Employee Benefit Plans

Defined Benefit Plans — Oshkosh and certain of its subsidiaries sponsor multiple defined benefit pension plans for certain employees providing services to Oshkosh, Oshkosh Defense, Airport Products, Oshkosh Commercial and Pierce. The benefits provided are based primarily on average compensation, years of service and date of birth. Hourly plans are generally based on years of service and a benefit dollar multiplier. The Company periodically amends the plans, including changing the benefit dollar multipliers and other revisions. Effective December 31, 2012, salaried participants in the pension plans no longer receive credit, other than for vesting purposes, for eligible earnings. In January 2013, salaried employees became eligible for additional employer contributions to the Company's defined contribution plan (see “401(k) and Defined Contribution Pension Replacement Plans” below).

In connection with staffing reductions in the defense segment as a result of declining sales to the DoD, the Company recorded pension curtailment losses of $6.8 million and $2.8 million during fiscal 2014 and 2013, respectively. Changes related to the ratification of a five-year extension of the defense segment unionized hourly employees' contract increased the benefit obligation by $8.1 million in fiscal 2013. In December 2013, the Pierce pension plan was amended to close participation in the plan for new production employees. During fiscal 2014, the Company amended the Oshkosh and Pierce pension plans to offer qualified terminated vested plan participants and/or their beneficiaries the option of an immediate lump sum distribution or monthly annuity during a limited window of time. A settlement charge of $1.4 million was recorded during fiscal 2014 based on the results of the offer, which resulted in accelerated pension benefit payments of $13.5 million in fiscal 2014 from the plan assets.

Supplemental Executive Retirement Plans — The Company maintains defined benefit SERPs for certain executive officers of the Company and its subsidiaries. Benefits are based upon the employees' earnings. Effective December 31, 2012, the Oshkosh SERP was amended to freeze benefits under the plan. During fiscal 2013, the Company established the Trust to fund obligations under the Oshkosh SERP. As of September 30, 2015, the Trust held assets of $21.6 million. The Trust assets are subject to claims of the Company's creditors. The Trust assets are included in “Other current assets” and “Other long-term assets” in the Consolidated Balance Sheets. In January 2013, the affected executive officers became eligible for a new, non-qualified, defined contribution SERP. The Company recognized $0.8 million, $1.7 million and $1.7 million of expense for liabilities under the defined contribution SERP in fiscal 2015, 2014 and 2013, respectively.

Postretirement Medical Plans — Oshkosh and certain of its subsidiaries sponsor multiple postretirement benefit plans for Oshkosh Defense, JLG and Kewaunee hourly employees, retirees and their spouses. The plans generally provide health benefits based on years of service and date of birth. These plans are unfunded.

In September 2012, the Oshkosh plan was amended to eliminate postretirement benefit coverage for salaried employees. In September 2013, as a result of changes made to active hourly Oshkosh employees' health coverage effective October 2017, the expected cost of coverage under the postretirement benefit plan decreased. The effect of the amendment was a reduction in the benefit obligation of $24.6 million as of September 30, 2013. This reduction is being amortized over the expected average remaining years of service of 18 years for participants expected to receive benefits under this plan. In addition, in connection with staffing reductions in the defense segment, the Company recorded post-employment curtailment gains of $3.4 million, $10.0 million and $2.9 million during fiscal 2015, 2014 and 2013, respectively.

Changes in benefit obligations and plan assets, as well as the funded status of the Company’s defined benefit pension plans and postretirement benefit plans as of and for the fiscal years ended September 30, 2015 and 2014, were as follows (in millions):



							Postretirement
	Pension Benefits						Health and Other
	2015			2014			2015			2014

Accumulated benefit obligation at September 30	$	410.3		$	395.4		$	37.5		$	44.0

Change in projected benefit obligation
Benefit obligation at October 1	$	403.2		$	350.0		$	44.0		$	42.5
Service cost	8.2			8.1			1.7			2.2
Interest cost	18.1			17.7			1.7			2.0
Actuarial (loss) gain	(3.3		)	51.7			(5.5		)	2.4
Participant contributions	0.2			0.2			—			0.1
Plan amendments	1.1			1.1			—			—
Curtailments	—			(2.5		)	(2.2		)	(3.1		)
Benefits paid	(11.1		)	(23.1		)	(2.2		)	(2.1		)
Currency translation adjustments	(1.5		)	—			—			—
Benefit obligation at September 30	$	414.9		$	403.2		$	37.5		$	44.0



Change in plan assets
Fair value of plan assets at October 1	$	320.6		$	308.0		$	—		$	—
Actual return on plan assets	4.7			36.2			—			—
Company contributions	2.7			2.5			2.2			2.0
Participant contributions	0.2			0.2			—			0.1
Expenses paid	(2.8		)	(3.2		)	—			—
Benefits paid	(11.1		)	(23.1		)	(2.2		)	(2.1		)
Currency translation adjustments	(1.8		)	—			—			—
Fair value of plan assets at September 30	$	312.5		$	320.6		$	—		$	—
Funded status of plan - underfunded at September 30	$	(102.4	)	$	(82.6	)	$	(37.5	)	$	(44.0	)

Recognized in consolidated balance sheet at September 30
Prepaid benefit cost (long-term asset)	$	3.9		$	4.0		$	—		$	—
Accrued benefit liability (current liability)	(1.5		)	(1.5		)	(1.6		)	(2.4		)
Accrued benefit liability (long-term liability)	(104.8		)	(85.1		)	(35.9		)	(41.6		)
	$	(102.4	)	$	(82.6	)	$	(37.5	)	$	(44.0	)



Recognized in accumulated other comprehensive income (loss) as of September 30 (net of taxes)
Net actuarial (loss) gain	$	(47.0	)	$	(42.2	)	$	0.8	$	(4.1	)
Prior service (cost) benefit	(9.5		)	(9.9		)	9.3		12.0
	$	(56.5	)	$	(52.1	)	$	10.1	$	7.9



Weighted-average assumptions as of September 30
Discount rate	4.45	%	4.52	%	4.08	%	4.04	%
Expected return on plan assets	6.03	%	6.25	%	n/a		n/a

Pension benefit plans with accumulated benefit obligations in excess of plan assets consisted of the following as of September 30 (in millions):



	2015		2014
Projected benefit obligation	$	391.6	$	380.6
Accumulated benefit obligation	385.2		372.2
Fair value of plan assets	285.4		294.1

The components of net periodic benefit cost (income) for fiscal years ended September 30 were as follows (in millions):



										Postretirement
	Pension Benefits									Health and Other
	2015			2014			2013			2015			2014			2013
Components of net periodic benefit cost (income)
Service cost	$	8.2		$	8.1		$	13.2		$	1.7		$	2.2		$	7.3
Interest cost	18.1			17.7			16.1			1.7			2.0			3.2
Expected return on plan assets	(17.9		)	(19.8		)	(17.0		)	—			—			—
Amortization of prior service cost (benefit)	1.7			2.0			1.9			(0.9		)	(1.6		)	(0.5		)
Curtailment/settlement	—			8.2			2.8			(3.4		)	(10.0		)	(2.9		)
Amortization of net actuarial loss	2.6			0.6			4.4			0.1			0.2			1.1
Expenses paid	2.8			3.2			2.2			—			—			—
Net periodic benefit cost (income)	$	15.5		$	20.0		$	23.6		$	(0.8	)	$	(7.2	)	$	8.2



Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net actuarial loss (gain)	$	10.0		$	32.8		$	(75.9	)	$	(7.7	)	$	(0.8	)	$	(22.0	)
Prior service cost	1.1			1.1			8.1			—			—			(24.6		)
Amortization of prior service benefit (cost)	(1.7		)	(2.0		)	(1.9		)	0.9			1.6			0.5
Curtailment/settlement	—			(8.2		)	(2.8		)	3.4			10.0			2.9
Amortization of net actuarial loss	(2.6		)	(0.6		)	(4.4		)	(0.1		)	(0.2		)	(1.1		)
	$	6.8		$	23.1		$	(76.9	)	$	(3.5	)	$	10.6		$	(44.3	)



Weighted-average assumptions
Discount rate	4.52	%	5.07	%	4.24	%	4.04	%	4.76	%	3.95	%
Expected return on plan assets	6.25	%	6.50	%	6.25	%	n/a		n/a		n/a
Rate of compensation increase	n/a		n/a		3.69	%	n/a		n/a		n/a

Included in accumulated other comprehensive income (loss) in the Consolidated Balance Sheet at September 30, 2015 are prior service costs of $1.7 million ($1.1 million net of tax) and unrecognized net actuarial losses of $2.3 million ($1.5 million net of tax) expected to be recognized in pension and supplemental employee retirement plan net periodic benefit costs during fiscal 2016.

The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for the Company was 7.0% in fiscal 2015, declining to 5.0% in fiscal 2022. If the health care cost trend rate was increased by 100 basis points, the accumulated postretirement benefit obligation at September 30, 2015 would increase by $7.5 million and the net periodic postretirement benefit cost for fiscal 2016 would increase by $0.8 million. A corresponding decrease of 100 basis points would decrease the accumulated postretirement benefit obligation at September 30, 2015 by $5.5 million and the net periodic postretirement benefit cost for fiscal 2016 would decrease by $0.6 million.

The Company’s Board of Directors has appointed an Investment Committee (“Committee”), which consists of members of management, to manage the investment of the Company’s pension plan assets. The Committee has established and operates under an Investment Policy. The Committee determines the asset allocation and target ranges based upon periodic asset/liability studies and capital market projections. The Committee retains external investment managers to invest the assets and an adviser to monitor the performance of the investment managers. The Investment Policy prohibits certain investment transactions, such as commodity contracts, margin transactions, short selling and investments in Company securities, unless the Committee gives prior approval.

The weighted-average of the Company’s pension plan asset allocations and target allocations at September 30, by asset category, were as follows:



	Target %	2015		2014
Asset Category
Fixed income	30% - 40%	31	%	31	%
Large-cap growth	25% - 35%	32	%	33	%
Large-cap value	5% - 15%	12	%	12	%
Mid-cap value	5% - 15%	12	%	12	%
Small-cap value	5% - 15%	13	%	12	%
Other	0% - 5%	—	%	—	%
		100	%	100	%

The plans’ investment strategy is based on an expectation that, over time, equity securities will provide higher total returns than debt securities. The plans primarily minimize the risk of large losses through diversification of investments by asset class, by investing in different styles of investment management within the classes and by using a number of different investment managers. The Committee monitors the asset allocation and investment performance monthly, with a more comprehensive quarterly review with its adviser and annual reviews with each investment manager.

The plans’ expected return on assets is based on management’s and the Committee’s expectations of long-term average rates of return to be achieved by the plans’ investments. These expectations are based on the plans’ historical returns and expected returns for the asset classes in which the plans are invested.

The fair value of plan assets by major category and level within the fair value hierarchy was as follows (in millions):



	Quoted Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2015:
Common stocks
U.S. companies^(a)	$	97.5	$	4.8	$	—	$	102.3
International companies ^(b)	—		14.4		—		14.4
Mutual funds ^(a)	90.6		—		—		90.6
Government and agency bonds^(c)	11.8		27.8		—		39.6
Corporate bonds and notes^(d)	—		46.4		—		46.4
Money market funds ^(e)	19.2		—		—		19.2
	$	219.1	$	93.4	$	—	$	312.5



	Quoted Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2014:
Common stocks
U.S. companies^(a)	$	99.2	$	4.6	$	—	$	103.8
International companies ^(b)	—		15.0		—		15.0
Mutual funds ^(a)	96.4		—		—		96.4
Government and agency bonds^(c)	9.6		32.1		—		41.7
Corporate bonds and notes^(d)	—		52.4		—		52.4
Money market funds ^(e)	11.3		—		—		11.3
	$	216.5	$	104.1	$	—	$	320.6

_________________________


^(a)	Primarily valued using a market approach based on the quoted market prices of identical instruments that are actively traded on public exchanges.


^(b)	Valuation model looks at underlying security “best” price, exchange rate for underlying security's currency against the U.S. Dollar and ratio of underlying security to American depository receipt.

^(c)

These investments consist of debt securities issued by the U.S. Treasury, U.S. government agencies and U.S. government-sponsored enterprises and have a variety of structures, coupon rates and maturities. These investments are considered to have low default risk as they are guaranteed by the U.S. government. Fixed income securities are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported trades.


^(d)	These investments consist of debt obligations issued by a variety of private and public corporations. These are investment grade securities which historically have provided a steady stream of income. Fixed income securities are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported trades.


^(e)	These investments largely consist of short-term investment funds and are valued using a market approach based on the quoted market prices of identical instruments.

The Company’s policy is to fund the pension plans in amounts that comply with contribution limits imposed by law. The Company does not expect to make a contribution to its pension plans in fiscal 2016.

The Company’s estimated future benefit payments under Company sponsored plans were as follows (in millions):



					Postretirement Health and Other
Fiscal Year Ending	Pension Benefits
September 30,	Qualified		Non-Qualified
2016	$	9.9	$	1.5	$	1.6
2017	11.0		1.5		2.0
2018	12.3		1.5		2.2
2019	13.6		2.0		2.5
2020	15.0		2.0		2.9
2021-2025	96.2		10.2		15.2

Multi-Employer Pension Plans — The Company participates in the Boilermaker-Blacksmith National Pension Trust (Employer Identification Number 48-6168020), a multi-employer defined benefit pension plan related to collective bargaining employees at the Company's Kewaunee facility. The Company's contributions and pension benefits payable under the plan and the administration of the plan are determined by the terms of the related collective-bargaining agreement, which expires on May 1, 2017. The multi-employer plan poses different risks to the Company than single-employer plans in the following respects:


1.	The Company's contributions to the multi-employer plan may be used to provide benefits to all participating employees of the program, including employees of other employers.


2.	In the event that another participating employer ceases contributions to the multi-employer plan, the Company may be responsible for any unfunded obligations along with the remaining participating employers.


3.	If the Company chooses to withdraw from the multi-employer plan, then the Company may be required to pay a withdrawal liability, based on the underfunded status of the plan at that time.

As of December 31, 2014, the plan-certified zone status as defined by the Pension Protection Act of 2006 was Yellow and accordingly the plan has implemented a financial improvement plan or a rehabilitation plan. The Company's contributions to the multi-employer plan did not exceed 5% of the total plan contributions for the fiscal years 2015, 2014 or 2013. The Company made contributions to the plan of $1.2 million, $1.2 million and $1.1 million in fiscal 2015, 2014 and 2013, respectively.

401(k) and Defined Contribution Pension Replacement Plans — The Company has defined contribution 401(k) plans for substantially all domestic employees. The plans allow employees to defer 2% to 100% of their income on a pre-tax basis. Each employee who elects to participate is eligible to receive Company matching contributions, which are based on employee contributions to the plans, subject to certain limitations. Beginning in January 2013, the Company also contributes between 3% and 6% of an employee's base pay, depending on age, as part of a new defined contribution pension replacement plan. Amounts expensed for Company matching and discretionary contributions were $33.4 million, $31.9 million and $28.3 million in fiscal 2015, 2014 and 2013, respectively.