RETIREMENT PLANS

12 Months Ended

Dec. 31, 2023

RETIREMENT PLANS

RETIREMENT PLANS

16. RETIREMENT PLANS

Pension and Postretirement Health Care Benefits Plans

The Company has a non-contributory, qualified, defined benefit pension plan covering the majority of its U.S. employees. The Company also has U.S. non-contributory, non-qualified, defined benefit pension plans, which provide for benefits to employees in excess of limits permitted under its pension plans. The U.S. non-qualified plans are not funded and the recorded benefit obligations for the non-qualified plans were $87 million and $86 million at December 31, 2023 and 2022, respectively. The measurement date used for determining the U.S. pension plan assets and obligations is December 31.

Various international subsidiaries have defined benefit pension plans. International plans are funded based on local country requirements. The measurement date used for determining the international pension plan assets and obligations is November 30, the fiscal year end of the Company’s international subsidiaries.

The Company provides postretirement health care and life insurance benefits to certain U.S. employees and retirees. The U.S. postretirement health care plans are contributory based on years of service and choice of coverage (family or single), with retiree contributions adjusted annually. The Company also maintains several U.S. postretirement life insurance plans. The measurement date used to determine the U.S. postretirement health care and life insurance plan assets and obligations is December 31. Certain employees

outside the U.S. are covered under government-sponsored programs, which are not required to be fully funded. The expense and obligation for providing international postretirement health care benefits are not significant.

The following table sets forth financial information related to the Company’s pension and postretirement benefit plans:

	U.S.				International				U.S. Postretirement
	Pensions				Pensions				Benefits
(millions)	2023		2022		2023		2022		2023		2022
Accumulated benefit obligation, end of year		$1,859.5		$1,799.0		$1,125.8		$1,171.1		$112.0		$115.5
Projected benefit obligation
Projected benefit obligation, beginning of year		$1,799.0		$2,462.7		$1,221.9		$1,779.7		$115.5		$155.4
Service cost		40.9		40.8		21.7		28.4		0.4		0.8
Interest cost		88.1		65.3		45.9		22.0		5.6		3.3
Participant contributions		-		-		2.8		3.0		3.8		3.7
Plan amendments		-		-		(1.5)		-		-		-
Actuarial (gain) loss		90.2		(479.8)		(101.0)		(436.8)		(0.1)		(33.7)
Assumed through acquisitions		-		-		-		15.1		-		-
Other events		-		-		2.9		-		-		-
Benefits paid		(158.7)		(290.0)		(69.8)		(54.3)		(13.2)		(14.0)
Foreign currency translation		-		-		51.1		(135.2)		-		-
Projected benefit obligation, end of year		$1,859.5		$1,799.0		$1,174.0		$1,221.9		$112.0		$115.5
Plan assets
Fair value of plan assets, beginning of year		$1,668.5		$2,376.8		$905.1		$1,219.9		$3.2		$5.2
Actual returns on plan assets		149.1		(430.3)		(44.0)		(218.3)		0.2		(0.8)
Company contributions		60.8		12.0		35.4		38.3		12.2		12.8
Participant contributions		-		-		2.8		3.0		-		-
Acquired through acquisitions		-		-		2.9		15.1		-		-
Benefits paid		(158.7)		(290.0)		(67.6)		(54.3)		(13.2)		(14.0)
Foreign currency translation		-		-		36.6		(98.6)		-		-
Fair value of plan assets, end of year		$1,719.7		$1,668.5		$871.2		$905.1		$2.4		$3.2
Funded Status, end of year		($139.8)		($130.5)		($302.8)		($316.8)		($109.6)		($112.3)
Amounts recognized in the Consolidated Balance Sheets:
Other assets		$-		$-		$118.4		$118.6		$-		$-
Other current liabilities		($9.2)		(9.2)		(33.0)		(28.6)		(8.7)		(7.6)
Postretirement healthcare and pension benefits		($130.6)		(121.3)		(388.2)		(406.8)		(100.9)		(104.7)
Net liability		($139.8)		($130.5)		($302.8)		($316.8)		($109.6)		($112.3)
Amounts recognized in accumulated other comprehensive loss (income):
Unrecognized net actuarial loss (gain)		$495.2		$411.9		$278.5		$279.7		($40.8)		($43.6)
Unrecognized net prior service (benefits) costs		(16.7)		(21.2)		(0.4)		0.3		-		-
Tax (benefit) expense		(122.8)		(100.8)		(64.4)		(66.5)		6.2		7.7
Accumulated other comprehensive loss (income), net of tax		$355.7		$289.9		$213.7		$213.5		($34.6)		($35.9)
Change in accumulated other comprehensive loss (income):
Amortization of net actuarial gain (loss)		($0.2)		($30.2)		($14.8)		($22.7)		$3.1		$0.6
Amortization of prior service credits		4.5		4.5		0.5		0.1		-		-
Current period net actuarial loss (gain)		83.5		97.0		(1.0)		(147.8)		(0.3)		(32.5)
Current period prior service costs		-		-		(1.5)		-		-		-
Curtailments and settlements		-		(51.6)		2.7		-		-		-
Tax (benefit) expense		(22.0)		(5.5)		2.1		51.3		(1.5)		6.5
Foreign currency translation		-		-		12.2		(35.1)		-		-
Other comprehensive loss (income)		$65.8		$14.2		$0.2		($154.2)		$1.3		($25.4)

Estimate amounts in accumulated other comprehensive loss expected to be reclassified to net period cost during 2024 were as follows:

					U.S. Post-
	U.S.		International		Retirement
(millions)	Pensions		Pensions		Benefits
Net actuarial loss (gain)		$6.1		$10.0		($3.2)
Net prior service benefits		(4.6)		(0.6)		-
Total		$1.5		$9.4		($3.2)

Service cost is included with employee compensation cost in either cost of sales and selling, general and administrative expenses in the Consolidated Statements of Income based on employee roles in the Company while all non-service components are included in other (income) expense in the Consolidated Statements of Income.

The aggregate projected benefit obligation, accumulated benefit obligation and fair value of pension plan assets for plans with accumulated benefit obligations in excess of plan assets were as follows:

December 31, (millions)	2023		2022
Aggregate projected benefit obligation		$2,428.8		$2,392.1
Accumulated benefit obligation		2,392.4		2,355.8
Fair value of plan assets		1,868.9		1,828.1

These plans include the U.S. non-qualified pension plans which are not funded as well as various international pension plans which are funded consistent with local practices and requirements.

For the year ended December 31, 2023, the year-over-year decrease in the Company's consolidated net benefit obligations was due to an increase in pension plan assets, partially offset by a smaller increase in pension plan liabilities. Pension liabilities increased on a global basis primarily due to decreases in pension discount rates for U.S. plans, partially offset by increases in pension discount rates for international plans. The Company's pension discount rates are largely determined based on observable yields of investment grade corporate bonds or government issued debt-securities. The Company's pension plan assets are reported at fair value. The fair value of the Company's pension assets increased on a global basis primarily due to higher returns on the Company's equity and fixed income investments compared to prior year.

For the year ended December 31, 2022, the year-over-year decrease in the Company’s consolidated net benefit obligations was due to decreases in both pension liabilities and pension plan assets. Pension liabilities decreased on a global basis primarily due to increases in pension discount rates used to discount projected pension benefit payments. The Company’s pension discount rates are largely determined based on observable yields of investment grade corporate bonds or government issued debt-securities. Yields on these securities increased sharply in 2022 due, in part, to actions taken by many central banks to curb global inflation. The Company’s pension plan assets are reported at fair value. The fair value of the Company’s pension assets decreased on a global basis primarily due to unfavorable returns on the Company’s equity and fixed income investments.

Net Periodic Benefit Costs and Plan Assumptions

Pension and postretirement benefits expense for the Company’s operations were as follows:

	U.S.						International						U.S. Postretirement
	Pensions						Pensions						Benefits
(millions)	2023		2022		2021		2023		2022		2021		2023		2022		2021
Service cost		$40.9		$40.8		$43.9		$21.7		$28.4		$31.4		$0.4		$0.8		$1.0
Interest cost on benefit obligation		88.1		65.3		51.4		45.9		22.0		17.3		5.6		3.3		2.9
Expected return on plan assets		(145.1)		(144.4)		(152.3)		(56.1)		(69.8)		(70.7)		(0.2)		(0.3)		(0.4)
Recognition of net actuarial loss (gain)		0.2		30.2		56.7		12.5		22.8		28.7		(3.1)		(0.6)		0.7
Amortization of prior service benefit		(4.5)		(4.5)		(6.9)		(0.5)		(0.1)		(0.1)		-		-		-
Curtailments and settlements (a)		-		51.6		35.3		(2.7)		-		3.5		-		-		-
Total expense (benefit)		($20.4)		$39.0		$28.1		$20.8		$3.3		$10.1		$2.7		$3.2		$4.2

(a) $50.6 and $37.2 of settlement expense was recognized as special charges in 2022 and 2021, respectively.

During 2022 and 2021, the Company incurred settlement expense in the U.S. of $51.6 million ($38.9 million after tax) and $35.3 million ($26.8 million after tax), respectively, related to lump-sum payments to retirees in its U.S. pension plans. In addition to the U.S. qualified plan settlements in 2022 and 2021, the Company has historically recognized settlements and curtailment gains and losses associated with its U.S. nonqualified pension plans and International pension plans, the amounts of which have been historically not material. These charges have been included as a component of other (income) expense on the Consolidated Statements of Income.

The measurement of the Company’s pension and postretirement benefit obligations are dependent on a variety of assumptions determined by management and used by actuaries in their valuation method and calculations. The significant assumptions used in developing the required estimates of the projected benefit obligations are the discount rates, expected returns on assets, projected salary increases, and mortality tables. Assumptions for the Company were as follows:

Plan Assumptions	U.S.						International						U.S. Postretirement
	Pensions						Pensions						Benefits
(percent)	2023		2022		2021		2023		2022		2021		2023		2022		2021
Weighted-average actuarial assumptions
used to determine benefit obligations
as of year end:
Discount rate	4.95	%	5.17	%	2.86	%	4.34	%	3.70	%	1.45	%	4.95	%	5.14	%	2.75	%
Projected salary increase	4.03		4.03		4.03		2.84		2.81		2.42
Weighted-average actuarial assumptions
used to determine net cost:
Interest credit rate for cash balance plans	3.89		1.56		0.87		N/A		N/A		N/A		N/A		N/A		N/A
Discount rate	5.17		2.86		2.49		3.70		1.46		1.37		5.14		2.75		2.37
Expected return on plan assets	7.75		7.00		7.00		6.27		6.18		6.24		7.75		7.00		7.00
Projected salary increase	4.03		4.03		4.03		3.08		2.47		2.31

Discount rate assumptions for the U.S. plans are developed using a bond yield curve constructed from a population of high-quality, non-callable, corporate bonds with maturities ranging from six months to thirty years. Discount rates are estimated for the U.S. plans based on the timing of the expected benefit payments.

The Company measures service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The Company believes this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve.

The expected long-term rate of return used for the U.S. plans is based on the respective pension plan’s asset mix. The Company considers expected long-term real returns on asset categories, expectations for inflation, and estimates of the impact of active management of the assets in determining the expected long-term rate of return to use. The Company also considers historical returns.

The expected long-term rate of return used for the Company’s international plans is determined in each local jurisdiction and is based on the assets held in that jurisdiction, the expected rate of returns for the type of assets held and any guaranteed rate of return provided by the investment. The other assumptions used to measure the international pension obligations, including discount rate, vary by country based on specific local requirements and information.

The Company uses mortality tables appropriate in the circumstances, which generally are the recent available mortality tables as of the respective U.S. and international measurement dates. The Company’s 2023 and 2022 year-end U.S. valuations reflect mortality tables that estimate the impacts of COVID in an endemic state. This represents a change from 2021 when the impact of COVID on future mortality could not be reasonably estimated.

For postretirement benefit measurement purposes as of December 31, 2023, the annual rates of increase in the per capita cost of covered health care were assumed to be 7.46% for pre-65 costs. Post-65 costs are no longer used. The rates are assumed to decrease each year until they reach 4.5% in 2034 and remain at those levels thereafter. Health care costs for certain employees which are eligible for subsidy by the Company are limited by a cap on the subsidy.

Plan Asset Management

The Company’s U.S. investment strategy and policies are designed to maximize the possibility of having sufficient funds to meet the long-term liabilities of the qualified pension plan, while achieving a balance between the goals of asset growth of the qualified pension plan and keeping risk at a reasonable level. Investment income is not a primary goal of the policy.

The asset allocation position reflects the Company’s ability and willingness to accept relatively more short-term variability in the performance of the qualified pension plan asset portfolio in exchange for the expectation of better long-term returns, lower pension costs and better funded status in the long run. The U.S. qualified pension plan’s asset are diversified across a number of asset classes and securities. Selected individual portfolios within the asset classes may be undiversified while maintaining the diversified nature of total plan assets. The Company has no significant concentration of risk in its U.S. qualified pension plan assets.

Assets of funded international retirement plans are managed in each local jurisdiction and asset allocation strategy is set in accordance with local rules, regulations and practices; therefore, no overall target asset allocation is presented. Although foreign equity securities are all considered international for the Company, some equity securities are considered domestic for the local plan. The funds are invested in a variety of equities, bonds and real estate investments and, in some cases, the assets are managed by insurance companies which may offer a guaranteed rate of return. The Company has no significant concentration of risk in the assets of its international pension plans.

The fair value hierarchy is used to categorize investments measured at fair value in one of three levels in the fair value hierarchy. This categorization is based on the observability of the inputs used in valuing the investments. Refer to Note 7 for definitions of these levels.

The fair value of the Company’s U.S. qualified pension plan assets were as follows:

	Fair Value as of						Fair Value as of
(millions)	December 31, 2023						December 31, 2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash		$30.1		$-		$30.1		$54.8		$-		$54.8
Equity securities:
Large cap equity		276.1		-		276.1		237.1		-		237.1
Small cap equity		14.6		29.6		44.2		15.4		25.1		40.5
International equity		40.4		19.2		59.6		37.4		17.2		54.6
Fixed income:
Core fixed income		150.7		669.6		820.3		145.5		646.5		792.0
High-yield bonds		34.7		-		34.7		33.4		-		33.4
Emerging markets		-		24.8		24.8		-		25.4		25.4
Total investments at fair value		546.6		743.2		1,289.8		523.6		714.2		1,237.8
Investments measured at net asset value						432.3						433.9
Total		$546.6		$743.2		$1,722.1		$523.6		$714.2		$1,671.7

The Company had no Level 3 assets as part of its U.S. qualified pension plan assets as of December 31, 2023 or 2022.

The allocation of the Company’s U.S. qualified pension plan assets plans were as follows:

	Target Asset
Asset Category	Allocation				Percentage
	Percentage				of Plan Assets
December 31	2023		2022		2023		2022
Cash	-	%	-	%	2	%	3	%
Equity securities:
Large cap equity	21		21		16		14
Small cap equity	3		3		3		2
International equity	13		13		9		9
Fixed income:
Core fixed income	48		48		48		47
High-yield bonds	3		3		2		2
Emerging markets	2		2		1		2
Other:
Real estate	3		3		3		4
Private equity	5		5		14		15
Distressed debt	2		2		2		2
Total	100	%	100	%	100	%	100	%

The fair value of the Company’s international plan assets for its defined benefit pension plans were as follows:

	Fair Value as of			Fair Value as of
(millions)	December 31, 2023			December 31, 2022
	Level 1	Level 2	Total	Level 1	Level 2	Total
Cash	$12.6	$-	$12.6	$9.9	$-	$9.9
Equity securities:
International equity	-	182.5	182.5	-	219.3	219.3
Fixed income:
Corporate bonds	-	147.5	147.5	-	158.5	158.5
Government bonds	-	321.4	321.4	-	365.9	365.9
Insurance company accounts	-	163.4	163.4	-	106.2	106.2
Total investments at fair value	12.6	814.8	827.4	9.9	849.9	859.8
Investments measured at net asset value			43.8			45.3
Total	$12.6	$814.8	$871.2	$9.9	$849.9	$905.1

The Company had no Level 3 assets as part of its international plan assets as of December 31, 2023 or 2022.

The allocation of plan assets of the Company’s international plan assets for its defined benefit pension plans were as follows:

	Percentage
Asset Category	of Plan Assets
December 31	2023		2022
Cash	1	%	1	%
Equity securities:
International equity	21		24
Fixed income:
Corporate bonds	17		18
Government bonds	37		40
Total fixed income	54		58
Other:
Insurance contracts	19		12
Real estate	5		5
Total	100	%	100	%

Cash Flows

As of year-end 2023, the Company’s estimate of pension and postretirement benefits expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows:

(millions)	All Plans
2024		$242
2025		242
2026		241
2027		244
2028		246
2029 - 2033		1,215

Depending on plan funding levels, the U.S. qualified pension plan provides certain terminating participants with an option to receive their pension benefits in the form of a lump sum payout.

The Company is currently in compliance with all funding requirements of its U.S. pension and postretirement benefit plans. A $50.0 million voluntary contribution was made to its non-contributory qualified U.S. pension plan in 2023. The Company is required to fund certain international pension benefit plans in accordance with local legal requirements. The Company estimates contributions to be made to its international plans will approximate $47 million in 2024.

The Company seeks to maintain balance in its U.S. assets that meet the long-term funding requirements identified by the projections of the pension plans’ actuaries while simultaneously satisfying the fiduciary responsibilities prescribed in ERISA. The Company also takes into consideration the tax deductibility of contributions to the benefit plans.

Savings Plan and ESOP

The Company provides a 401(k) savings plan for the majority of its U.S. employees under the Company’s 401(k) savings plans, the Ecolab Savings Plan and ESOP (the “Ecolab Savings Plan”).

Under the Ecolab Savings Plan, Employee before-tax contributions of up to 4% of eligible compensation are matched 100% by the Company and employee before-tax contributions over 4% and up to 8% of eligible compensation are matched 50% by the Company.

The Company’s matching contributions are 100% vested immediately. The Company’s matching contribution expense was $88.2 million, $81.6 million and $78.2 million in 2023, 2022 and 2021, respectively.