Pension and Other Postretirement Benefit Plans | Pension and Other Postretirement Benefit Plans Company-Only Sponsored Plans We sponsor various defined benefit pension and other post retirement 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 varies by country and plan according to applicable local funding requirements and plan-specific funding agreements. 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, among 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. As a result of the ECR sale, ECR-related pension assets and liabilities that have been sold are reported as discontinued operations in accordance with ASC 210-05, Discontinued Operations . Activity for the year ended September 27, 2019 is shown in the appropriate rows and the balances as of the sale date are shown in the Disposition of ECR Plans rows below. The following table sets forth the changes in the plans’ combined net benefit obligation (segregated between plans existing within and outside the U.S.) for the years ended October 2, 2020 and September 27, 2019 (in thousands): U.S. Plans Non-U.S. Plans October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019 Net benefit obligation at the beginning of the year $ 448,540 $ 448,402 $ 2,258,129 $ 2,149,246 Service cost 409 2,784 5,710 7,171 Interest cost 12,673 16,697 39,469 52,627 Participants’ contributions — 243 167 367 Actuarial (gains)/losses 15,584 52,720 35,626 314,889 Benefits paid (22,836) (30,648) (64,395) (72,453) Curtailments/settlements/plan amendments (16,450) (39,388) (4,782) 30,124 Disposition of ECR Plans — — — (99,504) Effect of exchange rate changes and other, net — (2,270) 118,153 (124,338) Net benefit obligation at the end of the year $ 437,920 $ 448,540 $ 2,388,077 $ 2,258,129 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.) for the years ended October 2, 2020 and September 27, 2019 (in thousands): U.S. Plans Non-U.S. Plans October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019 Fair value of plan assets at the beginning of the year $ 390,210 $ 390,829 $ 1,916,637 $ 1,867,481 Actual return on plan assets 33,345 31,140 61,221 280,785 Employer contributions 88 10,668 33,192 32,063 Participants’ contributions — 243 167 367 Gross benefits paid (22,836) (30,648) (64,395) (72,453) Curtailments/settlements/plan amendments (18,557) (9,751) (4,782) (5,814) Disposition of ECR Plans — — — (76,111) Effect of exchange rate changes and other, net — (2,271) 101,316 (109,681) Fair value of plan assets at the end of the year $ 382,250 $ 390,210 $ 2,043,356 $ 1,916,637 During fiscal 2020, the Company incurred combined curtailment and settlement losses on our defined benefit plans of approximately $4.6 million primarily related to the Ireland and U.S. plans. During fiscal 2019, the Company incurred combined curtailment and settlement gains on its defined benefit plans of approximately $33.1 million primarily related to the CH2M retiree medical (further discussed below) and Ireland plans. The following table reconciles the combined funded statuses of the plans recognized in the accompanying Consolidated Balance Sheets at October 2, 2020 and September 27, 2019 (segregated between plans existing within and outside the U.S.) (in thousands): U.S. Plans Non-U.S. Plans October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019 Net benefit obligation at the end of the year $ 437,920 $ 448,540 $ 2,388,077 $ 2,258,129 Fair value of plan assets at the end of the year 382,250 390,210 2,043,356 1,916,637 Underfunded amount recognized at the end of the year $ 55,670 $ 58,330 $ 344,721 $ 341,492 The following table presents the accumulated benefit obligation at October 2, 2020 and September 27, 2019 (segregated between plans existing within and outside the U.S.) (in thousands): U.S. Plans Non-U.S. Plans October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019 Accumulated benefit obligation at the end of the year $ 436,770 $ 447,609 $ 2,376,059 $ 2,244,710 The following table presents the amounts recognized in the accompanying Consolidated Balance Sheets at October 2, 2020 and September 27, 2019 (segregated between plans existing within and outside the U.S.) (in thousands): U.S. Plans Non-U.S. Plans October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019 Prepaid benefit cost included in noncurrent assets $ — $ — $ 1,037 $ 2,939 Accrued benefit cost included in current liabilities 85 85 4,375 4,177 Accrued benefit cost included in noncurrent liabilities 57,919 58,245 339,049 340,254 Net amount recognized at the end of the year $ 58,004 $ 58,330 $ 342,387 $ 341,492 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 the years ended October 2, 2020, September 27, 2019 and September 28, 2018: For the Years Ended October 2, 2020 September 27, 2019 September 28, 2018 Discount rates 2.0% to 2.7% 2.8% to 3.1% 3.9% to 4.2% Rates of compensation increases 3.5% 3.5% 3.5% Expected long-term rates of return on assets 4.6% to 4.7% 5.1% 5.8% to 5.9% 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. plans for the years ended October 2, 2020, September 27, 2019 and September 28, 2018: For the Years Ended October 2, 2020 September 27, 2019 September 28, 2018 Discount rates 0.4% to 6.6% 0.2% to 7.1% 1.3% to 8.1% Rates of compensation increases 2.7% to 7.5% 3.7% to 7.5% 3.8% to 7.5% Expected long-term rates of return on assets 1.8% to 7.0% 2.3% to 7.5% 3.8% to 7.5% The following table presents certain amounts relating to our U.S. plans recognized in accumulated other comprehensive (gain) loss at October 2, 2020, September 27, 2019 and September 28, 2018 (in thousands): October 2, 2020 September 27, 2019 September 28, 2018 Arising during the period: Net actuarial (gain) loss $ (900) $ 36,108 $ (7,514) Prior service cost (benefit) 1,589 — — Total 689 36,108 (7,514) Reclassification adjustments: Net actuarial losses (2,653) (2,282) (2,913) Prior service cost (benefit) (244) — — Total (2,897) (2,282) (2,913) Total $ (2,208) $ 33,826 $ (10,427) The following table presents certain amounts relating to our non-U.S. plans recognized in accumulated other comprehensive (gain) loss at October 2, 2020, September 27, 2019 and September 28, 2018 (in thousands): October 2, 2020 September 27, 2019 September 28, 2018 Arising during the period: Net actuarial (gain) loss $ 71,676 $ 83,368 $ 59,827 Net (gain) loss on Sale of ECR — (12,520) — Prior service cost (benefit) — 29,829 215 Total 71,676 100,677 60,042 Reclassification adjustments: Net actuarial losses (6,322) (6,546) (5,507) Prior service cost (1,169) (1,075) 181 Total (7,491) (7,621) (5,326) Total $ 64,185 $ 93,056 $ 54,716 The following table presents certain amounts relating to our plans recorded in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at October 2, 2020 and September 27, 2019 (segregated between U.S. and non-U.S. plans) (in thousands): U.S. Plans Non-U.S. Plans October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019 Net actuarial loss $ 67,530 $ 71,083 $ 401,930 $ 365,661 Prior service cost 1,345 — 27,921 28,346 Total $ 68,875 $ 71,083 $ 429,851 $ 394,007 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 2021 based on 2020 exchange rates (segregated between U.S. and non-U.S. plans) (in thousands): U.S. Plans Non-U.S. Plans Unrecognized net actuarial loss $ 4,249 $ 10,016 Unrecognized prior service cost 431 1,431 Accumulated comprehensive loss to be recorded against earnings $ 4,680 $ 11,447 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, 2020 and September 27, 2019 (the measurement dates used in valuing the plans’ assets and liabilities) were as follows: U.S. Plans Non-U.S. Plans October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019 Equity securities 3 % 3 % 21 % 20 % Debt securities 58 % 58 % 56 % 52 % Real estate investments — % — % 7 % 7 % Other 39 % 39 % 17 % 21 % The following table presents the Fair Value of the Company’s Domestic U.S. plan assets at October 2, 2020, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): October 2, 2020 Fair Value, Determined Using Fair Value Measurement Inputs Level 1 Level 2 Level 3 Investments measured at Net Asset Value Total Domestic equities $ 12,376 $ — $ — $ — $ 12,376 Domestic bonds 68,324 131,534 — — 199,858 Overseas bonds — 19,223 — — 19,223 Cash and equivalents 18,226 — — — 18,226 Mutual funds 132,567 — — — 132,567 Total $ 231,493 $ 150,757 $ — $ — $ 382,250 The following table presents the Fair Value of the Company’s non-U.S. plan assets at October 2, 2020, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): October 2, 2020 Fair Value, Determined Using Fair Value Measurement Inputs Level 1 Level 2 Level 3 Investments measured at Net Asset Value Total Domestic equities $ — $ 103,036 $ — $ 5,745 $ 108,781 Overseas equities — 229,576 — 87,725 317,301 Domestic bonds — 34,469 — 1,175 35,644 Overseas bonds — 1,049,119 — 58,493 1,107,612 Cash and equivalents 24,568 — — — 24,568 Real estate — 10,383 105,422 — 115,805 Insurance contracts — 4,402 67,709 17,909 90,020 Hedge funds — — 171,730 7,153 178,883 Mutual funds — 64,742 — — 64,742 Total $ 24,568 $ 1,495,727 $ 344,861 $ 178,200 $ 2,043,356 The following table presents the Fair Value of the Company’s U.S. plan assets at September 27, 2019, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): September 27, 2019 Fair Value, Determined Using Fair Value Measurement Inputs Level 1 Level 2 Level 3 Investments measured at Net Asset Value Total Domestic equities $ 10,890 $ — $ — $ — $ 10,890 Domestic bonds 65,490 134,594 — — 200,084 Overseas bonds — 20,020 — — 20,020 Cash and equivalents 28,972 — — — 28,972 Mutual funds 130,244 — — — 130,244 Total $ 235,596 $ 154,614 $ — $ — $ 390,210 The following table presents the Fair Value of the Company’s non-U.S. plan assets at September 27, 2019, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands): September 27, 2019 Fair Value, Determined Using Fair Value Measurement Inputs Level 1 Level 2 Level 3 Investments measured at Net Asset Value Total Domestic equities $ — $ 17,255 $ — $ 19,413 $ 36,668 Overseas equities — 182,600 — 50,127 232,727 Domestic bonds — 306,225 — 34,408 340,633 Overseas bonds — 728,616 — 39,292 767,908 Cash and equivalents 37,811 (16) — — 37,795 Real estate — 24,735 97,539 15,198 137,472 Insurance contracts — 4,478 72,788 — 77,266 Derivatives — — — — — Hedge funds — — 130,200 7,156 137,356 Mutual funds — 148,812 — — 148,812 Total $ 37,811 $ 1,412,705 $ 300,527 $ 165,594 $ 1,916,637 The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the years ended September 27, 2019 and October 2, 2020 (in thousands): Real Estate Insurance Contracts Hedge Funds Balance at Balance at September 28, 2018 $ 99,587 $ 95,782 $ 135,786 Purchases, sales, and settlements (17,902) (5,126) (26,591) Realized and unrealized gains 21,838 9,134 29,161 Disposition of ECR Assets — (22,885) — Effect of exchange rate changes (5,984) (4,117) (8,156) Balance at September 27, 2019 $ 97,539 $ 72,788 $ 130,200 Purchases, sales, and settlements (475) (7,375) 29,999 Realized and unrealized gains (losses) 3,337 (1,399) 5,435 Effect of exchange rate changes 5,021 3,695 6,096 Balance at October 2, 2020 $ 105,422 $ 67,709 $ 171,730 The following table presents the amount of cash contributions we anticipate making into the plans during fiscal 2021 (in thousands): U.S. Plans Non-U.S. Plans Anticipated cash contributions $ — $ 31,258 The following table presents the total benefit payments expected to be paid to plan participants during each of the next five fiscal years, and in total for the five years thereafter (in thousands): U.S. Plans Non-U.S. Pans 2021 $ 34,757 $ 70,264 2022 32,690 69,594 2023 32,022 71,386 2024 30,710 72,131 2025 29,312 73,217 For the periods 2026 through 2030 129,516 406,156 The following table presents the components of net periodic benefit cost for the Company’s U.S. plans recognized in the accompanying Consolidated Statements of Earnings for the years ended October 2, 2020, September 27, 2019 and September 28, 2018 (in thousands): October 2, 2020 September 27, 2019 September 28, 2018 Service cost $ 409 $ 2,784 $ 4,765 Interest cost 12,673 16,697 13,778 Expected return on plan assets (17,670) (21,508) (19,663) Actuarial loss 3,518 3,026 3,845 Prior service cost 323 — — Net pension cost, before special items $ (747) $ 999 $ 2,725 Curtailment expense/Settlement (gain) loss 3,436 (35,020) 4,146 Total net periodic pension cost recognized $ 2,689 $ (34,021) $ 6,871 The following table presents the components of net periodic benefit cost for the Company’s Non-U.S. plans recognized in the accompanying Consolidated Statements of Earnings for the years ended October 2, 2020, September 27, 2019 and September 28, 2018 (in thousands): October 2, 2020 September 27, 2019 September 28, 2018 Service cost $ 5,710 $ 7,171 $ 8,269 Interest cost 39,469 52,627 49,324 Expected return on plan assets (93,407) (82,274) (83,328) Actuarial loss 7,578 7,854 6,655 Prior service cost 1,405 1,263 (257) Net pension cost, before special items $ (39,245) $ (13,359) $ (19,337) Curtailment expense/Settlement (gain) loss 1,341 1,933 1,268 Total net periodic pension (income) cost recognized $ (37,904) $ (11,426) $ (18,069) Total net periodic pension (income) cost recognized from Discontinued Operations $ — $ 2,282 $ 3,606 Total net periodic pension (income) cost recognized from Continuing Operations $ (37,904) $ (13,708) $ (21,675) As a result of the adoption of ASU 2017-07, Compensation- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost in the first quarter of fiscal 2019, the service cost component of net periodic pension expense has been presented in the same line item as other compensation costs (direct cost of contracts and selling, general and administrative expenses) and the other components of net periodic pension expense have been reclassified from selling, general and administrative expense and direct cost of contracts and instead presented in miscellaneous income (expense), net on the Consolidated Statements of Earnings for the year ended September 28, 2018 in the amount of $24.2 million. In the first quarter of fiscal 2019, the Company elected to discontinue the CH2M Hill Retiree Medical Plan and the OMI Retiree Medical Plan, effective December 31, 2018. Lump sum payments were made to participants in fiscal 2019, resulting in a plan settlement and related settlement gain of $35.0 million recognized in fiscal 2019. On January 1, 2019, the CH2M Hill Pension Plan and the CH2M Hill IDC Pension Plan merged into the Company's Sverdrup Pension Plan. The newly combined plan is called the Jacobs Consolidated Pension Plan. Due to a ruling by the High Court in the United Kingdom regarding equalization between men and women of a tranche of pension (the Guaranteed Minimum Pension) accrued between 1990 and 1997, Jacobs measured the estimated impact of this ruling in its consolidated financial statements, resulting in an increase of approximately $38.2 million in the ASC 715 balance sheet liability in fiscal 2019, with an offset to other comprehensive income, net of tax. Additionally, the Company recognized an additional $1.5 million in additional net periodic benefit cost during the year ended September 27, 2019 as a result of the ruling. Multiemployer Plans In the U.S. and various other countries, we contribute to trusteed pension plans covering hourly and certain salaried employees under industry-wide agreements. 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 are 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. Additionally, in fiscal year 2019, all Canadian and some US and European multiemployer plans were sold in connection with the ECR sale, which resulted in a year over year decrease in contributions made. The following table presents the Company’s contributions to these multiemployer plans for the years ended October 2, 2020, September 27, 2019 and September 28, 2018 (in thousands): October 2, 2020 September 27, 2019 September 28, 2018 Canada $ — $ 16,625 $ 36,354 Europe 1,922 9,413 10,677 United States 6,637 7,149 9,536 Contributions to multiemployer pension plans $ 8,559 $ 33,187 $ 56,567 |