PENSION AND POSTRETIREMENT BENEFITS

We have defined benefit retirement plans ("plans") for eligible salaried and hourly employees. Benefits are based on years of credited service and average compensation or stated amounts for each year of service. We also sponsor postretirement plans which provide certain medical and dental benefits ("other postretirement benefits") to qualifying U.S. employees. Effective August 1, 2013, our defined benefit pension plan for eligible salaried employees was closed to new hire salaried employees. New hire salaried employees will generally be eligible to participate in our defined contribution plan.

During the second quarter of fiscal 2018, we approved the amendment of our salaried and non-qualified pension plans effective as of December 31, 2017. The amendment froze the compensation and service periods used to calculate pension benefits for active employees who participate in the plans. Beginning January 1, 2018, impacted employees do not accrue additional benefit for future service and eligible compensation received under these plans.

As a result of the amendment, we remeasured our pension plan liability as of September 30, 2017. In connection with the remeasurement, we updated the effective discount rate assumption from 3.90% to 3.78%. The curtailment and related remeasurement resulted in a net decrease to the underfunded status of the pension plans by $43.5 million with a corresponding benefit within other comprehensive income (loss) for the second quarter of fiscal 2018. In addition, we recorded charges of $3.4 million and $0.7 million reflecting the write-off of actuarial losses in excess of 10% of our pension liability and a curtailment charge, respectively.

We recognize the funded status of our plans and other benefits in the Consolidated Balance Sheets. For our plans, we also recognize as a component of accumulated other comprehensive loss, the net of tax results of the actuarial gains or losses within the corridor and prior service costs or credits that arise during the period but are not recognized in net periodic benefit cost. For our other benefits, we also recognize as a component of accumulated other comprehensive income (loss), the net of tax results of the gains or losses and prior service costs or credits that arise during the period but are not recognized in net periodic benefit cost. These amounts will be adjusted out of accumulated other comprehensive income (loss) as they are subsequently recognized as components of net periodic benefit cost. For our pension plans, we have elected to immediately recognize actuarial gains and losses in our operating results in the year in which they occur, to the extent they exceed the corridor, eliminating amortization. Amounts are included in the components of pension benefit and other postretirement benefit costs, below, as recognized net actuarial loss.

The information below includes the activities of our continuing and discontinued operations.

The changes in benefit obligations and plan assets at May 27, 2018 and May 28, 2017 are presented in the following table.



	Pension Benefits						Other Benefits
	2018			2017			2018			2017
Change in Benefit Obligation
Benefit obligation at beginning of year	$	3,548.7		$	3,903.0		$	156.9		$	201.7
Service cost	42.8			56.9			0.2			0.3
Interest cost	111.1			116.8			3.9			4.6
Plan participants' contributions	—			—			4.7			4.7
Amendments	0.6			5.5			(17.2		)	—
Actuarial gain	(9.4		)	(51.5		)	(13.2		)	(32.0		)
Plan settlements	(10.2		)	(287.5		)	—			—
Special termination benefits	—			1.5			—			—
Curtailments	(79.5		)	(18.1		)	—			—
Benefits paid	(181.3		)	(169.7		)	(16.2		)	(19.0		)
Currency	0.8			(0.8		)	0.2			(0.2		)
Business divestitures	—			(7.4		)	—			(3.2		)
Benefit obligation at end of year	$	3,423.6		$	3,548.7		$	119.3		$	156.9
Change in Plan Assets
Fair value of plan assets at beginning of year	$	2,983.6		$	2,959.4		$	—		$	0.1
Actual return on plan assets	276.1			346.1			3.7			—
Employer contributions	312.6			163.0			11.5			14.2
Plan participants' contributions	—			—			4.7			4.7
Plan settlements	(10.2		)	(287.5		)	—			—
Investment and administrative expenses	(26.5		)	(26.7		)	—			—
Benefits paid	(181.3		)	(169.7		)	(16.2		)	(19.0		)
Currency	0.8			(1.0		)	—			—
Fair value of plan assets at end of year	$	3,355.1		$	2,983.6		$	3.7		$	—

The funded status and amounts recognized in our Consolidated Balance Sheets at May 27, 2018 and May 28, 2017 were:



	Pension Benefits						Other Benefits
	2018			2017			2018			2017
Funded Status	$	(68.5	)	$	(565.1	)	$	(115.6	)	$	(156.9	)
Amounts Recognized in Consolidated Balance Sheets
Other assets	$	103.0		$	17.1		$	2.6		$	—
Other accrued liabilities	(11.8		)	(10.9		)	(16.2		)	(18.4		)
Other noncurrent liabilities	(159.7		)	(571.3		)	(102.0		)	(138.5		)
Net Amount Recognized	$	(68.5	)	$	(565.1	)	$	(115.6	)	$	(156.9	)
Amounts Recognized in Accumulated Other Comprehensive (Income) Loss (Pre-tax)
Actuarial net loss (gain)	$	48.8		$	174.2		$	(25.8	)	$	(9.0	)
Net prior service cost (benefit)	13.8			16.0			(18.4		)	(4.6		)
Total	$	62.6		$	190.2		$	(44.2	)	$	(13.6	)
Weighted-Average Actuarial Assumptions Used to Determine Benefit Obligations at May 27, 2018 and May 28, 2017
Discount rate	4.14		%	3.90		%	3.81		%	3.33		%
Long-term rate of compensation increase	N/A			3.63		%	N/A			N/A

The accumulated benefit obligation for all defined benefit pension plans was $3.4 billion and $3.5 billion at May 27, 2018 and May 28, 2017, respectively.

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets at May 27, 2018 and May 28, 2017 were:



	2018		2017
Projected benefit obligation	$	951.1	$	3,433.6
Accumulated benefit obligation	950.1		3,357.1
Fair value of plan assets	779.5		2,851.4

Components of pension benefit and other postretirement benefit costs included:



	Pension Benefits									Other Benefits
	2018			2017			2016			2018			2017			2016
Service cost	$	42.8		$	56.9		$	93.8		$	0.2		$	0.3		$	0.4
Interest cost	111.1			116.8			159.8			3.9			4.6			7.5
Expected return on plan assets	(218.3		)	(207.4		)	(259.9		)	—			—			—
Amortization of prior service cost (benefit)	2.9			2.6			2.7			(3.4		)	(6.6		)	(7.8		)
Special termination benefits	—			1.5			25.6			—			—			—
Recognized net actuarial loss	3.4			1.2			348.5			—			0.5			0.1
Settlement loss	1.3			13.8			—			—			—			—
Curtailment loss	0.7			1.7			0.3			—			—			—
Benefit cost — Company plans	(56.1		)	(12.9		)	370.8			0.7			(1.2		)	0.2
Pension benefit cost — multi-employer plans	7.1			12.0			42.9			—			—			—
Total benefit (income) cost	$	(49.0	)	$	(0.9	)	$	413.7		$	0.7		$	(1.2	)	$	0.2

As a result of the Spinoff, during fiscal 2017, we recorded a pension curtailment gain of $19.5 million within other comprehensive income (loss) and remeasured a significant qualified pension plan as of November 9, 2016. In connection with the remeasurement, we updated the effective discount rate assumption from 3.86% to 4.04%. The remeasurement and the curtailment gain decreased the underfunded status of the pension plans by $66.0 million with a corresponding benefit within other comprehensive income (loss).

During fiscal 2017, we provided a voluntary lump-sum settlement offer to certain terminated vested participants in our salaried pension plan. Lump-sum settlement payments totaling $287.5 million were distributed from pension plan assets to such participants. Due to the pension settlement, we were required to remeasure our pension plan liability. In connection with the remeasurement, we updated the effective discount rate assumption to 4.11%, as of December 31, 2016. The settlement and related remeasurement resulted in the recognition of a settlement charge of 13.8 million, reflected in SG&A expenses, as well as a benefit to accumulated other comprehensive income (loss) totaling $62.2 million.

Special termination benefits granted in connection with the voluntary retirement program resulted in the recognition of $25.6 million of expense during fiscal 2016. This expense was included in restructuring activities.

In fiscal 2018, 2017, and 2016, the Company recorded charges of $3.4 million, $1.2 million, and $348.5 million, respectively, reflecting the year-end write-off of actuarial losses in excess of 10% of our pension liability.

The Company recorded an expense of $0.6 million (primarily within restructuring activities), $4.0 million ($2.1 million was recorded in discontinued operations and $1.9 million was recorded in restructuring activities), and $31.8 million ($2.0 million was recorded in discontinued operations and $29.8 million was recorded in restructuring activities) during fiscal 2018, 2017, and 2016, respectively, related to our expected incurrence of certain multi-employer plan withdrawal costs.

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) were:



	Pension Benefits						Other Benefits
	2018			2017			2018			2017
Net actuarial gain	$	120.0		$	183.1		$	16.8		$	32.4
Amendments	(0.6		)	(5.5		)	17.2			(0.4		)
Amortization of prior service cost (benefit)	2.9			2.9			(3.4		)	(6.6		)
Settlement and curtailment loss	2.0			13.8			—			—
Recognized net actuarial loss	3.4			1.2			—			0.5
Net amount recognized	$	127.7		$	195.5		$	30.6		$	25.9

Weighted-Average Actuarial Assumptions Used to Determine Net Expense



	Pension Benefits						Other Benefits
	2018		2017		2016		2018		2017		2016
Discount rate	3.90	%	3.83	%	4.10	%	3.33	%	3.18	%	3.50	%
Long-term rate of return on plan assets	7.50	%	7.50	%	7.75	%	N/A		N/A		N/A
Long-term rate of compensation increase	3.63	%	3.66	%	3.70	%	N/A		N/A		N/A

Beginning in fiscal 2017, the Company has elected to use a split discount rate (spot-rate approach) for the U.S. plans and certain foreign plans. Historically, a single weighted-average discount rate was used in the calculation of service and interest costs, both of which are components of pension benefit costs. The spot-rate approach applies separate discount rates for each projected benefit payment in the calculation of pension service and interest cost. This change is considered a change in accounting estimate and has been applied prospectively. The pre-tax reduction in total pension benefit cost associated with this change in fiscal 2017 was approximately $27.0 million.

We amortize prior service cost for our pension plans and postretirement plans, as well as amortizable gains and losses for our postretirement plans, in equal annual amounts over the average expected future period of vested service. For plans with no active participants, average life expectancy is used instead of average expected useful service.

The amounts in accumulated other comprehensive income (loss) expected to be recognized as components of net expense during the next year are as follows:



	Pension Benefits		Other Benefits
Prior service cost (benefit)	$	2.9	$	(2.2	)
Net actuarial gain	N/A		(1.5		)

Plan Assets

The fair value of plan assets, summarized by level within the fair value hierarchy described in Note 20, as of May 27, 2018, was as follows:



	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1.0	$	65.0	$	—	$	66.0
Equity securities:
U.S. equity securities	319.8		124.0		—		443.8
International equity securities	256.5		1.0		—		257.5
Fixed income securities:
Government bonds	—		1,854.8		—		1,854.8
Corporate bonds	—		4.7		—		4.7
Mortgage-backed bonds	—		9.3		—		9.3
Real estate funds	7.7		—		—		7.7
Master limited partnerships	0.4		—		—		0.4
Net payables for unsettled transactions	10.9		—		—		10.9
Fair value measurement of pension plan assets in the fair value hierarchy	$	596.3	$	2,058.8	$	—	$	2,655.1
Investments measured at net asset value							700.0
Total pension plan assets							$	3,355.1

The fair value of plan assets, summarized by level within the fair value hierarchy described in Note 20, as of May 28, 2017, was as follows:



	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1.0	$	94.0	$	—	$	95.0
Equity securities:
U.S. equity securities	494.0		13.7		—		507.7
International equity securities	249.9		13.2		—		263.1
Fixed income securities:
Government bonds	51.1		224.3		—		275.4
Corporate bonds	4.4		279.5		—		283.9
Mortgage-backed bonds	63.3		6.2		—		69.5
Real estate funds	9.5		—		—		9.5
Master limited partnerships	173.5		—		—		173.5
Net receivables for unsettled transactions	0.7		—		—		0.7
Fair value measurement of pension plan assets in the fair value hierarchy	$	1,047.4	$	630.9	$	—	$	1,678.3
Investments measured at net asset value							1,305.3
Total pension plan assets							$	2,983.6

Level 1 assets are valued based on quoted prices in active markets for identical securities. The majority of the Level 1 assets listed above include the common stock of both U.S. and international companies, mutual funds, master limited partnership units, and real estate investment trusts, all of which are actively traded and priced in the market.

Level 2 assets are valued based on other significant observable inputs including quoted prices for similar securities, yield curves, indices, etc. Level 2 assets consist primarily of individual fixed income securities where values are based on quoted prices of similar securities and observable market data.

Level 3 assets consist of investments where active market pricing is not readily available and, as such, fair value is estimated using significant unobservable inputs.

Certain assets that are measured at fair value using the NAV (net asset value) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. Such investments are generally considered long-term in nature with varying redemption availability. For certain of these investments, with a fair value of approximately $487.2 million as of May 27, 2018, the asset managers have the ability to impose customary redemption gates which may further restrict or limit the redemption of invested funds therein. As of May 27, 2018, funds with a fair value of $0.1 million have imposed such gates.

As of May 27, 2018, we have unfunded commitments for additional investments of $65.4 million in private equity funds and $26.7 million in natural resources funds. We expect unfunded commitments to be funded from plan assets rather than the general assets of the Company.

To develop the expected long-term rate of return on plan assets assumption for the pension plans, we consider the current asset allocation strategy, the historical investment performance, and the expectations for future returns of each asset class.

Our pension plan weighted-average asset allocations by asset category were as follows:



	May 27, 2018		May 28, 2017
Equity securities	21	%	39	%
Debt securities	58	%	25	%
Real estate funds	10	%	11	%
Multi-strategy hedge funds	4	%	11	%
Private equity	4	%	4	%
Other	3	%	10	%
Total	100	%	100	%

Due to the salaried pension plan freeze, the Company's pension asset strategy is now designed to align our pension plan assets with our projected benefit obligation to reduce volatility by targeting an investment strategy of approximately 90% in fixed-income securities and approximately 10% in return seeking assets, primarily equity securities, real estate, and private assets.

Other investments are primarily made up of cash and master limited partnerships.

Assumed health care cost trend rates have a significant effect on the benefit obligation of the postretirement plans.



Assumed Health Care Cost Trend Rates at:	May 27, 2018		May 28, 2017
Initial health care cost trend rate	7.87	%	8.44	%
Ultimate health care cost trend rate	4.5	%	4.5	%
Year that the rate reaches the ultimate trend rate	2024		2024

A one percentage point change in assumed health care cost rates would have the following effect:



	One Percent Increase		One Percent Decrease
Effect on total service and interest cost	$	0.3	$	(0.3	)
Effect on postretirement benefit obligation	3.9		(3.5		)

We currently anticipate making contributions of approximately $19.6 million to our pension plans in fiscal 2019. We anticipate making contributions of $16.2 million to our other postretirement plans in fiscal 2019. These estimates are based on ERISA guidelines, current tax laws, plan asset performance, and liability assumptions, which are subject to change.

The following table presents estimated future gross benefit payments for our plans:



	Pension Benefits		Health Care and Life Insurance Benefits
2019	$	188.7	$	16.4
2020	184.2		14.7
2021	186.5		13.4
2022	189.0		12.1
2023	191.3		11.0
Succeeding 5 years	980.7		40.1

Multiemployer Pension Plans

The Company contributes to several multiemployer defined benefit pension plans under collective bargaining agreements that cover certain of its union-represented employees. The risks of participating in such plans are different from the risks of single-employer plans, in the following respects:


a.	Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


b.	If a participating employer ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

If the Company ceases to have an obligation to contribute to a multiemployer plan in which it had been a contributing employer, it may be required to pay to the plan an amount based on the underfunded status of the plan and on the history of the Company's participation in the plan prior to the cessation of its obligation to contribute. The amount that an employer that has ceased to have an obligation to contribute to a multiemployer plan is required to pay to the plan is referred to as a withdrawal liability.

The Company's participation in multiemployer plans for the fiscal year ended May 27, 2018 is outlined in the table below. For each plan that is individually significant to the Company the following information is provided:


•	The "EIN / PN" column provides the Employer Identification Number and the three-digit plan number assigned to a plan by the Internal Revenue Service.

•

The most recent Pension Protection Act Zone Status available for 2017 and 2016 is for plan years that ended in calendar years 2017 and 2016, respectively. The zone status is based on information provided to the Company by each plan. A plan in the "red" zone has been determined to be in "critical status", based on criteria established under the Internal Revenue Code ("Code"), and is generally less than 65% funded. A plan in the "yellow" zone has been determined to be in "endangered status", based on criteria established under the Code, and is generally less than 80% funded. A plan in the "green" zone has been determined to be neither in "critical status" nor in "endangered status", and is generally at least 80% funded.


•	The "FIP/RP Status Pending/Implemented" column indicates whether a Funding Improvement Plan, as required under the Code to be adopted by plans in the "yellow" zone, or a Rehabilitation Plan, as required under the Code to be adopted by plans in the "red" zone, is pending or has been implemented by the plan as of the end of the plan year that ended in calendar year 2017.


•	Contributions by the Company are the amounts contributed in the Company's fiscal periods ending in the specified year.


•	The "Surcharge Imposed" column indicates whether the Company contribution rate for its fiscal year that ended on May 27, 2018 included an amount in addition to the contribution rate specified in the applicable collective bargaining agreement, as imposed by a plan in "critical status", in accordance with the requirements of the Code.


•	The last column lists the expiration dates of the collective bargaining agreements pursuant to which the Company contributes to the plans.

For plans that are not individually significant to Conagra Brands the total amount of contributions is presented in the aggregate.

Pension Protection Act

Zone Status

FIP /
RP Status
Pending /
Implemented

Contributions by

the Company

(millions)

Expiration

Dates of

Collective

Bargaining

Agreements

Pension Fund

EIN / PN

2017

2016

FY18

FY17

FY16

Surcharge

Imposed

Bakery and Confectionary Union and Industry International Pension Plan

52-6118572
/ 001

Red, Critical and Declining

RP Implemented

1.5

1.8

$3.1

2/28/2020

Central States, Southeast and Southwest Areas Pension Fund

36-6044243
/ 001

Red, Critical and Declining

Red

RP Implemented

1.8

1.9

5/31/2020

Western Conference of Teamsters Pension Plan

91-6145047
/ 001

Green

N/A

2.8

4.0

5.4

06/30/2018

Other Plans

0.4

0.7

Total Contributions

6.5

$8.0

$11.1

The Company was not listed in the Forms 5500 filed by any of the other plans or for any of the other years as providing more than 5% of the plan's total contributions. At the date our financial statements were issued, Forms 5500 were not available for plan years ending in calendar year 2017.

On May 31, 2018, subsequent to the end of fiscal 2018, we ceased to participate in the Bakery and Confectionary Union and Industry International Fund in conjunction with our sale of the Trenton, Missouri plant.

In addition to the contributions listed in the table above, we recorded an additional expense of $0.6 million, $4.0 million, and $31.8 million in fiscal 2018, 2017, and 2016, respectively, related to our expected incurrence of certain withdrawal costs.

Certain of our employees are covered under defined contribution plans. The expense related to these plans was $24.5 million, $18.0 million, and $35.4 million in fiscal 2018, 2017, and 2016, respectively.