Employee Benefits

9 Months Ended

Sep. 30, 2018

Pension and Similar Benefit Plans. We provide contributions to: (i) defined contribution 401(k) savings plans for salaried employees and certain hourly employees; (ii) a non-qualified, unfunded, unsecured plan of deferred compensation (see "Deferred Compensation Plan" below); (iii) multi-employer pension plans sponsored by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union AFL-CIO, CLC ("USW"), the International Association of Machinists and certain other unions at certain of our production facilities; and (iv) a defined benefit plan for salaried employees at our London, Ontario (Canada) facility.

Deferred Compensation Plan. We have a non-qualified, 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. 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. These assets are held in various investment funds at certain registered investment companies. Upon adoption of ASU 2016-01 on January 1, 2018 (see Note 1), these investments are now accounted for as equity investments with changes in fair value recorded within Other income (expense), net. During the quarter and nine months ended September 30, 2018, we recognized a $0.1 million loss and a $0.3 million gain, respectively, on equity securities still held at each respective reporting date related to the deferred compensation plan. Assets of our deferred compensation plan are classified within Level 2 of the fair value hierarchy and are measured and recorded at fair value based on their quoted market prices. The fair value of these assets at September 30, 2018 and December 31, 2017 was $10.9 million and $9.8 million, respectively, and are included in Other assets. Offsetting liabilities relating to the deferred compensation plan are included in Long-term liabilities.

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"). We have an ongoing obligation with no express termination date to make variable cash contributions up to a maximum of $2.9 million each year to the Salaried VEBA. We paid the maximum of $2.9 million with respect to 2017 during the quarter ended March 31, 2018. We account for the Salaried VEBA as a defined benefit plan in our financial statements.

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"). During the quarter ended March 31, 2018, we made a $12.8 million cash contribution to the Union VEBA with respect to the nine months ended September 30, 2017. This was our final contribution. We have no ongoing obligation to make further contributions to the Union VEBA.

Fair Value of Plan Assets. The plan assets of the Salaried VEBA and our Canadian pension plan 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.

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



	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Defined contribution plans¹	$	1.7	$	1.4	$	7.3	$	7.5
Deferred compensation plan¹	0.2		0.5		1.2		1.4
Multiemployer pension plans¹	1.2		1.1		3.5		3.4
Net periodic postretirement benefit cost relating to Salaried VEBA²	1.4		1.2		4.5		3.4
Loss (gain) on removal of Union VEBA net assets²	—		0.5		—		(0.8		)
Total	$	4.5	$	4.7	$	16.5	$	14.9

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¹	Substantially all of the employee benefits related charges are in Cost of products sold, excluding depreciation and amortization and other items with the remaining balance in Selling, general, administrative, research and development ("SG&A and R&D").

On January 1, 2018, we retrospectively adopted ASU 2017-07 (see Note 1). As such, the current service cost component of Net periodic postretirement benefit cost relating to Salaried VEBA is included within the Statements of Consolidated Income in SG&A and R&D for all periods presented. We reclassified all other components of Net periodic postretirement benefit cost relating to Salaried VEBA, as well as Loss (gain) on removal of Union VEBA net assets that had previously been presented within SG&A and R&D, to Other income (expense), net in the Statements of Consolidated Income.

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: (i) charges for service rendered by employees; (ii) a charge for accretion of interest; (iii) a benefit for the return on plan assets; and (iv) amortization of net gains or losses on assets, prior service costs associated with plan amendments and actuarial differences. Net periodic benefit cost related to the Canadian defined benefit plan was not material for the quarters and nine months ended September 30, 2018 and September 30, 2017.

The following table presents the components of Net periodic postretirement benefit cost relating to Salaried VEBA for the periods presented (in millions of dollars):



	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Salaried VEBA¹:
Interest cost	$	0.7		$	0.8		$	2.1		$	2.3
Expected return on plan assets	(0.8		)	(1.0		)	(2.2		)	(3.1		)
Amortization of prior service cost²	1.3			1.2			4.0			3.6
Amortization of net actuarial loss	0.2			0.2			0.6			0.6
Total net periodic postretirement benefit cost relating to Salaried VEBA	$	1.4		$	1.2		$	4.5		$	3.4

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¹	The service cost was insignificant for all periods presented.

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.