Employee Benefits

12 Months Ended

Dec. 31, 2020

Employee Benefits

Employee Benefits

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 2020 and 2019 and currently does not plan on making any contributions in 2021. Effective January 1, 2021, Seaboard will transfer assets and liabilities for employees of certain Seaboard subsidiaries into a successor plan.

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, 2020 and 2019, respectively, and the level within the fair value hierarchy used to measure each category of assets:

	December 31,
(Millions of dollars)	2020		Level 1		Level 2		Level 3
Assets:
Domestic equity securities	$	93	$	93	$	—	$	—
Foreign equity securities		64		64		—		—
Domestic fixed income mutual funds		32		32		—		—
Foreign fixed income mutual funds		15		15		—		—
Money market funds		2		2		—		—
Total assets	$	206	$	206	$	—	$	—

	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	$	—	$	—

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,
	2020				2019				2018
Weighted average assumptions
Discount rate used to determine obligations	0.70	-	2.60	%	2.15	-	3.50	%	3.50	-	4.50	%
Discount rate used to determine net periodic benefit cost	2.15	-	3.50	%	3.50	-	4.50	%	2.75	-	3.80	%
Expected return on plan assets			6.25	%			6.25	%			6.25	%
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,
		2020	2019
(Millions of dollars)		Accumulated benefits exceed assets		Accumulated benefits exceed assets
Reconciliation of benefit obligation:
Benefit obligation at beginning of year	$	348	$	293
Service cost		9		8
Interest cost		11		12
Actuarial losses		58		50
Plan settlements		(38)		(9)
Benefits paid		(9)		(9)
Other		—		3
Benefit obligation at end of year	$	379	$	348
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year	$	185	$	156
Actual return on plan assets		27		35
Employer contributions		38		9
Plan settlements		(38)		(9)
Benefits paid		(6)		(6)
Fair value of plan assets at end of year	$	206	$	185
Funded status	$	(173)	$	(163)

The net funded status of the Plan was $(43) million and $(53) million as of December 31, 2020 and 2019, respectively. The benefit obligation increased primarily due to a decrease in discount rates for all plans. The accumulated benefit obligation for the Plan was $157 million and $205 million, respectively, and for all the other plans was $179 million and $104 million as of December 31, 2020 and 2019, respectively. Expected future benefit payments for all plans during each of the next five years and the next five years thereafter were as follows: $10 million, $30 million, $19 million, $22 million, $14 million and $77 million, respectively.

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

	Years ended December 31,
(Millions of dollars)	2020		2019		2018
Components of net periodic benefit cost:
Service cost	$	9	$	8	$	10
Interest cost		11		12		11
Expected return on plan assets		(11)		(10)		(11)
Amortization		7		5		6
Settlement loss recognized		11		2		—
Net periodic benefit cost	$	27	$	17	$	16

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, 2020 and 2019 were $112 million and $88 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 were primarily due to certain participants who received lump sum payments that exceeded the service cost plus interest cost for the respective plan. During 2020, Seaboard made a lump sum $32 million pension distribution, related to the passing of Mr. Steve Bresky, Seaboard’s former Chief Executive Officer.

Seaboard has deferred compensation plans that allow certain employees to reduce their compensation in exchange for values in various investments, with one plan having options that are exercisable. In conjunction with these plans, Seaboard purchases investments that are classified as trading securities and included in other current assets and recognizes the amount payable to the employees in other current liabilities on the consolidated balance sheets. Investments for Seaboard’s deferred compensation plans were $26 million and $51 million as of December 31, 2020 and 2019, respectively. The payable to the employees was $23 million and $45 million as of December 31, 2020 and 2019, respectively. Seaboard paid $32 million of deferred compensation, related to Mr. Bresky, reducing the other current liabilities and other current assets. Deferred compensation plan costs recognized in selling, general and administrative expenses are offset by the effect of the marked-to-market adjustments on investments recorded in other investment income (loss). Seaboard’s income (expense) for these plans, which primarily includes amounts related to the change in fair value of the underlying investment accounts, was $(6) million, $(11) million and $2 million for the years ended December 31, 2020, 2019 and 2018, respectively. Investment income (loss) related to the deferred compensation investments totaled $6 million, $11 million and $(2) million, for the years ended December 31, 2020, 2019 and 2018, respectively.

Seaboard maintains defined contribution plans covering most of its domestic employees. Contribution expense for these plans was $4 million for each of the years ended December 31, 2020, 2019 and 2018.

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