Defined contribution and defined benefit retirement plans

12 Months Ended

Dec. 31, 2023

Defined contribution and defined benefit retirement plans

Defined contribution and defined benefit retirement plans

Note 10 – Defined contribution and defined benefit retirement plans:

Defined contribution plans – We maintain various defined contribution pension plans with our contributions based on matching or other formulas. Defined contribution plan expense approximated $3.9 million in each of 2021 and 2022 and $4.1 million in 2023.

Defined benefit pension plans – We sponsor various defined benefit pension plans. Certain non-U.S. employees are covered by plans in their respective countries. Our U.S. plan was closed to new participants in 1996, and existing participants no longer accrue any additional benefits after that date. The benefits under all of our defined benefit pension plans are based upon years of service and employee compensation. Our funding policy is to contribute annually the

minimum amount required under ERISA (or equivalent non-U.S.) regulations plus additional amounts as we deem appropriate. We recognize an asset or liability for the over or under funded status of each of our individual defined benefit pension plans on our Consolidated Balance Sheets. Changes in the funded status of these plans are recognized either in net income, to the extent they are reflected in periodic benefit cost, or through other comprehensive income (loss).

We expect to contribute the equivalent of approximately $17 million to all of our defined benefit pension plans during 2024. Benefit payments to plan participants out of plan assets are expected to be the equivalent of:

Years ending December 31,	Amount
	(In millions)
2024	$	25.4
2025		25.3
2026		25.9
2027		28.8
2028		33.0
Next 5 years		157.8

The funded status of our non-U.S. defined benefit pension plans is presented in the table below.

	December 31,
	2022		2023
	(In millions)
Change in projected benefit obligations (PBO):
Benefit obligations at beginning of the year	$	748.1	$	502.8
Service cost		11.3		6.3
Interest cost		10.5		19.7
Participant contributions		1.7		1.8
Actuarial (gains) losses		(195.8)		44.7
Settlements		(1.2)		(3.1)
Change in currency exchange rates		(50.3)		14.0
Benefits paid		(21.5)		(22.5)
Benefit obligations at end of the year		502.8		563.7
Change in plan assets:
Fair value of plan assets at beginning of the year		470.1		383.6
Actual return on plan assets		(49.5)		37.9
Employer contributions		15.0		15.6
Participant contributions		1.7		1.8
Settlements		(1.2)		(3.1)
Change in currency exchange rates		(31.0)		9.3
Benefits paid		(21.5)		(22.5)
Fair value of plan assets at end of year		383.6		422.6
Funded status	$	(119.2)	$	(141.1)
Amounts recognized in the balance sheet:
Noncurrent pension asset	$	8.2	$	8.1
Noncurrent accrued pension costs		(127.4)		(149.2)
Total	$	(119.2)	$	(141.1)
Amounts recognized in accumulated other comprehensive loss:
Actuarial losses	$	85.4	$	106.8
Prior service cost		.4		.3
Total	$	85.8	$	107.1
Accumulated benefit obligations (ABO)	$	488.0	$	549.8

The total net underfunded status of our non-U.S. defined benefit pension plans increased from $119.2 million at December 31, 2022 to $141.1 million at December 31, 2023 due to the change in our PBO during 2023 exceeding the change in plan assets during 2023. The increase in our PBO in 2023 was primarily attributable to higher actuarial losses due to the decrease in discount rates from year end 2022 and unfavorable currency fluctuations, primarily from the weakening of the U.S. dollar relative to the euro. The increase in our plan assets in 2023 was primarily attributable to positive plan asset returns in 2023, favorable currency fluctuations (primarily from the weakening of the U.S. dollar relative to the euro) and employer contributions.

The components of our net periodic defined benefit pension cost for our non-U.S. defined benefit pension plans are presented in the table below. The amounts shown below for the amortization of prior service cost and recognized actuarial losses for 2021, 2022 and 2023 were recognized as components of our accumulated other comprehensive loss at December 31, 2020, 2021 and 2022, respectively, net of deferred income taxes.

	Years ended December 31,
	2021		2022		2023
	(In millions)
Net periodic pension cost (income):
Service cost	$	14.7	$	11.3	$	6.3
Interest cost		8.2		10.5		19.7
Expected return on plan assets		(11.2)		(11.0)		(18.2)
Amortization of prior service cost		.2		.1		.1
Recognized actuarial losses		19.4		12.5		1.8
Settlements		-		.3		1.6
Total	$	31.3	$	23.7	$	11.3

Information concerning certain of our non-U.S. defined benefit pension plans (for which the ABO exceeds the fair value of plan assets as of the indicated date) is presented in the table below.

	December 31,
	2022		2023
	(In millions)
Plans for which the ABO exceeds plan assets:
PBO	$	403.5	$	463.1
ABO		392.4		452.9
Fair value of plan assets		276.0		313.8

The weighted-average rate assumptions used in determining the actuarial present value of benefit obligations for our non-U.S. defined benefit pension plans as of December 31, 2022 and 2023 are presented in the table below.

	December 31,
Rate	2022	2023
Discount rate	3.9%	3.4%
Increase in future compensation levels	2.7%	2.7%

The weighted-average rate assumptions used in determining the net periodic pension cost for our non-U.S. defined benefit pension plans for 2021, 2022 and 2023 are presented in the table below.

	Years ended December 31,
Rate	2021	2022	2023
Discount rate	1.0%	1.5%	3.9%
Increase in future compensation levels	2.6%	2.6%	2.7%
Long-term return on plan assets	2.4%	2.5%	4.6%

Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations, pension expense and funding requirements in future periods.

The funded status of our U.S. defined benefit pension plan is presented in the table below.

	December 31,
	2022		2023
	(In millions)
Change in PBO:
Benefit obligations at beginning of the year	$	17.7	$	13.2
Interest cost		.4		.7
Actuarial (gains) losses		(3.9)		.5
Benefits paid		(1.0)		(1.1)
Benefit obligations at end of the year		13.2		13.3
Change in plan assets:
Fair value of plan assets at beginning of the year		15.9		12.0
Actual return on plan assets		(3.2)		1.1
Employer contributions		.3		.5
Benefits paid		(1.0)		(1.1)
Fair value of plan assets at end of year		12.0		12.5
Funded status	$	(1.2)	$	(.8)
Amounts recognized in the balance sheet:
Accrued pension costs:
Current	$	-	$	-
Noncurrent		(1.2)		(.8)
Total	$	(1.2)	$	(.8)
Amounts recognized in accumulated other comprehensive loss - actuarial losses	$	9.2	$	8.5
ABO	$	13.2	$	13.3

The components of our net periodic defined benefit pension cost for our U.S. defined benefit pension plan is presented in the table below. The amounts shown below for recognized actuarial losses for 2021, 2022 and 2023 were recognized as components of our accumulated other comprehensive loss at December 31, 2020, 2021 and 2022 respectively, net of deferred income taxes.

	Years ended December 31,
	2021		2022		2023
	(In millions)
Net periodic pension cost (income):
Interest cost	$	.5	$	.4	$	.7
Expected return on plan assets		(.6)		(.6)		(.6)
Recognized actuarial losses		.6		.6		.6
Settlements		(.5)		-		-
Total	$	-	$	.4	$	.7

The discount rate assumptions used in determining the actuarial present value of the benefit obligation for our U.S. defined benefit pension plan as of December 31, 2022 and 2023 are 5.3% and 5.0%, respectively. The impact of assumed increases in future compensation levels does not have an effect on the benefit obligation as the plan is frozen with regards to compensation.

The weighted-average rate assumptions used in determining the net periodic pension cost for our U.S. defined benefit pension plan for 2021, 2022 and 2023 are presented in the table below. The impact of assumed increases in future compensation levels also does not have an effect on the periodic pension cost as the plan is frozen with regards to compensation.

	Years ended December 31,
Rate	2021	2022	2023
Discount rate	2.2%	2.6%	5.3%
Long-term return on plan assets	4.0%	4.0%	5.0%

Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations, pension expense and funding requirements in future periods.

The amounts shown in the tables above for actuarial losses and prior service cost at December 31, 2022 and 2023 have not yet been recognized as components of our periodic defined benefit pension cost as of those dates. These amounts will be recognized as components of our periodic defined benefit cost in future years and are recognized, net of deferred income taxes, in our accumulated other comprehensive loss at December 2022 and 2023.

The table below details the changes in our consolidated other comprehensive income (loss) during 2021, 2022 and 2023.

	Years ended December 31,
	2021		2022		2023
	(In millions)
Changes in plan assets and benefit obligations recognized in    other comprehensive income (loss):
Current year:
Net actuarial (losses) gains	$	52.5	$	135.1	$	(25.0)
Amortization of unrecognized:
Net actuarial losses		20.0		13.0		2.4
Prior service cost		.2		.1		.1
Settlement loss		-		.3		1.6
Total	$	72.7	$	148.5	$	(20.9)

In determining the expected long-term rate of return on our U.S. and non-U.S. plan asset assumptions, we consider the long-term asset mix (e.g. equity vs. fixed income) for the assets for each of our plans and the expected long-term rates of return for such asset components. In addition, we receive third-party advice about appropriate long-term rates of return. Such assumed asset mixes are summarized below:

● In Germany, the composition of our plan assets is established to satisfy the requirements of the German insurance commissioner. Our German pension plan assets represent an investment in a large collective investment fund established and maintained by Bayer AG in which several pension plans, including our German pension plans and Bayer’s pension plans, have invested. Our plan assets represent a very nominal portion of the total collective investment fund maintained by Bayer. These plan assets are a Level 3 in the fair value hierarchy because there is not an active market that approximates the value of our investment in the Bayer investment fund. We estimate the fair value of the Bayer plan assets based on periodic reports we receive from the managers of the Bayer fund and using a model we developed with assistance from our third-party actuary that uses estimated asset allocations and correlates such allocation to similar asset mixes in fund indexes quoted on an active market. We periodically evaluate the results of our valuation model against actual returns in the Bayer fund and adjust the model as needed. The Bayer fund periodic reports are subject to audit by the German pension regulator.

● In Canada, we currently have a plan asset target allocation of up to 10% to equity securities and 90 - 100% to fixed income securities. We expect the long-term rate of return for such investments to approximate the applicable average equity or fixed income index. The Canadian assets are Level 1 inputs because they are traded in active markets.

● In Norway, we currently have a plan asset target allocation of 18% to equity securities, 63% to fixed income securities, 14% to real estate and the remainder primarily to other investments and liquid investments such as money markets. The expected long-term rate of return for such investments is approximately 7%, 4%, 6%

and 7%, respectively. The majority of Norwegian plan assets are Level 1 inputs because they are traded in active markets; however, approximately 14% of our Norwegian plan assets are invested in real estate and other investments not actively traded and are therefore a Level 3 input.

● In the U.S. we currently have a plan asset target allocation of 33% to equity securities, 59% to fixed income securities, and the remainder is allocated to multi-asset and other strategies. The expected long-term rate of return for our equity securities and fixed income securities is approximately 7% and 5%, respectively (before plan administrative expenses). Approximately 98% of our U.S. plan assets are invested in funds that are valued at net asset value (NAV) and, in accordance with ASC 820-10, not subject to classification in the fair value hierarchy.

● We also have plan assets in Belgium. The Belgium plan assets are invested in certain individualized fixed income insurance contracts for the benefit of each plan participant as required by the local regulators and are therefore a Level 3 input. We had plan assets in the United Kingdom invested primarily in insurance contracts that were a Level 3 input as of December 31, 2022. During 2023, we completed a termination and buy-out of our pension plan in the United Kingdom resulting in a $1.3 million settlement loss.

We regularly review our actual asset allocation for each plan and will periodically rebalance the investments in each plan to more accurately reflect the targeted allocation and/or maximize the overall long-term return when considered appropriate.

The composition of our pension plan assets by asset category and fair value level at December 31, 2022 and 2023 is shown in the tables below.

	Fair Value Measurements at December 31, 2022
			Quoted		Significant
			prices		other		Significant
			in active		observable		unobservable		Assets
			markets		inputs		inputs		measured at
	Total		(Level 1)		(Level 2)		(Level 3)		NAV
	(In millions)
Germany	$	234.0	$	-	$	-	$	234.0	$	-
Canada:
Local currency equities		.1		.1		-		-		-
Non local currency equities		11.0		11.0		-		-		-
Local currency fixed income		72.9		72.9		-		-		-
Cash and other		.6		.6		-		-		-
Norway:
Local currency equities		2.3		2.3		-		-		-
Non local currency equities		4.7		4.7		-		-		-
Local currency fixed income		21.8		7.0		14.8		-		-
Non local currency fixed income		8.4		8.4		-		-		-
Real estate		7.8		-		-		7.8		-
Cash and other		2.7		2.4		-		.3		-
U.S.:
Equities		3.8		.3		-		-		3.5
Fixed income		7.0		.1		-		-		6.9
Cash and other		1.2		.9		-		-		.3
Other		17.3		.4		-		16.9		-
Total	$	395.6	$	111.1	$	14.8	$	259.0	$	10.7

	Fair Value Measurements at December 31, 2023
			Quoted		Significant
			prices		other		Significant
			in active		observable		unobservable		Assets
			markets		inputs		inputs		measured at
	Total		(Level 1)		(Level 2)		(Level 3)		NAV
	(In millions)
Germany	$	269.4	$	-	$	-	$	269.4	$	-
Canada:
Non local currency equities		2.7		2.7		-		-		-
Local currency fixed income		86.2		86.2		-		-		-
Cash and other		1.1		1.1		-		-		-
Norway:
Local currency equities		2.4		2.4		-		-		-
Non local currency equities		7.2		7.2		-		-		-
Local currency fixed income		23.9		4.4		19.5		-		-
Non local currency fixed income		4.2		4.2		-		-		-
Real estate		6.6		-		-		6.6		-
Cash and other		3.0		2.8		-		.2		-
U.S.:
Equities		3.5		-		-		-		3.5
Fixed income		8.4		-		-		-		8.4
Cash and other		.6		.2		-		-		.4
Other		15.9		-		-		15.9		-
Total	$	435.1	$	111.2	$	19.5	$	292.1	$	12.3

A rollforward of the change in fair value of Level 3 assets follows.

	December 31,
	2022		2023
	(In millions)
Fair value at beginning of year	$	310.3	$	259.0
Gain (loss) on assets held at end of year		(31.0)		11.1
Gain (loss) on assets sold during the year		(.7)		14.4
Assets purchased		13.8		1.7
Assets sold		(14.9)		(3.5)
Currency exchange rate fluctuations		(18.5)		9.4
Fair value at end of year	$	259.0	$	292.1