Employee Benefit Costs:

Retirement Plan and Other Postretirement Benefits

The Company has noncontributory, defined benefit retirement plans and other postretirement benefit plans covering certain employees. In October 2012, the Board of Directors of the Company authorized an amendment to the Company's defined benefit retirement plans for U.S., non-bargaining employees. The amendment freezes accruals for all non-bargaining employees within the pension plan effective January 1, 2014. The Company uses a June 30 measurement date for all of its plans. The following provides a reconciliation of obligations, plan assets and funded status of the plans for the two years indicated (in thousands):



	Pension Benefits						Other Postretirement Benefits
Actuarial Assumptions:	2016			2015			2016			2015
Discounted Rate Used to Determine Present Value of Projected Benefit Obligation	3.75		%	4.55		%	3.60		%	4.20		%
Expected Long-Term Rate of Return on Plan Assets	7.25		%	7.50		%	n/a			n/a
Change in Benefit Obligations:
Projected Benefit Obligation at Beginning of Year	$	1,186,777		$	1,173,147		$	81,290		$	96,457
Service Cost	3,532			3,432			262			295
Interest Cost	52,110			49,782			3,170			3,568
Plan Settlements	(47,102		)	—			—			—
Plan Participant Contributions	—			—			1,572			1,510
Actuarial (Gain) Loss	75,135			35,287			(1,909		)	(5,961		)
Benefits Paid	(73,527		)	(74,871		)	(13,891		)	(14,579		)
Projected Benefit Obligation at End of Year	$	1,196,925		$	1,186,777		$	70,494		$	81,290
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year	$	974,926		$	1,043,466		$	—		$	—
Actual Return on Plan Assets	26,059			3,317			—			—
Plan Participant Contributions	—			—			1,572			1,510
Employer Contributions	3,229			3,014			12,319			13,069
Benefits Paid	(73,527		)	(74,871		)	(13,891		)	(14,579		)
Plan Settlements	(47,102		)	—			—			—
Fair Value of Plan Assets at End of Year	$	883,585		$	974,926		$	—		$	—
Funded Status:
Plan Assets (Less Than) in Excess of Projected Benefit Obligation	$	(313,340	)	$	(211,851	)	$	(70,494	)	$	(81,290	)
Amounts Recognized on the Balance Sheets:
Accrued Pension Cost	$	(310,378	)	$	(208,623	)	$	—		$	—
Accrued Wages and Salaries	(2,962		)	(3,228		)	—			—
Accrued Postretirement Health Care Obligation	—			—			(38,441		)	(47,545		)
Accrued Liabilities	—			—			(9,125		)	(12,025		)
Accrued Employee Benefits	—			—			(22,928		)	(21,720		)
Net Amount Recognized at End of Year	$	(313,340	)	$	(211,851	)	$	(70,494	)	$	(81,290	)
Amounts Recognized in Accumulated Other Comprehensive Income (Loss), Net of Tax:
Net Actuarial Loss	$	(303,714	)	$	(249,279	)	$	(12,301	)	$	(15,468	)
Prior Service Credit (Cost)	(334		)	(443		)	2,873			4,487
Net Amount Recognized at End of Year	$	(304,048	)	$	(249,722	)	$	(9,428	)	$	(10,981	)

The accumulated benefit obligation for all defined benefit pension plans was $1,196 million and $1,186 million at July 3, 2016 and June 28, 2015, respectively.

The Company recognizes the funded status of its pension plan in the Consolidated Balance Sheets. The funded status is the difference between the projected benefit obligation and the fair value of its plan assets. The projected benefit obligation is the actuarial present value of all benefits expected to be earned by the employees’ service adjusted for future potential wage increases. Pension plan liabilities are revalued annually, or when an event occurs that requires remeasurement, based on updated assumptions and information about the individuals covered by the plan.

The pension benefit obligation and related pension expense or income are impacted by certain actuarial assumptions, including the discount rate, mortality tables, and the expected rate of return on plan assets. The discount rate is selected using a methodology that matches plan cash flows with a selection of Standard and Poor’s AA or higher rated bonds, resulting in a discount rate that is consistent with a bond yield curve with comparable cash flows. In estimating the expected return on plan assets, the Company considers the historical returns on plan assets, adjusted for forward looking considerations, including inflation assumptions and active management of the plan’s invested assets. These rates are evaluated on an annual basis considering such factors as market interest rates and historical asset performance.

For pension and other postretirement plans, accumulated actuarial gains and losses in excess of a 10 percent corridor are amortized on a straight-line basis from the date recognized over the average remaining life expectancy of all participants. Any prior service costs are amortized on a straight-line basis over the average remaining service of impacted employees at the time the unrecognized prior service cost was established. Approximately half of the costs related to defined pension benefit and other postretirement plans are included in cost of sales; the remainder is included in selling, general and administrative expenses.

The following table summarizes the plans’ income and expense for the three years indicated (in thousands):



	Pension Benefits									Other Postretirement Benefits
	2016			2015			2014			2016			2015			2014
Components of Net Periodic (Income) Expense:
Service Cost-Benefits Earned During the Year	$	3,532		$	3,432		$	7,645		$	262		$	295		$	333
Interest Cost on Projected Benefit Obligation	52,110			49,782			53,743			3,170			3,568			4,565
Expected Return on Plan Assets	(71,202		)	(74,638		)	(74,152		)	—			—			—
Amortization of:
Prior Service Cost (Credit)	180			180			180			(2,659		)	(2,758		)	(2,895		)
Actuarial Loss	13,007			13,262			25,105			3,234			4,316			5,527
Plan Settlements	20,245			—			—			—			—			—
Net Periodic Expense (Income)	$	17,872		$	(7,982	)	$	12,521		$	4,007		$	5,421		$	7,530

Significant assumptions used in determining net periodic expense for the fiscal years indicated are as follows:



	Pension Benefits			Other Postretirement Benefits
	2016	2015	2014	2016	2015	2014
Discount Rate	4.55%	4.40%	5.00%	4.20%	3.95%	4.40%
Expected Return on Plan Assets	7.50%	8.00%	8.25%	n/a	n/a	n/a
Compensation Increase Rate	n/a	n/a	3.0-4.0%	n/a	n/a	n/a

The amounts in Accumulated Other Comprehensive Income (Loss) that are expected to be recognized as components of net periodic (income) expense during the next fiscal year are as follows (in thousands):



	Pension Plans		Other Postretirement Plans
Prior Service Cost (Credit)	$	180	$	(2,654	)
Net Actuarial Loss	16,809		2,746

The “Other Postretirement Benefit” plans are unfunded.

On May 14, 2010, the Company notified retirees and certain retirement eligible employees of various amendments to the Company-sponsored retiree medical plans intended to better align the plans offered to both hourly and salaried retirees. On August 16, 2010, a putative class of retirees who retired prior to August 1, 2006 and the United Steel Workers filed a complaint in the U.S. District Court for the Eastern District of Wisconsin (Merrill, Weber, Carpenter, et al.; United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC v. Briggs & Stratton Corporation; Group Insurance Plan of Briggs & Stratton Corporation; and Does 1 through 20, Docket No. 10-C-0700), contesting the Company's right to make these changes. The complaint sought an injunction preventing the alleged unilateral termination or reduction in insurance coverage to the class of retirees, a permanent injunction preventing defendants from ever making changes to the retirees' insurance coverage, restitution with interest (if applicable) and attorneys' fees and costs. A class was certified and discovery was concluded. Both parties moved for summary judgment, which was fully briefed on December 23, 2014. The court denied both sides’ motions on September 3, 2015, concluding that factual issues were present which precluded summary judgment and should be determined by the jury at trial. The Company filed a motion requesting permission to appeal the court’s decision on an interlocutory basis. The plaintiffs also moved the court to clarify its decision. Upon the request of all parties, the court stayed any further decisions in the matter pending mediation in mid-December 2015. The mediation led to an agreement in principle to settle this case for an aggregate payment of $3.95 million covering both claimed benefits and plaintiffs’ attorneys fees, which resulted in a contribution of $1.975 million from the Company and $1.975 million from a third party insurance provider. The Company recorded a total charge of $1.975 million as Engineering, Selling, General and Administrative Expense on the Condensed Consolidated Statements of Operations in the second quarter of fiscal 2016 related to this matter. The parties filed a signed Stipulation of Settlement with the court on April 12, 2016 and the court held a hearing on the fairness, reasonableness and adequacy of the terms and conditions of the settlement and on the fee petition of the plaintiffs' counsel on August 11, 2016. The court approved the settlement following that hearing.

For measurement purposes a 6.3% annual rate of increase in the per capita cost of covered health care claims was assumed for the Company for the fiscal year 2016 decreasing gradually to 4.5% for the fiscal year 2038. The health care cost trend rate assumptions have a significant effect on the amounts reported. An increase of one percentage point, would increase the accumulated postretirement benefit by $1.1 million and would increase the service and interest cost by $0.1 million for fiscal 2016. A corresponding decrease of one percentage point, would decrease the accumulated postretirement benefit by $1.2 million and decrease the service and interest cost by $0.1 million for the fiscal year 2016.

In the third quarter of fiscal 2016, the Company initiated a limited offer for former employees with vested benefits to elect to receive a lump sum payout of their benefits. This program reduced the size of the pension plan while allowing former employees who accepted the offer to control the investment of their retirement funds. The Company completed this program during the fourth quarter of fiscal 2016. As a result of this program, the Company recognized pension settlement expense of $20.2 million ($13.2 million after tax) during fiscal 2016.

Plan Assets

A Board of Directors appointed Investment Committee (“Committee”) manages the investment of the pension plan assets. The Committee has established and operates under an Investment Policy. It determines the asset allocation and target ranges based upon periodic asset/liability studies and capital market projections. The Committee retains external investment managers to invest the assets. The Investment Policy prohibits certain investment transactions, such as lettered stock, commodity contracts, margin transactions and short selling, unless the Committee gives prior approval.

The Company’s pension plan’s current target and asset allocations at July 3, 2016 and June 28, 2015, by asset category are as follows:



		Plan Assets at Year-end
Asset Category	Target %	2016	2015
Domestic Equities	20%-28%	23%	22%
International Equities	7%-17%	14%	13%
Alternatives	0%-15%	10%	12%
Fixed Income	48%-52%	50%	50%
Cash Equivalents	0%-2%	3%	3%
		100%	100%

The plan’s investment strategy is based on an expectation that, over time, equity securities will provide higher total returns than debt securities, but with greater risk. The plan primarily minimizes the risk of large losses through diversification of investments by asset class, by investing in different types of styles within the classes and by using a number of different managers. The Committee monitors the asset allocation and investment performance monthly, with a more comprehensive quarterly review with its consultant. Beginning in fiscal 2014, the Committee revised the target asset allocation to shift to more fixed income and less alternative investments as a percentage of total plan assets. This revision to the target asset allocation was made to better match future cash flows from plan assets with the future cash flows of the projected benefit obligation.

The plan’s expected return on assets is based on management’s and the Committee’s expectations of long-term average rates of return to be achieved by the plan’s investments. These expectations are based on the plan’s historical returns and expected returns for the asset classes in which the plan is invested.

The Company has adopted the fair value provisions for the plan assets of its pension plans. The Company categorizes plan assets within a three level fair value hierarchy, as described in Note 6.

Investments stated at fair value as determined by quoted market prices (Level 1) include:

Short-Term Investments: Short-Term Investments include cash and money market mutual funds that invest in short-term securities and are valued based on cost, which approximates fair value;

Equity Securities: U.S. Common Stocks and International Mutual Funds are valued at the last reported sales price on the last business day of the fiscal year.

Investments stated at estimated fair value using significant observable inputs (Level 2) include:

Fixed Income Securities: Fixed Income Securities include investments in domestic bond collective trusts that are not traded publicly, but the underlying assets held in these funds are traded on active markets and the prices are readily observable. The investment in the trusts is valued at the last quoted price on the last business day of the fiscal year. Fixed Income Securities also include corporate and government bonds that are valued using a bid evaluation process with data provided by independent pricing sources.

Investments stated at estimated fair value using net asset value per share as the practical expedient include:

Other Investments: Other Investments include investments in limited partnerships and are valued at estimated fair value, as determined with the assistance of each respective limited partnership, based on the net asset value of the investment as of the balance sheet date, which is subject to judgment.

The fair value of the major categories of the pension plans’ investments are presented below (in thousands):



		July 3, 2016
Category		Total		Level 1		Level 2		Level 3
Short-Term Investments:		$	26,558	$	26,558	$	—	$	—
Fixed Income Securities:		441,869		—		441,869		—
Equity Securities:
U.S. common stocks		205,343		205,343		—		—
International mutual funds		126,589		126,589		—		—
Other Investments:
Venture capital funds	(A) (E)	40,470		—		—		—
Debt funds	(B) (E)	7,227		—		—		—
Real estate funds	(C) (E)	2,608		—		—		—
Private equity funds	(D) (E)	32,921		—		—		—
Fair Value of Plan Assets at End of Year		$	883,585	$	358,490	$	441,869	$	—



		June 28, 2015
Category		Total		Level 1		Level 2		Level 3
Short-Term Investments:		$	28,378	$	28,378	$	—	$	—
Fixed Income Securities:		481,576		—		481,576		—
Equity Securities:
U.S. common stocks		216,131		216,131		—		—
International mutual funds		127,423		127,423		—		—
Other Investments:
Venture capital funds	(A) (E)	47,289		—		—		—
Debt funds	(B) (E)	14,042		—		—		—
Real estate funds	(C) (E)	6,104		—		—		—
Private equity funds	(D) (E)	53,983		—		—		—
Fair Value of Plan Assets at End of Year		$	974,926	$	371,932	$	481,576	$	—


(A)	This category invests in a combination of public and private securities of companies in financial distress, spin-offs, or new projects focused on technology and manufacturing.


(B)	This fund primarily invests in the debt of various entities including corporations and governments in emerging markets, mezzanine financing, or entities that are undergoing, are considered likely to undergo or have undergone a reorganization.


(C)	This category invests primarily in real estate related investments, including real estate properties, securities of real estate companies and other companies with significant real estate assets as well as real estate related debt and equity securities.


(D)	Primarily represents investments in all sizes of mostly privately held operating companies in the following core industry sectors: healthcare, energy, financial services, technology-media-telecommunications and industrial and consumer.


(E)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

Contributions

On July 6, 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21 Act) was signed into law. The MAP-21 Act included certain pension-related provisions which included changes to the methodology used to determine discount rates for ERISA funding purposes for qualified defined benefit pension plans. Based on historical interest rates, the MAP-21 Act allows plan sponsors to utilize a higher discount rate to value pension liabilities, which results in lower required pension plan contributions under ERISA. On August 8, 2014, the Highway and Transportation Funding Act of 2014 (HATFA Act) was enacted. The HATFA Act extends the pension provisions included in the MAP-21 Act. During fiscal 2016, the Company made no cash contributions to the qualified pension plan. Based upon current regulations and actuarial studies the Company is required to make no minimum contributions to the qualified pension plan in fiscal 2017 and fiscal 2018. The Company may be required to make further contributions in future years depending on the actual return on plan assets and the funded status of the plan in future periods.

Estimated Future Benefit Payments

Projected benefit payments from the plans as of July 3, 2016 are estimated as follows (in thousands):



	Pension Benefits				Other Postretirement Benefits
Year Ending	Qualified		Non-Qualified		Retiree Medical		Retiree Life
2017	$	74,476	$	2,964	$	7,778	$	1,345
2018	74,240		2,983		7,094		1,365
2019	74,093		3,136		5,924		1,383
2020	73,811		3,159		5,104		1,398
2021	73,367		3,200		4,250		1,409
2022-2026	352,067		16,887		12,984		7,082

Defined Contribution Plans

Employees of the Company may participate in a defined contribution savings plan that allows participants to contribute a portion of their earnings in accordance with plan specifications. Prior to January 1, 2014, a maximum of 1.5% to 3.5% of each participant’s salary, depending upon the participant’s group, was matched by the Company. Additionally, certain employees may have received Company nonelective contributions equal to 2.0% of the employee’s salary.

Simultaneously with the aforementioned amendments to freeze the Company's defined benefit retirement plans for U.S., non-bargaining employees, effective January 1, 2014, amendments were also made to increase benefits under the defined contribution plans effective January 1, 2014. These amendments increased the Company's maximum matching contribution from 3.5% to 4.0% of pay and offer all domestic non-bargaining employees a Company non-elective contribution of 3.0% of the employee's pay.

The Company contributions totaled $14.5 million in 2016, $14.2 million in 2015 and $10.8 million in 2014.

Postemployment Benefits

The Company accrues the expected cost of postemployment benefits over the years that the employees render service. These benefits apply only to employees who become disabled while actively employed, or who terminate with at least thirty years of service and retire prior to age sixty-five. The items include disability payments, life insurance and medical benefits. These amounts were discounted using a 3.60% interest rate for fiscal 2016 and 4.20% interest rate for fiscal 2015. Amounts are included in Accrued Employee Benefits in the Consolidated Balance Sheets.