Pensions and Postretirement Benefits Other than Pensions | Note 11 - Pensions and Postretirement Benefits Other than Pensions The Company and its subsidiaries have a number of plans providing pension, retirement or profit-sharing benefits. These plans include defined benefit and defined contribution plans. The plans cover substantially all U.S. domestic employees. There are also plans that cover a significant number of employees in the U.K. and Germany. The Company has an unfunded, nonqualified supplemental retirement benefit plan in the U.S. covering certain employees whose participation in the qualified plan is limited by provisions of the Internal Revenue Code. For defined benefit plans, benefits are generally based on compensation and length of service for salaried employees and length of service for hourly employees. In the U.S., the Company froze the pension benefits in its Spectrum (salaried employees) Plan in 2009. In 2012, the Company closed the U.S. pension plans for the bargaining units to new participants. Certain grandfathered participants in the bargaining unit plans continue to accrue pension benefits. Employees of certain of the Company’s foreign operations in the U.K. and Germany are covered by either contributory or non-contributory trusteed pension plans. In 2012, the Company froze the benefits in the U.K. pension plan. Participation in the Company’s defined contribution plans is voluntary. The Company matches certain plan participants’ contributions up to various limits. Participants’ contributions are limited based on their compensation and, for certain supplemental contributions which are not eligible for company matching, based on their age. Expense for those plans was $14,236, $12,510 and $12,522 for 2015, 2014 and 2013, respectively. The Company currently provides retiree health care and life insurance benefits to a significant percentage of its U.S. salaried and hourly employees. U.S. salaried and non-bargained hourly employees hired on or after January 1, 2003 are not eligible for retiree health care or life insurance coverage. The Company has reserved the right to modify or terminate certain of these salaried benefits at any time. The Company has implemented household caps on the amounts of retiree medical benefits it will provide to certain retirees. The caps do not apply to individuals who retired prior to certain specified dates. Costs in excess of these caps will be paid by plan participants. The Company implemented increased cost sharing in 2004 in the retiree medical coverage provided to certain eligible current and future retirees. Since then, cost sharing has expanded such that nearly all covered retirees pay a charge to be enrolled. In accordance with U.S. GAAP, the Company recognizes the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligation) of its pension and OPEB plans and the net unrecognized actuarial losses and unrecognized prior service costs in the Consolidated Balance Sheets. The unrecognized actuarial losses and unrecognized prior service costs (components of cumulative other comprehensive loss in the stockholders’ equity section of the balance sheet) will be subsequently recognized as net periodic pension cost pursuant to the Company’s historical accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic benefit costs in the same periods will be recognized as a component of other comprehensive income. The following table reflects changes in the projected obligations and fair market values of assets in all defined benefit pension and other postretirement benefit plans of the Company: 2015 Pension Benefits 2014 Other Postretirement Benefits Domestic International Total Domestic International Total 2015 2014 Change in benefit obligation: Projected Benefit Obligation at January 1 $ 1,105,100 $ 457,233 $ 1,562,333 $ 973,276 $ 431,146 $ 1,404,422 $ 278,867 $ 252,866 Service cost - employer 11,037 9 11,046 9,760 8 9,768 2,513 2,404 Interest cost 40,202 15,853 56,055 42,842 19,620 62,462 10,320 11,305 Actuarial (gain)/loss (52,663 ) (27,763 ) (80,426 ) 137,217 47,015 184,232 (13,726 ) 24,294 Benefits paid (58,209 ) (14,321 ) (72,530 ) (57,995 ) (14,631 ) (72,626 ) (12,395 ) (12,002 ) Foreign currency translation effect — (25,127 ) (25,127 ) — (25,925 ) (25,925 ) — — Projected Benefit Obligation at December 31 $ 1,045,467 $ 405,884 $ 1,451,351 $ 1,105,100 $ 457,233 $ 1,562,333 $ 265,579 $ 278,867 Change in plans’ assets: Fair value of plans’ assets at January 1 $ 857,825 $ 330,848 $ 1,188,673 $ 823,790 $ 288,524 $ 1,112,314 $ — $ — Actual return on plans’ assets 1,095 (746 ) 349 56,284 65,128 121,412 — — Employer contribution 35,803 12,027 47,830 35,746 12,454 48,200 — — Benefits paid (58,209 ) (14,321 ) (72,530 ) (57,995 ) (14,631 ) (72,626 ) — — Foreign currency translation effect — (17,892 ) (17,892 ) — (20,627 ) (20,627 ) — — Fair value of plans’ assets at December 31 $ 836,514 $ 309,916 $ 1,146,430 $ 857,825 $ 330,848 $ 1,188,673 $ — $ — Funded status $ (208,953 ) $ (95,968 ) $ (304,921 ) $ (247,275 ) $ (126,385 ) $ (373,660 ) $ (265,579 ) $ (278,867 ) Amounts recognized in the balance sheets: Accrued liabilities $ (300 ) $ — $ (300 ) $ (300 ) $ — $ (300 ) $ (15,929 ) $ (14,562 ) Postretirement benefits other than pensions — — — — — — (249,650 ) (264,305 ) Pension benefits (208,653 ) (95,968 ) $ (304,621 ) (246,975 ) (126,385 ) $ (373,360 ) — — Included in cumulative other comprehensive loss at December 31, 2015 are the following amounts that have not yet been recognized in net periodic benefit cost: unrecognized prior service credits of ($1,905) (($1,565) net of tax) and unrecognized actuarial losses of $569,639 ($492,752 net of tax). Included in cumulative other comprehensive loss at December 31, 2014 are the following amounts that have not yet been recognized in net periodic benefit cost: unrecognized prior service credits of ($2,736) (($2,078) net of tax) and unrecognized actuarial losses of $647,115 ($546,502 net of tax). The prior service credit and actuarial loss included in cumulative other comprehensive loss that are expected to be recognized in net periodic benefit cost during the fiscal year-ended December 31, 2016 are ($566) and $43,882, respectively. The accumulated benefit obligation for all defined benefit pension plans was $1,448,277 and $1,558,908 at December 31, 2015 and 2014, respectively. Weighted average assumptions used to determine benefit obligations at December 31: Pension Other Postretirement Benefits 2015 2014 2015 2014 All plans Discount rate 4.10 % 3.70 % 4.20 % 3.80 % Domestic plans Discount rate 4.20 % 3.75 % 4.20 % 3.80 % Foreign plans Discount rate 3.84 % 3.59 % — — At December 31, 2015, the weighted average assumed annual rate of increase in the cost of medical benefits was 7.00 percent for 2016 trending linearly to 4.50 percent per annum in 2023. Pension Benefits - Domestic Pension Benefits - International 2015 2014 2013 2015 2014 2013 Components of net periodic benefit cost: Service cost $ 11,037 $ 9,760 $ 11,879 $ 9 $ 8 $ 8 Interest cost 40,202 42,842 38,751 15,853 19,620 15,661 Expected return on plan assets (55,299 ) (52,543 ) (47,555 ) (12,421 ) (19,977 ) (14,981 ) Amortization of actuarial loss 39,514 28,021 44,370 7,222 8,452 6,564 Net periodic benefit cost $ 35,454 $ 28,080 $ 47,445 $ 10,663 $ 8,103 $ 7,252 Other Post Retirement Benefits 2015 2014 2013 Components of net periodic benefit cost: Service cost $ 2,513 $ 2,404 $ 3,813 Interest cost 10,320 11,305 10,791 Amortization of prior service cost (566 ) (566 ) (566 ) Amortization of actuarial loss — — 1,915 Net periodic benefit cost $ 12,267 $ 13,143 $ 15,953 Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31: Pension Benefits Other Postretirement Benefits 2015 2014 2013 2015 2014 2013 All plans Discount rate 3.70 % 4.53 % 3.92 % 3.80 % 4.60 % 3.60 % Expected return on plan assets 6.12 % 6.91 % 6.75 % — — — Rate of compensation increase 0.00 % 0.00 % 0.00 % — — — Domestic plans Discount rate 3.75 % 4.55 % 3.75 % 3.80 % 4.60 % 3.60 % Expected return on plan assets 7.00 % 7.00 % 7.00 % — — — Foreign plans Discount rate 3.59 % 4.49 % 4.39 % — — — Expected return on plan assets 3.84 % 6.66 % 6.01 % — — — Rate of compensation increase 0.00 % 0.00 % 0.00 % — — — The following table lists the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets at December 31, 2015 and 2014: 2015 2014 Projected Accumulated Projected Accumulated Projected benefit obligation $ 1,451,351 $ 1,451,351 $ 1,562,333 $ 1,562,333 Accumulated benefit obligation 1,448,277 1,448,277 1,558,908 1,558,908 Fair value of plan assets 1,146,430 1,146,430 1,188,673 1,188,673 Assumed health care cost trend rates for other postretirement benefits have a significant effect on the amounts reported. A one-percentage-point change in assumed health care cost trend rates would have the following effects: Percentage Point Increase Decrease Increase (decrease) in total service and interest cost components $ 67 $ (60 ) Increase (decrease) in the postretirement benefit obligation 1,602 (1,426 ) The table below presents the Company’s weighted average asset allocations for its domestic and U.K. pension plans’ assets at December 31, 2015 and December 31, 2014 by asset category. U.S. Plans U.K. Plan Asset Category 2015 2014 2015 2014 Equity securities 59 % 53 % 21 % 20 % Debt securities 41 47 70 72 Other investments 0 0 9 8 Cash 0 0 0 0 Total 100 % 100 % 100 % 100 % The Company’s asset allocation strategy is based on a combination of factors, including the profile of the pension liability, the timing of future cash requirements, and the level of invested assets available to meet plan obligations. The goal is to manage the assets in such a way that the cost and risk are managed through portfolio diversification which is designed to maximize returns consistent with levels of liquidity and investment risk that are prudent and reasonable. Rebalancing of asset portfolios occurs periodically if the mix differs from the target allocation. Equity security investments are structured to achieve a balance between growth and value stocks. The assets of the Company’s pension plan in Germany consist of investments in German insurance contracts. The fair market value of U.S. plan assets was $836,514 and $857,825 at December 31, 2015 and 2014, respectively. The fair market value of the U.K. plan assets was $308,132 and $328,802 at December 31, 2015 and 2014, respectively. The fair market value of the German pension plan assets was $1,784 and $2,046 at December 31, 2015 and 2014, respectively. The table below classifies the assets of the U.S. and U.K. plans using the Fair Value Hierarchy described in Note 10 – Fair Value of Financial Instruments. Certain amounts for 2014 have been reclassified to conform to the current year presentation including reclassifying $12,775 from Level 2 Other investments to Level 3 Other investments in the United Kingdom plan. Fair Value Hierarchy Total Level 1 Level 2 Level 3 December 31, 2015 United States plans Cash & Cash Equivalents $ 724 $ 724 $ — $ — Equity securities 495,933 149,894 346,039 — Fixed income securities 339,857 133,420 206,437 — $ 836,514 $ 284,038 $ 552,476 $ — United Kingdom plan Cash & Cash Equivalents $ 917 $ 917 $ — $ — Equity securities 65,391 65,391 — — Fixed income securities 214,762 214,762 — — Other investments 27,062 — — 27,062 $ 308,132 $ 281,070 $ — $ 27,062 December 31, 2014 United States plans Cash & Cash Equivalents $ 770 $ 770 $ — $ — Equity securities 451,893 153,129 298,764 — Fixed income securities 405,162 137,693 267,469 — $ 857,825 $ 291,592 $ 566,233 $ — United Kingdom plan Cash & Cash Equivalents $ 935 $ 935 $ — $ — Equity securities 67,280 67,280 — — Fixed income securities 234,775 234,775 — — Other investments 25,812 — — 25,812 $ 328,802 $ 302,990 $ — $ 25,812 Plan assets are measured at fair value. While the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The Company’s valuation methodologies used for the plan assets measured at fair value are as follows: Cash and cash equivalents – Equity securities Fixed Income Securities – Common/Commingled Trust Funds – The Level 3 assets in the U.K. plan are investments in a European infrastructure fund and property fund. The fair market value is determined by the fund manager using a discounted cash flow methodology. The future cash flows expected to be generated by the assets of the funds and made available to investors are estimated and then discounted back to the valuation date. The discount rate is derived by adding a risk premium to the risk-free interest rate applicable to the country in which the assets are located. The following table details the activity in this investment for the years ended December 31, 2014 and 2015: Infrastructure and Balance at December 31, 2013 $ 13,915 Transfer into level 3 - property fund 12,719 Disbursements — Change in fair value — Foreign currency translation effect (822 ) Balance at December 31, 2014 25,812 Transfer into level 3 — Disbursements — Change in fair value 2,798 Foreign currency translation effect (1,548 ) Balance at December 31, 2015 $ 27,062 The Company determines the annual expected rates of return on pension assets by first analyzing the composition of its asset portfolio. Historical rates of return are applied to the portfolio. These computed rates of return are reviewed by the Company’s investment advisors and actuaries. Industry comparables and other outside guidance are also considered in the annual selection of the expected rates of return on pension assets. During 2015, the Company contributed $47,830 to its domestic and foreign pension plans, and during 2016, the Company expects to contribute between $42,000 and $52,000 to its domestic and foreign pension plans. The Company estimates its benefit payments for its domestic and foreign pension plans and other postretirement benefit plans during the next ten years to be as follows: Pension Other 2016 $ 82,900 $ 15,929 2017 78,612 16,233 2018 80,936 16,492 2019 81,072 16,773 2020 82,220 17,198 |