Pension, Postretirement and Postemployment Benefits

12 Months Ended

Dec. 29, 2019

Pension, Postretirement and Postemployment Benefits

Pension and Postretirement Benefits

The Company recognizes an asset or liability for each of its defined benefit pension plans equal to the difference between the projected benefit obligation of the plan and the fair value of the plan’s assets. Actuarial gains and losses and prior service costs that have not yet been included in income are recognized in the consolidated balance sheets in AOCE. Prior to 2018 reclassifications to earnings from AOCE related to pension and postretirement plans were recorded to selling, distribution and administration expense. As a result of the adoption of ASU 2017-7 (see note 1) in 2018, reclassifications to earnings from AOCE related to pension and postretirement plans were recorded to other (income) expense in 2019 and 2018.

Expenses related to the Company’s defined benefit pension and defined contribution plans for 2019, 2018 and 2017 were approximately $48,400, $41,900 and $45,900, respectively. Of these amounts, $35,100, $32,300 and $36,000, respectively, related to defined contribution plans in the United States and certain international subsidiaries. The remainder of the expense relates to defined benefit pension plans discussed below.

United States Plans

Prior to 2008, substantially all United States employees were covered under at least one of several non-contributory defined benefit pension plans maintained by the Company. Benefits under the two major plans which principally covered non-union employees, were based primarily on salary and years of service. Benefits under the remaining plans are based primarily on fixed amounts for specified years of service. In 2007, for the two major plans covering its non-union employees, the Company froze benefits being accrued effective at the end of December 2007. Following the August 2015 sale of its manufacturing facility in East Longmeadow, MA, the Company elected to freeze benefits related to its major plan covering union employees. Effective January 1, 2016, the plan covering union employees merged with and into the Hasbro Inc. Pension Plan, and ceased to exist as a separate plan on that date.

In February 2018, the Compensation Committee of the Company’s Board of Directors approved a resolution to terminate the Company’s U.S. defined benefit pension plan (“Plan”). During the first quarter of 2018 the Company commenced the U.S. Pension Plan termination process and received regulatory approval during the fourth quarter of 2018. During the second quarter of 2019, the Company settled all remaining benefits directly with vested participants electing a lump sum payout, and purchased a group annuity contract from Massachusetts Mutual Life Insurance Company to administer all future payments to remaining U.S. Pension Plan participants. The U.S. Pension Plan's net funded asset position was sufficient to cover the lump sum payments and the purchase of the group annuity contract and settle all other remaining benefit obligations with no additional cost to the Company. After the settlement of the benefit obligations and payment of expenses, the Company had excess assets in the U.S. Pension Plan of approximately $20,234. The Company elected to utilize the remaining surplus after payment of administrative expenses for the Company's future matching contributions under the Company's 401(k) plan. Upon settlement of the pension liability, which occurred in May 2019, the Company recognized a non-operating settlement charge of $110,777, with an additional settlement charge of $185 in December 2019, related to pension losses, reclassified from accumulated other comprehensive loss to other (income) expense in the Company's consolidated statements of operations, adjusted for market conditions and settlement costs at benefit distribution.

At December 29, 2019, the measurement date, the unfunded plans of the Company had an aggregate accumulated and projected benefit obligation of $30,971. There were no funded plans at December 29, 2019. At December 30, 2018, prior to the Plan termination, the fair value of the funded plans’ assets were in excess of the projected benefit obligations in the amount of $6,423 while the unfunded plans of the Company had an aggregate accumulated and projected benefit obligation of $32,072.

As of December 29, 2019, the Company had unrecognized losses related to its remaining U.S. pension and post retirement plans of $13,231.

Hasbro also provides certain postretirement health care and life insurance benefits to eligible employees who retired prior to January 1, 2020 and have either attained age 65 with 5 years of service or age 55 with 10 years of service. The cost of providing these benefits on behalf of employees who retired prior to 1993 has been substantially borne by the Company. The cost of providing benefits to all eligible employees who retire after 1992 is borne by the employee. The plan is not funded. During the fourth quarter of 2019, with the approval of the Compensation Committee of the Company's Board of Directors, the Company announced the elimination of the contributory postretirement health and life insurance coverage for employees whose retirement eligibility begins after December 31, 2019.

Reconciliations of the beginning and ending balances for the projected benefit obligation, the fair value of plan assets and the funded status are included below for the years ended December 29, 2019 and December 30, 2018.



	Pension						Postretirement
	2019			2018			2019		2018
Change in Projected Benefit Obligation
Projected benefit obligation — beginning	$	395,718		393,367			30,081		32,153
Service cost	1,168			1,300			888		756
Interest cost	6,624			13,358			1,267		1,171
Amendment	—			(78		)	—		—
Actuarial (gain) loss	(8,092		)	13,010			6,350		(2,339	)
Benefits paid	(13,271		)	(22,718		)	(1,641	)	(1,660	)
Expenses paid	(3,172		)	(2,521		)	—		—
Curtailment	—			—			(9,502	)	—
Settlements paid	(348,004		)	—			—		—
Projected benefit obligation — ending	$	30,971		395,718			27,443		30,081
Accumulated benefit obligation — ending	$	30,971		395,718			27,443		30,081
Change in Plan Assets
Fair value of plan assets — beginning	$	357,224		$	382,989		—		—
Actual return on plan assets	23,147			(3,328		)	—		—
Employer contribution	4,311			2,802			—		—
Benefits paid	(13,271		)	(22,718		)	—		—
Expenses paid	(3,172		)	(2,521		)	—		—
Settlements paid	(348,004		)	—			—		—
Transfers	(20,235		)	—			—		—
Fair value of plan assets — ending	$	—		357,224			—		—
Reconciliation of Funded Status
Projected benefit obligation	$	(30,971	)	(395,718		)	(27,443	)	(30,081	)
Fair value of plan assets	—			357,224			—		—
Funded status	(30,971		)	(38,494		)	(27,443	)	(30,081	)
Unrecognized net loss	13,054			155,829			177		3,350
Net amount	$	(17,917	)	117,335			(27,266	)	(26,731	)
Accrued liabilities	$	(2,484	)	(8,946		)	(1,767	)	(1,607	)
Other liabilities	(28,487		)	(29,548		)	(25,676	)	(28,474	)
Accumulated other comprehensive (earnings) loss	13,054			155,829			177		3,350
Net amount	$	(17,917	)	117,335			(27,266	)	(26,731	)

In fiscal 2020, the Company expects amortization of unrecognized net losses related to its defined benefit pension plans of $1,428 to be included as a component of net periodic benefit cost. The Company does not expect amortization in 2020 related to its post retirement plan.

Assumptions used to determine the year-end pension and postretirement benefit obligations are as follows:



	2019		2018
Pension
Weighted average discount rate	3.30	%	3.72	%
Mortality table	Pri-2012/Scale MP - 2019		RP-2014/Scale BB
Postretirement
Discount rate	3.46	%	4.33	%
Health care cost trend rate assumed for next year	6.25	%	6.50	%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend	2024		2024

As result of the plan termination and subsequent benefit settlement actions described above, as of December 29, 2019, there are no remaining assets in the plan.

The fair values of the plan assets by asset class and fair value hierarchy level (excluding assets for which the fair value is measured using net asset value per share) as of December 30, 2018 are as follows:



			Fair value measurements using:
	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
2018
Equity:
Other measured at net asset value(a)	$	300	—	—	—
Fixed Income measured at net asset value(a)	251,300		251,300	—	—
Cash Equivalents measured as net asset value(a)	105,600		—	—	—
	$	357,200	251,300	—	—


(a)	Certain investments that are measured at fair value using the net asset value per share are not 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 Schedule of Changes in Plan Assets disclosed previously in this note.

The Plan’s Level 1 assets consist of investments traded on active markets that are valued using published closing prices.

At December 30, 2018 the Company’s investments for which the fair value was measured using net asset value per share include the following; Cash and cash equivalents—$105,600 of cash and cash equivalents which were redeemable daily and public-private investment funds—$300 consisting of a public-private investment fund which was valued using the net asset value provided by the investment manager and invests in commercial mortgage-backed securities and non-agency residential mortgage-backed securities. The Company believed that the net asset values were the best information available for use in the fair value measurement of these funds.

The following is a detail of the components of the net periodic benefit cost for the three years ended December 29, 2019.



	2019			2018		2017
Components of Net Periodic Cost
Pension
Service cost	$	1,168		1,300		1,290
Interest cost	6,624			13,358		15,303
Expected return on assets	(6,163		)	(18,475	)	(19,534	)
Amortization of prior service cost	(11		)	—		—
Amortization of actuarial loss	7,578			10,995		9,082
Curtailment/Settlement losses	110,962			—		—
Net periodic benefit cost	$	120,158		7,178		6,141
Postretirement
Service cost	$	888		756		691
Interest cost	1,267			1,171		1,179
Amortization of actuarial loss	21			165		—
Net periodic benefit cost (income)	$	2,176		2,092		1,870

Assumptions used to determine net periodic benefit cost of the pension plan and postretirement plan for each fiscal year follow:



	2019		2018		2017
Pension
Weighted average discount rate	3.72	%	3.71	%	4.22	%
Long-term rate of return on plan assets	4.20	%	4.75	%	6.25	%
Postretirement
Discount rate	4.33	%	3.74	%	4.26	%
Health care cost trend rate assumed for next year	6.25	%	6.50	%	7.00	%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)	5.00	%	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2024		2024		2021

If the health care cost trend rate were increased one percentage point in each year, the accumulated postretirement benefit obligation at December 29, 2019 and the aggregate of the benefits earned during the period and the interest cost would have both increased by approximately 0.4%.

Hasbro worked with external benefit investment specialists to assist in the development of the long-term rate of return assumptions used to model and determine the overall asset allocation. Forecast returns were based on the combination of historical returns, current market conditions and a forecast for the capital markets for the next 5-7 years. All asset class assumptions were within certain bands around the long-term historical averages. Correlations were based primarily on historical return patterns.

Expected benefit payments under the defined benefit pension plans (which reflects the 2019 Plan termination) and the postretirement benefit plan for the next five years subsequent to 2019 and in the aggregate for the following five years are as follows:



	Pension		Postretirement
2020	$	2,488	1,797
2021	2,453		1,743
2022	2,379		1,694
2023	2,405		1,644
2024	2,534		1,600
2025-2029	11,072		7,352

International Plans

Pension coverage for employees of Hasbro’s international subsidiaries is provided, to the extent deemed appropriate, through separate defined benefit and defined contribution plans. At December 29, 2019 and December 30, 2018, the defined benefit plans had total projected benefit obligations of $112,882 and $98,476, respectively, and fair values of plan assets of $84,252 and $78,184, respectively. Substantially all of the plan assets are invested in equity and fixed income securities. The pension expense related to these plans was $2,113, $2,392 and $3,473 in 2019, 2018 and 2017, respectively. In fiscal 2019, the Company expects amortization of $(33) of prior service costs, $1,803 of unrecognized net losses and $2 of unrecognized transition obligation to be included as a component of net periodic benefit cost.

Expected benefit payments under the international defined benefit pension plans for the five years subsequent to 2019 and in the aggregate for the five years thereafter are as follows: 2020: $1,864; 2021: $1,965; 2022: $2,161; 2023: $2,408; 2024: $2,522; and 2024 through 2028: $15,801.

Postemployment Benefits

Hasbro has several plans covering certain groups of employees, which may provide benefits to such employees following their period of active employment but prior to their retirement. These plans include certain severance plans which provide benefits to employees involuntarily terminated and certain plans which continue the Company’s health and life insurance contributions for employees who have left Hasbro’s employ under terms of its long-term disability plan.