Employee Benefit Plans
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Oct. 31, 2013
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Employee Benefit Plans | 11. EMPLOYEE BENEFIT PLANS As of October 31, 2013, we had the following defined benefit and other postretirement benefit plans, which provide benefits based primarily on years of service and employee earnings and which have been previously amended to preclude new participants. Supplemental Executive Retirement Plan We have unfunded retirement agreements for certain current and former senior executives. The retirement agreements provide for monthly benefits for ten years commencing at the later of the respective retirement dates of those executives or age 65. The benefits are accrued over the vesting period. Effective December 31, 2002, this plan was amended to preclude new participants. Service Award Benefit Plan We have an unfunded service award benefit plan that meets the definition of a “severance pay plan” as defined by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and covers certain qualified employees. The plan provides participants, upon termination, with a guaranteed seven days pay for each year of employment subsequent to November 1, 1989. Effective January 1, 2002, no new participants were permitted under this plan. We will continue to incur interest costs related to this plan as the value of the previously earned benefits continues to increase. OneSource Employees’ Retirement Pension Plan (“OneSource Pension Plan”) On November 14, 2007, we acquired OneSource, which sponsored a funded, qualified employee retirement plan. The plan was amended to preclude participation and benefit accruals several years prior to the acquisition. Death Benefit Plan Our unfunded Death Benefit Plan covers certain qualified employees upon retirement on or after the employee’s 62nd birthday. This plan provides 50% of the death benefit that the employee was entitled to prior to retirement, subject to a maximum of $150,000. Coverage commencing upon retirement or 62nd birthday continues until death for retired employees hired before September 2, 1980. On March 1, 2003, the postretirement death benefit for any active employees hired after September 1, 1980 was eliminated. Active employees hired before September 1, 1980 who retire on or after their 62nd birthday will continue to be covered between retirement and death. For certain plan participants who retired before March 1, 2003, the postretirement death benefit continues until the retired employee’s 70th birthday. An exemption to the “age 62” retirement rule has been made for certain employees who were terminated as a result of our restructuring to a corporate shared service center. OneSource Postretirement Medical and Life Benefit Plan (“OneSource PRM Plan”) OneSource sponsored a postretirement benefit plan that provides medical and life insurance benefits to certain OneSource retirees. Since the date of acquisition, new participants have been precluded from participation.
Benefit Obligation and Net Obligation Recognized in Financial Statements The significant components of the above mentioned plans as of and for the years ended October 31, 2013 and 2012 are summarized as follows:
* Amounts relate to the OneSource Pension Plan, which is the only defined benefit pension plan funded by us.
Components of Net Periodic Benefit Cost Recognized in the Accompanying Consolidated Statements of Income The components of net periodic benefit cost of the defined benefit and other postretirement benefit plans for the years ended October 31, 2013, 2012, and 2011 were as follows:
Net actuarial losses of $0.1 million, on a pre-tax basis, are expected to be amortized from AOCL and recognized as a component of net periodic benefit cost in the year ending October 31, 2014. Assumptions The weighted average assumptions used to determine benefit obligations and net periodic benefit cost for the years ended October 31, 2013, 2012, and 2011 were as follows:
The discount rate is used for determining future net periodic benefit cost. Our discount rates were determined, as of the October 31, 2013 measurement date, using the individual cash flows of each plan. In determining the long-term rate of return for a plan, we consider the nature of the plan’s investments, historical rates of return, and an expectation for the plan’s investment strategies.
The expected long-term rate of return on plan assets represents the rate of earnings expected in the funds invested to provide for anticipated benefit payments related to our OneSource Pension Plan. With input from our investment advisors and actuaries, we have analyzed the expected rates of return on assets and determined that an estimated long-term rate of return of 6.0% is reasonable based on: (1) the current and expected asset allocations; (2) the plan’s historical investment performance; and (3) best estimates for future investment performance. We believe changes in assumptions would not have a material impact on our financial position and operating performance. We expect to fund payments required under the plans with cash flows from operating activities when due in accordance with the plans. Assumed health care cost trend rates relating to our OneSource PRM Plan are as follows:
The obligation attributable to medical benefits is small, as is the future obligation that varies with changes in compensation. Accordingly, a one-percentage-point change in assumed health care cost trend rates in the health care trend assumption rate have an immaterial impact on measuring the obligation. Expected Future Contributions and Benefit Payments We expect to contribute $0.9 million to the OneSource Pension Plan for the year ending October 31, 2014. Except for the OneSource Pension Plan, all of our other postretirement and defined benefit plans are unfunded. As a result, our expected contributions for these plans equal our expected future benefit payments for the year ended October 31, 2014. The expected future benefit payments were calculated using the same assumptions used to measure our benefit obligation as of October 31, 2013. This expectation is based upon expected future service.
OneSource Pension Plan Investment Policies and Strategies The investment objectives for the assets associated with the OneSource Pension Plan are to maintain acceptable levels of risk through the diversification of assets among asset classes and to optimize long-term returns. We are responsible for selecting investment managers, setting asset allocation targets, and monitoring asset allocations and investment performance. Our external investment professionals have the authority to manage assets within pre-established asset allocation ranges set by us.
At October 31, 2013, approximately 48% of the assets were invested in equities, 25% in cash, and 27% in fixed income. The target allocation ranges and asset allocations for the year ended October 31, 2013 were:
The following table presents the fair value hierarchy for the assets associated with the OneSource Pension Plan measured at fair value as of October 31, 2013 and 2012. These assets and liabilities are measured as Level 1.
Deferred Compensation Plans We account for deferred compensation and accrue interest thereon for employees who elect to participate in one of the following plans. Employee Deferred Compensation Plan This plan is available to executive, management, administrative, and sales employees who have an annualized base salary that equals or exceeds $140,000 for the year ended October 31, 2013. This plan allows such employees to defer 1% to 50% of their pre-tax compensation. The average rate of interest earned by the employees in this plan was 3.08%, 3.01%, and 3.25% for the years ending October 31, 2013, 2012, and 2011, respectively. Director Deferred Compensation Plan This plan allows directors to defer receipt of all or any portion of the compensation that he or she would otherwise receive from us. The average rate of interest earned by the directors in this plan was 3.08%, 3.01%, and 3.25% for the years ending October 31, 2013, 2012, and 2011, respectively. The deferred compensation under both the Employee and Director Deferred Compensation Plans earns interest equal to the prime interest rate on the last day of the calendar quarter. If the prime rate exceeds 6%, the interest rate is equal to 6% plus one half of the excess over 6%. Interest earned under both deferred compensation plans is capped at 120% of the long-term applicable federal rate as discussed in the plans.
OneSource Deferred Compensation Plan On November 14, 2007, we acquired OneSource, which sponsored a deferred compensation plan. Under this deferred compensation plan, a rabbi trust was created to fund the obligation. The plan requires us to contribute 50% of the participant’s deferred compensation contributions but only to the extent that the deferred contribution does not exceed 5% of the participant’s compensation for the contribution allocation period. This liability is adjusted, with a corresponding charge (or credit) to the deferred compensation cost, to reflect changes in the fair value. On December 31, 2008, the plan was amended to preclude new participants. The assets held in the rabbi trust are not available for general corporate purposes. Aggregate expense recognized under these deferred compensation plans for the years ended October 31, 2013, 2012, and 2011 were $0.4 million, $0.4 million, and $0.4 million, respectively. The total long-term liability of all deferred compensation plans at October 31, 2013 and 2012 (excluding the fair value of the assets held in the rabbi trust) was $17.0 million and $16.4 million, respectively, and is included in “Retirement plans and other” on the accompanying consolidated balance sheets. The fair value of the assets held in the rabbi trust at October 31, 2013 and 2012 was $5.4 million and $5.0 million, respectively. 401(k) Plans We sponsor six 401(k) savings plans covering certain employees, as set forth in the respective plan documents. These 401(k) plans are subject to the applicable provisions of ERISA and the Internal Revenue Code (“IRC”). Certain plans permit a company match of a portion of the participant’s contributions or a discretionary contribution after the participant has met the eligibility requirements set forth in the plan. We made matching 401(k) contributions required by the 401(k) plans during the years ended October 31, 2013, 2012, and 2011 in the amounts of $8.0 million, $7.9 million, and $8.3 million, respectively. Multiemployer Pension and Postretirement Plans Multiemployer Defined Benefit Pension Plans Certain of our union-represented employees are covered by multiemployer defined benefit pension plans. Multiemployer pension plans are different from single-employer pension plans, in the following respects:
The information in the following tables relates to multiemployer defined benefit pension plans that we have determined to be individually significant to us. To determine individually significant plans, we evaluated several factors, including our total contributions to the plan, our significance to the plan in terms of participating employees and contributions, and the funded status of the plan. The following table provides information about the funded status of individually significant plans:
For plans that are not individually significant to us, the total amount of contributions is presented in the aggregate.
We were listed in the Forms 5500 of the following plans as providing more than 5 percent of total contributions for the plan years presented below.
* These plans are not separately listed in our multiemployer table as they represent an insignificant portion of our total multiemployer pension plan contributions. There have been no significant changes that affect the comparability of total contributions for any of the periods presented. Other Postretirement Benefit Plans In addition to contributions to the defined benefit pension plans described above, ABM also contributes to several multiemployer plans that provide other postretirement benefits based on obligations arising under collective bargaining agreements covering union-represented employees. These plans may provide medical, pharmacy, dental, vision, mental health, and other benefits to active employees as determined by the trustees of each plan. Our contributions to such plans were $204.7 million, $193.1 million, and $177.0 million in the years ended October 31, 2013, 2012, and 2011, respectively. There have been no significant changes that affect the comparability of total contributions for any of the periods presented. |