General Mills will freeze its U.S. defined benefit pension plans at the end of 2027, according to the company’s annual report, which was filed with the Securities and Exchange Commission last week.
The move reduces the company’s projected benefit obligation by $130.9 million as of May 28, 2017, due to the decrease in expected future pensionable compensation, according to the company’s 10-K filing.
The food manufacturer mentioned in its annual report that a number of things affect the funded status of its pension plans, including changes in interest rates, mortality rates, healthcare costs, early retirement rates, investment returns and the market value of plan assets.
“A significant increase in our obligations or future funding requirements could have a negative impact on our results of operations and cash flows from operations,” the report stated.
That’s why General Mills began the process of winding down its U.S. defined benefit plan in June 2013, by closing it to salaried new hires. In January 2018, the plan will be closed to newly hired non-union production employees.
At the end of May 2017, the DB plan had $5.925 billion in assets and $6.459 billion in liabilities and was 92% funded. In 2016, the plan was 86% funded with $5.54 billion in assets and $6.449 billion in liabilities.
General Mills sponsors defined benefit plans in the U.S., Canada, France and the United Kingdom. Benefits for salaried employees are based on length of service and final average compensation. Benefits for hourly employees include various monthly amounts for each year of credited service, according to the report.
The company made no voluntary contributions to its U.S. DB plans in fiscal 2017, 2016 or 2015. It doesn’t expect to be required to make any contributions in fiscal 2018. All salaried employees hired on or after June 1, 2013, are eligible to participate in the company’s 401(k) plan but are not eligible to participate in the company’s defined benefit pension plan.
