Employee Benefits

12 Months Ended

Dec. 31, 2021

Employee Benefits

Employee Benefits

Note 9 − Employee Benefits

Seaboard has qualified defined benefit pension plans 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 did not make any contributions in 2021 and 2020 and currently does not plan on making any contributions in 2022 to qualified plans.

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

Pursuant to Seaboard’s investment policy for qualified pension plans, assets are invested 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 qualified plans’ assets measured at estimated fair value as of December 31, 2021 and 2020, respectively, and the level within the fair value hierarchy used to measure each category of assets:

	December 31,
(Millions of dollars)	2021		Level 1		Level 2		Level 3
Assets:
Domestic equity securities	$	113	$	113	$	—	$	—
Foreign equity securities		71		71		—		—
Domestic fixed income mutual funds		29		29		—		—
Foreign fixed income mutual funds		12		12		—		—
Money market funds		2		2		—		—
Total assets	$	227	$	227	$	—	$	—

	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	$	—	$	—

Assumptions used in determining pension information for the qualified and nonqualified plans were:

	Years ended December 31,
	2021				2020				2019
Weighted average assumptions:
Discount rate used to determine obligations	1.20	-	2.90	%	0.70	-	2.60	%	2.15	-	3.50	%
Discount rate used to determine net periodic benefit cost	0.70	-	2.60	%	2.15	-	3.50	%	3.50	-	4.50	%
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 rates based on a model-based result where the timing and amount of cash flows approximates the estimated payouts. The expected return on the qualified plans’ assets assumption is 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 qualified plans’ 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 qualified and nonqualified plans and the funded status were as follows:

	December 31,
		2021	2020
(Millions of dollars)		Accumulated benefits exceed assets		Accumulated benefits exceed assets
Reconciliation of benefit obligation:
Benefit obligation at beginning of year	$	379	$	348
Service cost		10		9
Interest cost		9		11
Actuarial losses (gains)		(10)		58
Plan settlements		(19)		(38)
Benefits paid		(7)		(9)
Benefit obligation at end of year	$	362	$	379
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year	$	206	$	185
Actual return on plan assets		27		27
Employer contributions		20		38
Plan settlements		(19)		(38)
Benefits paid		(7)		(6)
Fair value of plan assets at end of year	$	227	$	206
Funded status	$	(135)	$	(173)

The benefit obligation decreased primarily due to higher discount rates. The accumulated benefit obligation for the qualified and nonqualified plans was $319 million and $336 million as of December 31, 2021 and 2020, respectively. Expected future benefit payments for the qualified and nonqualified plans during each of the next five years and the next five years thereafter were as follows: $26 million, $25 million, $16 million, $11 million, $15 million and $76 million, respectively.

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

	Years ended December 31,
(Millions of dollars)	2021		2020		2019
Components of net periodic benefit cost:
Service cost	$	10	$	9	$	8
Interest cost		9		11		12
Expected return on plan assets		(12)		(11)		(10)
Amortization		9		7		5
Settlement loss recognized		6		11		2
Net periodic benefit cost	$	22	$	27	$	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 settlements recognized were primarily due to certain participants who received lump sum payments that cumulatively 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 Seaboard’s former Chief Executive Officer. The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive loss before taxes as of December 31, 2021 and 2020 were $71 million and $112 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.

Seaboard has deferred compensation plans that allow certain employees to reduce their compensation in exchange for values in various investments. One plan requires certain individuals to defer compensation over a specific threshold and another plan, which no longer allows contributions, has 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 $29 million and $26 million as of December 31, 2021 and 2020,

respectively. The payable to the employees was $26 million and $23 million as of December 31, 2021 and 2020, respectively. 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 $(3) million, $(6) million and $(11) million for the years ended December 31, 2021, 2020 and 2019, respectively. Investment income (loss) related to the deferred compensation investments totaled $3 million, $6 million and $11 million, for the years ended December 31, 2021, 2020 and 2019, 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, 2021, 2020 and 2019.

In 2019, after ratification of a renewed collective bargaining agreement, Seaboard ceased contributing to a multi-employer pension fund, which subsequently terminated Seaboard’s participation. 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 year ended December 31, 2019.