v3.25.2
PENSION AND POSTRETIREMENT BENEFITS
 12 Months Ended
Dec. 28, 2024
Retirement Benefits [Abstract]  
PENSION AND POSTRETIREMENT BENEFITS
PENSION AND POSTRETIREMENT BENEFITS
The Company sponsors a pension plan in the United States and plans in the United States and Canada that provide health care and other welfare benefits to retired employees, who have met certain age and service requirements. The majority of these plans are funded or unfunded defined benefit plans or defined contribution plans for certain employee groups. Defined benefits for salaried employees are generally based on salary and years of service, while union employee benefits are generally a negotiated amount for each year of service. The Company contributes to voluntary employee benefits association ("VEBA") trusts to fund certain U.S. retiree health and welfare benefit obligations. The Company uses a December 31 measurement date for these plans and, when necessary, adjusts for plan contributions and significant events between December 31 and its fiscal year-end.

Spin-Off Impacts
Prior to the Spin-Off, our employees participated in certain plans sponsored by Kellanova, which include participants of Kellanova’s other businesses. As a result, such plans were accounted for as multiemployer plans and no asset or liability was recorded by the Company to recognize the funded status of these plans. In connection with the Spin-Off, certain pension and nonpension postretirement plans (collectively, the "Plans") that were previously sponsored by Kellanova were divided such that the plans became dedicated to our employees and sponsored by WK Kellogg Co. As such, the Company was required to assume certain pension and postretirement assets and liabilities, along with associated deferred costs, in accumulated other comprehensive income (loss). Kellanova incurred remeasurement gains upon separation of the Plans, of which $32 million was allocated to WK Kellogg Co. The remeasurement recognized by Kellanova was primarily due to the amendment of the Plans to split them in anticipation of the Spin-Off. Remeasurement losses were recognized on the pension plans due to a lower-than-expected return on plan assets and were offset by remeasurement gains on the postretirement plans due to a higher-than-expected return on plan assets.

Expense
The following table summarizes the allocated expenses that were allocated to the company's Plans prior to the Spin-Off:
Type of plan20232022
Pension plans:
Direct planNet periodic benefit cost$1 $— 
Shared plans (multiemployer)Cost allocation - COGS & SGA5 11 
Shared plans (multiemployer)Cost allocation - OIE10 27 
Nonpension postretirement plans:
Direct planNet periodic benefit income(6)(4)
Shared plans (multiemployer)Cost allocation - COGS & SGA3 8 
Shared plans (multiemployer)Cost allocation - OIE(65)70 
Total pension and nonpension postretirement (income)/expense$(52)$112 
The components of pension expense are presented in the following table for all plans directly attributable to the Company after the Spin-Off occurred. Service cost is recorded in COGS and SGA expense. All other components of net periodic benefit expense (income) are included in OIE.
Pension BenefitsPostretirement Benefits
(millions)202420232022202420232022
Service cost$8 $2 $— $4 $1 $— 
Interest cost29 8 — 24 6 — 
Expected return on plan assets(35)(9)— (60)(14)— 
Amortization of unrecognized prior service cost2 1 — (8)(2)— 
Recognized (gain) loss, net12 4 — (5)
Curtailment (gain) loss, net3 — — — — — 
Net periodic benefit expense (income)$19 $6 $— $(40)$(14)$— 
The Company, and Kellanova prior to the Spin-Off, sponsor 401(k) or similar defined contribution savings plans for active employees. Expense related to these plans was $18 million in 2024, $6 million in 2023 and immaterial in 2022. Company contributions to these savings plans approximate annual expense.
Obligations and funded status
The aggregate change in projected benefit obligation, plan assets, and funded status is presented in the following tables:
Pension BenefitsPostretirement Benefits
(millions)2024202320242023
Change in projected benefit obligation
Beginning of year$605 $— $493 $16 
Service cost8 2 4 1 
Interest cost29 8 24 6 
Actuarial (gain)loss(19)21 (24)6 
Benefits paid, net of reimbursements (a)(51)(12)(48)(10)
Spin-Off impacts— 586 — 474 
End of year$572 $605 $449 $493 
Change in plan assets
Fair value beginning of year$470 $— $773 $— 
Actual return on plan assets5 26 36 26 
Employer contributions24 — — — 
Benefits paid(51)(12)(64)(10)
Spin-Off impacts— 456 — 757 
Fair value end of year$448 $470 $745 $773 
Funded (unfunded) status$(124)$(135)$296 $280 
(a) Benefits paid for postretirement plans include rebates and other anticipated subsidies from plan vendors.

Amounts recognized in the consolidated balance sheet consist of:
Pension BenefitsPostretirement Benefits
(millions)2024202320242023
Postretirement plan assets$— $— $301 $283 
Pension liability(124)(135)— — 
Other liabilities— — (5)(3)
Net amount recognized$(124)$(135)$296 $280 

Amounts recognized in accumulated other comprehensive income consist of:
Pension BenefitsPostretirement Benefits
(millions)2024202320242023
Prior service cost$9 $15 $(13)$(20)
Net amount recognized$9 $15 $(13)$(20)
The accumulated benefit obligation for all defined benefit pension plans was $572 million at December 28, 2024 and $605 million at December 30, 2023. Information for pension and postretirement plans with accumulated benefit obligations in excess of plan assets and projected benefit obligations in excess of plan assets were:
Pension BenefitsPostretirement Benefits
(millions)2024202320242023
Projected benefit obligation$572 $605 n/an/a
Accumulated benefit obligation$572 $605 n/an/a
Fair value of plan assets$448 $470 n/an/a
Assumptions
The weighted-average actuarial assumptions used to determine benefit obligations were:
Pension BenefitsPostretirement Benefits
202420232022202420232022
Discount rate5.7 %5.2 %— %5.6 %5.2 %5.2 %
Long-term rate of compensation increase6.0 %6.0 %— %n/an/an/a
The weighted-average actuarial assumptions used to determine annual net periodic benefit cost were:
Pension BenefitsPostretirement Benefits
202420232022202420232022
Discount rate5.2 %5.6 %— %5.1 %5.4 %2.9 %
Discount rate - interest5.1 %5.6 %— %5.0 %5.4 %— %
Long-term rate of compensation increase6.0 %6.0 %— %n/an/an/a
Long-term rate of return on plan assets7.8 %7.8 %n/a8.0 %8.0 %— %

Long-term rate of return on plan assets: The expected long-term rate of return is evaluated on an annual basis. The Company considers several factors when setting assumptions with respect to the long-term rate of return, including current and expected asset allocation and historical and expected returns on the plan asset categories. Actual asset allocations are regularly reviewed and periodically rebalanced to the targeted allocations when considered appropriate. Investment gains or losses represent the difference between the expected return estimated using the long-term rate of return and the actual return realized. Based on consolidated benefit plan assets at December 28, 2024, a 100 basis point increase or decrease in the assumed rate of return would correspondingly decrease or increase 2025 benefits expense by approximately $12 million. For the year ended December 28, 2024, our actual return on plan assets was less than the recognized assumed return by $54 million.

Health care trend rates: The Company's initial health care cost trend rate is reviewed annually and adjusted as necessary to remain consistent with our expectations regarding short-term future trends. The initial trend rate for 2025 of 6.50% reflects the recognition of increased short-term inflation and the health care provisions of the Inflation Reduction Act. The assumption trends downward by 0.25% per year, until the ultimate trend rate of 4.5% is reached. The ultimate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inflation plus an appropriate health care cost premium. Any arising health care claims cost-related experience gain or loss is recognized in the year in which they occur. The experience gain arising during 2024 from recognition of claims experience was approximately $21 million.

Discount rate: The Company utilizes a full yield curve approach in the estimation of service and interest costs by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The spot rates used in this process are derived from a yield curve created from yields on the 40th to 90th percentile of U.S. high quality bonds. This spot rate approach provides a more precise measurement of service and interest costs by improving the correlation between the projected cash flows to the corresponding spot rates along the yield curve. Based on consolidated obligations at December 28, 2024, a 25 basis point decline in the yield curve used for benefit plan measurement purposes would decrease 2025 benefits expense by approximately $1 million and would result in an immediate loss recognition of $22 million. All obligation-related actuarial gains and losses are recognized immediately in the year in which they occur.

Despite the previously-described policies for selecting major actuarial assumptions, we periodically experience material actuarial gains or losses due to differences between assumed and actual experience and due to changing economic conditions. During 2024, we recognized a net actuarial loss of approximately $11 million. The total net loss recognized in 2024 was driven by a loss of approximately $54 million from less than expected asset returns, partially offset by a gain of approximately $43 million from plan experience, including assumption changes.
Plan assets
The Company categorized Plan assets within a three level fair value hierarchy described as follows:
Investments stated at fair value as determined by quoted market prices (Level 1) include:
Cash and cash equivalents:  Value based on cost, which approximates fair value.
Corporate stock, common:  Value based on the last sales price on the primary exchange.
Investments stated at estimated fair value using significant observable inputs (Level 2) include:
Cash and cash equivalents:  Institutional short-term investment vehicles valued daily.
Mutual funds:  Valued at exit prices quoted in active or non-active markets or based on observable inputs.
Collective trusts:  Valued at exit prices quoted in active or non-active markets or based on observable inputs.
Bonds:  Value based on matrices or models from pricing vendors.
Equity options: Value is based on exit prices quoted in active or non-active markets.
The Company’s practice regarding the timing of transfers between levels is to measure transfers in at the beginning of the month and transfers out at the end of the month. For the year ended December 28, 2024, the Company had no transfers between Levels 1 and 2.
The fair value of Plan assets as of December 28, 2024 and December 30, 2023 within the fair value hierarchy are as follows:
Pension BenefitsPostretirement Benefits
(millions)Fair Value Hierarchy Level2024202320242023
Cash and cash equivalents (a)1, 2$22 $60 $11 $120 
Corporate stock, common1— — 25 21 
Bonds, corporate278 86 136 141 
Bonds, government240 49 83 88 
Bonds, other25 6 8 9 
Sub-total$145 $201 $263 $379 
Investments measured at net asset value (NAV) practical expedient (b)303 $269 482 $394 
Total plan assets$448 $470 $745 $773 
(a) Cash and cash equivalents related to pension and postretirement benefits are all classified as Level 2 assets in 2024. Cash and cash equivalents related to pension benefits includes Level 1 assets of $(1) million and Level 2 assets of $61 million for 2023. Cash and cash equivalents related to postretirement benefits includes Level 1 assets of $0 million and Level 2 assets of $120 million for 2023.
(b) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
There were no unfunded commitments to purchase investments at December 28, 2024 or December 30, 2023.
The Company’s investment strategy for its defined benefit plans is to maintain a diversified portfolio of asset classes with the primary goal of meeting long-term cash requirements as they become due. Assets are invested in a prudent manner to maintain the security of funds while maximizing returns within the Plan’s investment policy. The investment policy specifies the type of investment vehicles appropriate for the Plan, asset allocation guidelines, criteria for the selection of investment managers, procedures to monitor overall investment performance as well as investment manager performance. Derivatives, including swaps, forward and futures contracts, may be used as asset class substitutes or for hedging or other risk management purposes. It also provides guidelines enabling Plan fiduciaries to fulfill their responsibilities.
The current weighted-average target asset allocation reflected by this strategy is:
Pension BenefitsPostretirement Benefits
Equity securities43 %44 %
Debt securities43 %42 %
Real estate and other14 %14 %
Plan funding strategies are influenced by tax regulations and funding requirements. The Company expects to make contributions of $19 million to its defined benefit pension plans during 2025. The Company does not expect to make any contributions to its VEBA trusts during 2025.
Benefit payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
(millions)PensionPostretirement
2025$50 $35 
202651 35 
202751 36 
202850 36 
202949 36 
2030-2034226 178