based on the target asset allocation. The expected long-term-rates of return used in the valuation are the annual average returns generated by these assumptions over a 20 year period for each asset class based on the expected long-term rate of return of the underlying assets. The following table sets forth the changes in the plans’ combined net benefit obligation (segregated between plans existing within and outside the U.S.) during each of the fiscal years presented (in thousands): U.S. Pension Plans Non-U.S. Pension Plans 2015 2014 2015 2014 Net benefit obligation at the beginning of the year $ 495,788 $ 468,439 $ 1,196,520 $ 1,307,331 Service cost 12,045 12,077 21,374 25,374 Interest cost 20,629 22,041 44,659 54,208 Participants’ contributions 2,743 3,095 4,402 9,082 Actuarial losses 42,749 27,076 30,238 105,838 Benefits paid (40,289 ) (35,634 ) (35,662 ) (33,387 ) Curtailments and settlements — — (5,763 ) (269,580 ) Plan amendments — (1,306 ) (1,612 ) — Effect of exchange rate changes — — (98,564 ) (2,346 ) Net benefit obligation at the end of the year $ 533,665 $ 495,788 $ 1,155,592 $ 1,196,520 The following table sets forth the changes in the combined Fair Value of the plans’ assets (segregated between plans existing within and outside the U.S.) during each of the fiscal years presented (in thousands): U.S. Pension Plans Non-U.S. Pension Plans 2015 2014 2015 2014 Fair Value of plan assets at the beginning of the year $ 415,350 $ 390,777 $ 876,171 $ 982,479 Actual return on plan assets (1,754 ) 45,484 86,411 130,665 Employer contributions 3,857 11,628 39,326 57,977 Participants’ contributions 2,743 3,095 4,402 9,082 Gross benefits paid (40,289 ) (35,634 ) (35,662 ) (33,387 ) Curtailments/settlements — — (1,646 ) (268,486 ) Effect of exchange rate changes — — (72,704 ) (2,159 ) Fair Value of plan assets at the end of the year $ 379,907 $ 415,350 $ 896,298 $ 876,171 The following table reconciles the combined funded statuses of the plans recognized in the accompanying Consolidated Balance Sheets at October 2, 2015 , and September 26, 2014 (segregated between plans existing within and outside the U.S.) (in thousands): U.S. Pension Plans Non-U.S. Pension Plans 2015 2014 2015 2014 Net benefit obligation at the end of the year $ 533,665 $ 495,788 $ 1,155,592 $ 1,196,520 Fair Value of plan assets at the end of the year 379,907 415,350 896,298 876,171 Under-funded amount recognized at the end of the year $ 153,758 $ 80,438 $ 259,294 $ 320,349 The following table presents the accumulated benefit obligation at October 2, 2015 , and September 26, 2014 (segregated between plans existing within and outside the U.S.) (in thousands): U.S. Pension Plans Non-U.S. Pension Plans 2015 2014 2015 2014 Accumulated benefit obligation at the end of the year $ 488,024 $ 455,245 $ 1,113,016 $ 1,128,715 The following table presents the amounts recognized in the accompanying Consolidated Balance Sheets at October 2, 2015 and September 26, 2014 (segregated between plans existing within and outside the U.S.) (in thousands): U.S. Pension Plans Non-U.S. Pension Plans 2015 2014 2015 2014 Prepaid benefit cost included in prepaid assets $ — $ — $ 4,054 $ 7,123 Accrued benefit cost included in current liabilities — — 381 1,447 Accrued benefit cost included in noncurrent liabilities 153,758 80,438 262,967 326,025 Net amount recognized at the end of the year $ 153,758 $ 80,438 $ 259,294 $ 320,349 Included in the tables are amounts relating to a U.S. pension plan, the participating employees in which are assigned to, and work exclusively on, a specific operating contract with the U.S. federal government. It is the intention of the parties to this contract that the cost of this pension plan will be fully reimbursed by the U.S. federal government pursuant to applicable cost accounting standards. Accordingly, included in “Miscellaneous Noncurrent Assets” in the accompanying Consolidated Balance Sheet at October 2, 2015 is a receivable from the U.S. federal government of approximately $115.5 million ( $61.1 million at September 26, 2014 ) representing the underfunded amount for this pension plan. The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s U.S. plans for each fiscal year presented: 2015 2014 2013 Weighted average discount rates 3.9% to 4.0% 3.9% to 4.4% 4.4% to 5.0% Rates of compensation increases 3.00 % 2.95 % 2.80 % Expected long-term rates of return on plan assets 7.4 % 7.7 % 7.7 % The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s non-U.S. pension plans for each fiscal year presented: 2015 2014 2013 Weighted average discount rates 1.6% to 7.8% 1.8% to 8.8% 0.4% to 9.3% Rates of compensation increases 2.4% to 7.5% 2.6% to 7.5% 2.5% to 7.5% Expected long-term rates of return on plan assets 3.5% to 8.5% 4.5% to 8.5% 0.4% to 8.5% The following table presents certain amounts relating to our U.S. pension plans recognized in accumulated other comprehensive loss at October 2, 2015 , September 26, 2014 and September 27, 2013 (in thousands): 2015 2014 2013 Arising during the period: Net actuarial (gain) loss $ 12,237 $ 1,378 $ (15,850 ) Reclassification adjustments: Net actuarial gain (2,347 ) (2,255 ) (2,674 ) Total $ 9,890 $ (877 ) $ (18,524 ) The following table presents certain amounts relating to our non-U.S. pension plans recognized in accumulated other comprehensive loss at October 2, 2015 , September 26, 2014 and September 27, 2013 (in thousands): 2015 2014 2013 Arising during the period: Net actuarial loss (gain) $ (27,165 ) $ 48,752 $ 27,417 Prior service cost (benefit) (1,512 ) (1 ) 297 Total (28,677 ) 48,751 27,714 Reclassification adjustments: Net actuarial gain (14,034 ) (12,914 ) (9,778 ) Prior service cost (benefit) 51 (19 ) 41 Total (13,983 ) (12,933 ) (9,737 ) Total $ (42,660 ) $ 35,818 $ 17,977 The following table presents certain amounts relating to our pension plans recorded in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at October 2, 2015 , and September 26, 2014 (segregated between U.S. and non-U.S. plans) (in thousands): U.S. Pension Plans Non-U.S. Pension Plans 2015 2014 2015 2014 Net actuarial loss $ 59,458 $ 49,569 $ 208,929 $ 263,913 Prior service cost — — (1,947 ) (487 ) Total $ 59,458 $ 49,569 $ 206,982 $ 263,426 The following table presents the amount of accumulated comprehensive income that will be amortized against earnings as part of our net periodic benefit cost in fiscal 2016 based on 2015 exchange rates (segregated between U.S. and non-U.S. plans) (in thousands): U.S. Pension Plans Non-U.S. Pension Plans Unrecognized net actuarial loss $ 8,876 $ 14,176 Unrecognized prior service cost (235 ) (245 ) Accumulated comprehensive loss to be recorded against earnings $ 8,641 $ 13,931 We consider various factors in developing the estimates for the expected, long-term rates of return on plan assets. These factors include the projected, long-term rates of returns on the various types of assets in which the plans invest, as well as historical returns. In general, investment allocations are determined by each plan’s trustees and/or investment committees. The objectives of the plans’ investment policies are to (i) maximize returns while preserving capital; (ii) provide returns sufficient to meet the current and long-term obligations of the plan as the obligations become due; and (iii) maintain a diversified portfolio of assets so as to reduce the risk associated with having a disproportionate amount of the plans’ total assets invested in any one type of asset, issuer or geography. None of our pension plans hold Jacobs common stock directly (although some plans may hold shares indirectly through investments in mutual funds). The plans’ weighted average asset allocations at October 2, 2015 , and September 26, 2014 (the measurement dates used in valuing the plans’ assets and liabilities) were as follows: U.S. Pension Plans Non-U.S. Pension Plans 2015 2014 2015 2014 Equity securities 70 % 75 % 25 % 29 % Debt securities 21 % 21 % 31 % 32 % Real estate investments 3 % — % 7 % 7 % Other 6 % 4 % 37 % 32 % The following table presents the Fair Value of the Company’s Domestic U.S. plan assets at October 2, 2015 , segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): Fair Values By Level of Fair Value Measurement Inputs Level 1 Level 3 Total Domestic equities $ 225,362 $ — $ 225,362 Overseas equities 41,414 — 41,414 Domestic bonds 80,804 — 80,804 Cash and equivalents 6,041 — 6,041 Real estate — 9,914 9,914 Hedge funds — 16,372 16,372 Total $ 353,621 $ 26,286 $ 379,907 The following table presents the Fair Value of the Company’s non-U.S. pension plan assets at October 2, 2015 , segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): Fair Values By Level of Level 1 Level 3 Total Domestic equities $ 28,007 $ — $ 28,007 Overseas equities 198,309 — 198,309 Domestic bonds 203,266 — 203,266 Overseas bonds 71,545 — 71,545 Cash and equivalents 39,933 — 39,933 Real estate — 61,996 61,996 Insurance contracts — 32,522 32,522 Hedge funds — 260,720 260,720 Total $ 541,060 $ 355,238 $ 896,298 The following table presents the Fair Value of the Company’s U.S. pension plan assets at September 26, 2014 , segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): Fair Values By Level of Level 1 Level 3 Total Domestic equities $ 268,674 $ — $ 268,674 Overseas equities 40,587 — 40,587 Domestic bonds 85,853 — 85,853 Cash and equivalents 3,932 — 3,932 Hedge funds — 16,304 16,304 Total $ 399,046 $ 16,304 $ 415,350 The following table presents the Fair Value of the Company’s Non-U.S. pension plan assets at September 26, 2014 , segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): Fair Values By Level of Level 1 Level 3 Total Domestic equities $ 33,842 $ — $ 33,842 Overseas equities 218,779 — 218,779 Domestic bonds 198,344 — 198,344 Overseas bonds 76,349 — 76,349 Cash and equivalents 37,487 — 37,487 Real estate — 59,966 59,966 Insurance contracts — 37,468 37,468 Hedge funds — 213,936 213,936 Total $ 564,801 $ 311,370 $ 876,171 At October 2, 2015 and September 26, 2014 , the Company holds no assets in the U.S. or non-U.S. pension plans that use Level 2 fair value measurement inputs. The following table summarizes the changes in the Fair Value of the Company’s U.S. Pension Plans’ Level 3 assets for the year ended October 2, 2015 (in thousands): Real Estate Hedge Funds Balance, beginning of year $ — $ 16,304 Purchases, sales, and settlements 10,616 — Realized and unrealized gains (losses) — 68 Transfers (702 ) — Balance, end of year $ 9,914 $ 16,372 The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the year ended October 2, 2015 (in thousands): Real Estate Insurance Contracts Hedge Funds Balance, beginning of year $ 59,966 $ 37,468 $ 213,936 Purchases, sales, and settlements 1,271 526 4,760 Realized and unrealized gains 5,390 1,353 54,719 Transfers — — — Effect of exchange rate changes (4,631 ) (6,825 ) (12,695 ) Balance, end of year $ 61,996 $ 32,522 $ 260,720 The following table summarizes the changes in the Fair Value of the Company’s U.S. Pension Plans’ Level 3 assets for the year ended September 26, 2014 (in thousands): Real Estate Hedge Funds Balance, beginning of year $ 4,411 $ 15,511 Sales (4,411 ) — Realized and unrealized losses — 793 Balance, end of year $ — $ 16,304 The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the year ended September 26, 2014 (in thousands): Infrastructure / Raw Goods Real Estate Insurance Contracts Hedge Funds Balance, beginning of year $ 7,076 $ 57,173 $ 21,214 $ 246,389 Purchases, sales, and settlements (8,125 ) (6,022 ) 975 4,915 Realized and unrealized gains 1,025 8,341 926 (41,096 ) Transfers — — 15,756 — Effect of exchange rate changes 24 474 (1,403 ) 3,728 Balance, end of year $ — $ 59,966 $ 37,468 $ 213,936 The following table presents the amount of cash contributions we anticipate making into the plans during fiscal 2016 (in thousands): U.S. Pension Plans Non-U.S. Pension Plans $ 15,100 $ 30,830 The following table presents the total benefit payments expected to be paid to pension plan participants during each of the next five fiscal years, and in total for the five years thereafter (in thousands): U.S. Pension Plans Non-U.S. Pension Plans 2016 $ 43,155 $ 30,242 2017 47,442 31,632 2018 41,798 33,959 2019 44,240 35,833 2020 44,697 35,869 For the periods 2021 through 2025 216,232 224,452 The following table presents the components of net periodic benefit cost for the Company’s U.S. pension plans recognized in the accompanying Consolidated Statements of Earnings for each of the last three fiscal years (in thousands): 2015 2014 2013 Service cost $ 12,045 $ 12,077 $ 13,814 Interest cost 20,629 22,041 18,569 Expected return on plan assets (29,526 ) (28,495 ) (25,826 ) Actuarial loss 3,756 3,608 8,030 Prior service cost (239 ) (103 ) (103 ) Net pension cost, before special items 6,665 9,128 14,484 Special termination benefits — — 29 Total net periodic pension cost recognized $ 6,665 $ 9,128 $ 14,513 The following table presents the components of net periodic benefit cost for the Company’s Non-U.S. pension plans recognized in the accompanying Consolidated Statements of Earnings for each of the last three fiscal years (in thousands): 2015 2014 2013 Service cost $ 21,374 $ 25,374 $ 30,117 Interest cost 44,659 54,208 51,331 Expected return on plan assets (53,052 ) (56,394 ) (54,817 ) Actuarial loss 17,398 15,993 13,276 Prior service cost (96 ) (28 ) (43 ) Net pension cost, before special items 30,283 39,153 39,864 Curtailments and settlements 255 (15,894 ) (383 ) Total net periodic pension cost recognized $ 30,538 $ 23,259 $ 39,481 Multiemployer Plans In Canada and the U.S., we contribute to various trusteed pension plans covering hourly construction employees under industry-wide agreements. We also contribute to various trusteed plans in Australia and certain countries in Europe covering both hourly and certain salaried employees. Contributions are based on the hours worked by employees covered under these agreements and are charged to direct costs of contracts on a current basis. The majority of the contributions the Company makes to multiemployer pension plans is outside the U.S. With respect to these multiemployer plans, the Company's liability to fund these plans is generally limited to the contributions we are required to make under collective bargaining agreements. Based on our review of our multiemployer pension plans under the guidance provided in ASU 2011-09— Compensation-Retirement Benefits-Multiemployer Plans , we have concluded that none of the multiemployer pension plans into which we contribute are individually significant to our Consolidated Financial Statements. The following table presents the Company’s contributions to these multiemployer plans during each of the last three fiscal years (in thousands): 2015 2014 2013 Canada $ 42,575 $ 56,341 $ 72,660 Europe 10,902 12,693 12,930 United States 5,968 4,485 4,366 Total $ 59,445 $ 73,519 $ 89,956 |