EMPLOYEE BENEFIT PLANS

The Company has funded single-employer defined benefit pension plans that cover substantially all non-bargaining unit employees and certain bargaining unit employees. In addition, the Company has plans that provide certain retiree health care and life insurance benefits to substantially all salaried and to certain hourly employees. Employees are generally eligible for such benefits upon retirement and completion of a specified number of years of credited service. The Company does not pre-fund these health care and life insurance benefits and has the right to modify or terminate certain of these plans in the future. Certain groups of retirees pay a portion of the benefit costs.

Plan Administration, Investments and Asset Allocations: The Company has an Investment Committee that is responsible for the investment and management of the pension plan assets. In 2013, the Company changed its pension plan investment and management approach to a liability driven investment strategy, which seeks to increase the correlation of the pension plan assets and liabilities to reduce the volatility of the plan's funded status, and over time, improve the funded status of the plan. The adoption of this strategy has resulted in an asset allocation that is weighted more toward fixed income investments, which reduces investment volatility, but also reduces investment returns over time. In connection with the adoption of a liability driven investment strategy, the Company appointed an investment adviser that directs investments and selects investment options, based on guidelines established by the Investment Committee.

The Company’s investment strategy for its pension plan assets is to achieve a diversified mix of investments that balances long-term growth with an acceptable level of risk. The mix of assets includes a fixed income allocation that increases as the plan's funded status improves. The Company’s weighted-average asset allocations at December 31, 2014 and 2013, and 2014 year-end target allocation, by asset category, were as follows:



	Target		2014		2013
Domestic equity securities	28	%	32	%	29	%
International equity securities	15	%	15	%	16	%
Debt securities	46	%	44	%	44	%
Alternatives and other	11	%	6	%	8	%
Cash	—	%	3	%	3	%
Total	100	%	100	%	100	%

The Company’s investments in equity securities primarily include domestic large-cap and mid-cap companies, but also include an allocation to small-cap and international equity securities. Equity investments do not include any direct holdings of the Company’s stock but may include such holdings to the extent that the stock is included as part of certain mutual fund or ETF holdings. Debt securities include investment-grade corporate bonds from diversified industries and U.S. Treasuries. Other types of investments include funds that invest in commercial real estate assets, and to a lesser extent, private equity investments in technology companies.

The expected return on plan assets assumption (7.10 percent for 2014) is principally based on the long-term outlook for various asset class returns, asset mix, the historical performance of the plan assets under the liability driven investment strategy, and a comparison of the estimated long-term return calculated to the distribution of assumptions adopted by other plans with similar asset mixes. For the year ended December 31, 2014, the return on plan assets was 8.12 percent. Over the long-term, the actual returns have generally exceeded the benchmark returns used by the Company to evaluate performance of its fund managers.

The Company’s pension plan assets are held in a master trust and stated at estimated fair value, which is based on the fair values of the underlying investments. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, as amended, establishes a fair value hierarchy, which requires the pension plans to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurements) and assigns the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs within the hierarchy are defined as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the pension plans’ own assumptions about the assumptions that market participants would use in pricing an asset or liability.

If the technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy, the lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

Equity Securities: Domestic and international common stocks are valued by obtaining quoted prices on recognized and highly liquid exchanges.

Exchange-Trade Funds (ETF): ETFs are valued by obtaining quoted prices on recognized and highly liquid exchanges.

Fixed Income Securities: Corporate bonds and U.S. government treasury and agency securities are valued based upon the closing price reported in the market in which the security is traded. U.S. government agency, corporate asset-backed securities, and mortgage securities may utilize models, such as a matrix pricing model, that incorporates other observable inputs such as cash flow, security structure, or market information, when broker/dealer quotes are not available.

Real Estate, Private Equity, Managed Futures and Insurance Contract Interests: The fair value of real estate fund investments, private equity and insurance contract interests are determined by the issuer based on the unit values of the funds. Unit values are determined by dividing the fund’s net assets by the number of units outstanding at the valuation date. Fair value for underlying investments in real estate is determined through a combination of independent property appraisals and market, income and cost valuation approaches. Fair value of underlying investments in private equity assets is determined based on one or more valuation techniques, such as the market or income valuation approach, utilizing information provided by the general partner and taking into consideration the purchase price of the underlying securities, developments concerning the investee company subsequent to the acquisition of the investment, financial data and projections of the investee company provided to the general partner, illiquidity and non-transferability, and such other factors as the general partner deems relevant. The fair value of managed futures fund investments is determined by the issuer based on the unit values of the fund. Unit values are determined by dividing the fund’s net assets by the number of units outstanding at the valuation date. Fair value of the underlying investments in the managed futures fund is determined through quoted market prices. Insurance contract interests consist of investments in group annuity contracts, which are valued based on the present value of expected future payments.

The fair values of the Company’s pension plan assets at December 31, 2014 and 2013, by asset category, are as follows (in millions):



	Fair Value Measurements as of
	December 31, 2014
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category
Cash	$	3.5	$	3.5	$	—	$	—
Equity securities:
Domestic	18.2		18.2		—		—
Domestic exchange-traded funds	33.0		33.0		—		—
International	9.8		9.7		0.1		—
International and emerging markets exchange-traded funds	14.9		14.9		—		—
Fixed income securities:
U.S. Treasury obligations	24.7		24.7		—		—
Domestic corporate bonds and notes	40.9		—		40.9		—
Foreign corporate bonds	5.4		—		5.4		—
Other types of investments:
Limited partnership interest in private equity fund	0.3		—		—		0.3
Exchange-traded global real estate fund	5.1		5.1		—		—
Insurance contracts	1.4		—		—		1.4
Exchange-traded commodity fund	2.8		2.8		—		—
Other receivables	0.8		0.8		—		—
Total	$	160.8	$	112.7	$	46.4	$	1.7



	Fair Value Measurements as of
	December 31, 2013
	Total		Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category
Cash	$	5.2	$	5.2	$	—	$	—
Equity securities:
Domestic	44.8		44.8		—		—
International	24.4		24.4		—		—
Fixed income securities:
Exchange traded funds - U.S. Treasuries	16.3		16.3		—		—
Exchange traded funds - Investment grade U.S. corporate bonds	45.0		45.0		—		—
Limited partnership investment in high-yield U.S. corporate bonds	6.4		—		—		6.4
Other types of investments:
Real estate partnership interests	7.5		—		—		7.5
Limited partnership interest in private equity fund	0.3		—		—		0.3
Exchange-traded commodity fund	2.5		2.5		—		—
Insurance contracts	1.0		—		—		1.0
Total	$	153.4	$	138.2	$	—	$	15.2

The table below presents a reconciliation of all pension plan investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2014 and 2013 (in millions):



	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Real Estate			Private Equity			Insurance		Limited Partnership			Total
Beginning balance, January 1, 2013	$	7.8		$	0.7		$	0.9	$	—		$	9.4
Actual return on plan assets:
Assets held at the reporting date	1.1			(0.2		)	0.1		0.3			1.3
Assets sold during the period	0.3			0.1			—		—			0.4
Purchases, sales and settlements	(1.7		)	(0.3		)	—		6.1			4.1
Ending balance, December 31, 2013	7.5			0.3			1.0		6.4			15.2
Actual return on plan assets:
Assets held at the reporting date	—			—			0.4		—			0.4
Assets sold during the period	—			—			—		—			—
Purchases, sales and settlements	(7.5		)	—			—		(6.4		)	(13.9		)
Ending balance, December 31, 2014	$	—		$	0.3		$	1.4	$	—		$	1.7

Contributions are determined annually for each plan by the Company’s pension Administrative Committee, based upon the actuarially determined minimum required contribution under the Employee Retirement Income Security Act of 1974, as amended, the Pension Protection Act of 2006 (the “Act”), and the maximum deductible contribution allowed for tax purposes. In 2014, 2013 and 2012, the Company contributed approximately $5.7 million, $0.1 million, and $2.6 million, respectively, to its defined benefit pension plans. The Company’s funding policy is to contribute cash to its pension plans so that it meets at least the minimum contribution requirements.

For the plans covering employees who are members of collective bargaining units, the benefit formulas are determined according to the collective bargaining agreements, either using career average pay as the base or a flat dollar amount per year of service.

In 2007, the Company changed the traditional defined benefit pension plan formula for new non-bargaining unit employees hired after January 1, 2008 and, replaced it with a cash balance defined benefit pension plan formula. Subsequently, effective January 1, 2012, the Company changed the benefits under its traditional defined benefit plans for non-bargaining unit employees hired before January 1, 2008 and, replaced the benefit with the same cash balance defined benefit pension plan formula provided to those employees hired after January 1, 2008. Retirement benefits under the cash balance pension plan formula are based on a fixed percentage of employee eligible compensation, plus interest. The plan interest credit rate will vary from year-to-year based on the 10-year U.S. Treasury rate.

Benefit Plan Assets and Obligations: The measurement date for the Company’s benefit plan disclosures is December 31 of each year. The status of the funded defined benefit pension plan and the unfunded accumulated post-retirement benefit plans at December 31, 2014 and 2013 are shown below (in millions):



	Pension Benefits						Other Post-retirement Benefits
	2014			2013			2014			2013
Change in Benefit Obligation
Benefit obligation at beginning of year	$	175.4		$	189.7		$	12.9		$	10.9
Service cost	2.6			2.6			0.1			0.1
Interest cost	8.3			7.6			0.6			0.4
Plan participants’ contributions	—			—			0.8			0.9
Actuarial (gain) loss	29.7			(13.2		)	(0.7		)	3.0
Benefits paid	(11.6		)	(11.1		)	(1.7		)	(1.8		)
Special or contractual termination benefits	—			—			—			—
Curtailment	—			(0.2		)	—			(0.6		)
Benefit obligation at end of year	$	204.4		$	175.4		$	12.0		$	12.9
Change in Plan Assets
Fair value of plan assets at beginning of year	153.4			142.3			—			—
Actual return on plan assets	13.3			22.1			—			—
Employer contributions	5.7			0.1			—			—
Benefits paid	(11.6		)	(11.1		)	—			—
Fair value of plan assets at end of year	$	160.8		$	153.4		$	—		$	—

Funded Status and Recognized Liability	$	(43.6	)	$	(22.0	)	$	(12.0	)	$	(12.9	)

The accumulated benefit obligation for the Company’s qualified pension plans was $203.2 million and $173.6 million as of December 31, 2014 and 2013, respectively. Amounts recognized on the consolidated balance sheets and in accumulated other comprehensive loss at December 31, 2014 and 2013 were as follows (in millions):



	Pension Benefits						Other Post-retirement Benefits
	2014			2013			2014			2013
Non-current assets	$	—		$	3.3		$	—		$	—
Current liabilities	—			—			(0.8		)	(0.9		)
Non-current liabilities	(43.6		)	(25.3		)	(11.2		)	(12.0		)
Total	$	(43.6	)	$	(22.0	)	$	(12.0	)	$	(12.9	)

Net loss (net of taxes)	$	47.3		$	33.2		$	0.5		$	1.1
Unrecognized prior service credit (net of taxes)	(3.4		)	(3.9		)	—			—
Total	$	43.9		$	29.3		$	0.5		$	1.1

The accumulated and projected benefit obligations increased from 2013 primarily due to a 90-basis-point decrease in the discount rate and the adoption of a change in mortality assumptions that generally reflects increased longevity for plan participants. The information for qualified pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2014 and 2013 is shown below (in millions):



	2014		2013
Projected benefit obligation	$	204.4	$	167.7
Accumulated benefit obligation	$	203.2	$	166.0
Fair value of plan assets	$	160.8	$	142.4

The estimated prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2015 is $0.8 million. The estimated net loss that will be recognized in net periodic pension cost for the defined benefit pension plans in 2015 is $6.7 million. The estimated net loss for the other defined benefit post-retirement plans that will be amortized from accumulated other comprehensive loss into net periodic pension cost in 2015 is $0.2 million. The estimated prior service cost for the other defined benefit post-retirement plans that will be amortized from accumulated other comprehensive loss into net periodic pension cost in 2015 is negligible.

Unrecognized gains and losses of the post-retirement benefit plans are amortized over five years. Although current health costs are expected to increase, the Company attempts to mitigate these increases by maintaining caps on certain of its benefit plans, using lower cost health care plan options where possible, requiring that certain groups of employees pay a portion of their benefit costs, self-insuring for certain insurance plans, encouraging wellness programs for employees, and implementing measures to mitigate future benefit cost increases.

Components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the defined benefit pension plans and the post-retirement health care and life insurance benefit plans during 2014, 2013, and 2012, are shown below (in millions):



	Pension Benefits									Other Post-retirement Benefits
	2014			2013			2012			2014			2013			2012
Components of Net Periodic Benefit Cost
Service cost	$	2.6		$	2.6		$	2.4		$	0.1		$	0.1		$	0.1
Interest cost	8.3			7.6			8.2			0.6			0.4			0.5
Expected return on plan assets	(10.7		)	(10.9		)	(10.5		)	—			—			—
Amortization of net loss	4.0			7.7			7.9			0.3			(0.2		)	(0.2		)
Amortization of prior service cost	(0.8		)	(0.8		)	(0.8		)	—			—			—
Curtailment gain	—			—			—			—			(0.5		)	—
Recognition of loss on special termination benefit	—			—			0.1			—			—			—
Net periodic benefit cost	3.4			6.2			7.3			1.0			(0.2		)	0.4

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss (gain)	$	27.1		$	(24.7	)	$	7.0		$	(0.6	)	$	3.0		$	(0.4	)
Amortization of unrecognized gain (loss)	(4.0		)	(7.7		)	(7.9		)	(0.3		)	0.2			0.3
Amortization of prior service cost	0.8			0.8			0.8			—			—			—
Total recognized in other comprehensive income	23.9			(31.6		)	(0.1		)	(0.9		)	3.2			(0.1		)
Total recognized in net periodic benefit cost and other comprehensive income	$	27.3		$	(25.4	)	$	7.2		$	0.1		$	3.0		$	0.3

The weighted average assumptions used to determine benefit information during 2014, 2013 and 2012 were as follows:



	Pension Benefits						Other Post-retirement Benefits
	2014		2013		2012		2014		2013		2012
Weighted Average Assumptions:
Discount rate	4.00	%	4.90	%	4.10	%	4.10	%	4.90	%	4.10	%
Expected return on plan assets	7.10	%	8.00	%	8.25	%	—	%	—	%	—	%
Rate of compensation increase	0.5%-3%		3.00	%	3.00	%	3.00	%	3.00	%	3.00	%
Initial health care cost trend rate							7.30	%	7.50	%	8.00	%
Ultimate rate							4.50	%	4.50	%	4.50	%
Year ultimate rate is reached							2028		2028		2020

If the assumed health care cost trend rate were increased or decreased by one percentage point, the accumulated post-retirement benefit obligation, as of December 31, 2014, 2013 and 2012 and the net periodic post-retirement benefit cost for 2014, 2013 and 2012, would have increased or decreased as follows (in millions):



	Other Post-retirement Benefits
	One Percentage Point
	Increase						Decrease
	2014		2013		2012		2014			2013			2012
Effect on total of service and interest cost components	$	0.1	$	—	$	—	$	(0.1	)	$	—		$	—
Effect on post-retirement benefit obligation	$	1.1	$	1.2	$	0.6	$	(0.9	)	$	(1.0	)	$	(0.5	)

Non-qualified Benefit Plans: The Company has non-qualified supplemental pension plans covering certain employees and retirees, which provide for incremental pension payments from the Company’s general funds so that total pension benefits would be substantially equal to amounts that would have been payable from the Company’s qualified pension plans if it were not for limitations imposed by income tax regulations. The obligations relating to these plans totaled $7.1 million at December 31, 2014. A 3.1 percent discount rate was used to determine the 2014 obligation. The expense associated with the non-qualified plans was $0.1 million in 2014, $0.1 million in 2013, and $0.9 million in 2012. As of December 31, 2014, the amount recognized in accumulated other comprehensive income for unrecognized loss, net of tax, was approximately $1.8 million, and the amount recognized as unrecognized prior service credit, net of tax, was ($1.8) million. The estimated net loss and prior service (credit), net of tax, that will be recognized in net periodic pension cost in 2014 is ($0.2) million.

Estimated Benefit Payments: The estimated future benefit payments for the next ten years are as follows (in millions):



	Pension		Non-qualified		Post-retirement
Year	Benefits		Plan Benefits		Benefits
2015	$	10.9	$	0.7	$	0.9
2016	$	11.2	$	3.6	$	0.9
2017	$	11.4	$	0.1	$	0.8
2018	$	11.6	$	1.0	$	0.8
2019	$	11.8	$	0.1	$	0.8
2020-2024	$	62.5	$	0.7	$	3.4

Current liabilities of approximately $1.6 million, related to non-qualified plan and post-retirement benefits, are classified as accrued and other liabilities in the consolidated balance sheet as of December 31, 2014.

Multiemployer Plans: Grace and certain subsidiaries contribute to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:


a.	Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.


b.	If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.


c.	If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company's participation in these plans for the year ended December 31, 2014, is outlined in the table below. The "EIN Pension Plan Number" column provides the Employee Identification Number (EIN) and the 3-digit plan number, if applicable. The most recent Pension Protection Act (PPA) zone status available in 2014 is for the plan's year-end as of December 31, 2013, for the Pension Trust Fund for Operating Engineers Pension Plan and Laborer's National (Industrial) Pension Fund. The zone status available for 2014 for the Hawaii Laborers Trust Funds is for the plan year-end as of February 28, 2014. GP Roadway Solutions, Inc. and GP/RM Prestress, LLC have separate contracts and different expiration dates with the Hawaii Laborers Trust Fund. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans that are less than 65 percent funded are "red zone" plans in need of reorganization; plans between 65 percent and 80 percent funded or that have an accumulated funding deficiency or are expected to have a deficiency in any of the next six years are "yellow zone" plans; plans that meet both of the "yellow zone" criteria are "orange zone" plans; and if the plan is funded more than 80 percent, it is a "green zone" plan. The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration dates of the collective-bargaining agreements to which the plans are subject.

There were no plans where the Company contributed more than 5 percent of the total contributions.

Pension Protection Act Zone Status

FIP/RP Status

Contribution by Entity

Surcharge Imposed

Expiration Date

Current Plan Year End

EIN Plan No.

2014 and 2013

Pending/Implemented

Jan. 1 - Dec. 31, 2014

Oct. 1 - Dec. 31, 2013

Fund

Operating Engineers

94-6090764; 001

Red

Yes

4.3

1.0

9/2/19*

12/31/14

Laborers National

52-6074345; 001

Red

Yes

0.1

—

8/31/15

12/31/14

Hawaii Laborers

99-6012128; 001

Green

0.5

0.1

8/31/15

2/28/14

Hawaii Laborers

99-6012128; 001

Green

0.1

—

9/30/19

2/28/14

5.0

1.1

* The Company has reached an agreement in principle with the IUOE, which contemplates a contractual expiration date on September 2, 2019.

Defined Contribution Plans: The Company sponsors defined contribution plans that qualify under Section 401(k) of the Internal Revenue Code and provides matching contributions of up to 3 percent of eligible employee compensation. The Company’s matching contributions expensed under these plans totaled $0.7 million in each of the years ended December 31, 2014 and 2013. The Company also maintains profit sharing plans, and if a minimum threshold of Company performance is achieved, provides contributions of 1 to 5 percent, depending upon Company performance above the minimum threshold. In 2014 and 2013, the profit sharing contribution expense was $0.6 million and $0.9 million, respectively. There was no profit sharing contribution expense recorded in 2012 for these plans.

Grace 401(k) Plans: The Company allows for discretionary non-elective employer contributions up to the sum of 10 percent of each eligible employee's compensation for the 12 months in the plan year, subject to certain limitations. Management incentives and/or profit sharing bonuses can be deferred to the employee's 401(k) account, but will be subject to the IRS' annual limit on employee elective deferrals. For the year ended December 31, 2014, Grace recognized discretionary employer contributions and profit sharing expense of approximately $1.8 million.