Retirement Benefit Plans

Defined Benefit Plans

The Company maintains two defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods.

The assumptions used in accounting for the defined benefit plans were as follows for the years ended December 31:



	2019		2018		2017
U.S. Plan
Discount rate for pension benefit obligation	2.88	%	4.00	%	3.30	%
Discount rate for net periodic benefit income	4.00	%	3.30	%	3.60	%
Expected long-term rate of return on assets for net periodic pension income	7.50	%	7.50	%	7.50	%
Non-U.S. Plan
Discount rate for pension benefit obligation	2.96	%	3.50	%	3.25	%
Discount rate for net periodic benefit (income) loss	3.50	%	3.50	%	3.75	%
Expected long-term rate of return on assets for net periodic pension (income) loss	5.50	%	5.50	%	5.50	%

Set forth below is a detail of the net periodic pension income for the defined benefit plans for the years ended December 31:



	2019			2018			2017
U.S. Plan
Interest cost	$	727		$	681		$	811
Expected return on plan assets	(1,987		)	(2,047		)	(2,074		)
Amortization of actuarial loss	561			623			501
Net periodic pension income	$	(699	)	$	(743	)	$	(762	)

Non-U.S. Plan
Interest cost	$	144		$	142		$	153
Expected return on plan assets	(263		)	(286		)	(264		)
Amortization of actuarial loss	72			200			10
Net periodic pension (income) loss	$	(47	)	$	56		$	(101	)

Set forth below is the detail of other changes in plan assets and benefit obligations recognized in other comprehensive loss (income) for the years ended December 31:



	2019			2018			2017
U.S. Plan
Current year actuarial loss (gain)	$	(1,727	)	$	2,347		$	(2,506	)
Amortization of actuarial loss	(561		)	(623		)	(501		)
Total recognized in other comprehensive loss (income)	$	(2,288	)	$	1,724		$	(3,007	)
Non-U.S. Plan
Current year actuarial loss	$	(155	)	$	236		$	60
Amortization of actuarial loss	(72		)	(200		)	(10		)
Total recognized in other comprehensive loss	$	(227	)	$	36		$	50

The following table sets forth the changes in the benefit obligation and the plan assets during the year and the funded status of the defined benefit plans at December 31:



	2019						2018
	U.S. Plan			Non-U.S. Plan			U.S. Plan			Non-U.S. Plan
Change in benefit obligation
Projected benefit obligation at beginning of year	$	19,131		$	4,084		$	21,716		$	4,604
Interest cost	727			144			681			142
Actuarial (gain) loss	1,266			311			(1,278		)	(148		)
Benefits paid	(1,750		)	(182		)	(1,988		)	(151		)
Foreign currency exchange rate changes	—			213			—			(363		)
Projected benefit obligation at end of year	$	19,374		$	4,570		$	19,131		$	4,084
Accumulated benefit obligation at end of year	$	19,374		$	4,570		$	19,131		$	4,084
Change in plan assets
Fair value of plan assets at beginning of year	$	25,671		$	4,744		$	29,237		$	5,456
Actual return on plan assets	4,979			726			(1,578		)	(111		)
Benefits paid	(1,750		)	(182		)	(1,988		)	(151		)
Foreign currency exchange rate changes	—			62			—			(450		)
Fair value of plan assets at end of year	$	28,900		$	5,350		$	25,671		$	4,744
Funded status at end of year	$	9,526		$	780		$	6,540		$	660
Amounts recognized in the balance sheets consist of:
Non-current assets	$	9,526		$	780		$	6,540		$	660
Components of accumulated other comprehensive loss consist of:
Actuarial loss	$	(9,140	)	$	(1,058	)	$	(11,427	)	$	(1,225	)
Deferred taxes and other	2,280			348			2,933			485
	$	(6,860	)	$	(710	)	$	(8,494	)	$	(740	)

The actuarial loss included in accumulated other comprehensive loss expected to be recognized in net periodic pension income in 2020 is $0.7 million.

The Company recognizes as a component of benefit cost (income), as of the measurement date, any unrecognized actuarial net gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets, defined as the "corridor." Amounts outside the corridor are amortized over the average expected remaining lifetime of inactive participants for the pension plans. The gain (loss) amounts recognized in AOCI are not expected to be fully recognized until the plan is terminated or as settlements occur, which would trigger accelerated recognition.

The Company's policy is to make contributions to fund its pension plans within the range allowed by applicable regulations. The Company does not expect to contribute to its U.S. and non-U.S. pension plans in 2020.

Pension benefit payments are made from assets of the pension plans.

Future pension benefit payments expected to be paid from assets of the pension plans are:



	U.S. Plan		Non-U.S. Plan
2020	$	2,200	$	184
2021	1,870		215
2022	1,880		246
2023	1,698		243
2024	1,591		249
2025 - 2029	6,148		1,322
	$	15,387	$	2,459

The expected long-term rate of return on defined benefit plan assets reflects management's expectations of long-term rates of return on funds invested to provide for benefits included in the projected benefit obligations. In establishing the expected long-term rate of return assumption for plan assets, the Company considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans as well as a forward-looking rate of return. The historical and forward-looking rates of return for each of the asset classes used to determine the Company's estimated rate of return assumption were based upon the rates of return earned or expected to be earned by investments in the equivalent benchmark market indices for each of the asset classes.

Expected returns for U.S. pension plans are based on a calculated market-related value for U.S. pension plan assets. Under this methodology, asset gains and losses resulting from actual returns that differ from the Company's expected returns are recognized in the market-related value of assets ratably over three years. Expected returns for non-U.S. pension plans are based on fair market value for non-U.S. pension plan assets.

The pension plans maintain investment policies that, among other things, establish a portfolio asset allocation methodology with percentage allocation bands for individual asset classes. The investment policies provide that investments are reallocated between asset classes as balances exceed or fall below the appropriate allocation bands.

The following is the actual allocation percentage and target allocation percentage for the U.S. pension plan assets at December 31:



	2019 Actual Allocation		2018 Actual Allocation		Target Allocation Range
U.S. equity securities	45.9	%	43.8	%	36.0% - 54.0%
Non-U.S. equity securities	20.4	%	19.3	%	16.0% - 24.0%
Fixed income securities	33.2	%	36.4	%	30.0% - 40.0%
Money market	0.5	%	0.5	%	0.0% - 10.0%

The following is the actual allocation percentage and target allocation percentage for the Non-U.S. pension plan assets at December 31:



	2019 Actual Allocation		2018 Actual Allocation		Target Allocation Range
Canadian equity securities	30.2	%	29.5	%	25.0% - 35.0%
Non-Canadian equity securities	32.3	%	29.9	%	25.0% - 35.0%
Fixed income securities	37.5	%	40.6	%	30.0% - 50.0%
Cash and cash equivalents	—	%	—	%	0.0% - 5.0%

The fair value of each major category of the Company's U.S. pension plan assets are valued using quoted market prices in active markets for identical assets, or Level 1 in the fair value hierarchy. The fair value of each major category of the Company's Non-U.S. pension plan assets are valued using observable inputs, either directly or indirectly, other than quoted market prices in active markets for identical assets. Following are the values as of December 31:



	U.S. Plan				Non-U.S. Plan
	2019		2018		2019		2018
U.S. equity securities	$	13,255	$	11,251	$	929	$	735
Non-U.S. equity securities	5,904		4,930		2,412		2,081
Fixed income securities	9,596		9,350		2,009		1,928
Money market	145		140		—		—
Total	$	28,900	$	25,671	$	5,350	$	4,744

Defined Contribution Plans

HBB maintains a defined contribution (401(k)) plan for substantially all U.S. employees and similar plans for employees outside of the U.S. The Company provides employer matching (or safe harbor) contributions based on plan provisions. The defined contribution retirement plans also provide for an additional minimum employer contribution. Certain plans also permit additional contributions whereby the applicable company’s contribution to participants is determined annually based on a formula that includes the effect of actual operating results compared with targeted operating results and the age and/or compensation of the participants. Total costs, including Company contributions, for these plans were $5.0 million in 2019 and $5.3 million in 2018 and 2017.