Employee Retirement and Pension Benefits

12 Months Ended

Dec. 31, 2019

Employee Retirement and Pension Benefits

U.S. Defined Benefit Pension Plan

Certain U.S. hourly employees participate in our defined benefit pension plan. The plan is not open to new employees.

Beginning in 2017, we moved from utilizing a weighted average discount rate, which was derived from the yield curve used to measure the pension benefit obligation at the beginning of the period, to a spot rate yield curve to estimate the pension benefit obligation and net periodic benefits costs. The change in estimate provides a more accurate measurement of service and interest cost by applying the spot rate that could be used to settle each projected cash flow individually.

The components of net periodic benefit cost are summarized as follows for the years ended December 31:



(amounts in thousands)
Components of pension benefit expense - U.S. benefit plan	2019			2018			2017
Service cost	$	4,890		$	4,170		$	3,870
Interest cost	14,861			13,180			13,371
Expected return on plan assets	(18,622		)	(20,769		)	(17,940		)
Amortization of net actuarial pension loss	8,919			9,314			12,680
Pension benefit expense	$	10,048		$	5,895		$	11,981

Discount rate used to determine benefit costs	4.27%			3.47%			3.94%
Expected long-term rate of return on assets	6.25%			6.25%			6.25%
Compensation increase rate	N/A			N/A			N/A

In October 2019, the Society of Actuaries released the PRI-2012 Mortality Tables (update to RP-2014 mortality tables), which were adopted in 2019 and represent our best estimate of future experience for the base mortality table. The Society of Actuaries has released annual updates to the mortality improvement projection scale that was first released in 2014, with the most recent annual update being Scale MP-2019. We adopted the use of Scale MP-2019 as of December 31, 2019 as it represents our best estimate of future mortality improvement projection experience as of the measurement date.

We developed the discount rate based on the plan’s expected benefit payments using the Willis Towers Watson RATE:Link 10:90 Yield Curve. Based on this analysis, we selected a 3.31% discount rate for our projected benefit obligation. As the discount rate is reduced or increased, the pension obligation would increase or decrease, respectively, and future pension expense would increase or decrease, respectively.

Pension benefit expense from amortization of net actuarial pension loss is estimated to be $7.2 million in 2020.

We maintain policies for investment of pension plan assets. The policies set forth stated objectives and a structure for managing assets, which includes various asset classes and investment management styles that, in the aggregate, are expected to produce a sufficient level of diversification and investment return over time and provide for the availability of funds for benefits as they become due. The policies also provide guidelines for each investment portfolio that control the level of risk assumed in the portfolio and ensure that assets are managed in accordance with stated objectives. The plan invests primarily in publicly traded equity and debt securities as directed by the plan’s investment committee. The pension plan’s expected return assumption is based on the weighted average aggregate long-term expected returns of various actively managed asset classes corresponding to the plan’s asset allocation. We have selected an expected return on plan assets based on a historical analysis of rates of return, our investment mix, market conditions and other factors. The fair value of plan assets increased in 2019 due primarily to investment returns and contributions in excess of our benefit payments and decreased in 2018 due primarily to investment losses and benefit payments in excess of our discretionary contributions.



(amounts in thousands)
Change in fair value of plan assets - U.S. benefit plan	2019			2018
Balance as of January 1,	$	302,763		$	339,751
Actual return on plan assets	69,767			(20,466		)
Company contribution	7,760			4,125
Benefits paid	(16,751		)	(15,965		)
Administrative expenses paid	(4,962		)	(4,682		)
Balance at period end	$	358,577		$	302,763

The plan’s investments as of December 31 are summarized below:



	% of Plan Assets
Summary of plan investments - U.S. benefit plan	2019	2018
Equity securities	7.9	7.4
Debt securities	36.1	38.0
Other	56.0	54.6
	100.0	100.0

The plan’s projected benefit obligation is determined by using weighted-average assumptions made on December 31, of each year as summarized below:



(amounts in thousands)
Change in projected benefit obligation - U.S. benefit plan	2019			2018
Balance as of January 1,	$	383,936		$	435,696
Service cost	4,890			4,170
Interest cost	14,861			13,180
Actuarial loss	51,434			(48,463		)
Benefits paid	(16,751		)	(15,965		)
Administrative expenses paid	(4,962		)	(4,682		)
Balance at period end	$	433,408		$	383,936
Discount rate	3.31%			4.27%
Compensation increase rate	N/A			N/A

As of December 31, 2019, the plan’s estimated benefit payments for the next ten years are as follows (amounts in thousands):



2020	$	19,444
2021	19,284
2022	20,040
2023	20,687
2024	21,329
2025-2029	112,907

The company made cash contributions to the plan of $7.8 million and $4.1 million for the year ended December 31, 2019 and 2018, respectively. During fiscal year 2020, we expect to make cash contributions to the plan of approximately $8.1 million.

The plan’s accumulated benefit obligation of $433.4 million is determined by taking the projected benefit obligation and removing the impact of the assumed compensation increases. The plan’s funded status as of December 31 is as follows:



(amounts in thousands)
Unfunded pension liability - U.S. benefit plan	2019			2018
Projected benefit obligation at end of period	$	433,408		$	383,936
Fair value of plan assets at end of period	(358,577		)	(302,763		)
Unfunded pension liability	$	74,831		$	81,173

Net actuarial pension losses are recorded in consolidated other comprehensive income (loss) for the years ended December 31 are as follows:



(amounts in thousands)
Accumulated other comprehensive (income) loss - U.S. benefit plan	2019			2018			2017
Net actuarial pension loss beginning of period	$	96,090		$	112,632		$	127,982
Amortization of net actuarial loss	(8,919		)	(9,314		)	(12,680		)
Net loss (gain) occurring during year	288			(7,228		)	(2,670		)
Net actuarial pension loss at end of period	87,459			96,090			112,632
Tax benefit	(3,145		)	(5,344		)	(9,583		)
Net actuarial pension loss at end of period, net of tax	$	84,314		$	90,746		$	103,049

Non-U.S. Defined Benefit Plans – We have several other defined benefit plans located outside the U.S. that are country specific. Some of these plans remain open to participants and others are closed. The expenses related to these plans are recorded in the consolidated statements of operations and are determined by using weighted-average assumptions made on January 1 of each year as summarized below for the years ended December 31.



(amounts in thousands)
Components of pension benefit expense - Non-U.S. benefit plans	2019			2018			2017
Service cost	$	2,386		$	2,070		$	1,668
Interest cost	1,398			1,417			1,272
Expected return on plan assets	(589		)	(833		)	(700		)
Amortization of net actuarial pension loss	225			189			145
Pension benefit expense	$	3,420		$	2,843		$	2,385

Discount rate	0.6% - 8.5%			0.2% - 9.0%			0.8% - 7.2%
Expected long-term rate of return on assets	0.0% - 5.8%			0.0% - 5.3%			0.0% - 5.7%
Compensation increase rate	0.5% - 7.0%			0.5% - 7.0%			0.5% - 7.0%

Non-U.S. pension benefit expenses from amortization of net actuarial pension losses are estimated to be $0.4 million in 2020.



(amounts in thousands)
Change in fair value of plan assets - Non-U.S. benefit plans	2019			2018
Balance as of January 1,	$	12,676		$	15,994
Actual return on plan assets	1,398			(33		)
Company contribution	236			250
Benefits paid	(3,272		)	(2,046		)
Administrative expenses paid	(21		)	(25		)
Cumulative translation adjustment	(93		)	(1,464		)
Balance at period end	$	10,924		$	12,676

The investments of the non-U.S. plans as of December 31 are summarized below:



	% of Plan Assets
Summary of plan investments - Non-U.S. benefit plans	2019	2018
Equity securities	45.8	48.4
Debt securities	20.7	20.8
Other	33.5	30.8
	100.0	100.0

The projected benefit obligation for the non-U.S. plans is determined by using weighted-average assumptions made on December 31, of each year as summarized below:



(amounts in thousands)
Change in projected benefit obligation - Non-U.S. benefit plans	2019			2018
Balance as of January 1,	$	42,803		$	41,406
Pension obligation acquired	—			4,891
Service cost	2,655			2,242
Interest cost	1,405			956
Actuarial loss	6,084			776
Benefits paid	(5,240		)	(4,481		)
Administrative expenses paid	(21		)	(25		)
Cumulative translation adjustment	21			(2,962		)
Balance at period end	$	47,707		$	42,803

Discount rate	0.6% - 8.5%			0.2% - 9.0%
Compensation increase rate	0.5% - 7.0%			0.5% - 7.0%

As of December 31, 2019, the estimated benefit payments for the non-U.S. plans over the next ten years are as follows (amounts in thousands):



2020	$	3,012
2021	2,696
2022	2,540
2023	2,789
2024	3,694
2025-2029	14,437

The accumulated benefit obligations of $39.5 million for the non-U.S. plans are determined by taking the projected benefit obligation and removing the impact of the assumed compensation increases. We expect to contribute $13.7 million to the non-U.S. plans in 2020.

The funded status of these plans as of December 31 are as follows:



(amounts in thousands)
Unfunded pension liability - Non-U.S. benefit plans	2019			2018
Projected benefit obligation at end of period	$	47,707		$	42,803
Fair value of plan assets at end of period	(10,924		)	(12,676		)
Net pension liability	$	36,783		$	30,127

Long-term unfunded pension liability	$	33,106		$	26,349
Current portion	5,605			5,295
Total unfunded pension liability	$	38,711		$	31,644

Total overfunded pension liability	$	1,928		$	1,517

The current portion of the unfunded pension liability is recorded in accrued payroll and benefits in the accompanying consolidated balance sheets and is equal to the expected employer contributions in the following year. The overfunded pension liability is recorded in long-term other assets in the accompanying consolidated balance sheets.

Net actuarial pension losses are recorded in consolidated other comprehensive income (loss) for the years ended December 31 are as follows:



(amounts in thousands)
Accumulated other comprehensive income (loss) - Non-U.S. benefit plans	2019			2018			2017
Net actuarial pension loss beginning of period	$	7,450		$	7,359		$	6,781
Amortization of net actuarial loss	(553		)	(1,442		)	(149		)
Net gain occurring during year	5,232			1,462			742
Cumulative translation adjustment	108			71			(15		)
Net actuarial pension loss at end of period	12,237			7,450			7,359
Tax benefit	(2,958		)	(1,911		)	(1,886		)
Net actuarial pension loss at end of period, net of tax	$	9,279		$	5,539		$	5,473

Other Defined Contribution Plans –We have several other defined contribution plans located outside the U.S. that are country specific. Other plans that are characteristically defined contribution plans have accrued liabilities of $1.3 million and $2.6 million, respectively, at December 31, 2019 and December 31, 2018. The total compensation expense for non-U.S. defined contribution plans was $24.6 million in 2019, $27.0 million in 2018, and $23.8 million in 2017.