XML 26 R11.htm IDEA: XBRL DOCUMENT v3.3.1.900
Pension and Other Retiree Benefits
 12 Months Ended
Dec. 31, 2015
Compensation and Retirement Disclosure [Abstract]  
Pension and Other Retiree Benefits
4. Pension and Other Retiree Benefits

We have a number of pension plans, principally in the U.K. and the U.S. The plans provide for payment of retirement benefits, primarily commencing between the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meeting certain qualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined based on an employee’s length of service and earnings. Several of these plans have been frozen and are no longer accruing additional service benefits. Cash contributions to the plans are made as necessary to ensure legal funding requirements are satisfied.

On January 20, 2009, the Company’s Board of Directors approved plan amendments to temporarily freeze our ACCO Brands Corporation Pension Plan for Salaried and Certain Hourly Paid Employees in the U.S. (the "U.S. Salaried Plan") effective March 7, 2009. During the fourth quarter of 2014, the U.S. Salaried Plan became permanently frozen and, as of December 31, 2014, we have permanently frozen a portion of our U.S. pension plan for certain bargained hourly employees.

On September 30, 2012, our U.K. pension plan was frozen and as of December 31, 2013, we have permanently frozen two of our Canadian pension plans.

We also provide post-retirement health care and life insurance benefits to certain employee and retirees in the U.S., U.K. and Canada. All but one of these benefit plans have been frozen to new participants. Many employees and retirees outside of the U.S. are covered by government health care programs.

The following table sets forth our defined benefit pension and post-retirement plans funded status and the amounts recognized in our Consolidated Balance Sheets:
 
Pension
 
Post-retirement
 
U.S.
 
International
 
 
(in millions of dollars)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Change in projected benefit obligation (PBO)
 
 
 
 
 
 
 
 
 
 
 
Projected benefit obligation at beginning of year
$
212.9

 
$
177.4

 
$
391.8

 
$
371.4

 
$
12.2

 
$
13.3

Service cost
1.6

 
2.1

 
0.9

 
0.8

 
0.1

 
0.2

Interest cost
8.7

 
8.6

 
12.9

 
15.7

 
0.4

 
0.5

Actuarial (gain) loss
(14.4
)
 
34.2

 
(19.0
)
 
48.3

 
(3.4
)
 
(0.3
)
Participants’ contributions
—

 
—

 
0.2

 
0.2

 
0.1

 
0.1

Benefits paid
(10.1
)
 
(9.4
)
 
(15.9
)
 
(16.6
)
 
(0.5
)
 
(0.8
)
Plan amendments
—

 
—

 
—

 
(0.2
)
 
(0.2
)
 
(0.4
)
Foreign exchange rate changes
—

 
—

 
(23.8
)
 
(27.8
)
 
(0.6
)
 
(0.4
)
Projected benefit obligation at end of year
198.7

 
212.9

 
347.1

 
391.8

 
8.1

 
12.2

Change in plan assets
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
163.9

 
156.3

 
351.2

 
342.8

 
—

 
—

Actual return on plan assets
(9.3
)
 
10.8

 
(0.8
)
 
43.8

 
—

 
—

Employer contributions
1.3

 
6.2

 
5.4

 
5.5

 
0.4

 
0.7

Participants’ contributions
—

 
—

 
0.2

 
0.2

 
0.1

 
0.1

Benefits paid
(10.1
)
 
(9.4
)
 
(15.9
)
 
(16.6
)
 
(0.5
)
 
(0.8
)
Foreign exchange rate changes
—

 
—

 
(21.2
)
 
(24.5
)
 
—

 
—

Fair value of plan assets at end of year
145.8

 
163.9

 
318.9

 
351.2

 
—

 
—

Funded status (Fair value of plan assets less PBO)
$
(52.9
)
 
$
(49.0
)
 
$
(28.2
)
 
$
(40.6
)
 
$
(8.1
)
 
$
(12.2
)
Amounts recognized in the Consolidated Balance Sheets consist of:
 
 
 
 
 
 
 
 
 
 
 
Other non-current assets
$
—

 
$
—

 
$
0.9

 
$
—

 
$
—

 
$
—

Other current liabilities
—

 
—

 
0.4

 
0.5

 
0.6

 
0.8

Pension and post-retirement benefit obligations(1)
52.9

 
49.0

 
28.7

 
40.1

 
7.5

 
11.4

Components of accumulated other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
Unrecognized actuarial loss (gain)
55.1

 
51.9

 
75.0

 
78.1

 
(4.2
)
 
(1.1
)
Unrecognized prior service (credit) cost
2.0

 
2.4

 
(0.3
)
 
(0.4
)
 
(0.2
)
 
(1.5
)
(1)
Pension and post-retirement obligations of $89.1 million as of December 31, 2015, decreased from $100.5 million as of December 31, 2014, primarily due to cash contributions.

Of the amounts included within accumulated other comprehensive income (loss), we expect to recognize the following pre-tax amounts as components of net periodic benefit cost (income) for the year ended December 31, 2016:
 
Pension
 
Post-retirement
(in millions of dollars)
U.S.
 
International
 
Actuarial loss (gain)
$
1.8

 
$
2.4

 
$
(0.4
)
Prior service cost
0.4

 
—

 
—

 
$
2.2

 
$
2.4

 
$
(0.4
)


All of our plans have projected benefit obligations in excess of plan assets, except for our Irish plan.

The accumulated benefit obligation for all pension plans was $533.6 million and $590.0 million at December 31, 2015 and 2014, respectively.

The following table sets out information for pension plans with an accumulated benefit obligation in excess of plan assets:
 
U.S.
 
International
(in millions of dollars)
2015
 
2014
 
2015
 
2014
Projected benefit obligation
$
198.7

 
$
212.9

 
$
334.1

 
$
371.0

Accumulated benefit obligation
196.1

 
209.1

 
324.7

 
360.9

Fair value of plan assets
145.8

 
163.9

 
305.0

 
331.1



The components of net periodic benefit (income) cost for pension and post-retirement plans for the years ended December 31, 2015, 2014, and 2013, respectively, were as follows:
 
Pension
 
Post-retirement
 
U.S.
 
International
 
 
 
 
 
 
(in millions of dollars)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Service cost
$
1.6

 
$
2.1

 
$
2.0

 
$
0.9

 
$
0.8

 
$
1.6

 
$
0.1

 
$
0.2

 
$
0.2

Interest cost
8.7

 
8.6

 
7.9

 
12.9

 
15.7

 
14.7

 
0.4

 
0.5

 
0.6

Expected return on plan assets
(12.2
)
 
(12.0
)
 
(10.4
)
 
(21.9
)
 
(22.8
)
 
(20.6
)
 
—

 
—

 
—

Amortization of net loss (gain)
2.1

 
5.1

 
9.6

 
2.4

 
1.9

 
2.4

 
(0.4
)
 
(1.1
)
 
(0.6
)
Amortization of prior service cost (credit)
0.4

 
0.4

 
0.1

 
—

 
—

 
—

 
(0.3
)
 
—

 
—

Curtailment gain
—

 
—

 
—

 
—

 
—

 
(1.0
)
 
—

 
—

 
—

Settlement gain
—

 
—

 
—

 
—

 
—

 
—

 
(0.5
)
 
(0.1
)
 
—

Net periodic benefit (income) cost
$
0.6

 
$
4.2

 
$
9.2

 
$
(5.7
)
 
$
(4.4
)
 
$
(2.9
)
 
$
(0.7
)
 
$
(0.5
)
 
$
0.2



Effective from January 1, 2015 we changed the amortization of our net actuarial loss included in accumulated other comprehensive income (loss) for the U.S. Salaried Plan from the average remaining service period of active employees expected to receive benefits under the plan to the average remaining life expectancy of all participants. This change was the result of the Company's decision to permanently freeze the benefits under the plan. In 2013, we recognized a curtailment gain of $1.0 million related to permanently freezing two of our Canadian pension plans.
Other changes in plan assets and benefit obligations that were recognized in other comprehensive income (loss) during the years ended December 31, 2015, 2014, and 2013 were as follows:
 
Pension
 
Post-retirement
 
U.S.
 
International
 
 
 
 
 
 
(in millions of dollars)
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Current year actuarial loss (gain)
$
7.1

 
$
35.4

 
$
(30.2
)
 
$
3.8

 
$
27.3

 
$
(10.0
)
 
$
(3.4
)
 
$
(0.3
)
 
$
(2.8
)
Amortization of actuarial (loss) gain
(2.1
)
 
(5.1
)
 
(9.6
)
 
(2.4
)
 
(1.9
)
 
(2.4
)
 
0.9

 
1.1

 
0.6

Current year prior service (credit) cost
—

 
—

 
3.7

 
—

 
(0.2
)
 
—

 
(0.2
)
 
(0.3
)
 
—

Amortization of prior service (cost) credit
(0.4
)
 
(0.4
)
 
(0.1
)
 
—

 
—

 
—

 
0.3

 
—

 
—

Foreign exchange rate changes
—

 
—

 
—

 
(5.6
)
 
(6.8
)
 
2.1

 
0.1

 
0.1

 
—

Total recognized in other comprehensive income (loss)
$
4.6

 
$
29.9

 
$
(36.2
)
 
$
(4.2
)
 
$
18.4

 
$
(10.3
)
 
$
(2.3
)
 
$
0.6

 
$
(2.2
)
Total recognized in net periodic benefit cost (credit) and other comprehensive income (loss)
$
5.2

 
$
34.1

 
$
(27.0
)
 
$
(9.9
)
 
$
14.0

 
$
(13.2
)
 
$
(3.0
)
 
$
0.1

 
$
(2.0
)


Assumptions
The weighted average assumptions used to determine benefit obligations for the years ended December 31, 2015, 2014, and 2013 were as follows:
 
Pension
 
Post-retirement
 
U.S.
 
International
 
 
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Discount rate
4.6
%
 
4.2
%
 
5.0
%
 
3.7
%
 
3.4
%
 
4.3
%
 
3.9
%
 
3.7
%
 
4.4
%
Rate of compensation increase
N/A

 
N/A

 
N/A

 
3.0
%
 
3.3
%
 
4.0
%
 
N/A

 
N/A

 
N/A


The weighted average assumptions used to determine net periodic benefit cost (income) for the years ended December 31, 2015, 2014, and 2013 were as follows:
 
Pension
 
Post-retirement
 
U.S.
 
International
 
 
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Discount rate
4.2
%
 
5.0
%
 
4.2
%
 
3.4
%
 
4.3
%
 
4.3
%
 
3.7
%
 
4.4
%
 
4.0
%
Expected long-term rate of return
8.0
%
 
8.2
%
 
8.2
%
 
6.5
%
 
6.8
%
 
6.8
%
 
N/A

 
N/A

 
N/A

Rate of compensation increase
N/A

 
N/A

 
N/A

 
3.0
%
 
3.3
%
 
4.0
%
 
N/A

 
N/A

 
N/A

The weighted average health care cost trend rates used to determine post-retirement benefit obligations and net periodic benefit cost (income) as of December 31, 2015, 2014, and 2013 were as follows:
 
Post-retirement
 
2015
 
2014
 
2013
Health care cost trend rate assumed for next year
7
%
 
8
%
 
8
%
Rate that the cost trend rate is assumed to decline (the ultimate trend rate)
5
%
 
5
%
 
5
%
Year that the rate reaches the ultimate trend rate
2024

 
2023

 
2020


Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
 
1-Percentage-
 
1-Percentage-
(in millions of dollars)
Point Increase
 
Point Decrease
Increase (decrease) on total of service and interest cost
$
0.1

 
$
(0.1
)
Increase (decrease) on post-retirement benefit obligation
0.7

 
(0.6
)

Plan Assets
The investment strategy for the Company is to optimize investment returns through a diversified portfolio of investments, taking into consideration underlying plan liabilities and asset volatility. Each plan has a different target asset allocation, which is reviewed periodically and is based on the underlying liability structure. The target asset allocation for our U.S. plan is 65% in equity securities, 20% in fixed income securities and 15% in alternative assets. The target asset allocation for non-U.S. plans is set by the local plan trustees.

Our pension plan weighted average asset allocations as of December 31, 2015 and 2014 were as follows:
 
 
2015
 
2014
 
 
U.S.
 
International
 
U.S.
 
International
Asset category
 
 
 
 
 
 
 
Equity securities
61
%
 
45
%
 
62
%
 
45
%
Fixed income
31

 
39

 
31

 
38

Real estate
—

 
4

 
—

 
3

Other(1)
 
8

 
12

 
7

 
14

Total
100
%
 
100
%
 
100
%
 
100
%

(1)
Insurance contracts, multi-strategy hedge funds and cash and cash equivalents for certain of our plans.

U.S. Pension Plan Assets

The fair value measurements of our U.S. pension plan assets by asset category as of December 31, 2015 were as follows:
(in millions of dollars)
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value
as of
December 31,
2015
Common stocks
$
6.9

 
$
—

 
$
—

 
$
6.9

Mutual funds
82.6

 
—

 
—

 
82.6

Common collective trust funds
—

 
2.1

 
—

 
2.1

Government debt securities
—

 
3.1

 
—

 
3.1

Corporate debt securities
—

 
19.0

 
—

 
19.0

Asset-backed securities
—

 
8.8

 
—

 
8.8

Multi-strategy hedge funds
—

 
9.2

 
—

 
9.2

Government mortgage-backed securities
—

 
7.3

 
—

 
7.3

Collateralized mortgage obligations, mortgage backed securities, and other
—

 
6.8

 
—

 
6.8

Total
$
89.5

 
$
56.3

 
$
—

 
$
145.8


The fair value measurements of our U.S. pension plan assets by asset category as of December 31, 2014 were as follows:
(in millions of dollars)
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value
as of
December 31,
2014
Common stocks
$
8.3

 
$
—

 
$
—

 
$
8.3

Mutual funds
93.2

 
—

 
—

 
93.2

Common collective trust funds
—

 
8.9

 
—

 
8.9

Government debt securities
—

 
2.2

 
—

 
2.2

Corporate debt securities
—

 
16.7

 
—

 
16.7

Asset-backed securities
—

 
9.8

 
—

 
9.8

Multi-strategy hedge funds
—

 
9.5

 
—

 
9.5

Government mortgage-backed securities
—

 
8.0

 
—

 
8.0

Collateralized mortgage obligations, mortgage backed securities, and other
—

 
7.3

 
—

 
7.3

Total
$
101.5

 
$
62.4

 
$
—

 
$
163.9



Mutual funds and common stocks: The fair values of mutual fund and common stock fund investments are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs).

Common collective trusts: The fair values of participation units held in common collective trusts are based on their net asset values, as reported by the managers of the common collective trusts and as supported by the unit prices of actual purchase and sale transactions occurring as of or close to the financial statement date (level 2 inputs).

Debt securities: Fixed income securities, such as corporate and government bonds, collateralized mortgage obligations, asset-backed securities, government mortgage-backed securities and other debt securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including market interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).

Multi-strategy hedge funds: The fair values of participation units held in multi-strategy hedge funds are based on their net asset values, as reported by the managers of the funds and are based on the daily closing prices of the underlying investments (level 2 inputs).

International Pension Plans Assets

The fair value measurements of our international pension plans assets by asset category as of December 31, 2015 were as follows:
(in millions of dollars)
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value
as of
December 31,
2015
Cash and cash equivalents
$
1.2

 
$
—

 
$
—

 
$
1.2

Equity securities
142.6

 
—

 
—

 
142.6

Corporate debt securities
—

 
121.6

 
—

 
121.6

Multi-strategy hedge funds
—

 
23.7

 
—

 
23.7

Insurance contracts
—

 
15.3

 
—

 
15.3

Real estate
—

 
10.6

 
0.7

 
11.3

Government debt securities
—

 
3.2

 
—

 
3.2

Total
$
143.8

 
$
174.4

 
$
0.7

 
$
318.9


The fair value measurements of our international pension plans assets by asset category as of December 31, 2014 were as follows:
(in millions of dollars)
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value
as of
December 31,
2014
Cash and cash equivalents
$
6.1

 
$
—

 
$
—

 
$
6.1

Equity securities
156.7

 
—

 
—

 
156.7

Corporate debt securities
—

 
118.6

 
—

 
118.6

Multi-strategy hedge funds
—

 
25.1

 
—

 
25.1

Insurance contracts
—

 
18.4

 
—

 
18.4

Other debt securities
—

 
12.1

 
—

 
12.1

Real estate
—

 
9.7

 
0.9

 
10.6

Government debt securities
—

 
3.6

 
—

 
3.6

Total
$
162.8

 
$
187.5

 
$
0.9

 
$
351.2



Equity securities: The fair values of equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs).

Debt securities: Fixed income securities, such as corporate and government bonds and other debt securities, consist of index-linked securities. These debt securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including market interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).

Real estate: Real estate, exclusive of the Canadian plan, consists of managed real estate investment trust securities (level 2 inputs). Real estate in the Canadian plans is appraised by a third party on an annual basis (level 3 inputs). There have been no substantial purchases or gains/losses in 2015 or 2014.

Insurance contracts: Valued at contributions made, plus earnings, less participant withdrawals and administrative expenses, which approximate fair value (level 2 inputs).

Multi-strategy hedge funds: The fair values of participation units held in multi-strategy hedge funds are based on their net asset values, as reported by the managers of the funds and are based on the daily closing prices of the underlying investments (level 2 inputs).

Cash Contributions

We contributed $7.1 million to our pension and post-retirement plans in 2015 and expect to contribute $6.5 million in 2016.

The following table presents estimated future benefit payments to participants for the next ten fiscal years:

 
Pension
 
Post-retirement
(in millions of dollars)
Benefits
 
Benefits
2016
$
24.5

 
$
0.6

2017
$
25.1

 
$
0.6

2018
$
26.0

 
$
0.6

2019
$
26.4

 
$
0.6

2020
$
27.2

 
$
0.6

Years 2021 — 2025
$
146.3

 
$
2.6



We also sponsor a number of defined contribution plans. Contributions are determined under various formulas. Costs related to such plans amounted to $9.8 million, $8.6 million and $8.4 million for the years ended December 31, 2015, 2014, and 2013, respectively. The $1.2 million increase in defined contribution plan costs in 2015 compared to 2014 was due to an additional contribution for certain hourly employees who agreed to have their pension benefits frozen.

Multi-Employer Pension Plan

We are a participant in a multi-employer pension plan. The plan has reported significant underfunded liabilities and declared itself in critical status (red). As a result, the trustees of the plan adopted a rehabilitation plan (RP) in an effort to forestall insolvency. Our required contributions to this plan could increase due to the shrinking contribution base resulting from the insolvency of or withdrawal of other participating employers, from the inability or the failure of withdrawing participating employers to pay their withdrawal liability, from lower than expected returns on pension fund assets, and from other funding deficiencies. In the event that we withdraw from participation in the plan, we will be required to make withdrawal liability payments for a period of 20 years or longer in certain circumstances. The present value of our withdrawal liability payments would be recorded as an expense in our Consolidated Statements of Income and as a liability on our Consolidated Balance Sheets in the first year of our withdrawal. The most recent Pension Protection Act (PPA) zone status available in 2015 and 2014 is for the plan’s years ended December 31, 2014 and 2013, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. Details regarding the plan are outlined in the table below.

 
 
 
 
Pension Protection Act Zone Status
 
FIP/RP Status Pending/Implemented
 
Contributions
 
 
 
Expiration Date of Collective-Bargaining Agreement
 
 
 
 
 
 
Year Ended December 31,
 
 
 
Pension Fund
 
EIN/Pension Plan Number
 
2015
 
2014
 
 
2015
 
2014
 
2013
 
Surcharge Imposed
 
PACE Industry Union-Management Pension Fund
 
11-6166763 / 001
 
Red
 
Red
 
Implemented
 
$
0.3

 
$
0.4

 
$
0.2

 
Yes
 
6/30/2017