Retirement Benefits

12 Months Ended

Sep. 30, 2024

Retirement Benefits [Abstract]

Retirement Benefits

RETIREMENT BENEFITS

We and certain of our subsidiaries sponsor defined benefit pension plans and defined contribution plans that cover a substantial portion of our worldwide employees. The principal defined benefit pension plans are the U.S. salaried pension plan and the U.K. pension plan. These plans were closed to new participants in 2005, after which defined contribution plans were offered to new employees. The principal defined contribution plan is the Retirement Savings Plan, in which a substantial portion of the U.S. employees participate. A similar plan is offered to U.K. employees. We also provide other postretirement benefits consisting primarily of healthcare benefits to U.S. retirees who meet age and service requirements.

Defined Benefit Pension Plans

Pension benefits earned are generally based on years of service and compensation during active employment. The components of net periodic cost (benefit) for our defined benefit pension plans for fiscal years 2024, 2023, and 2022 were as follows:

	Fiscal Year Ended 30 September
	2024			2023			2022
	U.S.	Inter- national	Total	U.S.	Inter- national	Total	U.S.	Inter- national	Total
Service cost	$9.6	$11.3	$20.9	$10.9	$12.3	$23.2	$18.3	$21.5	$39.8
Non-service cost (benefit):
Interest cost	134.9	60.0	194.9	129.9	59.9	189.8	73.9	28.9	102.8
Expected return on plan assets	(120.1)	(47.3)	(167.4)	(127.1)	(49.2)	(176.3)	(168.3)	(67.4)	(235.7)
Prior service cost amortization	1.1	0.9	2.0	1.2	0.7	1.9	1.3	—	1.3
Actuarial loss amortization	57.3	12.9	70.2	59.7	11.6	71.3	66.0	14.7	80.7
Settlements	1.1	1.2	2.3	1.4	0.6	2.0	6.0	0.2	6.2
Curtailments	—	—	—	—	(1.9)	(1.9)	—	—	—
Other	—	0.9	0.9	—	0.9	0.9	—	1.3	1.3
Net Periodic Cost (Benefit)	$83.9	$39.9	$123.8	$76.0	$34.9	$110.9	($2.8)	($0.8)	($3.6)

Our service costs are primarily included within "Cost of sales" and "Selling and administrative expense" on our consolidated income statements. The amount of service costs capitalized in fiscal years 2024, 2023 and 2022 were not material. The non-service related impacts are presented outside operating income within "Other non-operating income (expense), net."

Certain of our pension plans provide for a lump sum benefit payment option at the time of retirement, or for corporate officers, six months after their retirement date. A participant’s vested benefit is considered settled upon cash payment of the lump sum. We recognize pension settlement losses when cash payments exceed the sum of the service and interest cost components of net periodic cost (benefit) of the plan for the fiscal year. We recognized pension settlement losses of $1.1, $1.4 and $6.0 in fiscal years 2024, 2023 and 2022, respectively, to accelerate recognition of a portion of actuarial losses deferred in accumulated other comprehensive loss associated with the U.S. supplementary pension plan.

We calculate net periodic cost (benefit) for a given fiscal year based on assumptions developed at the end of the previous fiscal year. The following table sets forth the weighted average assumptions used in the calculation of net periodic cost (benefit):

	2024				2023				2022
	U.S.		International		U.S.		International		U.S.		International
Discount rate – Service cost	6.1	%	5.3	%	5.7	%	4.6	%	3.0	%	1.9	%
Discount rate – Interest cost	6.0	%	5.1	%	5.5	%	5.0	%	2.3	%	1.6	%
Expected return on plan assets	5.8	%	4.3	%	5.8	%	4.2	%	5.8	%	4.0	%
Rate of compensation increase	3.5	%	3.4	%	3.5	%	3.4	%	3.5	%	3.3	%

The projected benefit obligation ("PBO") is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future salary increases. The following table sets forth the weighted average assumptions used in the calculation of the PBO:

	2024				2023
	U.S.		International		U.S.		International
Discount rate	5.0	%	4.6	%	6.0	%	5.1	%
Rate of compensation increase	3.5	%	3.4	%	3.5	%	3.4	%

The following tables reflect the change in the PBO and the change in the fair value of plan assets based on the plan year measurement date, as well as the amounts recognized in the consolidated balance sheets:

	2024		2023
	U.S.	International	U.S.	International
Change in Projected Benefit Obligation
Obligation at beginning of year	$2,348.8	$1,162.4	$2,450.8	$1,137.5
Service cost	9.6	11.3	10.9	12.3
Interest cost	134.9	60.0	129.9	59.9
Amendments	1.3	—	0.3	7.0
Actuarial loss (gain)	296.2	50.7	(68.3)	(80.1)
Curtailments	—	—	—	(14.8)
Settlements	(3.6)	(8.6)	(4.7)	(3.4)
Participant contributions	—	0.7	—	0.8
Benefits paid	(174.1)	(55.8)	(170.1)	(52.8)
Currency translation and other	—	118.0	—	96.0
Obligation at End of Year	$2,613.1	$1,338.7	$2,348.8	$1,162.4

	2024		2023
	U.S.	International	U.S.	International
Change in Plan Assets
Fair value at beginning of year	$2,299.0	$1,134.0	$2,404.0	$1,122.0
Actual return on plan assets	404.4	154.5	61.4	(52.7)
Settlements	(3.6)	(8.6)	(4.7)	(3.4)
Company contributions	7.3	27.4	8.4	24.2
Participant contributions	—	0.7	—	0.8
Benefits paid	(174.1)	(55.8)	(170.1)	(52.8)
Currency translation and other	—	122.3	—	95.9
Fair Value at End of Year	$2,533.0	$1,374.5	$2,299.0	$1,134.0
Funded Status at End of Year	($80.1)	$35.8	($49.8)	($28.4)

	2024		2023
	U.S.	International	U.S.	International
Amounts Recognized
Noncurrent assets	$45.3	$154.7	$36.2	$83.8
Accrued liabilities	7.3	0.9	5.3	0.6
Noncurrent liabilities	118.1	118.0	80.7	111.6
Net Liability Recognized	($80.1)	$35.8	($49.8)	($28.4)

The changes in plan assets and benefit obligation that have been recognized in other comprehensive income on a pretax basis during fiscal years 2024 and 2023 consist of the following:

	2024		2023
	U.S.	International	U.S.	International
Net actuarial loss (gain) arising during the period	$11.9	($56.5)	($2.6)	$7.0
Amortization of net actuarial loss	(58.4)	(14.1)	(61.1)	(12.2)
Prior service cost arising during the period	1.3	—	0.3	7.0
Amortization of prior service (cost) credit	(1.1)	(0.9)	(1.2)	1.2
Total	($46.3)	($71.5)	($64.6)	$3.0

The net actuarial gains and losses represent the actual changes in the estimated obligation and plan assets that have not yet been recognized in the consolidated income statements and are included in accumulated other comprehensive loss. Actuarial losses arising during fiscal year 2024 are primarily attributable to higher than expected returns on plan assets that were partially offset by lower discount rates. Accumulated actuarial gains and losses that exceed a corridor are amortized over the average remaining service period of active U.S. participants, which was approximately six years as of 30 September 2024. For U.K. participants, accumulated actuarial gains and losses that exceed a corridor are amortized over the average remaining life expectancy, which was approximately 22 years as of 30 September 2024.

The components recognized in accumulated other comprehensive loss on a pretax basis at 30 September consisted of the following:

	2024		2023
	U.S.	International	U.S.	International
Net actuarial loss	$415.3	$435.8	$461.8	$506.4
Prior service cost	5.8	11.0	5.6	11.9
Net transition liability	—	0.4	—	0.4
Total	$421.1	$447.2	$467.4	$518.7

The accumulated benefit obligation ("ABO") is the actuarial present value of benefits attributed to employee service rendered to a particular date, based on current salaries. The ABO for all defined benefit pension plans was $3,860.4 and $3,429.1 as of 30 September 2024 and 2023, respectively.

The following table provides information on pension plans where the benefit liability exceeds the value of plan assets:

	2024		2023
30 September	U.S.	International	U.S.	International
Pension Plans with PBO in Excess of Plan Assets:
PBO	$2,446.5	$326.1	$2,194.5	$295.1
Fair value of plan assets	2,321.1	207.2	2,108.5	182.9
PBO in excess of plan assets	$125.4	$118.9	$86.0	$112.2
Pension Plans with ABO in Excess of Plan Assets:
ABO	$2,394.5	$139.8	$47.1	$144.3
Fair value of plan assets	2,321.1	42.0	—	56.3
ABO in excess of plan assets	$73.4	$97.8	$47.1	$88.0

The tables above include several pension arrangements that are not funded because of jurisdictional practice. The ABO and PBO related to these plans as of 30 September 2024 were $55.4 and $59.9, respectively. As of 30 September 2024, the U.S. salaried pension plan had both a PBO and ABO in excess of plan assets. As of 30 September 2023, the U.S. salaried pension plan had plan assets in excess of ABO.

Pension Plan Assets

Our pension plan investment strategy is to invest in diversified portfolios to earn a long-term return consistent with acceptable risk in order to pay retirement benefits and meet regulatory funding requirements while minimizing company cash contributions over time. De-risking strategies are also employed for closed plans as funding improves, generally resulting in higher allocations to long duration bonds. The plans invest primarily in passive and actively managed equity and debt securities. Equity investments are diversified geographically and by investment style and market capitalization. Fixed income investments include sovereign, corporate and asset-backed securities generally denominated in the currency of the plan. The U.S. and U.K. plans' investment managers are authorized to utilize derivatives to manage interest and inflation exposure.

Asset allocation targets are established based on the long-term return, volatility and correlation characteristics of the asset classes, the profiles of the plans’ liabilities, and acceptable levels of risk. As of 30 September 2024, the U.S pension plan was at target with respect to the fixed income securities portfolio. We continue to monitor the investment portfolio and various investment markets and will take action accordingly. Assets are routinely rebalanced through contributions, benefit payments, and otherwise as deemed appropriate. The actual and target allocations at the measurement date are as follows:

	2024 Target Allocation				2024 Actual Allocation				2023 Actual Allocation
	U.S.		International		U.S.		International		U.S.		International
Asset Category
Equity securities	16 - 27%		5 - 22%		20	%	14	%	19	%	19	%
Fixed income securities	66 - 80%		78 - 95%		73	%	86	%	72	%	80	%
Real estate and other	4 - 7%		—	%	6	%	—	%	8	%	—	%
Cash	—	%	—	%	1	%	—	%	1	%	1	%
Total					100	%	100	%	100	%	100	%

In fiscal year 2024, the 5.8% expected return for U.S. plan assets was based on a weighted average of estimated long-term returns of major asset classes and the historical performance of plan assets. In determining the estimated long-term asset class returns, we take into account historical long-term returns and the value of active management, as well as other economic and market factors, and input from our actuaries and investment advisors.

In fiscal year 2024, the 4.3% expected rate of return for international plan assets was based on a weighted average return for plans outside the U.S., which vary significantly in size, asset structure and expected returns. The expected asset return for the U.K. plan, which represents approximately 80% of the assets of our International plans, was 4.3% and was derived from expected equity and debt security returns.

The table below summarizes pension plan assets measured at fair value by asset class (see Note 16, Fair Value Measurements, for definition of the levels):

	2024				2023
30 September	Total	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3
U.S. Qualified Pension Plans
Cash and cash equivalents	$14.7	$14.7	$—	$—	$14.6	$14.6	$—	$—
Equity securities	320.0	320.0	—	—	143.0	143.0	—	—
Equity mutual funds	—	—	—	—	105.2	105.2	—	—
Equity pooled funds	204.7	—	204.7	—	187.8	—	187.8	—
Fixed income securities	1,844.7	—	1,844.7	—	1,661.8	—	1,661.8	—
Total U.S. Qualified Pension Plans at Fair Value	$2,384.1	$334.7	$2,049.4	$—	$2,112.4	$262.8	$1,849.6	$—
Real estate pooled funds(A)	148.9				186.6
Total U.S. Qualified Pension Plans	$2,533.0				$2,299.0
International Pension Plans
Cash and cash equivalents	$3.6	$3.6	$—	$—	$8.0	$8.0	$—	$—
Equity pooled funds	192.1	—	192.1	—	218.5	—	218.5	—
Fixed income pooled funds	971.6	—	858.0	113.6	724.6	—	630.4	94.2
Other pooled funds	19.4	—	19.4	—	17.1	—	17.1	—
Insurance contracts	187.8	—	—	187.8	165.8	—	—	165.8
Total International Pension Plans	$1,374.5	$3.6	$1,069.5	$301.4	$1,134.0	$8.0	$866.0	$260.0

(A)Real estate pooled funds consist of funds that invest in properties. These funds generally allow for quarterly redemption with 30 days' notice. Timing for redemption could be delayed based on the priority of our request and the availability of funds. Interests in these funds are valued using the net asset value ("NAV") per share practical expedient and are not classified in the fair value hierarchy.

The table below summarizes changes in fair value of the pension plan assets classified as Level 3:

	Insurance Contracts	Fixed Income Pooled Funds	Total Level 3
Balance at 30 September 2022	$155.5	$53.5	$209.0
Purchases, sales, and settlements, net	(3.7)	34.5	30.8
Actual return on plan assets held at end of year	14.0	6.2	20.2
Balance at 30 September 2023	$165.8	$94.2	$260.0
Purchases, sales, and settlements, net	(4.9)	(7.5)	(12.4)
Actual return on plan assets held at end of year	26.9	26.9	53.8
Balance at 30 September 2024	$187.8	$113.6	$301.4

The descriptions and fair value methodologies for the U.S. and International pension plan assets are as follows:

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents approximate fair value due to the short-term maturity.

Equity Securities

Equity securities are valued at the closing market price reported on a U.S. or international exchange where the security is actively traded and are therefore classified as Level 1 assets.

Equity Mutual Funds

Shares of mutual funds are valued at the daily closing price as reported by the fund. The mutual funds are required to publish their daily NAV and to transact at that price. The mutual funds are deemed to be actively traded and are classified as Level 1 assets.

Equity Pooled Funds

Units of pooled funds are valued at the per unit NAV determined by the fund manager based on the value of the underlying traded holdings and are classified as Level 2 assets.

Fixed Income Securities

Corporate and government bonds, and related fixed income securities, are classified as Level 2 assets, as they are either valued at quoted market prices from observable pricing sources at the reporting date or valued based upon comparable securities with similar yields and credit ratings. U.S. plan fixed income investments primarily include U.S. corporate bonds, U.S. treasury investments, interest rate swaps, total return swaps, and U.S. treasury future contracts.

Fixed Income Pooled Funds

Fixed income pooled funds are classified as either Level 2 or Level 3 assets depending on the underlying investments of the fund. Fixed income pooled funds classified as Level 2 assets may hold government bonds, index linked bonds, corporate bonds, cash, and derivative instruments. The NAV of these assets is based on quoted market pricing from observable pricing sources or valued based upon comparable securities with similar yields, credit ratings, or factors as of the reporting date. Fixed income pooled funds classified as Level 3 may hold high yield bonds, emerging market debt, loans, structured credit, and other instruments. Due to the limited market activity of the underlying securities, the NAV of these assets is based on the fund manager's estimate of the fair value of the shares held as of the reporting date.

Other Pooled Funds

Other pooled funds are classified as Level 2 assets, as they are valued at the NAV of the shares held at year end, which is based on the fair value of the underlying investments.

Insurance Contracts

Insurance contracts are classified as Level 3 assets, as they are carried at contract value, which approximates the estimated fair value. The estimated fair value is based on the fair value of the underlying investment of the insurance company and discount rates that require inputs with limited observability.

Contributions and Projected Benefit Payments

Pension contributions to funded plans and benefit payments for unfunded plans for fiscal year 2024 were $34.7. Contributions for funded plans resulted primarily from contractual and regulatory requirements. Benefit payments to unfunded plans were due primarily to the timing of retirements. We anticipate contributing $30 to $40 to the defined benefit pension plans in fiscal year 2025. These contributions are anticipated to be driven primarily by contractual and regulatory requirements for funded plans and benefit payments for unfunded plans, which are dependent upon timing of retirements.

Projected benefit payments, which reflect expected future service, are as follows:

	U.S.	International
2025	$182.5	$60.5
2026	183.0	63.7
2027	185.7	67.0
2028	188.1	68.5
2029	190.2	69.8
2030-2034	954.5	385.7

These estimated benefit payments are based on assumptions about future events. Actual benefit payments may vary significantly from these estimates.

Defined Contribution Plans

We maintain a non-leveraged employee stock ownership plan ("ESOP") which forms part of the Air Products and Chemicals, Inc. Retirement Savings Plan ("RSP"). The ESOP was established in May of 2002. The balance of the RSP is a qualified defined contribution plan including a 401(k) elective deferral component. A substantial portion of U.S. employees are eligible and participate.

We treat dividends paid on ESOP shares as ordinary dividends. Under existing tax law, we may deduct dividends which are paid with respect to shares held by the plan. Shares of our common stock in the ESOP totaled 1,690,227 as of 30 September 2024.

Our contributions to the RSP include a Company core contribution for certain eligible employees who do not receive their primary retirement benefit from the defined benefit pension plans, with the core contribution based on a percentage of pay that is dependent on years of service. For the RSP, we also make matching contributions on overall employee contributions as a percentage of the employee contribution and include an enhanced contribution for certain eligible employees that do not participate in the defined benefit pension plans. Worldwide contributions expensed to income in fiscal years 2024, 2023, and 2022 were $82.6, $71.5, and $60.6, respectively.

Other Postretirement Benefits

We provide other postretirement benefits consisting primarily of healthcare benefits to certain U.S. retirees who meet age and service requirements. The healthcare benefit is a continued medical benefit until the retiree reaches age 65. Healthcare benefits are contributory, with contributions adjusted periodically. The retiree medical costs are capped at a specified dollar amount, with the retiree contributing the remainder. The cost of these benefits was not material in fiscal years 2024, 2023, and 2022. Accumulated postretirement benefit obligations as of the end of fiscal years 2024 and 2023 were $12.0 and $14.0, respectively, of which $3.1 and $3.7 were current obligations, respectively.

We recognize changes in other postretirement benefit plan obligations in other comprehensive income on a pretax basis. During fiscal years 2024 and 2023 we recognized a loss of $1.7 and $0.1, respectively, that arose during the period, and $0.5 and $2.0 of net actuarial gain amortization, respectively.

The net actuarial gain recognized in accumulated other comprehensive loss on a pretax basis was $0.2 and $2.4 as of 30 September 2024 and 2023, respectively.