The Company has defined benefit pension and other postretirement plans covering certain union and non-union employees, primarily in the U.S., Canada and France. In connection with the Acquisition, we assumed the obligations of various defined benefit pension and other postretirement plans that were maintained by Tembec which cover certain employees, primarily in Canada and France. The defined benefit pension plans are closed to new participants.

In October 2019, the Company settled certain Canadian pension liabilities through the purchase of annuity contracts with an insurance company. The settlement resulted in the recognition of approximately $9 million in pension settlement losses which

were recognized in “Other components of net periodic benefit costs” in our Consolidated Statement of Income and Comprehensive Income for the year ended December 31, 2019.

Defined benefit pension and other postretirement plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.

The following tables set forth the changes in the projected benefit obligation and plan assets and reconciles the funded status and the amounts recognized in the Consolidated Balance Sheets for the defined benefit pension and postretirement plans for the two years ended December 31:



	Pension						Postretirement
Change in Projected Benefit Obligation	2019			2018			2019			2018
Projected benefit obligation at beginning of year	$	1,013,541		$	1,112,785		$	41,243		$	45,449
Service cost	9,857			11,663			1,849			1,716
Interest cost	36,138			35,499			1,432			1,327
Actuarial loss (gain)	101,576			(44,976		)	(39		)	(2,720		)
Participant contributions	900			905			130			360
Benefits paid	(55,801		)	(59,531		)	(2,824		)	(3,418		)
Plan amendment	1,693			—			—			—
Settlement	(222,342		)	—			(146		)	—
Effects of foreign currency exchange rates	22,811			(42,804		)	926			(1,471		)
Projected benefit obligation at end of year	$	908,373		$	1,013,541		$	42,571		$	41,243



Change in Plan Assets
Fair value of plan assets at beginning of year	$	844,588		$	979,269		$	—		$	—
Actual return on plan assets	148,226			(44,167		)	—			—
Employer contributions	8,899			9,109			2,694			3,059
Participant contributions	900			905			130			360
Benefits paid	(55,801		)	(59,316		)	(2,824		)	(3,419		)
Settlement	(222,342		)	—			—			—
Effects of foreign currency exchange rates	21,388			(41,212		)	—			—
Fair value of plan assets at end of year	$	745,858		$	844,588		$	—		$	—



Funded Status at end of year:	$	(162,515	)	$	(168,953	)	$	(42,571	)	$	(41,243	)

The projected benefit obligation decreased during the year ended December 31, 2019 due to the settlement of certain Canadian pension plan obligations, as discussed above, partially offset by an actuarial loss resulting from a decrease in the discount rate assumed.



	Pension						Postretirement
Amounts recognized in the Consolidated Balance Sheets consist of:	2019			2018			2019			2018
Non-current assets	$	37,505		$	30,395		$	—		$	—
Current liabilities	(3,745		)	(3,773		)	(2,221		)	(3,160		)
Non-current liabilities	(196,275		)	(195,575		)	(40,350		)	(38,083		)
Net amount recognized	$	(162,515	)	$	(168,953	)	$	(42,571	)	$	(41,243	)



	Pension								Postretirement
	2019			2018			2017		2019			2018		2017
Net gains (losses)	$	(6,294	)	$	(55,918	)	$	24,411	$	(97	)	$	2,640	$	1,639
Prior service (costs) gains	$	(1,728	)	$	—		$	—	$	—		$	—	$	—

Net gains or losses and prior service costs or credits reclassified from other comprehensive income and recognized as a component of pension and postretirement expense for the three years ended December 31 are as follows:



	Pension						Postretirement
	2019		2018		2017		2019			2018			2017
Pension settlement loss (a)	$	8,787	$	—	$	—	$	—		$	—		$	—
Amortization of losses	10,244		11,648		11,651		81			229			333
Amortization of prior service (credit) cost	846		572		761		(153		)	(153		)	(151		)

(a) In October 2019, the Company purchased annuity contracts from a third-party insurance company who has assumed responsibility for future pension benefits for certain participants in our Canadian defined benefit plans. As required under ASC 715 Compensation-Retirement Benefits, we recognized a loss in the fourth quarter of 2019 on the settlement and de-recognition of the projected benefit obligation.

Net losses, prior service costs or credits and plan amendments that have not yet been included in pension and postretirement expense for the two years ended December 31 which have been recognized as a component of AOCI are as follows:



	Pension						Postretirement
	2019			2018			2019			2018
Prior service cost	$	(2,842	)	$	(1,681	)	$	1,185		$	1,338
Net losses	(160,058		)	(172,484		)	(2,266		)	(2,280		)
Deferred income tax benefit	37,050			39,299			293			218
Accumulated other comprehensive income (loss)	$	(125,850	)	$	(134,866	)	$	(788	)	$	(724	)

For defined benefit pension plans with accumulated benefit obligations in excess of plan assets, the following table sets forth the projected and accumulated benefit obligations and the fair value of plan assets for the years ended December 31:



	Pension									Postretirement
Components of Net Periodic Benefit Cost	2019			2018			2017			2019			2018			2017
Service cost	$	9,857		$	11,663		$	5,646		$	1,849		$	1,716		$	1,249
Interest cost	36,138			35,499			15,926			1,432			1,327			827
Expected return on plan assets	(52,343		)	(57,438		)	(25,978		)	—			—			—
Amortization of prior service (credit) cost	569			572			761			(153		)	(153		)	(151		)
Amortization of losses	10,363			11,648			11,651			81			229			333
Pension settlement loss	8,787			—			—			—			—			—
Net periodic benefit cost (a)	$	13,371		$	1,944		$	8,006		$	3,209		$	3,119		$	2,258

In 2017, the Company changed its method used to determine the service and interest cost components of net periodic benefit cost. Previously, the cost was determined using a single weighted-average discount rate derived from the yield curve. Under the new method, known as the spot rate approach, individual spot rates along the yield curve that correspond with the timing of each benefit payment will be used. The Company believes this change will provide a more precise measurement of service and interest costs by improving the correlation between projected cash outflows and corresponding spot rates on the yield curve. This change does not affect the measurement of plan obligations but generally results in lower pension expense in periods where the yield curve is upward sloping. The Company accounted for this change prospectively as a change in accounting estimate.

The following table sets forth the weighted average principal assumptions inherent in the determination of benefit obligations and net periodic benefit cost of the pension and postretirement benefit plans as of December 31:



	Pension						Postretirement
	2019		2018		2017		2019		2018		2017
Assumptions used to determine benefit obligations at December 31:
Discount rate	3.46	%	3.99	%	3.55	%	3.20	%	3.82	%	3.14	%
Rate of compensation increase	2.67	%	2.61	%	2.60	%	3.63	%	3.68	%	3.10	%
Assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate	3.91	%	3.42	%	3.77	%	3.91	%	3.40	%	3.64	%
Expected long-term return on plan assets	6.37	%	6.32	%	7.38	%	N/A		N/A		N/A
Rate of compensation increase	2.67	%	2.61	%	2.59	%	3.63	%	3.68	%	3.10	%

The estimated return on plan assets is based on historical and expected long-term rates of return on broad equity and bond indices and consideration of the actual annualized rate of return. The Company, with the assistance of external consultants, utilizes this information in developing assumptions for returns, risks and correlation of asset classes, which are then used to establish the asset allocation ranges.

Assumed health care cost trends have a significant effect on the amounts reported for the postretirement benefit plans. The following table sets forth the assumed health care cost trend rates as of December 31:



	Postretirement
	2019				2018
	U.S.		Canada		U.S.		Canada
Health care cost trend rate assumed for next year	7.00	%	6.50	%	7.50	%	5.00	%
Rate to which the cost trend is assumed to decline (ultimate trend rate)	5.00	%	4.50	%	5.00	%	4.50	%
Year that ultimate trend rate is reached	2024		2021-2022		2024		2019

The Company’s Pension and Savings Plan Committee and the Audit Committee of the Board of Directors oversee the defined benefit pension plans’ investment program. The investment approach of each defined benefit pension plan is designed to maximize returns and provide sufficient liquidity to meet each plans obligations while maintaining acceptable risk levels. For certain defined benefit plans, investment target allocation percentages for equity securities can range up to 65 percent. In other more well-funded plans, 100 percent is allocated to fixed income securities. All plans were within their respective targeted ranges. The Company’s weighted average defined benefit pension plan asset allocation at December 31, 2019 and 2018, by asset category are as follows:



	Percentage of Plan Assets
Asset Category	2019		2018
U.S. equity securities	25	%	22	%
International equity securities	31	%	24	%
U.S. fixed income securities	19	%	13	%
International fixed income securities	21	%	36	%
Other	4	%	5	%
Total	100	%	100	%

Investments within the equity categories may include large capitalization, small capitalization and emerging market securities, while the international fixed income portfolio may include emerging markets debt. Pension assets did not include a direct investment in Rayonier Advanced Materials common stock at December 31, 2019 or 2018.

The following table sets forth by level, within the fair value hierarchy (see Note 2 — Summary of Significant Accounting Policies and New Accounting Pronouncements for definition), the assets of the plans as of December 31, 2019 and 2018.



	Fair Value at December 31, 2019
Asset Category	Level 1		Level 2		Level 3		Total
Mutual funds	$	128,000	$	—	$	—	$	128,000

Investments at net asset value:
Common collective trust funds							617,858
Total assets at fair value							$	745,858



	Fair Value at December 31, 2018
Asset Category	Level 1		Level 2		Level 3		Total
Mutual funds	$	172,870	$	—	$	—	$	172,870

Investments at net asset value:
Common collective trust funds							671,718
Total assets at fair value							$	844,588

Common collective trust funds — Common collective trusts are measured at NAV per share, as a practical expedient for fair value, as provided by the Plan trustee. The NAV is calculated by determining the fair value of the fund’s underlying assets, deducting its liabilities, and dividing by the units outstanding as of the valuation date. These funds are not publicly traded; however, in the majority of cases the unit price calculation is based on observable market inputs of the funds’ underlying assets.



	Pension Benefits		Postretirement Benefits
2020	$	45,443	$	2,988
2021	44,157		2,863
2022	45,396		2,902
2023	46,400		2,798
2024	47,098		2,730
2025 — 2029	243,013		12,990