Pension, Post-Retirement and Post-Employment Plans

12 Months Ended

Dec. 31, 2019

PENSION, POST-RETIREMENT AND POST-EMPLOYMENT PLANS

For 2019, 2018 and 2017, the net periodic cost for all plans totaled $1.0 million, $0.1 million and $11.5 million, respectively.

Domestic Defined Benefit Pension Plan

The domestic non-contributory defined benefit pension plan is closed to new participants. Pursuant to this plan, retirement benefits are provided based upon years of service and compensation levels. An investment committee, appointed by the Board, manages the plan and its assets in accordance with the plan’s investment policies. The Company’s investment policies incorporate an asset allocation strategy that emphasizes the long-term growth of capital and acceptable asset volatility as long as it is consistent with the volatility of the relevant market indexes. The investment policies attempt to achieve a mix of approximately 25% of plan investments for long-term growth, 74% for liability-matching assets and 1% for near-term benefit payments. These allocation targets exclude the market value of equity derivatives. The Company believes this strategy is consistent with the long-term nature of plan liabilities and ultimate cash needs of the plans. Plan assets consist primarily of listed stocks, equity security funds, short-term Treasury bond mutual funds, derivatives and limited partnership interests. The weighted average asset allocation of this pension plan was 87% fixed income mutual fund holdings, 7% equity securities, 5% limited partnership interests and 1% cash at December 31, 2019.

Actual pension expense and future contributions required to fund this pension plan will depend on future investment performance, changes in future discount rates, the level of Company contributions and various other factors related to the populations participating in this pension plan. The Company evaluates the plan's actuarial assumptions on an annual basis, including the expected long-term rate of return on assets and discount rate, and adjusts the assumptions, as necessary, to ensure proper funding levels are maintained so that the plan can meet obligations as they become due.

At December 31, 2019 and 2018, the projected benefit obligation for this pension plan totaled $220 million and $199 million, respectively.

Supplemental Executive Retirement Plans

The Company sponsors SERPs that entitle certain employees to the difference between the benefits actually paid to them and the benefits they would have received under the pension plan described above were it not for certain restrictions imposed by the Internal Revenue Service Code. Covered compensation under the SERPs includes an employee’s annual salary and bonus. At December 31, 2019 and 2018, the projected benefit obligation for the SERPs totaled $8.0 million and $7.3 million, respectively.

Foreign Pension Plans

The Company's international benefit plans are included in the tables presented below. These plans are not significant, individually or in the aggregate, to the Company's consolidated financial position, results of operations or cash flows. At December 31, 2019 and 2018, the projected benefit obligation for these foreign pension plans totaled $26.6 million and $23.3 million, respectively.

Certain other foreign subsidiaries maintain benefit plans that are consistent with statutory practices but do not meet the criteria for pension or post-retirement accounting and have therefore been excluded from the tables presented below. These benefit plans had obligation balances of $1.1 million at December 31, 2019 and 2018, respectively, and were recorded in the Consolidated Balance Sheets as "Pension and post-retirement benefits."

The Company's U.K. Pension Plan, which was comprised of a defined benefit plan and a defined contribution plan providing retirement and death benefit plans to employees in the U.K., was transferred to Pension Insurance Corporation plc at December 31, 2017, in accordance with an agreement entered in to by the plan trustees in October 2014, and the related plan liabilities were settled. The Company reclassified $9.8 million from "Accumulated other comprehensive loss" to reflect the settlement of the pension obligation in 2017.

Domestic Defined Benefit Post-Retirement Medical and Dental Plan

The Company sponsors defined benefit post-retirement medical and dental plans that covers all of its MacDermid domestic full-time employees, hired prior to April 1, 1997, who retire after age 55, with at least ten to twenty years of service (depending upon the date of hire). Eligible employees receive a subsidy from the Company towards the purchase of their retiree medical benefits based on the date of retirement. The annual increase in the Company’s costs for post-retirement medical benefits is subject to a limit of 5%. Retirees are required to contribute to the plan costs in excess of their respective Company limits in addition to their other required contributions. The projected benefit obligation for the post-retirement plan at December 31, 2019 is comprised of 39% retirees, 32% fully eligible active participants and 29% other participants. The actuarial determination of the Company's accumulated benefit obligation associated with the plan for post-retirement medical benefits assumes annual cost increases of 2% and 4%, based on the date of retirement. As a result of the above mentioned plan limits, the effect of an increase in the healthcare cost trend on the Company's accumulated benefit obligation and the service and interest costs associated therewith is limited to an immaterial amount.

The components of net periodic (benefit)/cost of the Domestic and Foreign Pension Plans and Post-Retirement Medical Benefits were as follows:


	Year Ended December 31,
	2019						2018						2017
(dollars in millions)	Domestic		Foreign		Domestic		Foreign		Domestic		Foreign
Pension and SERP Benefits
Service cost	$	—	$	0.7	$	—	$	1.2	$	—	$	1.6
Interest cost on the projected benefit obligation	8.7		0.3		8.1		0.3		8.8		1.4
Expected return on plan assets	(9.6)		(0.1)		(10.4)		(0.1)		(10.1)		(1.3)
Amortization of prior service cost	—		—		—		—		—		0.1
Amortization of actuarial net loss	—		0.1		—		—		—		0.1
Plan curtailment	—		—		0.1		—		—		0.3
Plan settlement	—		0.2		0.2		0.1		—		10.1
Net periodic (benefit) cost	$	(0.9)	$	1.2	$	(2.0)	$	1.5	$	(1.3)	$	12.3
Post-retirement Medical Benefits
Service cost	$	—	$	0.1	$	—	$	0.1	$	—	$	—
Interest cost on the projected benefit obligation	0.4		0.1		0.4		0.1		0.4		0.1

Net periodic cost	$	0.4	$	0.3	$	0.4	$	0.2	$	0.4	$	0.1

The weighted average key assumptions used to determine the net periodic (benefit)/cost of the Domestic and Foreign Pension Plans are as follows:


	Year Ended December 31,
	2019			2018			2017
	Domestic	Foreign	Domestic	Foreign	Domestic	Foreign
Pension and SERP Benefits
Discount rate	4.4%	1.5%	3.7%	1.4%	4.2%	1.6%
Rate of compensation increase	3.5%	3.4%	3.5%	3.4%	3.5%	3.2%
Long-term rate of return on assets	5.4%	1.4%	5.4%	1.8%	5.9%	1.7%
Post-retirement Medical Benefits
Discount rate	4.3%	9.2%	3.7%	9.9%	4.2%	12.2%

The expected long-term rate of return on assets assumption is developed with reference to historical returns, forward-looking return expectations, the Domestic and Foreign Pension Plans' investment allocations and peer comparisons.

The following tables summarize changes in benefit obligation, plan assets and funded status of the Company’s plans:


	Pension and SERP Benefits														Post-Retirement Medical Benefits
	2019						2018						2019				2018
(dollars in millions)	Domestic		Foreign		Domestic		Foreign		Domestic		Foreign		Domestic		Foreign
Change in Projected Benefit Obligation:
Beginning of period balance	$	206.2	$	23.3	$	226.2	$	23.0	$	9.0	$	1.3	$	9.7	$	0.9
Additions	—		2.7		—		2.0		—		—		—		—

Service cost	—		0.7		—		1.2		—		0.1		—		0.1
Plan amendments	—		—		—		—		—		(1.4)		—		—
Interest cost	8.7		0.3		8.1		0.3		0.4		0.1		0.4		0.1


Actuarial loss (gain) due to assumption change	25.6		1.1		(15.4)		(0.5)		1.0		0.1		(1.1)		0.1
Actuarial (gain) loss due to plan experience	(1.1)		1.0		(1.7)		0.2		(0.6)		(0.1)		0.5		0.3
Benefits and expenses paid	(11.5)		(0.6)		(10.3)		(0.9)		(0.6)		—		(0.5)		—
Settlement	—		(1.6)		(0.7)		(1.1)		—		—		—		—
Foreign currency translation	—		(0.2)		—		(0.9)		—		—		—		(0.2)
End of period balance	$	227.9	$	26.6	$	206.2	$	23.3	$	9.2	$	0.1	$	9.0	$	1.3
Change in Plan Assets:
Beginning of period balance	$	184.7	$	4.3	$	199.6	$	7.7	$	—	$	—	$	—	$	—
Additions	—		—		—		—		—		—		—		—

Actual return on plan assets, net of expenses	32.2		1.4		(5.1)		0.2		—		—		—		—
Employer contributions	0.5		2.4		1.2		(1.7)		0.5		—		0.5		—

Benefits paid	(11.5)		(0.6)		(10.3)		(0.9)		(0.5)		—		(0.5)		—
Settlement	—		(1.6)		(0.7)		(0.8)		—		—		—		—
Foreign currency translation	—		0.1		—		(0.2)		—		—		—		—
End of period balance	$	205.9	$	6.0	$	184.7	$	4.3	$	—	$	—	$	—	$	—
Funded Status
Funded status of plan	$	(22.0)	$	(20.6)	$	(21.5)	$	(19.0)	$	(9.2)	$	(0.1)	$	(9.0)	$	(1.3)
Supplemental Information:
Accumulated benefit obligation	$	217.1	$	23.3	$	196.8	$	20.1	$	9.2	$	0.1	$	9.0	$	1.3
Plans with Accumulated Benefit Obligation in excess of Plan Assets:
Accumulated benefit obligation	$	217.1	$	23.2	$	196.8	$	20.0	$	9.2	$	0.1	$	9.0	$	1.3
Fair value plan assets	$	205.9	$	5.8	$	184.7	$	4.1	$	—	$	—	$	—	$	—
Plans with Projected Benefit Obligation in excess of Plan Assets:
Projected benefit obligation	$	227.9	$	26.5	$	206.2	$	23.1	$	9.2	$	0.1	$	9.0	$	1.3
Fair value plan assets	$	205.9	$	5.8	$	184.7	$	4.1	$	—	$	—	$	—	$	—

Weighted average key assumptions used to determine the benefit obligations in the actuarial valuations of the pension and post-retirement benefit liabilities are as follows:


	Pension and SERP Benefits							Post-Retirement Medical Benefits
	2019			2018			2019		2018
	Domestic	Foreign	Domestic	Foreign	Domestic	Foreign	Domestic	Foreign
Discount rate	3.3%	1.0%	4.3%	1.5%	3.2%	7.3%	4.3%	9.2%
Rate of compensation increase	3.5%	3.1%	3.5%	3.4%	N/A	N/A	N/A	N/A

(N/A) Not applicable as compensation rates are not used in the determination of benefit obligations under the post-retirement benefit plans.

Amounts recognized in the Consolidated Balance Sheets and "Accumulated other comprehensive loss" consist of the following:


	Pension and SERP Benefits														Post-Retirement Medical Benefits
	2019						2018						2019				2018
(dollars in millions)	Domestic		Foreign		Domestic		Foreign		Domestic		Foreign		Domestic		Foreign
Balance Sheet

Accrued expenses and other current liabilities	$	0.6	$	0.8	$	0.5	$	1.0	$	0.6	$	—	$	0.7	$	—
Pension and post-retirement benefits	21.4		19.8		21.0		18.0		8.6		0.1		8.3		1.3
Accumulated Other Comprehensive Loss
Net actuarial loss	$	(6.9)	$	(2.1)	$	(5.1)	$	(1.8)	$	(0.6)	$	(0.7)	$	(0.3)	$	(0.8)
Prior service costs	—		—		—		—		—		1.4		—		—

The following table presents the fair value of plan assets:


		December 31,
(dollars in millions)	Classification	2019		2018
Asset Category
Domestic equities	Level 1	$	—	$	22.0
Derivatives	Level 2	9.9		—
Foreign equities	Level 1	5.4		3.9

Foreign bonds	Level 2	1.3		—
Mutual funds holding U.S. Treasury Securities	Level 1	20.3		19.0
Mutual funds holding fixed income securities	Level 1	121.9		96.3



U.S. Treasury bonds	Level 2	36.4		21.5
Cash and cash equivalents	Level 1	6.8		6.2
Sub-Total		202.0		168.9
Assets using net asset value (or NAV) as a practical expedient		9.9		20.1
Total		$	211.9	$	189.0

Assets using NAV as a practical expedient include limited partnership interests and commingled funds that are not actively traded or whose underlying investments are valued using observable marketplace inputs.

At December 31, 2019, expected future benefit payments related to the Company’s defined benefit plans were as follows:


	Pension and SERP Benefits						Post-Retirement Medical Benefits		Total
(dollars in millions)	Domestic		Foreign
2020	$	12.6	$	1.3	$	0.6	$	14.5
2021	12.4		1.4		0.6		14.4
2022	13.2		1.3		0.6		15.1
2023	13.0		1.5		0.6		15.1
2024	12.7		1.8		0.6		15.1
Subsequent five years	65.2		7.3		2.8		75.3
Total	$	129.1	$	14.6	$	5.8	$	149.5

The measurement date used to determine pension and other post-retirement medical benefits was December 31, 2019, at which time the minimum contribution level for the following year was determined. The Company is not required to make any plan contributions in 2020.