Retirement Plans

12 Months Ended

Dec. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Retirement Plans

19. Retirement Plans

DEFINED CONTRIBUTION PLANS

Many of the Company’s employees are covered by government sponsored pension and welfare programs. Under the terms of these programs, the Company makes periodic payments to various government agencies. In addition, in some countries the Company sponsors or participates in certain non-governmental defined contribution plans. Contributions to defined contribution plans for the years ended December 31, 2020, 2019 and 2018 were $14.7 million, $15.7 million and $19.2 million, respectively.

MULTIEMPLOYER PLANS

The Company participates in a multiemployer plan in Sweden. This ITP-2 plan is funded through Alecta and covers employees born before 1979, for whom it provides a final pay pension benefit based on all service with participating employers. The Company must pay for wage increases in excess of inflation on service earned with previous employers. The plan also provides disability and family benefits and is more than 100% funded. The Company´s contributions to this multiemployer plan for the years ended December 31, 2020, 2019 and 2018 were $4.0 million, $3.9 million and $6.1 million, respectively.

DEFINED BENEFIT PLANS

The Company has a number of defined benefit pension plans, both contributory and non-contributory, in the U.S., France, Germany, India, Japan, Mexico, Philippines, Sweden, South Korea, Thailand, Turkey and the United Kingdom. There are funded as well as unfunded plan arrangements which provide retirement benefits to both U.S. and non-U.S. participants.

The main plan is the U.S. plan for which the benefits are based on an average of the employee’s earnings in the years preceding retirement and on credited service. In a prior year, the Company closed participation in the Autoliv ASP, Inc. Pension Plan to exclude those employees hired after December 31, 2003. Within the U.S. there is also a non-qualified restoration plan that provides benefits to employees whose benefits in the primary U.S. plan are restricted by limitations on the compensation that can be considered in calculating their benefits. During December 2017 the Company amended the U.S. defined benefit pension plan, communicating a benefits freeze that will begin on December 31, 2021.

For the Company’s non-U.S. defined benefit plans the most significant individual plan is in the U.K. The Company has closed participation in the U.K. defined benefit plan to exclude all employees hired after April 30, 2003 with few members currently accruing benefits.

CHANGES IN BENEFIT OBLIGATIONS AND PLAN ASSETS FOR THE PERIODS ENDED DECEMBER 31

	U.S.						Non-U.S.
	2020			2019			2020			2019
Benefit obligation at beginning of year	$	400.1		$	332.1		$	252.6		$	216.9
Service cost		7.5			6.9			12.2			10.7
Interest cost		12.2			14.2			5.8			6.4
Actuarial (gain) loss due to:
Change in discount rate		46.4			67.8			12.9			27.7
Experience		(5.0	)		3.0			0.1			(1.2	)
Other assumption changes		3.2			(0.4	)		(11.2	)		(1.0	)
Benefits paid		(3.8	)		(23.5	)		(9.0	)		(8.4	)
Plan settlements		(34.4	)		—			(0.4	)		(1.2	)
Special termination benefits		—			—			0.0			0.5
Other		—			—			1.5			1.6
Translation difference		—			—			14.9			0.6
Benefit obligation at end of year	$	426.2		$	400.1		$	279.4		$	252.6
Fair value of plan assets at beginning of year	$	323.8		$	273.0		$	88.7		$	77.8
Actual return on plan assets		52.5			67.0			8.8			8.9
Company contributions		16.5			7.3			9.7			9.5
Benefits paid		(3.8	)		(23.5	)		(9.0	)		(8.4	)
Plan settlements		(34.4	)		—			(0.4	)		(1.2	)
Translation difference		—			—			5.0			2.1
Fair value of plan assets at end of year	$	354.6		$	323.8		$	102.8		$	88.7
Funded status recognized in the balance sheet	$	(71.6	)	$	(76.3	)	$	(176.6	)	$	(163.9	)

The U.S. plan provides that benefits may be paid in the form of a lump sum if so elected by the participant. In order to more accurately reflect a market-derived pension obligation, Autoliv adjusts the assumed lump sum interest rate to reflect market conditions as of each December 31. This methodology is consistent with the approach required under the Pension Protection Act of 2006, which provides the rules for determining minimum funding requirements in the U.S.

COMPONENTS OF NET PERIODIC BENEFIT COST ASSOCIATED WITH THE DEFINED BENEFIT RETIREMENT PLANS

	U.S.
(Dollars in millions)	2020			2019			2018
Service cost	$	7.5		$	6.9		$	8.7
Interest cost		12.2			14.2			12.8
Expected return on plan assets		(16.3	)		(13.5	)		(20.4	)
Amortization of prior service credit		0.0			0.0			0.1
Amortization of actuarial loss		2.8			1.9			2.2
Settlement loss		7.2			—			—
Net periodic benefit cost	$	13.4		$	9.5		$	3.4

	Non-U.S.
(Dollars in millions)	2020			2019			2018
Service cost	$	12.2		$	10.7		$	10.8
Interest cost		5.8			6.4			5.7
Expected return on plan assets		(1.7	)		(1.9	)		(2.0	)
Amortization of prior service costs		0.4			0.3			0.3
Amortization of actuarial loss		2.3			0.9			1.4
Settlement loss		0.1			0.6			0.2
Special termination benefits		0.0			0.5			0.5
Net periodic benefit cost	$	19.1		$	17.5		$	16.9

The service cost and amortization of prior service cost components are reported among other employee compensation costs in the Consolidated Statements of Income. The remaining components, interest cost, expected returns on plan assets and amortization of actuarial loss, are reported as Other non-operating items, net in the Consolidated Statements of Income.

Amortization of the net actuarial loss from accumulated other comprehensive income is made over the estimated remaining service lives of the plan participants, 9 years for U.S. and from 4 to 31 years for non-U.S. participants, varying between the different countries depending on the age of the work force.

COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME BEFORE TAX AS OF DECEMBER 31

	U.S.				Non-U.S.
(Dollars in millions)	2020		2019		2020		2019
Net actuarial loss	$	61.5	$	63.1	$	41.9	$	47.6
Prior service cost		0.0		0.1		3.5		3.7
Total accumulated other comprehensive income    recognized in the balance sheet	$	61.5	$	63.2	$	45.4	$	51.3

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BEFORE TAX FOR THE PERIODS ENDED DECEMBER 31

	U.S.						Non-U.S.
(Dollars in millions)	2020			2019			2020			2019
Total retirement benefit recognized in accumulated    other comprehensive income at beginning of year	$	63.2		$	48.1		$	51.3		$	33.9
Net actuarial (gain) loss		8.3			16.9			(5.2	)		19.1
Amortization of prior service credit (cost)		0.0			0.0			(0.4	)		(0.3	)
Amortization of actuarial loss		(10.0	)		(1.8	)		(2.3	)		(1.5	)
Translation difference		—			—			2.0			0.1
Total retirement benefit recognized in accumulated    other comprehensive income at end of year	$	61.5		$	63.2		$	45.4		$	51.3

The accumulated benefit obligation for the U.S. non-contributory defined benefit pension plans was $419.1 million and $384.4 million at December 31, 2020 and 2019, respectively. The accumulated benefit obligation for the non-U.S. defined benefit pension plans was $236.9 million and $194.5 million at December 31, 2020 and 2019, respectively.

Pension plans for which the accumulated benefit obligation (ABO) is notably in excess of the plan assets reside in the following countries: U.S., Mexico, France, Germany, Japan, South Korea and Sweden.

PENSION PLANS FOR WHICH ABO EXCEEDS THE FAIR VALUE OF PLAN ASSETS AS OF DECEMBER 31

	U.S.				Non-U.S.
(Dollars in millions)	2020		2019		2020		2019
Projected Benefit Obligation (PBO)	$	426.2	$	400.1	$	179.2	$	169.3
Accumulated Benefit Obligation (ABO)		419.1		384.3		142.7		127.2
Fair value of plan assets		354.6		323.8		4.0		3.8

The Company, in consultation with its actuarial advisors, determines certain key assumptions to be used in calculating the projected benefit obligation and annual net periodic benefit cost.

ASSUMPTIONS USED TO DETERMINE THE BENEFIT OBLIGATIONS AS OF DECEMBER 31

	U.S.				Non-U.S.1)
% WEIGHTED AVERAGE	2020		2019		2020	2019
Discount rate		2.35		3.25	0.25-2.70	0.25-2.70
Rate of increases in compensation level		2.65		2.65	1.80-4.00	2.00-5.00

ASSUMPTIONS USED TO DETERMINE THE NET PERIODIC BENEFIT COST FOR YEARS ENDED DECEMBER 31

	U.S.
% WEIGHTED AVERAGE	2020		2019		2018
Discount rate		3.25		4.35		3.55
Rate of increases in compensation level		2.65		2.65		2.65
Expected long-term rate of return on assets		5.05		5.05		7.08

	Non-U.S.1)
% WEIGHTED AVERAGE	2020	2019	2018
Discount rate	0.25-2.70	0.50-3.25	0.25-3.25
Rate of increases in compensation level	2.00-5.00	2.00-5.00	2.00-5.00
Expected long-term rate of return on assets	1.50-2.25	2.25-2.50	2.25-2.50

1) The Non-U.S. weighted average plan ranges in the tables above have been prepared using significant plans only, which in total represent around 83% of the total Non-U.S. projected benefit obligation.

The discount rate for the U.S. plans has been set based on the rates of return on high-quality fixed-income investments currently available at the measurement date and expected to be available during the period the benefits will be paid. The expected timing of cash flows from the plan has also been considered in selecting the discount rate. In particular, the yields on bonds rated AA or better on the measurement date have been used to set the discount rate. The discount rate for the U.K. plan has been set based on the weighted average yields on long-term high-grade corporate bonds and is determined by reference to financial markets on the measurement date.

The expected rate of increase in compensation levels and long-term rate of return on plan assets are determined based on a number of factors and must take into account long-term expectations and reflect the financial environment in the respective local market. The expected return on assets for the U.S. and U.K. plans are based on the fair value of the assets as of December 31.

The level of equity exposure is currently targeted at approximately 40% for the primary U.S. plan. The investment objective is to provide an attractive risk-adjusted return that will ensure the payment of benefits while protecting against the risk of substantial investment losses. Correlations among the asset classes are used to identify an asset mix that Autoliv believes will provide the most attractive returns. Long-term return forecasts for each asset class using historical data and other qualitative considerations to adjust for projected economic forecasts are used to set the expected rate of return for the entire portfolio. The Company has assumed a long-term rate of return on the U.S. plan assets of 5.05% for calculating the 2020 expense and 5.05% for calculating the 2021 expense.

The Company has assumed a long-term rate of return on the non-U.S. plan assets in a range of 1.50-2.25% for 2020. The closed U.K. plan which has a targeted and actual allocation of almost 100% debt instruments accounts for approximately 80% of the total non-U.S. plan assets.

Autoliv made contributions to the U.S. plan during 2020 and 2019 amounting to $16.5 million and $7.3 million, respectively. Contributions to the U.K. plan during 2020 and 2019 amounted to $1.9 million and $1.2 million, respectively. The Company expects to contribute $12.6 million to its U.S. pension plan in 2021 and is currently projecting a yearly funding at approximately the same level in the years thereafter. For the UK pension plan, which is the most significant non-U.S. pension plan, the Company expects to contribute $2.0 million in 2021 and in the years thereafter.

FAIR VALUE OF TOTAL PLAN ASSETS FOR YEARS ENDED DECEMBER 31

	U.S.		U.S.				Non-U.S.
ASSETS CATEGORY IN % WEIGHTED AVERAGE	Target allocation		2020		2019		2020		2019
Equity securities		40		42		40		0		0
Debt instruments		60		57		60		77		79
Other assets		—		1		0		23		21
Total		100		100		100		100		100

The following table summarizes the fair value of the Company’s U.S. and non-U.S. defined benefit pension plan assets (dollars in millions):

(Dollars in millions)	Fair value measurement at December 31, 2020		Fair value measurement at December 31, 2019
Assets
Non-U.S. Bonds
Corporate	$	79.6	$	70.4
Insurance Contracts		17.5		14.7
Other Investments		9.6		6.2
Assets at fair value Level 2		106.7		91.3
Investments measured at net asset value (NAV):
Common collective trusts		350.7		321.2
Total	$	457.4	$	412.5

The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. Plan assets not measured using the NAV are classified as Level 2 in the table above. Plan assets measured using the NAV mainly relate to the U.S. defined benefit pension plans and are separately disclosed as Common collective trusts below the Level 2 assets in the table above.

The estimated future benefit payments for the pension benefits reflect expected future service, as appropriate. The amount of benefit payments in a given year may vary from the projected amount, especially for the U.S. plan since historically this plan pays the majority of benefits as a lump sum, where the lump sum amounts vary with market interest rates.

PENSION BENEFITS EXPECTED PAYMENTS (dollars in millions)	U.S.		Non-U.S.
2021		21		9
2022		22		11
2023		23		11
2024		29		12
2025		26		13
Years 2026-2030		131		76

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company currently provides postretirement health care and life insurance benefits to most of its U.S. retirees.

In general, the terms of the plans provide that U.S. employees who retire after attaining age 55, with 15 years of service (5 years before December 31, 2006), are reimbursed for qualified medical expenses up to a maximum annual amount. Spouses for certain retirees are also eligible for reimbursement under the plan. Life insurance coverage is available for those who elect coverage under the retiree health plan. During 2014, the plan was amended to move from a self-insured model where employees were charged an estimated premium based on anticipated plan expenses for continued coverage, to a plan where retirees are provided a fixed contribution to a Health Retirement Account (HRA). Retirees can use the HRA funds to purchase insurance through a private exchange. Employees hired on or after January 1, 2004 are not eligible to participate in the plan.

CHANGES IN BENEFIT OBLIGATION FOR POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS AS OF DECEMBER 31

(Dollars in millions)	2020			2019
Benefit obligation at beginning of year	$	18.4		$	15.5
Service cost		0.2			0.2
Interest cost		0.6			0.6
Actuarial loss (gain)		2.1			2.2
Benefits paid		(0.4	)		(0.3	)
Other		0.3			0.2
Benefit obligation at end of year	$	21.2		$	18.4

The liability for postretirement benefits other than pensions is classified as other non-current liabilities in the balance sheet.

COMPONENTS OF NET PERIODIC BENEFIT COST ASSOCIATED WITH THE POST RETIREMENT BENEFIT PLANS OTHER THAN PENSIONS

PERIOD ENDED DECEMBER 31 (Dollars in millions)	2020			2019			2018
Service cost	$	0.2		$	0.2		$	0.3
Interest cost		0.6			0.6			0.6
Amortization of prior service cost		(2.1	)		(2.2	)		(2.2	)
Amortization of actuarial loss		(0.0	)		(0.3	)		(0.3	)
Net periodic benefit (credit)	$	(1.3	)	$	(1.7	)	$	(1.6	)

COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME BEFORE TAX ASSOCIATED WITH POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS AS OF DECEMBER 31

	U.S.
(Dollars in millions)	2020			2019
Net actuarial loss (gain)	$	(0.1	)	$	2.0
Prior service cost (credit)		4.0			6.1
Total accumulated other comprehensive loss (income)    recognized in the balance sheet	$	3.9		$	8.1

The average discount rate used to determine the U.S. postretirement benefit obligation was 2.6% in 2020 and 3.5% in 2019. The average discount rate used in determining the postretirement benefit cost was 3.5% in 2020, 4.45% in 2019 and 3.75% in 2018.

The estimated future benefit payments for the postretirement benefits set forth below reflect expected future service as appropriate (dollars in millions).

POSTRETIREMENT BENEFITS (Dollars in millions)	EXPECTED PAYMENTS
2021		0.5
2022		0.6
2023		0.6
2024		0.7
2025		0.7
Years 2026–2030		3.9