COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

Sysco has company-sponsored defined benefit and defined contribution retirement plans for its employees. Also, the company provides certain health care benefits to eligible retirees and their dependents.

Defined Contribution Plans

The company operates a defined contribution 401(k) Plan as a Safe Harbor Plan, which is a plan that treats all employees’ benefits equally within the plan, under Sections 401(k) and 401(m) of the Internal Revenue Code with respect to non-union employees and those union employees whose unions adopted the Safe Harbor Plan provisions. The company will make a non-elective contribution each pay period equal to 3% of a participant’s compensation. Additionally, the company will make matching contributions of 50% of a participant’s pre-tax contribution on the first 5% of the participant’s compensation contributed by the participant. Certain employees are also eligible for a transition contribution, and the company may also make discretionary contributions. For union employees who are members of unions that did not adopt the Safe Harbor Plan provisions, the plan provides that under certain circumstances the company may make matching contributions of up to 50% of the first 6% of a participant’s compensation.

The company also has a nonqualified, unfunded Management Savings Plan (MSP) available to key management personnel who are participants in the Management Incentive Plan. Participants may defer up to 50% of their annual salary and up to 100% of their annual bonus. The company will make a non-elective contribution each pay period equal to 3% of a participant’s compensation. Additionally, the company will make matching contributions of 50% of a participant’s pre-tax contribution on the first 5% of the participant’s eligible compensation that is deferred. Certain employees are also eligible for a transition contribution, and the company may also make discretionary contributions. All company contributions to the MSP are limited by the amounts contributed by the company to the participant’s 401(k) account.

Sysco’s expense related to its defined contribution plans was $141.2 million in fiscal 2017, $135.5 million in fiscal 2016, and $125.4 million in fiscal 2015.

Defined Benefit Plans

Sysco maintains various qualified pension plans (Retirement Plans) that pays benefits to participating employees at retirement, using formulas based on a participant’s years of service and compensation. The U.S. plan is frozen for all U.S.-based salaried and non-union hourly employees, as these employees are eligible for benefits under the company’s defined contribution 401(k) plan. In connection with the Brakes Acquisition, Sysco assumed the obligations of various defined benefit pension plans that were maintained by the Brakes Group that cover certain employees, primarily in the U.K., France and Sweden; however, the U.K. defined benefit plan is frozen to plan participants. The funding policy for each plan complies with the requirements of relevant governmental laws and regulations.

In addition to receiving benefits upon retirement under the company’s Retirement Plan, certain key management personnel who were participants in the Management Incentive Plan (MIP) are entitled to receive benefits under a Supplemental Executive Retirement Plan (SERP). This plan is a nonqualified, unfunded supplementary retirement plan. This plan is frozen to all participants, and current MIP participants are eligible to participate in the MSP.

The company also provides certain health care benefits to eligible retirees and their dependents. These health care benefits represent Sysco’s unfunded other postretirement medical plans. The plan had benefit obligations of $13.6 million as of July 1, 2017 and $13.4 million as of July 2, 2016.

Funded Status

Accumulated pension assets measured against the obligation for pension benefits represents the funded status of a given plan. The funded status of Sysco’s company-sponsored defined benefit plans is presented in the table below. The caption “U.S. Pension Benefits” in the tables below includes both the Retirement Plan and the SERP.



	U.S. Pension Benefits						International Pension Benefits
	Jul. 1, 2017			Jul. 2, 2016			Jul. 1, 2017
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	4,284,776		$	3,679,127		$	400,028
Service cost	14,287			11,815			2,880
Interest cost	171,282			174,602			9,951
Amendments	925			—			(110		)
Curtailments	—			—			(611		)
Actuarial (gain) loss, net	(86,680		)	517,070			26,528
Total disbursements ⁽¹⁾	(160,359		)	(97,838		)	(13,879		)
Exchange rate changes	—			—			(4,052		)
Benefit obligation at end of year	4,224,231			4,284,776			420,735
Change in plan assets:
Fair value of plan assets at beginning of year	3,115,040			3,003,128			271,821
Actual return on plan assets	333,890			52,268			1,938
Employer contribution ⁽¹⁾	53,091			157,482			4,530
Total disbursements ⁽¹⁾	(160,359		)	(97,838		)	(13,879		)
Exchange rate changes	—			—			(5,037		)
Fair value of plan assets at end of year	3,341,662			3,115,040			259,373
Funded status at end of year	$	(882,569	)	$	(1,169,736	)	$	(161,362	)

In order to meet a portion of its obligations under the SERP, Sysco has contributed to a rabbi trust, COLI policies on the lives of participants and interests in corporate-owned real estate assets. These assets are not included as plan assets or in the funded status amounts in the tables above and below. The life insurance policies on the lives of the participants had carrying values of $95.3 million as of July 1, 2017 and $97.0 million as of July 2, 2016. Sysco is the sole owner and beneficiary of such policies.

The amounts recognized on Sysco’s consolidated balance sheets related to its company-sponsored defined benefit plans are as follows:



	U.S. Pension Benefits						International Pension Benefits
	Jul. 1, 2017			Jul. 2, 2016			Jul. 1, 2017
	(In thousands)
Current accrued benefit liability (Accrued expenses)	$	(30,538	)	$	(29,480	)	$	(1,477	)
Non-current accrued benefit liability (Other long-term liabilities)	(852,031		)	(1,140,256		)	(159,886		)
Net amount recognized	$	(882,569	)	$	(1,169,736	)	$	(161,363	)

Accumulated other comprehensive loss (income) as of July 1, 2017 consists of the following amounts that had not, as of that date, been recognized in net benefit cost:



	U.S. Pension Benefits		International Pension Benefits			Total
	(In thousands)
Prior service cost	$	28,630	$	114		$	28,744
Actuarial losses (gains)	1,521,174		(35,935		)	1,485,239
Total	$	1,549,804	$	(35,821	)	$	1,513,983

Accumulated other comprehensive loss (income) as of July 2, 2016 consists of the following amounts that had not, as of that date, been recognized in net benefit cost:



	U.S. Pension Benefits
	(In thousands)
Prior service cost	$	38,907
Actuarial losses (gains)	1,760,556
Total	$	1,799,463

The accumulated benefit obligation, which does not consider any salary increases for the remaining active union employees in the U.S. Retirement Plan, for the company-sponsored defined benefit pension plans was $4.6 billion and $4.3 billion as of July 1, 2017 and July 2, 2016, respectively.

Information for plans with accumulated benefit obligation/aggregate benefit obligation in excess of fair value of plan assets is as follows:



	U.S. Pension Benefits ⁽¹⁾				International Pension Benefits
	Jul. 1, 2017		Jul. 2, 2016		Jul. 1, 2017
	(In thousands)
Accumulated benefit obligation/aggregate benefit obligation	$	4,213,318	$	4,272,547	$	413,552
Fair value of plan assets at end of year	3,341,662		3,115,040		259,373


⁽¹⁾	Information under Pension Benefits as of July 1, 2017 and July 2, 2016 includes both the Retirement Plan and the SERP.

Components of Net Benefit Costs and Other Comprehensive Income

The components of net company-sponsored pension costs for each fiscal year are as follows:



	2017						2016			2015
	U.S. Pension Benefits			International Pension Benefits			U.S. Pension Benefits			U.S. Pension Benefits
	(In thousands)
Service cost	$	14,287		$	2,880		$	11,815		$	11,263
Interest cost	171,282			9,951			174,602			171,120
Expected return on plan assets	(222,699		)	(10,033		)	(216,888		)	(228,624		)
Amortization of prior service cost	11,202			(1		)	11,201			11,111
Amortization of actuarial loss	41,511			(38		)	22,186			19,871
Curtailment loss	—			(611		)	—			—
Net pension (benefits) costs	$	15,583		$	2,148		$	2,916		$	(15,259	)

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) related to company-sponsored pension plans for each fiscal year are as follows:



	2017						2016			2015
	U.S. Pension Benefits			International Pension Benefits			U.S. Pension Benefits			U.S. Pension Benefits
	(In thousands)
Amortization of prior service cost	$	11,202		$	(1	)	$	11,202		$	11,111
Amortization of actuarial loss	41,511			(38		)	22,186			19,871
Prior service cost arising in current year	(925		)	110			—			(914		)
Effect of exchange rates on amounts in AOCI	—			(1,269		)	—			—
Actuarial (loss) gain arising in current year	197,871			(34,623		)	(681,691		)	(62,270		)
Net pension costs	$	249,659		$	(35,821	)	$	(648,303	)	$	(32,202	)

Amounts included in accumulated other comprehensive loss (income) as of July 1, 2017 that are expected to be recognized as components of net company-sponsored benefit cost during fiscal 2018 are:



	U.S. Pension Benefits		International Pension Benefits			Total
	(In thousands)
Amortization of prior service cost	$	9,460	$	(10	)	$	9,450
Amortization of actuarial losses (gains)	35,696		2			35,698
Total	$	45,156	$	(8	)	$	45,148

Employer Contributions

The company made cash contributions to its company-sponsored pension plans of $57.6 million and $157.5 million in fiscal years 2017 and 2016, respectively. The $25 million contribution to the U.S. Retirement Plan in fiscal 2017 was voluntary, as there were no required contributions to meet ERISA minimum funding requirements in fiscal 2017. There are no required contributions to the Retirement Plan to meet ERISA minimum funding requirements in fiscal 2018. The company’s contributions to the SERP plan are made in the amounts needed to fund current year benefit payments. The estimated aggregate fiscal 2018 contribution to fund benefit payments for the SERP plan is $30.5 million. The estimated fiscal 2018 contributions to fund benefit payments for the international retirement plans are $9.2 million.

Estimated Future Benefit Payments

Estimated future benefit payments for vested participants, based on actuarial assumptions, are as follows:



	U.S. Pension Benefits		International Pension Benefits
	(In thousands)
2018	$	127,700	$	9,169
2019	137,971		10,374
2020	147,995		11,045
2021	159,056		12,671
2022	170,078		12,965
Subsequent five years	1,005,292		84,500

Assumptions

Weighted-average assumptions used to determine benefit obligations as of year-end were:



	Jul. 1, 2017		Jul. 2, 2016
Discount rate — U.S. Retirement Plan	4.19	%	4.07	%
Discount rate — SERP	4.08		3.91
Discount rate — U.K. Retirement Plan	2.60		N/A
Rate of compensation increase — U.S. Retirement Plan	2.62		2.62
Rate of compensation increase — U.K. Retirement Plan	N/A		N/A

As benefit accruals under the SERP are frozen, future pay is not projected in the determination of the benefit obligation as of July 1, 2017 or July 2, 2016.

Weighted-average assumptions used to determine net company-sponsored pension costs for each fiscal year were:



	2017		2016		2015
Discount rate — U.S. Retirement Plan	4.07	%	4.84	%	4.74	%
Discount rate — SERP	3.91		4.63		4.59
Discount rate — U.K. Retirement Plan	2.80		N/A		N/A
Expected rate of return — U.S. Retirement Plan	7.25		7.25		7.75
Expected rate of return — U.K. Retirement Plan	4.15		N/A		N/A
Rate of compensation increase — U.S. Retirement Plan	2.62		3.89		3.89
Rate of compensation increase — U.K. Retirement Plan	N/A		N/A		N/A

For guidance in determining the discount rate for U.S. defined benefit plans, Sysco calculates the implied rate of return on a hypothetical portfolio of high-quality fixed-income investments for which the timing and amount of cash outflows approximates the estimated payouts of the company-sponsored pension plans. Sysco uses an annualized corporate bond yield curve to estimate the rate at which pension benefits could effectively be settled to estimate a discount rate for the U.K. Retirement Plan. The discount rate assumption is updated annually and revised as deemed appropriate. The discount rates to be used for the calculation of fiscal 2018 net company-sponsored benefit costs for the U.S. Retirement Plan and U.K. Retirement Plan are 4.19% and 2.60%, respectively. The discount rate to be used for the calculation of fiscal 2018 net company-sponsored benefit costs for the SERP is 4.08%.

The expected long-term rate of return on plan assets assumption for the Retirement Plans are net return on assets assumption, representing gross return on assets less plan expenses. The expected return for the U.S. Retirement Plan is derived from a mathematical asset model that incorporates assumptions as to the various asset class returns, reflecting a combination of rigorous historical performance analysis and the forward-looking views of the financial markets regarding the yield on bonds, the historical returns of the major stock markets and returns on alternative investments. The expected return for the U.K. Retirement Plan is derived from a long-term swap yield time horizon adjusted for the expected return based on the plan’s current asset allocation and historical results. The rate of return assumption is reviewed annually and revised as deemed appropriate. The expected long-term rate of return to be used in the calculation of fiscal 2018 net company-sponsored benefit costs for the U.S. Retirement Plan and U.K. Retirement Plan are 7.0% and 4.55%, respectively.

Plan Assets

Investment Strategy

The company’s overall strategic investment objectives for the U.S. Retirement Plan are to preserve capital for future benefit payments and to balance risk and return commensurate with ongoing changes in the valuation of plan liabilities. Over time, the company intends to decrease the risk of the U.S. Retirement Plan’s investments in order to preserve the U.S. Retirement Plan’s funded status. In order to accomplish these objectives, the company oversees the U.S. Retirement Plan’s investment objectives and policy design, decides proper plan asset class strategies and structures, monitors the performance of plan investment managers and investment funds and determines the proper investment allocation of pension plan contributions. The company has created an investment structure for the U.S. Retirement Plan that takes into account the nature of the U.S. Retirement Plan’s liabilities. This structure ensures the U.S. Retirement Plan’s investments are diversified within each asset class, in addition to being diversified across asset classes with the intent to build asset class portfolios that are structured without strategic bias for or against any subcategories within each asset class. The company has also created a set of investment guidelines for the U.S. Retirement Plan’s investment managers to specify prohibited transactions, including borrowing of money except for real estate, private equity or hedge fund portfolios where leverage is a key component of the investment strategy and permitted in the investments’ governing documents, the purchase of securities on margin unless fully collateralized by cash or cash equivalents or short sales, pledging, mortgaging or hypothecating of any securities, except for loans of securities that are fully collateralized, market timing transactions and the direct purchase of the securities of Sysco or the investment manager. The purchase or sale of derivatives for speculation or leverage is also prohibited; however, investment managers are allowed to use derivative securities so long as they do not increase the risk profile or leverage of the manager’s portfolio.

The U.S. Retirement Plan’s target and actual investment allocation as of July 1, 2017 is as follows:



	U.S. Retirement Plan
	Target Asset Allocation		Actual Asset Allocation
U.S. equity	24	%	27	%
International equity	24		22
Long duration fixed income	27		26
High yield & emerging markets	7		7
Alternative investments	18		18
			100	%

Sysco’s U.S. Retirement Plan investment strategy is implemented through a combination of balanced and specialized investment managers, passive investment funds and actively managed investment funds. U.S. equity consists of both large-cap and small-to-mid-cap securities. Long duration fixed income investments include U.S. government and agency securities, corporate bonds from diversified industries, asset-backed securities, mortgage-backed securities, other debt securities and derivative securities. High yield fixed income consists of below investment grade corporate debt securities and may include derivative securities. Alternative investments may include private equity, private real estate, hedge funds, timberland, and commodities investments. Investment funds are selected based on each fund’s stated investment strategy to align with Sysco’s overall target mix of investments. Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered appropriate.

The primary objective for the U.K. Retirement Plan is to provide sufficient assets to pay benefits as they fall due. The Retirement Plan has a return objective that aims to achieve a return on plan assets of 2.9% in excess of the return on the liability benchmark over rolling five year periods. The liability benchmark is the portfolio of swaps that best matches the liability profile of the Retirement Plan. The investment objective includes a risk statement that allows for the active risk within the plan asset portfolio to be below 12% per year, which may fluctuate over time as the composition of the portfolio changes and the levels of risk in markets change. The Retirement Plan’s Trustee and Solvency Manager seeks to achieve the Plan’s investment objectives by investing in a suitably diversified mix of assets. The company allows the Trustee and Solvency Manager to use derivatives such as forwards, futures, swaps and options for risk management and for the efficient implementation of the investment strategy.

The company’s target and actual investment allocation as of July 1, 2017 is as follows:



	International Retirement Plan
	Target Asset Allocation		Actual Asset Allocation
Common contractual fund	75	%	74	%
Liability hedging assets	25		26
			100	%

The U.K. plan’s investment strategy is implemented primarily through a bespoke common contractual investment fund and liability hedging assets. The pooled investment fund consists of investment types including (1) equity investments covering a range of geographies and including investment managers that hold long and short positions, (2) credit investments including global investment grade and high yield bonds, loans and other debt and derivative securities, (3) property investments including global direct or indirect real estate holdings, (4) macro-oriented funds that seek to generate return by going long and short in a variety of markets and operate strategies which focus on markets rather than individual stocks and often use derivatives rather than physical assets, and (5) multi-strategy funds which combine a range of different credit, equity and macro-orientated ideas and dynamically allocate funds across asset classes. Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered appropriate.

As discussed above, the Retirement Plans’ investments in equities, debt instruments and alternative investments provide a range of returns and also expose the plan to investment risk. However, the investment policies put in place by the company require diversification of plan assets across issuers, industries and countries. As such, the Retirement Plans do not have significant concentrations of risk in plan assets.

Fair Value of Plan Assets

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). See Note 5, "Fair Value Measurements," for a description of the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The following is a description of the valuation methodologies used for assets and liabilities held by Sysco’s Retirement Plans measured at fair value.

Cash and cash equivalents: Valued at amortized cost, which approximates fair value due to the short-term maturities of these investments. Cash and cash equivalents is included as a Level 1 measurement in the table below.

Equity securities: Valued at the closing price reported on the exchange market. If a stock is not listed on a public exchange, such as an American Depository Receipt or some preferred stocks, the stock is valued using an evaluated bid price based on a compilation of observable market information. Inputs used include yields, the underlying security “best price”, adjustments for corporate actions and exchange prices of underlying and common stock of the same issuer. Equity securities valued at the closing price reported on the exchange market are classified as a Level 1 measurement in the table below.

Fixed income securities: Valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active market. Inputs used vary by type of security, but include spreads, yields, rate benchmarks, rate of prepayment, cash flows, rating changes and collateral performance and type. All fixed income securities are included as a Level 2 measurement in the table below.

Investment funds: Represents collective trust and funds holding debt, equity, hedge funds, private equity funds, exchange-traded real estate securities, and common contractual funds which are valued at the net asset value (NAV) provided by the manager of each fund. The NAV is calculated as the underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV is based on the fair value of the underlying securities within the fund. Non-exchange traded real estate funds are valued based on the proportionate interest held by the U.S. Retirement Plan, which is based on the valuations of the underlying real estate investments held by each fund. Each real estate investment is valued on the basis of a discounted cash flow approach. Inputs used include future rental receipts, expenses and residual values from a market participant view of the highest and best use of the real estate as rental property. The private equity funds are valued based on the proportionate interest held by the U.S. Retirement Plan, which is based on the valuations of the underlying private equity investments held by each fund. The hedge funds are valued based on the hedge funds’ proportionate share of the net assets of the underlying private investment fund as determined by the underlying private investment fund’s general partner. Indirectly held investments are valued utilizing the latest financial reports supplied by the fund’s portfolio investments. Directly held investments are valued initially based on transaction price and are adjusted utilizing available market data and investment-specific factors, such as estimates of liquidation value, prices of recent transactions in the same or similar issuer, current operating performance and future expectations of the particular investment, changes in market outlook and the financing environment.

Derivatives: Valuation method varies by type of derivative security.

•

Credit default and interest rate swaps: Valued using evaluated bid prices based on a compilation of observable market information. Inputs used for credit default swaps include spread curves and trade data about the credit quality of the counterparty. Inputs used for interest rate swaps include benchmark yields, swap curves, cash flow analysis, and interdealer broker rates. Credit default and interest rate swaps are included as a Level 2 measurement in the table below.


•	Foreign currency contracts: Valued using a standardized interpolation model that utilizes the quoted prices for standard-length forward foreign currency contracts and adjusts to the remaining term outstanding on the contract being valued. Foreign currency contracts are included as a Level 2 measurement in the table below.


•	Futures and option contracts: Valued at the closing price reported on the exchange market for exchange-traded futures and options. Over-the-counter options are valued using pricing models that are based on observable market information. Exchange-traded futures and options are included as a Level 1 measurement in the table below; over-the-counter options are included as a Level 2 measurement.

The following table presents the fair value of the U.S. Retirement Plan’s assets by major asset category as of July 1, 2017:



	Assets Measured at Fair Value as of Jul. 1, 2017
	Level 1		Level 2		Level 3		Measured at NAV ⁽⁴⁾		Total
	(In thousands)
Cash and cash equivalents	$	2,989	$	37,346	$	—	$	—	$	40,335
U.S. equity ⁽¹⁾	331,946		—		—		577,626		909,572
International equity ⁽¹⁾	185,502		—		—		537,317		722,819
Long duration fixed income:
Corporate bonds	—		628,033		—		—		628,033
U.S. government and agency securities	—		250,940		—		—		250,940
Other ⁽²⁾	—		6,220		—		—		6,220
High yield and emerging markets fixed income ⁽³⁾	—		—		—		226,358		226,358
Alternative investment funds:
Hedge fund of funds ⁽⁵⁾	—		—		—		336,812		336,812
Real estate funds ⁽⁶⁾	—		—		—		145,208		145,208
Private equity funds ⁽⁷⁾	—		—		—		75,365		75,365
Total investments at fair value	$	520,437	$	922,539	$	—	$	1,898,686	$	3,341,662


⁽¹⁾	Include direct investments in equity securities and within investment funds for which fair value is measured at NAV. There are no unfunded commitments as of July 1, 2017, and there were no redemption restrictions as of July 1, 2017. Investments in the funds may be redeemed once per day.


⁽²⁾	Include foreign government and state and municipal debt securities.


⁽³⁾	There was no unfunded commitments as of July 1, 2017, and there were no redemption restrictions as of July 1, 2017. The investment may be redeemed once per day. The daily maximum withdrawal limitation is the greater of $2.0 million or 5% of the asset value.


⁽⁴⁾	Include certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.


⁽⁵⁾	There was no unfunded commitments as of July 1, 2017, and there were no redemption restrictions as of July 1, 2017. The investment may be redeemed once per quarter.


⁽⁶⁾	For investments in the funds listed in this category, total unfunded commitment as of July 1, 2017 was $10.0 million. Approximately 15% of the investments cannot be redeemed but the fund will make distributions through liquidation. The estimate of the liquidation period for these funds varies from 2020 to 2021. The remaining investments may be redeemed once per day or once per quarter.


⁽⁷⁾	Total unfunded commitment as of July 1, 2017 was $30.7 million. The investments cannot be redeemed but the fund will make distributions through liquidation. The estimate of the liquidation period varies for each fund from 2017 to 2031.

The following table presents the fair value of the U.K. Retirement Plan’s assets by major asset category as of July 1, 2017:



	Assets Measured at Fair Value as of Jul. 1, 2017
	Level 1		Level 2		Level 3		Measured at NAV ⁽³⁾		Total
	(In thousands)
Liability hedging assets:
Cash and cash equivalents	$	26,992	$	—	$	—	$	—	$	26,992
U.K. government securities	—		9,327		—		—		9,327
Derivatives, net ⁽¹⁾	—		20,900		—		—		20,900
Pooled funds	—		10,296		—		—		10,296
Investment funds:
Common contractual fund ⁽²⁾	—		—		—		191,508		191,508
Total investments at fair value	$	26,992	$	40,523	$	—	$	191,508	$	259,023


⁽¹⁾	Include interest rate swaps and zero coupon swaps. The fair value of asset positions totaled $47.4 million; the fair value of liability positions totaled $26.5 million.


⁽²⁾	There were $9.3 million of unfunded commitments as of July 1, 2017, and there were no redemption restrictions as of July 1, 2017. The investment may be redeemed once per week.


⁽³⁾	Include certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet

The following table presents the fair value of the U.S. Retirement Plan’s assets by major asset category as of July 2, 2016:



	Assets Measured at Fair Value as of Jul. 2, 2016
	Level 1		Level 2		Level 3		Measured at NAV ⁽⁴⁾		Total
	(In thousands)
Cash and cash equivalents	$	103,974	$	—	$	—	$	—	$	103,974
U.S. equity ⁽¹⁾	451,826		—		—		270,501		722,327
International equity⁽¹⁾	174,936		—		—		547,719		722,655
Long duration fixed income:
Corporate bonds	—		631,927		—		—		631,927
U.S. government and agency securities	—		179,974		—		—		179,974
Other ⁽²⁾	—		4,246		—		—		4,246
High yield and emerging markets fixed income ⁽³⁾	—		—		—		214,735		214,735
Alternative investment funds:
Hedge fund of funds ⁽⁵⁾	—		—		—		309,208		309,208
Real estate funds ⁽⁶⁾	793		—		—		162,108		162,901
Private equity funds ⁽⁷⁾	—		—		—		63,093		63,093
Total investments at fair value	$	731,529	$	816,147	$	—	$	1,567,364	$	3,115,040


⁽¹⁾	Include direct investments in equity securities and within investment funds for which fair value is measured at NAV. There were no unfunded commitments as of July 2, 2016, and there were no redemption restrictions as of July 2, 2016.


⁽²⁾	Include credit default swaps, interest rate swaps and futures. The fair value of asset positions totaled $0.3 million; the fair value of liability positions totaled $0.3 million.


⁽³⁾	There was no unfunded commitments as of July 2, 2016, and there were no redemption restrictions as of July 2, 2016. The investment may be redeemed once per day. The daily maximum withdrawal limitation is the greater of $2.0 million or 5% of the asset value.


⁽⁴⁾	Include certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.


⁽⁵⁾	There was no unfunded commitments as of July 2, 2016, and there were no redemption restrictions as of July 2, 2016. The investment may be redeemed once per quarter.


⁽⁶⁾	For investments in the funds listed in this category, total unfunded commitment as of July 2, 2016 was $10 million. Approximately 20% of the investments cannot be redeemed but the fund will make distributions through liquidation. The estimate of the liquidation period for these funds varies from 2020 to 2021. The remaining investments may be redeemed once per day or once per quarter.


⁽⁷⁾	Total unfunded commitments as of July 2, 2016 was $39.0 million. The investments cannot be redeemed but the fund will make distributions through liquidation. The estimate of the liquidation period varies for each fund from 2017 to 2031.

MULTIEMPLOYER EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plans

Sysco participates in several multiemployer defined benefit pension plans in the U.S. based on obligations arising under collective bargaining agreements covering union-represented employees. Expense is recognized at the time the contribution is made. Sysco does not directly manage these multiemployer plans, which are generally managed by boards of trustees, half of whom are appointed by the unions and the other half appointed by employers contributing to the plan. Approximately 13% of Sysco’s current employees in the U.S. are participants in such multiemployer plans as of July 1, 2017.

The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:


•	Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


•	If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.


•	If Sysco chooses to stop participating in some of its multiemployer plans in the U.S, Sysco may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Based upon the information available from plan administrators, management believes that several of these multiemployer plans are underfunded. In addition, pension-related legislation in the U.S. requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding. As a result, Sysco expects its contributions to these plans to increase in the future. In addition, if a U.S. multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service (IRS) may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund. Under current law regarding multiemployer defined benefit plans, a plan’s termination, Sysco’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan would require Sysco to make payments to the plan for Sysco’s proportionate share of the multiemployer plan’s unfunded vested liabilities.

Plan Contributions

Sysco’s contributions to multiemployer defined benefit pension plans were as follows for each fiscal year:



	2017		2016		2015
	(In thousands)
Individually significant plans	$	36,653	$	33,787	$	32,097
All other plans	7,898		7,260		6,047
Total contributions	$	44,551	$	41,047	$	38,144

Sysco’s Albany operating company withdrew from the New York State Teamsters Conference Pension and Retirement Fund in the fourth quarter of fiscal 2017. As a result, a withdrawal liability of $35.6 million was accrued in the fourth quarter of 2017.

Individually Significant Plans

The information in the following tables relates to multiemployer defined benefit pension plans which Sysco has determined to be individually significant to the company. To determine individually significant plans, the company evaluated several factors, including Sysco’s significance to the plan in terms of employees and contributions, the funded status of the plan and the size of the company’s potential withdrawal liability if it were to voluntarily withdraw from the plan.

The following table provides information about the funded status of individually significant plans:


•	The “EIN-PN” column provides the Employer Identification Number (EIN) and the three-digit plan number (PN).

•

The “Pension Protection Act Zone Status” columns provide the two most recent Pension Protection Act zone statuses available from each plan. The zone status is based on information that the company received from the plan’s administrators and is certified by each plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the orange zone are both less than 80% funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The Multiemployer Protection Act of 2014 created a new zone called “critical and declining.” Plans are generally considered “critical and declining” if they are projected to become insolvent within 15 years.

•

The “FIP/RP Status” column indicates whether a financial improvement plan (FIP) for yellow/orange zone plans or a rehabilitation plan (RP) for red zone plans is pending or implemented in the current year or was put in place in a prior year. A status of “Pending” indicates a FIP/RP has been approved but actual period covered by the FIP/RP has not begun. A status of “Implemented” means the period covered by the FIP/RP began in the current year or is ongoing.

•

The “Surcharge Imposed” column indicates whether a surcharge was paid during the most recent annual period presented for the company’s contributions to each plan in the red zone. If the company’s current collective bargaining agreement (CBA) with a plan satisfies the requirements of a pending but not yet implemented RP, then the payment of surcharges is not required and “No” will be reflected in this column. If the company’s current CBA with a plan does not yet satisfy the requirements of a pending but not yet implemented RP, then the payment of surcharges is required and “Yes” will be reflected in this column.

Pension Protection Act
Zone Status

Pension Fund

EIN-PN

As of
12/31/17

As of
12/31/16

FIP/RP
Status

Surcharge
Imposed

Expiration
Date(s)
of CBA(s)

Western Conference of Teamsters Pension Plan

91-6145047-001

Green

N/A

9/1/2018 to 1/6/2024 ⁽¹⁾

Teamsters Pension Trust Fund of Philadelphia and Vicinity

23-1511735-001

Yellow

Implemented

N/A

7/20/2020 ⁽²⁾

New York State Teamsters Conference Pension and Retirement Fund

16-6063585-074

N/A

Red ⁽³⁾

Implemented

Withdrew in fiscal 2017

Truck Drivers and Helpers Local Union No. 355 Retirement Pension Fund

52-6043608-001

Yellow

Implemented

N/A

3/1/2018

Minneapolis Food Distributing Industry Pension Plan

41-6047047-001

Green

Implemented

N/A

8/6/2017


⁽¹⁾	Sysco is party to 22 CBAs that require contributions to the Western Conference of Teamsters Pension Trust. Each agreement covers anywhere from less than 1% to 9% of the total contributions Sysco is required to pay the fund.


⁽²⁾	Sysco is party to 1 CBA that require contributions to the Teamsters Pension Trust Fund of Philadelphia and Vicinity. This agreement expires July 20, 2020 and covers approximately 5% of the total Contribution Sysco is required to pay the fund.


⁽³⁾	This fund has filed a Critical and Declining Notice. Sysco withdrew from this plan in the fourth quarter of fiscal 2017.

The following table provides information about the company’s contributions to individually significant plans:


•	The “Sysco Contributions” columns provide contribution amounts based on Sysco’s fiscal years, which may not coincide with the plans’ fiscal years.


•	The “Sysco 5% of Total Plan Contributions” columns indicate whether Sysco was listed in the plan’s most recently filed Form 5500s as providing more than five percent of the total contributions to the plan, and the plan year-end is noted.



	Sysco Contributions						Sysco 5% of Total Plan Contributions
Pension Fund	2017		2016		2015		Year Ending 12/31/16	Year Ending 12/31/15
	(In thousands)
Western Conference of Teamsters Pension Plan	$	28,145	$	24,684	$	23,268	No	No
Teamsters Pension Trust Fund of Philadelphia and Vicinity	3,081		2,375		2,233		No	No
N.Y. State Teamsters Conference Pension and Retirement Fund	—		1,496		1,455		No	No
Truck Drivers and Helpers Local Union No. 355 Retirement Pension Fund	2,430		2,237		2,068		Yes	No
Minneapolis Food Distributing Industry Pension Plan	2,996		2,996		3,073		Yes	Yes

For all of the plans noted in the table above, minimum contributions outside of the agreed upon contractual rate are not required.