Employee Benefit Costs

12 Months Ended

Jul. 03, 2011

Employee Benefit Costs

Employee Benefit Costs

(15) 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. 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:	2011		2010		2011		2010
Discounted Rate Used to Determine Present Value of Projected Benefit Obligation		5.35%		5.30%		4.45%		4.60%
Expected Rate of Future Compensation Level Increases		3.0- 4.0%		3.0-4.0%		n/a		n/a
Expected Long-Term Rate of Return on Plan Assets		8.50%		8.50%		n/a		n/a
Change in Benefit Obligations:
Projected Benefit Obligation at Beginning of Year	$	1,108,427	$	938,269	$	180,609	$	200,114
Service Cost		13,475		11,197		486		604
Interest Cost		56,696		60,705		7,088		10,942
Plan Amendments		212		-		(8,750)		(13,514)
Plan Participant Contributions		-		-		1,234		1,357
Actuarial Loss		6,747		170,148		5,329		4,781
Benefits Paid		(75,258)		(71,892)		(24,200)		(23,675)
Projected Benefit Obligation at End of Year	$	1,110,299	$	1,108,427	$	161,796	$	180,609
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year	$	831,490	$	797,258	$	-	$	-
Actual Return on Plan Assets		157,420		104,171		-		-
Plan Participant Contributions		-		-		1,234		1,357
Employer Contributions		2,558		1,953		22,966		22,318
Benefits Paid		(75,258)		(71,892)		(24,200)		(23,675)
Fair Value of Plan Assets at End of Year	$	916,210	$	831,490	$	-	$	-
Funded Status:
Plan Assets (Less Than) in Excess of Projected Benefit Obligation	$	(194,089)	$	(276,937)	$	(161,796)	$	(180,609)
Amounts Recognized on the Balance Sheets:
Accrued Pension Cost	$	(191,417)	$	(274,737)	$	-	$	-
Accrued Wages and Salaries		(2,672)		(2,200)		-		-
Accrued Postretirement Health Care Obligation		-		-		(116,092)		(135,978)
Accrued Liabilities		-		-		(22,576)		(22,847)
Accrued Employee Benefits		-		-		(23,128)		(21,784)
Net Amount Recognized at End of Year	$	(194,089)	$	(276,937)	$	(161,796)	$	(180,609)
Amounts Recognized in Accumulated Other Comprehensive Income (Loss):
Transition Assets (Obligation)	$	(10)	$	(15)	$	-	$	-
Net Actuarial Loss		(219,637)		(275,437)		(56,708)		(59,830)
Prior Service Credit (Cost)		(4,022)		(5,758)		13,132		9,858
Net Amount Recognized at End of Year	$	(223,669)	$	(281,210)	$	(43,576)	$	(49,972)

The accumulated benefit obligation for all defined benefit pension plans was $1,062 million and $1,055 million at July 3, 2011 and June 27, 2010, respectively.

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

	Pension Benefits						Other Postretirement Benefits
	2011		2010		2009		2011		2010		2009
Components of Net Periodic (Income) Expense:
Service Cost-Benefits Earned During the Year	$	13,475	$	11,197	$	11,507	$	486	$	604	$	721
Interest Cost on Projected Benefit Obligation		56,696		60,705		61,210		7,088		10,942		12,487
Expected Return on Plan Assets		(76,975)		(81,021)		(83,331)		-		-		-
Amortization of:
Transition Obligation		8		8		8		-		-		-
Prior Service Cost (Credit)		3,059		3,068		3,348		(3,485)		(1,140)		(876)
Actuarial Loss		17,771		3,171		558		10,268		10,418		9,840
Net Periodic (Income) Expense	$	14,034	$	(2,872)	$	(6,700)	$	14,357	$	20,824	$	22,172

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

	Pension Benefits			Other Postretirement Benefits
	2011	2010	2009	2011	2010	2009
Discount Rate	5.30%	6.75%	7.0%	4.60%	6.00%	6.40%
Expected Return on Plan Assets	8.50%	8.75%	8.75%	n/a	n/a	n/a
Compensation Increase Rate	3.0-4.0%	3.0-4.0%	3.0-4.0%	n/a	n/a	n/a

The amounts in Accumulated Other Comprehensive Income 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
Transition Obligation	$	8	$	-
Prior Service Cost (Credit)		2,899		(3,835	)
Net Actuarial Loss		18,706		8,947

The "Other Postretirement Benefit" plans are unfunded.

On May 14, 2010, the Company notified retirees and certain retirement eligible employees of various changes to the Company-sponsored retiree medical plans. The purpose of the amendments was 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. In addition to a request for class certification, the complaint seeks 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. The Company moved to dismiss the complaint and believes the changes are within its rights. On April 21, 2011, the district court issued an order granting the Company's motion to dismiss the complaint. The plaintiffs filed a motion with the court to reconsider its order on May 17, 2011. On August 24, 2011, the Court granted the plaintiffs' motion and vacated the dismissal of the case, and discovery will therefore proceed in the matter.

For measurement purposes an 8.7% annual rate of increase in the per capita cost of covered health care claims was assumed for the Company for the fiscal year 2011 decreasing gradually to 4.5% for the fiscal year 2028. 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 $3.0 million and would increase the service and interest cost by $0.1 million for fiscal 2011. A corresponding decrease of one percentage point, would decrease the accumulated postretirement benefit by $3.5 million and decrease the service and interest cost by $0.1 million for the fiscal year 2011.

As discussed in Note 19 in the Notes to the Consolidated Financial Statements, the Company closed its Jefferson and Watertown, WI production facilities during fiscal 2010. The closure of these facilities resulted in the termination of certain employees, and the related impact on unrecognized prior service costs, unrecognized losses and the projected benefit obligation resulted in a net curtailment loss of $1.2 million in fiscal 2009.

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 asset allocations at July 3, 2011 and June 27, 2010, by asset category are as follows:

		Plan Assets at Year-end
Asset Category	Target %	2011	2010
Domestic Equities	17%-23%	19%	20%
International Equities	2%-6%	4%	4%
Alternative & Absolute Return	25%-35%	35%	31%
Hedge Funds	0%-5%	0%	4%
Real Estate	0%	0%	3%
Emerging Markets Global Balanced	2%-5%	3%	3%
Fixed Income	37%-43%	36%	31%
Cash Equivalents	1%	3%	4%
		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. 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.

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 fair value of the major categories of the pension plans' investments are presented below (in thousands). The inputs and valuation techniques used to measure the fair value of the assets are consistently applied and described in Note 4.

			July 3, 2011
Category			Total			Level 1		Level 2			Level 3
Short-term Investments:			$	30,103		$	30,103	$	-		$	-
Fixed Income Securities:				330,283			-		330,283			-
Equity Securities:
U.S. common stocks				176,370			176,370		-			-
International mutual funds				38,155			38,155		-			-
Other Investments:
Venture capital funds	(A	)		189,353			-		-			189,353
Debt funds	(B	)		44,373			-		-			44,373
Real estate funds	(C	)		17,242			-		-			17,242
Private equity funds	(D	)		64,215			-		-			64,215
Global balanced funds	(E	)		26,662			-		-			26,662
Total Investments			$	916,756		$	244,628	$	330,283		$	341,845
Securities lending collateral pools, net	(F	)		(546	)		-		(546	)		-
Fair Value of Plan Assets at End of Year			$	916,210		$	244,628	$	329,737		$	341,845

			June 27, 2010
Category			Total			Level 1		Level 2			Level 3
Short-term Investments:			$	41,951		$	41,951	$	-		$	-
Fixed Income Securities:				259,375			-		259,375			-
Equity Securities:
U.S. common stocks				161,125			161,125		-			-
International mutual funds				31,130			31,130		-			-
Other Investments:
Venture capital funds	(A	)		136,179			-		-			136,179
Debt funds	(B	)		47,110			-		-			47,110
Real estate funds	(C	)		40,041			-		-			40,041
Private equity funds	(D	)		58,610			-		-			58,610
Global balanced funds	(E	)		22,805			-		-			22,805
Hedge funds	(G	)		35,026			-		-			35,026
Total Investments			$	833,352		$	234,206	$	259,375		$	339,771
Securities lending collateral pools, net	(F	)		(2,966	)		-		(2,966	)		-
Cash and other				1,104			1,104		-			-
Fair Value of Plan Assets at End of Year			$	831,490		$	235,310	$	256,409		$	339,771

(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) Primarily represents investments in emerging market debt and equity.

(F) This category comprises pools of cash like debt securities and floating rate notes having a maturity or average life of three years or less, with a final payment of principal occurring in five years or less. Some of the investments are collateralized mortgage-backed securities whose maturities have been extended. This category's fair value is determined based on the net book value of the plan's pro-rated share of the collateral pool.

(G) This category invests in multi-strategy hedge fund-of-funds and funds that use leverage and derivatives to invest long and short in global currency markets, bond markets, equity markets, industry sectors and commodities.

The following tables present the changes in Level 3 investments for the pension plan (in thousands).

Changes to Level 3 investments for the year ended July 3, 2011:

Category	June 27, 2010 Fair Value		Purchases, Sales, Issuances, and Settlements			Realized     and Unrealized     Gain    (Loss)			July 3, 2011 Fair Value (a)
Venture capital funds	$	136,179	$	(10,290	)	$	63,464		$	189,353
Debt funds		47,110		(7,667	)		4,930			44,373
Real estate funds		40,041		(2,709	)		(20,090	)		17,242
Private equity funds		58,610		(3,465	)		9,070			64,215
Global balanced funds		22,805		-			3,857			26,662
Hedge funds		35,026		(36,533	)		1,507			-
	$	339,771	$	(60,664	)	$	62,738		$	341,845

Changes to Level 3 investments for the year ended June 27, 2010:

Category	June 28, 2009   Fair Value		Purchases, Sales, Issuances, and Settlements			Realized     and Unrealized     Gain		June 27, 2010  Fair Value (a)
Venture capital funds	$	133,556	$	(10,535	)	$	13,158	$	136,179
Debt funds		39,227		(1,005	)		8,888		47,110
Real estate funds		38,044		1,413			584		40,041
Private equity funds		55,517		(61	)		3,154		58,610
Global balanced funds		13,360		5,000			4,445		22,805
Hedge funds		33,606		-			1,420		35,026
	$	313,310	$	(5,188	)	$	31,649	$	339,771

(a) There were no transfers in or out of Level 3 during the years ended July 3, 2011 or June 27, 2010.

Contributions

The Company is required to make minimum contributions to the qualified pension plan of $30.2 million in fiscal 2012. 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, 2011 are estimated as follows (in thousands):

	Pension Benefits				Other Postretirement Benefits
Year Ending	Qualified		Non-Qualified		Retiree Medical		Retiree Life		LTD
2012	$	70,625	$	2,734	$	22,748	$	1,268	$	110
2013		70,795		2,731		21,872		1,292		116
2014		70,915		2,736		20,618		1,315		93
2015		71,207		2,735		17,784		1,336		94
2016		71,243		2,724		15,961		1,355		95
2017-2021		356,793		14,980		49,902		6,973		273

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. A maximum of 1-1/2% to 3-1/2% of each participant's salary, depending upon the participant's group, is matched by the Company. Some of these Company matching contributions ceased July 1, 2009 and were reinstated effective January 1, 2010. Additionally, certain employees may receive Company nonelective contributions equal to 2% of the employee's salary. The Company contributions totaled $8.7 million in 2011, $7.6 million in 2010 and $8.1 million in 2009.

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 are also discounted using a 4.45% interest rate for fiscal year 2011 and 4.60% interest rate for fiscal year 2010. Amounts are included in Accrued Employee Benefits in the Consolidated Balance Sheets.