Employee Benefit Obligations

Defined Benefit Plans

HGI

HGI has a noncontributory defined benefit pension plan (the “HGI Pension Plan”) covering certain former U.S. employees. During 2006, the HGI Pension Plan was frozen which caused all existing participants to become fully vested in their benefits.

Additionally, HGI has an unfunded supplemental pension plan (the “Supplemental Plan”) which provides supplemental retirement payments to certain former senior executives of HGI. The amounts of such payments equal the difference between the amounts received under the HGI Pension Plan and the amounts that would otherwise be received if HGI Pension Plan payments were not reduced as the result of the limitations upon compensation and benefits imposed by Federal law. Effective December 1994, the Supplemental Plan was frozen.

Spectrum Brands

Spectrum Brands has various defined benefit pension plans (the “Spectrum Brands Pension Plans”) covering some of its employees in the U.S. and certain employees in other countries, primarily the United Kingdom and Germany. The Spectrum Brands Pension Plans generally provide benefits of stated amounts for each year of service. Spectrum Brands funds its U.S. pension plans in accordance with the requirements of the defined benefit pension plans and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws. Additionally, in compliance with Spectrum Brands’ funding policy, annual contributions to non-U.S. defined benefit plans are equal to the actuarial recommendations or statutory requirements in the respective countries.

Spectrum Brands also sponsors or participates in a number of other non-U.S. pension arrangements, including various retirement and termination benefit plans, some of which are covered by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and therefore are not included in the information presented below. Spectrum Brands also has various nonqualified deferred compensation agreements with certain of its employees. Under certain of these agreements, Spectrum Brands has agreed to pay certain amounts annually for the first 15 years subsequent to retirement or to a designated beneficiary upon death. It is management’s intent that life insurance contracts owned by Spectrum Brands will fund these agreements. Under the remaining agreements, Spectrum Brands has agreed to pay such deferred amounts in up to 15 annual installments beginning on a date specified by the employee, subsequent to retirement or disability, or to a designated beneficiary upon death.

Spectrum Brands also provides postretirement life insurance and medical benefits to certain retirees under separate contributory plans.

Consolidated

The recognition and disclosure provisions of ASC Topic 715: “Compensation-Retirement Benefits” (“ASC 715”) requires recognition of the overfunded or underfunded status of defined benefit pension and postretirement plans as an asset or liability in the consolidated balance sheet, and to recognize changes in that funded status in AOCI.

In accordance with the measurement date provisions of ASC 715, the Company measures all of its defined benefit pension and postretirement plan assets and obligations as of September 30, which is the Company’s fiscal year end.

The following tables provide additional information on the Company’s pension and other postretirement benefit plans which principally relate to Spectrum Brands:



	Pension and Deferred Compensation Benefits						Other Benefits
	2014			2013			2014			2013
Change in benefit obligation
Benefit obligation, beginning of year	$	274.5		$	260.7		$	0.4		$	0.6
Liabilities assumed through acquisitions	—			14.7			—			—
Service cost	3.5			3.0			—			—
Interest cost	11.2			10.6			—			—
Actuarial loss (gain)	15.3			1.1			—			(0.1		)
Participant contributions	—			0.1			—			—
Curtailments	—			(1.5		)	—			(0.1		)
Benefits paid	(11.5		)	(17.4		)	—			—
Foreign currency exchange rate changes	(5.9		)	3.2			—			—
Benefit obligation, end of year	$	287.1		$	274.5		$	0.4		$	0.4
Change in plan assets
Fair value of plan assets, beginning of year	$	190.8		$	168.6		$	—		$	—
Assets acquired through acquisitions	—			6.7			—			—
Actual return on plan assets	13.8			18.3			—			—
Employer contributions	13.8			12.9			—			—
Employee contributions	—			0.1			—			—
Benefits paid	(11.5		)	(17.4		)	—			—
Foreign currency exchange rate changes	(2.4		)	1.6			—			—
Fair value of plan assets, end of year	$	204.5		$	190.8		$	—		$	—
Accrued Benefit Cost / Funded Status	$	(82.6	)	$	(83.7	)	$	(0.4	)	$	(0.4	)
Range of assumptions:
Discount rate	2.0% to 13.5%			1.8% to 13.0%			4.7		%	4.7		%
Expected return on plan assets	2.0% to 7.5%			3.6% to 7.8%			N/A			N/A
Rate of compensation increase	2.3% to 5.5%			2.3% to 5.5%			N/A			N/A

The net underfunded status as of September 30, 2014 and 2013 of $82.6 and $83.7, respectively, is recognized in the accompanying Consolidated Balance Sheets within “Employee benefit obligations.” Included in AOCI as of September 30, 2014 and 2013 were unrecognized net losses of $21.8, net of tax benefit of $0.8 and noncontrolling interest of $13.6, and $17.8, net of tax expense of $0.8 and noncontrolling interest of $11.9, respectively, which have not yet been recognized as components of net periodic pension cost. The net loss in AOCI expected to be recognized during the fiscal year ending September 30, 2015 (“Fiscal 2015”) is $0.9.

At September 30, 2014, the Company’s total pension and deferred compensation benefit obligation of $287.1 consisted of $91.0 associated with U.S. plans and $196.1 associated with international plans. The fair value of the Company’s pension and deferred compensation benefit assets of $204.5 consisted of $78.0 associated with U.S. plans and $126.5 associated with international plans. The weighted average discount rate used for the Company’s domestic plans was approximately 4.2% and approximately 3.3% for its international plans. The weighted average expected return on plan assets used for the Company’s domestic plans was approximately 7.5% and approximately 4.3% for its international plans.

At September 30, 2013, the Company’s total pension and deferred compensation benefit obligation of $274.5 consisted of $85.2 associated with U.S. plans and $189.3 associated with international plans. The fair value of the Company’s pension and deferred compensation benefit assets of $190.8 consisted of $73.8 associated with U.S. plans and $117.0 associated with international plans. The weighted average discount rate used for the Company’s domestic plans was approximately 3.9% and approximately 3.9% for its international plans. The weighted average expected return on plan assets used for the Company’s domestic plans was approximately 7.6% and approximately 4.7% for its international plans.

Net periodic benefit cost for Fiscal 2014, 2013 and 2012 included the following components:



	Pension and Deferred Compensation Benefits									Other Benefits
	Fiscal									Fiscal
	2014			2013			2012			2014		2013		2012
Components of net periodic cost:
Service cost	$	3.5		$	3.4		$	2.4		$	—	$	—	$	—
Interest cost	11.2			10.6			11.4			—		—		0.1
Expected return on assets	(11.0		)	(9.7		)	(9.1		)	—		—		—
Amortization of prior service cost	—			—			0.1			—		—		—
Curtailment gain	(0.1		)	(0.8		)	—			—		—		—
Recognized net actuarial loss(gain)	1.5			2.1			0.9			—		—		(0.1		)
Net periodic cost	$	5.1		$	5.6		$	5.7		$	—	$	—	$	—

The discount rate is used to calculate the projected benefit obligation. The discount rate used is based on the rate of return on government bonds as well as current market conditions of the respective countries where the plans are established.

Below is a summary allocation of all pension plan assets as of the measurement date.



	Weighted Average Allocation
	Target		Actual
	2014		2014		2013
Asset Category
Equity securities	0-60%		27	%	52	%
Fixed income securities	0-40%		28	%	19	%
Other	0-100%		45	%	29	%
	100	%	100	%	100	%

The weighted average expected long-term rate of return on total assets is 5.5%.

The Company has established formal investment policies for the assets associated with these plans. Policy objectives include maximizing long-term return at acceptable risk levels, diversifying among asset classes, if appropriate, and among investment managers, as well as establishing relevant risk parameters within each asset class. Specific asset class targets are based on the results of periodic asset liability studies. The investment policies permit variances from the targets within certain parameters. The weighted average expected long-term rate of return is based on a Fiscal 2014 review of such rates. The plan assets currently do not include holdings of common stock of HGI or its subsidiaries.

The Company’s pension plan assets have a diversified portfolio of investments in U.S. and foreign equity and debt securities. In addition, the plan assets are invested in real estate mutual funds, life insurance contracts and private equity funds.

The Company’s expected future pension benefit payments for Fiscal 2015 through its fiscal year 2024 are as follows:



Fiscal Year	Future Benefit Payments
2015	$	13.8
2016	12.0
2017	12.2
2018	12.7
2019	13.7
2020 to 2024	72.1

The following tables sets forth the fair value of the Company’s pension plan assets, segregated by level within the fair value hierarchy.



	September 30, 2014
	Level 1		Level 2		Level 3		Total
Defined Benefit Plan Assets:
Equity Securities
U.S. equity securities	$	19.9	$	14.3	$	—	$	34.2
Foreign equity securities	11.1		9.7		—		20.8
Debt Securities
U.S. bonds	4.0		20.6		—		24.6
Foreign bonds	3.1		20.5		—		23.6
Foreign government bonds	—		8.6		—		8.6
Real estate	1.2		5.9		—		7.1
Life insurance contracts	—		37.7		—		37.7
Other	—		39.7		—		39.7
Foreign cash & cash equivalents	6.4		1.8		—		8.2
Total defined benefit plan assets	$	45.7	$	158.8	$	—	$	204.5



	September 30, 2013
	Level 1		Level 2		Level 3		Total
Defined Benefit Plan Assets:
Equity Securities
U.S. equity securities	$	18.5	$	24.5	$	—	$	43.0
Foreign equity securities	10.8		39.1		—		49.9
Debt Securities
U.S. bonds	2.3		19.7		—		22.0
Foreign bonds	—		10.7		—		10.7
Foreign government bonds	—		8.0		—		8.0
Real estate	1.2		5.4		—		6.6
Life insurance contracts	—		37.7		—		37.7
Other	—		1.0		—		1.0
Foreign cash & cash equivalents	6.6		5.3		—		11.9
Total defined benefit plan assets	$	39.4	$	151.4	$	—	$	190.8

Defined Contribution Plans

Spectrum Brands sponsors a defined contribution pension plan for its domestic salaried employees, which allows participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code. Spectrum Brands also sponsors defined contribution pension plans for employees of certain foreign subsidiaries. FGL sponsors a defined contribution plan in which eligible participants may defer a fixed amount or a percentage of their eligible compensation, subject to limitations, and FGL makes a discretionary matching contribution of up to 5% of eligible compensation. FGL has also established a nonqualified defined contribution plan for independent agents. FGL makes contributions to the plan based on both FGL’s and the agent’s performance. Contributions are discretionary and evaluated annually. HGI also sponsors a defined contribution plan for its corporate employees in which eligible participants may defer a fixed amount or a percentage of their eligible compensation, subject to limitations. HGI makes a discretionary matching contribution of up to 5% of eligible compensation. Aggregate contributions charged to operations for the defined contribution plans, including discretionary amounts, for Fiscal 2014, 2013 and 2012 were $13.9, $12.1 and $2.8, respectively.