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Pension
 12 Months Ended
Dec. 31, 2017
Retirement Benefits [Abstract]  
Pension
Pension

We have pension plans covering the majority of our employees. Benefits generally are based on compensation and service for salaried employees and job grade and length of service for hourly employees. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006, and most hourly U.S.-based employees (excluding employees hired at Shreveport after December 15, 2008, and at Toledo after September 30, 2010). Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. The non-U.S. pension plans cover the employees of our wholly owned subsidiaries in Mexico and the Netherlands (through 2015). The plans in Mexico are unfunded.
 
In the fourth quarter of 2015, we executed an agreement with Pensioenfonds voor de Grafische Bedrijven (“PGB”), an industry wide pension fund, and unwound direct ownership of our defined benefit pension plan in the Netherlands. In accordance with this agreement, we transferred all assets of the plan and made a cash contribution of $5.2 million to PGB. In return, PGB assumed the related liabilities and administrative responsibilities of the plan. As a result, there is no longer a pension liability on the Consolidated Balance Sheet related to this pension plan. This event also resulted in a settlement charge of $21.6 million being recorded in the Consolidated Statement of Operations in the fourth quarter of 2015. Beginning in 2016, Libbey Holland makes cash contributions to PGB as participating employees earn pension benefits. These related costs are expensed as incurred, similar to the accounting associated with a defined contribution retirement plan and amounted to $1.9 million in both 2017 and 2016.

Effect on Operations
The components of our net pension expense, including the SERP, are as follows:
Year ended December 31,
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Service cost (benefits earned during the period)
 
$
3,916

 
$
3,717

 
$
4,365

 
$
1,085

 
$
1,226

 
$
2,965

 
$
5,001

 
$
4,943

 
$
7,330

Interest cost on projected benefit obligation
 
13,787

 
14,963

 
14,715

 
2,749

 
2,594

 
4,332

 
16,536

 
17,557

 
19,047

Expected return on plan assets
 
(22,479
)
 
(23,027
)
 
(22,661
)
 
—

 
—

 
(2,447
)
 
(22,479
)
 
(23,027
)
 
(25,108
)
Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior service cost (credit)
 
236

 
263

 
417

 
(204
)
 
(207
)
 
(244
)
 
32

 
56

 
173

Actuarial loss
 
5,232

 
4,272

 
7,291

 
594

 
782

 
1,599

 
5,826

 
5,054

 
8,890

Settlement charge
 
245

 
42

 
13

 
—

 
126

 
21,574

 
245

 
168

 
21,587

Curtailment credit
 
—

 
—

 
—

 
—

 
—

 
(14
)
 
—

 
—

 
(14
)
Pension expense
 
$
937

 
$
230

 
$
4,140

 
$
4,224

 
$
4,521

 
$
27,765

 
$
5,161

 
$
4,751

 
$
31,905



In 2017, 2016 and 2015, we incurred pension settlement charges of $0.2 million, $0.2 million and $21.6 million, respectively. The pension settlement charges in 2015 were triggered primarily by the liquidation of the Dutch pension fund. The pension settlement charges in 2017 and 2016 were triggered by excess lump sum distributions taken by employees, which required us to record unrecognized gains and losses in our pension plan accounts.

Actuarial Assumptions
The assumptions used to determine the benefit obligations were as follows:
 
 
U.S. Plans
 
Non-U.S. Plans
 
 
2017
 
2016
 
2017
 
2016
Discount rate
 
3.64%
to
3.69%
 
4.18%
to
4.23%
 
9.40%
 
9.30%
Rate of compensation increase
 
Not applicable
 
Not applicable
 
4.30%
 
4.30%

The assumptions used to determine net periodic pension costs were as follows:
 
U.S. Plans
 
Non-U.S. Plans
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Discount rate
4.18
%
to
4.23
%
 
4.66
%
to
4.73
%
 
4.17
%
to
4.29
%
 
9.30%
 
8.10%
 
2.30
%
to
7.60
%
Expected long-term rate of return on plan assets
7.00%
 
7.25%
 
7.25%
 
Not applicable
 
Not applicable
 
4.00%
Rate of compensation increase
Not applicable
 
Not applicable
 
Not applicable
 
4.30%
 
4.30%
 
2.00
%
to
4.30
%


The discount rate enables us to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments at our December 31 measurement date. The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects for the subsequent year. A higher discount rate decreases the present value of benefit obligations and decreases pension expense.

To determine the expected long-term rate of return on plan assets for our funded plans, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. The expected long-term rate of return on plan assets at December 31st is used to measure the earnings effects for the subsequent year.

Future benefits are assumed to increase in a manner consistent with past experience of the plans except for the Libbey U.S. Salaried Pension Plan and SERP as discussed above, which, to the extent benefits are based on compensation, includes assumed compensation increases as presented above. Amortization included in net pension expense is based on the average remaining service of employees.

We account for our defined benefit pension plans on an expense basis that reflects actuarial funding methods. The actuarial valuations require significant estimates and assumptions to be made by management, primarily with respect to the discount rate and expected long-term return on plan assets. These assumptions are all susceptible to changes in market conditions. The discount rate is based on a selected settlement portfolio from a universe of high quality bonds. In determining the expected long-term rate of return on plan assets, we consider historical market and portfolio rates of return, asset allocations and expectations of future rates of return. We evaluate these critical assumptions on our annual measurement date of December 31st. Other assumptions involving demographic factors such as retirement age, mortality and turnover are evaluated periodically and are updated to reflect our experience. Actual results in any given year often will differ from actuarial assumptions because of demographic, economic and other factors.

For our U.S. pension plans, we use the RP 2014 Sex Distinct Mortality Tables, as released by the Society of Actuaries, to determine our projected benefit obligations. In 2015, 2016 and 2017, the Society of Actuaries published new generational projection scales reflecting additional years of mortality experience. We adopted these updates in each respective year.

Projected Benefit Obligation (PBO) and Fair Value of Assets

The changes in the projected benefit obligations and fair value of plan assets are as follows:
Year ended December 31,
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Change in projected benefit obligation:
 
 
 
 
 
 
 
 
 
 
 
 
Projected benefit obligation, beginning of year
 
$
336,648

 
$
325,863

 
$
28,161

 
$
35,915

 
$
364,809

 
$
361,778

Service cost
 
3,916

 
3,717

 
1,085

 
1,226

 
5,001

 
4,943

Interest cost
 
13,787

 
14,963

 
2,749

 
2,594

 
16,536

 
17,557

Exchange rate fluctuations
 
—

 
—

 
1,214

 
(5,821
)
 
1,214

 
(5,821
)
Actuarial (gain) loss
 
22,991

 
11,108

 
1,409

 
(2,477
)
 
24,400

 
8,631

Settlements paid
 
(281
)
 
(259
)
 
—

 
—

 
(281
)
 
(259
)
Benefits paid
 
(23,008
)
 
(18,744
)
 
(2,651
)
 
(3,276
)
 
(25,659
)
 
(22,020
)
Projected benefit obligation, end of year
 
$
354,053

 
$
336,648

 
$
31,967

 
$
28,161

 
$
386,020

 
$
364,809

 
 
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of plan assets:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets, beginning of year
 
$
318,414

 
$
316,184

 
$
—

 
$
—

 
$
318,414

 
$
316,184

Actual return on plan assets
 
47,595

 
20,974

 
—

 
—

 
47,595

 
20,974

Employer contributions
 
499

 
259

 
2,651

 
3,276

 
3,150

 
3,535

Settlements paid
 
(281
)
 
(259
)
 
—

 
—

 
(281
)
 
(259
)
Benefits paid
 
(23,008
)
 
(18,744
)
 
(2,651
)
 
(3,276
)
 
(25,659
)
 
(22,020
)
Fair value of plan assets, end of year
 
$
343,219

 
$
318,414

 
$
—

 
$
—

 
$
343,219

 
$
318,414

 
 
 
 
 
 
 
 
 
 
 
 
 
Funded ratio
 
96.9
%
 
94.6
%
 
—
%
 
—
%
 
88.9
%
 
87.3
%
Funded status and net accrued pension benefit cost
 
$
(10,834
)
 
$
(18,234
)
 
$
(31,967
)
 
$
(28,161
)
 
$
(42,801
)
 
$
(46,395
)


The current portion of the pension liability reflects the amount of expected benefit payments that are greater than the plan assets on a plan-by-plan basis. The net accrued pension benefit liability at December 31 of the respective year-ends were included in the Consolidated Balance Sheets as follows:
December 31,
(dollars in thousands)
 
2017
 
2016
Pension asset
 
$
2,939

 
$
—

Pension liability (current portion)
 
(2,185
)
 
(2,461
)
Pension liability
 
(43,555
)
 
(43,934
)
Net accrued pension liability
 
$
(42,801
)
 
$
(46,395
)


The pretax amounts recognized in accumulated other comprehensive loss as of December 31, 2017 and 2016, are as follows:
Year ended December 31,
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Net actuarial loss
 
$
98,228

 
$
105,830

 
$
12,378

 
$
11,077

 
$
110,606

 
$
116,907

Prior service cost (credit)
 
1

 
237

 
(2,636
)
 
(2,704
)
 
(2,635
)
 
(2,467
)
Total cost
 
$
98,229

 
$
106,067

 
$
9,742

 
$
8,373

 
$
107,971

 
$
114,440



The pretax amounts in accumulated other comprehensive loss as of December 31, 2017, that are expected to be recognized as components of net periodic benefit cost during 2018 are as follows:
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
Net actuarial loss
 
$
6,546

 
$
605

 
$
7,151

Prior service cost (credit)
 
1

 
(195
)
 
(194
)
Total cost
 
$
6,547

 
$
410

 
$
6,957



Estimated contributions for 2018, as well as, contributions made in 2017 and 2016 to the pension plans are as follows:
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
Estimated contributions in 2018
 
$
131

 
$
2,148

 
$
2,279

Contributions made in 2017
 
$
499

 
$
2,651

 
$
3,150

Contributions made in 2016
 
$
259

 
$
3,276

 
$
3,535



It is difficult to estimate future cash contributions to the pension plans, as such amounts are a function of actual investment returns, withdrawals from the plans, changes in interest rates and other factors uncertain at this time. It is possible that greater cash contributions may be required in 2018 than the amounts in the above table. Although a decline in market conditions, changes in current pension law and uncertainties regarding significant assumptions used in the actuarial valuations may have a material impact in future required contributions to our pension plans, we currently do not expect funding requirements to have a material adverse impact on current or future liquidity.

Pension benefit payment amounts are anticipated to be paid from the plans (including the SERP) as follows:
Year
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
2018
 
$
19,838

 
$
2,148

 
$
21,986

2019
 
$
19,765

 
$
2,007

 
$
21,772

2020
 
$
19,842

 
$
2,193

 
$
22,035

2021
 
$
20,304

 
$
2,558

 
$
22,862

2022
 
$
20,525

 
$
2,687

 
$
23,212

2023-2027
 
$
104,932

 
$
15,143

 
$
120,075



Accumulated Benefit Obligation in Excess of Plan Assets

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2017 and 2016 were as follows:
December 31,
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Projected benefit obligation
 
$
268,887

 
$
336,648

 
$
31,967

 
$
28,161

 
$
300,854

 
$
364,809

Accumulated benefit obligation
 
$
268,887

 
$
336,648

 
$
27,055

 
$
23,194

 
$
295,942

 
$
359,842

Fair value of plan assets
 
$
255,115

 
$
318,414

 
$
—

 
$
—

 
$
255,115

 
$
318,414



Plan Assets

Our investment strategy is to control and manage investment risk through diversification across asset classes and investment styles, within established target asset allocation ranges. The investment risk of the assets is limited by appropriate diversification both within and between asset classes. Assets are diversified among a mix of traditional investments in equity and fixed income instruments, as well as alternative investments including real estate and hedge funds. It would be anticipated that a modest allocation to short-term investments would exist within the plans, since each investment manager is likely to hold some short-term investments in the portfolio with the goal of ensuring that sufficient liquidity will be available to meet expected cash flow requirements.

Our investment valuation policy is to state the investments at fair value. All investments are valued at their respective net asset value (NAV) as a practical expedient and calculated by the Trustee, except for certain hedge fund investments valued at NAV. The real estate, equity securities and fixed income investments are held in a Group Trust which is valued at the unit prices established by the Trustee and are valued using NAV as a practical expedient. Underlying equity securities (including large and small cap domestic and international equities), for which market quotations are readily available, are valued at the last reported readily available sales price on their principal exchange on the valuation date or official close for certain markets. Fixed income investments are valued on a basis of valuations furnished by a trustee-approved pricing service, which determines valuations for normal institutional-size trading units of such securities which are generally recognized at fair value as determined in good faith by the Trustee. The fair value of investments in real estate funds is based on valuation of the fund as determined by periodic appraisals of the underlying investments owned by the respective fund. Investments in registered investment companies are valued at quoted market prices. Collective pooled funds, if any, are recorded using NAV practical expedients. Short-term investments are valued at their respective NAV and have no redemption restrictions. The hedge fund investments using NAV as a practical expedient are valued by using estimated month-end NAV and performance numbers provided by the fund administrator. The Plan is required to provide a month’s advance written notice to liquidate its entire share in the Group Trust. Certain investments in the hedge funds can only be liquidated on either a quarterly or semi-annual basis, require advance notification and are subject to audit holdback provisions.

All investments measured at NAV as a practical expedient for fair value have been excluded from the fair value hierarchy, in accordance with U.S. GAAP. The table below presents our U.S. pension plan assets at fair value.
December 31,
(dollars in thousands)
 
Measured at NAV as a practical expedient
 
Target Allocation
 
2017
 
2016
 
2018
Short-term investments
 
$
8,061

 
$
8,766

 
3
%
Real estate
 
16,390

 
15,812

 
5
%
Equity securities
 
156,434

 
148,302

 
45
%
Debt securities
 
125,671

 
96,658

 
37
%
Hedge funds
 
36,663

(1) 
48,876

 
10
%
Total
 
$
343,219

 
$
318,414

 
100
%

_________________________
(1) Includes $9.1 million of hedge funds valued daily at NAV which is considered to be a Level 2 investment in the fair value hierarchy. See note 14 for discussion of the fair value hierarchy.