Postretirement Benefits |
NOTE N – POSTRETIREMENT BENEFITS
We sponsor several unfunded-health-care-benefit plans for certain
of our retired employees as well as post-retirement life insurance
for certain key employees. Eligibility for these benefits is based
upon various requirements. The following table illustrates the
effect on operations of these plans for the three years ended
May 31, 2014:
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U.S. Plans |
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Non-U.S. Plans |
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(In thousands)
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2014 |
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2013 |
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2012 |
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2014 |
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2013 |
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2012 |
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Service cost - Benefits earned during the period
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
1,264 |
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$ |
1,185 |
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$ |
745 |
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Interest cost on the accumulated obligation
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297 |
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349 |
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416 |
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1,225 |
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1,188 |
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968 |
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Amortization of:
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Prior service (credit)
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(153 |
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(86 |
) |
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(86 |
) |
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Net actuarial (gains) losses
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(144 |
) |
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16 |
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(58 |
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516 |
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470 |
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72 |
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Net Periodic Postretirement Expense
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$ |
— |
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$ |
279 |
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$ |
272 |
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$ |
3,005 |
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$ |
2,843 |
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$ |
1,785 |
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The changes in benefit obligations of the plans at May 31,
2014 and 2013 were as follows:
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U.S. Plans |
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Non-U.S. Plans |
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(In thousands)
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2014 |
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2013 |
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2014 |
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2013 |
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Accumulated postretirement benefit obligation at beginning of
year
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$ |
8,514 |
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$ |
9,677 |
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$ |
28,415 |
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$ |
24,517 |
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Service cost
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— |
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1,264 |
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1,185 |
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Interest cost
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297 |
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349 |
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1,225 |
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1,188 |
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Benefit payments
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(362 |
) |
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(572 |
) |
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(421 |
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(441 |
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Medicare subsidy received
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37 |
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74 |
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Plan amendments
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(1,471 |
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Actuarial (gains) losses
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(228 |
) |
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(1,014 |
) |
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(766 |
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1,988 |
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Currency exchange rate changes
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(1,462 |
) |
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(22 |
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Accumulated and accrued postretirement benefit obligation at end
of year
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$ |
6,787 |
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$ |
8,514 |
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$ |
28,255 |
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$ |
28,415 |
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In determining the postretirement benefit amounts outlined above,
measurement dates as of May 31 for each period were
applied.
Amounts recognized in the Consolidated Balance Sheets for the years
ended May 31, 2014 and 2013 are as follows:
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U.S. Plans |
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Non-U.S. Plans |
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(In thousands)
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2014 |
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2013 |
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2014 |
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2013 |
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Current liabilities
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$ |
(410 |
) |
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$ |
(642 |
) |
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$ |
(522 |
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$ |
(486 |
) |
Noncurrent liabilities
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(6,377 |
) |
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(7,872 |
) |
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(27,733 |
) |
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(27,929 |
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Net Amount Recognized
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$ |
(6,787 |
) |
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$ |
(8,514 |
) |
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$ |
(28,255 |
) |
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$ |
(28,415 |
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The following table presents the pretax net actuarial gain (loss)
and prior service credits recognized in accumulated other
comprehensive income (loss) not affecting retained earnings:
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U.S. Plans |
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Non-U.S. Plans |
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(In thousands)
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2014 |
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2013 |
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2014 |
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2013 |
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Net actuarial gain (loss)
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$ |
1,080 |
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$ |
996 |
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$ |
(9,136 |
) |
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$ |
(10,950 |
) |
Prior service credits
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1,834 |
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516 |
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Total recognized in accumulated other comprehensive income not
affecting retained earnings
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$ |
2,914 |
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$ |
1,512 |
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$ |
(9,136 |
) |
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$ |
(10,950 |
) |
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The following table includes the changes recognized in other
comprehensive income:
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U.S. Plans |
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Non-U.S. Plans |
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(In thousands)
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2014 |
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2013 |
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2014 |
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2013 |
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Changes in plan assets and benefit obligations recognized in other
comprehensive income:
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Prior service cost
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$ |
(1,471 |
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$ |
— |
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$ |
— |
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$ |
— |
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Net loss (gain) arising during the year
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(228 |
) |
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(1,014 |
) |
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(766 |
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1,988 |
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Effect of exchange rates on amounts included in AOCI
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(532 |
) |
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(9 |
) |
Amounts recognized as a component of net periodic benefit cost:
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Amortization or curtailment recognition of prior service credit
(cost)
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153 |
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86 |
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Amortization or settlement recognition of net gain (loss)
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144 |
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(16 |
) |
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(516 |
) |
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(470 |
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Total recognized in other comprehensive loss (income)
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$ |
(1,402 |
) |
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$ |
(944 |
) |
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$ |
(1,814 |
) |
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$ |
1,509 |
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The following weighted-average assumptions were used to determine
our year-end benefit obligations and net periodic postretirement
benefit costs under the plans:
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U.S. Plans |
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Non-U.S. Plans |
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Year-End Benefit Obligations
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2014 |
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2013 |
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2014 |
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2013 |
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Discount rate
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4.00 |
% |
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3.95 |
% |
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4.40 |
% |
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4.50 |
% |
Current healthcare cost trend rate
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12.28 |
% |
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7.54 |
% |
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6.31 |
% |
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6.43 |
% |
Ultimate healthcare cost trend rate
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4.50 |
% |
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4.50 |
% |
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4.20 |
% |
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4.20 |
% |
Year ultimate healthcare cost trend rate will be realized
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2029 |
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2029 |
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2030 |
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2030 |
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U.S. Plans |
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Non-U.S. Plans |
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Net Periodic Postretirement Cost
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2014 |
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2013 |
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2012 |
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2014 |
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2013 |
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2012 |
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Discount rate
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3.95 |
% |
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3.75 |
% |
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4.75 |
% |
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4.50 |
% |
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4.75 |
% |
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5.75 |
% |
Healthcare cost trend rate
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7.54 |
% |
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7.70 |
% |
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7.87 |
% |
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6.43 |
% |
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6.92 |
% |
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7.00 |
% |
Ultimate healthcare cost trend rate
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4.50 |
% |
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4.50 |
% |
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4.50 |
% |
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4.20 |
% |
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4.20 |
% |
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4.50 |
% |
Year ultimate healthcare cost trend rate will be realized
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2029 |
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2029 |
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2029 |
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2030 |
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2030 |
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2030 |
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Increasing or decreasing current healthcare cost trend rates by 1%
would affect our accumulated postretirement benefit obligation and
net postretirement expense by the following amounts for the years
ended May 31, 2014 and 2013:
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U.S. Plans |
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Non-U.S. Plans |
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(In thousands)
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2014 |
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2013 |
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2014 |
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2013 |
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1% Increase in trend rate
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Accumulated Benefit Obligation
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$ |
239 |
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$ |
296 |
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$ |
6,502 |
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$ |
9,080 |
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Postretirement Cost
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11 |
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15 |
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|
727 |
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|
647 |
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1% Decrease in trend rate
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Accumulated Benefit Obligation
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$ |
(209 |
) |
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$ |
(265 |
) |
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$ |
(5,011 |
) |
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$ |
(3,802 |
) |
Postretirement Cost
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(10 |
) |
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(13 |
) |
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(534 |
) |
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(481 |
) |
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We expect to pay approximately $0.9 million to $1.3 million in
estimated postretirement benefits in each of the next five years.
In the five years thereafter (2020-2024) we expect to pay a
cumulative total of $8.2 million.
The Medicare Prescription Drug, Improvement and Modernization Act
of 2003 (the “Act”), was signed into law on
December 8, 2003. The Act provides for prescription drug
benefits under Medicare Part D and contains a subsidy to plan
sponsors who provide “actuarially equivalent”
prescription drug plans. Our actuary has determined that the
prescription drug benefit provided by our postretirement plan is
considered to be actuarially equivalent to the benefits provided
under the Act for all years since inception. However, effective
January 1, 2014, we changed our retiree medical offering to a
Medicare Advantage Plan. Under the Medicare Advantage Plan, any
Part D subsidy belongs to the insurance carrier. Our results
reflect this change.
We have included the impact of our portion of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003
subsidy in the determination of accumulated postretirement benefit
obligation for the U.S. nonpension postretirement benefit plan for
the periods ended May 31, 2014 and 2013. For the fiscal years
ended May 31, 2014 and 2013, we received reimbursements from
Medicare related to this law amounting to approximately $37,000 and
$74,000, respectively.
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