RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

We sponsor various defined benefit and defined contribution retirement plans that provide retirement benefits to substantially all of our employees. Most regularly scheduled employees are eligible to participate in these plans except those covered by a collective bargaining agreement, unless the collective bargaining agreement specifically allows for participation in our plans. We contribute to a multiemployer plan for certain employees covered by collective bargaining agreements. We also provide other post-retirement benefits consisting primarily of healthcare benefits to certain retirees who meet age and service requirements.

Defined Benefit Plans

Pension benefits are earned generally based upon years of service and compensation during active employment. Contributions to the qualified defined benefit pension plans are based on actuarial calculations of amounts to cover current service costs and amortization of prior service costs over periods ranging up to 20 years. We contribute additional funds as necessary to maintain desired funding levels. As of January 1, 2018, we retroactively adopted ASU 2017-07, "Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost". See Note 2 for further discussion.

Benefit accruals under our most significant plan, which account for approximately 81% of the assets and 83% of the benefit obligations in the tables below, had been credited at the rate of 4% of eligible compensation with an interest credit based upon the 30-year U.S. Treasury rate. The Company discontinued providing contribution credits effective January 1, 2010 to this plan. The remaining defined benefit pension plans in Canada use a variety of benefit formulas, and we will discontinue providing contribution credits effective January 1, 2019.

We also maintain a Supplemental Executive Retirement Plan (SERP), an unfunded, non-qualified defined benefit plan intended to provide supplemental retirement benefits to certain executives. Benefits are generally based on compensation in the years immediately preceding normal retirement. During the years ended December 31, 2018 and 2017, we recorded a plan settlement charge of $0.1 million and $3.1 million associated with the retirement of our executives during 2018 and 2017. As of December 31, 2018, we have no active participants in the SERP plan.

The projected benefit obligation is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated salary increases. The following table details information regarding our pension plans at December 31:



Dollar amounts in millions	2018			2017
Change in benefit obligation:
Beginning of year balance	$	345.5		$	331.9
Service cost	2.6			4.9
Interest cost	11.1			12.5
Actuarial loss	(24.5		)	10.8
Curtailment	(1.3		)	—
Foreign exchange rate changes	(4.5		)	3.6
Benefits paid	(32.2		)	(18.2		)
End of year balance	$	296.7		$	345.5
Change in assets (fair value):
Beginning of year balance	$	265.9		$	239.9
Actual return on plan assets	(7.3		)	27.8
Employer contribution	52.9			12.7
Foreign exchange rate changes	(4.5		)	3.7
Benefits paid	(32.2		)	(18.2		)
End of year balance	$	274.8		$	265.9
Funded status:
Plan assets (less than) over benefit obligations:	$	(21.9	)	$	(79.6	)

Amounts included in the balance sheet:
Noncurrent pension assets, included in “Other assets”	$	4.5		$	1.4
Current pension liabilities, included in “Accounts payable and accrued liabilities”	(3.1		)	(12.1		)
Noncurrent pension liabilities, included in “Other long-term liabilities”	(23.3		)	(68.9		)
Net amount recognized	$	(21.9	)	$	(79.6	)

The pretax amounts recognized in Accumulated other comprehensive loss were as follows:



Dollar amounts in millions	Actuarial losses			Prior service cost			Total
December 31, 2016	$	(140.6	)	$	(8.4	)	$	(149.0	)
Other comprehensive income (loss) before reclassifications	3.2			—			3.2
Amounts reclassified from accumulated comprehensive loss	9.3			0.5			9.8
December 31, 2017	(128.1		)	(7.9		)	(136.0		)
Other comprehensive income (loss) before reclassifications	4.1			—			4.1
Amounts reclassified from accumulated comprehensive loss	7.6			0.5			8.1
December 31, 2018	$	(116.4	)	$	(7.4	)	$	(123.8	)

Weighted-average assumptions used to calculate our benefit obligations at December 31:



	2018		2017
Discount rate:
US	4.2	%	3.5	%
Canada	3.8	%	3.3	%
SERP	NA		2.9	%
Rate of compensation increase:
US	NA		NA
Canada	3.5	%	3.5	%
SERP	NA		3.0	%

Benefit obligations by plan category are as follows:



	2018
Dollar amounts in millions	US			Canada		SERP			Total
Fair value of plan assets	$	222.4		$	52.4	$	—		$	274.8
Benefit obligation	244.8			49.0		2.9			296.7
Funded Status	$	(22.4	)	$	3.4	$	(2.9	)	$	(21.9	)

	2017
	US			Canada		SERP			Total
Fair value of plan assets	$	207.7		$	58.2	$	—		$	265.9
Benefit obligation	272.6			58.1		14.8			345.5
Funded Status	$	(64.9	)	$	0.1	$	(14.8	)	$	(79.6	)

The total accumulated benefit obligation for all pension plans as of December 31, 2018 and 2017 was $296.5 million and $343.2 million. The decrease in the accumulated benefit obligation primarily is a result of an increase in the discount rate and a discretionary contribution to our U.S. plan of $33.2 million to maximize the tax savings allowed under the Tax Act and lower our expenses associated with pension funding regulations going forward.

The accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $248.8 million and $222.4 million at December 31, 2018 and $287.9 million and $207.7 million at December 31, 2017. The projected benefit obligations and fair value of plan assets of plans with projected benefit obligations in excess of plan assets were $248.8 million and $222.4 million at December 31, 2018 and $288.7 million and $207.7 million at December 31, 2017.

The amount of accumulated other comprehensive income that is expected to be amortized as expense during 2019 is:



Dollar amounts in millions
Net actuarial loss	$	4.7
Prior service cost	0.5
Total	$	5.2

The benefits expected to be paid from the benefit plans, which reflect expected future service, are as follows:



Dollar amounts in millions
Year
2019	$	22.4
2020	20.3
2021	20.4
2022	19.6
2023	20.1
2024– 2028	96.6

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

The following table sets forth the net periodic pension cost for our defined benefit pension plans. The components of our net periodic pension costs consisted of the following:



	Year ended December 31,
Dollar amounts in millions	2018			2017			2016
Service cost	$	2.6		$	4.9		$	4.3
Other components of net periodic pension cost:
Interest cost	11.1			12.5			13.1
Expected return on plan assets	(13.9		)	(13.1		)	(13.1		)
Amortization of prior service cost and net transition asset	0.5			0.5			0.5
Amortization of net actuarial loss	6.3			6.2			5.4
Net periodic pension cost before loss due to settlement	$	6.6		$	11.0		$	10.2
Loss due to settlement	0.1			3.1			—
	$	6.7		$	14.1		$	10.2

Net periodic pension cost included in cost of sales	$	1.6		$	3.6		$	3.2
Net periodic pension cost included in selling, general, and administrative expenses	1.0			1.3			1.1
Net periodic pension cost included in other non-operating items	4.1			9.2			5.9
	$	6.7		$	14.1		$	10.2

Weighted-average assumptions used to calculate our net periodic pension costs for the year ended December 31:



	2018		2017		2016
Discount rate:
U.S.	3.5	%	4.0	%	4.2	%
Canada	3.3	%	3.7	%	3.8	%
SERP	NA		2.7	%	2.8	%
Expected return on plan assets:
U.S.	5.8	%	5.8	%	5.8	%
Canada	4.1	%	3.8	%	3.8	%
SERP	NA		NA		NA
Rate of compensation increase:
U.S.	NA		NA		NA
Canada	3.5	%	3.5	%	3.5	%
SERP	NA		3.0	%	3.0	%

The expected long-term rate of return on plan assets reflects the weighted-average expected long-term rates of return for the broad categories of investments currently held in the plans (adjusted for expected changes), based on historical rates of return for each broad category, as well as factors that may constrain or enhance returns in the broad categories in the future. The expected long-term rate of return on plan assets is adjusted when there are fundamental changes in expected returns in one or more broad asset categories and when the weighted-average mix of assets in the plans changes significantly.

Asset allocation targets are established based upon the long-term returns and volatility characteristics of the investment classes and recognize the benefits of diversification and the profits of the plans’ liabilities. The actual and target allocations at the measurement dates are as follows:



	Target Allocation 2018		Actual Allocation
	Target Allocation 2018		2018		2017
Asset category
U.S. Plans
Equity securities	33	%	26	%	40	%
Debt securities	50	%	52	%	20	%
Multi-Strategy Funds	17	%	22	%	40	%
Total Allocation for U.S. Plans	100	%	100	%	100	%

Non-U.S. Plans
Equity securities	—	%	—	%	28	%
Debt securities	90	%	90	%	70	%
Multi-Strategy Funds	10	%	10	%	2	%
Total Allocation for Non-U.S. Plans	100	%	100	%	100	%

Our investment policies for the defined benefit pension plans provide target asset allocations by broad categories of investment and ranges of acceptable allocations. These policies are set by an administrative committee with the goal of maximizing long-term investment returns within acceptable levels of volatility and risk. Our U.S. plans include hedge funds and real return investment strategies to increase returns and reduce volatility. Our plans do not currently invest directly in derivative securities, although such investments may be considered in the future to increase returns and/or reduce volatility. To the extent the expected return on plan assets varies from the actual return, an actuarial gain or loss results.

The fair value of our pension plan assets at December 31, 2018 and December 31, 2017, fair value asset categories and the level of inputs as defined in Note 4 are as follows:



Dollar amounts in millions Asset Category	December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity investment funds:^(a)
Domestic stock funds:
Measured within the fair value hierarchy	$	22.3	$	22.3	$	—	$	—
Measured at net asset value ^(d)	8.3		—		8.3		—
International stock funds:
Measured within the fair value hierarchy	13.2		13.2		—		—
Measured at net asset value ^(d)	13.7				13.7
Fixed income investment funds:^(b)
Domestic bond funds:
Measured within the fair value hierarchy	27.1		27.1		—		—
Measured at net asset value ^(d)	88.5		3.9		84.6
International bond funds:
Measured within the fair value hierarchy	27.3				27.3
Measured at net asset value ^(d)	20.1		—		20.1		—
Multi-strategy funds:^(c)
Measured within the fair value hierarchy	35.0		35.0		—		—
Measured at net asset value ^(d)	17.8		—		5.1		12.7
Cash & cash equivalents	1.5		—		1.5		—
Total	$	274.8	$	101.5	$	160.6	$	12.7

_______________


^(a)	Equity investments include investments in funds that are primarily invested in large capitalization U.S. and international equity securities and a mutual fund.


^(b)	Fixed income investments include investments in funds that are primarily invested in a diversified portfolio of investment grade U.S. and international debt securities.


^(c)	The multi-strategy funds invest in various hedge funds that employ a fund of funds strategy.


^(d)	Investments for which fair value is measured using the net asset value per share as a practical expedient are not categorized within the fair value hierarchy.



Dollar amounts in millions Asset Category	December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity investment funds:^(a)
Domestic stock funds	$	56.2	$	42.2	$	14.0	$	—
International stock funds	43.1		15.5		27.6		—
Fixed income investment funds:^(b)
Domestic bond funds	40.2		20.2		20.0		—
International bond funds	40.9		—		40.9		—
Multi-strategy funds^(c)	82.5		69.6		—		12.9
Cash & cash equivalents	3.0		—		3.0		—
Total	$	265.9	$	147.5	$	105.5	$	12.9

_______________


^(a)	Equity investments include investments in funds that are primarily invested in large capitalization U.S. and international equity securities and a mutual fund.


^(b)	Fixed income investments include investments in funds that are primarily invested in a diversified portfolio of investment grade U.S. and international debt securities.


^(c)	The multi-strategy funds invest in various hedge funds that employ a fund of funds strategy.

Level 1 investments are valued based on active market quotations.

Level 2 investments are valued based on the unit prices quoted by the funds, representing the fair value of underlying investments.

Due to the lack of observable market quotations on real estate and multi-strategy funds, we evaluate our structure and current market estimates of fair value, including fair value estimates from the funds that rely exclusively on Level 3 inputs. These inputs include those that are based on expected cash flow streams and property values, including assessments of overall market liquidity. The valuations are subject to uncertainties that are difficult to predict.

The following table summarizes assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period.



Dollar amounts in millions	Multi-Strategy Funds
Balance at January 1, 2017	$	12.2
Total unrealized gains	0.7
Contribution (redemption)	0.1
Management fees	(0.1		)
Balance at December 31, 2017	$	12.9
Total unrealized gains	$	(0.2	)
Contribution (redemption)	0.2
Management fees	(0.2		)
Balance at December 31, 2018	$	12.7

Defined Contribution Plans

We also sponsor defined contribution plans in the U.S. and Canada. In the U.S., these plans are primarily 401(k) plans for hourly and salaried employees that allow for pre-tax employee deferrals and a company match of up to 5.0% of an employee’s eligible wages (subject to certain limits). Under the profit sharing feature of these plans, we may elect to contribute a discretionary amount as a percentage of eligible wages. Included in the assets of the 401(k) and profit sharing plans are 1.3 million shares of LP common stock that represented approximately 7.5% of the total market value of plan assets at December 31, 2018.

In Canada, we sponsor both defined contribution plans and Registered Retirement Savings Plans for hourly and salaried employees that allow for tax employee deferrals. We provide a base contribution of 2.5% of eligible earnings and matches 50% of an employee’s deferrals up to a maximum of 3% of each employee’s eligible earnings (subject to certain limits).

Expenses related to defined contribution plans and the multiemployer plan in 2018, 2017 and 2016 were $10.1 million, $9.7 million and $8.7 million.

Other Benefit Plans

We have several plans that provide post-retirement benefits other than pensions, primarily for salaried employees in the U.S. and certain groups of Canadian employees. The funded status at December 31, 2018 and 2017 was $8.6 million and $9.0 million. Net expense related to these plans was not significant in 2018 or 2017.

Effective August 16, 2004, we adopted the Louisiana-Pacific Corporation 2004 Executive Deferred Compensation Plan (the Plan). Pursuant to the Plan, certain management employees are eligible to defer up to 90% of their regular salary and annual cash incentives that exceed the limitation as set forth by the I.R.S. Each plan participant is fully vested in all employee deferred compensation and earnings credited associated with employee contributions. Employer contributions and associated earnings vest over periods not exceeding five years. The liability under this plan amounted to $1.1 million and $1.9 million at December 31, 2018 and December 31, 2017 and is included in “Other long-term liabilities” on LP’s Consolidated Balance Sheets.