| Components of Pension Cost and Income |
The components of pension cost (income) for VF’s defined benefit plans were as follows:
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Year Ended March |
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| (In thousands) |
|
2021 |
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2020 |
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2019 |
| Service cost — benefits earned during the period |
|
$ |
15,747 |
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|
$ |
14,476 |
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|
$ |
22,352 |
|
| Interest cost on projected benefit obligations |
|
47,316 |
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|
55,575 |
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|
63,434 |
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| Expected return on plan assets |
|
(83,107) |
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|
(91,309) |
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|
(93,409) |
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| Settlement charges |
|
1,584 |
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|
27,443 |
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|
8,856 |
|
| Curtailments |
|
920 |
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|
|
— |
|
|
9,530 |
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| Transfers to Kontoor Brands |
|
— |
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|
668 |
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|
— |
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| Amortization of deferred amounts: |
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| Net deferred actuarial losses |
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11,911 |
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14,848 |
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28,474 |
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| Deferred prior service costs (credits) |
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(81) |
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1,887 |
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|
494 |
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| Net periodic pension cost (income) |
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$ |
(5,710) |
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$ |
23,588
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$ |
39,731
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| Weighted average actuarial assumptions used to determine pension expense: |
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| Discount rate in effect for determining service cost |
|
1.32 |
% |
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1.46 |
% |
|
3.85 |
% |
| Discount rate in effect for determining interest cost |
|
2.82 |
% |
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|
3.20 |
% |
|
3.51 |
% |
| Expected long-term return on plan assets |
|
4.97 |
% |
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|
5.40 |
% |
|
5.58 |
% |
Rate of compensation increase (a)
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2.04 |
% |
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|
2.74 |
% |
|
3.73 |
% |
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| Reconciliation of Changes in Fair Value of Defined Benefit Plan Assets and Projected Benefit Obligations |
The following provides a reconciliation of the changes in fair value of VF’s defined benefit plan assets and projected benefit obligations for each period, and the funded status at the end of each period:
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| (In thousands) |
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March 2021 |
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March 2020 |
| Fair value of plan assets, beginning of period |
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$ |
1,712,775 |
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$ |
1,751,094 |
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| Actual return on plan assets |
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110,467 |
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|
173,261 |
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| VF contributions |
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17,714 |
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26,372 |
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| Participant contributions |
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4,434 |
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|
4,298 |
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| Transfer to Kontoor Brands |
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— |
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(6,697) |
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| Benefits paid |
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(101,753) |
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(233,398) |
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| Currency translation |
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11,777 |
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(2,155) |
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| Fair value of plan assets, end of period |
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1,755,414 |
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1,712,775 |
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| Projected benefit obligations, beginning of period |
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1,726,776 |
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1,818,931 |
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| Service cost |
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15,747 |
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14,476 |
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| Interest cost |
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47,316 |
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55,575 |
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| Participant contributions |
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4,434 |
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4,298 |
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| Actuarial loss |
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40,264 |
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|
84,057 |
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| Benefits paid |
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(101,753) |
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(233,398) |
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| Plan amendments |
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(3,098) |
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|
655 |
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| Transfer to Kontoor Brands |
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— |
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(17,279) |
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| Curtailments |
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(729) |
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— |
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| Currency translation |
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12,753 |
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(539) |
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Projected benefit obligations, end of period (a)
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1,741,710 |
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1,726,776 |
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| Funded status, end of period |
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$ |
13,704
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$ |
(14,001) |
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(a)The changes in projected benefit obligations in the years ended March 2021 and 2020 were driven by actuarial losses primarily as a result of decreases in discount rates. The change in projected benefit obligations in the year ended March 2020 was also driven by a lump-sum distribution of approximately $130.0 million related to the U.S. qualified plan.
Pension benefits are reported in the Consolidated Balance Sheets as a net asset or liability based on the overfunded or underfunded status of the defined benefit plans, assessed on a plan-by-plan basis.
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| (In thousands) |
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March 2021 |
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March 2020 |
| Amounts included in Consolidated Balance Sheets: |
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| Other assets (Note 11) |
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$ |
197,484 |
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$ |
166,955 |
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| Accrued liabilities (Note 13) |
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(17,030) |
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(10,449) |
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| Other liabilities (Note 15) |
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(166,750) |
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(170,507) |
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| Funded status |
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$ |
13,704
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$ |
(14,001) |
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| Accumulated other comprehensive loss, pretax: |
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| Net deferred actuarial losses |
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$ |
358,916 |
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$ |
357,989 |
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| Net deferred prior service credits |
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(4,588) |
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(733) |
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| Total accumulated other comprehensive loss, pretax |
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$ |
354,328
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$ |
357,256
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| Accumulated benefit obligations |
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$ |
1,710,678
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$ |
1,703,224
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| Weighted average actuarial assumptions used to determine pension obligations: |
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| Discount rate |
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2.94% |
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3.18% |
Rate of compensation increase (a)
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2.30% |
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2.22% |
(a)Rate of compensation increase is calculated as the weighted average rate of compensation increase for active plans. Frozen plans are excluded from the calculation.
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| Fair Value of Investments Held by Pension Plan |
The fair value of investments held by VF’s defined benefit plans at March 2021 and March 2020, by asset class, is summarized below. Refer to Note 23 for a description of the three levels of the fair value measurement hierarchy.
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Total Plan
Assets |
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Fair Value Measurements |
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| (In thousands) |
Level 1 |
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Level 2 |
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Level 3 |
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| March 2021 |
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| Plan assets |
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| Cash equivalents |
$ |
7,410 |
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$ |
7,410 |
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$ |
— |
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$ |
— |
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| Fixed income securities: |
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| U.S. Treasury and government agencies |
5 |
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— |
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5 |
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— |
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| Insurance contracts |
84,497 |
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— |
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84,497 |
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— |
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| Futures contracts |
(4,452) |
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|
(4,452) |
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— |
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— |
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| Total plan assets in the fair value hierarchy |
87,460
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$ |
2,958
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$ |
84,502
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$ |
—
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| Plan assets measured at net asset value |
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| Cash equivalents |
78,191 |
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| Equity securities: |
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| Domestic |
96,509 |
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| International |
88,488 |
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| Fixed income securities: |
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| Corporate and international bonds |
1,240,551 |
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| Alternative investments |
164,215 |
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| Total plan assets measured at net asset value |
1,667,954 |
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| Total plan assets |
$ |
1,755,414
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Total Plan
Assets |
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Fair Value Measurements |
| (In thousands) |
Level 1 |
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Level 2 |
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Level 3 |
| March 2020 |
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| Plan assets |
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| Cash equivalents |
$ |
9,421 |
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$ |
9,421 |
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$ |
— |
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$ |
— |
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| Fixed income securities: |
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| U.S. Treasury and government agencies |
6 |
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— |
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|
6 |
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— |
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| Insurance contracts |
76,161 |
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|
— |
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|
76,161 |
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|
— |
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| Futures contracts |
3,878 |
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|
3,878 |
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|
— |
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|
— |
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| Total plan assets in the fair value hierarchy |
89,466
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|
$ |
13,299
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$ |
76,167
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$ |
—
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| Plan assets measured at net asset value |
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| Cash equivalents |
54,745 |
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| Equity securities: |
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| Domestic |
70,503 |
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| International |
71,365 |
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| Fixed income securities: |
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| Corporate and international bonds |
1,293,768 |
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| Alternative investments |
132,928 |
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| Total plan assets measured at net asset value |
1,623,309 |
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| Total plan assets |
$ |
1,712,775
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