Retirement and Other Postretirement Benefit Plans | 12 Months Ended |
Dec. 31, 2013 |
Retirement and Other Postretirement Benefit Plans | ' |
Retirement and Other Postretirement Benefit Plans | ' |
Note 7 — Retirement and Other Postretirement Benefit Plans |
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We maintain qualified defined benefit retirement plans covering certain current and former European employees, as well as nonqualified defined benefit retirement plans and retirement savings plans covering certain eligible U.S. and European employees, and participate in a union sponsored multi-employer pension plan covering certain U.S. employees with union affiliations. In addition, we provide certain postretirement health care and life insurance benefits to eligible U.S. retirees. |
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Accounting standards require the use of certain assumptions, such as the expected long-term rate of return, discount rate, rate of compensation increase, healthcare cost trend rates, and retirement and mortality rates, to determine the net periodic costs of such plans. These assumptions are reviewed and set annually at the beginning of each year. In addition, these models use an “attribution approach” that generally spreads individual events, such as plan amendments and changes in actuarial assumptions, over the service lives of the employees in the plan. That is, employees render service over their service lives on a relatively smooth basis and therefore, the income statement effects of retirement and postretirement benefit plans are earned in, and should follow, the same pattern. |
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We use our actual return experience, future expectations of long-term investment returns, and our actual and targeted asset allocations to develop our expected rate of return assumption used in the net periodic cost calculations of our funded European defined benefit retirement plans. Due to the difficulty involved in predicting the market performance of certain assets, there will be a difference in any given year between our expected return on plan assets and the actual return. Following the attribution approach, each year’s difference is amortized over a number of future years. Over time, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees. |
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We annually set our discount rate assumption for retirement-related benefits accounting to reflect the rates available on high-quality, fixed-income debt instruments. The rates used reached a lowpoint as of 2012 and rebounded during 2013 and are expected to remain stable for 2014. The rate of compensation increase for nonqualified pension plans, which is another significant assumption used in the actuarial model for pension accounting, is determined by us based upon our long-term plans for such increases and assumed inflation. For the postretirement health care and life insurance benefits plan, we review external data and the plan’s historical trends for health care costs to determine the health care cost trend rates. Retirement and termination rates are based primarily on actual plan experience. The mortality table used for the U.S. plans is based on the RP2000 Mortality Table projected to 2020 and for the U.K. Plans the S1NA table with CMI 2011 projections (1.5% p.a. future improvements). |
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Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods. While we believe that the assumptions used are appropriate, significant changes in economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations. |
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U.S. Defined Benefit Retirement Plans |
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We have nonqualified defined benefit retirement plans covering certain current and former U.S. employees that are funded as benefits are incurred. Under the provisions of these plans, we expect to contribute approximately $23.8 million in 2014 to cover unfunded benefits. |
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Multi-Employer Plan |
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The Company is party to a multi-employer pension plan covering certain U.S. employees with union affiliations. The plan is the Western Metal Industry Pension Fund, (“the Plan”). The Plan’s employer identification number is 91-6033499; the Plan number is 001. In 2012, the Plan reported Hexcel Corporation as being an employer that contributed greater than 5% of the Plan’s total contributions. The expiration date of the collective bargaining agreement is September 30, 2015. The Plan has been listed in “critical status” and has been operating in accordance with a Rehabilitation Plan since 2010. The Plan, as amended under the Rehabilitation Plan, reduced the adjustable benefits of the participants and levied a surcharge on employer contributions. The Company has contributed approximately $1.0 million in 2013, 2012 and 2011. We expect the Company’s contribution to be about $1.0 million in 2014 and remain at that level over the next few years. |
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U.S. Retirement Savings Plan |
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Under the retirement savings plan, eligible U.S. employees can contribute up to 75% of their annual compensation to an individual 401(k) retirement savings account. The Company makes matching contributions equal to 50% of employee contributions, not to exceed 3% of employee compensation each year. We also contribute an additional 2% to 4% of each eligible employee’s salary to an individual 401(k) retirement savings account, depending on the employee’s age. This increases the maximum contribution to individual employee savings accounts to between 5% and 7% per year, before any profit sharing contributions that are made when we meet or exceed certain performance targets that are set annually. These profit sharing contributions are made at the Company’s discretion and are targeted at 3% of an eligible employee’s pay, with a maximum of 4.5%. |
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U.S. Postretirement Plans |
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In addition to defined benefit and retirement savings plan benefits, we also provide certain postretirement health care and life insurance benefits to eligible U.S. retirees. Depending upon the plan, benefits are available to eligible employees who retire after meeting certain age and service requirements and were employed by Hexcel as of February 1996. Our funding policy for the postretirement health care and life insurance benefit plans is generally to pay covered expenses as they are incurred. Under the provisions of these plans, we expect to contribute approximately $0.6 million in 2014 to cover unfunded benefits. |
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European Defined Benefit Retirement Plans |
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We have defined benefit retirement plans in the United Kingdom, Belgium, France and Austria covering certain employees of our subsidiaries in those countries. The defined benefit plan in the United Kingdom (the “U.K. Plan”), the largest of the European plans, was terminated in 2011 and replaced with a defined contribution plan. We recorded a curtailment gain of $5.7 million (after tax gain of $0.04 per diluted share) to recognize previously unrecognized prior service credits. As of December 31, 2013, 57% of the total assets in the U.K. Plan were invested in equities. Equity investments are made with the objective of achieving a return on plan assets consistent with the funding requirements of the plan, maximizing portfolio return and minimizing the impact of market fluctuations on the fair value of the plan assets. As a result of an annual review of historical returns and market trends, the expected long-term weighted average rate of return for the U.K. Plan for the 2014 plan year will be 6.5% and 3.25% to 4.5% for the other European Plans as a group. |
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U.K. Defined Contribution Pension Plan |
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Under the Defined Contribution Section, eligible U.K. employees can belong to the Deferred Contribution Plan on a non-participatory basis or can elect to contribute 3%, 5% or 7% of their pensionable salary. The Company will contribute 5%, 9% and 13% respectively. The plan also provides life insurance and disability insurance benefits for members. |
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Retirement and Other Postretirement Plans - France |
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The employees of our French subsidiaries are entitled to receive a lump-sum payment upon retirement subject to certain service conditions under the provisions of the national chemicals and textile workers collective bargaining agreements. The amounts attributable to the French plans have been included within the total expense and obligation amounts noted for the European plans. |
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Net Periodic Pension Expense |
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Net periodic expense for our U.S. and European qualified and nonqualified defined benefit pension plans and our retirement savings plans for the three years ended December 31, 2013 is detailed in the table below. |
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(In millions) | | 2013 | | 2012 | | 2011 | | | | | | | | | | |
Defined benefit retirement plans | | $ | 7.3 | | $ | 5.4 | | $ | (0.3 | ) | | | | | | | | | |
Union sponsored multi-employer pension plan | | 1.6 | | 1.2 | | 0.9 | | | | | | | | | | |
Retirement savings plans-matching contributions | | 3 | | 3.3 | | 2.9 | | | | | | | | | | |
Retirement savings plans-profit sharing contributions | | 6.7 | | 7.6 | | 8 | | | | | | | | | | |
Net periodic expense | | $ | 18.6 | | $ | 17.5 | | $ | 11.5 | | | | | | | | | | |
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Defined Benefit Retirement and Postretirement Plans |
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Net periodic cost of our defined benefit retirement and postretirement plans for the three years ended December 31, 2013, were: |
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(In millions) | | U.S. Plans | | European Plans | |
Defined Benefit Retirement Plans | | 2013 | | 2012 | | 2011 | | 2013 | | 2012 | | 2011 | |
Service cost | | $ | 1.7 | | $ | 1.3 | | $ | 1.5 | | $ | 0.7 | | $ | 0.5 | | $ | 1.1 | |
Interest cost | | 0.8 | | 1.1 | | 1.1 | | 6.9 | | 6.6 | | 7.2 | |
Expected return on plan assets | | — | | — | | — | | (8.0 | ) | (7.3 | ) | (7.8 | ) |
Net amortization | | 4 | | 2.3 | | 1.6 | | 1.2 | | 0.9 | | 0.7 | |
Curtailment gain | | — | | — | | — | | — | | — | | (5.7 | ) |
Net periodic pension cost (income) | | $ | 6.5 | | $ | 4.7 | | $ | 4.2 | | $ | 0.8 | | $ | 0.7 | | $ | (4.5 | ) |
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(In millions) | | 2013 | | 2012 | | 2011 | | | | | | | | | | |
U.S. Postretirement Plans | | | | | | | | | |
Interest cost | | 0.2 | | 0.3 | | 0.4 | | | | | | | | | | |
Net amortization and deferral | | (0.4 | ) | (0.5 | ) | (0.3 | ) | | | | | | | | | |
Net periodic postretirement benefit (income) cost | | $ | (0.2 | ) | $ | (0.2 | ) | $ | 0.1 | | | | | | | | | | |
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| | Defined Benefit Retirement Plans | | | | | |
| | U.S. Plans | | European Plans | | Postretirement Plans | |
(In millions) | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | |
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income | | | | | | | | | | | | | |
Net loss (gain) | | $ | 1 | | $ | 3.1 | | $ | (16.5 | ) | $ | 12.1 | | $ | (1.6 | ) | $ | 0.1 | |
Amortization of actuarial losses | | (3.9 | ) | (2.2 | ) | (1.3 | ) | (0.9 | ) | 0.4 | | 0.5 | |
Amortization of prior service credit (cost) | | (0.1 | ) | (0.1 | ) | — | | — | | — | | — | |
Effect of foreign exchange | | — | | — | | 0.2 | | 1.9 | | — | | — | |
Total recognized in other comprehensive income (pre-tax) | | $ | (3.0 | ) | $ | 0.8 | | $ | (17.6 | ) | $ | 13.1 | | $ | (1.2 | ) | $ | 0.6 | |
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The Company expects to recognize $2.4 million of net actuarial loss and an immaterial net prior service cost as a component of net periodic pension cost in 2014 for its defined benefit plans. The recognition of net prior service credit and net actuarial gain as a component of net periodic postretirement benefit cost in 2014 is expected to be immaterial. |
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The benefit obligation, fair value of plan assets, funded status, and amounts recognized in the consolidated financial statements for our defined benefit retirement plans and postretirement plans, as of and for the years ended December 31, 2013 and 2012, were: |
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| | Defined Benefit Retirement Plans | | | | | |
| | U.S. Plans | | European Plans | | Postretirement Plans | |
(In millions) | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | |
Change in benefit obligation: | | | | | | | | | | | | | |
Benefit obligation - beginning of year | | $ | 38.6 | | $ | 33.4 | | $ | 164.8 | | $ | 139.8 | | $ | 8.1 | | $ | 8 | |
Service cost | | 1.7 | | 1.3 | | 0.7 | | 0.5 | | — | | — | |
Interest cost | | 0.8 | | 1.1 | | 6.8 | | 6.6 | | 0.2 | | 0.3 | |
Plan participants’ contributions | | — | | — | | 0.1 | | 0.1 | | 0.1 | | 0.1 | |
Actuarial loss (gain) | | 1.1 | | 3.1 | | (8.3 | ) | 15.2 | | (1.6 | ) | 0.1 | |
Benefits and expenses paid | | (0.3 | ) | (0.3 | ) | (4.9 | ) | (3.7 | ) | (0.4 | ) | (0.4 | ) |
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Currency translation adjustments | | — | | — | | 3.5 | | 6.3 | | — | | — | |
Benefit obligation - end of year | | $ | 41.9 | | $ | 38.6 | | $ | 162.7 | | $ | 164.8 | | $ | 6.4 | | $ | 8.1 | |
Change in plan assets: | | | | | | | | | | | | | |
Fair value of plan assets - beginning of year | | $ | — | | $ | — | | $ | 128.3 | | $ | 110.8 | | $ | — | | $ | — | |
Actual return on plan assets | | — | | — | | 16.2 | | 10.3 | | — | | — | |
Employer contributions | | 0.3 | | 0.3 | | 5.9 | | 5.7 | | 0.3 | | 0.3 | |
Plan participants’ contributions | | — | | — | | 0.1 | | 0.1 | | 0.1 | | 0.1 | |
Benefits and expenses paid | | (0.3 | ) | (0.3 | ) | (4.9 | ) | (3.7 | ) | (0.4 | ) | (0.4 | ) |
Currency translation adjustments | | — | | — | | 3.7 | | 5.1 | | — | | — | |
Fair value of plan assets - end of year | | $ | — | | $ | — | | $ | 149.3 | | $ | 128.3 | | $ | — | | $ | — | |
Amounts recognized in Consolidated Balance Sheets: | | | | | | | | | | | | | |
Noncurrent Assets | | $ | — | | $ | — | | $ | 2.7 | | $ | — | | $ | — | | $ | — | |
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Current liabilities | | $ | 23.8 | | $ | 0.3 | | $ | 0.4 | | $ | 0.4 | | $ | 0.6 | | $ | 0.6 | |
Non-current liabilities | | 18.1 | | 38.3 | | 15.7 | | 36.1 | | 5.8 | | 7.5 | |
Total Liabilities | | $ | 41.9 | | $ | 38.6 | | $ | 16.1 | | $ | 36.5 | | $ | 6.4 | | $ | 8.1 | |
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Amounts recognized in Accumulated Other Comprehensive Income: | | | | | | | | | | | | | |
Actuarial net (loss) gain | | $ | (7.3 | ) | $ | (10.2 | ) | $ | (32.2 | ) | $ | (49.7 | ) | $ | 4.3 | | $ | 3.1 | |
Prior service cost | | (0.1 | ) | (0.2 | ) | (0.1 | ) | (0.1 | ) | — | | — | |
Total amounts recognized in accumulated other comprehensive (loss) income | | $ | (7.4 | ) | $ | (10.4 | ) | $ | (32.3 | ) | $ | (49.8 | ) | $ | 4.3 | | $ | 3.1 | |
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The measurement date used to determine the benefit obligations and plan assets of the defined benefit retirement and postretirement plans was December 31, 2013. |
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The total accumulated benefit obligation (“ABO”) for the U.S. defined benefit retirement plans was $40.9 million and $38.0 million as of December 31, 2013 and 2012, respectively. The European Plans’ ABO exceeded plan assets as of December 31, 2013 and 2012, by $11.0 million and $32.3 million, respectively. These plans’ ABO was $17.5 million and $160.6 million as of December 31, 2013 and 2012, respectively. The ABO and plan assets of the U.K. Plan are not included in the 2013 disclosures as the plan is no longer underfunded. |
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As of December 31, 2013 and 2012, the accrued benefit costs for the defined benefit retirement plans and postretirement benefit plans included within “accrued compensation and benefits” was $24.8 million and $1.3 million, respectively, and within “other non-current liabilities” was $39.6 million and $81.9 million, respectively, in the accompanying consolidated balance sheets. |
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Benefit payments for the plans are expected to be as follows: |
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(In millions) | | U.S. Plans | | European | | Postretirement | | | | | | | | | | |
Plans | Plans | | | | | | | | | |
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2014 | | $ | 23.8 | | $ | 3.8 | | $ | 0.6 | | | | | | | | | | |
2015 | | 4.5 | | 4 | | 0.7 | | | | | | | | | | |
2016 | | 2.2 | | 5 | | 0.7 | | | | | | | | | | |
2017 | | 1.1 | | 5.7 | | 0.6 | | | | | | | | | | |
2018 | | 1.4 | | 6.8 | | 0.7 | | | | | | | | | | |
2019-2023 | | 10.2 | | 37.1 | | 2.9 | | | | | | | | | | |
| | $ | 43.2 | | $ | 62.4 | | $ | 6.2 | | | | | | | | | | |
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Fair Values of Pension Assets |
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The following table presents pension assets measured at fair value at December 31, 2013 and 2012 utilizing the fair value hierarchy discussed in Note 19: |
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(In millions) | | December | | Fair Value Measurements at | | | | | | | |
31, | December 31, 2013 | | | | | | |
Description | | 2013 | | Level 1 | | Level 2 | | Level 3 | | | | | | | |
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Equity funds | | $ | 83.3 | | $ | — | | $ | 83.3 | | $ | — | | | | | | | |
Active corporate bond fund | | 58.5 | | — | | 58.5 | | — | | | | | | | |
Diversified investment funds | | 2.9 | | — | | — | | 2.9 | | | | | | | |
Insurance contracts | | 3.6 | | — | | — | | 3.6 | | | | | | | |
Cash and cash equivalents | | 1 | | — | | 1 | | — | | | | | | | |
Total assets | | $ | 149.3 | | $ | — | | $ | 142.8 | | $ | 6.5 | | | | | | | |
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| | December | | Fair Value Measurements at | | | | | | | |
31, | December 31, 2012 | | | | | | |
Description | | 2012 | | Level 1 | | Level 2 | | Level 3 | | | | | | | |
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Equity funds | | $ | 70 | | $ | — | | $ | 70 | | $ | — | | | | | | | |
Active corporate bond fund | | 52.1 | | — | | 52.1 | | — | | | | | | | |
Diversified investment funds | | 3.1 | | — | | 0.3 | | 2.8 | | | | | | | |
Insurance contracts | | 3.1 | | — | | — | | 3.1 | | | | | | | |
Total assets | | $ | 128.3 | | $ | — | | $ | 122.4 | | $ | 5.9 | | | | | | | |
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(In millions) | | Balance at | | Actual | | Purchases, | | Changes due | | Balance at | | | | |
Reconciliation of Level 3 Assets | January 1, | return on | sales and | to exchange | December 31, | | | |
| 2013 | plan assets | settlements | rates | 2013 | | | |
Diversified investment funds | | $ | 2.8 | | $ | 0.2 | | $ | (0.2 | ) | $ | 0.1 | | $ | 2.9 | | | | |
Insurance contracts | | 3.1 | | 0.1 | | 0.2 | | 0.2 | | 3.6 | | | | |
Total level 3 assets | | $ | 5.9 | | $ | 0.3 | | $ | — | | $ | 0.3 | | $ | 6.5 | | | | |
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Reconciliation of Level 3 Assets | | Balance at | | Actual | | Purchases, | | Changes due | | Balance at | | | | |
January 1, | return on | sales and | to exchange | December 31, | | | |
2012 | plan assets | settlements | rates | 2012 | | | |
Diversified investment funds | | $ | 2.5 | | $ | 0.2 | | $ | 0.1 | | $ | — | | $ | 2.8 | | | | |
Insurance contracts | | 2.6 | | 0.2 | | 0.2 | | 0.1 | | 3.1 | | | | |
Total level 3 assets | | $ | 5.1 | | $ | 0.4 | | $ | 0.3 | | $ | 0.1 | | $ | 5.9 | | | | |
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Plan assets are invested in a number of unit linked pooled funds by an independent asset management group. Equity funds are split 50/50 between U.K. and overseas equity funds (North America, Japan, Asia Pacific and Emerging Markets). The asset management firm uses quoted prices in active markets to value the assets. |
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The Bond Allocation is invested in a number of Active Corporate Bond funds which are pooled funds. The Corporate Bond funds primarily invest in corporate fixed income securities denominated in British Pounds Sterling with credit ratings of BBB- and above. We use quoted prices in active markets to value the assets. |
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Diversified investment funds are invested in an external pension fund which in turn invests in a range of asset classes including equities and government and corporate bonds, hedge funds and private equity. The fair value of the assets as of December 31, 2013 is equal to the fair value of the assets as of January 1, 2013, as provided by the external pension fund, adjusted for cash flows over the year and the estimated investment return on underlying assets over the year. |
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Insurance contracts contain a minimum guaranteed return. The fair value of the assets is equal to the total amount of all individual technical reserves plus the non-allocated employer’s financing fund reserves at the valuation date. The individual technical and financing fund reserves are equal to the accumulated paid contributions taking into account the insurance tarification and any allocated profit sharing return. |
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The actual allocations for the pension assets at December 31, 2013 and 2012, and target allocations by asset class, are as follows: |
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| | Percentage | | Target | | Percentage | | Target | | | | | | | | | | | |
Of Plan Assets | Allocations | Of Plan Assets | Allocations | | | | | | | | | | |
Asset Class | | 2013 | | 2013 | | 2012 | | 2012 | | | | | | | | | | | |
U.K. Equity Fund | | 28.1 | % | 30.6 | % | 28 | % | 28.6 | % | | | | | | | | | | |
Overseas Equity Fund | | 27.7 | | 30.6 | | 26.6 | | 28.6 | | | | | | | | | | | |
Active Corporate Bond Funds | | 39.2 | | 34.5 | | 40.6 | | 38.2 | | | | | | | | | | | |
Insurance Contracts | | 2.4 | | 2.4 | | 2.4 | | 2.4 | | | | | | | | | | | |
Diversified Investment Funds | | 1.9 | | 1.9 | | 2.4 | | 2.2 | | | | | | | | | | | |
Cash and cash equivalents | | 0.7 | | — | | — | | — | | | | | | | | | | | |
Total | | 100 | % | 100 | % | 100 | % | 100 | % | | | | | | | | | | |
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Assumptions |
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The assumed discount rate for pension plans reflects the market rates for high-quality fixed income debt instruments currently available. The Buck Standard Yield Curve was used for the U.S. non-qualified and postretirement plans. For the U.K. plan, plan cash flows were not available and therefore we considered the derived yield to market on a representative bond of suitable duration taken from Buck’s synthetic bond yield curve. We believe that the timing and amount of cash flows related to these instruments is expected to match the estimated defined benefit payment streams of our plans. The assumed discount rate for the U.S. non-qualified plans has changed to use individual discount rates for each plan based on their associated cash flows. |
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Salary increase assumptions are based on historical experience and anticipated future management actions. For the postretirement health care and life insurance benefit plans, we review external data and our historical trends for health care costs to determine the health care cost trend rates. Retirement rates are based primarily on actual plan experience and on rates from previously mentioned mortality tables. Actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, generally affect the net periodic costs and recorded obligations in such future periods. While we believe that the assumptions used are appropriate, significant changes in economic or other conditions, employee demographics, retirement and mortality rates, and investment performance may materially impact such costs and obligations. |
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Assumptions used to estimate the actuarial present value of benefit obligations at December 31, 2013, 2012 and 2011 are shown in the following table. These year-end values are the basis for determining net periodic costs for the following year. |
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| | 2013 | | 2012 | | 2011 | | | | | | | | | | | | | |
U.S. defined benefit retirement plans: | | | | | | | | | | | | | | | | | | | |
Discount rates | | 0.1% - 4.0% | | 2.00% | | 3.20% | | | | | | | | | | | | | |
Rate of increase in compensation | | 3.00% | | 3.0%-5.8% | | 3.00% | | | | | | | | | | | | | |
Expected long-term rate of return on plan assets | | N/A | | N/A | | N/A | | | | | | | | | | | | | |
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European defined benefit retirement plans: | | | | | | | | | | | | | | | | | | | |
Discount rates | | 3.0% - 4.6% | | 3.25% - 4.5% | | 4.5% - 4.75% | | | | | | | | | | | | | |
Rates of increase in compensation | | 3.00% | | 3.00% | | 3.00% | | | | | | | | | | | | | |
Expected long-term rates of return on plan assets | | 4.0% — 6.5% | | 4.0% — 6.5% | | 4.25% — 6.5% | | | | | | | | | | | | | |
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Postretirement benefit plans: | | | | | | | | | | | | | | | | | | | |
Discount rates | | 3.80% | | 2.75% | | 3.85% | | | | | | | | | | | | | |
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The following table presents the impact that a one-percentage-point increase and a one-percentage-point decrease in the expected long-term rate of return and discount rate would have on the 2014 pension expense, and the impact on our retirement obligation as of December 31, 2013 for a one-percentage-point change in the discount rate: |
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| | Non-Qualified | | Retiree | | U.K. | | | | | | | | | | |
Medical | Retirement | | | | | | | | | |
(In millions) | | Pension Plans | | Plans | | Plan | | | | | | | | | | |
Periodic pension expense | | | | | | | | | | | | | | | | |
One-percentage-point increase: | | | | | | | | | | | | | | | | |
Expected long-term rate of return | | $ | N/A | | $ | N/A | | $ | (1.4 | ) | | | | | | | | | |
Discount rate | | $ | (0.1 | ) | $ | — | | $ | (0.2 | ) | | | | | | | | | |
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One-percentage-point decrease: | | | | | | | | | | | | | | | | |
Expected long-term rate of return | | $ | N/A | | $ | N/A | | $ | 1.4 | | | | | | | | | | |
Discount rate | | $ | 0.3 | | $ | — | | $ | 0.4 | | | | | | | | | | |
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Retirement obligation | | | | | | | | | | | | | | | | |
One-percentage-point increase in discount rate | | $ | (1.1 | ) | $ | (0.4 | ) | $ | (21.2 | ) | | | | | | | | | |
One-percentage-point decrease in discount rate | | $ | 1.2 | | $ | 0.4 | | $ | 26.8 | | | | | | | | | | |
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The annual rate of increase in the per capita cost of covered health care benefits is assumed to be 8.0% for medical non-Medicare eligible, 6.0% for Medicare eligible and 5.0% for dental and vision for 2014. The medical rates are assumed to gradually decline to 4.5% by 2021, whereas dental and vision rates are assumed to remain constant at 5.0%. A one-percentage-point increase and a one-percentage-point decrease in the assumed health care cost trend would have an insignificant impact on the total of service and interest cost components, and would have an unfavorable and a favorable impact of approximately $0.2 million and $0.2 million on the postretirement benefit obligation for both 2013 and 2012, respectively. |