Defined Benefit Pension Plans

We have defined benefit pension plans covering many employees in the United States, Canada, Switzerland, France, and the United Kingdom. Benefits for salaried employees are based on length of service and final average compensation. Benefits for hourly employees include various monthly amounts for each year of credited service. Our funding policy is consistent with the requirements of applicable laws. We made no voluntary contributions to our principal U.S. plans in fiscal 2019 or 2018. We do not expect to be required to make any contributions in fiscal 2020. Our principal domestic retirement plan covering salaried employees has a provision that any excess pension assets would be allocated to active participants if the plan is terminated within five years of a change in control. All salaried employees hired on or after June 1, 2013, are eligible for a retirement program that does not include a defined benefit pension plan.

In fiscal 2018, we approved an amendment to reorganize the U.S. qualified defined benefit pension plans and the supplemental pension plans that resulted in the spinoff of a portion of the General Mills Pension Plan (the Plan) and the 2005 Supplemental Retirement Plan and the Supplemental Retirement Plan (Grandfathered) (together, the Supplemental Plans) into new plans effective May 31, 2018. The benefits offered to the plans’ participants were unchanged. The result of the reorganization was the creation of the General Mills Pension Plan I (Plan I) and the 2005 Supplemental Retirement Plan I and the Supplemental Retirement Plan I (Grandfathered) (together, the Supplemental Plans I). The reorganization was made to facilitate a targeted investment strategy over time and to provide additional flexibility in evaluating opportunities to reduce risk and volatility. Actuarial gains and losses associated with the Plan and the Supplemental Plans are amortized over the average remaining service life of the active participants. Actuarial gains and losses associated with the Plan I and the Supplemental Plans I are amortized over the average remaining life of the participants.

Other Postretirement Benefit Plans

We also sponsor plans that provide health care benefits to many of our retirees in the United States, Canada, and Brazil. The United States salaried health care benefit plan is contributory, with retiree contributions based on years of service. We make decisions to fund related trusts for certain employees and retirees on an annual basis. We made no voluntary contributions to these plans in fiscal 2019 or fiscal 2018.

We review our health care cost trend rates annually. Our review is based on data we collect about our health care claims experience and information provided by our actuaries. This information includes recent plan experience, plan design, overall industry experience and projections, and assumptions used by other similar organizations. Our initial health care cost trend rate is adjusted as necessary to remain consistent with this review, recent experiences, and short-term expectations. Our initial health care cost trend rate assumption is 6.7 percent for retirees age 65 and over and 6.4 percent for retirees under age 65 at the end of fiscal 2019. Rates are graded down annually until the ultimate trend rate of 4.5 percent is reached in 2029 for all retirees. The trend rates are applicable for calculations only if the retirees’ benefits increase as a result of health care inflation. The ultimate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inflation plus an appropriate health care cost premium. Assumed trend rates for health care costs have an important effect on the amounts reported for the other postretirement benefit plans.

A one percentage point change in the health care cost trend rate would have the following effects:

Postemployment Benefit Plans

Under certain circumstances, we also provide accruable benefits, primarily severance, to former or inactive employees in the United States, Canada, and Mexico. We recognize an obligation for any of these benefits that vest or accumulate with service. Postemployment benefits that do not vest or accumulate with service (such as severance based solely on annual pay rather than years of service) are charged to expense when incurred. Our postemployment benefit plans are unfunded.

		Defined BenefitPension Plans				OtherPostretirementBenefit Plans				PostemploymentBenefit Plans
		Fiscal Year				Fiscal Year				Fiscal Year
In Millions		2019		2018		2019		2018		2019		2018
Change in Plan Assets:
Fair value at beginning of year	$	6,177.4	$	5,925.2	$	726.1	$	694.8
Actual return on assets		391.9		496.5		41.3		50.5
Employer contributions		30.4		41.8		0.1		0.1
Plan participant contributions		3.9		6.1		15.0		15.7
Benefits payments		(305.2)		(298.0)		(28.7)		(35.0)
Foreign currency		(6.8)		5.8		-		-
Fair value at end of year (a)	$	6,291.6	$	6,177.4	$	753.8	$	726.1
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year	$	6,416.0	$	6,458.6	$	871.8	$	951.4	$	126.7	$	134.5
Service cost		94.6		102.9		9.9		11.6		7.6		8.6
Interest cost		248.0		217.9		33.1		30.1		3.0		2.3
Plan amendment		-		25.4		-		(0.7)		1.7		1.2
Curtailment/other		(0.7)		-		-		-		-		-
Plan participant contributions		3.9		6.1		15.0		15.7		-		-
Medicare Part D reimbursements		-		-		2.5		3.0		-		-
Actuarial loss (gain)		301.8		(102.0)		(45.4)		(73.9)		2.6		(7.0)
Benefits payments		(305.8)		(298.6)		(62.2)		(64.9)		(13.2)		(13.1)
Foreign currency		(7.1)		5.7		(0.6)		(0.5)		(0.4)		0.2
Projected benefit obligation at end of year (a)	$	6,750.7	$	6,416.0	$	824.1	$	871.8	$	128.0	$	126.7
Plan assets less than benefit obligation as of fiscal year end	$	(459.1)	$	(238.6)	$	(70.3)	$	(145.7)	$	(128.0)	$	(126.7)
(a) Plan assets and obligations are measured as of May 31, 2019, and May 31, 2018.

As of May 26, 2019, other postretirement benefit plans had benefit obligations of $498.4 million that exceeded plan assets of $233.7 million. As of May 27, 2018, other postretirement benefit plans had benefit obligations of $507.3 million that exceeded plan assets of $223.1 million. Postemployment benefit plans are not funded and had benefit obligations of $128.0 million and $126.7 million as of May 26, 2019 and May 27, 2018, respectively.

The accumulated benefit obligation for all defined benefit pension plans was $6,436.9 million as of May 26, 2019, and $6,076.6 million as of May 27, 2018.

Amounts recognized in AOCI as of May 26, 2019 and May 27, 2018, are as follows:

		Defined BenefitPension Plans				Other PostretirementBenefit Plans				PostemploymentBenefit Plans				Total
		Fiscal Year			Fiscal Year				Fiscal Year				Fiscal Year
In Millions		2019		2018		2019		2018		2019		2018		2019		2018
Net actuarial (loss) gain	$	(1,961.6)	$	(1,764.1)	$	81.0	$	44.4	$	0.1	$	(3.9)	$	(1,880.5)	$	(1,723.6)
Prior service (costs) credits		(5.9)		(7.1)		26.3		33.1		(6.0)		0.3		14.4		26.3
Amounts recorded in accumulated other comprehensive loss	$	(1,967.5)	$	(1,771.2)	$	107.3	$	77.5	$	(5.9)	$	(3.6)	$	(1,866.1)	$	(1,697.3)

		Defined Benefit Pension Plans						Other Postretirement Benefit Plans						Postemployment Benefit Plans
		Fiscal Year						Fiscal Year						Fiscal Year
In Millions		2019		2018		2017		2019		2018		2017		2019		2018		2017
Service cost	$	94.6	$	102.9	$	119.7	$	9.9	$	11.6	$	12.5	$	7.6	$	8.6	$	8.8
Interest cost		248.0		217.9		216.5		33.1		30.1		32.2		3.0		2.3		2.6
Expected return on plan assets		(445.8)		(480.2)		(486.7)		(40.4)		(52.2)		(48.5)		-		-		-
Amortization of losses		109.8		177.0		190.2		0.6		0.8		2.5		0.1		0.8		1.7
Amortization of prior service costs (credits)		1.5		1.9		2.5		(5.5)		(5.4)		(5.4)		0.7		0.6		0.6
Other adjustments		-		-		3.1		-		-		1.3		6.7		6.7		1.3
Settlement or curtailment losses		0.3		-		3.8		-		-		(0.9)		-		-		(1.4)
Net expense	$	8.4	$	19.5	$	49.1	$	(2.3)	$	(15.1)	$	(6.3)	$	18.1	$	19.0	$	13.6

	Defined BenefitPension Plans						Other PostretirementBenefit Plans						PostemploymentBenefit Plans
	Fiscal Year						Fiscal Year						Fiscal Year
	2019		2018		2017		2019		2018		2017		2019		2018		2017
Discount rate (a)	4.20	%	4.08	%	4.19	%	4.17	%	3.92	%	3.97	%	3.60	%	2.87	%	2.94	%
Service cost effective rate	4.34		4.37		4.57		4.27		4.27		4.42		3.99		3.54		3.55
Interest cost effective rate	3.92		3.45		3.44		3.80		3.24		3.17		3.37		2.67		2.67
Rate of salary increases	4.27		4.25		4.28		-		-		-		4.44		4.46		4.35
Expected long-term rate of return on plan assets	7.25		7.88		8.17		5.67		7.59		7.85		-		-		-
(a) Determined utilizing the full yield curve method.

Discount Rates

We estimate the service and interest cost components of the net periodic benefit expense for our United States and most of our international defined benefit pension, other postretirement benefit, and postemployment benefit plans utilizing a full yield curve approach by applying the specific spot rates along the yield curve used to determine the benefit obligation to the relevant projected cash flows. Our discount rate assumptions are determined annually as of May 31 for our defined benefit pension, other postretirement benefit, and postemployment benefit plan obligations. We also use discount rates as of May 31 to determine defined benefit pension, other postretirement benefit, and postemployment benefit plan income and expense for the following fiscal year. We work with our outside actuaries to determine the timing and amount of expected future cash outflows to plan participants and, using the Aa Above Median corporate bond yield, to develop a forward interest rate curve, including a margin to that index based on our credit risk. This forward interest rate curve is applied to our expected future cash outflows to determine our discount rate assumptions.

	Fiscal Year 2019								Fiscal Year 2018
In Millions		Level 1		Level 2		Level 3		Total Assets		Level 1		Level 2		Level 3		Total Assets
Fair value measurement of pension plan assets:
Equity (a)	$	1,226.2	$	664.6	$	-	$	1,890.8	$	1,722.5	$	782.1	$	-	$	2,504.6
Fixed income (b)		1,635.5		1,144.9		-		2,780.4		1,264.5		714.5		-		1,979.0
Real asset investments (c)		179.4		59.9		-		239.3		229.1		115.2		-		344.3
Other investments (d)		-		-		0.3		0.3		-		-		0.3		0.3
Cash and accruals		186.5		-		-		186.5		124.4		-		-		124.4
Fair value measurement of pension plan assets	$	3,227.6	$	1,869.4	$	0.3	$	5,097.3	$	3,340.5	$	1,611.8	$	0.3	$	4,952.6
Assets measured at net asset value (e)								1,194.3								1,224.8
Total pension plan assets (f)							$	6,291.6							$	6,177.4


Fair value measurement of postretirement benefit plan assets:
Equity (a)	$	-	$	66.8	$	-	$	66.8	$	-	$	35.8	$	-	$	35.8
Fixed income (b)		139.7		241.4		-		381.1		241.0		123.6		-		364.6
Real asset investments (c)		0.3		-		-		0.3		8.0		-		-		8.0
Cash and accruals		11.1		-		-		11.1		19.1		-		-		19.1
Fair value measurement of postretirement benefit plan assets	$	151.1	$	308.2	$	-	$	459.3	$	268.1	$	159.4	$	-	$	427.5
Assets measured at net asset value (e)								294.5								298.6
Total postretirement benefit plan assets (f)							$	753.8							$	726.1

(a) Primarily publicly traded common stock for purposes of total return and to maintain equity exposure consistent with policy allocations. Investments include: United States and international equity securities, mutual funds, and equity futures valued at closing prices from national exchanges, and commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments.

(b) Primarily government and corporate debt securities and futures for purposes of total return, managing fixed income exposure to policy allocations, and duration targets. Investments include: fixed income securities and bond futures generally valued at closing prices from national exchanges, fixed income pricing models, and independent financial analysts; and fixed income commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments.

(c) Publicly traded common stock and limited partnerships in the energy and real estate sectors for purposes of total return. Investments include: energy and real estate securities generally valued at closing prices from national exchanges, and commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the underlying investments.

(d) Insurance and annuity contracts to provide a stable stream of income for pension retirees. Fair values are based on the fair value of the underlying investments and contract fair values established by the providers.

(e) Primarily private investments, insurance contracts, and common collective trusts that are measured at fair value using the net asset value per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy.

(f) Plan assets and obligations are measured as of May 31, 2019, and May 31, 2018.

There were no material changes in our level 3 investments in fiscal 2019 and fiscal 2018.

Expected Rate of Return on Plan Assets

Our expected rate of return on plan assets is determined by our asset allocation, our historical long-term investment performance, our estimate of future long-term returns by asset class (using input from our actuaries, investment services, and investment managers), and long-term inflation assumptions. We review this assumption annually for each plan; however, our annual investment performance for one particular year does not, by itself, significantly influence our evaluation.

The investment objective for our defined benefit pension and other postretirement benefit plans is to secure the benefit obligations to participants at a reasonable cost to us. Our goal is to optimize the long-term return on plan assets at a moderate level of risk. The defined benefit pension plan and other postretirement benefit plan portfolios are broadly diversified across asset classes. Within asset classes, the portfolios are further diversified across investment styles and investment organizations. For the U.S. defined benefit pension plans, the long-term investment policy allocation is: 18 percent to equities in the United States; 11 percent to international equities; 9 percent to private equities; 48 percent to fixed income; and 14 percent to real assets (real estate, energy, and infrastructure). For other U.S. postretirement benefit plans, the long-term investment policy allocations are: 18 percent to equities in the United States; 10 percent to international equities; 4 percent to private equities; 65 percent to fixed income; and 3 percent to real assets (real estate, energy, and timber). The actual allocations to these asset classes may vary tactically around the long-term policy allocations based on relative market valuations.

Contributions and Future Benefit Payments

We do not expect to be required to make contributions to our defined benefit pension, other postretirement benefit, and postemployment benefit plans in fiscal 2020. Actual fiscal 2020 contributions could exceed our current projections, as influenced by our decision to undertake discretionary funding of our benefit trusts and future changes in regulatory requirements. Estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid from fiscal 2020 to 2029 as follows:

Defined Contribution Plans

The General Mills Savings Plan is a defined contribution plan that covers domestic salaried, hourly, nonunion, and certain union employees. This plan is a 401(k) savings plan that includes a number of investment funds, including a Company stock fund and an Employee Stock Ownership Plan (ESOP). We sponsor another money purchase plan for certain domestic hourly employees with net assets of $22.3 million as of May 26, 2019, and $23.9 million as of May 27, 2018. We also sponsor defined contribution plans in many of our foreign locations. Our total recognized expense related to defined contribution plans was $52.7 million in fiscal 2019, $49.2 million in fiscal 2018, and $54.1 million in fiscal 2017.

We match a percentage of employee contributions to the General Mills Savings Plan. The Company match is directed to investment options of the participant’s choosing. The number of shares of our common stock allocated to participants in the ESOP was 5.1 million as of May 26, 2019, and 5.6 million as of May 27, 2018. The ESOP’s only assets are our common stock and temporary cash balances.

The Company stock fund and the ESOP collectively held $410.1 million and $392.1 million of Company common stock as of May 26, 2019 and May 27, 2018, respectively.