| Benefit plans | Benefit Plans We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate. We also have non-qualified supplemental executive and Board retirement plans. Financial information on changes in benefit obligation, plan assets funded and balance sheets status as of August 31, 2015 and 2014 is as follows: Qualified Pension Benefits Non-Qualified Pension Benefits Other Benefits 2015 2014 2015 2014 2015 2014 (Dollars in thousands) Change in benefit obligation: Benefit obligation at beginning of period $ 720,893 $ 641,284 $ 37,983 $ 36,225 $ 44,318 $ 45,542 Service cost 36,006 30,417 875 860 1,513 1,729 Interest cost 28,046 29,900 1,414 1,660 1,489 1,918 Actuarial (gain) loss 20,993 1,973 393 393 1,563 (4,135 ) Assumption change (16,297 ) 57,406 (1,082 ) 2,421 (5,136 ) 1,425 Plan amendments — 647 — — — — Settlements — — (5,715 ) — — — Benefits paid (58,846 ) (40,734 ) (684 ) (3,576 ) (1,750 ) (2,161 ) Benefit obligation at end of period $ 730,795 $ 720,893 $ 33,184 $ 37,983 $ 41,997 $ 44,318 Change in plan assets: Fair value of plan assets at beginning of period $ 822,125 $ 730,628 $ — $ — $ — $ — Actual gain (loss) on plan assets (6,065 ) 106,531 — — — — Company contributions 39,165 25,700 6,399 3,576 1,750 2,161 Settlements — — (5,715 ) — — — Benefits paid (58,846 ) (40,734 ) (684 ) (3,576 ) (1,750 ) (2,161 ) Fair value of plan assets at end of period $ 796,379 $ 822,125 $ — $ — $ — $ — Funded status at end of period $ 65,584 $ 101,232 $ (33,184 ) $ (37,983 ) $ (41,997 ) $ (44,318 ) Amounts recognized on balance sheet: Non-current assets $ 65,927 $ 103,125 $ — $ — $ — $ — Accrued benefit cost: Current liabilities — — (1,752 ) (3,222 ) (2,708 ) (2,787 ) Non-current liabilities (343 ) (1,893 ) (31,432 ) (34,761 ) (39,289 ) (41,531 ) Ending balance $ 65,584 $ 101,232 $ (33,184 ) $ (37,983 ) $ (41,997 ) $ (44,318 ) Amounts recognized in accumulated other comprehensive loss (pretax): Prior service cost (credit) $ 5,217 $ 6,848 $ 631 $ 859 $ (472 ) $ (592 ) Net (gain) loss 276,450 235,564 9,161 12,542 (10,409 ) (7,573 ) Ending balance $ 281,667 $ 242,412 $ 9,792 $ 13,401 $ (10,881 ) $ (8,165 ) The accumulated benefit obligation of the qualified pension plans was $ 693.9 million and $ 682.1 million at August 31, 2015 and 2014 , respectively. The accumulated benefit obligation of the non-qualified pension plans was $ 23.6 million and $ 22.7 million at August 31, 2015 and 2014 , respectively. The assumption changes for the years ended August 31, 2015 and 2014 were related to increases in and reductions to the discount rates for both CHS and CHS McPherson (formerly known as NCRA) qualified pension plans, respectively. The changes in the discount rates were due to changes in the yield curves for investment grade corporate bonds that CHS and CHS McPherson have historically used. Components of net periodic benefit costs for the years ended August 31, 2015 , 2014 and 2013 are as follows: Qualified Pension Benefits Non-Qualified Pension Benefits Other Benefits 2015 2014 2013 2015 2014 2013 2015 2014 2013 (Dollars in thousands) Components of net periodic benefit costs: Service cost $ 36,006 $ 30,417 $ 31,387 $ 875 $ 860 $ 721 $ 1,513 $ 1,729 $ 2,936 Interest cost 28,046 29,900 25,445 1,414 1,660 1,316 1,489 1,918 2,275 Expected return on assets (49,746 ) (47,655 ) (49,728 ) — — — — — — Settlement of retiree obligations — — — 1,635 — — — — — Prior service cost (credit) amortization 1,631 1,593 1,597 228 229 228 (426 ) (493 ) (120 ) Actuarial loss amortization 19,621 18,228 22,615 1,058 957 921 (431 ) (180 ) 1,104 Transition amount amortization — — — — — — — — 562 Net periodic benefit cost $ 35,558 $ 32,483 $ 31,316 $ 5,210 $ 3,706 $ 3,186 $ 2,145 $ 2,974 $ 6,757 Weighted-average assumptions to determine the net periodic benefit cost: Discount rate 4.00 % 4.80 % 3.80 % 4.00 % 4.50 % 4.25 % 4.20 % 3.75 % 3.75 % Expected return on plan assets 6.50 % 6.75 % 7.25 % N/A N/A N/A N/A N/A N/A Rate of compensation increase 4.90 % 4.85 % 4.50 % 5.15 % 4.75 % 4.75 % N/A N/A N/A Weighted-average assumptions to determine the benefit obligations: Discount rate 4.20 % 4.00 % 4.80 % 4.50 % 4.50 % 4.50 % 3.75 % 4.60 % 3.75 % Rate of compensation increase 4.90 % 4.90 % 4.85 % 4.80 % 4.80 % 4.75 % N/A N/A N/A The estimated amortization in fiscal 2016 from accumulated other comprehensive loss into net periodic benefit cost is as follows: Qualified Pension Benefits Non-Qualified Pension Benefits Other Benefits (Dollars in thousands) Amortization of prior service cost (benefit) $ 1,626 $ 228 $ (120 ) Amortization of net actuarial (gain) loss 19,017 692 (464 ) For measurement purposes, a 6.8% annual rate of increase in the per capita cost of covered health care benefits was assumed for the year ended August 31, 2015 . The rate was assumed to decrease gradually to 5.0% by 2027 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point change in the assumed health care cost trend rates would have the following effects: 1% Increase 1% Decrease (Dollars in thousands) Effect on total of service and interest cost components $ 500 $ (380 ) Effect on postretirement benefit obligation 3,600 (3,200 ) We provide defined life insurance and health care benefits for certain retired employees and Board of Directors participants. The plan is contributory based on years of service and family status, with retiree contributions adjusted annually. We have other contributory defined contribution plans covering substantially all employees. Total contributions by us to these plans were $ 27.4 million , $ 24.6 million and $ 22.9 million , for the years ended August 31, 2015 , 2014 and 2013 , respectively. We voluntarily contributed $ 39.2 million to qualified pension plans in fiscal 2015 . Based on the funded status of the qualified pension plans as of August 31, 2015 , we do not believe we will be required to contribute to these plans in fiscal 2016 , although we may voluntarily elect to do so. We expect to pay $ 4.5 million to participants of the non-qualified pension and postretirement benefit plans during fiscal 2016 . Our retiree benefit payments which reflect expected future service are anticipated to be paid as follows: Qualified Pension Benefits Non-Qualified Pension Benefits Other Benefits Gross (Dollars in thousands) 2016 $ 37,593 $ 1,753 $ 2,708 2017 48,935 2,292 2,781 2018 52,646 1,981 2,909 2019 52,565 2,552 3,017 2020 55,026 2,939 3,175 2021-2025 307,130 23,288 16,831 We have trusts that hold the assets for the defined benefit plans. CHS and CHS McPherson have qualified plan committees that set investment guidelines with the assistance of external consultants. Investment objectives for the plans' assets are as follows: • optimization of the long-term returns on plan assets at an acceptable level of risk • maintenance of a broad diversification across asset classes and among investment managers • focus on long-term return objectives Asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the pension plans. The CHS pension plans' investment policy strategy is such that liabilities match assets. This is being accomplished through the asset portfolio mix by reducing volatility and de-risking the plan. The plans’ target allocation percentages are 50% for fixed income securities, and 50% for equity securities. An annual analysis of the risk versus the return of the investment portfolio is conducted to justify the expected long-term rate of return assumption. We generally use long-term historical return information for the targeted asset mix identified in asset and liability studies. Adjustments are made to the expected long-term rate of return assumption, when deemed necessary, based upon revised expectations of future investment performance of the overall investment markets. The discount rate reflects the rate at which the associated benefits could be effectively settled as of the measurement date. In estimating this rate, we look at rates of return on fixed-income investments of similar duration to the liabilities in the plans that receive high, investment-grade ratings by recognized ratings agencies. The investment portfolio contains a diversified portfolio of investment categories, including domestic and international equities, fixed-income securities and real estate. Securities are also diversified in terms of domestic and international securities, short and long-term securities, growth and value equities, large and small cap stocks, as well as active and passive management styles. The committees believe that with prudent risk tolerance and asset diversification, the plans should be able to meet pension obligations in the future. Our pension plans’ recurring fair value measurements by asset category at August 31, 2015 and 2014 are presented in the tables below: 2015 Level 1 Level 2 Level 3 Total (Dollars in thousands) Cash and cash equivalents $ 4,882 $ — $ — $ 4,882 Equities: Mutual funds 91,619 — — 91,619 Common/collective trust at net asset value (1) — — — 194,463 Fixed income securities: Mutual funds 133,556 20,560 — 154,116 Common/collective trust at net asset value (1) — — — 296,684 Partnership and joint venture interests measured at net asset value (1) — — — 52,640 Other assets measured at net asset value (1) — — — 1,975 Total $ 230,057 $ 20,560 $ — $ 796,379 2014 Level 1 Level 2 Level 3 Total (Dollars in thousands) Cash and cash equivalents $ 4,218 $ — $ — $ 4,218 Equities: Mutual funds 84,830 18,085 — 102,915 Common/collective trust at net asset value (1) — — — 48,400 Fixed income securities: Mutual funds 138,458 8,726 — 147,184 Common/collective trust at net asset value (1) — — — 479,800 Partnership and joint venture interests measured at net asset value (1) — — — 37,649 Other assets measured at net asset value (1) — — — 1,959 Total $ 227,506 $ 26,811 $ — $ 822,125 (1) In accordance with ASC Topic 820-10, Fair Value Measurements , certain assets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of net assets. Definitions for valuation levels are found in Note 13, Fair Value Measurements . We use the following valuation methodologies for assets measured at fair value. Mutual funds: Valued at quoted market prices, which are based on the net asset value of shares held by the plan at year end. Mutual funds traded in active markets are classified within Level 1 of the fair value hierarchy. Certain of the mutual fund investments held by the plan have observable inputs other than Level 1 and are classified within Level 2 of the fair value hierarchy. Mutual funds measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy in accordance with ASC Topic 820-10, Fair Value Measurement . Common/Collective Trusts: Common/Collective trusts primarily consist of equity and fixed income funds and are valued using other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risks, referenced indices, quoted prices in inactive markets, adjusted quoted prices in active markets, adjusted quoted prices on foreign equity securities that were adjusted in accordance with pricing procedures approved by the Trust, etc.). Common/Collective trust investments can be redeemed daily and without restriction. Redemption of the entire investment balance generally requires a 45-60-day notice period. The equity funds provide exposure to large, mid and small cap U.S. equities, international large and small cap equities and emerging market equities. The fixed income funds provide exposure to U.S., international and emerging market debt securities. Common/Collective trusts measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy in accordance with ASC Topic 820-10, Fair Value Measurement . Partnership and joint venture interests: Valued at the net asset value of shares held by the plan at year end as a practical expedient for fair value. The net asset value is based on the fair value of the underlying assets owned by the trust, minus its liabilities then divided by the number of units outstanding. Redemptions of these interests generally require a 45 to 60 day notice period. Partnerships and joint venture interests measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy in accordance with ASC Topic 820-10, Fair Value Measurement. Other assets : Other assets primarily includes real estate funds and hedge funds held in the asset portfolio of our U.S. defined benefit pension plans. Other funds measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value in accordance with ASC Topic 820-10, Fair Value Measurement. We are one of approximately 400 employers that contribute to the Co-op Retirement Plan ("Co-op Plan"), which is a defined benefit plan constituting a “multiple employer plan” under the Internal Revenue Code of 1986, as amended, and a “multiemployer plan” under the accounting standards. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: • Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and • If we choose to stop participating in the multiemployer plan, we may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. Our participation in the Co-op Plan for the years ended August 31, 2015 , 2014 , and 2013 is outlined in the table below: Contributions of CHS (Dollars in thousands) Plan Name EIN/Plan Number 2015 2014 2013 Surcharge Imposed Expiration Date of Collective Bargaining Agreement Co-op Retirement Plan 01-0689331 / 001 $ 2,021 $ 2,079 $ 2,095 N/A N/A Our contributions for the years stated above did not represent more than 5% of total contributions to the Co-op Plan as indicated in the Co-op Plan's most recently available annual report (Form 5500). The Pension Protection Act of 2006 (PPA) does not apply to the Co-op Plan because it is covered and defined as a single-employer plan. There is a special exemption for cooperative plans defining them under the single-employer plan as long as the plan is maintained by more than one employer and at least 85% of the employers are rural cooperatives or cooperative organizations owned by agricultural producers. In the Co-op Plan, a “zone status” determination is not required, and therefore not determined. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. The most recent financial statements available in 2015 and 2014 are for the Co-op Plan's year-end at March 31, 2014 and 2013, respectively. In total, the Co-op Plan was at least 80% funded on those dates based on the total plan assets and accumulated benefit obligations. Because the provisions of the PPA do not apply to the Co-op Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience. In addition to the contributions to the Co-op Plan listed above, total contributions to individually insignificant multi-employer pension plans were immaterial in fiscal 2015 , 2014 and 2013 . |
