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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2020

Pension Plans

We historically sponsored several defined benefit pension plans covering most employees not covered by union-administered plans, including certain employees in foreign countries. These plans generally provided participants with benefits based on years of service and career-average compensation levels.

In past years, we made amendments to defined benefit retirement plans that froze the retirement benefits for non-grandfathered and certain non-union employees in the U.S., Canada and the U.K. In 2020, our Board of Directors approved further amendments to freeze our U.S. and Canadian pension plans for substantially all of the remaining active employees in these plans effective December 31, 2020. As a result, these employees will cease accruing further benefits under the pension plans after December 31, 2020 and will begin participating in an enhanced defined contribution plan. All retirement benefits earned by these participants as of December 31, 2020 will be fully preserved and will be paid in accordance with the plan and legal requirements. We recognized curtailment losses of $9 million in non-operating pension costs with an offset to accumulated other comprehensive loss as a result of the freeze of the pension plans.

During 2019, we offered approximately 4,500 vested former employees in our U.S. defined benefit plan a one-time option to receive a lump sum distribution of their benefits. Approximately 1,700 former employees, or 38% of those that were offered the distribution, accepted the offer. In December 2019, we made payments of approximately $80 million from the U.S. defined benefit plan assets, which resulted in a settlement of $90 million, representing approximately 4% of our U.S. pension plan obligations. We recognized a settlement loss of $32 million of the pro-rata share of the unrecognized actuarial losses existing at the time of the settlement.

The funding policy for these plans is to make contributions based on annual service costs plus amortization of unfunded past service liability, but not greater than the maximum allowable contribution deductible for federal income tax purposes. We may, from time to time, make voluntary contributions to our pension plans, which exceed the amount required by statute. The majority of the plans’ assets are invested in a master trust that, in turn, is invested primarily in commingled funds whose investments are listed stocks and bonds. During 2020, total global pension contributions were $136 million, which included $98 million of prefunding contributions for our U.S. pension plan for 2021 through 2023, compared with $72 million in 2019.

We also have a non-qualified supplemental pension plan covering certain U.S. employees, which provides for incremental pension payments so that the participants' payments equal the amounts that could have been received under our qualified pension plan if it were not for limitations imposed by income tax regulations. The accrued pension liability related to this plan was $61 million and $58 million as of December 31, 2020 and 2019, respectively.

Pension Expense

Pension expense from continuing operations was as follows:


	Years ended December 31,
	2020		2019		2018
	(In thousands)
Company-administered plans:
Service cost	$	11,915	$	11,007	$	12,108
Interest cost	67,781		84,960		78,234
Expected return on plan assets	(97,526)		(91,034)		(101,980)
Pension settlement expense	—		34,974		3,061
Curtailment loss	9,329		—		—
Amortization of:
Net actuarial loss	31,134		30,708		28,593
Prior service cost	653		711		550
	23,286		71,326		20,566
Multi-employer plans	10,977		10,582		9,326
Net pension expense	$	34,263	$	81,908	$	29,892

Company-administered plans:
U.S.	$	32,503	$	75,936	$	28,043
Foreign	(9,217)		(4,610)		(7,477)
	23,286		71,326		20,566
Multi-employer plans	10,977		10,582		9,326
	$	34,263	$	81,908	$	29,892

Non-operating pension costs include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any charges for settlements or curtailments.

The following table sets forth the weighted-average actuarial assumptions used in determining our annual pension expense:


	U.S. Plans Years ended December 31,			Foreign Plans Years ended December 31,
	2020	2019	2018	2020	2019	2018
Discount rate	3.18%	4.35%	3.70%	2.28%	3.04%	2.70%
Rate of increase in compensation levels	3.00%	3.00%	3.00%	3.11%	3.08%	3.08%
Expected long-term rate of return on plan assets	5.05%	5.40%	5.40%	4.99%	5.36%	5.50%
Gain and loss amortization period (years)	21	22	21	24	24	26

The return on plan assets assumption reflects the weighted-average of the expected long-term rates of return for the broad categories of investments held in the plans. The expected long-term rate of return is adjusted when there are fundamental changes in expected returns or in asset allocation strategies of the plan assets.

Obligations and Funded Status

The following table sets forth the benefit obligations, assets and funded status associated with our pension plans:



	2020			2019
	(In thousands)
Change in benefit obligations:
Benefit obligations at January 1	$	2,324,080		$	2,135,143
Service cost	11,915			11,007
Interest cost	67,781			84,960
Actuarial (gain) loss	212,099			274,456
Pension curtailment and settlement	(19,052)			(102,905)
Benefits paid	(104,977)			(96,290)


Foreign currency exchange rate changes	17,247			17,709
Benefit obligations at December 31	2,509,093			2,324,080

Change in plan assets:
Fair value of plan assets at January 1	1,978,708			1,725,543
Actual return on plan assets	275,372			348,354
Employer contribution	136,029			72,202
Benefits paid	(104,977)			(96,290)
Pension settlement	—			(93,049)

Foreign currency exchange rate changes	18,864			21,948
Fair value of plan assets at December 31	2,303,996			1,978,708
Funded status	$	(205,097)		$	(345,372)
Funded percent	92		%	85		%

The funded status of our pension plans was presented in the Consolidated Balance Sheets as follows:


	December 31,
	2020		2019
	(In thousands)
Noncurrent asset	$	63,857	$	72,320
Current liability	(3,776)		(3,863)
Noncurrent liability	(265,178)		(413,829)
Net amount recognized	$	(205,097)	$	(345,372)

Amounts recognized in accumulated other comprehensive loss (pre-tax) consisted of:


	December 31,
	2020		2019
	(In thousands)
Prior service cost	$	3,816	$	13,798
Net actuarial loss	855,300		869,907
Net amount recognized	$	859,116	$	883,705

In 2021, we expect to amortize $28 million of net actuarial loss as a component of pension expense.

The following table sets forth the weighted-average actuarial assumptions used in determining funded status:


	U.S. Plans December 31,		Foreign Plans December 31,
	2020	2019	2020	2019
Discount rate	2.60%	3.30%	1.53%	2.30%
Rate of increase in compensation levels	3.00%	3.00%	3.11%	3.11%

As of December 31, 2020 and 2019, our total accumulated benefit obligations, as well as our pension plan obligations (projected benefit obligations (PBO) and accumulated benefit obligations (ABO)) in excess of the fair value of the related plan assets, for our U.S. and foreign plans were as follows:


	U.S. Plans December 31,				Foreign Plans December 31,				Total December 31,
	2020		2019		2020		2019		2020		2019
	(In thousands)
Total accumulated benefit obligations	$	1,940,549	$	1,812,813	$	566,177	$	489,135	$	2,506,726	$	2,301,948
Plans with pension obligations in excess of plan assets:
PBO	1,940,704		1,832,786		9,848		8,693		1,950,552		1,841,479
ABO	1,940,549		1,812,813		7,995		7,025		1,948,544		1,819,838
Fair value of plan assets	1,681,598		1,423,787		—		—		1,681,598		1,423,787

Plan Assets

Our pension investment strategy is to reduce the effects of future volatility on the fair value of our pension assets relative to our pension obligations. We increase our allocation of high quality, longer-term fixed income securities and reduce our allocation of equity investments as the funded status of the plans improve. The plans utilize several investment strategies, including actively and passively managed equity and fixed income strategies. The investment policy establishes targeted allocations for each asset class that incorporate measures of asset and liability risks. Deviations between actual pension plan asset allocations and targeted asset allocations may occur as a result of investment performance and changes in the funded status from time to time. Rebalancing of our pension plan asset portfolios is evaluated periodically and rebalanced if actual allocations exceed an acceptable range. Equity securities primarily include investments in both domestic and international common collective trusts and publicly traded equities. Fixed income securities primarily include domestic collective trusts and corporate bonds. Other types of investments include private equity fund-of-funds and hedge fund-of-funds. U.S. plans account for approximately 73% of our total pension plan assets. Equity and fixed income securities in our international plans include actively and passively managed mutual fund.

The following table presents the fair value of each major category of pension plan assets and the level of inputs used to measure fair value as of December 31, 2020 and 2019:


	Fair Value Measurements at December 31, 2020
Asset Category	Total		Level 1		Level 2		Level 3
	(In thousands)

Equity securities:

U.S. common collective trusts	$	371,893	$	—	$	371,893	$	—
Foreign common collective trusts	263,023		—		263,023		—
Fixed income securities:
Corporate bonds	98,715		—		98,715		—
Common collective trusts	1,447,225		—		1,447,225		—

Private equity and hedge funds	123,140		—		—		123,140
Total	$	2,303,996	$	—	$	2,180,856	$	123,140


	Fair Value Measurements at December 31, 2019
Asset Category	Total		Level 1		Level 2		Level 3
	(In thousands)
Equity securities:

U.S. common collective trusts	$	384,739	$	—	$	384,739	$	—
Foreign common collective trusts	379,717		—		379,717		—
Fixed income securities:
Corporate bonds	84,519		—		84,519		—
Common collective trusts	1,011,515		—		1,011,515		—
Private equity and hedge funds	118,218		—		—		118,218
Total	$	1,978,708	$	—	$	1,860,490	$	118,218

The following is a description of the valuation methodologies used for our pension assets as well as the level of input used to measure fair value:

Equity securities — These investments include common and preferred stocks and index common collective trusts that track U.S. and foreign indices. The common collective trusts were valued at the unit prices established by the funds’ sponsors based on the fair value of the assets underlying the funds. Since the units of the funds are not actively traded, the fair value measurements have been classified within Level 2 of the fair value hierarchy.

Fixed income securities — These investments include investment grade bonds of U.S. issuers from diverse industries, government issuers, index common collective trusts that track the Barclays Aggregate Index and other fixed income investments (primarily mortgage-backed securities). Fair values for the corporate bonds were valued using third-party pricing services. These sources determine prices utilizing market income models which factor in, where applicable, transactions of similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap spreads and volatility. Since the corporate bonds are not actively traded, the fair value measurements have been classified within Level 2 of the fair value hierarchy. The common collective trusts were valued at the unit prices established by the funds’ sponsors based on the fair value of the assets underlying the funds. Since the units of the funds are not actively traded, the fair value measurements have been classified within Level 2 of the fair value hierarchy. The other investments are not actively traded and fair values are estimated using bids provided by brokers, dealers or quoted prices of similar securities with similar characteristics or pricing models. Therefore, the other investments have been classified within Level 2 of the fair value hierarchy.

Private equity and hedge funds — These investments represent limited partnership interests in private equity and hedge funds. The partnership interests are valued by the general partners based on the underlying assets in each fund. The limited partnership interests are valued using unobservable inputs and have been classified within Level 3 of the fair value hierarchy.

The following table presents a summary of changes in the fair value of the pension plans’ Level 3 assets for 2020 and 2019:


	2020		2019
	(In thousands)
Beginning balance at January 1	$	118,218	$	121,836
Return on plan assets:
Relating to assets still held at the reporting date	8,969		5,752
Relating to assets sold during the period	—		(44)
Purchases, sales, settlements and expenses	(4,047)		(9,326)
Ending balance at December 31	$	123,140	$	118,218

The following table details pension benefits expected to be paid in each of the next five fiscal years and in aggregate for the five fiscal years thereafter:


	(In thousands)
2021	$	108,724
2022	111,015
2023	114,655
2024	118,086
2025	120,260
2026-2030	623,627

Multi-employer Plans

We participate in multi-employer plans that provide defined benefits to certain employees covered by collective-bargaining agreements. Such plans are usually administered by a board of trustees comprised of the management of the participating companies and labor representatives. The net pension cost of these plans, which is included in the pension expense table above, is equal to the annual contribution determined in accordance with the provisions of negotiated labor contracts.

As of December 31, 2020, all plans are considered in the green zone for the most recent Pension Protection Act zone status, except for IAM National (red) and New England Teamsters & Trucking Industry (red). Plans in the red zone are generally less than sixty-five percent funded, plans in the yellow zone are less than eighty percent funded, and plans in the green zone are at least eighty percent funded. However, the trustees of IAM National voluntarily elected to put the fund in red status, even though the plan is at least eighty percent funded, and implemented a rehabilitation plan in 2019.

Savings Plans

Employees who do not actively participate in pension plans and are not covered by union-administered plans are generally eligible to participate in enhanced savings plans. These plans provide for (1) a company contribution even if employees do not make contributions for employees hired before January 1, 2016, (2) a company match of employee contributions of eligible pay, subject to tax limits and (3) a discretionary company match. Savings plan costs totaled $40 million, $39 million and $40 million in 2020, 2019 and 2018, respectively.

Deferred Compensation and Long-Term Compensation Plans

We have deferred compensation plans that permit eligible U.S. employees, officers and directors to defer a portion of their compensation. The deferred compensation liability, including Ryder matching amounts and accumulated earnings, was $83 million and $71 million as of December 31, 2020 and 2019, respectively.

We have established grantor trusts (Rabbi Trusts) to provide funding for benefits payable under the supplemental pension plan, deferred compensation plans and long-term incentive compensation plans. The assets held in the trusts were $84 million and $72 million as of December 31, 2020 and 2019, respectively. The Rabbi Trusts’ assets consist of short-term cash investments and a managed portfolio of equity securities, including our common stock. These assets, except for the investment in our common stock, are included in “Sales-type leases and other assets” because they are available to our general creditors in the event of insolvency. The equity securities are classified as trading securities and stated at fair value. During 2020, 2019 and 2018, we recognized realized and unrealized investment income gains (losses) of $11 million, $11 million and ($3) million,

respectively, in "Miscellaneous income, net". The Rabbi Trusts’ investments in our common stock as of both December 31, 2020 and 2019 were not material.

Investments held in Rabbi Trusts are assets measured at fair value on a recurring basis, all of which are considered Level 1 of the fair value hierarchy. The following table presents the asset classes as of December 31, 2020 and 2019:


	December 31,
	2020		2019
	(In thousands)
Cash and cash equivalents	$	24,573	$	18,460
U.S. equity mutual funds	39,066		34,035
Foreign equity mutual funds	8,389		8,658
Fixed income mutual funds	10,269		9,800
Total Investments held in Rabbi Trusts	$	82,297	$	70,953