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.

•

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.

•

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, 2017, approximately 63% of the plan assets were invested in equity securities and 33% 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 65% in equity securities, 30% in fixed income securities and 5% in short-term securities. The plan assets of our Canadian pension plan are managed by advisors selected by us, with the investment portfolio subject to periodic review and evaluation by our investment committee. The investment of assets in the Canadian pension plan is based upon the objective of maintaining a diversified portfolio of investments in order to minimize concentration of credit and market risks (such as interest rate, currency, equity price and liquidity risks). The degree of risk and risk tolerance take into account the obligation structure of the plan, the anticipated demand for funds and the maturity profiles required from the investment portfolio in light of these demands.

•

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 ("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 "Fair Value of Plan Assets" below). Liabilities relating to the deferred compensation plan are included in Long-term liabilities on the Consolidated Balance Sheets.


•	An employment agreement with our chief executive officer extending through July 15, 2020. 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.

Salaried VEBA Postretirement Obligation. Certain retirees who retired prior to 2004 and certain employees who were hired prior to February 2002 and have subsequently retired or will retire with the requisite age and service, along with their surviving spouses and eligible dependents, are eligible to participate in a voluntary employees' beneficiary association ("VEBA") that provides healthcare cost, medical cost and long-term care insurance cost reimbursement benefits ("Salaried VEBA"). The Salaried VEBA is managed by trustees who determine the level and type of benefits to offer to its participants and who appoint an independent fiduciary to manage the assets of the Salaried VEBA. The Salaried VEBA trustees are independent of us and not under our control. However, because we have an ongoing obligation with no express termination date to make annual variable cash contributions to the Salaried VEBA, we account for it as a defined benefit plan in our financial statements.

Our annual cash contribution payable to the Salaried VEBA varies from a minimum of zero to a maximum of $2.9 million, depending on our annual cash flow. We paid the maximum of $2.9 million to the Salaried VEBA in 2017 and we determined that in 2018 we will also pay the maximum of $2.9 million as our variable cash contribution. Such amount was calculated with respect to the 2017 calendar year and recorded within Other accrued liabilities as of December 31, 2017 (see Note 2). It will be paid during the first quarter of 2018.

Union VEBA Postretirement Obligation. Certain other eligible retirees represented by certain unions along with their surviving spouses and eligible dependents participate in a separate VEBA ("Union VEBA") that provides healthcare and medical cost reimbursement benefits. We had an obligation to make variable cash contributions to the Union VEBA with respect to periods through September 30, 2017. Our final cash contribution for the nine months ended September 30, 2017, totaling $12.8 million, will be paid during the first quarter of 2018 and was recorded within Other accrued liabilities (see Note 2). The variable contribution relating to 2016 in the amount of $17.1 million was paid in 2017.

We terminated defined benefit plan accounting with respect to the Union VEBA in 2015, after determining that our obligation to make annual variable contributions to the Union VEBA would expire as of September 2017. This resulted in a non-cash loss of $307.8 million, net of a $184.4 million tax benefit, as we removed the Union VEBA net assets and related deferred tax liabilities from our Consolidated Balance Sheet and accrued amounts estimated to be paid through the expiration of our obligation.

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 Salaried VEBA. 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				Salaried VEBA
	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
Discount rate	3.40	%	3.80	%	3.20	%	3.60	%
Rate of compensation increase	3.00	%	3.00	%	—		—

Key assumptions made in computing the net obligation of the Salaried VEBA and in total include:

With respect to Salaried VEBA assets:


•	Based on the information received from the Salaried VEBA at December 31, 2017 and at December 31, 2016, the Salaried VEBA assets were invested in various managed proprietary funds.


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

With respect to Salaried VEBA obligations:


•	The accumulated postretirement benefit obligation ("APBO") for the Salaried VEBA was computed based on the level of benefits being provided by it at December 31, 2017 and December 31, 2016.


•	Since the Salaried VEBA was paying a fixed annual amount to its participants at both December 31, 2017 and December 31, 2016, 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 for the years ended December 31 were:



	Canadian Pension Plan						Salaried VEBA
	2017		2016		2015		2017		2016		2015
Discount rate	3.80	%	4.10	%	4.00	%	3.60	%	3.90	%	3.60	%
Expected long-term return on plan assets¹	4.45	%	4.45	%	5.10	%	7.75	%	7.75	%	7.75	%
Rate of compensation increase	3.00	%	3.00	%	3.00	%	—		—		—

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^1.	The expected long-term rate of return assumption for the Salaried VEBA is based on the targeted investment portfolios provided to us by the trustee of the Salaried VEBA.

Benefit Obligations and Funded Status. The following table presents the benefit obligations and funded status of our Canadian pension and the Salaried VEBA as of December 31, 2017 and December 31, 2016 and the corresponding amounts that are included in our Consolidated Balance Sheets (in millions of dollars):



	Canadian Pension Plan						Salaried VEBA
	2017			2016			2017			2016
Change in benefit obligation:
Obligation at beginning of year	$	7.0		$	6.1		$	86.8		$	77.9
Foreign currency translation adjustment	0.5			0.2			—			—
Service cost	0.3			0.3			—			—
Interest cost	0.3			0.3			3.0			2.9
Prior service cost¹	—			—			7.3			8.4
Actuarial loss (gain)²	0.6			0.3			(0.5		)	4.1
Plan participants contributions	0.1			—			—			—
Benefits paid by Company	(0.3		)	(0.2		)	—			—
Benefits paid by Salaried VEBA	—			—			(6.6		)	(6.5		)
Obligation at end of year³	8.5			7.0			90.0			86.8

Change in plan assets:
Fair market value of plan assets at beginning of year	6.1			5.7			58.2			58.9
Foreign currency translation adjustment	0.5			0.2			—			—
Actual return on assets	0.5			0.1			3.6			2.9
Plan participants contributions	0.1			—			—			—
Company contributions	0.4			0.3			2.9			2.9
Benefits paid by Company	(0.3		)	(0.2		)	—			—
Benefits paid by Salaried VEBA	—			—			(6.6		)	(6.5		)
Fair market value of plan assets at end of year	7.3			6.1			58.1			58.2
Net funded status⁴	$	(1.2	)	$	(0.9	)	$	(31.9	)	$	(28.6	)

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^1.	The prior service cost relating to the Salaried VEBA in both 2017 and 2016 resulted from increases in the annual healthcare reimbursement benefit starting in 2018 and 2017, respectively, for plan participants.


^2.	The actuarial gain relating to the Salaried VEBA in 2017 was comprised of: (i) a $2.5 million gain due to changes in census information; (ii) a $1.0 million gain due to a change in the projected utilization rate; offset by (iii) a $3.0 million loss due to a change in the discount rate.

The actuarial loss relating to the Salaried VEBA in 2016 was comprised of: (i) a $2.3 million loss due to changes in census information; (ii) a $2.2 million loss due to a reduction in the discount rate; offset by (iii) a $0.4 million gain due to a change in the projected utilization rate.


^3.	For the Canadian pension plan, the benefit obligation is the projected benefit obligation. For the Salaried VEBA, the benefit obligation is the APBO.


^4.	Net funded status of $31.9 million and $28.6 million relating to the Salaried VEBA at December 31, 2017 and December 31, 2016, respectively, was presented as Net liabilities of Salaried VEBA on the Consolidated Balance Sheet.

The accumulated benefit obligation for the Canadian defined benefit pension plan was $7.9 million and $6.4 million at December 31, 2017 and December 31, 2016, respectively. We expect to contribute $0.5 million to the Canadian pension plan in 2018.

As of December 31, 2017, the net benefits expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows (in millions of dollars):



	Benefit Payments Due by Period
	2018		2019		2020		2021		2022		2023-2027
Canadian pension plan benefit payments	$	0.3	$	0.3	$	0.3	$	0.4	$	0.3	$	1.9
Salaried VEBA benefit payments¹	7.5		7.3		7.2		7.0		6.8		30.3
Total net benefits	$	7.8	$	7.6	$	7.5	$	7.4	$	7.1	$	32.2

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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 included in the Consolidated Balance Sheets (within Accumulated other comprehensive loss) associated with our Canadian defined benefit pension plan and the Salaried VEBA (before tax) that had not yet been reflected in net periodic benefit cost was as follows at December 31 (in millions of dollars):



	Canadian Pension Plan						Salaried VEBA
	2017			2016			2017			2016
Accumulated net actuarial loss	$	(1.9	)	$	(1.5	)	$	(17.5	)	$	(18.3	)
Transition assets	0.1			0.1			—			—
Prior service cost	—			—			(42.7		)	(40.2		)
Cumulative loss reflected in Accumulated other comprehensive loss	$	(1.8	)	$	(1.4	)	$	(60.2	)	$	(58.5	)

The amount in Accumulated other comprehensive loss that has not yet been recognized as a component of net periodic postretirement benefit cost at December 31, 2017 that is expected to be recognized in 2018 for the Canadian pension plan was nominal at December 31, 2017. For the Salaried VEBA, such amounts were $6.2 million at December 31, 2017. Of the $6.2 million relating to the Salaried VEBA, $5.4 million is related to amortization of prior service cost and $0.8 million is related to amortization of net actuarial loss. See Note 10 for reclassification adjustments of other comprehensive (loss) income that were recognized as components of net periodic benefit cost for 2017, 2016 and 2015.

Fair Value of Plan Assets. The plan assets of our Canadian pension plan and the Salaried VEBA are measured annually on December 31 and reflected in our Consolidated Balance Sheets at fair value. In determining the fair value of the plan assets at an annual period end, we utilize primarily the results of valuations supplied by the investment advisors responsible for managing the assets of each plan, which we independently review for reasonableness. Valuation of certain Canadian pension plan and Salaried VEBA assets are based on the net asset value ("NAV") of shares held by the plans at year-end using the NAV practical expedient.

With respect to the Salaried VEBA, the investment advisors providing the valuations are engaged by the Salaried VEBA trustees. Certain Salaried VEBA plan assets are valued based upon unadjusted quoted market prices in active markets that are accessible at the measurement date for identical, unrestricted assets (e.g., liquid securities listed on an exchange). Such assets are classified within Level 1 of the fair value hierarchy. Valuation of other Salaried VEBA invested plan assets is based on significant observable inputs (e.g., valuations derived from actual market transactions, broker-dealer supplied valuations or correlations between a given U.S. market and a non-U.S. security). Valuation model inputs can generally be verified and valuation techniques do not involve significant judgment. The fair values of such financial instruments are classified within Level 2 of the fair value hierarchy.

In addition to the Canadian pension plan and Salaried VEBA, we also hold assets in various investment funds at certain registered investment companies in connection with our deferred compensation program. Such assets are accounted for as available for sale securities within Level 2 of the fair value hierarchy and are measured and recorded at fair value based on their quoted market prices (see Note 1).

The following table presents the fair value of plan assets, classified under the appropriate level of the fair value hierarchy, as of each period presented (in millions of dollars):



	Level 1		Level 2		Level 3		Total
As of December 31, 2017:
Plan Assets in the Fair Value Hierarchy:
Salaried VEBA –
Cash and money market investments	$	1.3	$	—	$	—	$	1.3
Diversified investment funds in registered investment companies¹	10.2		—		—		10.2
Total Salaried VEBA assets in the fair value hierarchy	11.5		—		—		11.5
Deferred compensation program – Diversified investment funds in registered investment companies¹	—		9.8		—		9.8
Total plan assets in the fair value hierarchy	$	11.5	$	9.8	$	—	$	21.3

Plan Assets Measured at NAV ²:
Salaried VEBA – Fixed income investment funds in registered investment companies³							$	19.4
Salaried VEBA – Equity investment funds in registered investment companies⁴							24.3
Canadian pension plan – Diversified investment funds in registered investment companies¹							7.3
Total plan assets at fair value							$	72.3

As of December 31, 2016:
Plan Assets in the Fair Value Hierarchy:
Salaried VEBA –
Cash and money market investments	$	3.3	$	—	$	—	$	3.3
Diversified investment funds in registered investment companies¹	12.8		—		—		12.8
Total Salaried VEBA assets in the fair value hierarchy	16.1		—		—		16.1
Deferred compensation program – Diversified investment funds in registered investment companies¹	—		8.2		—		8.2
Total plan assets in the fair value hierarchy	$	16.1	$	8.2	$	—	$	24.3

Plan Assets Measured at NAV ²:
Salaried VEBA – Fixed income investment funds in registered investment companies³							$	17.9
Salaried VEBA – Equity investment funds in registered investment companies⁴							21.3
Canadian pension plan – Diversified investment funds in registered investment companies¹							6.1
Total plan assets at fair value							$	69.6

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^1.	The plan assets are invested in investment funds that hold a diversified portfolio of: (i) U.S and international debt and equity securities; (ii) fixed income securities such as corporate bonds and government bonds; (iii) mortgage-related securities; and (iv) cash and cash equivalents.

^2.

The market value of these funds has not been categorized in the fair value hierarchy and is being presented in the table above to permit a reconciliation of the fair value hierarchy to the Consolidated Balance Sheets. Equity investment funds measured at fair value using the NAV practical expedient are managed by an investment adviser registered with the SEC under the Investment Advisers Act of 1940 and can be redeemed with five business days notice on the 15th (or last business day prior to the 15th) and on the last business day of each month. A business day is every day that the New York Stock Exchange is open. Diversified investment funds measured at fair value using the NAV practical expedient are unitized mutual funds without externally published net asset values, which can be redeemed daily without restriction.

^3.

This category represents investments in various fixed income funds with multiple registered investment companies. Such funds invest in diversified portfolios, including: (i) marketable fixed income securities, such as (a) U.S. Treasury and other government and agency securities, (b) municipal bonds, (c) mortgage-backed securities, (d) asset-backed securities, (e) corporate bonds, notes and debentures in various sectors, (f) preferred and common stock, (g) investments in affiliated and other investment companies, (h) short-term investments and other net assets, and (i) repurchase agreements and reverse repurchase agreements; (ii) other commingled investments; (iii) investment grade debt; (iv) fixed income instruments which may be represented by options, future contracts or swap agreements; and (v) cash and cash equivalents. In the prior year, the $17.9 million balance as of December 31, 2016 in the table above was presented within the Level 2 category and has been restated in the current year to properly reflect the balance within the NAV category.


^4.	This category represents investments in equity funds that invest in portfolios comprised of: (i) equity and equity-related securities of U.S. and non-U.S. issuers across all market capitalizations; (ii) common stock in investment trust funds; and (iii) other short-term investments.

Components of Net Periodic Benefit Cost. Our results of operations included the following impacts associated with the Canadian defined benefit plan and the Salaried VEBA: (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 for the years ended December 31 (in millions of dollars):



	Canadian Pension Plan									Salaried VEBA
	2017			2016			2015			2017			2016			2015
Service cost¹	$	0.3		$	0.3		$	0.3		$	—		$	—		$	—
Interest cost	0.3			0.3			0.3			3.0			2.9			2.7
Expected return on plan assets	(0.3		)	(0.3		)	(0.3		)	(4.1		)	(4.1		)	(4.3		)
Amortization of prior service cost²	—			—			—			4.7			4.1			3.0
Amortization of net actuarial loss	—			—			0.1			0.9			0.5			1.0
Net periodic benefit cost	$	0.3		$	0.3		$	0.4		$	4.5		$	3.4		$	2.4

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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 expense (income) related to all benefit plans for the periods presented (in millions of dollars):



	Year Ended December 31,
	2017		2016			2015
Included within Fabricated Products:
Canadian pension plan	$	0.3	$	0.3		$	0.4
Deferred compensation plan	0.4		0.2			0.1
Defined contribution plans	8.1		8.1			7.8
Multiemployer pension plans¹	4.6		4.7			4.4
Total Fabricated Products²	13.4		13.3			12.7

Included within All Other:
Net periodic postretirement benefit cost relating to Salaried VEBA	4.5		3.4			2.4
(Gain) loss on removal of Union VEBA net assets	—		(0.1		)	493.4
Deferred compensation plan	1.4		0.7			0.3
Defined contribution plans	0.8		0.8			0.8
Total All Other³	6.7		4.8			496.9

Total	$	20.1	$	18.1		$	509.6

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^1.	See Note 5 for more information on our multiemployer defined benefit pension plans.


^2.	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.


^3.	Expense (income) related to VEBAs is included within the Statements of Consolidated Income (Loss) as Net periodic postretirement benefit cost relating to Salaried VEBA and (Gain) loss on removal of Union VEBA net assets. The remaining balance is reported in SG&A and R&D.