Retirement Plans

12 Months Ended

Dec. 31, 2023

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

Retirement Plans

Retirement Plans

Retirement Plans

The Company sponsors pension and other post-retirement benefit plans for certain associates. Most of the Company's associates are accumulating retirement income benefits through defined contribution plans. The majority of Company's defined benefit pension plans covering the Company's domestic associates have been closed to new associates and frozen for existing associates, however certain employees represented by collective bargaining continue to earn benefits. Certain foreign associates are covered by government sponsored plans in the countries in which they are employed.

Defined Benefit Pension Plans

Benefits provided under defined benefit pension plans are based, depending on the plan, on associates' average earnings and years of credited service, or a benefit multiplier times years of service. Funding of these qualified defined benefit pension plans is in accordance with federal laws and regulations. The actuarial valuation measurement date for pension plans is the calendar year end of each year. In connection with the Altra Transaction, $30.1 million of plan benefit obligations and $13.7 million of plan assets included in the Altra business were transferred to the Company on March 27, 2023.

The Company's target allocation, target return and actual weighted-average asset allocation by asset category are as follows:

	Target		Actual Allocation
	Allocation	Return	2023	2022
Equity Investments	22.5%	5.8 - 7.5%	14.7%	41.1%
Fixed Income	64.7%	4.2 - 7.0%	68.2%	44.7%
Other	12.8%	0.5% - 7.3%	17.1%	14.2%
Total	100.0%	5.3%	100.0%	100.0%

During 2023, the Company amended its dynamic de-risking investment strategy initially implemented during 2021 designed to allow the plans to attain and/or maintain fully funded status levels while reducing volatility, in order to further increase the overall fixed income portfolio to meet allocation targets in such a matter that its interest rate sensitivity correlates highly with that of the liabilities of the plans while other asset classes are intended to provide additional return with associated higher levels

of risk. This change is expected to result in improved funding levels and less required contributions over time. Allocation targets have been established to fit this strategy in response to increased funded ratio thresholds along a glidepath. The long-term rate of return assumptions consider historic returns and volatilities adjusted for changes in overall economic conditions that may affect future returns and a weighting of each investment class.

The following table presents a reconciliation of the funded status of the defined benefit pension plans:

	2023		2022
Change in Projected Benefit Obligation:
Obligation at Beginning of Period	$	440.3	$	587.2
Service Cost	2.1		1.4
Interest Cost	22.8		14.0
Actuarial Loss (Gain)	20.1		(123.9)
Less: Benefits Paid	34.4		32.5
Settlements	(3.9)		(0.2)
Foreign Currency Translation	6.0		(5.7)
Acquisitions	30.1		—
Obligation at End of Period	$	483.1	$	440.3
Change in Fair Value of Plan Assets:
Fair Value of Plan Assets at Beginning of Period	$	346.2	$	478.9
Actual Return on Plan Assets	34.2		(104.5)
Employer Contributions	8.3		8.3
Less: Benefits Paid	34.4		32.5
Settlements	(3.9)		(0.2)
Foreign Currency Translation	3.6		(3.8)
Acquisitions	13.7		—
Fair Value of Plan Assets at End of Period	$	367.7	$	346.2
Funded Status	$	(115.4)	$	(94.1)

The actuarial loss for fiscal 2023 was primarily due to a decrease in discount rates. The actuarial gain for fiscal 2022 was primarily due to an increase in discount rates, partially offset by losses due to demographic experience.

The funded status as of December 31, 2023 included domestic plans of $(64.5) million and international plans of $(50.9) million. The funded status as of December 31, 2022 included domestic plans of $(64.6) million and international plans of $(29.5) million.

Funded Status and Expense

The Company recognized the funded status of its defined benefit pension plans on the Consolidated Balance Sheets as follows:

	2023		2022
Other Noncurrent Assets	$	4.1	$	2.1
Accrued Compensation and Benefits	(6.6)		(4.4)
Pension and Other Post Retirement Benefits	(112.9)		(91.8)
Total	$	(115.4)	$	(94.1)
Amounts Recognized in Accumulated Other Comprehensive Loss
Net Actuarial Gain	$	35.6	$	21.2
Prior Service Cost	0.3		0.4
Total	$	35.9	$	21.6

The accumulated benefit obligation for all defined benefit pension plans was $475.6 million and $434.8 million as of December 31, 2023 and December 31, 2022, respectively.

Defined pension plans with accumulated benefit obligations in excess of plan assets as of December 31, 2023 and December 31, 2022 were as follows:

	2023		2022
Projected Benefit Obligation	$	445.7	$	407.0
Accumulated Benefit Obligation	442.1		405.1
Fair Value of Plan Assets	326.4		310.9

Defined pension plans with projected benefit obligations in excess of plan assets as of December 31, 2023 and December 31, 2022 were as follows:

	2023		2022
Projected Benefit Obligation	$	447.2	$	408.6
Accumulated Benefit Obligation	443.3		406.4
Fair Value of Plan Assets	327.7		312.3

The following weighted average assumptions were used to determine the projected benefit obligation as of December 31, 2023 and December 31, 2022, respectively:

	2023	2022
Discount Rate	4.7%	5.2%

The objective of the discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled. In making the determination, the Company takes into account the timing and amount of benefits that would be available under the plans. The methodology for selecting the discount rate was to match the plan's cash flows to that of a theoretical bond portfolio yield curve.

Certain of the Company's defined benefit pension plan obligations are based on years of service rather than on projected compensation percentage increases. For those plans that use compensation increases in the calculation of benefit obligations and net periodic pension cost, the Company used an assumed rate of compensation increase of 2.8% for the years ended December 31, 2023 and December 31, 2022.

Net periodic pension benefit costs and the net actuarial loss and prior service cost recognized in OCI for the defined benefit pension plans were as follows:

	2023		2022		2021
Service Cost	$	2.1	$	1.4	$	1.2
Interest Cost	22.8		14.0		7.5
Expected Return on Plan Assets	(27.1)		(20.3)		(14.5)
Amortization of Net Actuarial Gain (Loss)	(1.8)		1.0		3.0
Amortization of Prior Service Cost	0.1		0.1		0.2
Curtailment Expense	0.2		—		—
Net Periodic Benefit Cost	$	(3.7)	$	(3.8)	$	(2.6)
Change in Obligations Recognized in OCI, Net of Tax
Prior Service Cost	$	0.1	$	0.1	$	0.1
Net Actuarial (Gain) Loss	(14.4)		0.7		2.4
Total Recognized in OCI	$	(14.3)	$	0.8	$	2.5

The amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of associates expected to receive benefits under the plans. The amortization of the net actuarial loss is

determined using a straight-line amortization of the loss over the average remaining life expectancy of the associates expected to receive benefits under the plans.

The following weighted average assumptions were used to determine net periodic pension cost for fiscal years 2023, 2022 and 2021, respectively.

	2023	2022	2021
Discount Rate	5.2%	2.7%	2.6%
Expected Long-Term Rate of Return on Assets	6.6%	4.6%	6.2%

Pension Assets

The Company classifies its investments into Level 1, which refers to securities valued using quoted prices from active markets for identical assets, Level 2, which refers to securities not traded on an active market but for which observable market inputs are readily available, and Level 3, which refers to securities valued based on significant unobservable inputs. Mutual funds are valued at the unadjusted quoted market prices for the securities. Common collective trust funds are valued based on the net asset value (“NAV”) provided by the administrator of the fund as a practical expedient to estimate fair value. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. Investments in units of collective trust funds and short-term investment funds, comprised of cash and money market funds, are valued at their respective published market prices as reported by the funds daily. Certain international plans hold insurance contracts. The fair value of these contracts is calculated by projecting expected future cash flows from the contract and discounting them to present value based on current market rates. The contracts are included within Level 3 of the hierarchy as the assumptions used to project expected future cash flows are based on actuarial estimates and are unobservable.

Pension assets by type and level are as follows:

	December 31, 2023
	Total		Level 1		Level 3
Cash and Cash Equivalents	$	4.9	$	4.9	$	—
Mutual Funds:
US Equity Funds	1.8		1.8		—
International Equity Funds	9.5		9.5		—
Fixed Income Funds	3.8		3.8		—
Other	6.1		1.8		4.3
Insurance Contracts	23.7		—		23.7
	$	49.8	$	21.8	$	28.0
Investments Measured at Net Asset Value	317.9
Total	$	367.7

	December 31, 2022
	Total		Level 1		Level 3
Cash and Cash Equivalents	$	4.3	$	4.3	$	—
Mutual Funds:
US Equity Funds	1.5		1.5		—
International Equity Funds	3.1		3.1		—
Fixed Income Funds	2.3		2.3		—
Other	1.6		1.6		—
Insurance Contracts	20.9		—		20.9
	$	33.7	$	12.8	$	20.9
Investments Measured at Net Asset Value	312.5
Total	$	346.2

The Company had no assets classified within Level 2 of the hierarchy as of December 31, 2023 and December 31, 2022.

The following table sets forth additional disclosures for the fair value measurement of the fair value of pension plan assets that calculate fair value based on NAV per share practical expedient as of December 31, 2023 and December 31, 2022:

	2023		2022
Common Collective Trust Funds	$	317.9	$	312.5

The 2023 common collective trust funds are investments in the following portfolios:

•Mercer US Small/Midcap Equity Portfolio - seeks to provide long term total returns comprised primarily of capital appreciation by investing in equity securities issued by small to medium capitalization US companies;

•Mercer Non-US Core Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of non-US companies;

•Mercer Global Low Volatility Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of US and foreign issuers;

•Mercer US Large Cap Passive Equity Portfolio - seeks to approximate, as closely as possible, the performance of the S&P 500 Index over the long term by investing in the equity securities comprising the index in approximately the same proportions as they are represented in the index;

•Mercer Emerging Markets Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing equity securities of companies that are located in emerging markets, other investments that are tied economically to emerging markets, as well as in American, European and Global Depository Receipts;

•Mercer Active Long Corporate Fixed Income Portfolio - seeks to maximize long term total return by investing on high quality US corporate bonds;

•Mercer Opportunistic Fixed Income Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in high yield bonds and emerging markets debt;

•Mercer Long Strips Fixed Income Portfolio - seeks to extend the duration of plan assets by investing in US Treasury STRIPS with a maturity of greater than 20 years;

•Mercer Core Real Estate Portfolio - seeks to earn attractive risk-adjusted returns on a diversified portfolio of private real estate, by systematically favoring the market segments and opportunities believed to offer the most attractive relative value at a given point in time;

•Mercer Active Intermediate Credit Fixed Income Portfolio - seeks to maximize long-term total return relative to the Bloomberg Barclays US Intermediate Credit Index;

•Mercer Long Duration Passive Fixed Income Portfolio - seeks to match the total return of the Bloomberg US Long Government Bond Index.

The 2023 common collective trust funds are available for immediate redemption.

The 2022 common collective trust funds are investments in the following portfolios:

•Mercer US Small/Midcap Equity Portfolio - seeks to provide long term total returns comprised primarily of capital appreciation by investing in equity securities issued by small to medium capitalization US companies;

•Mercer Non-US Core Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of non-US companies;

•Mercer Global Low Volatility Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in equity securities of US and foreign issuers;

•Mercer US Large Cap Passive Equity Portfolio - seeks to approximate, as closely as possible, the performance of the S&P 500 Index over the long term by investing in the equity securities comprising the index in approximately the same proportions as they are represented in the index;

•Mercer Emerging Markets Equity Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing equity securities of companies that are located in emerging markets, other investments that are tied economically to emerging markets, as well as in American, European and Global Depository Receipts;

•Mercer Active Long Corporate Fixed Income Portfolio - seeks to maximize long term total return by investing on high quality US corporate bonds;

•Mercer Opportunistic Fixed Income Portfolio - seeks to provide long term total return, which includes capital appreciation and income, by investing in high yield bonds and emerging markets debt;

•Mercer Long Strips Fixed Income Portfolio - seeks to extend the duration of plan assets by investing in US Treasury STRIPS with a maturity of greater than 20 years;

•Mercer Core Real Estate Portfolio - seeks to earn attractive risk-adjusted returns on a diversified portfolio of private real estate, by systematically favoring the market segments and opportunities believed to offer the most attractive relative value at a given point in time.

The 2022 common collective trust funds are available for immediate redemption.

The table below sets forth a summary of changes in the Company's Level 3 assets in its pension plan investments as of December 31, 2023 and December 31, 2022:

	2023						2022
	Other		Insurance Contracts		Total		Insurance Contracts
Beginning Balance	$	—	$	20.9	$	20.9	$	34.0
Acquisition	4.3		—		4.3		—
Net Sales	—		(0.8)		(0.8)		(0.2)
Net Gains (Losses)	—		2.7		2.7		(10.7)
Translation	—		0.9		0.9		(2.2)
Ending Balance	$	4.3	$	23.7	$	28.0	$	20.9

The Company made contributions to its defined benefit plan of $8.3 million for the fiscal years ended December 31, 2023 and December 31, 2022.

The Company estimates that in fiscal 2024 it will make contributions in the amount of $17.8 million to fund its defined benefit pension plans.

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Year	Expected Payments
2024	$	37.9
2025	36.6
2026	37.0
2027	35.9
2028	35.9
2029-2033	171.0

Post-Retirement Health Care Plans

The Company's other post-retirement health care plans were not significant during fiscal 2023 and fiscal 2022.

Defined Contribution Plans

Company contributions to domestic defined contribution plans totaled $24.3 million, $16.2 million and $9.8 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. Company contributions to non-US defined contribution plans were $15.7 million, $7.8 million and $5.7 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively.