9. Employee Benefit Plans

The Company sponsors defined benefit pension plans covering certain union and non-union employees in the U.S. and Europe. As of December 31, 2016, all of the U.S. plans are closed to new hires. In addition, future benefit accruals are frozen for a number of the plans. The Company uses a measurement date of December 31 for all of its pension plans.

During 2016, the Company offered certain eligible terminated vested participants in the U.S. pension plans the opportunity to elect a lump sum payment of their respective pension benefits. As a result of these elections, and significant lump sum payouts in the European plans, the Company paid benefits of $5.2 million, and incurred a settlement charge of $1.5 million in 2016. In 2015, the Company incurred settlement charges in both the U.S. and European plans that totaled $0.8 million as a result of employee retirements, and paid $3.8 million from plan assets. In 2014, the Company offered certain eligible terminated vested participants in the U.S. pension plans the opportunity to elect a lump sum payment of their respective pension benefits, and as a result, incurred a settlement charge of $1.0 million and paid benefits of $4.4 million. As a result of the acquisition of the New Business, the projected benefit obligation of the European plans increased $3.9 million in 2016.

In 2014, the Society of Actuaries released a new mortality table – RP-2014, and a new projection scale – MP-2014. The Company adopted the new RP-2014 mortality table and a modified version of the new MP-2014 projection scale for the U.S. plans as of December 31, 2014. The Company has continued to use the same mortality tables and the modified version of the projection scale in 2015 and 2016. For the European defined benefit plans, the Company utilizes country-specific mortality tables and has used the same tables for the majority of its European plans since 2014. In 2016, the Company updated the mortality tables used for the United Kingdom plans which did not cause a significant increase to the projected benefit obligations for those plans.

The following table provides a reconciliation of changes in the plans’ benefit obligations and fair value of assets over the two-year period ended December 31, 2016 and the funded status as of December 31 for both years:


	U.S. Plans				European Plans
	2016		2015		2016		2015
Change in projected benefit obligations
Projected benefit obligations as of January 1	$	108,938	$	117,319	$	39,201	$	42,886
Service cost		957		1,136		395		288
Interest cost		4,589		4,499		1,142		1,250
Employee contributions		—		—		73		71
Actuarial loss (gain)		4,293		(7,551)		7,018		(64)
Benefits paid		(4,094)		(4,022)		(1,527)		(1,091)
Acquisition		—		—		3,899		—
Plan amendments		—		—		(91)		—
Settlement		(3,951)		(2,443)		(1,224)		(1,383)
Foreign currency exchange rate changes		—		—		(5,391)		(2,756)
Projected benefit obligations as of December 31	$	110,732	$	108,938	$	43,495	$	39,201

Change in plan assets
Fair value of plan assets as of January 1	$	89,382	$	98,395	$	29,351	$	31,025
Actual return on plan assets		6,221		(3,830)		4,212		646
Employer contributions		682		1,282		1,744		1,774
Employee contributions		—		—		73		71
Benefits paid		(4,094)		(4,022)		(1,527)		(1,091)
Settlement		(3,951)		(2,443)		(1,224)		(1,383)
Foreign currency exchange rate changes		—		—		(4,693)		(1,691)
Fair value of plan assets as of December 31	$	88,240	$	89,382	$	27,936	$	29,351
Funded status as of December 31	$	(22,492)	$	(19,556)	$	(15,559)	$	(9,850)

Amounts recognized in the balance sheets consist of:
Noncurrent asset — Other assets	$	—	$	273	$	141	$	1,258
Current liability — Payroll and benefits payable		(82)		(82)		(493)		(450)
Noncurrent liability — Accrued pension and other liabilities		(22,410)		(19,747)		(15,207)		(10,658)
Net amount recognized	$	(22,492)	$	(19,556)	$	(15,559)	$	(9,850)

Amounts recognized in accumulated other comprehensive income consist of:
Accumulated prior service cost	$	—	$	—	$	(91)	$	—
Accumulated net actuarial loss		38,694		38,741		10,549		8,039
Net amount recognized, before tax effect	$	38,694	$	38,741	$	10,458	$	8,039

The assumptions used to determine benefit obligations are shown in the following table:


	U.S. Plans				European Plans
Weighted average actuarial assumptions as of December 31:	2016		2015		2016		2015
Discount rate	4.09	%	4.38	%	2.11	%	3.15	%
Rate of increase in compensation levels	3.00	%	3.00	%	2.87	%	3.37	%

The following tables set forth the fair values of the Company’s pension plans assets as of December 31, 2016 and 2015:


	U.S. Plans
	Fair Value Measurements								Fair Value Measurements
	as of December 31, 2016								as of December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	4,414	$	—	$	—	$	4,414	$	262	$	4,038	$	—	$	4,300
Equity securities
Large cap		16,528		—		—		16,528		19,329		—		—		19,329
Small/mid cap		9,584		—		—		9,584		9,598		—		—		9,598
Equities blend (a)		—		—		—		—		257		—		—		257
International equity (b)		6,377		—		—		6,377		5,607		—		—		5,607
Emerging markets (c)		5,333		—		—		5,333		5,056		—		—		5,056
Fixed income securities
Corporate bonds (d)		—		23,034		—		23,034		—		23,777		—		23,777
Government bonds (e)		561		13,785		—		14,346		1,487		12,458		—		13,945
International bonds (f)		—		3,966		—		3,966		—		3,531		—		3,531
Commodities (g)		2,051		—		—		2,051		1,768		—		—		1,768
Real estate (h)		2,607		—		—		2,607		2,214		—		—		2,214
Total	$	47,455	$	40,785	$	—	$	88,240	$	45,578	$	43,804	$	—	$	89,382

(a)

This category invests in the common stock of primarily U.S. companies across the capitalization spectrum.

(b)

This category consists of international equity securities from Europe, Australia and Southeast Asia.

(c)

This category invests in global emerging markets outside the U.S. The strategy targets broad diversification across various economic sectors in emerging economies.

(d)

This category invests primarily in investment grade corporate securities.

(e)

This category includes securities and mutual funds which invest in a diversified portfolio of longer duration bonds. The funds typically invest primarily in U.S. investment grade securities.

(f)

This includes securities and mutual funds which invest in a diversified portfolio of longer duration foreign bonds.

(g)

This fund invests in assets of commodity linked derivative instruments and fixed income securities.

(h)

This fund primarily invests in equity related securities of real estate companies and other real estate securities. A significant portion of the total assets are typically in foreign securities.


	European Plans
	Fair Value Measurements								Fair Value Measurements
	as of December 31, 2016								as of December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	2,005	$	—	$	—	$	2,005	$	1,997	$	—	$	—	$	1,997
Equity securities
M&G PP UK equity passive fund (a)		950		—		—		950		—		—		—		—
M&G PP overseas equity passive fund (b)		4,291		—		—		4,291		—		—		—		—
LGIM dynamic diversified fund (c)		3,758		—		—		3,758		—		—		—		—
W. Blair dynamic diversified allocation fund (d)		1,160		—		—		1,160		—		—		—		—
M&G PP discretionary fund (e)		—		—		—		—		4,673		—		—		4,673
Global equity 60-40 index (f)		—		—		—		—		5,412		—		—		5,412
Fixed income securities
Delta Lloyd fixed income (g)		—		—		1,158		1,158		—		—		1,864		1,864
Corporate bonds (h)		428		—		—		428		5,022		—		—		5,022
Government bonds (i)		10,582		—		—		10,582		6,913		—		—		6,913
Real estate (j)		2,796		—		—		2,796		2,211		—		—		2,211
Insurance reserves (k)		—		—		808		808		—		—		1,259		1,259
Total	$	25,970	$	—	$	1,966	$	27,936	$	26,228	$	—	$	3,123	$	29,351

(a)

This fund invests in the shares of UK companies.

(b)

This fund invests in overseas companies with fixed proportions representing each region’s economic importance.

(c)

This fund invests in a range of different asset classes, including equities, bonds, properties, commodities, listed infrastructure, private equity, and global real estate companies.

(d)

This fund utilizes a combination of traditional assets (equities, bonds, currencies, etc.), and investment strategies based on advanced derivative techniques.

(e)

This fund invests in a mix of UK and overseas equity shares, bonds, property and cash.

(f)

This index fund invests primarily in the UK Equity Index Fund and secondarily in overseas index funds.

(g)

This category invests in fixed income investments with Delta Lloyd.

(h)

This category invests primarily in investment grade corporate bonds, and other debt instruments, including higher yielding corporate bonds, government debt, convertible and preferred stocks, money market instruments and equities.

(i)

This category invests mainly in long-term gilts.

(j)

This category invests in commercial properties in the UK and is well diversified in the retail, office, and industrial sectors.

(k)

This category invests in individual insurance policies in the name of the individual plan members.

The European plans’ Level 3 investments were valued using significant unobservable inputs. Inputs to these valuations include characteristics and quantitative data relating to the assets and reserves, investment and insurance policy cost, position size, liquidity, current financial condition of the company/insurer and other relevant market data. The following table sets forth changes in the fair value measurements for the years ended December 31, 2016 and 2015:


	Delta Lloyd		Insurance
	Fixed Income		Reserves
Balance as of January 1, 2015	$	3,481	$	1,299
Purchases		—		139
Sales/Maturities		(1,394)		(50)
Foreign currency translation		(223)		(129)
Balance as of December 31, 2015	$	1,864	$	1,259
Purchases		—		101
Sales/Maturities		(668)		(525)
Foreign currency translation		(38)		(27)
Balance as of December 31, 2016	$	1,158	$	808

The following table provides information on the plans’ projected benefit obligations, accumulated benefit obligations, and the fair value of plan assets:


	U.S. Plans				European Plans
	December 31				December 31
	2016		2015		2016		2015
The projected benefit obligation and accumulated benefit obligation for all defined benefit plans was as follows:
Projected benefit obligation	$	110,732	$	108,938	$	43,495	$	39,201
Accumulated benefit obligation		107,037		105,550		40,886		37,133
Fair value of plan assets		88,240		89,382		27,936		29,351

The aggregate projected benefit obligation and fair value of plan assets for plans with projected benefit obligations in excess of plan assets was as follows:
Projected benefit obligation	$	110,732	$	99,920	$	31,570	$	28,150
Fair value of plan assets		88,240		80,091		15,872		17,042

The aggregate accumulated benefit obligation and fair value of plan assets for plans with accumulated benefit obligations in excess of plan assets was as follows:
Accumulated benefit obligation	$	107,037	$	96,532	$	28,962	$	26,083
Fair value of plan assets		88,240		80,091		15,872		17,042

Information about the expected cash flows by year for the pension plans follows:


	U.S. Plans		European Plans
Employer contributions
2017	$	2,885	$	1,689
Benefit payments
2017	$	6,358	$	1,251
2018		6,144		1,495
2019		6,451		1,159
2020		6,841		1,294
2021		6,703		1,249
2022 - 2026		36,536		8,817

For the European plans, the total benefit payments include both the Company’s share of the benefit cost and the participants’ share of the cost, which is funded by participant contributions to the plans.


	U.S. Plans						European Plans
	Year Ended December 31						Year Ended December 31
	2016		2015		2014		2016		2015		2014
Net periodic pension cost
Service cost	$	957	$	1,136	$	895	$	395	$	288	$	342
Interest cost		4,589		4,499		4,815		1,142		1,250		1,653
Expected return on assets		(6,040)		(7,070)		(7,541)		(1,416)		(1,705)		(1,549)
Amortization of prior service cost		—		15		74		—		—		—
Net actuarial loss amortization		3,010		2,606		877		229		219		245
Settlement		1,149		607		1,025		361		199		—
Net periodic pension cost	$	3,665	$	1,793	$	145	$	711	$	251	$	691


	U.S. Plans						European Plans
	Year Ended December 31						Year Ended December 31
	2016		2015		2014		2016		2015		2014
Amounts recognized in other comprehensive income (loss)
Current year actuarial loss	$	(4,112)	$	(3,348)	$	(19,756)	$	(4,222)	$	(984)	$	(2,117)
Amortization of actuarial loss		3,010		2,606		877		229		219		245
Current year prior service credit		—		—		—		91		—		—
Amortization of prior service cost		—		15		74		—		—		—
Settlement		1,149		607		1,025		361		199		—
Foreign currency exchange		—		—		—		1,122		603		818
Total recognized in other comprehensive income (loss)	$	47	$	(120)	$	(17,780)	$	(2,419)	$	37	$	(1,054)
Total recognized in net periodic pension cost and other comprehensive income (loss)	$	(3,618)	$	(1,913)	$	(17,925)	$	(3,130)	$	(214)	$	(1,745)


	U.S. Plans		European Plans
	2017		2017
Amounts expected to be recognized in net periodic pension cost
Prior service credit	$	—	$	(9)
Net actuarial loss		2,984		424
Total as of December 31	$	2,984	$	415

The assumptions used in the measurement of net periodic pension cost are shown in the following table:


	U.S. Plans						European Plans
	December 31						December 31
	2016		2015		2014		2016		2015		2014
Weighted average actuarial assumptions
Discount rate	4.38	%	4.01	%	4.88	%	2.97	%	3.00	%	3.92	%
Expected annual return on plan assets	7.00	%	7.50	%	7.75	%	5.28	%	5.54	%	5.23	%
Rate of increase in compensation levels	3.00	%	3.00	%	3.50	%	3.07	%	3.38	%	3.50	%

The discount rates that the Company utilizes to determine pension obligations for its U.S. plans are based on a review of long-term corporate bonds that receive one of the two highest ratings given by a recognized rating agency.

The expected rate of return on plan assets was determined by the Company based on a review of asset class return expectations, as well as long-term inflation assumptions. Projected returns are based on broad equity and bond indices that the Company uses to benchmark its actual asset portfolio performance. The Company also considered historical returns on asset classes and investment mix. The expected long-term return on the U.S. plans’ assets is based on an asset allocation assumption of approximately 40%-50% equity securities, 45%-55% fixed income securities, and 5% with other investments. The expected long-term return on the European plans’ assets is based on its targeted portfolio mix of approximately 20%-30% equity securities, 55%-65% fixed income securities and 10%-20% other investments. The Company also takes into account the effect on its projected returns from any reasonably likely changes in its asset portfolio when applicable. The Company’s investment strategy is to earn the highest possible long-term total rate of return while minimizing the associated risk to ensure the preservation of the plan assets for the provision of benefits to participants and their beneficiaries. This is accomplished by managing a diversified portfolio of fund styles, asset types, risk characteristics and investment holdings.

Multi-Employer Pension Plan

In addition to the aforementioned European plans, the Company participates in a multi-employer pension plan in Europe. This multi-employer plan almost entirely relates to former employees of operations it has divested. Benefits are distributed by the multi-employer plan. As of both December 31, 2016 and 2015, the Company had a $0.9 million liability recorded as a component of payroll and benefits payable within its consolidated balance sheets. Refer to Note 16 for further information related to this multi-employer plan.

Defined Contribution Plans

The Company sponsors a defined contribution plan for certain U.S. employees. The plan allows for employee contributions, and the Company can make fixed, matching and discretionary contributions to the plan on behalf of its employees. The Company also makes contributions to the USW 401(k) Plan for certain eligible employees. Total expenses related to the defined contribution plans were $3.8 million, $3.1 million, and $2.8 million for the years ended December 31, 2016, 2015, and 2014, respectively.