Retirement Benefits | 13. Retirement Benefits Defined Benefit Pension Plans U.S. Pension Plans Non-U.S. Plans 2019 2018 2017 2019 2018 2017 (Dollars in thousands) Service cost $ 10 $ 11 $ 11 $ 1,410 $ 1,392 $ 1,410 Interest cost 11,787 11,308 14,594 2,264 2,166 2,089 Expected return on plan assets ( 12,622 ) ( 15,982 ) ( 20,111 ) ( 758 ) ( 755 ) ( 773 ) Amortization of prior service cost — — 7 7 6 8 Mark-to-market actuarial net losses (gains) 1,228 16,633 ( 5,432 ) 11,033 2,444 ( 1,792 ) Curtailment and settlement effects losses — — 2,581 292 156 28 Special termination benefits — — — — 106 27 Net periodic benefit cost (credit) $ 403 $ 11,970 $ ( 8,350 ) $ 14,248 $ 5,515 $ 997 Weighted-average assumptions: Discount rate 4.40 % 3.80 % 4.40 % 2.61 % 2.35 % 2.24 % Rate of compensation increase N/A N/A N/A 3.19 % 3.18 % 3.14 % Expected return on plan assets 7.70 % 7.70 % 8.20 % 2.74 % 2.55 % 2.54 % For the majority of our U.S. defined benefit pension plans, the participants stopped accruing benefit service costs after March 31, 2006, except for one plan with a single employee. In 2019, the mark-to-market actuarial net loss on the U.S. pension plans of $ 1.2 million consisted of a charge of $ 28.3 million to remeasure the liability based on a lower discount rate compared with the prior year, partially offset by a gain of $ 23.3 million from actual returns on plan assets exceeding expected returns and a $ 3.8 million gain on demographic experience and actuarial assumptions. The mark-to-market actuarial net loss of $ 11.0 million for non-U.S. plans was primarily driven by remeasurement of the respective liabilities at lower discount rates. In 2018, the mark-to-market actuarial net loss on the U.S. pension plans of $ 16.6 million was driven by a loss of $ 31.0 million from expected returns on plan assets being lower than actual returns, partially offset by a gain of $ 17.9 million from the change in the discount rate compared with the prior year. The mark-to-market actuarial net loss of $ 2.4 million for non-U.S. plans was primarily driven by expected returns on plan assets being lower than actual returns. In 2017, the mark-to-market actuarial net gain on the U.S. pension plans of $ 5.4 million was based on $ 20.8 million of gain from actual returns on plan assets exceeding expected returns on plan assets, partially offset by a loss on remeasurement of the liability from a lower discount rate compared with the prior year. The mark-to-market actuarial net gain of $ 1.8 million for non-U.S. plans was primarily driven by remeasurement of the respective liabilities at a higher discount rate. U.S. Pension Plans Non-U.S. Pension Plans 2019 2018 2019 2018 (Dollars in thousands) Change in benefit obligation Benefit obligation at beginning of year $ 279,885 $ 303,170 $ 106,098 $ 109,450 Service cost 10 11 1,410 1,392 Interest cost 11,787 11,308 2,264 2,166 Curtailments — — ( 45 ) — Amendments — — 23 — Settlements — ( 25 ) ( 734 ) ( 517 ) Special termination benefits — — — 106 Plan participants' contributions — — 14 21 Benefits paid ( 19,978 ) ( 20,165 ) ( 5,367 ) ( 2,658 ) Net transfer in — — — 140 Actuarial loss (gain) 24,477 ( 14,414 ) 14,949 816 Exchange rate effect — — ( 1,914 ) ( 4,818 ) Benefit obligation at end of year $ 296,181 $ 279,885 $ 116,698 $ 106,098 Accumulated benefit obligation at end of year $ 296,181 $ 279,885 $ 107,332 $ 97,406 Change in plan assets: Fair value of plan assets at beginning of year $ 204,425 $ 239,260 $ 32,979 $ 36,314 Actual return on plan assets 35,871 ( 15,065 ) 4,336 ( 1,029 ) Employer contributions 2,909 420 3,277 2,523 Plan participants' contributions — — 14 21 Benefits paid ( 19,978 ) ( 20,165 ) ( 5,367 ) ( 2,658 ) Effect of settlements — ( 25 ) ( 734 ) ( 517 ) Exchange rate effect — — ( 607 ) ( 1,675 ) Fair value of plan assets at end of year $ 223,227 $ 204,425 $ 33,898 $ 32,979 Amounts recognized in the balance sheet: Other non-current assets $ — $ — $ 44 $ — Accrued expenses and other current liabilities ( 410 ) ( 404 ) ( 2,589 ) ( 2,912 ) Postretirement and pension liabilities ( 72,544 ) ( 75,056 ) ( 80,255 ) ( 70,205 ) Funded status $ ( 72,954 ) $ ( 75,460 ) $ ( 82,800 ) ( 73,117 ) U.S. Pension Plans Non-U.S. Pension Plans 2019 2018 2019 2018 (Dollars in thousands) Weighted-average assumptions as of December 31: Discount rate 3.35 % 4.40 % 1.76 % 2.61 % Rate of compensation increase N/A N/A 3.11 % 3.19 % Pension plans with benefit obligations in excess of plan assets: Benefit obligations $ 296,181 $ 279,885 $ 84,791 $ 78,791 Plan assets 223,227 204,425 1,946 5,674 Pension plans with accumulated benefit obligations in excess of plan assets: Projected benefit obligations $ 296,181 $ 279,885 $ 84,338 $ 76,097 Accumulated benefit obligations 296,181 279,885 75,073 67,619 Plan assets 223,227 204,425 1,553 3,100 Activity and balances in Accumulated other comprehensive loss related to defined benefit pension plans are summarized below: U.S. Pension Plans Non-U.S. Pension Plans 2019 2018 2019 2018 (Dollars in thousands) Prior service (cost): Balance at beginning of year $ — $ — $ ( 22 ) $ 2 Amounts recognized as net periodic benefit costs — — ( 7 ) ( 6 ) Plan amendments — — ( 14 ) — Exchange rate effects — — ( 1 ) ( 18 ) Balance at end of year $ — $ — $ ( 44 ) $ ( 22 ) Estimated amounts to be amortized in 2020 $ — $ ( 8 ) The overall investment objective for our defined benefit pension plan assets is to achieve the highest level of investment return that is compatible with prudent investment practices, asset class risk and current and future benefit obligations of the plans. Based on the potential risks and expected returns of various asset classes, the Company establishes asset allocation ranges for major asset classes. For U.S. plans, the target allocations are 35 % fixed income, 60 % equity, and 5 % other investments. For non-U.S. plans, the target allocations are 75 % fixed income, 24 % equity, and 1 % other investments. The Company invests in funds and with asset managers that track broad investment indices. The equity funds generally capture the returns of the equity markets in the U.S., Europe, and Asia Pacific and also reflect various investment styles, such as growth, value, and large or small capitalization. The fixed income funds generally capture the returns of government and investment-grade corporate fixed income securities in the U.S. and Europe and also reflect various durations of these securities. We derive our assumption for expected return on plan assets at the beginning of the year based on the weighted-average expected return for the target asset allocations of the major asset classes held by each plan. In determining the expected return, the Company considers both historical performance and an estimate of future long-term rates of return. The Company consults with, and considers the opinion of, its actuaries in developing appropriate return assumptions. The fair values of our pension plan assets at December 31, 2019, by asset category are as follows: Level 1 Level 2 Level 3 Total (Dollars in thousands) U.S. plans: Fixed income: Guaranteed deposits $ — 1,863 — 1,863 Mutual funds 73,563 — — 73,563 Commingled funds — 434 244 678 Equities: U.S. common stocks 4,198 — — 4,198 Mutual funds 128,546 — — 128,546 Commingled funds — 706 — 706 Total assets in the fair value hierarchy $ 206,307 $ 3,003 $ 244 $ 209,554 Investments measured at net asset value — — — 13,673 Investments at fair value $ 206,307 $ 3,003 $ 244 $ 223,227 Non-U.S. plans Fixed income: Cash and cash equivalents $ 10 $ — $ — $ 10 Guaranteed deposits — 748 30,155 30,903 Mutual funds 2,352 — — 2,352 Other 89 — — 89 Equities: Mutual funds 544 — — 544 Other assets — — — — Total $ 2,995 $ 748 $ 30,155 $ 33,898 The fair values of our pension plan assets at December 31, 2018, by asset category are as follows: Level 1 Level 2 Level 3 Total (Dollars in thousands) U.S. plans: Fixed income: Guaranteed deposits $ — 1,723 — 1,723 Mutual funds 74,310 — — 74,310 Commingled funds — 502 226 728 Equities: U.S. common stocks 4,439 — — 4,439 Mutual funds 109,756 — — 109,756 Commingled funds — 695 — 695 Total assets in the fair value hierarchy $ 188,505 $ 2,920 $ 226 $ 191,651 Investments measured at net asset value — — — 12,774 Investments at fair value $ 188,505 $ 2,920 $ 226 $ 204,425 Non-U.S. plans Fixed income: Cash and cash equivalents $ — $ 89 $ — $ 89 Guaranteed deposits 32 744 27,318 28,094 Mutual funds 1,070 — — 1,070 Other 1,068 2,126 — 3,194 Equities: Mutual funds 451 — — 451 Other assets 81 — — 81 Total $ 2,702 $ 2,959 $ 27,318 $ 32,979 The Company’s U.S. pension plans held 0.3 million shares of the Company’s common stock with a market value of $ 4.2 million at December 31, 2019 and 0.3 million shares with a market value of $ 4.4 million at December 31, 2018. Level 3 assets consist primarily of guaranteed deposits. The guaranteed deposits in Level 3 are in the form of contracts with insurance companies that secure the payment of benefits and are valued based on discounted cash flow models using the same discount rate used to value the related plan liabilities. The investments measured at net investment value, which is a practical expedient to estimating fair value, seek both current income and long term capital appreciation through investing in underlying funds that acquire, manage, and dispose of commercial real estate properties. A rollforward of Level 3 assets is presented below. Unrealized gains included in earnings were $ 3.9 million in 2019 and unrealized loss included in earnings were $ 1.0 million in 2018. Guaranteed Commingled deposits funds Total (Dollars in thousands) Balance at December 31, 2017 $ 30,127 $ 269 $ 30,396 Sales ( 487 ) — ( 487 ) Gains (losses) included in earnings ( 960 ) ( 43 ) ( 1,003 ) Exchange rate effect ( 1,362 ) — ( 1,362 ) Balance at December 31, 2018 $ 27,318 $ 226 $ 27,544 Sales ( 473 ) — ( 473 ) Gains (losses) included in earnings 3,885 18 3,903 Exchange rate effect ( 575 ) — ( 575 ) Balance at December 31, 2019 30,155 244 $ 30,399 We expect to contribute approximately $ 9.7 million to our U.S. pension plans and $ 3.5 million to our non-U.S. pension plans in 2020. We estimate that future pension benefit payments, will be as follows: U.S. Plans Non-U.S. Plans (Dollars in thousands) 2020 $ 20,340 $ 3,487 2021 20,580 3,275 2022 20,952 3,655 2023 20,450 4,017 2024 20,336 3,371 2025-2029 96,857 22,516 Postretirement Health Care and Life Insurance Benefit Plans 2019 2018 2017 (Dollars in thousands) Net periodic benefit cost: Interest expense $ 702 $ 732 $ 843 Service cost 2 — — Mark-to-market actuarial net loss (gain) 1,080 ( 2,580 ) 458 Total net periodic benefit cost (credit) $ 1,784 $ ( 1,848 ) $ 1,301 Weighted-average assumptions: Discount rate 4.30 % 3.70 % 4.20 % Current trend rate for health care costs 6.30 % 6.40 % 6.50 % Ultimate trend rate for health care costs 4.50 % 4.50 % 4.50 % Year that ultimate trend rate is reached 2036 2036 2036 A one-percentage-point change in the assumed health care cost trend rates would have the following effect: 1-Percentage- 1-Percentage- Point Point Increase Decrease (Dollars in thousands) Effect on total of service and interest costs components $ 38 $ ( 34 ) Effect on postretirement benefit obligation 877 ( 773 ) 2019 2018 (Dollars in thousands) Change in benefit obligation: Benefit obligation at beginning of year $ 17,198 $ 20,725 Service cost 2 — Interest cost 702 732 Benefits paid ( 1,833 ) ( 1,679 ) Actuarial loss (gain) 1,080 ( 2,580 ) Benefit obligation at end of year $ 17,149 $ 17,198 Change in plan assets: Fair value of plan assets at beginning of year $ — $ — Employer contributions 1,836 1,679 Benefits paid ( 1,836 ) ( 1,679 ) Fair value of plan assets at end of year $ — $ — Amounts recognized in the balance sheet: Accrued expenses and other current liabilities $ ( 1,945 ) $ ( 1,966 ) Postretirement and pension liabilities ( 15,204 ) ( 15,232 ) Funded status $ ( 17,149 ) $ ( 17,198 ) Weighted-average assumptions as of December 31: Discount rate 3.25 % 4.30 % Current trend rate for health care costs 6.10 % 6.30 % Ultimate trend rate for health care costs 4.50 % 4.50 % Year that ultimate trend rate is reached 2036 2036 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 provides subsidies for certain drug costs to companies that provide coverage that is actuarially equivalent to the drug coverage under Medicare Part D. We estimate that future postretirement health care and life insurance benefit payments will be as follows: Before Medicare After Medicare Subsidy Subsidy (Dollars in thousands) 2020 $ 1,945 $ 1,737 2021 1,846 1,651 2022 1,741 1,559 2023 1,635 1,466 2024 1,537 1,382 2025-2029 6,181 5,589 Other Retirement Plans We also have defined contribution retirement plans covering certain employees. Our contributions are determined by the terms of the plans and are limited to amounts that are deductible for income taxes. Generally, benefits under these plans vest over a period of five year s from date of employment. The largest plan covers salaried and most hourly employees in the U.S. In this plan, the Company contributes a percentage of eligible employee basic compensation and also a percentage of employee contributions. The expense applicable to these plans was $ 3.7 million, $ 2.9 million, and $ 5.7 million in 2019, 2018, and 2017, respectively. |