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Benefit Plans
 12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Benefit Plans 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 2017, our Board of Directors approved amendments to terminate the Pentair Salaried Plan (the “Salaried Plan”), a U.S. qualified pension plan. The Salaried Plan discontinued accruing benefits on December 31, 2017 and the termination was effective December 31, 2017. The Salaried Plan participants were not adversely affected by the plan termination.
In 2018, participants whose plan benefits were not in pay status as of July 1, 2018 were given the opportunity to elect a lump sum (or monthly annuity) payment during a special election window. Payments of $171.9 million were made to participants who elected to receive a lump sum during this window.
In 2019, the Company received all required government approvals to complete the termination of the Salaried Plan. In June 2019, we entered into an agreement with an insurance company to purchase from us, through an annuity contract, our remaining obligations under the Salaried Plan. For the year ended December 31, 2019, we contributed $11.1 million to the Salaried Plan as part of the process to settle our obligations. As a result of these actions, a non-cash pre-tax settlement gain of $11.8 million was recorded for the year ended December 31, 2019 and is reflected within Net actuarial loss (gain) in the Net periodic benefit expense table below.
As described in Note 1, during the first quarter of 2018, the Company adopted ASU 2017-07. As a result, service costs are classified as employee compensation costs within Cost of goods sold and Selling, general and administrative expense within the Consolidated Statements of Operations and Comprehensive Income. All other components of net periodic benefit expense are classified within Other (income) expense for the periods presented.
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, 2019 and 2018:
 
Pension plans
 
Other post-retirement
plans
In millions
2019
2018
 
2019
2018
Change in benefit obligations
 
 
 
 
 
Benefit obligation beginning of year
$
277.9

$
473.8

 
$
14.9

$
17.5

Service cost
2.6

4.1

 
—

—

Interest cost
7.3

11.5

 
0.6

0.6

Settlements
(1.5
)
—

 
—

—

Actuarial loss (gain)
8.0

(23.6
)
 
2.0

(1.4
)
Foreign currency translation
0.1

(0.2
)
 
—

—

Benefits paid
(182.3
)
(187.7
)
 
(2.9
)
(1.8
)
Benefit obligation end of year
$
112.1

$
277.9

 
$
14.6

$
14.9

Change in plan assets
 
 
 
 
 
Fair value of plan assets beginning of year
$
180.7

$
382.8

 
$
—

$
—

Actual return on plan assets
16.0

(21.4
)
 
—

—

Company contributions
18.0

7.1

 
2.9

1.8

Settlements
(1.5
)
—

 
—

—

Foreign currency translation
0.1

(0.1
)
 
—

—

Benefits paid
(182.3
)
(187.7
)
 
(2.9
)
(1.8
)
Fair value of plan assets end of year
$
31.0

$
180.7

 
$
—

$
—

Funded status
 
 
 
 
 
Benefit obligations in excess of the fair value of plan assets
$
(81.1
)
$
(97.2
)
 
$
(14.6
)
$
(14.9
)

Amounts recorded in the Consolidated Balance Sheets were as follows:
 
Pension plans
 
Other post-retirement
plans
In millions
2019
2018
 
2019
2018
Current liabilities
$
(5.3
)
$
(28.3
)
 
$
(1.7
)
$
(1.7
)
Non-current liabilities
(75.8
)
(68.9
)
 
(12.9
)
(13.2
)
Benefit obligations in excess of the fair value of plan assets
$
(81.1
)
$
(97.2
)
 
$
(14.6
)
$
(14.9
)

The accumulated benefit obligation for all defined benefit plans was $107.1 million and $275.0 million at December 31, 2019 and 2018, 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
2019
2018

2019
2018
Projected benefit obligation
$
111.7

$
277.9


$
111.7

$
270.6

Fair value of plan assets
30.4

180.7


30.4

173.7

Accumulated benefit obligation
N/A

N/A


107.1

268.3


Components of net periodic benefit expense for our pension plans for the years ended December 31 were as follows:
In millions
2019
2018
2017
Service cost
$
2.6

$
4.1

$
11.7

Interest cost
7.3

11.5

16.4

Expected return on plan assets
(3.9
)
(7.6
)
(11.6
)
Net actuarial (gain) loss
(4.1
)
5.2

8.4

Net periodic benefit expense
$
1.9

$
13.2

$
24.9


Components of net periodic benefit expense for our other post-retirement plans for the years ended December 31, 2019, 2018 and 2017, were not material.
Assumptions
The following table provides the weighted-average assumptions used to determine benefit obligations and net periodic benefit cost as they pertain to our pension and other post-retirement plans.
 
Pension plans

Other post-retirement
plans
 
2019
2018
2017

2019
2018
2017
Benefit obligation assumptions (1)
Discount rate
2.68
%
3.73
%
4.00
%

2.81
%
3.95
%
3.40
%
Rate of compensation increase
3.68
%
3.77
%
3.96
%

NA
NA
NA
Net periodic benefit expense assumptions
 
 
 
 
 
 
 
Discount rate
3.70
%
4.00
%
3.94
%
 
3.95
%
3.40
%
3.80
%
Expected long-term return on plan assets
4.37
%
4.17
%
4.05
%
 
NA
NA
NA
Rate of compensation increase
3.72
%
3.96
%
3.96
%
 
NA
NA
NA


(1) 
The benefit obligation for the Salaried Plan as of December 31, 2018 was determined using assumptions reflecting the termination of the plan. As a result, the 2018 weighted-average assumptions for the pension plans reflected in the table above do not include the Salaried Plan.
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. There are no known or anticipated changes in our discount rate assumptions that will impact our pension expense in 2020.
Expected rates of return
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 long-term market indices. Pension plan assets yielded returns of 8.85%, (5.60)% and 12.00% in 2019, 2018 and 2017, respectively.
Healthcare cost trend rates
The assumed healthcare cost trend rates for other post-retirement plans as of December 31 were as follows:
 
2019
2018
Healthcare cost trend rate assumed for following year
5.8
%
6.2
%
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



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.
Asset allocation
Our actual overall asset allocation for our pension plans as compared to our investment policy goals as of December 31 was as follows:
 
Actual
 
Target
 
2019
2018
 
2019
2018
Fixed income
70
%
87
%
 
72
%
95
%
Alternative
29
%
5
%
 
28
%
5
%
Cash
1
%
8
%
 
—
%
—
%
Fair value measurement
The fair values of our pension plan assets and their respective levels in the fair value hierarchy as of December 31, 2019 and December 31, 2018 were as follows:
 
December 31, 2019
In millions
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
0.4

$
—

$
—

$
0.4

Other investments
—

—

8.9

8.9

Total investments at fair value
$
0.4

$
—

$
8.9

$
9.3

Investments measured at NAV



21.7

Total



$
31.0


 
December 31, 2018
In millions
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
—

$
12.0

$
—

$
12.0

Fixed income
—

137.5

—

137.5

Other investments
—

—

9.3

9.3

Total investments at fair value
$
—

$
149.5

$
9.3

$
158.8

Investments measured at NAV
 
 
 
21.9

Total
 
 
 
$
180.7



 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 is considered a Level 1 investment. 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 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 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, 2019 and 2018 was not material.
Cash flows
Contributions
Pension contributions from continuing operations totaled $18.0 million and $7.1 million in 2019 and 2018, respectively. We anticipate our 2020 pension contributions to be approximately $6.6 million. The 2020 expected contributions will equal or exceed our minimum funding requirements.
Estimated future benefit payments
The following benefit payments, which reflect expected future service or payout from termination, as appropriate, are expected to be paid by the plans in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows:
In millions
Pension plans
Other post-
retirement
plans
2020
$
6.8

$
1.7

2021
6.8

1.6

2022
6.8

1.5

2023
7.2

1.4

2024
7.2

1.3

2025 - 2029
36.9

4.9


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 met certain age requirements. Under the 401(k) plan, eligible U.S. employees could voluntarily contribute a percentage of their eligible compensation. We match contributions made by employees who met certain eligibility and service requirements.

As of January 1, 2018, the 401(k) company match contribution was changed to a dollar-for-dollar (100%) matching contribution on up to 5% of employee eligible earnings, contributed as before-tax contributions. This change replaced the ESOP component discussed below and offers the same 5% total company match.

During 2017, the 401(k) matching contribution was 100% of eligible employee contributions for the first 1% of eligible compensation and 50% of the next 5% of eligible compensation.
During 2018 and 2017, in addition to the matching contribution, all employees who met certain service requirements received a discretionary ESOP contribution equal to 1.5% of annual eligible compensation.
Our combined expense for the 401(k) plan and the ESOP was $14.4 million, $23.4 million and $27.9 million in 2019, 2018 and 2017, respectively.
Other retirement compensation
Total other accrued retirement compensation, primarily related to deferred compensation and supplemental retirement plans, was $29.0 million and $28.2 million as of December 31, 2019 and 2018, respectively, and is included in Pension and other post-retirement compensation and benefits and Other non-current liabilities in the Consolidated Balance Sheets.