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Employee Benefits

12 Months Ended

Dec. 31, 2019

Note 10 - Employee Benefits

Seaboard has a qualified defined benefit pension plan (the “Plan”) for its domestic salaried and clerical employees that were hired before January 1, 2014. Benefits are generally based upon the number of years of service and a percentage of final average pay. Seaboard has historically based pension contributions on minimum funding standards to avoid the Pension Benefit Guaranty Corporation (“PBGC”) variable rate premiums established by the Employee Retirement Income Security Act (“ERISA”) of 1974. Seaboard did not make any contributions in 2019 and 2018 and currently does not plan on making any contributions in 2020.

Pursuant to Seaboard’s investment policy, assets are invested in the Plan to achieve a diversified target allocation of approximately 50% in domestic equities, 25% in international equities, 20% in fixed income securities and 5% in alternative investments. The investment strategy is periodically reviewed by management for adherence to policy and performance. The following tables show the Plan’s assets measured at estimated fair value as of December 31, 2019 and 2018, respectively, and the level within the fair value hierarchy used to measure each category of assets:



	December 31,
(Millions of dollars)	2019		Level 1		Level 2		Level 3
Assets:
Domestic equity securities	$	84	$	84	$	—	$	—
Foreign equity securities		57		57		—		—
Domestic fixed income mutual funds		30		30		—		—
Foreign fixed income mutual funds		12		12		—		—
Money market funds		2		2		—		—
Total assets	$	185	$	185	$	—	$	—



	December 31,
(Millions of dollars)	2018		Level 1		Level 2		Level 3
Assets:
Domestic equity securities	$	69	$	69	$	—	$	—
Foreign equity securities		47		47		—		—
Domestic fixed income mutual funds		27		27		—		—
Foreign fixed income mutual funds		11		11		—		—
Money market funds		2		2		—		—
Total assets	$	156	$	156	$	—	$	—

Seaboard also sponsors non-qualified, unfunded supplemental executive plans, and has certain individual, non-qualified, unfunded supplemental retirement agreements for certain retired employees. Management has no plans to provide funding for these supplemental executive plans in advance of when the benefits are paid.

Assumptions used in determining pension information for all of the above plans were:



	Years ended December 31,
	2019				2018				2017
Weighted average assumptions
Discount rate used to determine obligations	2.15	-	3.50	%	3.50	-	4.50	%	2.75	-	3.80	%
Discount rate used to determine net periodic benefit cost	3.50	-	4.50	%	2.75	-	3.80	%	2.90	-	4.60	%
Expected return on plan assets			6.25	%			6.25	%			6.50	%
Long-term rate of increase in compensation levels			4.00	%			4.00	%			4.00	%

Management selected the discount rate based on a model-based result where the timing and amount of cash flows approximates the estimated payouts. The expected returns on the Plan’s assets assumption are based on the weighted average of asset class expected returns that are consistent with historical returns. The assumed rate of return selected was based on model-based results that reflect the Plan’s asset allocation and related long-term projected returns. The measurement date for all plans is December 31.

The aggregate changes in the benefit obligation and fair value of assets for the Plan, supplemental executive plans and retirement agreements and the funded status were as follows:



	December 31,
(Millions of dollars)		2019	2018
Reconciliation of benefit obligation:
Benefit obligation at beginning of year	$	293	$	300
Service cost		8		10
Interest cost		12		11
Actuarial losses (gains)		50		(22)
Plan settlements		(9)		—
Benefits paid		(9)		(6)
Other		3		—
Benefit obligation at end of year	$	348	$	293
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year	$	156	$	171
Actual return on plan assets		35		(11)
Employer contributions		9		2
Plan settlements		(9)		—
Benefits paid		(6)		(6)
Fair value of plan assets at end of year	$	185	$	156
Funded status	$	(163)	$	(137)

The net funded status of the Plan was $(53) million and $(35) million as of December 31, 2019 and 2018, respectively. The benefit obligation increased primarily due to a decrease in discount rates for all plans. The accumulated benefit obligation for the Plan was $205 million and $165 million and for all the other plans was $104 million and $95 million as

of December 31, 2019 and 2018, respectively. Expected future net benefit payments for all plans during each of the next five years and thereafter were as follows: $19 million, $11 million, $29 million, $23 million, $16 million and $82 million, respectively.

The net periodic benefit cost of these plans was as follows:



	Years ended December 31,
(Millions of dollars)	2019		2018		2017
Components of net periodic benefit cost:
Service cost	$	8	$	10	$	9
Interest cost		12		11		11
Expected return on plan assets		(10)		(11)		(10)
Amortization		5		6		5
Settlement loss recognized		2		—		2
Net periodic benefit cost	$	17	$	16	$	17

The service cost component is recorded in either cost of sales or selling, general and administrative expenses depending upon the employee, and the other components of net periodic benefit cost are recorded in miscellaneous, net in the consolidated statements of comprehensive income. The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive loss before taxes as of December 31, 2019 and 2018 were $88 million and $72 million, respectively. Such amounts primarily represent the unrecognized net actuarial losses that are generally amortized over the average remaining working lifetime of the active participants for all of these plans. The settlements recognized during 2019 and 2017 were primarily due to certain participants who received lump sum payments that exceeded the service cost plus interest cost for the respective plan.

Seaboard participated in a multi-employer pension fund, the United Food and Commercial Workers International Union-Industry Pension Fund (the “Fund”), which covered certain union employees under a collective bargaining agreement. Contribution expense for this Fund was $1 million for each of the years ended December 31, 2019, 2018 and 2017. Effective July 22, 2019, after ratification of a renewed collective bargaining agreement, Seaboard ceased contributing to the Fund, which subsequently terminated Seaboard’s participation in the Fund. Seaboard recorded a $14 million withdrawal liability in 2019, that is payable in quarterly installments over 20 years.

Seaboard maintains a defined contribution plan covering most of its domestic salaried and clerical employees. In 2019, 2018 and 2017, Seaboard contributed to this plan an amount equal to 50% of the first 6% of each employee’s contributions to the plan. Employee vesting is based upon years of service, with 20% vested after one year of service and an additional 20% vesting with each additional complete year of service. Contribution expense for this plan was $3 million for each of the years ended December 31, 2019 and 2018 and 2017. In addition, Seaboard maintains a defined contribution plan covering most of its hourly, non-union employees. Contribution expense for this plan was less than $1 million for December 31, 2019 and $1 million for the years ended December 31, 2018 and 2017.

Seaboard has a deferred compensation plan that allows certain employees to reduce their compensation in exchange for values in various investments. Seaboard contributes 3% of the employees’ reduced compensation. Seaboard also has an Investment Option Plan that allowed certain employees to reduce their compensation in exchange for an option to acquire interests measured by reference to three investments. Contributions are no longer permitted under the Investment Option Plan. The exercise price for each investment option was established based upon the fair market value of the underlying investment on the date of grant. Seaboard’s income (expense) for these two plans, which primarily includes amounts related to the change in fair value of the underlying investment accounts, was $(11) million, $2 million and $(10) million for the years ended December 31, 2019, 2018 and 2017, respectively. Included in other liabilities as of December 31, 2019 and 2018 were $45 million and $38 million, respectively, representing the market value of the payable to the employees upon distribution or exercise for each plan. In conjunction with these plans, Seaboard purchased the specified number of units of the employee-designated investment, plus the applicable option price for the Investment Option Plan. These investments are treated as trading securities and are stated at their fair market values. Accordingly, as of December 31, 2019 and 2018, $51 million and $45 million, respectively, were included in other current assets in the consolidated balance sheets. Investment income (loss) related to the mark-to-market of these investments for 2019, 2018 and 2017 totaled $11 million, $(2) million and $9 million, respectively.