Employee Benefits

Employee Plans. Employee benefit plans include:

•

A defined contribution 401(k) savings plan for hourly bargaining unit employees at nine of our production facilities based on the specific collective bargaining agreement at each facility. For active bargaining unit employees at three of these production facilities, we are required to make fixed rate contributions. For active bargaining unit employees at one of these production facilities, we are required to match certain employee contributions. For active bargaining unit employees at three of these production facilities, we are required to make both fixed rate contributions and concurrent matches. For active bargaining unit employees at two remaining production facilities, we are not required to make any contributions. Fixed rate contributions either: (i) range from (in whole dollars) $800 to $2,400 per employee per year, depending on the employee’s age, or (ii) vary between 2% to 10% of the employees’ compensation depending on their age and years of service for employees hired prior to January 1, 2004 or is a fixed 2% annual contribution for employees hired on or after January 1, 2004. We contributed $1.9 million to such plans during 2015.

•

A defined contribution 401(k) savings plan for salaried and certain hourly employees providing for a concurrent match of up to 4% of certain contributions made by employees plus an annual contribution of between 2% and 10% of their compensation depending on their age and years of service to employees hired prior to January 1, 2004. All new hires on or after January 1, 2004 receive a fixed 2% contribution annually. We contributed $6.7 million to such plans during 2015.

•

A defined benefit plan for salaried employees at our London, Ontario facility, with annual contributions based on each salaried employee’s age and years of service. At December 31, 2015, approximately 59% of the plan assets were invested in equity securities and 37% of plan assets were invested in fixed income securities. The remaining plan assets were invested in short-term securities. Our investment committee reviews and evaluates the investment portfolio. The asset mix target allocation on the long-term investments is approximately 66% in equity securities, 30% in fixed income securities and the remaining assets in short-term securities. See Note 11 for additional information regarding the fair values of the Canadian pension plan assets.

•

A non-qualified, unfunded, unsecured plan of deferred compensation for key employees who would otherwise suffer a loss of benefits under our defined contribution plan as a result of the limitations imposed by the Internal Revenue Code of 1986 (the "Code"). Despite the plan being an unfunded plan, we make an annual contribution to a rabbi trust to fulfill future funding obligations, as contemplated by the terms of the plan. The assets in the trust are at all times subject to the claims of our general creditors and no participant has a claim to any assets of the trust. Plan participants are eligible to receive distributions from the trust subject to vesting and other eligibility requirements. Assets in the rabbi trust relating to the deferred compensation plan are accounted for as available for sale securities and are included in Other assets on the Consolidated Balance Sheets (see Note 2). Liabilities relating to the deferred compensation plan are included in Long-term liabilities on the Consolidated Balance Sheets (see Note 2).


•	An employment agreement with our chief executive officer extending through December 31, 2018. We also provide certain members of senior management, including each of our named executive officers, with benefits related to terminations of employment in specified circumstances, including in connection with a change in control, by us without cause and by the executive officer with good reason.

VEBA Postretirement Obligations. Certain eligible retirees receive certain healthcare related benefits through participation in a voluntary employees' beneficiary association ("VEBA") that provides healthcare and medical cost reimbursement benefits for eligible retirees represented by certain unions and their surviving spouse and eligible dependents (the "Union VEBA") or a VEBA that provides healthcare related benefits for certain other retirees and their spouse and eligible dependents (the "Salaried VEBA" and, together with the Union VEBA, the "VEBAs"). The Union VEBA covers certain qualifying bargaining unit retirees and future retirees. The Salaried VEBA covers certain retirees who retired prior to the 2004 termination of the prior plan and employees who were hired prior to February 2002 and have subsequently retired or will retire with the requisite age and service. The Union VEBA is managed by four trustees, two of which are appointed by us and two of which are appointed by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC ("USW"). The Salaried VEBA is managed by trustees who are independent of us. The VEBAs' assets are managed by independent fiduciaries appointed by the VEBAs' trustees.

Our primary financial obligation to the VEBAs is to make an annual variable cash contribution. The formula determining the annual variable contribution amount is 10% of the first $20.0 million of annual cash flow (as defined; in general terms, the principal elements of cash flow are earnings before interest expense, provision for income taxes and depreciation and amortization less cash payments for, among other things, interest, income taxes and capital expenditures), plus 20% of annual cash flow (as defined) in excess of $20.0 million. Such payments may not exceed $20.0 million annually and payments are allocated between the Union VEBA and the Salaried VEBA at 85.5% and 14.5%, respectively. The variable cash contribution obligation to the Union VEBA will terminate in September 2017, while the obligation to the Salaried VEBA has no express termination date. As of December 31, 2015, we determined that the variable contribution for 2015 was $19.6 million (comprised of $16.8 million to the Union VEBA and $2.8 million to the Salaried VEBA). These amounts will be paid during the first quarter of 2016. The variable contribution relating to 2014 in the amount of $13.7 million was paid in 2015.

We have no claim to the assets of the VEBAs nor do we have any obligation to fund their liabilities. The VEBA plan designs and benefits paid by the VEBAs are at the sole discretion of the respective VEBA trustees and are outside our control. Nevertheless, we have historically accounted for the VEBAs as defined benefit postretirement plans with the current VEBA assets and future variable contributions from us and earnings thereon, operating as a cap on the benefits to be paid. Accordingly, we have historically accounted for net periodic postretirement benefit costs (income) in accordance with ASC Topic 715, Compensation – Retirement Benefits, and recorded any difference between the assets of each VEBA and our accumulated postretirement benefit obligation in our consolidated financial statements. Information necessary for the valuation of the net funded status of the plans must be obtained from the VEBAs on an annual basis.

Under this accounting treatment, the funding status of each of the VEBAs could result in a liability or asset position on our Consolidated Balance Sheets. Such liability or asset has no impact on our cash flow or liquidity. Only our obligation to make an annual variable cash contribution can have a material impact to our cash flow or liquidity.

In January 2015, members of the USW at our Newark, Ohio ("Newark") and Spokane, Washington ("Trentwood") facilities ratified a new five-year collective bargaining agreement. The collective bargaining agreement did not extend our obligation to make annual variable contributions to the Union VEBA. As a result of our obligation to make annual variable contributions to the Union VEBA expiring for any period after September 2017, we no longer account for the Union VEBA as a defined benefit plan and have removed the Union VEBA net assets and related deferred tax liabilities from our Consolidated Balance Sheets as of January 1, 2015. As of December 31, 2015, the estimated liability for the remaining variable cash contributions through September 2017 of $46.7 million in the aggregate was recorded in Other accrued liabilities and Long-term liabilities (see Note 2) of which $16.8 million was related to 2015 and will be paid in the first quarter of 2016, as noted above. The remaining $29.9 million is an estimate of the amounts due for 2016 (to be paid in 2017) and 2017 (to be paid in 2018). The final amount is subject to change until the close of each respective calendar year. The estimated liability for the remaining variable cash contributions will be adjusted quarterly based on our most current projections of cash flow (as defined) with the changes reflected in our Operating (loss) income.

The projected benefit obligation and fair value of the plan assets of the Union VEBA as of December 31, 2014 were $391.5 million and $731.6 million, respectively. As a result of the termination of defined benefit plan accounting for the Union VEBA, the projected benefit obligation and fair value of the plan assets were removed from our consolidated financial statements, resulting in a predominantly non-cash loss of $306.9 million, net of a $186.5 million tax benefit, during 2015.

Key Assumptions. The following data presents the key assumptions used and the amounts reflected in our consolidated financial statements with respect to our Canadian pension plan and the VEBAs. We use a December 31 measurement date for all of the plans.

Assumptions used to determine benefit obligations as of the periods presented were as follows:



	Canadian Pension Plan				VEBAs
	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
					Salaried VEBA		Union VEBA		Salaried VEBA
Discount rate	4.10	%	4.00	%	3.90	%	3.80	%	3.60	%
Rate of compensation increase	3.00	%	3.00	%	—		—		—
Initial medical trend rate ¹	—		—		—		7.00	%	—
Ultimate medical trend rate ¹	—		—		—		5.00	%	—

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^1.	The medical trend rate assumptions used for the Union VEBA at December 31, 2014 were provided by the Union VEBA and certain industry data were provided by our actuaries. The trend rate was assumed to decline to 5% by 2019.

Key assumptions made in computing the net asset/obligation of each VEBA and in total include:

With respect to VEBA assets:


•	Based on the information received from the Salaried VEBA at December 31, 2015 and the VEBAs at December 31, 2014, both the Salaried VEBA and Union VEBA assets were invested in various managed proprietary funds. VEBA plan assets are managed by an independent fiduciary selected by the applicable VEBA's trustees and are not under our control.


•	Our variable payment, if any, is treated as a funding/contribution policy and not counted as a VEBA asset at December 31 for actuarial purposes.

With respect to VEBA obligations:


•	The accumulated postretirement benefit obligation ("APBO") for each VEBA was computed based on the level of benefits being provided by it at December 31, 2015 for the Salaried VEBA and December 31, 2014 for the VEBAs.


•	Since the Salaried VEBA was paying a fixed annual amount to its constituents at both December 31, 2015 and December 31, 2014, no future cost trend rate increase has been assumed in computing the APBO for the Salaried VEBA.

Assumptions used to determine net periodic benefit cost (income) for the years ended December 31 were:



	Canadian Pension Plan						VEBAs
	2015		2014		2013		2015		2014				2013
							Salaried VEBA		Union VEBA		Salaried VEBA		Union VEBA		Salaried VEBA
Discount rate	4.00	%	4.90	%	4.40	%	3.60	%	4.70	%	4.20	%	4.00	%	3.40	%
Expected long-term return on plan assets¹	5.10	%	4.75	%	4.50	%	7.75	%	6.75	%	7.75	%	6.25	%	7.25	%
Rate of compensation increase	3.00	%	3.00	%	3.00	%	—		—		—		—		—
Initial medical trend rate²	—		—		—		—		7.50	%	—		8.00	%	—
Ultimate medical trend rate²	—		—		—		—		5.00	%	—		5.00	%	—

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^1.	The expected long-term rate of return assumption is based on the targeted investment portfolios provided to us by the VEBAs’ trustees.


^2.	The medical trend rate was assumed to decline to 5% by 2019 for each of 2014 and 2013.

Benefit Obligations and Funded Status. The following table presents the benefit obligations and funded status of our Canadian pension and the VEBAs as of December 31, 2015 and December 31, 2014 and the corresponding amounts that are included in our Consolidated Balance Sheets (in millions of dollars):



	Canadian Pension Plan						VEBAs
	2015			2014			2015			2014
Change in benefit obligation:
Obligation at beginning of year	$	7.0		$	6.6		$	470.9		$	374.7
Removal of Union VEBA	—			—			(391.5		)	—
Foreign currency translation adjustment	(1.0		)	(0.5		)	—			—
Service cost	0.2			0.2			—			2.2
Interest cost	0.2			0.3			2.7			16.7
Prior service cost¹	—			—			13.2			90.4
Actuarial loss (gain)²	(0.1		)	0.7			(11.2		)	10.2
Benefits paid by Company	(0.2		)	(0.3		)	—			—
Benefits paid by VEBAs	—			—			(6.2		)	(24.7		)
Reimbursement from retiree drug subsidy³	—			—			—			1.4
Obligation at end of year	6.1			7.0			77.9			470.9

Change in plan assets:
Fair market value of plan assets at beginning of year	6.3			6.2			793.8			780.7
Removal of Union VEBA⁴	—			—			(778.3		)	—
Foreign currency translation adjustment	(1.0		)	(0.5		)	—			—
Actual return on assets	0.3			0.6			0.1			22.7
Employer/Company contributions^4,5	0.3			0.3			49.5			13.7
Benefits paid by Company	(0.2		)	(0.3		)	—			—
Benefits paid by VEBAs	—			—			(6.2		)	(24.7		)
Reimbursement from retiree drug subsidy³	—			—			—			1.4
Fair market value of plan assets at end of year	5.7			6.3			58.9			793.8
Net funded status⁶	$	(0.4	)	$	(0.7	)	$	(19.0	)	$	322.9

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^1.	The prior service cost relating to the Salaried VEBA in 2015 was primarily comprised of a $13.2 million loss due to an increase in the annual healthcare reimbursement benefit starting in 2016 for plan participants.

The prior service cost relating to the VEBAs in 2014 was primarily comprised of: (i) a $60.5 million loss due to an increase in the healthcare premium reimbursement benefit in the Union VEBA; (ii) a $15.9 million loss resulting from the addition of a new death benefit starting in 2015 for plan participants in the Union VEBA; and (iii) a $14.0 million loss due to an increase in the annual healthcare reimbursement benefit starting in 2015 for plan participants in the Salaried VEBA.


^2.	The actuarial gain relating to the Salaried VEBA in 2015 was primarily comprised of: (i) a $5.5 million gain due to projected lower benefit utilization; (ii) a $2.0 million gain due primarily to reductions in the discount rates; and (iii) a $3.7 million gain due primarily to updated actuarial mortality rates.

The actuarial gain relating to the VEBAs in 2014 was primarily comprised of: (i) a gain of $53.6 million due to projected lower benefit utilization; (ii) a gain of $18.0 million due to projected lower drug claim cost in the future because of lower than expected drug claim costs in 2014 in the Union VEBA; (iii) a gain of $0.4 million due primarily to a reduction in administrative cost in the Union VEBA. The actuarial gain relating to the VEBAs in 2014 was partially offset by: (i) a loss of $45.0 million due primarily to reductions in the discount rates; and (ii) a loss of $37.2 million due primarily to updated actuarial mortality rates in both VEBAs.


^3.	The Union VEBA was eligible for the retiree drug subsidy of the Medicare Modernization Act that went into effect January 1, 2006. As a result, we measured the Union VEBA’s obligations and costs for the year ended December 31, 2014 to take into account this subsidy.


^4.	Removal of Union VEBA and Employer/Company contributions each include $46.7 million of accrued variable cash contribution, of which: (i) $16.8 million relates to the Union VEBA for the 2015 year, which will be paid during the first quarter of 2016 and (ii) $29.9 million relates to the estimated accrual for the Union VEBA with respect to the variable contributions for 2016 and 2017.

^5.

In addition to the $46.7 million discussed above, Employer/Company contributions included $2.8 million of accrued variable cash contribution related to the Salaried VEBA for the 2015 year, which will be paid during the first quarter of 2016. For the calendar year 2014, we accrued a total (Union and Salaried) liability for a variable cash contribution of $13.7 million, which was paid in the first quarter of 2015.

^6.

Net funded status of $19.0 million relating to the Salaried VEBA at December 31, 2015 was presented as Net liabilities of Salaried VEBA on the Consolidated Balance Sheet. Net funded status of $322.9 million at December 31, 2014 was comprised of $340.1 million presented as Net assets of Union VEBA on the Consolidated Balance Sheet, offset by $17.2 million presented as Net liabilities of Salaried VEBA.

The following table presents the net assets (liabilities) of each VEBA as of the periods presented. Such information is also included in the tables required under GAAP above which roll forward the assets and obligations (in millions of dollars):



	Salaried VEBA						Union VEBA
	December 31, 2015			December 31, 2014			December 31, 2015		December 31, 2014
Accumulated plan benefit obligation	$	(77.9	)	$	(79.4	)	$	—	$	(391.5	)
Plan assets	58.9			62.2			—		731.6
Net funded status	$	(19.0	)	$	(17.2	)	$	—	$	340.1

The accumulated benefit obligation for the Canadian defined benefit pension plan was $5.4 million and $6.2 million at December 31, 2015 and December 31, 2014, respectively. We expect to contribute $0.3 million to the Canadian pension plan in 2016.

As of December 31, 2015, the net benefits expected to be paid in each of the next five fiscal years and in aggregate for the five fiscal years thereafter are as follows (in millions of dollars):



	Benefit Payments Due by Period
	2016		2017		2018		2019		2020		2020-2023
Canadian pension plan benefit payments	$	0.2	$	0.2	$	0.2	$	0.3	$	0.3	$	1.6
Salaried VEBA benefit payments¹	7.6		7.3		7.0		6.7		6.4		27.2
Total net benefits	$	7.8	$	7.5	$	7.2	$	7.0	$	6.7	$	28.8

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^1.	Such amounts are based on benefit amounts and certain key assumptions obtained from the Salaried VEBA.

The amount of loss which is recognized in the Consolidated Balance Sheets (in Accumulated other comprehensive loss) associated with our Canadian defined benefit pension plan and the VEBAs (before tax) that have not yet been reflected in net periodic benefit cost (income) were as follows for the years ended December 31 (in millions of dollars):



	Canadian Pension Plan						Salaried VEBA						Union VEBA
	2015			2014			2015			2014			2015		2014
Accumulated net actuarial (loss) gain	$	(1.0	)	$	(1.9	)	$	(13.6	)	$	(21.5	)	$	—	$	65.1
Transition assets	0.1			0.2			—			—			—		—
Prior service cost	—			—			(35.9		)	(25.7		)	—		(171.7		)
Loss recognized in Accumulated other comprehensive loss	$	(0.9	)	$	(1.7	)	$	(49.5	)	$	(47.2	)	$	—	$	(106.6	)

The amount in Accumulated other comprehensive loss that has not yet been recognized as a component of net periodic postretirement benefit cost (income) at December 31, 2015 that is expected to be recognized in 2016 is $4.5 million for the Salaried VEBA. For the Canadian pension plan, such amounts were nominal at December 31, 2015. Of the $4.5 million relating to the Salaried VEBA, $4.0 million is related to amortization of prior service cost and $0.5 million is related to amortization of net actuarial gain (loss). See the Statement of Comprehensive (Loss) Income for reclassification adjustments of other comprehensive income (loss) that were recognized as components of net periodic benefit cost (income) for 2015, 2014 and 2013.

Fair Value of Plan Assets. See Note 11 for the fair values of the assets of the Canadian pension plan and the VEBAs.

Components of Net Periodic Benefit Cost (Income). Our results of operations included the following impacts associated with the Canadian defined benefit plan and the VEBAs: (a) charges for service rendered by employees; (b) a charge for accretion of interest; (c) a benefit for the return on plan assets; and (d) amortization of net gains or losses on assets, prior service costs associated with plan amendments and actuarial differences. The following table presents the components of net periodic benefit cost (income) for the years ended December 31 (in millions of dollars):



	Canadian Pension Plan									VEBAs
	2015			2014			2013			2015			2014			2013
Service cost¹	$	0.3		$	0.2		$	0.3		$	—		$	2.2		$	2.5
Interest cost	0.3			0.3			0.3			2.7			16.7			14.6
Expected return on plan assets	(0.3		)	(0.3		)	(0.3		)	(4.3		)	(51.4		)	(45.1		)
Amortization of prior service cost²	—			—			—			3.0			10.6			4.2
Amortization of net actuarial loss (gain)	0.1			0.1			0.2			1.0			(1.8		)	1.3
Net periodic benefit cost (income)	0.4			0.3			0.5			2.4			(23.7		)	(22.5		)

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^1.	The service cost related to the Salaried VEBA was insignificant for all periods presented.


^2.	We amortize prior service cost on a straight-line basis over the average remaining years of service to full eligibility for benefits of the active plan participants.

The following tables present the total charges (income) related to all benefit plans for the periods presented (in millions of dollars):



	Year Ended December 31,
	2015		2014			2013
Included within Fabricated Products:
Canadian pension plan	$	0.4	$	0.3		$	0.5
Deferred compensation plan	0.1		0.2			0.3
Defined contribution plans	7.8		7.3			7.2
Total Fabricated Products¹	$	8.3	$	7.8		$	8.0

Included within All Other:
Net periodic postretirement benefit cost (income) relating to VEBAs	2.4		(23.7		)	(22.5		)
Loss on removal of Union VEBA net assets	493.4		—			—
Deferred compensation plan	0.3		0.7			0.9
Defined contribution plans	0.8		0.8			0.7
Total All Other²	$	496.9	$	(22.2	)	$	(20.9	)

Total	$	505.2	$	(14.4	)	$	(12.9	)

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^1.	Substantially all of the Fabricated Products segment’s charges related to employee benefits were in Cost of products sold, excluding depreciation and amortization and other items with the remaining balance in SG&A and R&D.


^2.	Charges (income) related to VEBAs is included within the Statements of Consolidated (Loss) Income as Net periodic postretirement benefit cost (income) relating to VEBAs with the remaining balance in SG&A and R&D.