Defined Benefit Plan, Assumptions Used Calculating Net Periodic Benefit Cost, Expected Long-term Rate of Return on Plan Assets

THE HERSHEY COMPANYNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)(amounts in thousands, except share data or if otherwise indicated)  
The non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans is reflected within other (income) expense, net in the Consolidated Statements of Income (see [Note 17](#i0bc28196a24d4084af1a4cbdf6bdf4bd_88)).During the first nine months of 2022, we recognized pension settlement charges in our hourly retirement plan and salaried retirement plan due to lump sum withdrawals by employees retiring or leaving the Company. The non-cash settlement charges, which represent the acceleration of a portion of the respective plan’s accumulated unrecognized actuarial loss, were triggered when the cumulative lump sum distributions exceeded the plan’s anticipated annual service and interest costs. In connection with the third quarter 2022 settlements, the related plan assets and liabilities were remeasured using a discount rate as of the remeasurement date that was 288 basis points higher than the rate as of December 31, 2021 and an expected rate of return on plan assets of 5.8%.12. STOCK COMPENSATION PLANS Share-based grants for compensation and incentive purposes are made pursuant to the Equity and Incentive Compensation Plan (“EICP”). The EICP provides for grants of one or more of the following stock-based compensation awards to employees, non-employee directors and certain service providers upon whom the successful conduct of our business is dependent:•Non-qualified stock options (“stock options”);•Performance stock units (“PSUs”) and performance stock;•Stock appreciation rights;•Restricted stock units (“RSUs”) and restricted stock; and•Other stock-based awards.The EICP also provides for the deferral of stock-based compensation awards by participants if approved by the Compensation and Human Capital Committee of our Board and if in accordance with an applicable deferred compensation plan of the Company. Currently, the Compensation and Human Capital Committee has authorized the deferral of PSU and RSU awards by certain eligible employees under the Company’s Deferred Compensation Plan. Our Board has authorized our non-employee directors to defer any portion of their cash retainer, committee chair fees and RSUs awarded that they elect to convert into deferred stock units under our Directors’ Compensation Plan.At the time stock options are exercised or PSUs and RSUs become payable, Common Stock is issued from our accumulated treasury shares. Dividend equivalents are credited on RSUs on the same date and at the same rate as dividends paid on our Common Stock. Dividend equivalents are charged to retained earnings and included in accrued liabilities until paid.Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. In addition, historical data is used to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.For the periods presented, compensation expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows:

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|  |  | Three Months Ended |  | Nine Months Ended |
|  |  | October 2, 2022 |  | October 3, 2021 |  | October 2, 2022 |  | October 3, 2021 |
| Pre-tax compensation expense |  | $ | 18,079  |  |  | $ | 18,527  |  |  | $ | 50,640  |  |  | $ | 51,009  |  |
| Related income tax benefit |  | 2,990  |  |  | 2,791  |  |  | 9,925  |  |  | 10,814  |  |

Compensation expenses for stock compensation plans are primarily included in selling, marketing and administrative expense. As of October 2, 2022, total stock-based compensation expense related to non-vested awards not yet recognized was $93,265 and the weighted-average period over which this amount is expected to be recognized was approximately 1.8 years.   


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| [Table of Contents](#i0bc28196a24d4084af1a4cbdf6bdf4bd_7) | The Hershey Company | Q3 2022 Form 10-Q | Page 25 | hsy-20221002_g2.jpg |

  

