Pensions and Other Post-retirement Benefits | Pensions and Other Post-retirement Benefits We maintain various defined benefit and defined contribution plans covering the majority of our employees. Our principal U.S. plan is funded in compliance with the Employee Retirement Income Security Act (ERISA). It is our general policy to fund current costs for the international plans, except in Germany and Mexico, where it is common practice and permissible under tax laws to accrue book reserves. We provide health care benefits and limited life insurance for certain retired employees who are covered by our principal U.S. defined benefit pension plan until they become Medicare-eligible. Information pertaining to defined benefit pension plans and other post-retirement benefits plans is provided in the following table: Pension Benefits Other Benefits (In thousands) 2016 2015 2016 2015 Change in Benefit Obligations Benefit obligations at January 1 $ 491,180 $ 519,194 $ 22,974 $ 26,851 Service cost 10,417 11,517 426 444 Interest cost 18,752 18,314 946 863 Participant contributions 100 105 222 255 Plan amendments (1,092 ) 604 (400 ) — Actuarial (gains) losses 9,123 (21,073 ) 1,285 (3,998 ) Benefits paid (19,550 ) (19,261 ) (1,773 ) (1,441 ) Curtailments (163 ) — — — Settlements (381 ) (2,094 ) — — Currency translation (4,389 ) (16,126 ) — — Benefit obligations at December 31 503,997 491,180 23,680 22,974 Change in Plan Assets Fair value of plan assets at January 1 419,088 445,299 — — Actual return on plan assets 31,418 (4,754 ) — — Employer contributions 3,878 4,058 1,551 1,186 Participant contributions 100 105 222 255 Settlements (381 ) (2,094 ) — — Benefits paid (19,550 ) (16,979 ) (1,773 ) (1,441 ) Reimbursement of German benefits — (2,282 ) — — Administrative Expenses Paid — 6 — — Currency translation (1,291 ) (4,271 ) — — Fair value of plan assets at December 31 433,262 419,088 — — Funded Status Funded status at December 31 (70,735 ) (72,092 ) (23,680 ) (22,974 ) Unrecognized transition losses 8 12 — — Unrecognized prior service (credit) cost (646 ) 525 (1,505 ) (1,524 ) Unrecognized net actuarial losses 187,738 188,531 3,643 2,117 Net amount recognized 116,365 116,976 (21,542 ) (22,381 ) Amounts Recognized in the Balance Sheet Noncurrent assets 62,916 62,072 — — Current liabilities (4,620 ) (5,033 ) (1,638 ) (1,382 ) Noncurrent liabilities (129,031 ) (129,131 ) (22,042 ) (21,592 ) Net amount recognized (70,735 ) (72,092 ) (23,680 ) (22,974 ) Amounts Recognized in Accumulated Other Comprehensive Loss Net actuarial losses 187,738 188,531 3,643 2,425 Prior service (credit) cost (646 ) 525 (1,505 ) (1,523 ) Unrecognized net initial obligation 8 12 — — Total (before tax effects) 187,100 189,068 2,138 902 Accumulated Benefit Obligations for all Defined Benefit Plans 465,448 453,382 — — Pension Benefits Other Benefits (In thousands) 2016 2015 2014 2016 2015 2014 Components of Net Periodic Benefit Cost Service cost $ 10,417 $ 11,517 $ 9,425 $ 426 $ 444 $ 538 Interest cost 18,752 18,314 19,340 946 863 1,107 Expected return on plan assets (34,751 ) (34,130 ) (32,944 ) — — — Amortization of transition amounts 2 2 2 — — — Amortization of prior service (credit) cost (14 ) 66 84 (419 ) (335 ) (335 ) Recognized net actuarial losses 11,921 15,545 8,639 68 27 182 Settlement loss 5 641 290 — — — Termination benefits — — — — — — Net periodic benefit cost $ 6,332 $ 11,955 $ 4,836 $ 1,021 $ 999 $ 1,492 Actuarial gains and losses are amortized over the average future working lifetime of the active population in the plan using the projected unit credit method. This approximates 11 years . Amounts included in accumulated other comprehensive income expected to be recognized in 2017 net periodic benefit costs. (In thousands) Pension Benefits Other Benefits Loss recognition $ 12,255 $ 103 Prior service credit recognition (15 ) (288 ) Transition obligation recognition 1 — Information for pension plans with an accumulated benefit obligation in excess of plan assets. (In thousands) 2016 2015 Aggregate accumulated benefit obligations (ABO) $ 147,531 $ 147,864 Aggregate projected benefit obligations (PBO) 160,543 161,009 Aggregate fair value of plan assets 26,986 26,844 Pension Benefits Other Benefits 2016 2015 2016 2015 Assumptions used to determine benefit obligations Average discount rate 3.67 % 3.92 % 4.05 % 4.20 % Rate of compensation increase 2.99 % 3.06 % — — Assumptions used to determine net periodic benefit cost Average discount rate 3.92 % 3.63 % 4.20 % 3.85 % Expected return on plan assets 8.18 % 8.17 % — — Rate of compensation increase 3.06 % 3.03 % — — Discount rates were determined using various corporate bond indexes as indicators of interest rate levels and movements and by matching our projected benefit obligation payment stream to current yields on high quality bonds. The expected return on assets for the 2016 net periodic pension cost was determined by multiplying the expected returns of each asset class (based on historical returns) by the expected percentage of the total portfolio invested in that asset class. A total return was determined by summing the expected returns over all asset classes. Pension Plan Assets at December 31, 2016 2015 Equity securities 70 % 67 % Fixed income securities 20 24 Pooled investment funds 5 5 Insurance contracts 4 3 Cash and cash equivalents 1 1 Total 100 % 100 % The overall objective of our pension investment strategy is to earn a rate of return over time to satisfy the benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and meet other cash requirements of our pension funds. Investment policies for our primary U.S. pension plan are determined by the plan’s Investment Committee and set forth in the plan’s investment policy. Asset managers are granted discretion for determining sector mix, selecting securities and timing transactions, subject to the guidelines of the investment policy. An aggressive, flexible management of the portfolio is permitted and encouraged, with shifts of emphasis among equities, fixed income securities and cash equivalents at the discretion of each manager. No target asset allocations are set forth in the investment policy. For our non-U.S. pension plans, our investment objective is generally met through the use of pooled investment funds and insurance contracts. The following table summarizes our pension plan assets measured at fair value on a recurring basis by fair value hierarchy level (See Note 18): December 31, 2016 (In thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Equity securities $ 242,161 $ 62,299 $ — $ 304,460 Fixed income securities 25,109 62,667 — 87,776 Pooled investment funds — 20,156 — 20,156 Insurance contracts — — 14,948 14,948 Cash and cash equivalents 5,922 — — 5,922 Total $ 273,192 $ 145,122 $ 14,948 $ 433,262 December 31, 2015 (In thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Equity securities $ 225,191 $ 55,428 $ — $ 280,619 Fixed income securities 29,903 70,164 — 100,067 Pooled investment funds — 19,345 — 19,345 Insurance contracts — — 13,681 13,681 Cash and cash equivalents 5,376 — — 5,376 Total $ 260,470 $ 144,937 $ 13,681 $ 419,088 Equity securities consist primarily of publicly traded U.S. and non-U.S. common stocks. Equities are valued at closing prices reported on the listing stock exchange. Fixed income securities consist primarily of U.S. government and agency bonds and U.S. corporate bonds. Fixed income securities are valued at closing prices reported in active markets or based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the bond is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, and may include adjustments, for certain risks that may not be observable, such as credit and liquidity risks. Pooled investment funds consist of mutual and collective investment funds that invest primarily in publicly traded non-U.S. equity and fixed income securities. Pooled investment funds are valued at net asset values calculated by the fund manager based on fair value of the underlying securities. The underlying securities are generally valued at closing prices reported in active markets, quoted prices of similar securities, or discounted cash flows approach that maximizes observable inputs such as current value measurement at the reporting date. Insurance contracts are valued in accordance with the terms of the applicable collective pension contract. The fair value of the plan assets equals the discounted value of the expected cash flows of the accrued pensions which are guaranteed by the counterparty insurer. Cash equivalents consist primarily of money market and similar temporary investment funds. Cash equivalents are valued at closing prices reported in active markets. The preceding methods may produce fair value measurements that are not indicative of net realizable value or reflective of future fair values. Although we believe the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table presents a reconciliation of Level 3 assets: (In thousands) Insurance Contracts Other Balance January 1, 2015 $ 15,069 $ 753 Net realized and unrealized losses included in earnings (1,526 ) (64 ) Net purchases, issuances and settlements 138 (184 ) Transfers out of Level 3 — (505 ) Balance December 31, 2015 13,681 — Net realized and unrealized gains included in earnings 975 — Net purchases, issuances and settlements 292 — Transfers out of Level 3 — — Balance December 31, 2016 $ 14,948 $ — We expect to make net contributions of $5.9 million to our pension plans in 2017 which are primarily associated with our International segment. For the 2016 beginning of the year measurement purposes (net periodic benefit expense), 6.5% increase in the costs of covered health care benefits was assumed decreasing by 0.5% for each successive year to 4.5% in 2020 and thereafter. For the 2016 end of the year measurement purposes (benefit obligation), 6.0% increase in the costs of covered health care benefits was assumed decreasing by 0.5% for each successive year to 4.5% in 2021 and thereafter. A one -percentage-point change in assumed health care cost trend rates would have increased or decreased the other post-retirement benefit obligations and current year plan expense by approximately $810 thousand and $55 thousand , respectively. Expense for defined contribution pension plans was $5.1 million in 2016 , $6.8 million in 2015 and $6.5 million in 2014 . Estimated pension benefits to be paid under our defined benefit pension plans during the next five years are $20.9 million in 2017, $21.6 million in 2018, $22.2 million in 2019, $23.7 million in 2020, $24.6 million in 2021, and are expected to aggregate $138.5 million for the five years thereafter. Estimated other post-retirement benefits to be paid during the next five years are $1.7 million in 2017, $1.7 million in 2018, $1.9 million in 2019, $1.8 million in 2020, $1.9 million in 2021, and are expected to aggregate $8.1 million for the five years thereafter. |