RETIREMENT BENEFITS

For periods prior to October 1, 2016, Air Products offered various long-term benefits to our employees through defined benefit pension plans and defined contribution plans. Prior to the Separation on October 1, 2016, participation of our employees in these plans is reflected in the Annual Consolidated Financial Statements as though we participated in a multi-employer plan with Air Products.

Defined Benefit Pensions

In 2017, certain international pension plans were legally split from Air Products. Our plans provide certain international employees in Germany, Korea and Taiwan who previously participated in the Air Products plans the same defined benefit pension benefits that had previously been provided by Air Products.

The following table summarizes the benefit obligation, fair value of the plan assets and the funded status at September 30, 2018 and 2017:



	2018			2017
(In millions)
Change in benefit obligation:
Benefit obligation at beginning of year	$	22.8		$	—
Converted on October 1, 2016	—			26.5
Service cost	2.0			2.3
Interest cost	0.7			0.6
Actuarial loss (gain)	1.3			(4.9		)
Benefits paid	(0.8		)	(1.2		)
Other	0.7			—
Foreign currency impact	0.4			(0.5		)
Benefit obligation at end of year	$	27.1		$	22.8
Change in plan assets:
Fair value of plan assets at beginning of year	$	6.8		$	—
Converted on October 1, 2016	—			3.0
Employer contributions	0.8			5.0
Benefits paid	(0.8		)	(1.2		)
Foreign currency impact	0.1			—
Fair value of plan assets at end of year	$	7.1		$	6.8
Funded status:
Plan assets less than benefit obligation - Net amount recognized	$	(20.0	)	$	(16.0	)

Amounts recognized in the annual consolidated balance sheets consist of:



	2018			2017
(In millions)
Non-current liabilities	$	(20.0	)	$	(16.0	)
Accumulated other comprehensive loss, net of taxes	(3.4		)	(2.2		)

Amounts recognized in accumulated other comprehensive loss, net of tax consist of:



	2018			2017
(In millions)
Balance at beginning of year	$	(2.2	)	$	—
Converted on October 1, 2016	—			(6.2		)
Net actuarial loss amortized during the year	0.1			0.4
Net actuarial (loss) gain during the year	(1.4		)	3.7
Non-controlling interest	0.1			(0.1		)
Balance at end of year	$	(3.4	)	$	(2.2	)

The components of net periodic pension costs for our defined benefit pension plans are as follows:



	2018			2017
(In millions)
Service cost	$	2.0		$	2.3
Interest cost	0.7			0.6
Expected return on plan assets	(0.1		)	(0.1		)
Actuarial loss amortization	0.1			0.5
Net periodic pension cost	$	2.7		$	3.3

The estimated amount that will be amortized from accumulated other comprehensive income into net periodic pension cost in 2019 is $0.2 million.

Assumptions used in determining the benefit obligation and net periodic pension cost for the years ended September 30, 2018 and 2017 are presented in the following table as weighted-averages:



	2018		2017
(In millions)
Benefit obligations:
Discount rate	2.9	%	3.2	%
Rate of compensation increase	4.1	%	4.1	%
Net Periodic Pension Cost:
Discount rate	3.3	%	2.3	%
Rate of compensation increase	4.1	%	4.9	%
Expected rate of return on plan	1.7	%	2.0	%

The discount rate assumption is calculated based on market yields at the valuation date on government bonds and high quality corporate bonds as well as the estimated maturity of benefit payments. The expected rate of return assumption is based on weighted-average expected returns from each asset class. Expected returns reflect a combination of historical performance analysis and current market conditions and include input from our actuaries.

The fair value of our pension plan assets at September 30, 2018 and 2017, by asset category utilizing the fair value hierarchy discussed in Note 13, is as follows:



	2018		2017
(In millions)
Other investments (Level 2)	$	4.4	$	4.1
Insurance contract (Level 3)	2.7		2.7
Total	$	7.1	$	6.8

The Other investments category represents accounts our subsidiaries in Taiwan have invested in a government directed Labor Pension Fund in which the return is guaranteed by the government. Therefore it is characterized as Other and level 2. The Insurance contract category represents the Korea plan which is funded by an investment with Samsung Insurance and is classified as level 3, as they are carried at contract value which approximates fair value.

We expect to make contributions of approximately $0.1 million during 2019. The expected future benefit payments related to the defined benefit plans are shown below:



	Payments
(In millions)
2019	$	0.9
2020	1.0
2021	1.1
2022	1.3
2023	1.6
2024-2028	10.7

Defined Contribution Plan

Prior to the Separation, Air Products sponsored several defined contribution plans which covered all U.S. employees and certain non-U.S. employees. Versum received an allocation of the total cost of defined contributions from Air Products.

Upon Separation, our employees’ balances were transferred to a new Versum defined contribution plan.

The following table summarizes our defined contribution expense:



	2018		2017		2016
(In millions)
Defined contribution expense	$	12.4	$	11.0	$	5.5