Retirement and Postretirement Plans

6 Months Ended

Jun. 30, 2022

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Retirement and Postretirement Plans

Note 11 - Retirement and Postretirement Plans

Plan Amendments and Updates

TimkenSteel Corporation Bargaining Unit Pension Plan ("Bargaining Plan")

On October 29, 2021, the United Steelworkers ("USW") Local 1123 voted to ratify a new four-year contract (the “Contract”). The Contract is in effect until September 27, 2025 and resulted in several changes to the Bargaining Plan which increased the pension liability by $14.2 million in 2021. These plan amendments were recognized in other comprehensive income (loss) in 2021 and have begun to be amortized as part of the pension net periodic benefit cost in the first quarter of 2022. The primary change that drove the increase in the pension liability was the addition of a full lump sum form of payment for participants commencing benefits on or after January 1, 2022. In addition, the plan is now closed to new entrants effective January 1, 2022.

On July 7, 2022, the Company entered into an agreement with The Prudential Insurance Company of America ("Prudential") to purchase an irrevocable group annuity contract and transfer approximately $256.2 million of the Bargaining Plan's obligations. In connection with the agreement, Prudential will pay future benefits under the group annuity contract starting October 1, 2022, for a specified group of approximately 1,900 participants and beneficiaries who are currently receiving payments from the Bargaining Plan. Benefits payable to these participants and beneficiaries will not be reduced as a result of this transaction. Plan participants and beneficiaries not included in the transaction remain in the Bargaining Plan. The Company will record a settlement gain of approximately $2.7 million in the third quarter of 2022 related to this partial plan annuitization. This settlement is a significant event which requires remeasurement of the Bargaining Plan. This remeasurement will be performed during the third quarter. The transaction is funded directly by the assets of the Bargaining Plan and requires no cash contribution from the Company.

The timing and amount of future required pension contributions is significantly affected by asset returns and actuarial assumptions. Plan asset losses in the first half of 2022, combined with current actuarial assumptions, have resulted in potentially accelerated timing of future required pension contributions to as early as 2024. Required future pension contribution timing and amounts are subject to significant change based on future investment performance, Company estimates and actuarial assumptions, as well as current funding laws.

TimkenSteel Corporation Retirement Plan ("Salaried Plan")

During the fourth quarter of 2021, termination of the Salaried Plan was approved by the TimkenSteel Board of Directors. Participants were notified in January 2022 and the plan was terminated effective March 31, 2022, subject to regulatory approval. The purchase of an annuity from an insurance company is expected to occur in 2023, after which time the insurance company selected will be responsible for all participant benefit payments.

Pension Net Periodic Benefit Cost (Income)

The components of net periodic benefit cost (income) for the three months ended June 30, 2022 were as follows:

	Pension
	United States of America								United Kingdom			Mexico
	Bargaining Plan			Salaried Plan			Supplemental Plan		Pension Scheme			Pension Plan		Total Pension			Postretirement Plans
Service cost	$	4.1		$	0.1		$	—	$	—		$	—	$	4.2		$	0.3
Interest cost		7.5			1.6			0.2		0.4			—		9.7			0.9
Expected return on plan assets		(14.4	)		(1.3	)		—		(0.9	)		—		(16.6	)		(0.9	)
Amortization of prior service cost		0.3			—			—		—			—		0.3			(1.5	)
Net remeasurement losses (gains)		(44.8	)		9.3			—		—			—		(35.5	)		—
Net Periodic Benefit Cost (Income)	$	(47.3	)	$	9.7		$	0.2	$	(0.5	)	$	—	$	(37.9	)	$	(1.2	)

The components of net periodic benefit cost (income) for the three months ended June 30, 2021 were as follows:

	Pension
	United States of America								United Kingdom			Mexico
	Bargaining Plan			Salaried Plan			Supplemental Plan		Pension Scheme			Pension Plan		Total Pension			Postretirement Plans
Service cost	$	4.2		$	0.1		$	—	$	—		$	—	$	4.3		$	0.3
Interest cost		7.1			1.6			0.2		0.3			—		9.2			0.8
Expected return on plan assets		(12.9	)		(3.0	)		—		(0.8	)		—		(16.7	)		(0.9	)
Amortization of prior service cost		—			—			—		—			—		—			(1.5	)
Net remeasurement losses (gains)		—			(0.7	)		—		—			—		(0.7	)		—
Net Periodic Benefit Cost (Income)	$	(1.6	)	$	(2.0	)	$	0.2	$	(0.5	)	$	—	$	(3.9	)	$	(1.3	)

The components of net periodic benefit cost (income) for the six months ended June 30, 2022 were as follows:

	Pension
	United States of America									United Kingdom			Mexico
	Bargaining Plan			Salaried Plan			Supplemental Plan			Pension Scheme			Pension Plan		Total Pension			Postretirement Plans
Service cost	$	8.2		$	0.2		$	—		$	—		$	—	$	8.4		$	0.6
Interest cost		15.0			3.0			0.3			0.8			—		19.1			1.7
Expected return on plan assets		(28.8	)		(2.8	)		—			(1.8	)		—		(33.4	)		(1.8	)
Amortization of prior service cost		0.6			—			—			—			—		0.6			(3.0	)
Net remeasurement losses (gains)		(44.8	)		5.3			(2.5	)		—			—		(42.0	)		—
Net Periodic Benefit Cost (Income)	$	(49.8	)	$	5.7		$	(2.2	)	$	(1.0	)	$	—	$	(47.3	)	$	(2.5	)

The components of net periodic benefit cost (income) for the six months ended June 30, 2021 were as follows:

	Pension
	United States of America								United Kingdom			Mexico
	Bargaining Plan			Salaried Plan			Supplemental Plan		Pension Scheme			Pension Plan		Total Pension			Postretirement Plans
Service cost	$	8.5		$	0.2		$	—	$	—		$	—	$	8.7		$	0.6
Interest cost		14.2			3.1			0.4		0.6			—		18.3			1.6
Expected return on plan assets		(25.8	)		(6.5	)		—		(1.6	)		—		(33.9	)		(1.8	)
Amortization of prior service cost		0.1			—			—		—			—		0.1			(3.0	)
Net remeasurement losses (gains)		—			(0.5	)		—		—			—		(0.5	)		—
Net Periodic Benefit Cost (Income)	$	(3.0	)	$	(3.7	)	$	0.4	$	(1.0	)	$	—	$	(7.3	)	$	(2.6	)

The Bargaining Plan, Salaried Plan, and Supplemental Plan have a provision that permits employees to elect to receive their pension benefits in a lump sum upon retirement. The Company's accounting policy is to recognize settlements during the quarter in which it is projected that the costs of all settlements during the year will be greater than the sum of the service cost and intertest cost components.

In the first quarter of 2022, the cumulative cost of all lump sum payments exceeded this threshold for the Supplemental Plan. Additionally, in the first quarter of 2022, the cumulative costs of all lump sum payments were projected to exceed this threshold during 2022 for the Salaried Plan. These costs did ultimately exceed this threshold for the Salaried Plan during the second quarter of 2022. Also, during the second quarter of 2022, the cumulative costs of all lump sum payments were projected to exceed this threshold in 2022 for the Bargaining Plan.

These payments constitute a partial settlement, which is a significant event requiring remeasurement of both plan assets and benefit obligations. As a result, the Company completed a full remeasurement of its pension obligations and plan assets associated with the Supplemental Plan during the first quarter of 2022. No further remeasurement was required in the second quarter of 2022 or is expected for the remainder of 2022 related to the Supplemental Plan, as no further lump sum payments have been made or are expected to be made during the year. The Salaried Plan's pension obligations and plan assets were remeasured during the first and second quarters of 2022, as lump sum payments are ongoing throughout the year. We also completed a full remeasurement of the Bargaining Plan's pension obligations and plan assets during the second quarter of 2022. The Company expects to complete a full remeasurement of the Bargaining and Salaried plans for the remainder of the year.

A full remeasurement of the pension obligations and plan assets associated with the Salaried Plan was also completed throughout each quarter of 2021.