Pension, Postretirement and Postemployment Benefits

12 Months Ended

Dec. 30, 2018

Pension, Postretirement and Postemployment Benefits [Abstract]

Pension, Postretirement and Postemployment Benefits

(15) 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 are recorded to selling, distribution and administration expense. As a result of the adoption of ASU 2017-07 (see Note 1) in 2018, reclassifications to earnings from AOCE related to pension and postretirement plans were recorded to other (income) expense in 2018.

Expenses related to the Company's defined benefit pension and defined contribution plans for 2018, 2017 and 2016 were approximately $41,900, $45,900 and $45,200, respectively. Of these amounts, $32,300, $36,000 and $33,300, 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. 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.

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 plan termination process and expects to complete the transfer of the Plan’s assets to a third-party administrator in the second quarter of 2019.

In connection with the decision to terminate the Plan, the Company remeasured the projected benefit obligation in the first quarter of 2018 based on the expected Plan termination costs. This remeasurement utilized a discount rate of 3.2% compared to the discount rate of 3.7% utilized in the December 31, 2017 measurement and resulted in an increase in the projected benefit obligation of $35,192 with offsetting amounts recorded to accumulated other comprehensive losses and deferred taxes. Upon settlement of the pension liability, the Company will reclassify the related pension losses, currently recorded to accumulated other comprehensive loss, to the consolidated statements of operations. As of December 30, 2018, the Company had unrecognized losses related to the Plan of $142,439. The Company will recognize this loss upon termination of the Plan, adjusted for year-end remeasurement, as well as the total required payout to plan participants which will be determined based on employee elections and market conditions present at the time of termination.

At December 30, 2018, the measurement date, the projected benefit obligations of the funded plans were in excess of the fair value of the plans’ assets in the amount of $6,423 while the unfunded plans of the Company had an aggregate accumulated and projected benefit obligation of $32,072. At December 31, 2017 the fair value of the funded plans’ assets were in excess of the projected benefit obligations in the amount of $25,603 while the unfunded plans of the Company had an aggregate accumulated and projected benefit obligation of $35,981.

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 has been 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 30, 2018 and December 31, 2017.

	Pension				Postretirement

	2018		2017		2018		2017
Change in Projected Benefit Obligation
Projected benefit obligation – beginning	$	393,367		372,824		32,153		28,484
Service cost		1,300		1,290		756		691
Interest cost		13,358		15,303		1,171		1,179
Amendment		(78)		—		—		—
Actuarial (gain) loss		13,010		27,670		(2,339)		3,432
Benefits paid		(22,718)		(22,579)		(1,660)		(1,633)
Expenses paid		(2,521)		(1,141)		—		—
Projected benefit obligation – ending	$	395,718		393,367		30,081		32,153
Accumulated benefit obligation – ending	$	395,718		393,367		30,081		32,153

Change in Plan Assets
Fair value of plan assets – beginning	$	382,989		309,380		—		—
Actual return on plan assets		(3,328)		44,562		—		—
Employer contribution		2,802		52,767		—		—
Benefits paid		(22,718)		(22,579)		—		—
Expenses paid		(2,521)		(1,141)		—		—
Fair value of plan assets – ending	$	357,224		382,989		—		—

Reconciliation of Funded Status
Projected benefit obligation	$	(395,718)		(393,367)		(30,081)		(32,153)
Fair value of plan assets		357,224		382,989		—		—
Funded status		(38,494)		(10,378)		(30,081)		(32,153)
Unrecognized net loss		155,829		132,088		3,350		5,853
Net amount	$	117,335		121,710		(26,731)		(26,300)

Accrued liabilities	$	(8,946)		(2,448)		(1,607)		(1,630)
Other liabilities		(29,548)		(7,930)		(28,474)		(30,523)
Accumulated other comprehensive earnings (loss)		155,829		132,088		3,350		5,853
Net amount	$	117,335		121,710		(26,731)		(26,300)

In fiscal 2019, the Company expects amortization of unrecognized net losses related to its defined benefit pension plans and post retirement plan of $12,116 and $21, respectively, to be included as a component of net periodic benefit cost.


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

	2018	2017
Pension
Weighted average discount rate	3.72%	3.71%

Mortality table	RP-2014/Scale BB	RP-2014/Scale BB

Postretirement
Discount rate	4.33%	3.74%
Health care cost trend rate assumed for next year	6.50%	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

Hasbro's pension plan assets (the "Plan Assets") are intended to provide retirement benefits to participants in accordance with the benefit structure established by Hasbro, Inc. The Plan Asset investment managers, who exercise full investment discretion within guidelines outlined in the Plan Asset 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 Asset’s allocations are structured to meet a long-term targeted total return consistent with the ongoing nature of the pension plan liabilities. The shared long-term total return goal, presently 4.75%, includes income plus realized and unrealized gains and/or losses on the Plan’s assets. Utilizing generally accepted diversification techniques, the Plan 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 pension plan long-term obligations to employees. The Company’s asset allocation has included 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 used derivatives to gain market returns in an efficient and timely manner; however, derivatives were not used to leverage the portfolio beyond the market value of the underlying assets. The Plan’s Assets were not involved in these alternative investment strategies at December 30, 2018. Investments in these alternative strategies were included in other equity, total return fund and fixed income asset categories at December 31, 2017. Plan asset allocations are reviewed at least quarterly and rebalanced to achieve target allocation among the asset categories when necessary.

The Plan Assets’ 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 Plan Assets.

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 30, 2018 and December 31, 2017 are as follows:

					Fair value measurements using:


					Quoted
					Prices in
					Active		Significant
					Markets For		Other		Significant
					Identical		Observable		Unobservable
			Fair		Assets		Inputs		Inputs
			Value		(Level 1)		(Level 2)		(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		—		—

2017
	Equity:
		Large Cap	$	38,400		38,400		—		—
		Small Cap		25,300		25,300		—		—
		International measured at net asset value (a)		43,900		43,900		—		—
		Other measured at net asset value (a)		300		—		—		—
Fixed Income measured at net asset value (a)				217,200		—		—		—
Total Return Fund measured at net asset value (a)				26,900		26,900		—		—
Cash Equivalents measured as net asset value (a)				31,000		—		—		—
			$	383,000		134,500		—		—

	(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 is measured using net asset value per share include the following; Cash and cash equivalents - $105,600 of cash and cash equivalents which are redeemable daily and public-private investment funds - $300 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.

The following is a detail of the components of the net periodic benefit cost for the three years ended December 30, 2018.

	2018		2017		2016
Components of Net Periodic Cost

Pension
Service cost	$	1,300		1,290		2,100
Interest cost		13,358		15,303		16,106
Expected return on assets		(18,475)		(19,534)		(17,013)
Amortization of actuarial loss		10,995		9,082		7,361
Net periodic benefit cost	$	7,178		6,141		8,554

Postretirement
Service cost	$	756		691		532
Interest cost		1,171		1,179		1,175
Amortization of actuarial loss		165		—		—
Net periodic benefit cost (income)	$	2,092		1,870		1,707

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

	2018	2017	2016
Pension
Weighted average discount rate	3.71%	4.22%	4.58%
Long-term rate of return on plan assets	4.75%	6.25%	6.75%

Postretirement
Discount rate	3.74%	4.26%	4.64%
Health care cost trend rate assumed for next year	6.50%	7.00%	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	2021	2021

If the health care cost trend rate were increased one percentage point in each year, the accumulated postretirement benefit obligation at December 30, 2018 and the aggregate of the benefits earned during the period and the interest cost would have both increased by approximately 0.7%.

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 (which reflects the expected completion of the termination of the Plan in 2019) and the postretirement benefit plan for the next five years subsequent to 2018 and in the aggregate for the following five years are as follows:

	Pension		Postretirement
2019	$	368,278		1,641
2020		2,465		1,594
2021		2,434		1,548
2022		2,410		1,510
2023		2,420		1,472
2024-2028		11,634		7,031

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 30, 2018 and December 31, 2017, the defined benefit plans had total projected benefit obligations of $98,476 and $127,012, respectively, and fair values of plan assets of $78,184 and $100,766, respectively. Substantially all of the plan assets are invested in equity and fixed income securities. The pension expense related to these plans was $2,392, $3,473 and $1,533 in 2018, 2017 and 2016, respectively. In fiscal 2019, the Company expects amortization of $(34) of prior service costs, $965 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 2018 and in the aggregate for the five years thereafter are as follows: 2019: $1,774; 2020: $1,958; 2021: $2,072; 2022: $2,279; 2023: $2,531; and 2024 through 2028: $15,337.

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.