Employee Benefit Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Employee Benefits

Employee Benefit Plans

Defined Benefit Plans

The Company sponsors various defined benefit pension plans in several countries. Benefits provided generally depend on length of service, pay grade and remuneration levels. Employees in the U.S., Puerto Rico and certain international locations are also provided retirement benefits through defined contribution plans.

The Company also sponsors other postretirement benefit plans including plans that provide for postretirement supplemental medical coverage. Benefits from these plans are provided to employees and their spouses and dependents who meet various minimum age and service requirements. In addition, the Company sponsors other plans that provide for life insurance benefits and postretirement medical coverage for certain officers and management employees.

In connection with the Combination, the Company assumed certain post retirement defined benefit pension plans sponsored by Upjohn. The most significant plans include those in Puerto Rico, Ireland and Japan. Upjohn is also the sponsor of one postretirement medical plan in Puerto Rico. As part of the acquisition accounting, the Company has recorded the fair value of these plans. Upon completion of the Combination, the excess of projected benefit obligation over the plan assets was recognized as a liability and any existing unrecognized actuarial gains or losses and unrecognized service costs or benefits were eliminated in purchase accounting.

Accounting for Defined Benefit Pension and Other Postretirement Plans

The Company recognizes on its balance sheet an asset or liability equal to the over- or under-funded benefit obligation of each defined benefit pension and other postretirement plan. Actuarial gains or losses and prior service costs or credits that arise during the period are not recognized as components of net periodic benefit cost, but are recognized, net of tax, as a component of other comprehensive (loss) earnings.

Included in accumulated other comprehensive loss as of December 31, 2021 and 2020 are:

	Pension Benefits				Other Postretirement Benefits
	December 31,				December 31,
(In millions)	2021		2020		2021		2020
Unrecognized actuarial (gain) loss	$	(59.9)	$	33.9	$	21.7	$	5.7
Unrecognized prior service cost (credit)	6.6		(1.4)		(3.7)		0.6
Total	$	(53.3)	$	32.5	$	18.0	$	6.3

The unrecognized net actuarial losses exceeded 10% of the higher of the market value of plan assets or the projected benefit obligation at the beginning of the year for certain of the plans, therefore, amortization of such excess has been included in net periodic benefit costs for pension and other postretirement benefits in each of the last three years. The amortization period is the average remaining service period that active employees are expected to receive benefits, unless a plan is mostly inactive in which case the amortization period is the average remaining life expectancy of the plan participants. Unrecognized prior service cost is amortized over the future service periods of those employees who are active at the dates of the plan amendments and who are expected to receive benefits. If all or almost all of a plan's participants are inactive, unrecognized prior service cost is amortized over the remaining life expectancy of those participants. The increase in accumulated other comprehensive loss in 2021 relating to pension benefits and other postretirement benefits consists of:

(In millions)	Pension Benefits		Other Postretirement Benefits
Unrecognized actuarial (gain) loss	$	(102.2)	$	16.2
Amortization of actuarial gain/(loss)	7.6		(0.2)
Unrecognized prior service credit (cost)	8.0		(4.3)
Amortization of prior service costs	(0.5)		—
Impact of foreign currency translation	1.3		—
Net change	$	(85.8)	$	11.7

Components of net periodic benefit cost, change in projected benefit obligation, change in plan assets, funded status, fair value of plan assets, assumptions used to determine net periodic benefit cost, funding policy and estimated future benefit payments are summarized below for the Company’s pension plans and other postretirement plans.

Net Periodic Benefit Cost

Components of net periodic benefit cost for the years ended December 31, 2021, 2020 and 2019 were as follows:

	Pension Benefits						Other Postretirement Benefits
	December 31,						December 31,
(In millions)	2021		2020		2019		2021		2020		2019
Service cost	$	38.6	$	23.5	$	20.7	$	3.4	$	1.2	$	0.6
Interest cost	31.6		13.5		13.6		2.6		1.4		1.5
Expected return on plan assets	(66.1)		(19.9)		(12.1)		—		—		—
Plan curtailment, settlement and termination	(16.5)		1.1		(0.3)		—		—		3.2
Amortization of prior service costs	0.9		—		0.9		—		—		—
Recognized net actuarial losses (gains)	1.3		0.4		(0.8)		0.2		0.3		0.2
Net periodic benefit cost	$	(10.2)	$	18.6	$	22.0	$	6.2	$	2.9	$	5.5

During the year ended December 31, 2021, the Company recognized a settlement gain as a result of cash payments from lump sum elections related to the U.S. and Puerto Rico pension plans.

Change in Projected Benefit Obligation, Change in Plan Assets and Funded Status

The table below presents components of the change in projected benefit obligation, change in plan assets and funded status at December 31, 2021 and 2020.

	Pension Benefits				Other Postretirement Benefits
(In millions)	2021		2020		2021		2020
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year	$	2,145.8	$	674.7	$	188.8	$	33.8
Service cost	38.6		23.5		3.4		1.1
Interest cost	31.6		13.5		2.6		1.4
Participant contributions	2.0		1.8		2.4		0.1
Acquisitions	4.0		1,389.4		—		153.1
Plan settlements and terminations	(128.6)		(23.1)		(4.3)		(0.2)
Actuarial (gains) losses	(26.1)		37.2		16.2		1.1
Benefits paid	(52.8)		(24.6)		(20.7)		(1.6)
Impact of foreign currency translation	(67.9)		53.4		—		—
Projected benefit obligation, end of year	$	1,946.6	$	2,145.8	$	188.4	$	188.8
Change in Plan Assets
Fair value of plan assets, beginning of year	$	1,354.6	$	315.7	$	—	$	—
Actual return on plan assets	141.7		46.0		—		—
Company contributions	97.0		58.2		18.3		1.7
Participant contributions	2.0		1.8		2.4		0.1
Acquisitions	(2.1)		959.3		—		—
Plan settlements	(128.9)		(23.1)		—		(0.2)
Benefits paid	(52.8)		(24.6)		(20.7)		(1.6)
Impact of foreign currency translation	(45.1)		21.3		—		—
Fair value of plan assets, end of year	1,366.4		1,354.6		—		—
Funded status of plans	$	(580.2)	$	(791.2)	$	(188.4)	$	(188.8)

Net accrued benefit costs for pension plans and other postretirement benefits are reported in the following components of the Company’s consolidated balance sheets at December 31, 2021 and 2020:

	Pension Benefits				Other Postretirement Benefits
	December 31,				December 31,
(In millions)	2021		2020		2021		2020
Noncurrent assets	$	117.2	$	70.7	$	—	$	—
Current liabilities	(14.6)		(15.1)		(16.1)		(16.3)
Noncurrent liabilities	(682.8)		(846.8)		(172.3)		(172.5)
Net accrued benefit costs	$	(580.2)	$	(791.2)	$	(188.4)	$	(188.8)

The projected benefit obligation is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases. The accumulated benefit obligation is the actuarial present value of benefits attributable to employee service rendered to date, but does not include the effects of estimated future pay increases. The accumulated benefit obligation for the Company’s pension plans was $1.86 billion and $2.04 billion at December 31, 2021 and 2020, respectively.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of the fair value of plan assets at December 31, 2021 and 2020 were as follows:

	December 31,
(In millions)	2021		2020
Plans with accumulated benefit obligation in excess of plan assets:
Projected benefit obligation	$	1,591.8	$	1,747.2
Accumulated benefit obligation	1,546.4		1,678.2
Fair value of plan assets	904.1		893.9

Fair Value of Plan Assets

The Company measures the fair value of plan assets based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy described in Note 9 Financial Instruments and Risk Management. The table below presents total plan assets by investment category as of December 31, 2021 and 2020 and the classification of each investment category within the fair value hierarchy with respect to the inputs used to measure fair value:

	December 31, 2021
(In millions)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	63.1	$	1.9	$	—	$	65.0
Equity securities	53.9		497.2		—		551.1
Fixed income securities	211.4		405.5		—		616.9
Assets held by insurance companies and other	10.2		41.6		81.6		133.4
Total	$	338.6	$	946.2	$	81.6	$	1,366.4

	December 31, 2020
(In millions)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	51.2	$	0.6	$	—	$	51.8
Equity securities	145.3		468.1		—		613.4
Fixed income securities	292.6		299.4		—		592.0
Assets held by insurance companies and other	4.0		20.0		73.4		97.4
Total	$	493.1	$	788.1	$	73.4	$	1,354.6

Risk tolerance on invested pension plan assets is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. Investment risk is measured and monitored on an ongoing basis through annual liability measures, periodic asset/liability studies and investment portfolio reviews. The Company’s investment strategy is to maintain, where possible, a diversified investment portfolio across several asset classes that, when combined with the Company’s contributions to the plans, will ensure that required benefit obligations are met.

Assumptions

The following weighted average assumptions were used to determine the benefit obligations for the Company’s defined benefit pension and other postretirement plans as of December 31, 2021 and 2020:

	Pension Benefits				Other Postretirement Benefits
	2021		2020		2021		2020
Discount rate	2.3	%	1.9	%	2.5	%	1.9	%
Expected return on plan assets	5.1	%	4.3	%	—	%	—	%
Rate of compensation increase	3.1	%	2.9	%	—	%	—	%

The following weighted average assumptions were used to determine the net periodic benefit cost for the Company’s defined benefit pension and other postretirement benefit plans for the three years in the period ended December 31, 2021:

	Pension Benefits						Other Postretirement Benefits
	2021		2020		2019		2021		2020		2019
Discount rate	1.9	%	1.6	%	2.3	%	1.9	%	3.3	%	4.3	%
Expected return on plan assets	5.1	%	4.3	%	4.3	%	—	%	—	%	—	%
Rate of compensation increase	2.9	%	2.7	%	2.9	%	—	%	—	%	—	%

The assumptions for each plan are reviewed on an annual basis. The discount rate reflects the current rate at which the pension and other benefit liabilities could be effectively settled at the measurement date. In setting the discount rates, we utilize comparable corporate bond indices as an indication of interest rate movements and levels. Corporate bond indices were selected based on individual plan census data and duration. The expected return on plan assets was determined using historical market returns and long-term historical relationships between equities and fixed income securities. The Company compares the expected return on plan assets assumption to actual historic returns to ensure reasonableness. Current market factors such as inflation and interest rates are also evaluated.

The weighted-average healthcare cost trend rate used for 2021 was 5.7% declining to a projected 4.5% in the year 2037. For 2022, the assumed weighted-average healthcare cost trend rate used will be 6.3% declining to a projected 4.0% in the year 2045. In selecting rates for current and long-term healthcare cost assumptions, the Company takes into consideration a number of factors including the Company’s actual healthcare cost increases, the design of the Company’s benefit programs, the demographics of the Company’s active and retiree populations and external expectations of future medical cost inflation rates.

Estimated Future Benefit Payments

The Company’s funding policy for its funded pension plans is based upon local statutory requirements. The Company’s funding policy is subject to certain statutory regulations with respect to annual minimum and maximum company contributions. Plan benefits for the non-qualified plans are paid as they come due.

Estimated benefit payments over the next ten years for the Company’s pension plans and retiree health plan are as follows:

(In millions)	Pension Benefits		Other Postretirement Benefits
2022	$	101.8	$	16.1
2023	97.1		16.5
2024	103.0		16.9
2025	100.7		16.8
2026	104.3		16.6
Thereafter	528.5		73.0
Total	$	1,035.4	$	155.9

Defined Contribution Plans

The Company sponsors defined contribution plans covering its employees in the U.S. and Puerto Rico, as well as certain employees in a number of countries outside the U.S. The Company’s domestic defined contribution plans consist primarily of a Profit Sharing 401(k) Plan and a 401(k) retirement plan for union-represented employees. Profit sharing contributions are made at the discretion of the Board of Directors. The Company’s non-domestic plans vary in form depending on local legal requirements. The Company’s contributions are based upon employee contributions, service hours, or pre-determined amounts depending upon the plan. Obligations for contributions to defined contribution plans are recognized as expense in the consolidated statements of operations when they are earned.

The Company maintains a 401(k) Restoration Plan, which permits employees who earn compensation in excess of the limits imposed by Section 401(a)(17) of the Code to (i) defer a portion of base salary and bonus compensation, (ii) be credited with a Company matching contribution in respect of deferrals under the Restoration Plan, and (iii) be credited with Company non-elective contributions (to the extent so made by the Company), in each case, to the extent that participants otherwise would be able to defer or be credited with such amounts, as applicable, under the Profit Sharing 401(k) Plan if not for the limits on contributions and deferrals imposed by the Code.

The Company maintains an Income Deferral Plan, which permits certain management or highly compensated employees who are designated by the plan administrator to participate in the Income Deferral Plan to elect to defer up to 50% of base salary and up to 100% of bonus compensation, in each case, in addition to any amounts that may be deferred by such participants under the Profit Sharing 401(k) Plan and the Restoration Plan. In addition, under the Income Deferral Plan, eligible participants may be granted employee deferral awards, which awards will be subject to the terms and conditions (including vesting) as determined by the plan administrator at the time such awards are granted.

Total employer contributions to defined contribution plans were approximately $107.4 million, $115.5 million and $95.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Other Benefit Arrangements

The Company participated in a multi-employer pension plan under previous collective bargaining agreements. The PACE Industry Union-Management Pension Fund (the “PACE Plan”) provides defined benefits to certain retirees and certain production and maintenance employees at the Company’s manufacturing plant in Morgantown, West Virginia who were covered by the previous collective bargaining agreements. Pursuant to a collective bargaining agreement entered into on April 16, 2012, the Company withdrew from the PACE Plan effective May 10, 2012. In 2013, the PACE Plan trustee notified the Company that its withdrawal liability was approximately $27.3 million, which was accrued by the Company in 2013. The withdrawal liability is being paid over a period of approximately nine years; payments began in March 2014. The withdrawal liability was approximately $5.5 million and $8.9 million at December 31, 2021 and 2020, respectively. The Employer Identification Number for the PACE Plan is 11-6166763.