PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Defined Benefit Plans

Description of Plans

The Company sponsors several defined benefit pension plans covering U.S. salaried employees and certain foreign and other employee groups. These plans provide retirement benefits based primarily on employee compensation and years of service. Plan assets consist primarily of equity and fixed income investments. The Company also sponsors defined benefit plans that provide postretirement health and life insurance benefits for eligible U.S. employees who have attained specific age and service levels. The health benefits are funded by the Company as the costs of those benefits are incurred. The plan design includes cost-sharing features such as deductibles and coinsurance. The life insurance benefits are funded with deposits to a reserve account held by an insurance company. The Company has the right to amend or discontinue its pension and other postretirement benefit plans at any time.

In the following disclosures, the term “accumulated benefit obligation” (“ABO”) represents the actuarial present value of estimated future benefit payments earned by participants in the Company's defined benefit pension plans as of the balance sheet date without regard to the estimated effect of future compensation increases on those benefits. The term does not apply to other postretirement benefits. “Projected benefit obligation” refers to the projected benefit obligation (“PBO”) for pension benefits and the accumulated postretirement benefit obligation (“APBO”) for other postretirement benefits. These amounts represent the actuarial present value of estimated future benefit payments earned by participants in the benefit plans as of the balance sheet date. For pension benefits, the projected benefit obligation includes the estimated effect of future compensation increases on those benefits.

Actuarial Assumptions

Assumptions used for financial reporting purposes to compute net periodic benefit cost and benefit obligations for the Company's primary defined benefit plans were as follows:



	Pension Benefits						Other Postretirement Benefits
	2014		2013		2012		2014		2013		2012
Discount rates:
Benefit cost for plan year	4.20	%	4.60	%	5.50	%	3.90	%	4.40	%	5.50	%
Benefit obligation at end of plan year	4.50	%	4.20	%	4.60	%	4.30	%	3.90	%	4.40	%
Expected long-term return on plan assets:
Benefit cost for plan year	8.00	%	8.00	%	8.00	%	4.30	%	4.30	%	4.30	%
Benefit obligation at end of plan year	7.75	%	8.00	%	8.00	%	4.30	%	4.30	%	4.30	%
Salary scale:
Benefit cost for plan year	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%
Benefit obligation at end of plan year	4.50	%	5.00	%	5.00	%	4.50	%	5.00	%	5.00	%
Healthcare cost trend rate	N/A		N/A		N/A		7.40	%	7.60	%	7.80	%

The healthcare cost trend rate used by the Company is based on a recent study of medical cost inflation rates. The revised trend assumption of 7.40% in 2014 declines gradually to 4.50% in 2028.

Benefit Obligations, Plan Assets, and Funded Status

The following table reflects the changes in benefit obligations and plan assets in 2014 and 2013, and the funded status of the plans at March 31, 2014 and 2013:



	Pension Benefits						Other Postretirement Benefits
	March 31,						March 31,
	2014			2013			2014			2013
Actuarial present value of benefit obligation:
Accumulated benefit obligation	$	258,240		$	280,626		$	—		$	—
Projected benefit obligation	259,928			299,161			41,846			48,970

Change in projected benefit obligation:
Projected benefit obligation, beginning of year	$	299,161		$	302,632		$	48,970		$	48,784
Service cost	5,190			4,650			527			467
Interest cost	12,223			13,001			2,106			2,303
Effect of discount rate change	(8,316		)	13,798			(2,483		)	3,068
Plan amendment	(22,145		)	—			—			—
Foreign currency exchange rate changes	22			(1,528		)	—			—
Settlements	(2,136		)	(13,027		)	—			—
Other	(2,586		)	(6,420		)	(4,282		)	(2,733		)
Benefit payments	(21,485		)	(13,945		)	(2,992		)	(2,919		)
Projected benefit obligation, end of year	$	259,928		$	299,161		$	41,846		$	48,970

Change in plan assets:
Plan assets at fair value, beginning of year	$	205,942		$	199,525		$	2,932		$	3,062
Actual return on plan assets	15,758			22,865			97			151
Employer contributions	17,866			11,552			2,498			2,638
Settlements	(2,136		)	(13,027		)	—			—
Foreign currency exchange rate changes	(2,663		)	(1,028		)	—			—
Benefit payments	(21,485		)	(13,945		)	(2,992		)	(2,919		)
Plan assets at fair value, end of year	$	213,282		$	205,942		$	2,535		$	2,932

Funded status:
Funded status of the plans, end of year	$	(46,646	)	$	(93,219	)	$	(39,311	)	$	(46,038	)

During the fiscal year ended March 31, 2014, the Company offered terminated participants in its ERISA-regulated U.S. defined benefit pension plan who had not yet begun receiving monthly retirement payments the opportunity to receive a lump-sum distribution of their vested benefit. Benefit payments for fiscal year 2014 in the above table include approximately $7 million paid to participants who accepted that offer.

During the quarter ended September 30, 2013, the Company amended its ERISA-regulated and non-regulated pension plans in the U.S. to change the benefit formula applied to service periods beginning January 1, 2014, to modify early retirement factors, and to cover on a prospective basis certain employees who did not previously participate in the plans. Due to the significance of the amendments on the benefit obligation for the plans, the Company remeasured the plan's assets and liabilities during the quarter using actuarial assumptions that were updated as of the valuation date. The updated actuarial assumptions included an increase in the discount rate used to calculate the benefit liability, reflecting a general rise in the market interest rates since March 31, 2013. The remeasurement resulted in a prior service benefit of approximately $22 million.

The funded status of the Company’s plans at the end of fiscal years 2014 and 2013 was reported in the consolidated balance sheets as follows:



	Pension Benefits						Other Postretirement Benefits
	March 31,						March 31,
	2014			2013			2014			2013
Non-current asset (included in other noncurrent assets)	$	2,476		$	1,280		$	—		$	—
Current liability (included in accounts payable and accrued expenses)	(764		)	(1,581		)	(2,587		)	(3,327		)
Non-current liability (reported as pensions and other postretirement benefits)	(48,358		)	(92,918		)	(36,724		)	(42,711		)
Amounts recognized in the consolidated balance sheets	$	(46,646	)	$	(93,219	)	$	(39,311	)	$	(46,038	)

Additional information on the funded status of the Company’s plans as of the respective measurement dates for the fiscal years ended March 31, 2014 and 2013, is as follows:



	Pension Benefits				Other Postretirement Benefits
	March 31,				March 31,
	2014		2013		2014		2013
For plans with a projected benefit obligation in excess of plan assets:
Aggregate projected benefit obligation (PBO)	$	254,117	$	290,142	$	41,846	$	48,970
Aggregate fair value of plan assets	204,995		195,642		2,535		2,932
For plans with an accumulated benefit obligation in excess of plan assets:
Aggregate accumulated benefit obligation (ABO)	243,496		272,148		N/A		N/A
Aggregate fair value of plan assets	195,627		195,642		N/A		N/A

Net Periodic Benefit Cost

The components of the Company’s net periodic benefit cost were as follows:



	Pension Benefits									Other Postretirement Benefits
	Fiscal Year Ended March 31,									Fiscal Year Ended March 31,
	2014			2013			2012			2014			2013			2012
Components of net periodic benefit cost:
Service cost	$	5,190		$	4,650		$	4,614		$	527		$	467		$	591
Interest cost	12,223			13,001			13,959			2,106			2,303			2,636
Expected return on plan assets	(14,218		)	(14,632		)	(14,958		)	(119		)	(124		)	(134		)
Settlement cost	1,094			3,304			—			—			—			—
Net amortization and deferral	6,779			10,299			6,309			(5		)	(8		)	(335		)
Net periodic benefit cost	$	11,068		$	16,622		$	9,924		$	2,509		$	2,638		$	2,758

A one-percentage-point increase in the assumed healthcare cost trend rate would increase the March 31, 2014, accumulated postretirement benefit obligation by approximately $1.5 million, while a one-percentage-point decrease would reduce the benefit obligation by approximately $1.4 million. The aggregate service and interest cost components of the net periodic postretirement benefit expense for fiscal year 2015 would not change by a significant amount as a result of a one-percentage-point increase or decrease in the assumed healthcare cost trend rate.

Amounts Included in Accumulated Other Comprehensive Loss

Reclassification adjustments represent amounts included in accumulated other comprehensive loss at the beginning of the year that were recognized in net periodic benefit cost during the year. All amounts shown are before allocated income taxes. The amounts recognized in other comprehensive income or loss for fiscal years 2014 and 2013 and the amounts included in accumulated other comprehensive loss at the end of those fiscal years are shown below.



	Pension Benefits						Other Postretirement Benefits
	March 31,						March 31,
	2014			2013			2014			2013
Change in net actuarial loss (gain):
Net actuarial loss (gain), beginning of year	$	93,357		$	108,171		$	(3,918	)	$	(4,644	)
Losses (gains) arising during the year	(12,834		)	(928		)	(6,039		)	717
Reclassification adjustments during the year	(10,035		)	(13,886		)	5			9
Net actuarial loss (gain), end of year	70,488			93,357			(9,952		)	(3,918		)

Change in prior service cost (benefit):
Prior service cost (benefit), beginning of year	(2,617		)	(3,080		)	226			500
Prior service cost (benefit) arising during the year	(22,145		)	—			—			—
Reclassification adjustments during the year	1,764			463			(226		)	(274		)
Prior service cost (benefit), end of year	(22,998		)	(2,617		)	—			226

Total amounts in accumulated other comprehensive loss at end of year, before income taxes	$	47,490		$	90,740		$	(9,952	)	$	(3,692	)

Amounts in the above table reflect the Company and its consolidated subsidiaries. The accumulated other comprehensive loss reported in the consolidated balance sheets also includes pension and other postretirement benefit adjustments related to ownership interests in unconsolidated affiliates. As noted above, the prior service benefit arising during fiscal year 2014 related to an amendment to the Company's U.S. pension plans to change the benefit formula applied to service periods beginning January 1, 2014 and to modify early retirement benefit factors.

The Company expects to recognize approximately $5.8 million of the March 31, 2014 net actuarial loss and $3.1 million of the March 31, 2014 prior service benefit in net periodic benefit cost during fiscal year 2015.

Allocation of Pension Plan Assets

The Company has established, and periodically adjusts, target asset allocations for its investments in its U.S. ERISA-regulated defined benefit pension plan, which represents 91% of consolidated plan assets and 80% of consolidated PBO at March 31, 2014, to balance the needs of liquidity, total return, and risk control. The assets are required to be diversified across asset classes and investment styles to achieve that balance. During the year, the asset allocation is reviewed for adherence to the target policy and rebalanced to the targeted weights. The Company reviews the expected long-term returns of the asset allocation each year to help determine whether changes are needed. The return is evaluated on a weighted-average basis in relation to inflation. The assumed long-term rate of return used to calculate annual benefit expense is based on the asset allocation and expected market returns for those asset classes.

The weighted–average target pension asset allocation and target ranges at the March 31, 2014 measurement date and the actual asset allocations at the March 31, 2014 and 2013 measurement dates by major asset category were as follows:



							Actual Allocation
	Target Allocation						March 31,
Major Asset Category	Target Allocation		Range				2014		2013
Equity securities	46.0	%	36	%	-	56%	48.3	%	57.0	%
Fixed income securities ⁽¹⁾	44.0	%	34	%	-	54%	41.3	%	32.6	%
Alternative investments	10.0	%	5	%	-	15%	10.4	%	10.4	%
Total	100.0	%					100.0	%	100.0	%


⁽¹⁾	Actual amounts include high yield securities and cash balances held for the payment of benefits.

Universal makes regular contributions to its pension and other postretirement benefit plans. As previously noted, for postretirement health benefits, contributions reflect funding of those benefits as they are incurred. With plan contributions and an increase in asset values during fiscal years 2013 and 2014, the Company believes that it is in full compliance with all funding requirements of the Pension Protection Act of 2006. The Company expects to make contributions of approximately $7.1 million to its defined benefit pension plans in fiscal year 2015, including $5.5 million to its ERISA-regulated U.S. plan and $1.6 million to its non-ERISA regulated and other plans.

Estimated future benefit payments to be made from the Company’s plans are as follows:



Fiscal Year:	Pension Benefits		Other Postretirement Benefits
2015	$	16,906	$	2,976
2016	16,855		3,007
2017	18,967		3,035
2018	15,243		3,008
2019	19,842		3,058
2020 - 2024	87,632		14,908

Fair Values of Pension Plan Assets

Assets held by the Company's defined benefit pension plans primarily consist of equity securities, fixed income securities, and alternative investments. Equity securities are primarily invested in actively-traded mutual funds with underlying common stock investments in U.S. and foreign companies ranging in size from small to large corporations. Fixed income securities are also held primarily through actively-traded mutual funds with the underlying investments in both U.S. and foreign securities. The methodologies for determining the fair values of the plan assets are outlined below. Where the values are based on quoted prices for the securities in an active market, they are classified as Level 1 of the fair value hierarchy. Where secondary pricing sources are used, they are classified as Level 2 of the hierarchy. Pricing models that use significant unobservable inputs are classified as Level 3.


•	Equity securities: Investments in equity securities through actively-traded mutual funds are valued based on the net asset values of the units held in the respective funds, which are determined by obtaining quoted prices on nationally recognized securities exchanges. These securities are classified as Level 1

•

Fixed income securities: Fixed income investments that are held through mutual funds are valued based on the net asset values of the units held in the respective funds, which are determined by obtaining quoted prices on nationally recognized securities exchanges. These securities are classified as Level 1. Other fixed income investments are valued at an estimated price that a dealer would pay for a similar security on the valuation date using observable market inputs and are classified as Level 2. These market inputs may include yield curves for similarly rated securities. Small amounts of cash are held in common collective trusts. Fixed income securities also include insurance assets, which are valued based on an actuarial calculation. Those securities are classified as Level 3.

•

Alternative investments: Real estate assets are valued using valuation models that incorporate income and market approaches, including external appraisals, to derive fair values. The hedge fund allocation is a fund of hedge funds and is valued by the manager based on the net asset value of each fund. These models use significant unobservable inputs and are classified as Level 3 within the fair value hierarchy.

Fair values of the assets of the Company’s pension plans as of March 31, 2014 and 2013, classified based on how their values were determined under the fair value hierarchy are as follows:



	March 31, 2014
	Level 1		Level 2		Level 3		Total
Equity securities	$	93,229	$	—	$	—	$	93,229
Fixed income securities⁽¹⁾	80,567		8,287		11,266		100,120
Alternative investments	—		—		19,933		19,933
Total investments	$	173,796	$	8,287	$	31,199	$	213,282



	March 31, 2013
	Level 1		Level 2		Level 3		Total
Equity securities	$	107,164	$	—	$	—	$	107,164
Fixed income securities⁽¹⁾	61,553		10,300		7,435		79,288
Alternative investments	—		—		19,490		19,490
Total investments	$	168,717	$	10,300	$	26,925	$	205,942


⁽¹⁾	Includes high yield securities and cash and cash equivalent balances.

Other Benefit Plans

Universal and several subsidiaries offer employer defined contribution savings plans. Amounts charged to expense for these plans were approximately $1.6 million for fiscal year 2014, $1.5 million for fiscal year 2013, and $1.1 million for fiscal year 2012.