| 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) |
|
2022 |
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|
2021 |
|
2020 |
| Service cost — benefits earned during the period |
|
$ |
14,288 |
|
|
|
$ |
15,747 |
|
|
$ |
14,476 |
|
| Interest cost on projected benefit obligations |
|
37,534 |
|
|
|
47,316 |
|
|
55,575 |
|
| Expected return on plan assets |
|
(77,432) |
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|
|
(83,107) |
|
|
(91,309) |
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| Settlement charges |
|
7,466 |
|
|
|
1,584 |
|
|
27,443 |
|
| Curtailments |
|
— |
|
|
|
920 |
|
|
— |
|
| Transfers to Kontoor Brands |
|
— |
|
|
|
— |
|
|
668 |
|
| Amortization of deferred amounts: |
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| Net deferred actuarial losses |
|
11,310 |
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|
11,911 |
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|
14,848 |
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| Deferred prior service costs (credits) |
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(440) |
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(81) |
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|
1,887 |
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| Net periodic pension cost (income) |
|
$ |
(7,274) |
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|
$ |
(5,710) |
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$ |
23,588
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| Weighted average actuarial assumptions used to determine pension cost (income): |
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| Discount rate in effect for determining service cost |
|
0.46 |
% |
|
|
1.32 |
% |
|
1.46 |
% |
| Discount rate in effect for determining interest cost |
|
2.16 |
% |
|
|
2.82 |
% |
|
3.20 |
% |
| Expected long-term return on plan assets |
|
4.53 |
% |
|
|
4.97 |
% |
|
5.40 |
% |
Rate of compensation increase (a)
|
|
2.01 |
% |
|
|
2.04 |
% |
|
2.74 |
% |
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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 2022 |
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March 2021 |
| Fair value of plan assets, beginning of period |
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$ |
1,755,414 |
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|
$ |
1,712,775 |
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| Actual return on plan assets |
|
(26,855) |
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|
|
110,467 |
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| VF contributions |
|
34,035 |
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|
|
17,714 |
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| Participant contributions |
|
5,026 |
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|
4,434 |
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| Benefits paid |
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(118,389) |
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(101,753) |
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| Currency translation |
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(5,796) |
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|
11,777 |
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| Fair value of plan assets, end of period |
|
1,643,435 |
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|
1,755,414 |
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| Projected benefit obligations, beginning of period |
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1,741,710 |
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|
|
1,726,776 |
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| Service cost |
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14,288 |
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|
15,747 |
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| Interest cost |
|
37,534 |
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|
47,316 |
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| Participant contributions |
|
5,026 |
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|
|
4,434 |
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| Actuarial (gain) loss |
|
(117,214) |
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|
40,264 |
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| Benefits paid |
|
(118,389) |
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|
|
(101,753) |
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| Plan amendments |
|
— |
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|
(3,098) |
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| Curtailments |
|
— |
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|
(729) |
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| Currency translation |
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(5,240) |
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|
12,753 |
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Projected benefit obligations, end of period (a)
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|
1,557,715 |
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1,741,710 |
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| Funded status, end of period |
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$ |
85,720
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$ |
13,704
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(a)The changes in projected benefit obligations in the years ended March 2022 and 2021 were driven by actuarial gains and losses, respectively, primarily as a result of changes in discount rates.
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 2022 |
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March 2021 |
| Amounts included in Consolidated Balance Sheets: |
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| Other assets (Note 11) |
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213,820 |
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$ |
197,484 |
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| Accrued liabilities (Note 13) |
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(16,927) |
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|
(17,030) |
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| Other liabilities (Note 15) |
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(111,173) |
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(166,750) |
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| Funded status |
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$ |
85,720 |
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$ |
13,704
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| Accumulated other comprehensive loss, pretax: |
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| Net deferred actuarial losses |
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$ |
326,929 |
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$ |
358,916 |
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| Net deferred prior service credits |
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(4,204) |
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|
(4,588) |
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| Total accumulated other comprehensive loss, pretax |
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$ |
322,725 |
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$ |
354,328
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| Accumulated benefit obligations |
|
$ |
1,539,593 |
|
|
$ |
1,710,678
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| Weighted average actuarial assumptions used to determine pension obligations: |
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| Discount rate |
|
3.65 |
% |
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|
2.94% |
Rate of compensation increase (a)
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|
1.95 |
% |
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|
2.30% |
(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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| Components of Pension Plans with an Accumulated Benefit Obligation and Projected Benefit Obligation in Excess of Plan Assets |
The following provides information for VF's defined benefit plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets:
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| (In thousands) |
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March 2022 |
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March 2021 |
| Projected benefit obligations |
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$ |
213,002 |
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$ |
268,277 |
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| Accumulated benefit obligations |
|
194,879 |
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|
237,245 |
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| Fair value of plan assets |
|
84,902 |
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|
84,497 |
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The net amount of projected benefit obligations and plan assets for underfunded defined benefit plans was $128.1 million and $183.8 million as of March 2022 and 2021, respectively, and was reported in accrued liabilities and other liabilities in the Consolidated Balance Sheets.
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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 2022 and March 2021, 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 2022 |
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| Plan assets |
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| Cash equivalents |
$ |
5,761 |
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$ |
5,761 |
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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 |
4 |
|
|
— |
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|
4 |
|
|
— |
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| Insurance contracts |
88,574 |
|
|
— |
|
|
88,574 |
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|
— |
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| Futures contracts |
(2,812) |
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|
(2,812) |
|
|
— |
|
|
— |
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| Total plan assets in the fair value hierarchy |
91,527
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|
$ |
2,949
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$ |
88,578
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|
$ |
—
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| Plan assets measured at net asset value |
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| Cash equivalents |
73,849 |
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| Equity securities: |
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| Domestic |
94,844 |
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| International |
77,468 |
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| Fixed income securities: |
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| Corporate and international bonds |
1,177,421 |
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| Alternative investments |
128,326 |
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| Total plan assets measured at net asset value |
1,551,908 |
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| Total plan assets |
$ |
1,643,435
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Total Plan
Assets |
|
Fair Value Measurements |
| (In thousands) |
Level 1 |
|
Level 2 |
|
Level 3 |
| March 2021 |
|
|
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| Plan assets |
|
|
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|
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| Cash equivalents |
$ |
7,410 |
|
|
$ |
7,410 |
|
|
$ |
— |
|
|
$ |
— |
|
| Fixed income securities: |
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| U.S. Treasury and government agencies |
5 |
|
|
— |
|
|
5 |
|
|
— |
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| Insurance contracts |
84,497 |
|
|
— |
|
|
84,497 |
|
|
— |
|
| Futures contracts |
(4,452) |
|
|
(4,452) |
|
|
— |
|
|
— |
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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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|
|
|
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| Cash equivalents |
78,191 |
|
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|
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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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