Pension and Other Post-Retirement Benefits

The Company maintains several qualified and non-qualified pension and other post-retirement benefit plans. The Company's significant pension, post-retirement health care benefit and defined contribution plans are discussed below. The Company's other pension and post-retirement benefit plans are not significant individually or in the aggregate.

Qualified Plans

HNH sponsors a defined benefit pension plan, the WHX Pension Plan, covering many of H&H's employees and certain employees of H&H's former subsidiary, Wheeling-Pittsburgh Corporation ("WPC"). The WHX Pension Plan was established in May 1998 as a result of the merger of the former H&H plans, which covered substantially all H&H employees, and the WPC plan. The WPC plan, covering most United Steel Workers of America-represented employees of WPC, was created pursuant to a collective bargaining agreement ratified on August 12, 1997. Prior to that date, benefits were provided through a defined contribution plan, the Wheeling-Pittsburgh Steel Corporation Retirement Security Plan ("RSP Plan"). The assets of the RSP Plan were merged into the WPC plan as of December 1, 1997. Under the terms of the WHX Pension Plan, the benefit formula and provisions for the WPC and H&H participants continued as they were designed under each of the respective plans prior to the merger.

The qualified pension benefits under the WHX Pension Plan were frozen as of December 31, 2005 and April 30, 2006 for hourly and salaried non-bargaining participants, respectively, with the exception of a single operating unit. In 2011, the benefits were frozen for the remainder of the participants. WPC employees ceased to be active participants in the WHX Pension Plan effective July 31, 2003, and as a result, such employees no longer accrue benefits under the WHX Pension Plan.

JPS sponsors a defined benefit pension plan ("JPS Pension Plan"), which was assumed in connection with the JPS acquisition. Under the JPS Pension Plan, substantially all JPS employees who were employed prior to April 1, 2005 have benefits. The JPS Pension Plan was frozen effective December 31, 2005. Employees no longer earned additional benefits after that date. Benefits earned prior to December 31, 2005 will be paid out to eligible participants following retirement. The JPS Pension Plan was "unfrozen" for employees who were active employees on or after June 1, 2012. This new benefit, calculated based on years of service and a capped average salary, will be added to the amount of any pre-2005 benefit. The JPS Pension Plan was again frozen for all future accruals effective December 31, 2015, although unvested participants may still vest in accrued but unvested benefits.

Bairnco had several pension plans, which covered substantially all its employees. In 2006, Bairnco froze the Bairnco Corporation Retirement Plan and initiated employer contributions to its 401(k) plan. On June 2, 2008, two Bairnco plans (Salaried and Kasco) were merged into the WHX Pension Plan.

Some of the Company's foreign subsidiaries provide retirement benefits for their employees through defined contribution plans or otherwise provide retirement benefits for employees consistent with local practices. The foreign plans are not significant in the aggregate and, therefore, are not included in the following disclosures.

Pension benefits under the WHX Pension Plan are based on years of service and the amount of compensation earned during the participants' employment. However, as noted above, the qualified pension benefits have been frozen for all participants.

Pension benefits for the WPC bargained participants include both defined benefit and defined contribution features, since the plan includes the account balances from the RSP Plan. The gross benefit, before offsets, is calculated based on years of service and the benefit multiplier under the plan. The net defined benefit pension plan benefit is the gross amount offset for the benefits payable from the RSP Plan and benefits payable by the Pension Benefit Guaranty Corporation from previously terminated plans. Individual employee accounts established under the RSP Plan are maintained until retirement. Upon retirement, participants who are eligible for the WHX Pension Plan and maintain RSP Plan account balances will normally receive benefits from the WHX Pension Plan. When these participants become eligible for benefits under the WHX Pension Plan, their vested balances in the RSP Plan become assets of the WHX Pension Plan. Although these RSP Plan assets cannot be used to fund any of the net benefit that is the basis for determining the defined benefit plan's net benefit obligation at the end of the year, the Company has included the amount of the RSP Plan accounts of $13.1 million and $13.3 million on a gross-basis as both assets and liabilities of the plan as of December 31, 2016 and December 31, 2015, respectively.

On December 30, 2016, the WHX Pension Plan was split into two plans by spinning off certain plan participants with smaller benefit obligations (which in the aggregate were equal to approximately 3.0% of the assets of the WHX Pension Plan), and assets equal thereto, to a new separate plan, the WHX Pension Plan II. The benefits of participants under the WHX Pension Plan II are equal to their accrued benefits under the benefit formula that was applicable to each participant under the WHX Pension Plan at the time of the plan spin-off. The total benefit liabilities of the two plans after the spin-off were equal to the benefit liabilities of the WHX Pension Plan immediately before the spin-off, and under the applicable spin-off rules, the WHX Pension Plan II is considered fully funded.

Certain current and retired employees of H&H are covered by post-retirement medical benefit plans, which provide benefits for medical expenses and prescription drugs. Contributions from a majority of the participants are required, and for those retirees and spouses, the Company's payments are capped.

Actuarial losses for the WHX Pension Plan are being amortized over the average future lifetime of the participants, which is expected to be approximately 20 years. The Company believes that use of the future lifetime of the participants is appropriate because the WHX Pension Plan is completely inactive.

The components of pension expense and other post-retirement benefit (income) expense for the Company's benefit plans included the following:



	Pension Benefits									Other Post-Retirement Benefits
(in thousands)	2016			2015			2014			2016			2015			2014
Service cost	$	—		$	54		$	—		$	—		$	—		$	—
Interest cost	18,507			21,286			20,518			35			46			49
Expected return on plan assets	(23,542		)	(25,046		)	(24,157		)	—			—			—
Amortization of prior service cost	—			—			—			(103		)	(103		)	(103		)
Amortization of actuarial loss	13,174			11,186			7,378			47			37			34
Total	$	8,139		$	7,480		$	3,739		$	(21	)	$	(20	)	$	(20	)

Actuarial assumptions used to develop the components of pension expense and other post-retirement benefit (income) expense were as follows:



	Pension Benefits						Other Post-Retirement Benefits
	2016		2015		2014		2016		2015		2014
Discount rates:
WHX Pension Plan	4.01	%	3.70	%	4.40	%	N/A		N/A		N/A
JPS Pension Plan	3.93	%	4.00	%	N/A		N/A		N/A		N/A
Other post-retirement benefit plans	N/A		N/A		N/A		3.89	%	3.55	%	4.10	%
Expected return on assets	7.00	%	7.00	%	7.00	%	N/A		N/A		N/A
Rate of compensation increase	N/A		N/A		N/A		N/A		N/A		N/A
Health care cost trend rate - initial	N/A		N/A		N/A		6.50	%	6.75	%	7.00	%
Health care cost trend rate - ultimate	N/A		N/A		N/A		5.00	%	5.00	%	5.00	%
Year ultimate reached	N/A		N/A		N/A		2022		2022		2022

Pension expense in 2016 was favorably impacted by a change in the manner by which the interest cost component of net periodic pension expense was determined; specifically, by utilizing the "spot rate approach," which provides a more precise measurement of interest cost. The impact of this change was to reduce annual pension expense in 2016 by approximately $4.8 million.

The measurement date for plan obligations is December 31. The discount rate is the rate at which the plans' obligations could be effectively settled and is based on high quality bond yields as of the measurement date.

Summarized below is a reconciliation of the funded status for the Company's qualified defined benefit pension plans and other post-retirement benefit plan:



	Pension Benefits						Other Post-Retirement Benefits
(in thousands)	2016			2015			2016			2015
Change in benefit obligation:
Benefit obligation at January 1	$	613,394		$	531,824		$	1,213		$	1,356
JPS Pension Plan acquisition	—			117,688			—			—
Service cost	—			54			—			—
Interest cost	18,507			21,286			35			46
Actuarial loss (gain)	7,970			(19,814		)	(3		)	159
Participant contributions	—			—			2			1
Benefits paid	(42,466		)	(37,644		)	(95		)	(349		)
Benefit obligation at December 31	$	597,405		$	613,394		$	1,152		$	1,213

Change in plan assets:
Fair value of plan assets at January 1	$	347,921		$	323,493		$	—		$	—
JPS Pension Plan acquisition	—			87,321			—			—
Actual returns on plan assets	9,903			(43,273		)	—			—
Participant contributions	—			—			2			1
Benefits paid	(42,466		)	(37,644		)	(95		)	(349		)
Company contributions	16,514			18,024			93			348
Fair value of plan assets at December 31	331,872			347,921			—			—
Funded status	$	(265,533	)	$	(265,473	)	$	(1,152	)	$	(1,213	)

Accumulated benefit obligation ("ABO") for qualified defined benefit plans:
ABO at January 1	$	613,394		$	531,824		$	1,213		$	1,356
ABO at December 31	$	597,405		$	613,394		$	1,152		$	1,213

Amounts recognized on the consolidated balance sheets:
Current liability	$	—		$	—		$	(107	)	$	(119	)
Non-current liability	(265,533		)	(265,473		)	(1,045		)	(1,094		)
Total	$	(265,533	)	$	(265,473	)	$	(1,152	)	$	(1,213	)

The weighted-average assumptions used in the valuations at December 31 were as follows:



	Pension Benefits				Other Post-Retirement Benefits
	2016		2015		2016		2015
Discount rates:
WHX Pension Plan	3.84	%	4.01	%	N/A		N/A
WHX Pension Plan II	3.64	%	N/A		N/A		N/A
JPS Pension Plan	3.81	%	3.93	%	N/A		N/A
Other post-retirement benefit plans	N/A		N/A		3.74	%	3.89	%
Rate of compensation increase	N/A		N/A		N/A		N/A
Health care cost trend rate - initial	N/A		N/A		6.25	%	6.50	%
Health care cost trend rate - ultimate	N/A		N/A		5.00	%	5.00	%
Year ultimate reached	N/A		N/A		2022		2022

The effect of a 1% increase (decrease) in health care cost trend rates on benefit expense and on other post-retirement benefit obligations is not significant.

Pretax amounts included in accumulated other comprehensive loss (income) at December 31, 2016 and 2015 were as follows:



	Pension Benefits				Other Post-Retirement Benefits
(in thousands)	2016		2015		2016			2015
Prior service credit	$	—	$	—	$	(1,196	)	$	(1,299	)
Net actuarial loss	330,887		322,451		770			820
Accumulated other comprehensive loss (income)	$	330,887	$	322,451	$	(426	)	$	(479	)

The pretax amount of actuarial losses and prior service credit included in accumulated other comprehensive loss (income) at December 31, 2016 that is expected to be recognized in net periodic benefit cost (income) in 2017 is $13.7 million and $0.0 million, respectively, for the defined benefit pension plans, and $0.0 million and $(0.1) million, respectively, for the other post-retirement benefit plan.

Other changes in plan assets and benefit obligations recognized in comprehensive (loss) income are as follows:



	Pension Benefits									Other Post-Retirement Benefits
(in thousands)	2016			2015			2014			2016			2015			2014
Current year actuarial (loss) gain	$	(21,517	)	$	(48,505	)	$	(90,106	)	$	3		$	(159	)	$	(293	)
Amortization of actuarial loss	13,174			11,186			7,378			47			37			34
Amortization of prior service credit	—			—			—			(103		)	(103		)	(103		)
Total recognized in comprehensive (loss) income	$	(8,343	)	$	(37,319	)	$	(82,728	)	$	(53	)	$	(225	)	$	(362	)

The actuarial loss in 2016 occurred principally because the investment returns on the assets of the WHX Pension Plan and the JPS Pension Plan were lower than actuarial assumptions.

Benefit obligations were in excess of plan assets for each of the pension plans and the other post-retirement benefit plan at both December 31, 2016 and 2015. Additional information for the plans with accumulated benefit obligations in excess of plan assets:



	Pension Benefits				Other Post-Retirement Benefits
(in thousands)	2016		2015		2016		2015
Projected benefit obligation	$	597,405	$	613,394	$	1,152	$	1,213
Accumulated benefit obligation	$	597,405	$	613,394	$	1,152	$	1,213
Fair value of plan assets	$	331,872	$	347,921	$	—	$	—

In determining the expected long-term rate of return on plan assets, the Company evaluated input from various investment professionals. In addition, the Company considered its historical compound returns, as well as the Company's forward-looking expectations. The Company determines its actuarial assumptions for its pension and other post-retirement benefit plans on December 31 of each year to calculate liability information as of that date and pension and other post-retirement benefit expense or income for the following year. The discount rate assumption is derived from the rate of return on high-quality bonds as of December 31 of each year.

The Company's investment policy is to maximize the total rate of return with a view to long-term funding objectives of the pension plans to ensure that funds are available to meet benefit obligations when due. Pension plan assets are diversified to the extent necessary to minimize risk and to achieve an optimal balance between risk and return. There are no target allocations. The pension plans' assets are diversified as to type of assets, investment strategies employed and number of investment managers used. Investments may include equities, fixed income, cash equivalents, convertible securities and private investment funds. Derivatives may be used as part of the investment strategy. The Company may direct the transfer of assets between investment managers in order to rebalance the portfolio in accordance with asset allocation guidelines established by the Company.

The fair value of pension investments is defined by reference to one of three categories (Level 1, Level 2 or Level 3) based on the reliability of inputs, as such terms are defined in Note 18 - "Fair Value Measurements."

The pension plan assets at December 31, 2016 and 2015, by asset category, are as follows (in thousands):



Fair Value Measurements as of December 31, 2016:
	Assets at Fair Value as of December 31, 2016
Asset Class	Level 1		Level 2		Level 3		Total
Equity securities:
U.S. mid-cap blend	$	22,560	$	—	$	—	$	22,560
U.S. large-cap	34,256		—		—		34,256
Convertible promissory notes	—		—		3,500		3,500
Stock warrants	—		—		875		875
Subtotal	$	56,816	$	—	$	4,375	61,191
Pension assets measured at net asset value (1)
Hedge funds: (2)
Equity long/short							6,832
Event driven							47,771
Value driven							17,648
Fund of funds - long term capital growth (3)							8,325
Common trust funds: (2)
Other							78
Insurance separate account (4)							14,391
Total pension assets measured at net asset value							95,045
Cash and cash equivalents							175,435
Net receivables							201
Total pension assets							$	331,872
Fair Value Measurements as of December 31, 2015:
	Assets at Fair Value as of December 31, 2015
Asset Class	Level 1		Level 2		Level 3		Total
Fixed income security:
Credit contract	$	—	$	3,100	$	—	$	3,100
Subtotal	$	—	$	3,100	$	—	3,100
Pension assets measured at net asset value (1)
Hedge funds: (2)
Equity long/short							2,706
Event driven							45,660
Fund of funds - international large cap growth (5)							4,531
Common trust funds: (2)
Large cap equity							35,081
Mid-cap equity							9,040
Small-cap equity							5,158
International equity							4,664
Intermediate bond fund							6,492
Other							662
Insurance separate account (4)							15,013
Total pension assets measured at net asset value							129,007
Cash and cash equivalents							166,503
Net receivables							49,311
Total pension assets							$	347,921


(1)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.


(2)	Hedge funds and common trust funds are comprised of shares or units in commingled funds that may not be publicly traded. The underlying assets in these funds are primarily publicly traded equity securities and fixed income securities.

(3)

The limited partnership operates as a fund of funds. The underlying assets in this fund are generally expected to be illiquid. The limited partnership's investment strategy is to seek above-average rates of return and long-term capital growth by investing in a broad range of investments, including, but not limited to, global distressed corporate securities, activist equities, value equities, post-reorganizational equities, municipal bonds, high yield bonds, leveraged loans, unsecured debt, collateralized debt obligations, mortgage-backed securities, commercial mortgage-backed securities, direct lending and sovereign debt.

(4)

The JPS Pension Plan holds a deposit administration group annuity contract with an immediate participation guarantee from Transamerica Life Insurance Company ("TFLIC"). The TFLIC contract unconditionally guarantees benefits to certain salaried JPS Pension Plan participants earned through June 30, 1984 in the plan of a predecessor employer. The assets deposited under the contract are held in a separate custodial account ("TFLIC Assets"). If the TFLIC Assets decrease to the level of the trigger point (as defined in the contract), which represents the guaranteed benefit obligation representing the accumulated plan benefits as of June 30, 1984, TFLIC has the right to cause annuities to be purchased for the individuals covered by these contract agreements. Since the TFLIC Assets have remained in excess of the trigger point, no annuities have been purchased for the individuals covered by these contract arrangements.


(5)	Fund of funds consist of fund-of-fund LLC or commingled fund structures. The underlying assets in these funds are primarily publicly traded equity securities, fixed income securities and commodity-related securities. The LLCs are valued based on net asset values calculated by the fund and are not publicly available.

There were no assets for which fair value was determined using significant unobservable inputs (Level 3) during 2015. During 2016 and 2014, changes in Level 3 assets were as follows (in thousands):



Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Year Ended December 31, 2016	Convertible Promissory Notes		Stock Warrants		Total
Beginning balance as of January 1, 2016	$	—	$	—	$	—
Transfers into Level 3	—		—		—
Transfers out of Level 3	—		—		—
Gains or losses included in changes in net assets	—		—		—
Purchases, issuances, sales and settlements
Purchases	3,500		875		4,375
Issuances	—		—		—
Sales	—		—		—
Settlements	—		—		—
Ending balance as of December 31, 2016	$	3,500	$	875	$	4,375



Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Year Ended December 31, 2014	Corporate Bonds and Loans
Beginning balance as of January 1, 2014	$	500
Transfers into Level 3	—
Transfers out of Level 3	—
Gains or losses included in changes in net assets	73
Purchases, issuances, sales and settlements
Purchases	—
Issuances	—
Sales	(573		)
Settlements	—
Ending balance as of December 31, 2014	$	—

The Company's policy is to recognize transfers in and transfers out of Level 3 as of the date of the event or change in circumstances that caused the transfer.

The following tables present the category, fair value, unfunded commitments, redemption frequency and redemption notice period for those assets whose fair value was estimated using the net asset value per share (or its equivalents), as well as plan assets which have redemption notice periods, as of December 31, 2016 and December 31, 2015 (in thousands):

December 31, 2016:



Class Name	Description	Fair Value December 31, 2016		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds	Value driven hedge fund	$	17,648	$	—	(1)	6 months
Fund of funds	Long term capital growth	$	8,325	$	27,022	(2)	95 days
Hedge funds	Equity long/short hedge funds	$	6,832	$	6,250	(3)	60 days
Hedge funds	Event driven hedge funds	$	47,771	$	—	Monthly	90 days
Common trust funds	Collective equity investment funds	$	78	$	—	Daily	0-2 days
Insurance separate account	Insurance separate account	$	14,391	$	—	(4)	(4)
Private equity	Asset-based lending-maritime	$	—	$	10,000	(5)	(5)
Private equity	Value driven private equity	$	—	$	12,500	(6)	(6)


(1)	5 year staggered lockup period. One-third of the investment on each of December 31, 2020, 2021 and 2022.

(2)

Each capital commitment is subject to a commitment period of three years during which capital may be drawn-down, subject to two, one-year extensions. During the commitment period, no withdrawals are permitted. Once permitted, withdrawals of available liquidity in underlying investment vehicles is permitted quarterly. The fund-of-funds will not invest in any fund or investment vehicle that has an initial lock-up period of more than five years. Upon complete redemption, a holdback of up to 10% is withheld and paid after the fund's financial statement audit.


(3)	Redeemable annually subject to three year rolling, staggered lock up period. Upon complete redemption, a holdback of up to 10% is withheld and paid after the fund's financial statement audit.


(4)	Except for benefit payments to participants and beneficiaries and related expenses, withdrawals are restricted for substantially all of the assets in the account, as defined in the contract. However, a suspension or transfer can be requested with 30 days' notice. When funds are exhausted either by benefit payments, purchase of annuity contracts or transfer, the related contract terminates.

(5)

Entered into an agreement effective December 15, 2016 with a commitment of $10.0 million. Capital has not been called as of December 31, 2016. The agreement contains a commitment period of three years, subject to an extension of up to one additional year. Voluntary withdrawals are not permitted. Complete distributions will be made after eight years, subject to an extension of an additional two years.


(6)	Entered into an agreement effective September 8, 2016 with a commitment of $12.5 million. Capital has not been called as of December 31, 2016. Voluntary withdrawals are not permitted. Complete distributions will be made after ten years, subject to an extension of an additional one year.

In addition to those on the table above, the Company has an additional unfunded commitment at December 31, 2016 totaling $20.0 million for a separately managed investment account, which will have a U.S. mid/large-cap equity strategy.

December 31, 2015:



Class Name	Description	Fair Value December 31, 2015		Redemption Frequency	Redemption Notice Period
Hedge funds	Event driven hedge funds	$	45,660	Monthly	90 days
Fund of funds	International large cap growth	$	4,531	(1)	(1)
Hedge funds	Equity long/short hedge funds	$	2,706	(1)	(1)
Common trust funds	Collective equity investment funds	$	61,097	Daily	0-2 days
Insurance separate account	Insurance separate account	$	15,013	(2)	(2)


(1)	Request for redemption had been submitted as of December 31, 2015. Investment was redeemed in 2016.


(2)	Except for benefit payments to participants and beneficiaries and related expenses, withdrawals are restricted for substantially all of the assets in the account, as defined in the contract. However, a suspension or transfer can be requested with 30 days' notice. When funds are exhausted either by benefit payments, purchase of annuity contracts or transfer, the related contract terminates.

Contributions

Employer contributions consist of funds paid from employer assets into a qualified pension trust account. The Company's funding policy is to contribute annually an amount that satisfies the minimum funding standards of the Employee Retirement Income Security Act.

The Company expects to have required minimum pension contributions for 2017, 2018, 2019, 2020, 2021 and for the five years thereafter of $34.2 million, $31.1 million, $39.9 million, $36.0 million, $32.7 million and $80.6 million, respectively. Required future pension contributions are estimated based upon assumptions such as discount rates on future obligations, assumed rates of return on plan assets and legislative changes. Actual future pension costs and required funding obligations will be affected by changes in the factors and assumptions described in the previous sentence, as well as other changes such as any plan termination or other acceleration events.

Benefit Payments

Estimated future benefit payments for the benefit plans over the next ten years are as follows (in thousands):



	Pension		Other Post-Retirement
Years	Benefits		Benefits
2017	$	43,910	$	107
2018	43,472		105
2019	42,987		106
2020	42,372		89
2021	41,672		82
2022-2026	195,366		373

401(k) Plans

Certain employees participate in a Company sponsored savings plan, which qualifies under Section 401(k) of the Internal Revenue Code. This savings plan allows eligible employees to contribute from 1% to 75% of their income on a pretax basis. The Company presently makes a contribution to match 50% of the first 6% of the employee's contribution. The charge to expense for the Company's matching contributions amounted to $2.2 million, $1.9 million and $2.0 million in 2016, 2015 and 2014, respectively.