| 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, 2016 and 2015 is as follows: Qualified Pension Benefits Non-Qualified Pension Benefits Other Benefits 2016 2015 2016 2015 2016 2015 (Dollars in thousands) Change in benefit obligation: Benefit obligation at beginning of period $ 730,795 $ 720,893 $ 33,184 $ 37,983 $ 41,997 $ 44,318 Service cost 37,533 36,006 1,035 875 1,412 1,513 Interest cost 30,773 28,046 1,406 1,414 1,709 1,489 Actuarial (gain) loss 361 20,993 (3,333 ) 393 (4,892 ) 1,563 Assumption change 57,385 (16,297 ) 2,679 (1,082 ) 2,602 (5,136 ) Plan amendments 411 — (1,045 ) — (4,495 ) — Settlements — — — (5,715 ) — — Benefits paid (44,509 ) (58,846 ) (1,230 ) (684 ) (1,554 ) (1,750 ) Benefit obligation at end of period $ 812,749 $ 730,795 $ 32,696 $ 33,184 $ 36,779 $ 41,997 Change in plan assets: Fair value of plan assets at beginning of period $ 796,379 $ 822,125 $ — $ — $ — $ — Actual gain (loss) on plan assets 88,089 (6,065 ) — — — — Company contributions 43,306 39,165 1,230 6,399 1,554 1,750 Settlements — — — (5,715 ) — — Benefits paid (44,509 ) (58,846 ) (1,230 ) (684 ) (1,554 ) (1,750 ) Fair value of plan assets at end of period $ 883,265 $ 796,379 $ — $ — $ — $ — Funded status at end of period $ 70,516 $ 65,584 $ (32,696 ) $ (33,184 ) $ (36,779 ) $ (41,997 ) Amounts recognized on balance sheet: Non-current assets $ 70,594 $ 65,927 $ — $ — $ — $ — Accrued benefit cost: Current liabilities — — (1,880 ) (1,752 ) (2,490 ) (2,708 ) Non-current liabilities (78 ) (343 ) (30,816 ) (31,432 ) (34,289 ) (39,289 ) Ending balance $ 70,516 $ 65,584 $ (32,696 ) $ (33,184 ) $ (36,779 ) $ (41,997 ) Amounts recognized in accumulated other comprehensive loss (pretax): Prior service cost (credit) $ 4,021 $ 5,217 $ (641 ) $ 631 $ (4,847 ) $ (472 ) Net (gain) loss 275,146 276,450 7,815 9,161 (12,235 ) (10,409 ) Ending balance $ 279,167 $ 281,667 $ 7,174 $ 9,792 $ (17,082 ) $ (10,881 ) The accumulated benefit obligation of the qualified pension plans was $ 766.2 million and $ 693.9 million at August 31, 2016 and 2015 , respectively. The accumulated benefit obligation of the non-qualified pension plans was $ 23.7 million and $ 23.6 million at August 31, 2016 and 2015 , respectively. One significant assumption for pension plan accounting is the discount rate. Historically, we have selected a discount rate each year (as of our fiscal year-end measurement date) for our plans based upon a high-quality corporate bond yield curve for which the cash flows from coupons and maturities match the year-by-year projected benefit cash flows for our pension plans. The corporate bond yield curve is comprised of high-quality fixed income debt instruments available at the measurement date. At August 31, 2016, we changed to use an individual spot-rate approach, discussed below. This alternative approach focuses on measuring the service cost and interest cost components of net periodic benefit cost by using individual spot rates derived from a high-quality corporate bond yield curve and matched with separate cash flows for each future year instead of a single weighted-average discount rate approach. As of August 31, 2016 , we changed the method used to estimate the service and interest cost components of net periodic benefit cost for pension and other post retirement benefits. This change in methodology is expected to result in a decrease in the service and interest cost components for the pension and other post retirement benefit costs beginning in fiscal 2017. We historically estimated these service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Beginning in 2017, we elected to utilize a full-yield curve approach in the determination of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. We elected to make this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. This change does not affect the measurement of our total benefit obligations at August 31, 2016 , the net periodic cost recognized in fiscal 2016 or the ultimate benefit payment that must be made in the future. We have accounted for this change as a change in accounting estimate and, accordingly, have accounted for it on a prospective basis. Components of net periodic benefit costs for the years ended August 31, 2016 , 2015 and 2014 are as follows: Qualified Pension Benefits Non-Qualified Pension Benefits Other Benefits 2016 2015 2014 2016 2015 2014 2016 2015 2014 (Dollars in thousands) Components of net periodic benefit costs: Service cost $ 37,533 $ 36,006 $ 30,417 $ 1,035 $ 875 $ 860 $ 1,412 $ 1,513 $ 1,729 Interest cost 30,773 28,046 29,900 1,406 1,414 1,660 1,709 1,489 1,918 Expected return on assets (48,055 ) (49,746 ) (47,655 ) — — — — — — Settlement of retiree obligations — — — — 1,635 — — — — Prior service cost (credit) amortization 1,606 1,631 1,593 228 228 229 (120 ) (426 ) (493 ) Actuarial loss amortization 19,016 19,621 18,228 692 1,058 957 (464 ) (431 ) (180 ) Net periodic benefit cost $ 40,873 $ 35,558 $ 32,483 $ 3,361 $ 5,210 $ 3,706 $ 2,537 $ 2,145 $ 2,974 Weighted-average assumptions to determine the net periodic benefit cost: Discount rate 4.20 % 4.00 % 4.80 % 4.20 % 4.00 % 4.50 % 4.20 % 4.20 % 3.75 % Expected return on plan assets 6.00 % 6.50 % 6.75 % N/A N/A N/A N/A N/A N/A Rate of compensation increase 4.90 % 4.90 % 4.85 % 4.90 % 5.15 % 4.75 % N/A N/A N/A Weighted-average assumptions to determine the benefit obligations: Discount rate 3.60 % 4.20 % 4.00 % 3.30 % 4.50 % 4.50 % 3.30 % 3.75 % 4.60 % Rate of compensation increase 5.60 % 4.90 % 4.90 % 5.60 % 4.80 % 4.80 % N/A N/A N/A The estimated amortization in fiscal 2017 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) $ 1,563 $ 19 $ (565 ) Amortization of net actuarial (gain) loss 26,969 546 (913 ) For measurement purposes, a 7.6% annual rate of increase in the per capita cost of covered health care benefits was assumed for the year ended August 31, 2016 . The rate was assumed to decrease gradually to 4.5% by 2025 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 $ 280 $ (240 ) Effect on postretirement benefit obligation 2,700 (2,300 ) 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 $ 29.5 million , $ 27.4 million and $ 24.6 million , for the years ended August 31, 2016 , 2015 and 2014 , respectively. We voluntarily contributed $ 43.3 million to qualified pension plans in fiscal 2016 . Based on the funded status of the qualified pension plans as of August 31, 2016 , we do not believe we will be required to contribute to these plans in fiscal 2017 , although we may voluntarily elect to do so. We expect to pay $ 4.4 million to participants of the non-qualified pension and postretirement benefit plans during fiscal 2017 . 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) 2017 $ 48,399 $ 1,880 $ 2,490 2018 62,579 2,360 2,560 2019 68,104 2,360 2,670 2020 67,913 2,350 2,760 2021 71,891 2,540 2,850 2022-2026 400,300 16,370 14,690 We have trusts that hold the assets for the defined benefit plans. CHS has a qualified plan committee that sets 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; and • 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. Our 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 plans. The plans’ target allocation percentages range between 35% and 55% for fixed income securities, and range between 45% and 65% 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, 2016 and 2015 are presented in the tables below: 2016 Level 1 Level 2 Level 3 Total (Dollars in thousands) Cash and cash equivalents $ 4,841 $ — $ — $ 4,841 Equities: Mutual funds 507 — — 507 Common/collective trust at net asset value (1) — — — 228,717 Fixed income securities: Common/collective trust at net asset value (1) — — — 551,604 Partnership and joint venture interests measured at net asset value (1) — — — 95,744 Other assets measured at net asset value (1) — — — 1,852 Total $ 5,348 $ — $ — $ 883,265 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 (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 to 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 hierarchy 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, 2016 , 2015 , and 2014 is outlined in the table below: Contributions of CHS (Dollars in thousands) Plan Name EIN/Plan Number 2016 2015 2014 Surcharge Imposed Expiration Date of Collective Bargaining Agreement Co-op Retirement Plan 01-0689331 / 001 $ 1,862 $ 2,021 $ 2,079 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 as a 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 employers. The most recent financial statements available in 2016 and 2015 are for the Co-op Plan's year-end at March 31, 2015 and 2014, 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 2016 , 2015 and 2014 . |
