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Retirement and Post Retirement Health Care Plans
 12 Months Ended
Jan. 01, 2022
Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]  
Retirement and Post Retirement Health Care Plans Retirement and Post-Retirement Health Care Plans
Retirement Plans
The Company sponsors pension and other post-retirement benefit plans for certain associates. Most of the Company's associates are accumulating retirement income benefits through defined contribution plans. The majority of Company's defined benefit pension plans covering the Company's domestic associates have been closed to new associates and frozen for existing associates, however certain employees represented by collective bargaining continue to earn benefits. Certain foreign associates
are covered by government sponsored plans in the countries in which they are employed. The defined contribution plans provide for Company contributions based, depending on the plan, upon one or more of participant contributions, service and profits. Company contributions to domestic defined contribution plans totaled $9.8 million, $7.6 million and $8.9 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively. Company contributions to non-US defined contribution plans were $5.7 million, $5.5 million and $10.6 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.
Benefits provided under defined benefit pension plans are based, depending on the plan, on associates' average earnings and years of credited service, or a benefit multiplier times years of service. Funding of these qualified defined benefit pension plans is in accordance with federal laws and regulations. The actuarial valuation measurement date for pension plans is the calendar year end of each year.
The Company's target allocation, target return and actual weighted-average asset allocation by asset category are as follows:

TargetActual Allocation
AllocationReturn20212020
Equity Investments37.7%
6.2 - 7.5%
35.7%72.4%
Fixed Income51.6%
2.5 - 5.8%
55.0%26.8%
Other10.7%
1.5% - 6.2%
9.3%0.8%
Total100.0%4.6%100.0%100.0%

In 2021, the Company's investment strategy shifted from achieving moderately aggressive growth to implementing a dynamic de-risking strategy designed to allow the plans to attain and/or maintain fully funded status levels while reducing volatility. Accordingly, allocation targets have been established to fit this strategy, with fixed income allocations increasing in response to increased funded ratio thresholds along a glidepath. The overall fixed income portfolio shall be invested in such a manner that its interest rate sensitivity correlates highly with that of the liabilities of the plans, and other assets classes are intended to provide additional return with associated higher levels of risk. The long-term rate of return assumptions consider historic returns and volatilities adjusted for changes in overall economic conditions that may affect future returns and a weighting of each investment class. Prior to 2021, the Company's investment strategy for its defined benefit pension plans is to achieve moderately aggressive growth, earning a long-term rate of return sufficient to allow the plans to reach fully funded status. The long-term rate of return assumptions consider historic returns and volatilities adjusted for changes in overall economic conditions that may affect future returns and a weighting of each investment class.
The following table presents a reconciliation of the funded status of the defined benefit pension plans (in millions):
20212020
Change in Projected Benefit Obligation:
Obligation at Beginning of Period$298.4 $282.8 
Service Cost1.2 2.0 
Interest Cost7.5 8.0 
Actuarial (Gain) Loss(1.2)21.2 
Less: Benefits Paid19.7 15.9 
Settlements(1.9)— 
Foreign Currency Translation(3.0)0.3 
Acquisitions305.9 — 
Obligation at End of Period$587.2 $298.4 
Change in Fair Value of Plan Assets:
Fair Value of Plan Assets at Beginning of Period$230.2 $203.4 
Actual Return on Plan Assets33.7 33.7 
Employer Contributions5.7 8.5 
Less: Benefits Paid19.7 15.9 
Settlements(1.9)— 
Foreign Currency Translation(1.3)0.5 
Acquisitions232.2 — 
Fair Value of Plan Assets at End of Period$478.9 $230.2 
Funded Status$(108.3)$(68.2)
The net actuarial gain for fiscal 2021 is attributable to an increase in discount rates resulting in a gain of $11.4 million offset by $10.2 million of losses from census experience. The net actuarial losses for fiscal 2020 are attributable to a decrease in discount rates and census experience resulting in a loss of $24.1 million offset by $2.9 million of gains to the mortality assumption update.
In connection with the Rexnord Transaction, $305.9 million of plan benefit obligations and $232.2 million of plan assets included in the Rexnord PMC business were transferred to the Company on October 4, 2021. One of the international plans that transferred in connection with the Rexnord Transaction was in the process of winding down at the time of the merger. The plan was fully settled as expected and carried no additional income statement impact.

The funded status as of January 1, 2022 included domestic plans of $(61.6) million and international plans of $(46.7) million. The funded status as of January 2, 2021 included domestic plans of $(62.6) million and international plans of $(5.6) million.
Pension Assets
The Company classifies its investments into Level 1, which refers to securities valued using quoted prices from active markets for identical assets, Level 2, which refers to securities not traded on an active market but for which observable market inputs are readily available, and Level 3, which refers to securities valued based on significant unobservable inputs. Mutual funds are valued at the unadjusted quoted market prices for the securities. Real estate interest values are determined using model-based techniques that include relative value analysis and discounted cash flow techniques. Common collective trust funds are valued based on the net asset value (“NAV”) provided by the administrator of the fund as a practical expedient to estimate fair value. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. Investments in units of collective trust funds and short-term investment funds, comprised of cash and money market funds, are valued at their respective published market prices as reported by the funds daily. Certain international plans hold insurance contracts. The fair value of these contracts is calculated by projecting expected future cash flows from the contract and discounting them to present value based on current market rates. The contracts are included within Level 3 of the hierarchy as the assumptions used to project expected future cash flows are based on actuarial estimates and are unobservable.
Pension assets by type and level are as follows (in millions):
January 1, 2022
TotalLevel 1Level 2Level 3
Cash and Cash Equivalents$5.3 $5.3 $— $— 
Mutual Funds:
US Equity Funds1.9 1.9 — — 
International Equity Funds3.9 3.9 — — 
Fixed Income Funds2.9 2.9 — — 
Other2.0 2.0 — — 
Insurance Contracts34.0 — — 34.0 
$50.0 $16.0 $— $34.0 
Investments Measured at Net Asset Value428.9 
Total$478.9 
January 2, 2021
TotalLevel 1Level 2Level 3
Cash and Cash Equivalents$1.3 $1.3 $— $— 
Mutual Funds:
US Equity Funds1.6 1.6 — — 
International Equity Funds3.5 3.5 — — 
Fixed Income Funds3.0 3.0 — — 
 Other1.8 1.8 — — 
Real Estate Fund10.0 — — 10.0 
$21.2 $11.2 $— $10.0 
Investments Measured at Net Asset Value209.0 
Total$230.2 

The following table sets forth additional disclosures for the fair value measurement of the fair value of pension plan assets that calculate fair value based on NAV per share practical expedient as of January 1, 2022 and January 2, 2021 (in millions):
20212021
Common Collective Trust Funds$428.9 $209.0 
The 2021 common collective trust funds are investments in the Mercer US Small/Midcap Equity Portfolio, the Mercer Non-US Core Equity Portfolio, the Mercer Global Low Volatility Equity Portfolio, the Mercer US Large Cap Passive Equity Portfolio, the Mercer Long Duration Passive Fixed Income Portfolio, the Mercer Emerging Markets Equity Portfolio, the Mercer Active Long Corporate Fixed Income Portfolio, the Mercer Opportunistic Fixed Income Portfolio, the Mercer Long Strips Fixed Income Portfolio, the Mercer Active Intermediate Credit Portfolio, and the Mercer Core Real Estate Portfolio. The Mercer US Small/Midcap Equity Portfolio seeks to provide long term total returns comprised primarily of capital appreciation by investing in equity securities issued by small to medium capitalization US companies. The Mercer Non-US Core Equity Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of non-US companies. The Mercer Global Low Volatility Equity Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of US and foreign issuers. The Mercer US Large Cap Passive Equity Portfolio seeks to approximate, as closely as possible, the performance of the S&P 500 Index over the long term by investing in the equity securities comprising the index in approximately the same proportions as they are represented in the index. The Mercer Long Duration Passive Fixed Income Portfolio seeks to approximate as closely as practicable, before expenses, the performance of the Bloomberg Barclays Capital US Long Government Bond Index over the long term by investing in securities that comprise the index in the same proportions as they are represented in the index. The Mercer Emerging Markets Equity Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing equity securities of companies that are located in emerging markets, other investments that are tied economically to emerging markets, as well as in American, European and Global Depository Receipts. The Mercer Active Long Corporate Fixed Income Portfolio seeks to maximize long term total return by investing on high quality US corporate bonds. The Mercer Opportunistic Fixed Income Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing in high yield bonds and emerging markets debt. The Mercer Long Strips Fixed Income Portfolio seeks to extend the duration of plan assets by investing in US Treasury STRIPS with a maturity of greater than 20 years. The Mercer Active Intermediate Credit Portfolio seeks to maximize long-term total return. The Mercer Core Real Estate Portfolio seeks to earn attractive risk-adjusted returns on a diversified portfolio of private real estate, by systematically favoring the market segments and opportunities believed to offer the most attractive relative value at a given point in time. The 2021 common collective trust funds are available for immediate redemption.
The 2020 common collective trust funds are investments in the Mercer US Small/Midcap Equity Portfolio, the Mercer US Core Fixed Income Portfolio, the Mercer Non-US Core Equity Portfolio, the Mercer Global Low Volatility Equity Portfolio, the Mercer US Large Cap Passive Equity Portfolio, the Mercer Long Duration Passive Fixed Income Portfolio, the Mercer Emerging Markets Equity Portfolio, the Mercer Active Long Corporate Fixed Income Portfolio, and the Mercer Opportunistic Fixed Income Portfolio. The Mercer US Small/Midcap Equity Portfolio seeks to provide long term total returns comprised primarily of capital appreciation by investing in equity securities issued by small to medium capitalization US companies. The Mercer US Core Fixed Income Portfolio seeks to provide total return, consisting of both current income and capital appreciation, by investing in fixed income securities. The Mercer Non-US Core Equity Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of non-US companies. The Mercer Global Low Volatility Equity Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of US and foreign issuers. The Mercer US Large Cap Passive Equity Portfolio seeks to approximate, as closely as possible, the performance of the S&P 500 Index over the long term by investing in the equity securities comprising the index in approximately the same proportions as they are represented in the index. The Mercer Long Duration Passive Fixed Income Portfolio seeks to approximate as closely as practicable, before expenses, the performance of the Bloomberg Barclays Capital US Long Government Bond Index over the long term by investing in securities that comprise the index in the same proportions as they are represented in the index. The Mercer Emerging Markets Equity Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing equity securities of companies that are located in emerging markets, other investments that are tied economically to emerging markets, as well as in American, European and Global Depository Receipts. The Mercer Active Long Corporate Fixed Income Portfolio seeks to maximize long term total return by investing on high quality US corporate bonds. The Mercer Opportunistic Fixed Income Portfolio seeks to provide long term total return, which includes capital appreciation and income, by investing in high yield bonds and emerging markets debt. The 2020 common collective trust funds are available for immediate redemption.
The table below sets forth a summary of changes in the Company's Level 3 assets in its pension plan investments as of January 1, 2022 and January 2, 2021 (in millions):
20212020
Real Estate FundInsurance ContractsTotalReal Estate Fund
Beginning Balance$10.0 $— $10.0 $9.9 
Acquisition— 33.6 33.6 — 
Net Sales(11.6)— (11.6)— 
Net Gains 1.6 1.4 3.0 0.1 
Translation— (1.0)(1.0)— 
Ending Balance$— $34.0 $34.0 $10.0 

Funded Status and Expense

The Company recognized the funded status of its defined benefit pension plans on the Consolidated Balance Sheets as follows (in millions):
20212020
Other Noncurrent Assets$0.8 $— 
Accrued Compensation and Benefits(4.9)(4.1)
Pension and Other Post Retirement Benefits(104.2)(64.1)
Total$(108.3)$(68.2)
Amounts Recognized in Accumulated Other Comprehensive Loss
Net Actuarial Gain$20.5 $43.7 
Prior Service Cost0.7 0.9 
Total$21.2 $44.6 

The accumulated benefit obligation for all defined benefit pension plans was $580.9 million and $292.8 million as of January 1, 2022 and January 2, 2021, respectively.

The accumulated benefit obligation exceeded plan assets for all pension plans as of January 1, 2022 and January 2, 2021.

The following weighted average assumptions were used to determine the projected benefit obligation as of January 1, 2022 and January 2, 2021, respectively:
20212020
Discount Rate2.7%2.6%

The objective of the discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled. In making the determination, the Company takes into account the timing and amount of benefits that would be available under the plans. The methodology for selecting the discount rate was to match the plan's cash flows to that of a theoretical bond portfolio yield curve.

Certain of the Company's defined benefit pension plan obligations are based on years of service rather than on projected compensation percentage increases. For those plans that use compensation increases in the calculation of benefit obligations and net periodic pension cost, the Company used an assumed rate of compensation increase of 3.0% for the fiscal years ended January 1, 2022 and January 2, 2021.
Net periodic pension benefit costs and the net actuarial loss and prior service cost recognized in OCI for the defined benefit pension plans were as follows (in millions):
202120202019
Service Cost$1.2 $2.0 $6.2 
Interest Cost7.5 8.0 10.6 
Expected Return on Plan Assets(14.5)(13.3)(12.5)
Amortization of Net Actuarial Loss3.0 1.9 2.2 
Amortization of Prior Service Cost0.2 0.3 0.3 
Net Periodic Benefit Cost$(2.6)$(1.1)$6.8 
Change in Obligations Recognized in OCI, Net of Tax
    Prior Service Cost$0.1 $0.2 $0.2 
    Net Actuarial Loss2.4 1.5 1.7 
Total Recognized in OCI$2.5 $1.7 $1.9 

As permitted under relevant accounting guidance, the amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of associates expected to receive benefits under the plans.

The following weighted average assumptions were used to determine net periodic pension cost for fiscal years 2021, 2020 and 2019, respectively.
202120202019
Discount Rate2.6%3.3%4.4%
Expected Long-Term Rate of Return on Assets6.2%7.0%7.0%

The Company made contributions to its defined benefit plan of $5.7 million and $8.5 million for the fiscal years ended January 1, 2022 and January 2, 2021, respectively.

The Company estimates that in fiscal 2022 it will make contributions in the amount of $6.7 million to fund its defined benefit pension plans.

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in millions):
YearExpected Payments
2022$34.8 
202333.7 
202433.8 
202534.1 
202634.1 
2027-2030163.8 

Post-Retirement Health Care Plan

In connection with the acquisition of the Power Transmission Solutions business from Emerson Electric Co. in 2015, the Company established an unfunded post-retirement health care plan for certain domestic retirees and their dependents.

In connection with the Rexnord Transaction, a post-retirement medical plan liability included in the Rexnord PMC business of $2.7 million was transferred to the Company on October 4, 2021.
The following table presents a reconciliation of the accumulated benefit obligation of the post-retirement health care plan (in millions):
Change in Accumulated Post Retirement Benefit Obligation20212020
Obligation at Beginning of Period$5.9 $5.9 
Interest Cost0.1 0.2 
Actuarial (Gain) Loss(0.2)0.1 
Curtailment Loss0.2 — 
Participant Contributions0.2 0.2 
Less: Benefits Paid0.5 0.5 
Acquisitions 2.7 — 
Obligation at End of Period$8.4 $5.9 

The Company recognized the funded status of its post-retirement health care plan on the balance sheet as follows (in millions):
20212020
Accrued Compensation and Benefits$0.9 $0.5 
Pension and Other Post Retirement Benefits7.5 5.4 
Total$8.4 $5.9 
Amounts Recognized in Accumulated Other Comprehensive Loss
Net Actuarial Gain$(2.7)$(3.2)
Prior Service Cost— (0.9)
Total$(2.7)$(4.1)

The following assumptions were used to determine the accumulated post-retirement benefit obligation as of January 1, 2022 and January 2, 2021, respectively.
20212020
Discount Rate2.7%2.5%

Net periodic post-retirement health care benefit costs for the post-retirement health care plan were as follows (in millions):
202120202019
Interest Cost$0.1 $0.2 $0.3 
Amortization of Net Actuarial Gain(0.6)(0.6)(0.4)
Amortization of Prior Service Cost(0.9)(0.9)(0.1)
Curtailment Gain— — (0.5)
Net Periodic Post-Retirement Health Care Benefit Cost$(1.4)$(1.3)$(0.7)
Change in Obligations Recognized in OCI, Net of Tax
    Prior Service Gain$(0.7)$(0.7)$(0.1)
    Net Actuarial Gain(0.4)(0.5)(0.3)
Total Recognized in OCI$(1.1)$(1.2)$(0.4)

The following assumptions were used to determine net periodic post-retirement health care benefit cost for fiscal years 2021, 2020 and 2019, respectively.
202120202019
Discount Rate4.7%3.2%4.2%
The health care cost trend rate for fiscal 2021, 2020 and 2019, respectively, is 5.7%, 5.8% and 6.8% for pre-65 participants and 5.7%, 5.6% and 5.1% for post-65 participants, decreasing to 4.5% for all years in fiscal 2031, the year that the health care cost trend rate reaches the assumed ultimate rate.

The Company contributed $0.3 million and $0.3 million to the post-retirement health care plan in fiscal 2021 and fiscal 2020, respectively. The Company estimates that in fiscal 2022 it will make contributions of $0.9 million to the post-retirement health care plan.

The following post-retirement benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in millions):
YearExpected Payments
2022$0.9 
20230.8 
20240.7 
20250.6 
20260.6 
2027-20302.4