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Employee Benefit Plans (Notes)
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
Employee Benefit Plans
16. Employee Benefit Plans

Knowles sponsors its own defined contribution plans. The Company's expense relating to defined contribution plans was $6.9 million, $6.2 million, and $6.2 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Knowles sponsors four defined benefit pension plans to certain non-U.S. employees. The two plans in the U.K. and the plan in Taiwan are closed to new participants; however, all active participants in these plans continue to accrue benefits. The plan in the Philippines is open to new participants. These plans are considered direct obligations of the Company and have been recorded within the accompanying Consolidated Financial Statements.
Non-U.S. Defined Benefit Pension Plans

Obligations and Funded Status

The following tables summarize the balance sheet impact, including the benefit obligations, assets, and funded status associated with the Company's four defined benefit plans for non-U.S. participants at December 31, 2022 and 2021.
December 31,
(in millions)20222021
Change in benefit obligation:  
Benefit obligation at beginning of year$69.5 $74.5 
Service cost0.3 0.3 
Interest cost1.1 0.9 
Benefits paid(1.9)(1.6)
Actuarial gain (1)
(23.5)(3.8)
Plan amendments0.2 — 
Currency translation and other (2)
(3.9)(0.8)
Benefit obligation at end of year41.8 69.5 
Change in plan assets:  
Fair value of plan assets at beginning of year69.3 65.7 
Actual return on plan assets(20.1)4.6 
Company contributions1.2 1.5 
Benefits paid(1.9)(1.6)
Currency translation and other(7.2)(0.9)
Fair value of plan assets at end of year41.3 69.3 
Funded status$(0.5)$(0.2)
Amounts recognized in the Consolidated Balance Sheets consist of:  
Other assets and deferred charges$3.4 $2.6 
Other liabilities(3.9)(2.8)
Funded status$(0.5)$(0.2)
Accumulated other comprehensive loss:
Net actuarial losses$17.9 $19.2 
Prior service cost1.2 1.1 
Deferred taxes(2.7)(3.3)
Total accumulated other comprehensive loss, net of tax16.4 17.0 
Accumulated benefit obligation$41.1 $68.4 
(1) The net actuarial gains during the years ended December 31, 2022 and 2021 primarily related to changes in the discount rates for the U.K. plans.
(2) The Company recorded an increase in liabilities of $3.4 million related to pre-spin-off pension obligations during the year ended December 31, 2022.
Pension plans with projected benefit obligations in excess of plan assets consisted of the following at December 31, 2022 and 2021:
December 31,
 (in millions)20222021
Projected benefit obligation$24.5 $42.6 
Fair value of plan assets20.6 39.9 

Pension plans with accumulated benefit obligations in excess of plan assets consisted of the following at December 31, 2022 and 2021:
December 31,
 (in millions)20222021
Accumulated benefit obligation$24.5 $40.0 
Fair value of plan assets20.6 37.8 

Net Periodic Benefit Cost (Income)

Components of the net periodic benefit cost (income) were as follows:
Years Ended December 31,
(in millions)202220212020
Service cost$0.3 $0.3 $0.3 
Interest cost1.1 0.9 1.2 
Expected return on plan assets(2.6)(2.8)(2.4)
Amortization of prior service cost — — 0.1 
Amortization of recognized actuarial loss0.5 0.8 0.5 
Other (1)
3.4 — — 
Total net periodic benefit cost (income)$2.7 $(0.8)$(0.3)
(1) The Company recorded an adjustment of $3.4 million related to pre-spin-off pension obligations during the year ended December 31, 2022.

The components of net periodic benefit cost (income) other than service cost are presented in the Other (income) expense, net line on the Consolidated Statements of Earnings. The service cost component is presented within the Cost of goods sold, Research and development expenses, and Selling and administrative expenses lines on the Consolidated Statements of Earnings based on the nature of services performed by the related employees.

Assumptions

The Company determines actuarial assumptions on an annual basis. The actuarial assumptions used for the Company’s four defined benefit plans for non-U.S. participants will vary depending on the applicable country and as such, the tables below include these assumptions by country, as well as in total.
The assumptions used in determining the benefit obligations were as follows:
December 31,
 20222021
Discount rate
Philippines7.50 %5.25 %
Taiwan1.75 %0.75 %
United Kingdom4.84 %1.84 %
Weighted-average4.71 %1.83 %
Average wage increase
Philippines4.00 %4.00 %
Taiwan4.00 %4.00 %
United Kingdom4.35 %4.65 %
Weighted-average4.30 %4.59 %

The assumptions used in determining the net periodic benefit cost (income) were as follows:
Years Ended December 31,
 202220212020
Discount rate
Philippines5.25 %4.00 %5.00 %
Taiwan0.75 %0.25 %0.75 %
United Kingdom1.84 %1.28 %2.00 %
Weighted-average1.83 %1.27 %1.97 %
Average wage increase
Philippines4.00 %4.00 %5.00 %
Taiwan4.00 %4.00 %4.00 %
United Kingdom4.65 %4.20 %4.25 %
Weighted-average4.59 %4.18 %4.24 %
Expected return on plan assets
Taiwan4.00 %3.50 %3.75 %
United Kingdom4.15 %4.34 %4.35 %
Weighted-average4.15 %4.32 %4.33 %

The Company’s discount rate assumptions are determined by developing yield curves based on high quality corporate bonds with maturities matching the plans’ expected benefit payment streams. The plans’ expected cash flows are then discounted by the resulting year-by-year spot rates.

Plan Assets

The primary financial objective of the plans is to secure participant retirement benefits. Accordingly, the key objective in the plans’ financial management is to promote stability and, to the extent appropriate, growth in the funded status. Related and supporting financial objectives are established in conjunction with a review of current and projected plan financial requirements.
As it relates to the funded defined benefit pension plans, the Company’s funding policy is consistent with the funding requirements of applicable local non-U.S. laws. The Company is responsible for overseeing the management of the investments of the plans’ assets and otherwise ensuring that the plans’ investment programs are in compliance with applicable local law, other relevant legislation, and related plan documents. Where relevant, the Company has retained professional investment managers to manage the plans’ assets and investment process. The investment managers, in executing their investment processes, have the authority and responsibility to select appropriate investments in the asset classes specified by the terms of their applicable prospectus or investment manager agreements with the plans.

The assets of the plans are invested to achieve an appropriate return for the plans consistent with a prudent level of risk. The asset return objective is to achieve, as a minimum over time, the passively managed return earned by market index funds, weighted in the proportions outlined by the asset class exposures identified in the plans’ strategic allocation. The expected return on plan assets assumptions are developed through analysis of historical market returns, statistical analysis, current market conditions, and the past experience of plan asset investments.

Fair Value Measurements

The fair values of plan assets by asset category within the ASC 820 hierarchy were as follows at December 31, 2022 and 2021:
 December 31, 2022December 31, 2021
(in millions)Level 1Level 2Level 3Total Fair ValueLevel 1Level 2Level 3Total Fair Value
Asset category:       
Fixed income investments$3.3 $16.7 $— $20.0 $3.5 $26.1 $— $29.6 
Common stock funds — 6.1 — 6.1 — 18.9 — 18.9 
Real estate funds— 4.1 — 4.1 — 5.5 — 5.5 
Cash and equivalents1.4 — — 1.4 0.5 — — 0.5 
Other4.1 5.6 — 9.7 9.0 5.8 — 14.8 
Total$8.8 $32.5 $— $41.3 $13.0 $56.3 $— $69.3 

See Note 11. Hedging Transactions and Derivative Instruments for additional information on the fair value hierarchy. There were no significant transfers between Level 1 and Level 2 assets during the years ended December 31, 2022 and 2021.

Fixed income investments include government and municipal securities and corporate bonds, which are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

Common stock funds consist of mutual funds and collective trusts. Mutual funds are valued by obtaining quoted prices from nationally recognized securities exchanges. Collective trusts are valued using Net Asset Value (the "NAV") as of the last business day of the year. The NAV is based on the underlying value of the assets owned by the fund minus its liabilities and then divided by the number of shares outstanding. The value of the underlying assets is based on quoted prices in active markets.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. 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 fair value measurement at the reporting date.
Future Estimates

Benefit Payments

Estimated future benefit payments to retirees, which reflect expected future service, are as follows:
(in millions)
2023$2.7 
20242.0 
20252.3 
20262.5 
20272.7 
2028-203212.7 

Contributions

Generally, annual contributions are made at such times and in such amounts as required by law and agreed with the trustees of the non-U.S. defined benefit plans. The Company estimates it will pay $1.3 million during the year ended December 31, 2023 related to contributions to these plans. This amount may vary based on updated funding agreements with the trustees of these plans.