Employee Benefit Plans

12 Months Ended

Jun. 30, 2023

Employee Benefit Plans

Employee Benefit Plans

11.     Employee Benefit Plans

Domestic Pension Plan

We maintain a noncontributory defined benefit pension plan for all domestic nonunion employees employed on or prior to December 31, 2013, who meet certain requirements of age, length of service and hours worked per year. We amended the plan to eliminate credit for future service and compensation increases, effective September 2016. Plan benefits are based upon years of service and average compensation, as defined. The measurement dates for the plan were as of June 30, 2023 and 2022.

Changes in the projected benefit obligation were:

For the Year Ended June 30	2023		2022
Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	63,079	$	77,915
Interest cost		2,608		1,675
Benefits paid		(2,865)		(2,426)
Actuarial gain		(2,149)		(14,085)
Projected benefit obligation at end of year	$	60,673	$	63,079

The discount rate used for the projected benefit obligation at June 30, 2023 and 2022, was 5.0% and 4.6%, respectively.

The projected benefit obligation for the year ended June 30, 2023 decreased due to a gain at the annual remeasurement period due to a higher discount rate, partially offset by losses derived from other actuarial assumptions. The discount rate used each period is determined with reference to current long-term bond market rates. The projected benefit obligation also increases each year by the interest cost due to the passage of time and decreases each year by the benefits paid to plan participants.

Changes in the plan assets and funded status of the plan were:

For the Year Ended June 30	2023		2022
Change in plan assets
Fair value of plan assets at beginning of year	$	61,286	$	79,099
Actual return on plan assets		(34)		(15,387)
Benefits paid		(2,865)		(2,426)
Fair value of plan assets at end of year	$	58,387	$	61,286
Liability funded status at end of year	$	(2,286)	$	(1,793)

The actual return on plan assets for the year ended June 30, 2023, was lower than expected due to a reduction in the market value of fixed income securities. Benefits paid increased compared with the prior year as additional participants began receiving benefits. Our investment strategy is to hold a significant portion of our plan assets in fixed income securities with maturities and amounts approximately matching projected future benefit payments.

The funded status is included in other liabilities in the consolidated balance sheets at June 30, 2023 and 2022, respectively. We seek to maintain an asset balance that meets the long-term funding requirements identified by actuarial projections while also satisfying ERISA fiduciary responsibilities. We do not expect to contribute to the domestic pension plan during 2024.

In July 2023, we entered into an annuity purchase agreement to irrevocably transfer a portion of the pension benefit obligation to a third-party insurance company. The annuity purchase price was $26,381 and was approximately equal to the benefit obligation transferred. The annuity purchase was funded from pension assets. During the three months ending September 30, 2023, we will recognize a partial settlement of the pension plan and expect to record an expense of approximately $10,400, resulting from the recognition of net pension losses currently included in Accumulated other comprehensive income and a benefit for income taxes of approximately $2,700.

Accumulated other comprehensive loss related to the plan was:

For the Year Ended June 30	2023		2022
Accumulated other comprehensive loss related to pension plan
Balance at beginning of period	$	(24,208)	$	(19,973)
Amortization of net actuarial loss and prior service costs		721		480
Current period net actuarial loss		(509)		(4,715)
Net change		212		(4,235)
Balance at end of period	$	(23,996)	$	(24,208)

Net periodic pension expense was:

For the Year Ended June 30	2023		2022		2021
Interest cost on benefit obligation	$	2,608	$	1,675	$	1,682
Expected return on plan assets		(2,624)		(3,413)		(3,660)
Amortization of net actuarial loss and prior service costs		721		480		560
Net periodic pension expense (income)	$	705	$	(1,258)	$	(1,418)

Significant actuarial assumptions used for the net periodic pension expense for the plan were:

For the Year Ended June 30	2023		2022		2021
Discount rate for interest cost	4.3	%	2.2	%	2.2	%
Expected rate of return on plan assets	4.4	%	4.4	%	4.9	%
Discount rate for benefit obligation	4.6	%	2.9	%	2.8	%

The plan used the Aon AA Bond Universe as a benchmark for its discount rate as of June 30, 2023, 2022 and 2021. The discount rate is determined by matching the plan’s timing and amount of expected cash outflows to a bond yield curve constructed from a population of AA-rated corporate bond issues that are generally non-callable and have at least $250 million par value outstanding. From this, the discount rate that results in the same present value is calculated.

Estimated future benefit payments, based on the benefit obligation as of June 30, 2023, prior to and after the effect of the July 2023 annuity purchase agreement, are:

		Prior to		After
		July 2023
For the Years Ending June 30		Partial Settlement
2024	$	3,561	$	1,129
2025		3,746		1,338
2026		3,901		1,528
2027		4,044		1,709
2028		4,136		1,845
2029 – 2033		21,230		10,667

The plan’s target asset allocation for 2024 and the weighted-average asset allocation of plan assets as of June 30, 2023 and 2022 are:

	Target
	Allocation	Percentage of Plan Assets
For the Year Ended June 30	2024	2023	2022
Debt securities	65% - 85%	75%	77%
Equity securities	10% - 30%	12%	17%
Global asset allocation/risk parity (1)	0% - 15%	3%	5%
Other	0% - 10%	10%	1%

(1) The global asset allocation/risk parity category consists of a variety of asset classes including, but not limited to, global bonds, global equities, real estate and commodities.

The expected long-term rate of return for the plan’s total assets is generally based on the plan’s asset mix. In determining the rate to use, we consider the expected long-term real returns on asset categories, expectations for inflation, estimates of the effect of active management and actual historical returns.

The investment policy and strategy is to earn a long-term investment return sufficient to meet the obligations of the plan, while assuming a moderate amount of risk in order to maximize investment return. In order to achieve this goal, assets are invested in a diversified portfolio consisting of debt securities, equity securities and other investments in a manner consistent with ERISA’s fiduciary requirements.

The fair values of the plan assets by asset category were:

	Fair Value Measurements Using
As of June 30, 2023	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	6,063	$		$		$	6,063
Common-collective funds
Global large cap equities				5,552		1,519		7,071
Fixed income securities				43,794				43,794
Mutual funds
Global asset allocations/risk parity		1,426						1,426
Other						33		33
	$	7,489	$	49,346	$	1,552	$	58,387

	Fair Value Measurements Using
As of June 30, 2022	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	362	$	—	$	—	$	362
Common-collective funds
Global large cap equities		—		8,783		1,952		10,735
Fixed income securities		665		46,491		—		47,156
Mutual funds
Global asset allocations/risk parity		3,023		—		—		3,023
Other		—		—		10		10
	$	4,050	$	55,274	$	1,962	$	61,286

The table below provides a summary of the changes in the fair value of Level 3 assets:

Change in Fair Value Level 3 assets	2023		2022
Balance at beginning of period	$	1,962	$	3,876
Redemptions		(603)		(1,199)
Change in fair value		193		(715)
Balance at end of period	$	1,552	$	1,962

The following outlines the valuation methodologies used to estimate the fair value of plan assets:

● Cash and cash equivalents are valued at $1 per unit;

● Common-collective funds are determined based on current market values of the underlying assets of the fund;

● Mutual funds and foreign currency deposits are valued using quoted market prices in active markets; and

● For Level 3 managed assets, business appraisers use a combination of valuations and appraisal methodologies, as well as a number of assumptions to create a price that brokers evaluate. For Level 3 non-managed assets, pricing is provided by various sources, such as issuer or investment manager.

Other employee benefit plans

We provide a 401(k) retirement savings plan, under which United States employees may make pre-tax and post-tax contributions. The Company contributes: (i) a matching contribution equal to 100% of the first 6.0% of an employee’s contribution; and, (ii) an additional discretionary contribution of up to 4.5% of compensation, depending on the employee’s age and years of service, provided that such contributions comply with ERISA non-discrimination requirements. Employee and Company contributions are subject to certain ERISA limitations. Employees are immediately vested in Company contributions. Our contribution expense was $6,214, $6,341 and $5,803 in 2023, 2022 and 2021, respectively.

Our consolidated balance sheets include other employee-related liabilities of $10,862 and $12,088 as of June 30, 2023 and 2022, respectively, including international retirement plans, supplemental retirement benefits and long-term incentive arrangements. Expense under these plans was $4,067, $3,788 and $5,095 in 2023, 2022 and 2021, respectively.