Retirement Plans

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Retirement Plans

Retirement Plans

401(k) Plan

The Company has a defined contribution plan ("the 401(k) Plan") whereby eligible employees may contribute up to 85.0% of their pay subject to certain limitations as defined by the 401(k) Plan. Employees are eligible to participate in the 401(k) Plan upon hire and are eligible to receive matching contributions upon six months of continuous employment with the Company. The 401(k) Plan provides a 100.0% match of the first 3.0% and 50.0% of the next 2.0% of eligible employee contributions. The match for union employees is based on the applicable collective bargaining arrangement. All matching contributions vest immediately. The Company incurred $6.7 million, $7.3 million and $5.0 million of expenses associated with the 401(k) Plan for the years ended December 31, 2016, 2015 and 2014, respectively, which are included in the Consolidated Statements of Income.

Company Defined Benefit Pension Plans

The Company has a noncontributory, defined benefit pension plan covering current and former hourly employees at only two of its active Sealy plants and ten previously closed Sealy U.S. facilities. Sealy Canada, Ltd. (a 100.0% owned subsidiary of the Company) also sponsors a noncontributory, defined benefit pension plan covering hourly employees at one of its facilities (collectively, referred to as the "Plans"). The Plans provide retirement and survivorship benefits based on the employees’ credited years of service. The Company’s funding policy provides for contributions of an amount between the minimum required and maximum amount that can be deducted for federal income tax purposes.

The Plans' assets consist of investments in various common/collective trusts with equity investment strategies diversified across multiple industry sectors and company market capitalization within specific geographical investment strategies, fixed income common/collective trusts, which invest primarily in investment-grade and high-yield corporate bonds and U.S. treasury securities, as well as money market mutual funds. The fixed income investments are diversified as to ratings, maturities, industries and other factors. The Plans' assets contain no significant concentrations of risk related to individual securities or industry sectors. The Plans have no direct investment in the Company's common stock.

The long-term rate of return for the Plans is based on the weighted average of the Plans’ investment allocation and the historical returns for those asset categories. Because future compensation levels are not a factor in these Plans’ benefit formulas, the accumulated benefit obligation is equal to the projected benefit obligation as reported below. The discount rate is based on the returns on long-term bonds in the private sector and incorporates a long-term inflation rate. Summarized information for the Plans follows:

Expenses and Status

Components of net periodic pension cost which is included in general, administrative and other expenses included in the accompanying Consolidated Statements of Income for the years ended December 31 were as follows:

(in millions)	2016			2015			2014
Service cost	$	0.8		$	0.8		$	0.9
Interest cost	1.2			1.9			1.8
Expected return on assets	(1.3		)	(2.2		)	(2.1		)
Curtailment loss	—			—			0.1
Amortization of net gain	—			—			(0.1		)
Settlement loss	0.2			1.3			—
Net periodic pension cost	$	0.9		$	1.8		$	0.6

The other changes in plan assets and benefit obligations recognized in other comprehensive loss (income) for the years ended December 31 were:

(in millions)	2016			2015			2014
Net loss	$	1.5		$	0.2		$	9.0
Amortization of prior service cost	—			—			(0.2		)
Amortization or settlement recognition of net (loss) gain	(0.2		)	(1.3		)	0.1
New prior service cost	—			0.1			0.1
Total recognized in other comprehensive loss (income)	$	1.3		$	(1.0	)	$	9.0

The following assumptions, calculated on a weighted-average basis, were used to determine net periodic pension cost for the Company’s Plans for the years ended December 31:

	2016		2015		2014
Discount rate (a)	4.27	%	4.12	%	4.01	%
Expected long-term return on plan assets	6.71	%	7.05	%	7.00	%

(a) The discount rates used in 2016 to determine the expenses for the U.S. retirement plan and Canadian retirement plan were 4.26% and 4.30%, respectively. The discount rates used in 2015 to determine the expenses for the U.S. retirement plan and Canadian retirement plan were 3.94% and 4.20%, respectively. The discount rates used in 2014 to determine the expenses for the U.S. retirement plan and Canadian retirement plan were 3.94% and 5.00%, respectively.     

Obligations and Funded Status

The measurement date for the Company's Plans is December 31. The funded status of the Plans as of December 31 was as follows:

(in millions)	2016			2015
Change in Benefit Obligation:
Projected benefit obligation at beginning of year	$	28.2		$	47.1
Service cost	0.8			0.8
Interest cost	1.2			1.9
Plan amendments	—			0.1
Actuarial loss (gain)	0.8			(3.3		)
Settlements	(2.0		)	(16.9		)
Benefits paid	(1.1		)	(0.8		)
Expenses paid	—			(0.1		)
Foreign currency exchange rate changes	0.1			(0.6		)
Projected benefit obligation at end of year	$	28.0		$	28.2
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	13.9		$	32.5
Actual return (loss) on assets	0.6			(1.3		)
Employer contribution	10.2			1.1
Settlements	(2.0		)	(16.9		)
Benefits paid	(1.1		)	(0.8		)
Expenses paid	—			(0.1		)
Foreign currency exchange rate changes	0.1			(0.6		)
Fair value of plan assets at end of year	$	21.7		$	13.9
Funded status	$	(6.3	)	$	(14.3	)

The Company’s defined benefit pension plan for U.S. Sealy employees is underfunded. As of December 31, 2016, the projected benefit obligation and fair value of plan assets were $24.9 million and $18.6 million, respectively. As of December 31, 2015, the projected benefit obligation and fair value of plan assets were $25.3 million and $10.8 million, respectively. As of December 31, 2016, the projected benefit obligation and fair value of plan assets for the Sealy Canada Ltd. pension plan were $3.1 million and $3.1 million, respectively. As of December 31, 2015, the projected benefit obligation and fair value of plan assets for the Sealy Canada Ltd. pension plan were $2.9 million and $3.1 million, respectively. During 2016, the Company contributed $10.0 million to the defined benefit pension plan for U.S. employees.

During the fourth quarter of 2015, the Company offered a lump-sum settlement to terminated, vested participants in the defined benefit pension plan for U.S. Sealy employees, which resulted in the recognition of a settlement loss of approximately $1.3 million and reduction of the benefit obligation and plan assets of approximately $17.0 million.

The accumulated benefit obligation for all pension plans was $28.0 million at December 31, 2016 and $28.2 million at December 31, 2015.

The following table represents amounts recorded in the Consolidated Balance Sheets:

	December 31,
(in millions)	2016		2015
Amounts recognized in the Consolidated Balance Sheets:
Non-current benefit liability	$	6.3	$	14.5
Non-current benefit asset	—		0.2

The following assumption, calculated on a weighted-average basis, was used to determine benefit obligations for the Company’s defined benefit pension plans as of December 31:

	2016		2015
Discount rate (a)	4.06	%	4.44	%

(a) The discount rates used in 2016 to determine the expenses for the U.S. retirement plan and Canadian retirement plan were 4.06% and 4.10%, respectively. The discount rates used in 2015 to determine the benefit obligations for the U.S. and Canadian defined benefit pension plans were 4.26% and 4.30%, respectively.

No material amounts are expected to be reclassified from AOCL to be recognized as components of net income during 2017.

Plan Contributions and Expected Benefit Payments

During 2017, the Company expects to contribute $0.5 million to the Company's Plans from available cash and cash equivalents.

The following table presents estimated future benefit payments:

(in millions)
Fiscal 2017	$	1.0
Fiscal 2018	1.0
Fiscal 2019	1.0
Fiscal 2020	1.0
Fiscal 2021	1.1
Fiscal 2022 ‑ Fiscal 2026	6.6

Pension Plan Asset Information

Investment Objective and Strategies

The Company's investment objectives are to minimize the volatility of the value of the Company's pension assets relative to pension liabilities and to ensure assets are sufficient to pay plan benefits. Target and actual asset allocations are as follows:

	2016 Target		2016 Actual
Common/collective trust consisting primarily of:
Equity securities	60.00	%	74.51	%
Debt securities	40.00	%	22.53	%
Other	—	%	2.96	%
Total plan assets	100.00	%	100.00	%

Investment strategies and policies reflect a balance of risk-reducing and return-seeking considerations. The objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset diversification. Assets are broadly diversified across many asset classes to achieve risk-adjusted returns that, in total, lower asset volatility relative to liabilities. The Company's policy to rebalance the Company's investment regularly ensures that actual allocations are in line with target allocations as appropriate.

Strategies to address the goal of ensuring sufficient assets to pay benefits include target allocations to a broad array of asset classes that provide return, diversification and liquidity.

The plan investment fiduciaries are responsible for setting asset allocation targets, and monitoring asset allocation and investment performance. The Company’s pension investment manager has discretion to manage assets to ensure compliance with the asset allocations approved by the plan fiduciaries.

Significant Concentrations of Risk

Significant concentrations of risk in the Company's plan assets relate to equity, interest rate, and operating risk. In order to ensure assets are sufficient to pay benefits, a portion of plan assets is allocated to equity investments that are expected, over time, to earn higher returns with more volatility than fixed income investments which more closely match pension liabilities. Within the common/collective trusts, the plan assets contain no significant concentrations of risk related to individual securities or industry sectors.

In order to minimize asset volatility relative to the liabilities, a portion of the plan assets are allocated to fixed income investments that are exposed to interest rate risk. Rate increases will generally result in a decline in fixed income assets while reducing the present value of the liabilities. Conversely, rate decreases will increase fixed income assets, partially offsetting the related increase in the liabilities.

Operating risks primarily include the risks of inadequate diversification and insufficient oversight. To mitigate this risk, investments are diversified across and within asset classes in support of investment objectives. Policies and practices to address operating risks include ongoing oversight, plan and asset class investment guidelines, and periodic reviews against these guidelines to ensure adherence.

Expected Long-Term Return on Plan Assets

The expected long-term return assumption at December 31, 2016 was 7.00% for the defined benefit pension plan for U.S. Sealy Employees and 5.50% for the defined benefit pension plan for Sealy Canada, Ltd. The expected long-term return assumption is based on historical and projected rates of return for current and planned asset classes in the plan’s investment portfolio. The assumption considers various sources, primarily inputs from advisors for long-term capital market returns, inflation, bond yields, and other variables, adjusted for specific aspects of the Company's investment strategy by plan.

The investments in plan assets primarily consist of common collective trusts and money market funds. Investments in common collective trusts and money market funds are valued at the net asset value ("NAV") per share or unit multiplied by the number of shares or units held as of the measurement date. Common/collective trusts are valued at the NAV per share multiplied by the number of shares held as of the measurement date. The determination of NAV for the common/collective trusts includes market pricing of the underlying assets as well as broker quotes and other valuation techniques that represent fair value as determined by the respective administrator of the common/collective trust. Management has determined that the NAV is an appropriate estimate of the fair value of the common collective trusts at December 31, 2016 and 2015, based on the fact that the common/collective trusts are audited and accounted for at fair value by the administrators of the respective common/collective trusts.  The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair value. Furthermore, while the Company believes its 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 estimate of fair value at the Consolidated Balance Sheet dates.

The fair value of the Company’s plan assets at December 31 by asset category was as follows:

(in millions)	2016		2015
Asset Category
Common/collective trust
U.S. equity	$	12.5	$	7.7
International equity	3.7		2.7
Total equity based funds	16.2		10.4
Common/collective trust - fixed income	4.9		2.9
Money market funds	0.6		0.6
Total	$	21.7	$	13.9

Multi‑Employer Benefit Plans

Approximately 32.0% of the Company’s domestic employees are represented by various labor unions with separate collective bargaining agreements. Hourly employees working at nine of the Company’s domestic manufacturing facilities are covered by union sponsored retirement plans. Further, employees working at three of the Company’s domestic manufacturing facilities are covered by union sponsored health and welfare plans. These plans cover both active employees and retirees. Through the health and welfare plans, employees receive medical, dental, vision, prescription and disability coverage. The Company’s cost associated with these plans consists of periodic contributions to these plans based upon employee participation. The expense recognized by the Company for such contributions for the years ended December 31 was follows:

(in millions)	2016		2015		2014
Multi‑employer retirement plan expense	$	4.9	$	5.0	$	4.7
Multi‑employer health and welfare plan expense	2.8		2.4		2.2

The risks of participating in multi‑employer pension plans are different from the risks of participating in single‑employer pension plans in the following respects: 1) contributions to the multi‑employer plan by one employer may be used to provide benefits to employees of other participating employers; 2) if a participating employer ceases its contributions to the plan, the unfunded obligations of the plan allocable to the withdrawing employer may be borne by the remaining participant employers; and 3) if the Company withdraws from the multi‑employer pension plans in which it participates, the Company may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan.

The following table presents information regarding the multi‑employer pension plans that are significant to the Company for the years ended December 31, 2016 and 2015, respectively:

(in millions)
Pension Fund	EIN/Pension Plan Number	Date of Plan Year-End	Pension Protection Act Zone Status(1) 2016	FIP/RP Status Pending/Implemented(2)	Contributions of the Company 2016		Surcharge Imposed(3)	Expiration Date of Collective Bargaining Agreement	Year Contributions to Plan Exceeded More than 5 Percent of Total Contributions
United Furniture Workers Pension Fund A(4)	13-5511877-001	2/29/16	Red	Implemented	$	1.2	Yes, 10.0%	2017	2014, 2015, 2016
Pension Plan of the National Retirement Fund	13-6130178-001	12/31/15	Red	Implemented	$	1.3	Yes, 10.0%	2019	N/A
Central States, Southeast & Southwest Areas Pension Plan	36-6044243-001	12/31/15	Red	Implemented	$	0.3	Yes, 10.0%	2018	N/A

(in millions)
Pension Fund	EIN/Pension Plan Number	Date of Plan Year-End	Pension Protection Act Zone Status(1) 2015	FIP/RP Status Pending/Implemented(2)	Contributions of the Company 2015		Surcharge Imposed(3)	Expiration Date of Collective Bargaining Agreement	Year Contributions to Plan Exceeded More than 5 Percent of Total Contributions
United Furniture Workers Pension Fund A(4)	13-5511877-001	2/28/15	Red	Implemented	$	1.1	Yes, 10.0%	2016	2013, 2014, 2015
Pension Plan of the National Retirement Fund	13-6130178-001	12/31/14	Red	Implemented	$	1.2	Yes, 10.0%	2016	N/A
Central States, Southeast & Southwest Areas Pension Plan	36-6044243-001	12/31/14	Red	Implemented	$	0.5	Yes, 10.0%	2016	N/A

(1) The Pension Protection Act of 2006 ranks the funded status of multi-employer pension plans depending upon a plan’s current and projected funding. A plan is in the Red Zone (Critical) if it has a current funded percentage of less than 65.0%. A plan is in the Yellow Zone (Endangered) if it has a current funded percentage of less than 80.0%, or projects a credit balance deficit within seven years. A plan is in the Green Zone (Healthy) if it has a current funded percentage greater than 80.0% and does not have a projected credit balance deficit within seven years. The zone status is based on the plan’s year end rather than the Company’s. The zone status listed for each plan is based on information that the Company received from that plan and is certified by that plan’s actuary for the most recent year available.

(2) Funding Improvement Plan or Rehabilitation Plan as defined in the Employee Retirement Income Security Act of 1974 has been implemented or is pending.

(3) Indicates whether the Company paid a surcharge to the plan in the most current year due to funding shortfalls and the amount of the surcharge.

(4) The Company represented more than 5.0% of the total contributions for the most recent plan year available. For year ended December 31, 2014, the Company contributed $0.9 million to the plan.