Benefit Plans

Pension and other post-retirement plans

We sponsor U.S. and Non-U.S. defined-benefit pension and other post-retirement plans. Pension benefits are based principally on an employee's years of service and/or compensation levels near retirement. In addition, we provide certain post-retirement health care and life insurance benefits. Generally, the post-retirement health care and life insurance plans require contributions from retirees. In December 2007, we announced that we will be freezing certain U.S. pension plans as of December 31, 2017.

The information herein relates to defined-benefit pension and other post-retirement plans of our continuing operations only.

Obligations and funded status

The following tables present reconciliations of plan benefit obligations, fair value of plan assets and the funded status of pension plans and other post-retirement plans as of and for the years ended December 31, 2016 and 2015:



	U.S. pension plans						Non-U.S. pension plans						Other post-retirement plans
In millions	2016			2015			2016			2015			2016			2015
Change in benefit obligations
Benefit obligation beginning of year	$	396.9		$	416.2		$	173.4		$	189.6		$	38.8		$	41.5
Service cost	11.2			14.0			6.6			7.8			0.2			0.2
Interest cost	16.4			14.9			4.1			3.9			1.5			1.5
Actuarial loss (gain)	0.9			(39.1		)	16.8			(6.5		)	(0.5		)	(0.9		)
Foreign currency translation	—			—			(9.2		)	(17.0		)	—			—
Benefits paid	(12.1		)	(9.1		)	(4.9		)	(4.4		)	(3.1		)	(3.5		)
Benefit obligation end of year	$	413.3		$	396.9		$	186.8		$	173.4		$	36.9		$	38.8
Change in plan assets
Fair value of plan assets beginning of year	$	327.7		$	343.9		$	46.6		$	49.9		$	—		$	—
Actual return on plan assets	24.6			(11.1		)	3.0			1.3			—			—
Company contributions	4.2			4.0			5.8			5.2			3.1			3.5
Foreign currency translation	—			—			(4.8		)	(5.4		)	—			—
Benefits paid	(12.1		)	(9.1		)	(4.9		)	(4.4		)	(3.1		)	(3.5		)
Fair value of plan assets end of year	$	344.4		$	327.7		$	45.7		$	46.6		$	—		$	—
Funded status
Benefit obligations in excess of the fair value of plan assets	$	(68.9	)	$	(69.2	)	$	(141.1	)	$	(126.8	)	$	(36.9	)	$	(38.8	)

Amounts recorded in the Consolidated Balance Sheets were as follows:



	U.S. pension plans						Non-U.S. pension plans						Other post-retirement plans
In millions	2016			2015			2016			2015			2016			2015
Other non-current assets	$	0.8		$	0.5		$	3.2		$	4.5		$	—		$	—
Current liabilities	(4.4		)	(4.1		)	(2.9		)	(3.0		)	(3.2		)	(3.3		)
Non-current liabilities	(65.3		)	(65.6		)	(141.4		)	(128.3		)	(33.7		)	(35.5		)
Benefit obligations in excess of the fair value of plan assets	$	(68.9	)	$	(69.2	)	$	(141.1	)	$	(126.8	)	$	(36.9	)	$	(38.8	)

The accumulated benefit obligation for all defined benefit plans was $585.9 million and $547.9 million at December 31, 2016 and 2015, respectively.

Information for pension plans with an accumulated benefit obligation or projected benefit obligation in excess of plan assets as of December 31 was as follows:



	Projected benefit obligation exceeds the fair value of plan assets				Accumulated benefit obligation exceeds the fair value of plan assets
In millions	2016		2015		2016		2015
U.S. pension plans
Projected benefit obligation	$	87.2	$	86.4	$	87.2	$	86.4
Fair value of plan assets	17.5		16.6		17.5		16.6
Accumulated benefit obligation	N/A		N/A		86.3		82.4
Non-U.S. pension plans
Projected benefit obligation	$	165.2	$	152.7	$	165.2	$	145.0
Fair value of plan assets	20.9		21.4		20.9		14.2
Accumulated benefit obligation	NA		NA		155.7		136.8

Components of net periodic benefit expense for our pension plans for the years ended December 31 were as follows:



	U. S. pension plans									Non-U.S. pension plans
In millions	2016			2015			2014			2016			2015			2014
Service cost	$	11.2		$	14.0		$	13.1		$	6.6		$	7.8		$	5.3
Interest cost	16.4			14.9			15.4			4.1			3.9			5.3
Expected return on plan assets	(11.4		)	(10.0		)	(10.5		)	(1.5		)	(1.6		)	(1.7		)
Net actuarial (gain) loss	(12.4		)	(18.0		)	(3.1		)	17.2			(2.4		)	31.5
Net periodic benefit expense	$	3.8		$	0.9		$	14.9		$	26.4		$	7.7		$	40.4

Components of net periodic benefit expense for our other post-retirement plans for the years ended December 31 2016, 2015 and 2014, were not material.

Assumptions

Weighted-average assumptions used to determine benefit obligations as of December 31 were as follows:



	U.S. pension plans						Non-U.S. pension plans						Other post-retirement plans
Percentages	2016		2015		2014		2016		2015		2014		2016		2015		2014
Discount rate	4.02	%	4.21	%	3.63	%	2.00	%	2.52	%	2.30	%	3.80	%	3.95	%	3.60	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%	2.91	%	2.90	%	2.89	%	—		—		—

Weighted-average assumptions used to determine net periodic benefit expense (income) for years ended December 31 were as follows:



	U.S. pension plans						Non-U.S. pension plans						Other post-retirement plans
Percentages	2016		2015		2014		2016		2015		2014		2016		2015		2014
Discount rate	4.21	%	3.63	%	4.51	%	2.52	%	2.30	%	3.73	%	3.95	%	3.60	%	4.35	%
Expected long-term return on plan assets	4.28	%	3.65	%	4.56	%	3.29	%	3.57	%	4.19	%	—		—		—
Rate of compensation increase	4.00	%	4.00	%	4.00	%	2.90	%	2.89	%	2.94	%	—		—		—

Uncertainty in the securities markets and U.S. economy could result in investment returns less than those assumed. Should the securities markets decline or medical and prescription drug costs increase at a rate greater than assumed, we would expect increasing annual combined net pension and other post-retirement costs for the next several years. Should actual experience differ from actuarial assumptions, the projected pension benefit obligation and net pension cost and accumulated other post-retirement benefit obligation and other post-retirement benefit cost would be affected in future years.

Discount rates

The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year based on our December 31 measurement date. The discount rate was determined by matching our expected benefit payments to payments from a stream of bonds rated AA or higher available in the marketplace, adjusted to eliminate the effects of call provisions. This produced a weighted-average discount rate for our U.S. pension plans of 4.02%, 4.21% and 3.63% in 2016, 2015 and 2014, respectively. The discount rates on our non-U.S. pension plans ranged from 0.50% to 4.00%, 0.50% to 4.25% and 0.50% to 4.25% in 2016, 2015 and 2014, respectively. There are no known or anticipated changes in our discount rate assumptions that will impact our pension expense in 2017.

Expected rates of return

Our expected rates of return on U.S. pension plan assets were 4.28%, 3.65% and 4.56% for 2016, 2015 and 2014, respectively. The expected rates of return on non-U.S. pension plan assets ranged from 1.00% to 5.50%, 1.00% to 6.00% and 1.00% to 6.00% in 2016, 2015 and 2014, respectively. The expected rate of return is designed to be a long-term assumption that may be subject to considerable year-to-year variance from actual returns. In developing the expected long-term rate of return, we considered our historical returns, with consideration given to forecasted economic conditions, our asset allocations, input from external consultants and broader longer-term market indices. U.S. pension plan assets yielded returns of 7.50%, (3.20)% and 22.30% in 2016, 2015 and 2014, respectively. As a result of our de-risking strategy to reduce U.S. pension plan liability, we anticipate the expected rate of return on our U.S. funded pension plans will continue to be consistent with the discount rate utilized. Any difference in the expected rate and actual returns will be included with the actuarial gain or loss recorded in the fourth quarter when our plans are remeasured.

Healthcare cost trend rates

The assumed healthcare cost trend rates for other post-retirement plans as of December 31 were as follows:



	2016		2015
Healthcare cost trend rate assumed for following year	7.0	%	7.4	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.4	%	4.4	%
Year the cost trend rate reaches the ultimate trend rate	2038		2038

The assumed healthcare cost trend rates can have a significant effect on the amounts reported for healthcare plans. A one-percentage-point change in the assumed healthcare cost trend rates would have the following effects as of and for the year ended December 31, 2016:



	One Percentage Point
In millions	Increase		Decrease
Increase (decrease) in annual service and interest cost	$	0.1	$	(0.1	)
Increase (decrease) in other post-retirement benefit obligations	0.8		(0.7		)

Pension plans assets

Objective

The primary objective of our investment strategy is to meet the pension obligation to our employees at a reasonable cost to us. This is primarily accomplished through growth of capital and safety of the funds invested.

During 2012, we adopted an investment strategy for our U.S. pension plans with a primary objective of preserving the funded status of the U.S. plans. This was achieved through investments in fixed interest instruments with interest rate sensitivity characteristics closely reflecting the interest rate sensitivity of our benefit obligations. Shifting of allocations away from equities to liability hedging fixed income investments, by reinvesting in fixed income instruments as equity investments were redeemed, was completed during 2013. As of December 31, 2016, the U.S. pension plans have an approximately 99 percent allocation to fixed income investments.

Asset allocation

Our actual overall asset allocation for our U.S. and non-U.S. pension plans as compared to our investment policy goals as of December 31 was as follows:



	U.S. pension plans
	Actual				Target
Percentages	2016		2015		2016		2015
Fixed income	99	%	98	%	100	%	100	%
Alternative	1	%	2	%	—	%	—	%



	Non-U.S. pension plans
	Actual				Target
Percentages	2016		2015		2016		2015
Equity securities	23	%	23	%	23	%	22	%
Fixed income	46	%	46	%	48	%	48	%
Alternative	26	%	27	%	27	%	28	%
Cash	5	%	4	%	2	%	2	%

Fair value measurement

The fair values of our pension plan assets and their respective levels in the fair value hierarchy as of December 31, 2016 and December 31, 2015 were as follows:



	December 31, 2016
In millions	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	—	$	3.4	$	—	$	3.4
Fixed income:
Corporate and non U.S. government	—		290.5		—		290.5
U.S. treasuries	—		30.5		—		30.5
Mortgage-backed securities	—		4.5		—		4.5
Other	—		37.0		—		37.0
Global equity securities:
Large cap equity	—		2.2		—		2.2
International equity	—		8.3		—		8.3
Other investments	—		11.7		2.0		13.7
Total fair value of plan assets	$	—	$	388.1	$	2.0	$	390.1



	December 31, 2015
In millions	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	—	$	3.1	$	—	$	3.1
Fixed income:
Corporate and non U.S. government	—		248.6		—		248.6
U.S. treasuries	—		52.0		—		52.0
Mortgage-backed securities	—		5.8		—		5.8
Other	—		37.2		—		37.2
Global equity securities:
Large cap equity	—		2.4		—		2.4
International equity	—		7.8		—		7.8
Other investments	—		13.3		4.1		17.4
Total fair value of plan assets	$	—	$	370.2	$	4.1	$	374.3

Valuation methodologies used for investments measured at fair value were as follows:


•	Cash and cash equivalents: Cash consists of cash held in bank accounts and was classified as Level 1. Cash equivalents consist of investments in commingled funds valued based on observable market data. Such investments were classified as Level 2.

•

Fixed income: Investments in corporate bonds, government securities, mortgages and asset backed securities were valued based upon quoted market prices for similar securities and other observable market data. Investments in commingled funds were generally valued at the net asset value of units held at the end of the period based upon the value of the underlying investments as determined by quoted market prices or by a pricing service. Such investments were classified as Level 2.


•	Global equity securities: Investments in commingled funds were valued at the net asset value of units held at the end of the period based upon the value of the underlying investments as determined by quoted market prices or by a pricing service. Such investments were classified as Level 2.

•

Other investments: Other investments include investments in commingled funds with diversified investment strategies. Investments in commingled funds that were valued at the net asset value of units held at the end of the period based upon the value of the underlying investments as determined by quoted market prices or by a pricing service were classified as Level 2. Investments in commingled funds that were valued based on unobservable inputs due to liquidation restrictions were classified as Level 3.

Activity for our Level 3 pension plan assets held during the years ended December 31, 2016 and 2015 was not material.

Cash flows

Contributions

Pension contributions totaled $10.0 million and $9.2 million in 2016 and 2015, respectively. Our 2017 pension contributions are expected to be approximately $22.0 million to $27.0 million. The 2017 expected contributions will equal or exceed our minimum funding requirements.

Estimated future benefit payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans for the years ended December 31 as follows:



In millions	U.S. pension plans		Non-U.S. pension plans		Other post- retirement plans
2017	$	13.9	$	4.3	$	3.1
2018	16.2		4.6		3.1
2019	18.5		5.5		3.1
2020	19.3		7.3		3.0
2021	19.3		5.2		2.9
Thereafter	113.4		33.1		12.5

Savings plan

We have a 401(k) plan (the "401(k) plan") with an employee share ownership ("ESOP") bonus component, which covers certain union and all non-union U.S. employees who meet certain age requirements. Under the 401(k) plan, eligible U.S. employees may voluntarily contribute a percentage of their eligible compensation. We match contributions made by employees who meet certain eligibility and service requirements. Our matching contribution is 100% of eligible employee contributions for the first 1% of eligible compensation and 50% of the next 5% of eligible compensation.

In addition to the matching contribution, all employees who meet certain service requirements receive a discretionary ESOP contribution equal to 1.5% of annual eligible compensation.

Our combined expense for the 401(k) plan and the ESOP was $27.1 million, $26.5 million and $21.5 million in 2016, 2015 and 2014, respectively.

Other retirement compensation

Total other accrued retirement compensation, primarily related to deferred compensation and supplemental retirement plans, was $61.0 million and $65.8 million as of December 31, 2016 and 2015, respectively, and is included in Pension and other post-retirement compensation and benefits and Other non-current liabilities in the Consolidated Balance Sheets.