| Pension and Postretirement Benefits | PENSION AND POSTRETIREMENT BENEFITS We sponsor several noncontributory defined benefit pension plans, covering substantially all U.S. employees and certain non-U.S. employees, which provide benefits based on years of service, age, job grade levels and type of compensation. Retirement benefits for all other covered employees are provided through contributory pension plans, cash balance pension plans and government-sponsored retirement programs. All funded defined benefit pension plans receive funding based on independent actuarial valuations to provide for current service and an amount sufficient to amortize unfunded prior service over periods not to exceed 30 years, with funding falling within the legal limits prescribed by prevailing regulation. We also maintain unfunded defined benefit plans that, as permitted by local regulations, receive funding only when benefits become due. Our defined benefit plan strategy is to ensure that current and future benefit obligations are adequately funded in a cost-effective manner. Additionally, our investing objective is to achieve the highest level of investment performance that is compatible with our risk tolerance and prudent investment practices. Because of the long-term nature of our defined benefit plan liabilities, our funding strategy is based on a long-term perspective for formulating and implementing investment policies and evaluating their investment performance. The asset allocation of our defined benefit plans reflects our decision about the proportion of the investment in equity and fixed income securities, and, where appropriate, the various sub-asset classes of each. At least annually, we complete a comprehensive review of our asset allocation policy and the underlying assumptions, which includes our long-term capital markets rate of return assumptions and our risk tolerances relative to our defined benefit plan liabilities. The expected rates of return on defined benefit plan assets are derived from review of the asset allocation strategy, expected long-term performance of asset classes, risks and other factors adjusted for our specific investment strategy. These rates are impacted by changes in general market conditions, but because they are long-term in nature, short-term market changes do not significantly impact the rates. Our U.S. defined benefit plan assets consist of a balanced portfolio of equity and fixed income securities. Our non-U.S. defined benefit plan assets include a significant concentration of United Kingdom ("U.K.") fixed income securities. We monitor investment allocations and manage plan assets to maintain acceptable levels of risk. For all periods presented, we used a measurement date of December 31 for each of our U.S. pension plans, non-U.S. pension plans and postretirement medical plans. U.S. Defined Benefit Plans We maintain qualified and non-qualified defined benefit pension plans in the U.S. The qualified plan provides coverage for substantially all full-time U.S. employees who receive benefits, up to an earnings threshold specified by the U.S. Department of Labor. The non-qualified plans primarily cover a small number of employees including current and former members of senior management, providing them with benefit levels equivalent to other participants, but that are otherwise limited by U.S. Department of Labor rules. The U.S. plans are designed to operate as "cash balance" arrangements, under which the employee has the option to take a lump sum payment at the end of their service. The difference between total accumulated benefit obligation and total projected benefit obligation ("Benefit Obligation") is immaterial. In August 2023, we amended the qualified plan in the U.S. for non-union employees to discontinue future benefit accruals under the qualified plan and freeze existing accrued benefits effective January 1, 2025. Benefits earned by participants under the qualified plan prior to January 1, 2025, are not affected. We also amended the U.S. non-qualified defined benefit pension plan that provides enhanced retirement benefits to select members of management. The qualified plan and the non-qualified plan are closed to new entrants effective January 1, 2024, and September 1, 2023, respectively. The amendments resulted in a curtailment of both plans during the year ended December 31, 2023. The curtailment loss incurred and the change in projected benefit obligation was immaterial. The following are assumptions related to the U.S. defined benefit pension plans: Year Ended December 31, 2023 2022 2021 Weighted average assumptions used to determine Benefit Obligations: Discount rate 5.41 % 5.73 % 3.00 % Rate of increase in compensation levels 4.00 3.50 3.50 Weighted average assumptions used to determine net pension expense: Long-term rate of return on assets 6.00 % 5.75 % 6.00 % Discount rate 5.73 3.00 2.62 Rate of increase in compensation levels 3.50 3.50 3.50 Weighted-average interest crediting rates 4.00 % 3.79 % 3.79 % At December 31, 2023 as compared with December 31, 2022, we de creased our discount rate from 5.73% to 5.41% based on an analysis of publicly-traded investment grade U.S. corporate bonds, which had a higher yield due to current market conditions. In determining 2023 expense, the expected rate of return on U.S. plan assets increased to 6.00%, primarily based on our target allocations and expected long-term asset returns. The long-term rate of return assumption is calculated using a quantitative approach that utilizes unadjusted historical returns and asset allocation as inputs for the calculation. For all U.S. plans, we adopted the Pri-2012 mortality tables and the MP-2021 improvement scale published in October 2021. We applied the Pri-2012 tables based on the constituency of our plan population for union and non-union participants. We adjusted the improvement scale to utilize the Proxy SSA Long Term Improvement Rates, consistent with assumptions adopted by the Social Security Administration trustees, based on long-term historical experience. Currently, we believe this approach provides the best estimate of our future obligation. Most plan participants elect to receive plan benefits as a lump sum at the end of service, rather than an annuity. As such, the updated mortality tables had an immaterial effect on our pension obligation. Net pension expense for the U.S. defined benefit pension plans (including both qualified and non-qualified plans) was: Year Ended December 31, 2023 2022 2021 (Amounts in thousands) Service cost $ 21,341 $ 24,680 $ 25,162 Interest cost 20,480 13,157 11,952 Expected return on plan assets (23,931) (25,345) (25,377) Settlement loss 15 — — Amortization of unrecognized prior service cost 185 175 188 Amortization of unrecognized net (gain) loss (13) 3,461 7,725 U.S. net pension expense $ 18,077 $ 16,128 $ 19,650 The following summarizes the net pension (liability) asset for U.S. plans: December 31, 2023 2022 (Amounts in thousands) Plan assets, at fair value $ 361,174 $ 365,044 Benefit Obligation (417,648) (382,959) Funded status $ (56,474) $ (17,915) The following summarizes amounts recognized in the balance sheet for U.S. plans: December 31, 2023 2022 (Amounts in thousands) Current liabilities (169) (232) Noncurrent liabilities (56,305) (17,683) Funded status $ (56,474) $ (17,915) The following is a summary of the changes in the U.S. defined benefit plans’ pension obligations: December 31, 2023 2022 (Amounts in thousands) Balance — January 1 $ 382,959 $ 471,825 Service cost 21,341 24,680 Interest cost 20,480 13,157 Plan amendments and settlements (3,103) 179 Actuarial loss (gain) (1) 31,912 (87,791) Benefits paid (35,941) (39,091) Balance — December 31 $ 417,648 $ 382,959 Accumulated benefit obligations at December 31 $ 417,648 $ 382,488 _______________________________________ (1) The actuarial loss in 2023 and gain in 2022 primarily reflect the impact of changes in the discount rate. The increase in the interest crediting rate assumption also contributed to the actuarial loss in 2023. The following table summarizes the expected cash benefit payments for the U.S. defined benefit pension plans in the future (amounts in millions): 2024 $ 43.4 2025 41.4 2026 38.8 2027 37.8 2028 35.3 2029-2033 154.1 The following table shows the change in accumulated other comprehensive loss attributable to the components of the net cost and the change in Benefit Obligations for U.S. plans, net of tax: December 31, 2023 2022 (Amounts in thousands) Balance — January 1 $ (44,455) $ (30,014) Amortization of net (gain) loss (10) 2,647 Amortization of prior service cost 141 134 Net loss arising during the year (20,362) (17,085) Settlement loss and other 2,140 — Prior service cost arising during the year (56) (137) Balance — December 31 $ (62,602) $ (44,455) Amounts recorded in accumulated other comprehensive loss consist of: December 31, 2023 2022 (Amounts in thousands) Unrecognized net loss $ (61,904) $ (43,725) Unrecognized prior service cost (698) (730) Accumulated other comprehensive loss, net of tax $ (62,602) $ (44,455) The following is a reconciliation of the U.S. defined benefit pension plans’ assets: December 31, 2023 2022 (Amounts in thousands) Balance — January 1 $ 365,044 $ 488,281 Gain (loss) on plan assets 29,323 (84,785) Company contributions 3,143 639 Benefits paid (35,941) (39,091) Settlements (395) — Balance — December 31 $ 361,174 $ 365,044 We contribu ted $3.1 million and $0.6 million to the U.S. defined benefit pension plans during 2023 and 2022, respectively. All U.S. defined benefit plan assets are held by the qualified plan. The asset allocations for the qualified plan at the end of 2023 and 2022 by asset category, are as follows: Target Allocation Percentage of Actual Plan Assets at December 31, Asset category 2023 2022 2023 2022 Cash and cash equivalents 1 % 1 % 2 % 1 % Cash and cash equivalents 1 % 1 % 2 % 1 % Global Equity 20 % 20 % 21 % 21 % Global Real Assets 14 % 14 % 15 % 13 % Equity securities 34 % 34 % 36 % 34 % Diversified Credit 14 % 14 % 15 % 18 % Liability-Driven Investment 51 % 51 % 47 % 47 % Fixed income 65 % 65 % 62 % 65 % None of our common stock is directly held by our qualified plan. Our investment strategy is to earn a long-term rate of return consistent with an acceptable degree of risk and minimize our cash contributions over the life of the plan, while taking into account the liquidity needs of the plan. We preserve capital through diversified investments in high quality securities. Our current allocation target is to invest approximately 34% of plan assets in equity securities and 65% in fixed income securities. Within each investment category, assets are allocated to various investment strategies. Professional money management firms manage our assets, and we engag e a consultant to assist in evaluating these activities. We periodically review the allocation target, generally in conjunction with an asset and liability study and in consideration of our future cash flow needs. We regularly rebalance the actual allocation to our target investment allocation. Plan assets are invested in commingled funds. Our "Pension and Investment Committee" is resp onsible for setting the investment strategy and the target asset allocation for the plan's assets. As the qualified plan approached fully funded status, we implemented a Liability-Driven Investing ("LDI") strategy, which more closely aligns the duration of the plan's assets with the duration of its liabilities. The LDI strategy results in an asset portfolio that more closely matches the behavior of the liability, thereby reducing the volatility of the plan's funded status. The plan’s financial instruments, shown below, are presented at fair value. See Note 1 for further discussion on how the hierarchical levels of the fair values of the Plan’s investments are determined. The fair values of our U.S. defined benefit plan assets were: At December 31, 2023 At December 31, 2022 Hierarchical Levels Hierarchical Levels Total I II III Total I II III (Amounts in thousands) (Amounts in thousands) Cash and cash equivalents $ 5,798 $ 5,798 $ — $ — $ 4,072 $ 4,072 $ — $ — Commingled Funds: Equity securities Global Equity(a) 76,217 — 76,217 — 77,217 — 77,217 — Global Real Assets(b) 54,025 — 54,025 — 46,476 — 46,476 — Fixed income securities Diversified Credit(c) 54,756 — 54,756 — 64,877 — 64,877 — Liability-Driven Investment(d) 170,378 — 170,378 — 172,402 — 172,402 — $ 361,174 $ 5,798 $ 355,376 $ — $ 365,044 $ 4,072 $ 360,972 $ — _______________________________________ (a) Global Equity fund seeks to closely track the performance of the MSCI All Country World Index. (b) Global Real Asset funds seek to provide exposure to the listed global real estate investment trusts and infrastructure markets. (c) Diversified Credit funds seek to provide exposure to the high yield, emerging markets, bank loans and securitized credit markets. (d) LDI funds seek to invest in high quality fixed income securities that collectively closely match those found in discount curves used to value the plan's liabilities. Non-U.S. Defined Benefit Plans We maintain defined benefit pension plans, which cover some or all of our employees in the following countries: Austria, Belgium, Canada, France, Germany, India, Italy, Japan, Mexico, The Netherlands, Switzerland and the U.K. The assets of the plans in the U.K. (two plans), The Netherlands and Canada represen t 88% of th e total non-U.S. plan assets ("non-U.S. assets"). Details of other countries’ plan assets have not been provided due to immater iality. The following are assumptions related to the non-U.S. defined benefit pension plans: Year Ended December 31, 2023 2022 2021 Weighted average assumptions used to determine Benefit Obligations: Discount rate 4.22 % 4.46 % 1.71 % Rate of increase in compensation levels 3.24 3.61 3.18 Weighted average assumptions used to determine net pension expense: Long-term rate of return on assets 3.97 % 2.43 % 2.37 % Discount rate 4.46 1.71 1.23 Rate of increase in compensation levels 3.62 3.18 3.11 Weighted-average interest crediting rates 2.29 % 1.49 % 1.41 % At December 31, 2023, as compared with December 31, 2022, we decreased our average discount rate for non-U.S. plans from 4.46% to 4.22% based on analysis of bonds and other publicly-traded instruments, by country, which had lower yields due to market conditions. To determine 2023 pension expense, our average expected rate of return on plan assets increased to 3.97% based on our target allocations and expected long-term asset returns. As the expected rate of return on plan assets is long-term in nature, short-term market fluctuations do not significantly impact the rate. Many of our non-U.S. defined benefit plans are unfunded, as permitted by local regulation. The expected long-term rate of return on assets for funded plans was determined by assessing the rates of return for each asset class and is calculated using a quantitative approach that utilizes unadjusted historical returns and asset allocation as inputs for the calculation. We work with our actuaries to determine the reasonableness of our long-term rate of return assumptions by looking at several factors including historical returns, expected future returns, asset allocation, risks by asset class and other items. Net pension expense for non-U.S. defined benefit pension plans was: Year Ended December 31, 2023 2022 2021 (Amounts in thousands) Service cost $ 4,611 $ 5,984 $ 7,336 Interest cost 11,897 6,506 5,544 Expected return on plan assets (6,659) (5,883) (6,204) Amortization of unrecognized net loss 1,270 2,729 4,509 Amortization of unrecognized prior service cost 300 293 300 Settlement (gain) loss and other (23) (75) 640 Non-U.S. net pension expense $ 11,396 $ 9,554 $ 12,125 The following summarizes the net pension liability for non-U.S. plans: December 31, 2023 2022 (Amounts in thousands) Plan assets, at fair value $ 179,450 $ 172,276 Benefit Obligation (297,600) (268,364) Funded status - Underfunded $ (118,150) $ (96,088) The following summarizes amounts recognized in the balance sheet for non-U.S. plans: December 31, 2023 2022 (Amounts in thousands) Noncurrent assets $ 9,563 $ 15,305 Current liabilities (7,682) (6,877) Noncurrent liabilities (120,031) (104,516) Funded status $ (118,150) $ (96,088) The following is a reconciliation of the non-U.S. plans’ defined benefit pension obligations: December 31, 2023 2022 (Amounts in thousands) Balance — January 1 $ 268,364 $ 420,809 Service cost 4,611 5,984 Interest cost 11,897 6,506 Employee contributions 80 71 Settlements and other (982) (7,944) Actuarial losses (gains)(1) 17,082 (108,546) Net benefits and expenses paid (15,181) (15,797) Currency translation impact(2) 11,729 (32,719) Balance — December 31 $ 297,600 $ 268,364 Accumulated benefit obligations at December 31 $ 279,760 $ 253,428 _______________________________________ (1) Actuarial losses (gains) primarily reflects the impact of changes in the discount rates for all plans. (2) In 2023, the currency translation loss reflects the weakening of the U.S. dollar against the Euro and the British pound, while in 2022, the currency translation gains reflects the strengthening of the U.S. dollar against the Euro and the British pound. The following table summarizes the expected cash benefit payments for the non-U.S. defined benefit plans in the future (amounts in millions): 2024 $ 17.5 2025 17.8 2026 18.7 2027 18.6 2028 19.8 2029-2033 101.2 The following table shows the change in accumulated other comprehensive loss attributable to the components of the net cost and the change in Benefit Obligations for non-U.S. plans, net of tax: December 31, 2023 2022 (Amounts in thousands) Balance — January 1 $ (42,421) $ (70,581) Amortization of net loss 1,631 2,450 Net (losses) gains arising during the year (16,039) 21,099 Settlement (gains) losses (23) 130 Prior service gain (cost) arising during the year 10 (233) Currency translation impact and other (3,126) 4,714 Balance — December 31 $ (59,968) $ (42,421) Amounts recorded in accumulated other comprehensive loss consist of: December 31, 2023 2022 (Amounts in thousands) Unrecognized net loss $ (56,698) $ (39,007) Unrecognized prior service cost (3,270) (3,414) Accumulated other comprehensive loss, net of tax $ (59,968) $ (42,421) The following is a reconciliation of the non-U.S. plans’ defined benefit pension assets: December 31, 2023 2022 (Amounts in thousands) Balance — January 1 $ 172,276 $ 275,941 Return (Loss) on plan assets 4,444 (71,104) Employee contributions 80 71 Company contributions 10,221 15,657 Settlements (967) (8,039) Currency translation impact 8,577 (24,453) Net benefits and expenses paid (15,181) (15,797) Balance — December 31 $ 179,450 $ 172,276 In 2023, the UK and The Netherlands plans contributed to the increase in plan assets. UK pension plans contributed to the change in the non-US plan assets due to lower asset re turns in 2022. Our contributions to non-U.S. defined benefit pension plans in 2024 are expect ed to be approximately $2 million , excluding direct benefits paid. The asset allocations for the non-U.S. defined benefit pension plans at the end of 2023 and 2022 are as follows: Target Allocation at Percentage of Actual Plan Asset category 2023 2022 2023 2022 Cash and cash equivalents — % 1 % — % 1 % Cash and cash equivalents — % 1 % — % 1 % U.K. Government Gilt Index 39 % 38 % 39 % 38 % Liability-Driven Investment 12 % 12 % 12 % 12 % Fixed income 51 % 50 % 51 % 50 % Multi-asset 19 % 20 % 19 % 20 % Buy-in Contracts 18 % 19 % 18 % 19 % Other 12 % 10 % 12 % 10 % Other types 49 % 49 % 49 % 49 % None of our common stock is held directly by these plans. In all cases, our investment strategy for these plans is to earn a long-term rate of return consistent with an acceptable degree of risk and minimize our cash contributions over the life of the plan, while taking into account the liquidity needs of the plan and the legal requirements of the particular country. We preserve capital through diversified investments in high quality securities. Asset allocation differs by plan based upon the plan’s benefit obligation to participants, as well as the results of asset and liability studies that are conducted for each plan and in consideration of our future cash flow needs. Professional money management firms manage plan assets and we engage a consultant in the U.K. to assist in evaluation of these activities. The assets of the U.K. plans are overseen by a group of Trustees who review the investment strategy, asset allocation and fund selection. These assets are passively managed as they are invested in index funds that attempt to match the performance of the specified benchmark index. The fair values of the non-U.S. assets were: At December 31, 2023 At December 31, 2022 Hierarchical Levels Hierarchical Levels Total I II III Total I II III (Amounts in thousands) (Amounts in thousands) Cash $ 706 $ 706 $ — — $ 2,134 $ 2,134 $ — $ — Commingled Funds: Fixed income securities U.K. Government Gilt Index(a) 69,566 — 69,566 — 65,650 — 65,650 — Liability-Driven Investment(b) 21,873 — 21,873 — 20,849 — 20,849 — Other Types of Investments: Multi-asset(c) 34,693 — 34,693 — 34,268 — 34,268 — Buy-in Contracts(d) 31,692 — — 31,692 32,313 — — 32,313 Other(e) 20,920 — — 20,920 17,062 — — 17,062 $ 179,450 $ 706 $ 126,132 $ 52,612 $ 172,276 $ 2,134 $ 120,767 $ 49,375 _______________________________________ (a) U.K. Government Gilt Index represents U.K. government issued fixed income investments which are passively managed to track their respective benchmarks. (b) LDI seeks to invest in fixed income securities that collectively closely match those found in discount curves used to value the plan's liabilities. (c) Multi-asset seeks an attractive risk-adjusted return by investing in a diversified portfolio of strategies, including equities and fixed income. (d) The Buy-in Contracts ("Contract" or "Contracts") represent assets held by plans, whereby the cost of providing benefits to plan participants is funded by the Contract. The Contracts are held by the plans for the benefit of plan participants in the Netherlands and U.K. The fair value of these assets are based on the current present value of accrued benefits and will fluctuate based on changes in the obligations associated with covered plan members as well as the assumptions used in the present value calculation. The fair value of asset held in the Netherlands Contract as of January 1, 2023 was $15.7 million, with contributions and currency adjustments resulting in a fair value of $16.9 million at December 31, 2023. Similarly, the fair value of asset held in the U.K. plan Contract as of January 1, 2023 was $16.6 million, with contributions and currency adjustments resulting in a fair value of $14.8 million at December 31, 2023. (e) Includes assets held by plans outside the United Kingdom, the Netherlands and Canada. Details have not been provided due to immateriality. Defined Benefit Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets The following summarizes key pension plan information regarding U.S. and non-U.S. plans whose accumulated benefit obligations exceed the fair value of their respective plan assets. December 31, 2023 2022 (Amounts in thousands) Benefit Obligation $ 590,015 $ 529,531 Accumulated benefit obligation 577,942 519,287 Fair value of plan assets 407,307 401,285 Postretirement Medical Plans We sponsor several defined benefit postretirement medical plans covering certain current retirees and a limited number of future retirees in the U.S. These plans provide for medical and dental benefits and are administered through insurance companies and health maintenance organizations. The plans include participant contributions, deductibles, co-insurance provisions and other limitations and are integrated with Medicare and other group plans. We fund the plans as benefits and health maintenance organization premiums are paid, such that the plans hold no assets in any period presented. Accordingly, we have no investment strategy or targeted allocations for plan assets. Benefits under our postretirement medical plans are not available to new employees or most existing employees. The following are assumptions related to postretirement benefits: Year Ended December 31, 2023 2022 2021 Weighted average assumptions used to determine Benefit Obligation: Discount rate 5.57 % 5.83 % 2.83 % Weighted average assumptions used to determine net expense: Discount rate 5.83 % 2.83 % 2.32 % The assumed ranges for the annual rates of increase in medical costs used to determine net expense were 7.00% for 2023, 7.25% for 2022 and 7.50% for 2021, with a gradual decrease to 5.00% for 2032 and future years. Net postretirement benefit cost for postretirement medical plans was: Year Ended December 31, 2023 2022 2021 (Amounts in thousands) Interest cost $ 761 $ 464 $ 399 Amortization of unrecognized prior service cost 122 122 122 Amortization of unrecognized net loss (gain) 53 192 (21) Net postretirement benefit expense $ 936 $ 778 $ 500 The following summarizes the accrued postretirement benefits liability for the postretirement medical plans: December 31, 2023 2022 (Amounts in thousands) Postretirement Benefit Obligation $ 12,417 $ 13,353 Funded status $ (12,417) $ (13,353) The following summarizes amounts recognized in the balance sheet for postretirement Benefit Obligation: December 31, 2023 2022 (Amounts in thousands) Current liabilities $ (2,037) $ (2,086) Noncurrent liabilities (10,380) (11,267) Funded status $ (12,417) $ (13,353) The following is a reconciliation of the postretirement Benefit Obligation: December 31, 2023 2022 (Amounts in thousands) Balance — January 1 $ 13,353 $ 17,021 Interest cost 761 464 Employee contributions 379 792 Medicare subsidies receivable 60 — Actuarial gain (49) (1,747) Net benefits and expenses paid (2,087) (3,177) Balance — December 31 $ 12,417 $ 13,353 The following presents expected benefit payments for future periods (amounts in millions): Expected 2024 $ 2.1 2025 1.9 2026 1.7 2027 1.5 2028 1.3 2029-2033 4.7 The following table shows the change in accumulated other comprehensive loss attributable to the components of the net cost and the change in Benefit Obligations for postretirement benefits, net of tax: 2023 2022 (Amounts in thousands) Balance — January 1 $ (496) $ (2,072) Amortization of net loss 41 147 Amortization of prior service cost 93 93 Net gain arising during the year 37 1,336 Balance — December 31 $ (325) $ (496) Amounts recorded in accumulated other comprehensive loss consist of: December 31, 2023 2022 (Amounts in thousands) Unrecognized net gain $ 130 $ 55 Unrecognized prior service cost (455) (551) Accumulated other comprehensive income, net of tax $ (325) $ (496) We made contributions to the postretirement medical plans to pay b enefits of $1.6 million in 2023, $2.4 million in 2022 and $3.3 million in 2021. Because the postretirement medical plans are unfunded, we make contributions as the covered individuals’ claims are approved for payment. Accordingly, contribution s during any period are directly correlated to the benefits paid. Defined Contribution Plans We sponsor several defined contribution plans covering substantially all U.S. and Canadian employees and certain other non-U.S. employees. Employees may contribute to these plans, and these contributions are matched in varying amounts by us, including opportunities for discretionary matching contributions by us. Defined contribution plan expense was $23.6 million in 2023, $21.9 million in 2022 and $19.9 million in 2021. |
