Pension, Postretirement and Postemployment Benefits

12 Months Ended

Dec. 25, 2016

Pension, Postretirement and Postemployment Benefits [Abstract]

Pension, Postretirement and Postemployment Benefits

(14)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. Reclassifications to earnings from AOCE related to pension and postretirement plans are recorded to selling, distribution and administration expense.

Expenses related to the Company's defined benefit pension and defined contribution plans for 2016, 2015 and 2014 were approximately $45,200, $36,000 and $34,300, respectively. Of these amounts, $33,300, $26,600 and $28,100, 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 cover non-union employees, were based primarily on salary and years of service. One of these major plans is funded. 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.

At December 25, 2016, the measurement date, the projected benefit obligation of the funded plan was in excess of the fair value of the plan’s assets in the amount of $28,340 while the unfunded plans of the Company had an aggregate accumulated and projected benefit obligation of $35,104. At December 27, 2015 the projected benefit obligations of the funded plans were in excess of the fair value of the plans’ assets in the amount of $66,980 while the unfunded plans of the Company had an aggregate accumulated and projected benefit obligation of $34,751.

Hasbro also provides certain postretirement health care and life insurance benefits to eligible employees who retire 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 is and will continue to be substantially borne by the Company. The cost of providing benefits on behalf of substantially all employees who retire after 1992 is borne by the employee. The plan is not funded.

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 25, 2016 and December 27, 2015.

	Pension				Postretirement
	2016		2015		2016		2015
Change in Projected Benefit Obligation
Projected benefit obligation – beginning	$	361,060		383,068		26,247		28,017
Service cost		2,100		1,918		532		567
Interest cost		16,106		15,683		1,175		1,154
Actuarial (gain) loss		17,353		(17,968)		2,380		(741)
Curtailment		—		660		—		(746)
Benefits paid		(22,508)		(20,202)		(1,850)		(2,004)
Expenses paid		(1,287)		(2,099)		—		—
Projected benefit obligation – ending	$	372,824		361,060		28,484		26,247
Accumulated benefit obligation – ending	$	372,824		361,060		28,484		26,247
Change in Plan Assets
Fair value of plan assets – beginning	$	259,329		272,010		—		—
Actual return on plan assets		8,961		(3,414)		—		—
Employer contribution		64,885		13,034		—		—
Benefits paid		(22,508)		(20,202)		—		—
Expenses paid		(1,287)		(2,099)		—		—
Fair value of plan assets – ending	$	309,380		259,329		—		—
Reconciliation of Funded Status
Projected benefit obligation	$	(372,824)		(361,060)		(28,484)		(26,247)
Fair value of plan assets		309,380		259,329		—		—
Funded status		(63,444)		(101,731)		(28,484)		(26,247)
Unrecognized net loss		138,529		120,482		2,420		41
Net amount recognized	$	75,085		18,751		(26,064)		(26,206)
Accrued liabilities	$	(2,553)		(2,663)		(1,599)		(1,800)
Other liabilities		(60,891)		(99,068)		(26,885)		(24,447)
Accumulated other comprehensive earnings (loss)		138,529		120,482		2,420		41
Net amount recognized	$	75,085		18,751		(26,064)		(26,206)

In fiscal 2017, the Company expects amortization of unrecognized net losses related to its defined benefit pension plans of $9,082to be included as a component of net periodic benefit cost. The Company does not expect amortization in 2017 related to its postretirement plan.

Assumptions used to determine the year-end pension and postretirement benefit obligations are as follows:
	2016	2015
Pension
Weighted average discount rate	4.22%	4.58%
Mortality table	RP-2014/Scale BB	RP-2014/Scale BB
Postretirement
Discount rate	4.26%	4.64%
Health care cost trend rate assumed for next year	7.00%	7.00%
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	2021	2021

The assets of the funded plans are managed by investment advisors. 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 25, 2016 and December 27, 2015 are as follows:

					Fair value measurements using:
					Quoted
					Prices in
					Active
					Markets For		Significant
					Identical		Other		Significant
					Identical		Observable		Unobservable
			Fair		Assets		Inputs		Inputs
			Value		(Level 1)		(Level 2)		(Level 3)
2016
	Equity:
		Large Cap	$	29,100		29,100		—		—
		Small Cap		29,200		29,200		—		—
		International measured at net asset value (a)		40,100		—		—		—
		Other measured at net asset value (a)		1,300		—		—		—
Fixed Income measured at net asset value (a)				119,500		—		—		—
Total Return Fund measured at net asset value (a)				29,000		—		—		—
Cash Equivalents measured as net asset value (a)				61,100		—		—		—
			$	309,300		58,300		—		—
2015
	Equity:
		Large Cap	$	27,600		27,600		—		—
		Small Cap		24,300		24,300		—		—
		International measured at net asset value (a)		37,500		—		—		—
		Other measured at net asset value (a)		2,500		—		—		—
Fixed Income measured at net asset value (a)				122,600		—		—		—
Total Return Fund measured at net asset value (a)				27,700		—		—		—
Cash Equivalents measured as net asset value (a)				17,100		—		—		—
			$	259,300		51,900		—		—
	(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 25, 2016 the Company’s investments for which the fair value is measured using net asset value per share include the following; International equity funds - $40.1 million of international equity funds that are redeemable daily with one days’ notice, Fixed income funds - $119.5 million of fixed income funds redeemable monthly with five days’ notice, Total return equity funds - $29.0 million total return equity funds redeemable monthly with fourteen days’ notice, Cash and cash equivalents - $61.1 million of cash and cash equivalents which are redeemable daily and public-private investment funds - $1.3 million consisting of a public-private investment fund which is 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 believes that the net asset values are the best information available for use in the fair value measurement of these funds.

Hasbro's major funded plan (the "Plan") is a defined benefit pension plan intended to provide retirement benefits to participants in accordance with the benefit structure established by Hasbro, Inc. The Plan’s investment managers, who exercise full investment discretion within guidelines outlined in the Plan’s Investment Policy, are charged with managing the assets with the care, skill, prudence and diligence that a prudent investment professional in similar circumstance would exercise. Investment practices, at a minimum, must comply with the Employee Retirement Income Security Act (ERISA) and any other applicable laws and regulations.

The Plan’s asset allocations are structured to meet a long-term targeted total return consistent with the ongoing nature of the Plan’s liabilities. The shared long-term total return goal, presently 6.75%, includes income plus realized and unrealized gains and/or losses on the Plan’s assets. Utilizing generally accepted diversification techniques, the Plan’s assets, in aggregate and at the individual portfolio level, are invested so that the total portfolio risk exposure and risk-adjusted returns best meet the Plan’s long-term obligations to employees. The Company’s asset allocation includes alternative investment strategies designed to achieve a modest absolute return in addition to the return on an underlying asset class such as bond or equity indices. These alternative investment strategies may use derivatives to gain market returns in an efficient and timely manner; however, derivatives are not used to leverage the portfolio beyond the market value of the underlying assets. These alternative investment strategies are included in other equity, total return fund and fixed income asset categories at December 25, 2016 and December 27, 2015. Plan asset allocations are reviewed at least quarterly and rebalanced to achieve target allocation among the asset categories when necessary.

The Plans' investment managers are provided specific guidelines under which they are to invest the assets assigned to them. In general, investment managers are expected to remain fully invested in their asset class with further limitations of risk as related to investments in a single security, portfolio turnover and credit quality.

With the exception of the alternative investment strategies mentioned above, the Plan’s Investment Policy restricts the use of derivatives associated with leverage or speculation. In addition, the Investment Policy also restricts investments in securities issued by Hasbro, Inc. except through index-related strategies (e.g. an S&P 500 Index Fund) and/or commingled funds. In addition, unless specifically approved by the Investment Committee (which comprises members of management, established by the Board to manage and control pension plan assets), certain securities, strategies, and investments are ineligible for inclusion within the Plans.

The following is a detail of the components of the net periodic benefit cost for the three years ended December 25, 2016.
	2016		2015		2014
Components of Net Periodic Cost
Pension
Service cost	$	2,100		1,918		1,824
Interest cost		16,106		15,683		16,209
Expected return on assets		(17,013)		(18,538)		(18,631)
Amortization of prior service cost		—		65		98
Amortization of actuarial loss		7,361		7,468		3,351
Curtailment/settlement losses		—		781		—
Net periodic benefit cost	$	8,554		7,377		2,851
Postretirement
Service cost	$	532		567		543
Interest cost		1,175		1,154		1,337
Amortization of actuarial (gain) loss		—		(304)		(457)
Curtailment gain		—		(3,842)		—
Net periodic benefit cost (income)	$	1,707		(2,425)		1,423
See note 17 for additional information on the 2015 curtailment (gain) loss.

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

	2016	2015	2014
Pension
Weighted average discount rate	4.58%	4.22%	5.02%
Long-term rate of return on plan assets	6.75%	7.00%	7.00%
Postretirement
Discount rate	4.64%	4.49%	5.11%
Health care cost trend rate assumed for next year	7.00%	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	2021	2020	2020

If the health care cost trend rate were increased one percentage point in each year, the accumulated postretirement benefit obligation at December 25, 2016 and the aggregate of the benefits earned during the period and the interest cost would have both increased by approximately 1.0%.

Hasbro works 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 are 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 are within certain bands around the long-term historical averages. Correlations are based primarily on historical return patterns.

Expected benefit payments under the defined benefit pension plans and the postretirement benefit plan for the next five years subsequent to 2016 and in the aggregate for the following five years are as follows:

	Pension		Postretirement
2017	$	20,034		1,633
2018		20,108		1,593
2019		20,520		1,541
2020		20,995		1,497
2021		21,694		1,452
2022-2026		116,258		6,829

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 25, 2016 and December 27, 2015, the defined benefit plans had total projected benefit obligations of $118,492and $112,799, respectively, and fair values of plan assets of $85,678and $85,752, respectively. Substantially all of the plan assets are invested in equity and fixed income securities. The pension expense related to these plans was $1,533, $2,769 and $3,363 in 2016, 2015 and 2014, respectively. In fiscal 2017, the Company expects amortization of $(36) of prior service costs, $1,281 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 2016 and in the aggregate for the five years thereafter are as follows: 2017: $1,689; 2018: $1,910; 2019: $2,051; 2020: $2,219; 2021: $2,453; and 2022 through 2026: $15,963.

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.