Pension And Other Postretirement Benefits

12 Months Ended

Dec. 31, 2019

Pension And Other Postretirement Benefits [Abstract]

Pension And Other Postretirement Benefits

13. PENSION AND OTHER POSTRETIREMENT BENEFITS

We have a noncontributory defined benefit pension plan (the "Pension Plan") covering substantially all employees first hired prior to July 1, 2015 after the completion of one year of service and 1,000 hours of service.  The Pension Plan provides retirement benefits based on an employee’s final average earnings and years of service.  These employees become 100% vested after three years of service, regardless of age.  A supplemental benefit plan provides nonqualified pension benefits for compensation in excess of the IRS compensation limits applicable to the Pension Plan and eligible compensation deferred by a participant.

Our funding policy is to make contributions to the Pension Plan, provided that the total annual contributions will not be less than ERISA and the Pension Protection Act of 2006 minimums or greater than the maximum tax-deductible amount, to review the contribution and funding strategy on a regular basis, and to allow discretionary contributions to be made by us from time to time.  The assets of the Pension Plan are invested primarily in fixed income investments and equity securities. We pay nonqualified pension benefits when they are due according to the terms of the supplemental benefit plan.

We provide certain postretirement healthcare and life insurance benefits to retired employees.  Substantially all of our employees hired or rehired prior to 2014 may become eligible for postretirement medical benefits if they reach the age and service requirements of the retiree medical plan and retire on a pension (except a deferred pension) under the Pension Plan.  Medical benefits are self-insured and claims are administered through a third party administrator. The cost of coverage is determined based on the annual projected plan costs. The participant's premium or cost is determined based on Company guidelines. Postretirement life insurance benefits are insured through an insurance company. We fund postretirement benefits as incurred, and accordingly, there were no assets held in the postretirement benefits plan at December 31, 2019 and 2018.

The following table sets forth information regarding the funded status of our pension and other postretirement benefits as of December 31, 2019 and 2018:

	Pension Benefits				Postretirement Benefits
		2019		2018		2019		2018
Change in Benefit Obligation:
Benefit obligation at beginning of period	$	708.8	$	756.3	$	72.5	$	76.8
Service cost		25.6		28.6		2.0		2.3
Interest cost		30.0		27.3		2.9		2.6
Actuarial loss (gain)		117.0		(57.7)		3.0		(5.2)
Benefits paid from plan assets		(52.3)		(42.5)		—		—
Benefits paid from Company assets		(1.7)		(1.6)		(5.8)		(5.6)
Plan participants' contributions		—		—		1.4		1.6
Administrative expenses paid		(2.3)		(1.6)		—		—
Plan amendments		—		—		0.2		—
Benefit Obligation at End of Period		825.1		708.8		76.2		72.5
Change in Plan Assets:
Fair value of plan assets at beginning of period		588.3		585.4		—		—
Actual return on plan assets		114.7		(33.0)		—		—
Employer contributions(A)		11.7		81.6		4.4		4.0
Plan participants' contributions		—		—		1.4		1.6
Benefits paid(A)		(54.0)		(44.1)		(5.8)		(5.6)
Administrative expenses paid		(2.3)		(1.6)		—		—
Fair Value of Plan Assets at End of Period		658.4		588.3		—		—
Unfunded Status	$	166.7	$	120.5	$	76.2	$	72.5

^(A) Includes $1.7 million and $1.6 million paid from our assets for unfunded nonqualified pension benefits in fiscal years 2019 and 2018, respectively.

The accumulated benefit obligation for our Pension Plan was $746.8 million and $636.3 million at December 31, 2019 and 2018, respectively.

Amounts recognized in the consolidated balance sheet for the years ended December 31 consist of the following:

	Pension Benefits				Postretirement Benefits
		2019		2018		2019		2018
Current accrued benefit cost	$	2.1	$	1.9	$	6.8	$	5.8
Non-current accrued benefit cost		164.6		118.6		69.4		66.7
Net amount recognized	$	166.7	$	120.5	$	76.2	$	72.5

 Current accrued benefit cost for both pension benefits and postretirement benefits is included in other current liabilities in the consolidated balance sheets. Non-current accrued benefit cost for pension benefits and postretirement benefits are included in pension liability and postretirement benefits liability, respectively, in the consolidated balance sheets.

Amounts recognized in accumulated other comprehensive loss for the years ended December 31, net of tax, consist of the following:

	Pension Benefits				Postretirement Benefits
		2019		2018		2019		2018
Net actuarial loss	$	232.4	$	219.6	$	10.4	$	8.3
Prior service cost (gain)		—		—		0.1		—
Accumulated other comprehensive loss	$	232.4	$	219.6	$	10.5	$	8.3

Amounts estimated to be amortized from accumulated other comprehensive loss into net periodic benefit costs in 2020, net of tax, consist of the following:

	Pension Benefits		Postretirement Benefits
Net actuarial loss	$	21.5	$	0.5
Accumulated other comprehensive loss	$	21.5	$	0.5

Weighted-average assumptions used to determine the actuarial present value of the pension and postretirement benefit obligations as of December 31 are:

	Pension Benefits				Postretirement Benefits
	2019		2018		2019		2018
Discount rate	3.38	%	4.31	%	3.19	%	4.16	%
Rate of compensation increase	4.36	%	4.49	%	—		—
Healthcare cost trend on covered charges	—		—		5.00	%	5.00	%

A one percentage point increase or decrease in the assumed healthcare cost trend rate would not have had a material effect on the postretirement benefit obligations as of December 31, 2019 and 2018.

The net periodic benefit cost for the years ended December 31, 2019, 2018, and 2017 included the following components:

		Pension Benefits					Postretirement Benefits
Components of Net Periodic Benefit Cost	2019		2018		2017		2019		2018		2017
Selling, general, and administrative expenses:
Service cost	$	25.6	$	28.6	$	26.4	$	2.0	$	2.3	$	2.3
Total selling, general, and administrative expenses	$	25.6	$	28.6	$	26.4	$	2.0	$	2.3	$	2.3
Non-operating expenses:
Interest cost		30.0		27.3		27.8		2.9		2.6		2.9
Expected return on plan assets		(34.1)		(31.9)		(30.6)		—		—		—
Amortization of:
Net actuarial loss		19.1		26.5		21.5		0.3		0.9		0.8
Prior service cost (gain)		—		0.3		0.4		—		(2.0)		(2.2)
Total non-operating expenses	$	15.0	$	22.2	$	19.1	$	3.2	$	1.5	$	1.5
Net periodic benefit cost	$	40.6	$	50.8	$	45.5	$	5.2	$	3.8	$	3.8

Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 were:

	Pension Benefits						Postretirement Benefits
	2019		2018		2017		2019		2018		2017
Discount rate	4.31	%	3.67	%	4.15	%	4.16	%	3.44	%	3.78	%
Expected return on plan assets	5.75	%	5.75	%	5.75	%	—		—		—
Rate of compensation increase	4.36	%	4.49	%	4.52	%	—		—		—
Healthcare cost trend on covered charges	—		—		—		5.00	%	5.50% / 5.00%		6.00% / 5.00%

The expected return on plan assets assumption for the Pension Plan is a long-term assumption and was determined after evaluating input from both the plan’s actuary and pension fund investment advisors, consideration of macroeconomic conditions, historical rates of return on plan assets, and anticipated current and long-term rates of return on the various classes of assets in which the plan invests.

For measurement of the postretirement benefits net periodic cost, a 5.00% annual rate of increase in per capita cost of covered healthcare benefits was assumed for 2019.  The rate was assumed to remain at 5.00% in 2020 and to remain at that level thereafter. A one percentage point increase or decrease in the assumed healthcare cost trend rate would not have had a material effect on 2019, 2018 and 2017 net periodic benefit cost.

We expect to fund $1.8 million for nonqualified pension benefits during 2020. Required pension contributions under ERISA regulations are expected to be $40.0 million in 2020; however, additional contributions may be made at our discretion.

Estimated future defined benefit pension and other postretirement benefit plan payments to plan participants for the years ending December 31 are as follows:

Year	Pension ‎Benefits		Postretirement ‎Benefits
2020	$	62.0	$	6.9
2021		58.3		7.5
2022		58.2		7.7
2023		59.2		7.5
2024		59.1		7.3
2025 to 2029		296.8		33.0

The investment objective of our Pension Plan is to ensure that there are sufficient assets to fund regular pension benefits payable to employees over the long-term life of the plan.  Our Pension Plan seeks to allocate plan assets in a manner that is closely duration-matched with the actuarial projected cash flow liabilities, consistent with prudent standards for preservation of capital, tolerance of investment risk, and maintenance of liquidity. Assets of the qualified pension plan are held by Comerica Bank (the "Trustee").

Our Pension Plan utilizes a liability-driven investment (“LDI”) approach to help meet these objectives. The LDI strategy employs a structured fixed-income portfolio designed to reduce volatility in the plan's future funding requirements and funding status. This is accomplished by using a blend of long duration government, quasi-governmental and corporate fixed-income securities, as well as appropriate levels of equity and alternative investments designed to optimize the plan's liability hedge ratio. In practice, the value of an asset portfolio constructed primarily of fixed income securities is inversely correlated to changes in market interest rates, primarily offsetting changes in the value of the pension benefit obligation caused by changes in the interest rate used to discount plan liabilities.

Asset allocation information for the Pension Plan at December 31, 2019 and 2018 is as follows:

Investment	2019 ‎Actual ‎Allocation		2019 ‎Target ‎Allocation ‎Range	2018 ‎Actual ‎Allocation		2018 ‎Target ‎Allocation ‎Range
Equity securities-U.S.	6	%	3-10 %	5	%	3-15 %
Equity securities-International	9	%	2-10 %	8	%	3-15 %
Fixed income investments	68	%	40-80 %	71	%	38-85 %
Hedge funds	5	%	2-8 %	5	%	5-15 %
Private markets	4	%	0-15 %	4	%	3-13 %
Other investments	8	%	0-14 %	7	%	0-10 %
Short-term investments	—	%	1-10 %	—	%	0-3 %
Total	100	%	100 %	100	%	100 %

Certain reclassifications have been made to the classes of plan assets in prior year to conform to the December 31, 2019 presentation due to a change in our investment policy in 2019.

The following is a description of the valuation methodologies used for assets held by the Pension Plan measured at fair value:

Equity securities - U.S.

Equity securities - U.S. consist of investments in U.S. corporate stocks and U.S. equity mutual funds. U.S. equity mutual funds include publicly traded mutual funds and a bank collective fund for ERISA plans. U.S. corporate stocks and U.S. equity mutual funds are primarily large-capitalization stocks (defined as companies with market capitalization of more than $10 billion). U.S. corporate stocks and publicly traded mutual funds are valued at the closing price reported on the active public market in which the individual securities are traded and are classified as Level 1. The bank collective fund for ERISA plans is valued at the net asset value ("NAV") of units of the fund. The NAV, as provided by the Trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund.

Equity securities – International

Equity securities - International consist of investments in international corporate stocks, publicly traded mutual funds, and a collective investment trust, and are primarily investments within developed and emerging markets. Investments other than the collective investment trust are valued at the closing price reported on the active public market in which the individual securities are traded and are classified as Level 1. The collective investment trust is valued at the NAV of units of the fund. The NAV, as provided by the Trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund. Audited financial statements are produced on an annual basis for the collective investment trust.

Fixed income investments

Fixed income investments consist of U.S. and international corporate bonds, government and government agency bonds, as well as a publicly traded mutual fund and commingled funds, both of which invest in corporate and government debt securities within the U.S. U.S. and international corporate bonds, government and government agency bonds, and the publicly traded mutual fund are valued at the closing price reported on the active market in which they are traded and thus are classified as Level 1. The commingled funds are valued at the NAV of units of the fund. The NAV, as provided by the Trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund.

Hedge funds

Hedge funds consist of investments in various hedge funds structured as fund-of-funds (defined as a single fund that invests in multiple funds). The hedge funds use various investment strategies in an attempt to generate non-correlated returns. A fund-of-funds is designed to help diversify and reduce the risk of the overall portfolio. The hedge funds are valued at the NAV of units of the fund. The NAV, as provided by the Trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund. Audited financial statements are produced on an annual basis for the hedge funds.

Private markets

Private markets consist of private equity investments. Private markets is an asset class that is generally characterized as requiring long-term commitments and where liquidity is typically limited. Private markets do not have an actively traded market with readily observable prices. The investments are limited partnerships (“LP”) and are diversified across typical private equity strategies including: buyouts, co-investments, secondary offerings, venture capital, real estate, and special situations. Valuations are developed using a variety of proprietary model methodologies. Valuations may be derived from publicly available sources as well as information obtained from each fund's general partner based upon public market conditions and returns. All private markets investments are classified as Level 3, other than a real estate investment trust (“REIT”). The REIT is a commingled trust valued at the NAV of units of the trust. The NAV, as provided by the Trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund. Audited financial statements are produced on an annual basis for the private markets investments.

Other investments

Other investments consist of investments in a diversified mutual fund, a private debt fund, and a high-yield bond fund. The diversified mutual fund is valued using quoted prices in an active market, and is therefore classified as Level 1. The private debt fund is valued using unobservable inputs with limited trading activity, and is therefore classified as Level 3. The high-yield bond fund is valued using the NAV based on the fair value of the underlying investments held by the fund. The NAV, as provided by the Trustee, is used as a practical expedient to estimate fair value. Audited financial statements are produced on an annual basis for the private debt fund and the high-yield bond fund.

Short-term investments

Short-term investments consist of cash and cash equivalents in a short-term fund which is valued at the NAV of units of the fund. The NAV, as provided by the Trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund.

The methods described above may produce fair value calculations that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while we believe our Pension Plan valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

There have been no changes in the methodologies for determining fair value at December 31, 2019 or 2018.

The following tables set forth, by level within the fair value hierarchy, the Pension Plan assets measured at fair value as of December 31, 2019 and 2018:

December 31, 2019
Investment	Investments ‎Measured at ‎NAV		Level 1		Level 2		Level 3		Total
Equity securities - U.S.	$	14.0	$	26.0	$	—	$	—	$	40.0
Equity securities - International		20.7		37.9		—		—		58.6
Fixed income investments		312.7		135.2		—		—		447.9
Hedge funds		32.0		—		—		—		32.0
Private markets		17.0		—		—		11.0		28.0
Other investments		17.7		20.4		—		11.4		49.5
Short-term investments		2.4		—		—		—		2.4
Total	$	416.5	$	219.5	$	—	$	22.4	$	658.4

December 31, 2018
Investment	Investments ‎Measured at ‎NAV		Level 1		Level 2		Level 3		Total
Equity securities - U.S.	$	10.7	$	19.3	$	—	$	—	$	30.0
Equity securities - International		—		47.6		—		—		47.6
Fixed income investments		291.7		124.9		—		—		416.6
Hedge funds		30.7		—		—		—		30.7
Private markets		16.3		—		—		6.0		22.3
Other investments		18.2		15.9		—		4.4		38.5
Short-term investments		2.6		—		—		—		2.6
Total	$	370.2	$	207.7	$	—	$	10.4	$	588.3

The tables below set forth a summary of changes in the fair value of the Pension Plan's Level 3 assets for the years ended December 31, 2019 and 2018:

December 31, 2019
	Private Markets		Other Investments		Total
Balance, beginning of year	$	6.0	$	4.4	$	10.4
Realized gains		0.1		—		0.1
Unrealized gains		0.7		0.8		1.5
Purchases		4.4		6.8		11.2
Sales		(0.2)		(0.6)		(0.8)
Balance, end of year	$	11.0	$	11.4	$	22.4

December 31, 2018
	Private Markets		Other Investments		Total
Balance, beginning of year	$	3.8	$	3.9	$	7.7
Realized gains		0.1		—		0.1
Purchases		3.2		0.9		4.1
Sales		(1.1)		(0.4)		(1.5)
Balance, end of year	$	6.0	$	4.4	$	10.4

Certain reclassifications have been made to the classes of plan assets in prior year to conform to the December 31, 2019 presentation due to a change in our investment policy in 2019.