Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

Mattel and certain of its subsidiaries have qualified and nonqualified retirement plans covering substantially all employees of these companies. These plans include defined benefit pension plans, defined contribution retirement plans, postretirement benefit plans, and deferred compensation and excess benefit plans. In addition, Mattel makes contributions to government-mandated retirement plans in countries outside the U.S. where its employees work.

A summary of retirement plan expense, net is as follows:

	For the Year Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	(In thousands)
Defined benefit pension plans	$	9,815		$	12,366		$	7,428
Defined contribution retirement plans	32,743			35,318			38,508
Postretirement benefit plans	(2,220		)	(2,148		)	963
Deferred compensation and excess benefit plans	10,994			(2,599		)	10,015
	$	51,332		$	42,937		$	56,914

In accordance with ASU 2017-07, which went into effect for interim and annual reporting periods beginning on January 1, 2018, Mattel's service cost component is recorded within operating income (loss), presented in the same line items as other employee compensation costs arising from employee services rendered in the period, while other components of net periodic pension cost and postretirement benefit cost are recorded in other non-operating expense, net, in the consolidated statements of operations. Prior period amounts have been retrospectively adjusted, which resulted in a reclassification of $3.4 million of expense, net from other selling and administrative expenses to other non-operating expense, net in the consolidated statements of operations for the year ended December 31, 2017.

Defined Benefit Pension and Postretirement Benefit Plans

Mattel provides defined benefit pension plans for eligible domestic employees, which are intended to comply with the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). Some of Mattel’s foreign subsidiaries have defined benefit pension plans covering substantially all of their eligible employees. Mattel funds these plans in accordance with the terms of the plans and local statutory requirements, which differ for each of the countries in which the subsidiaries are located. Mattel also has unfunded postretirement health insurance plans covering certain eligible domestic employees.

A summary of the components of Mattel’s net periodic benefit cost (credit) and other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income for the years ended December 31 is as follows:

	Defined Benefit Pension Plans									Postretirement Benefit Plans
	2019			2018			2017			2019			2018			2017
	(In thousands)
Net periodic benefit cost (credit):
Service cost	$	4,479		$	4,223		$	4,045		$	1		$	1		$	2
Interest cost	19,309			18,117			17,961			201			208			812
Expected return on plan assets	(21,714		)	(22,508		)	(23,072		)	—			—			—
Amortization of prior service cost (credit)	64			29			29			(2,038		)	(2,037		)	—
Recognized actuarial loss (gain)	7,585			8,518			8,362			(384		)	(320		)	149
Settlement loss	—			3,248			—			—			—			—
Curtailment loss	92			739			103			—			—			—
Net periodic benefit cost (credit)	$	9,815		$	12,366		$	7,428		$	(2,220	)	$	(2,148	)	$	963
Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:
Net actuarial loss (gain)	$	28,740		$	(4,433	)	$	46		$	1,870		$	(276	)	$	(2,746	)
Prior service cost (credit)	26			114			—			—			—			(16,261		)
Amortization of prior service (cost) credit	(64		)	(29		)	(29		)	2,038			2,037			—
Total recognized in other comprehensive (loss) income (a)	$	28,702		$	(4,348	)	$	17		$	3,908		$	1,761		$	(19,007	)
Total recognized in net periodic benefit cost (credit) and other comprehensive (loss) income	$	38,517		$	8,018		$	7,445		$	1,688		$	(387	)	$	(18,044	)

(a) Amounts exclude related tax expense of $5.5 million, $2.1 million, and $4.5 million, during 2019, 2018, and 2017, respectively, which are also included in other comprehensive (loss) income.

Net periodic benefit cost (credit) for Mattel’s domestic defined benefit pension and postretirement benefit plans was calculated on January 1 of each year using the following assumptions:

	For the Year Ended
	December 31, 2019		December 31, 2018		December 31, 2017
Defined benefit pension plans:
Discount rate	4.1	%	3.4	%	3.9	%
Weighted-average rate of future compensation increases	N/A		N/A		N/A
Long-term rate of return on plan assets	6.0	%	6.0	%	6.3	%
Postretirement benefit plans:
Discount rate	4.1	%	3.4	%	3.9	%
Annual increase in Medicare Part B premium	6.0	%	6.0	%	6.0	%
Health care cost trend rate:
Pre-65	7.0	%	7.3	%	7.0	%
Post-65	6.8	%	7.3	%	7.8	%
Ultimate cost trend rate:
Pre-65	4.5	%	4.5	%	4.5	%
Post-65	4.5	%	4.5	%	4.5	%
Year that the rate reaches the ultimate cost trend rate:
Pre-65	2025		2025		2024
Post-65	2025		2025		2024

Discount rates, weighted-average rates of future compensation increases, and long-term rates of return on plan assets for Mattel’s foreign defined benefit pension plans differ from the assumptions used for Mattel’s domestic defined benefit pension plans due to differences in local economic conditions in the locations where the non-U.S. plans are based. The rates shown in the preceding table are indicative of the weighted-average rates of all of Mattel’s defined benefit pension plans given the relative insignificance of the foreign plans to the consolidated total.

The estimated net actuarial loss for the domestic defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2020 is $8.5 million. The estimated net actuarial gain and prior service credit for the domestic postretirement benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit credit in 2020 is $2.1 million.

Mattel used a measurement date of December 31, 2019 for its defined benefit pension and postretirement benefit plans. A summary of the changes in benefit obligation and plan assets is as follows:

	Defined Benefit Pension Plans						Postretirement Benefit Plans
	December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
	(In thousands)
Change in Benefit Obligation:
Benefit obligation, beginning of year	$	567,502		$	639,319		$	6,201		$	7,752
Service cost	4,479			4,223			1			1
Interest cost	19,309			18,117			201			208
Impact of currency exchange rate changes	1,500			(7,793		)	—			—
Actuarial loss (gain)	72,353			(34,214		)	1,486			(596		)
Benefits paid	(36,991		)	(50,211		)	(2,108		)	(1,164		)
Plan amendments	—			809			—			—
Settlements	—			(2,748		)	—			—
Benefit obligation, end of year	$	628,152		$	567,502		$	5,781		$	6,201
Change in Plan Assets:
Plan assets at fair value, beginning of year	$	401,929		$	460,952		$	—		$	—
Actual return on plan assets	60,721			(18,162		)	—			—
Employer contributions	3,670			18,216			2,108			1,164
Impact of currency exchange rate changes	2,418			(5,554		)	—			—
Benefits paid	(36,991		)	(50,211		)	(2,108		)	(1,164		)
Settlements	—			(3,312		)	—			—
Plan assets at fair value, end of year	$	431,747		$	401,929		$	—		$	—
Net Amount Recognized in Consolidated Balance Sheets:
Funded status, end of year	$	(196,405	)	$	(165,573	)	$	(5,781	)	$	(6,201	)
Current accrued benefit liability	$	(4,593	)	$	(4,395	)	$	(750	)	$	(1,090	)
Noncurrent accrued benefit liability	(191,812		)	(161,178		)	(5,031		)	(5,111		)
Net amount recognized	$	(196,405	)	$	(165,573	)	$	(5,781	)	$	(6,201	)
Amounts Recognized in Accumulated Other Comprehensive Loss (a):
Net actuarial loss (gain)	$	266,714		$	238,862		$	(1,201	)	$	(3,071	)
Prior service cost (credit)	182			220			(12,186		)	(14,224		)
	$	266,896		$	239,082		$	(13,387	)	$	(17,295	)

(a) Amounts exclude related tax benefits of $84.5 million and $79.0 million for December 31, 2019 and 2018, respectively, which are also included in accumulated other comprehensive loss.

The accumulated benefit obligation differs from the projected benefit obligation in that it assumes future compensation levels will remain unchanged. Mattel’s accumulated benefit obligation for its defined benefit pension plans as of 2019 and 2018 totaled $608.4 million and $549.7 million, respectively.

The assumptions used in determining the projected and accumulated benefit obligations of Mattel’s domestic defined benefit pension and postretirement benefit plans are as follows:

	December 31, 2019		December 31, 2018
Defined benefit pension plans:
Discount rate	3.0	%	4.1	%
Weighted-average rate of future compensation increases	N/A		N/A
Postretirement benefit plans:
Discount rate	3.0	%	4.1	%
Annual increase in Medicare Part B premium	6.0	%	6.0	%
Health care cost trend rate:
Pre-65	7.0	%	7.0	%
Post-65	6.8	%	6.8	%
Ultimate cost trend rate:
Pre-65	4.5	%	4.5	%
Post-65	4.5	%	4.5	%
Year that the rate reaches the ultimate cost trend rate:
Pre-65	2026		2025
Post-65	2026		2025

A one percentage point increase/(decrease) in the assumed health care cost trend rate for each future year would not materially impact the postretirement benefit obligation as of December 31, 2019, or the service and interest cost recognized for 2019.

The estimated future benefit payments for Mattel’s defined benefit pension and postretirement benefit plans are as follows:

	Defined Benefit Pension Plans		Postretirement Benefit Plans
	(In thousands)
2020	$	37,686	$	750
2021	37,456		750
2022	39,617		650
2023	38,545		650
2024	38,912		650
2025–2027	175,229		2,440

Mattel expects to make cash contributions totaling approximately $11 million to its defined benefit pension and postretirement benefit plans in 2020, substantially all of which will be for benefit payments for its unfunded plans.

Mattel periodically commissions a study of the plans’ assets and liabilities to determine an asset allocation that would best match expected cash flows from the plans’ assets to expected benefit payments. Mattel monitors the returns earned by the plans’ assets and reallocates investments as needed. Mattel’s overall investment strategy is to achieve an adequately diversified asset allocation mix of investments that provides for both near-term benefit payments as well as long-term growth. The assets are invested in a combination of indexed and actively managed funds. The target allocations for Mattel’s domestic plan assets, which comprise 77% of Mattel’s total plan assets, are 42% in U.S. equities, 28% in non-U.S. equities, 20% in fixed income securities, and 10% in real estate securities. The U.S. equities are benchmarked against the S&P 500, and the non-U.S. equities are benchmarked against a combination of developed and emerging markets indices. Fixed income securities are long-duration bonds intended to closely match the duration of the liabilities and include U.S. government treasuries and agencies, corporate bonds from various industries, and mortgage-backed and asset-backed securities.

Mattel’s defined benefit pension plan assets are measured and reported in the consolidated financial statements at fair value using inputs, which are more fully described in "Note 11 to the Consolidated Financial Statements—Fair Value Measurements," as follows:

	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
U.S. government and U.S. government agency securities	$	—	$	16,196	$	—	$	16,196
U.S. corporate debt instruments	—		57,669		—		57,669
International corporate debt instruments	—		14,088		—		14,088
Mutual funds (a)	—		—		—		74,750
Money market funds	618		—		—		618
Other investments	—		14,952		—		14,952
Insurance "buy-in" policy	—		—		31,281		31,281
Collective trust funds (a):
U.S. equity securities							78,170
International equity securities							89,381
International fixed income							15,387
Diversified funds							39,255
Total	$	618	$	102,905	$	31,281	$	431,747

	December 31, 2018
	Level 1		Level 2		Level 3		Total
	(In thousands)
U.S. government and U.S. government agency securities	$	—	$	8,803	$	—	$	8,803
U.S. corporate debt instruments	—		45,714		—		45,714
International corporate debt instruments	—		13,034		—		13,034
Mutual funds	610		—		—		610
Money market funds	303		—		—		303
Other investments	—		7,964		—		7,964
Insurance "buy-in" policy	—		—		29,857		29,857
Collective trust funds (a):
U.S. equity securities							69,699
International equity securities							176,103
International fixed income							14,752
Diversified funds							35,090
Total	$	913	$	75,515	$	29,857	$	401,929

(a) These investments consist of privately placed funds that are valued based on net asset value per share. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position and its related disclosures.

The fair value of collective trust funds are determined based on the net asset value per share held at year-end. The fair value of U.S. government securities, U.S. government agency securities, corporate debt instruments, mutual funds, and money market funds are determined based on quoted market prices or are estimated using pricing models with observable inputs or quoted prices of securities with similar characteristics.

In December 2017, Mattel entered into an insurance buy-in policy contract with a private limited life insurance company to insure a portion of the U.K. pension plan, covering approximately 40% of the total membership in the plan. The assets and liabilities with respect to insured pensioners are assumed to match for the purposes of ASC 715, Pension — Retirement Benefits (i.e. the full benefits have been insured). The initial value of the asset associated with this policy was equal to the premium paid to secure the policy, and is adjusted each reporting period for changes in interest rates, discount rates, and benefits paid. As the valuation of this asset is judgmental, and there are no observable inputs associated with the valuation, the buy-in contract is classified as Level 3 on the fair value hierarchy.

The following table provides a reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Level 3
	(in thousands)
Balance at December 31, 2017	$	33,553
Purchases, sales, and settlements (a)	—
Change in fair value	(3,696		)
Balance at December 31, 2018	29,857
Purchases, sales, and settlements (a)	—
Change in fair value	1,424
Balance at December 31, 2019	$	31,281

(a) There were no purchases, sales, or settlements of Level 3 assets, or transfers in or out of Level 3, for the years ended December 31, 2019 and December 31, 2018.

Mattel’s defined benefit pension plan assets are not directly invested in Mattel common stock. Mattel believes that the long-term rate of return on plan assets of 6.0% as of December 31, 2019 is reasonable based on historical returns.

Defined Contribution Retirement Plans

Domestic employees are eligible to participate in a 401(k) savings plan, the Mattel, Inc. Personal Investment Plan (the "Plan"), sponsored by Mattel, which is a funded defined contribution plan intended to comply with ERISA’s requirements. Contributions to the Plan include voluntary contributions by eligible employees and employer automatic and matching contributions by Mattel. The Plan allows employees to allocate both their voluntary contributions and their employer automatic and matching contributions to a variety of investment funds, including a fund that is invested in Mattel common stock (the "Mattel Stock Fund"). Employees are not required to allocate any of their Plan account balance to the Mattel Stock Fund, allowing employees to limit or eliminate their exposure to market changes in Mattel’s stock price. Furthermore, the Plan limits the percentage of the employee’s total account balance that may be allocated to the Mattel Stock Fund to 25%. Employees may generally reallocate their account balances on a daily basis. However, pursuant to Mattel’s insider trading policy, employees classified as insiders and restricted personnel under Mattel’s insider trading policy are limited to certain periods in which they may make allocations into or out of the Mattel Stock Fund.

Certain non-U.S. employees participate in other defined contribution retirement plans with varying vesting and contribution provisions.

Deferred Compensation and Excess Benefit Plans

Mattel maintains a deferred compensation plan that permits certain officers and key employees to elect to defer portions of their compensation. The deferred compensation plan, together with certain contributions made by Mattel and participating employees to an excess benefit plan, earns various rates of return. The liability for these plans as of December 31, 2019 and 2018 was $65.2 million and $68.3 million, respectively, and is primarily included in other noncurrent liabilities in the consolidated balance sheets. Changes in the market value of the participant-selected investment options are recorded as retirement plan expense within other selling and administrative expenses in the consolidated statements of operations. Separately, Mattel has purchased group trust-owned life insurance contracts designed to assist in funding these programs. The cash surrender value of these policies, valued at $75.7 million and $65.8 million as of December 31, 2019 and 2018, respectively, are held in an irrevocable grantor trust, the assets of which are subject to the claims of Mattel’s creditors and are included in other noncurrent assets in the consolidated balance sheets.

Annual Incentive Compensation

Mattel has annual incentive compensation plans under which officers and key employees may earn incentive compensation based on Mattel’s performance and are subject to certain approvals of the Compensation Committee of the Board of Directors. Incentive compensation for 2019, 2018, and 2017, was $119.5 million, $84.1 million, and $19.4 million, respectively, for awards under these plans and was included in other selling and administrative expenses.

Long-Term Incentive Compensation

Mattel had three long-term incentive program ("LTIP") performance cycles in place in 2019, which were established by the Compensation Committee of the Board of Directors: (i) a January 1, 2017—December 31, 2019 performance cycle (ii) a January 1, 2018—December 31, 2020 performance cycle, and (iii) a January 1, 2019—December 31, 2021 performance cycle.

Under the LTIP performance cycles in place in 2019, officers and key employees may earn incentive compensation based on Mattel’s performance and are subject to certain approvals of the Compensation Committee of the Board of Directors. Long-term incentive compensation for 2019, 2018, and 2017, was $11.0 million, $3.0 million, and $0.6 million, respectively, and was included within other selling and administrative expenses.