Yellow Corporation and certain of our operating subsidiaries sponsor qualified and nonqualified defined benefit pension plans for certain employees not covered by collective bargaining agreements (approximately 9,000 current, former and retired employees). Qualified and nonqualified pension benefits are based on years of service and the employees’ covered earnings. Employees covered by collective bargaining agreements participate in various multi-employer pension plans to which the Company contributes, as discussed below. The domestic Company defined benefit pension plans closed to new participants effective January 1, 2004 and benefit accruals for participants were frozen effective July 1, 2008. Our actuarial valuation measurement date for our pension plans is December 31.

Our long-term strategy has been focused on de-risking these pension plans and improving the overall funded status. In 2017, the Company amended the domestic pension plans to provide an automatic commencement of benefit at age 65, regardless of employment status, in an effort to reduce our long-term pension obligations and ongoing annual pension expense. At the same time, the Yellow Corporation Pension Plan was amended to permit the payment of lump sum benefit payments for those participants who reached age 65. Effective January 1, 2018, the Yellow Corporation Pension Plan was amended to permit the payment of lump sum benefit payments for all participants. These amendments triggered non-cash settlement charges of $3.6 million and $10.9 million in 2020 and 2018, respectively, due to the amount of lump sum benefit payments distributed from plan assets. The lump sum benefit payments reduce pension obligations and are funded from existing plan assets. The non-cash settlement charge results from the requirement to expense the unrecognized actuarial losses associated with the lump sum settlements, which are reflected in nonoperating expenses. These charges had no effect on total equity because the actuarial losses were already recognized in accumulated other comprehensive loss. Accordingly, the effect on retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss. Additionally, the closure of a small plan for Canadian employees in 2019 resulted in lump sum benefit payments and annuity purchase premium transfers. These payments triggered a non-cash settlement charge of $1.8 million. Like other non-cash settlement charges, this was reflected in nonoperating expenses, with a corresponding offset in accumulated other comprehensive loss.

During the year ended December 31, 2020, our pension expense was $6.5 million, which includes a $3.6 million expense recognition of settlements from lump sum payouts during the year, as detailed above. Our cash contributions were $36.5 million during the year ended December 31, 2020. Using our current plan assumptions for the discount rate of 2.81% and an updated assumed 5.00% return on assets we expect to record income of $5.6 million for the year ended December 31, 2021.

The reconciliation of the beginning and ending balances of the projected benefit obligation and the fair value of plan assets for the years ended December 31, 2020 and 2019, and the funded status at December 31, 2020 and 2019, is as follows:

(in millions)	2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	1,128.8		$	1,073.2
Interest cost		37.1			45.7
Benefits paid		(102.1	)		(96.7	)
Actuarial (gain) loss		78.5			106.5
Other		—			0.1
Benefit obligation at year end	$	1,142.3		$	1,128.8
Change in plan assets:
Fair value of plan assets at prior year end	$	900.0		$	874.9
Actual return on plan assets		356.3			112.1
Employer contributions		36.5			9.7
Benefits paid		(102.1	)		(96.7	)
Fair value of plan assets at year end	$	1,190.7		$	900.0
Funded status at year end	$	48.4		$	(228.8	)

The overfunded status of the plans of $48.4 million at December 31, 2020 and underfunded status of the plans of $228.8 million at December 31, 2019 are recognized in the consolidated balance sheets as shown in the table below. No plan assets are expected to be returned to the Company during the year ending December 31, 2021.

Amounts recognized in the consolidated balance sheets for these pension plans at December 31 are as follows:

(in millions)	2020		2019
Noncurrent assets	$	63.2	$	6.1
Current liabilities		0.7		1.0
Noncurrent liabilities		14.1		233.9
Total	$	48.4	$	(228.8	)

Amounts recognized in accumulated other comprehensive loss at December 31 consist of:

As shown above, included in accumulated other comprehensive loss at December 31, 2020, are unrecognized actuarial losses of $162.1 million ($152.5 million, net of tax).

Information for pension plans with an accumulated benefit obligation (“ABO”) in excess of plan assets and plan assets that exceed ABO at December 31, 2020 and 2019 is as follows:

	At December 31, 2020
(in millions)	ABO Exceeds Assets		Assets Exceed ABO		Total
Projected benefit obligation	$	482.9	$	659.4	$	1,142.3
Accumulated benefit obligation		482.9		659.4		1,142.3
Fair value of plan assets		468.1		722.6		1,190.7

	At December 31, 2019
(in millions)	ABO Exceeds Assets		Assets Exceed ABO		Total
Projected benefit obligation	$	960.9	$	167.9	$	1,128.8
Accumulated benefit obligation		960.9		167.9		1,128.8
Fair value of plan assets		726.0		174.0		900.0

Weighted average actuarial assumptions used to determine benefit obligations at December 31:

Weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:

	2020			2019			2018
Discount rate		3.56	%		4.44	%		3.77	%
Expected rate of return on assets		7.0	%		7.0	%		7.0	%
Mortality table ^(a)	Pri-2012 (MP-2020 Scale, Custom)			Pri-2012 (MP-2019 Scale, Custom)			RP-2014 (MP-2016 Scale, Custom)

The discount rate refers to the interest rate used to discount the estimated future benefit payments to their present value, also referred to as the benefit obligation. The discount rate allows us to estimate what it would cost to settle the pension obligations as of the measurement date, December 31, and is used as the interest rate factor in the following year’s pension cost. We determine the discount rate by selecting a portfolio of high quality noncallable bonds such that the coupons and maturities exceed or are similar to our expected benefit payments.

In determining the expected rate of return on assets, we consider our historical experience in the plans’ investment portfolio, historical market data and long-term historical relationships as well as a review of other objective indices including current market factors such as inflation and interest rates. Due to the historically underfunded nature of these plans we managed our investment portfolio to hedge risks, but primarily focused on risk seeking assets that would provide an opportunity to close the net funded deficit. Based on various market factors, we selected an expected rate of return on assets of 7.0% effective for the 2020 and 2019 valuations.

With the net funded status fully funded, meaning the aggregate fair value of the assets exceeds the aggregate projected benefit obligation, as of December 31, 2020 we are reducing the percentage of the portfolio comprised of risk seeking assets and increasing the amount of hedge assets. As such, we have lowered our 2021 expected rate of return to 5.0% based on an improved

funded position and a lower risk profile. In addition, these changes should impact the prospective asset allocation detailed below by reducing equities. We will continue to review our expected long-term rate of return on an annual basis and revise appropriately. The pension trust holds no Company securities.

Our asset allocation as of December 31, 2020 and 2019, and targeted long-term asset allocation for the plans are as follows:

	2020			2019			Target
Equities		60	%		33	%		38	%
Debt Securities		31	%		30	%		30	%
Absolute Return		9	%		37	%		32	%

We expect cash contributions for all pension plans to be $4.7 million in 2021 and no significant annual contributions in years thereafter.

Expected benefit payments from our qualified and non-qualified defined benefit pension plans for each of the next five years and the total benefit payments for the following five years ended December 31 are as follows:

(in millions)		2021				2022				2023				2024				2025				2026-2030
Expected benefit payments		$	92.6			$	88.8			$	83.7			$	82.0			$	82.8			$	354.1

The components of our net periodic pension cost, other post-retirement costs and other amounts recognized in other comprehensive loss (income) before tax for the years ended December 31, 2020, 2019 and 2018 were as follows:

(in millions)	2020			2019			2018
Net periodic benefit cost:
Interest cost	$	37.1		$	45.7		$	44.1
Expected return on plan assets		(61.1	)		(57.3	)		(60.0	)
Amortization of prior net losses		14.3			12.8			14.6
Amortization of prior net service credit		(0.4	)		(0.4	)		(0.4	)
Settlement adjustment		3.6			1.8			10.9
Net periodic pension cost (benefit)	$	(6.5	)	$	2.6		$	9.2
Other changes in plan assets and benefit obligations recognized in other comprehensive loss (income):
Net actuarial (gains) losses and other adjustments	$	(216.7	)	$	51.9		$	(0.9	)
Settlement adjustment		(3.6	)		(1.8	)		(10.9	)
Amortization of prior net losses		(14.3	)		(12.8	)		(14.6	)
Amortization of prior net service credit		0.4			0.4			0.4
Total recognized in other comprehensive loss (income)	$	(234.2	)	$	37.7		$	(26.0	)
Total recognized in net periodic benefit cost and other comprehensive loss (income)	$	(240.7	)	$	40.3		$	(16.8	)

During the years ended December 31, 2020, 2019 and 2018 the income tax expense (benefit) related to amounts in other comprehensive (income) loss was $14.6 million, $(0.3) million and $(0.1) million, respectively.

Gains and losses occur due to changes in the amount of either the projected benefit obligation or plan assets from experience being different than assumed and from changes in assumptions. We recognize an amortization of the net gain or loss as a component of net pension cost for a year if, as of the beginning of the year, that net gain or loss exceeds ten percent of the greater of the benefit obligation or the market-related value of plan assets. If an amortization is required, it equals the amount of net gain or loss that exceeds the ten percent corridor, amortized over the average remaining life expectancy of plan participants.

As of December 31, 2020, the pension plans have net losses of $171.5 million and a projected benefit obligation of $1,142.3 million. The average remaining life expectancy of plan participants is approximately 19 years. For 2021, we expect to amortize approximately $12.3 million of the net loss. The comparable annual amortization amounts for the years ended December 31, 2020 and 2019 were $14.3 million and $12.8 million, respectively.

Our pension assets are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of Level 1 assets are based on quoted market prices. The majority of the Level 1 assets presented in the table below include common stock of both U.S. and, to a lesser extent, international companies, and mutual funds, which are actively traded and priced in the market. The fair value of Level 2 assets are based on other significant observable inputs, including quoted prices for similar securities. The Level 2 assets presented in the below table consist primarily of fixed income and absolute return funds where values are based on the quoted prices of similar securities and observable market data. Level 3 assets are those where the fair value is determined based on unobservable inputs. The Level 3 assets consist primarily of private equities, and the assets are either priced at cost less cash distributions for recent asset purchases, third-party valuations or discounted cash flow methods. Assets that are not considered Level 1, 2 or 3 assets are valued at the net asset value (“NAV”) of the underlying investments held, as determined by the fund managers.

The methods and assumptions used by third-party pricing sources may include a variety of factors, such as recently executed transactions, existing contracts, economic conditions, industry or market developments, and overall credit ratings. These estimated fair values may differ significantly from the values that would have been used had a ready market for these investments existed and as such, differences could be material. The availability of observable data is monitored by plan management to assess appropriate classification of financial instruments within the fair value hierarchy. Depending upon the availability of such inputs, specific securities may transfer between levels. In such instances, the transfer is reported at the end of the reporting period. For example, the pension plans had one significant asset previously recorded at NAV at December 31, 2019 that completed an initial public offering during 2020 and is now recorded as Level 1.

The tables below detail by level, within the fair value hierarchy, the pension assets at fair value as of December 31, 2020 and December 31, 2019:

	Pension Assets at Fair Value as of December 31, 2020
(in millions)	Total		Level 1		Level 2		Level 3
Equities	$	518.9	$	518.4	$	0.5	$	—
Private equities		36.9		—		—		36.9
Fixed income:
Corporate and other		32.1		6.0		17.7		8.4
Government		250.5		55.4		195.1		—
Interest bearing		67.0		8.7		58.3		—
Investments measured at NAV^(a)		285.3
Total plan assets	$	1,190.7	$	588.5	$	271.6	$	45.3

	Pension Assets at Fair Value as of December 31, 2019
(in millions)	Total		Level 1		Level 2		Level 3
Equities	$	67.0	$	66.6	$	0.4	$	—
Private equities		36.4		—		—		36.4
Fixed income:
Corporate and other		29.0		2.2		18.4		8.4
Government		204.2		53.3		150.9		—
Interest bearing		27.2		15.0		12.2		—
Investments measured at NAV^(a)		536.2
Total plan assets	$	900.0	$	137.1	$	181.9	$	44.8

The table below presents the activity of our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

(in millions)	Private Equities			Fixed income			Total Level 3
Balance at December 31, 2018	$	43.4		$	0.9		$	44.3
Purchases		—			8.1			8.1
Sales		(16.7	)		(0.8	)		(17.5	)
Realized gains		1.9			—			1.9
Unrealized gains		7.8			0.2			8.0
Balance at December 31, 2019	$	36.4		$	8.4		$	44.8
Transfers in		19.4			—			19.4
Purchases		—			1.6			1.6
Sales		(7.7	)		(1.4	)		(9.1	)
Unrealized losses		(11.2	)		(0.2	)		(11.4	)
Balance at December 31, 2020	$	36.9		$	8.4		$	45.3

The following table sets forth a summary of the assets for which a reported NAV is used to estimate the fair value as of December 31, 2020:

	Fair value estimated using Net Asset Value per Share
(in millions)	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Private equities ^(a)	$	119.0	$	1.5	Redemptions not permitted
Fixed income ^(b)		30.5		—	Monthly, Quarterly	35-90 days
Equities ^(c)		58.3		—	Monthly	3-30 days
Absolute return ^(d)		77.5		—	Monthly, Quarterly	3-75 days
Total	$	285.3

The following table sets forth a summary of the assets for which a reported NAV is used to estimate the fair value as of December 31, 2019:

	Fair value estimated using Net Asset Value per Share
(in millions)	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Private equities ^(a)	$	127.0	$	1.7	Redemptions not permitted
Fixed income ^(b)		231.4		4.1	Redemptions not permitted
Equities ^(c)		81.9		—	Daily, Monthly	0-30 days
Absolute return ^(d)		95.9		—	Monthly, Quarterly	3-75 days
Total	$	536.2

Historically, the investment strategy for private equities has consisted of direct investments or investments through limited partnerships with managers who purchase interests in non-public companies. In addition, the typical investment strategies of the fixed income and equity funds was based on fundamental and quantitative analysis and consisted of long and hedged strategies. Lastly, the general strategy of the absolute return funds consisted of alternative investment techniques, including derivative instruments and other unconventional assets, to achieve an absolute return rate.

We contribute to various separate multi-employer health, welfare and pension plans for employees that are covered by our collective bargaining agreements (approximately 79% of total employees of the Company and its subsidiaries). The collective bargaining agreements determine the amounts of these contributions. The health and welfare plans provide medical related benefits to active employees and retirees. The pension plans provide retirement benefits to retired participants. We recognize multi-employer pension cost within ‘Salaries, wages and employee benefits’ the contractually required contributions for the period and recognize as a liability any contributions due and unpaid at period end. We do not directly manage the multi-employer plans to which we contribute. The trusts covering these plans are generally managed by trustees, half of whom the unions appoint and half of whom various contributing employers appoint.

We expensed the following amounts related to these plans for the years ended December 31:

(in millions)	2020		2019		2018
Health and welfare	$	488.7	$	503.5	$	499.3
Pension		123.6		127.6		115.5
Total	$	612.3	$	631.1	$	614.8

The following table provides additional information related to our participation in individually significant multi-employer pension plans for the year ended December 31, 2020:

Expiration Date

Funding

of Collective-

Pension Protection Zone Status^(b)

Improvement or

Employer

Bargaining

Pension Fund^(a)

EIN Number

2020

2019

Rehabilitation Plan

Surcharge Imposed

Agreement

Central States, Southeast and Southwest Areas Pension Fund

36-6044243

Critical and

Declining

Critical and

Declining

Yes

3/31/2024

Teamsters National 401(k) Savings Plan^(c)

52-1967784

N/A

3/31/2024

Road Carriers Local 707 Pension Fund

51-6106510

Critical and

Declining

Critical and

Declining

Yes

3/31/2024

Teamsters Local 641 Pension Fund

22-6220288

Critical and

Declining

Critical and

Declining

Yes

3/31/2024

The Company was listed in the Central States, Road Carriers Local 707 Pension Fund and Teamsters Local 641 Pension Fund’s Forms 5500 as providing more than 5 percent of the total contributions for 2019 and 2018.

We contributed a total of $115.0 million, $128.8 million and $112.6 million to the multi-employer pension funds for the years ended December 31, 2020, 2019 and 2018, respectively. The following table provides the pension amounts contributed by fund for those funds that are considered to be individually significant for the years ended December 31:

(in millions)	2020		2019		2018
Central States, Southeast and Southwest Areas Pension Fund	$	69.0	$	77.7	$	70.7
Teamsters National 401(k) Savings Plan		17.5		19.0		14.7
Road Carriers Local 707 Pension Fund		1.9		2.5		2.2
Teamsters Local 641 Pension Fund		1.9		2.1		1.8

In 2006, the Pension Protection Act (“PPA”) became law and modified both the applicable Internal Revenue Code, as it applies to multi-employer pension plans, and the Employment Retirement Income Security Act of 1974, as amended. Federal law establishes minimum funding requirements for multi-employer pension plans. The funding status of these plans is determined by many factors. In 2014, the MPRA became law which modified the ability to suspend accrued benefits of plans facing insolvency by adding a new zone status of Critical and Declining.

If any of our multi-employer pension plans fail to meet minimum funding requirements, meet a required funding improvement or rehabilitation plan that the PPA may require for certain of our underfunded plans, obtain from the IRS certain changes to or a waiver of the requirements in how the applicable plan calculates its funding levels, or reduce pension benefits to a level where the requirements are met, then we could be required to make additional contributions to the pension plan. If any of our multi-

employer pension plans enters critical status or worse and our contributions are not sufficient to satisfy any rehabilitation plan schedule, the PPA could require us to make additional surcharge contributions to the multi-employer pension plan in the amount of five to ten percent of the existing contributions required by our labor agreement for the remaining term of the labor agreement.

In 2016 and 2015, the Central States, Southeast and Southwest Pension Plan and Road Carriers Local 707 Pension Fund filed an application under MPRA with the Department of Treasury requesting the approval of a benefit suspension plan, which was denied. In 2016, the New York State Teamsters Conference Pension and Retirement Fund filed a suspension application which was approved and implemented October 2017. The plan requires annual future employer contribution increases of 3.5% to the plan.

If we fail to make our required contributions to a multi-employer plan under a funding improvement or rehabilitation plan, it would expose us to penalties including potential withdrawal liability. If the benchmarks that an applicable funding improvement or rehabilitation plan provides are not met by the end of a prescribed period, the IRS could impose an excise tax on us and the plan’s other contributing employers. These excise taxes are not contributed to the deficient funds, but rather are deposited in the United States general treasury funds.

A requirement to materially increase contributions beyond our contractually agreed rate or the imposition of an excise tax on us could have a material adverse impact on the financial results and liquidity of the Company.

We sponsor the YRC Worldwide Inc. 401(k) Plan and the Reddaway Hourly 401(k) Plan, which are defined contribution plans primarily for employees that our collective bargaining agreements do not cover. The plans permit participants to make contributions to the plans and permit the employer of participants to make contributions on behalf of the participants. Additionally, the Reddaway Hourly 401(k) Plan allows for a non-elective employer contribution. Including non-elective employer contributions, total employer contributions were $3.7 million in 2020, $12.8 million in 2019 and $13.3 million in 2018. Our employees covered under collective bargaining agreements may also participate in union-sponsored 401(k) plans.

The Company provides an annual cash incentive compensation plan (Annual Incentive Plan, or AIP) to certain salaried employees across various levels of the organization which is based on factors such as operating revenues and Adjusted EBITDA achieved for the year, compared to targeted operating results. Results from operations include performance incentive expense of $10.0 million in 2020, and $29.8 million in 2018. There were no such expenses in 2019. Performance incentive expenses for 2018 were accrued and paid subsequent to year end.