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Employee benefit plans

12 Months Ended

Dec. 31, 2019

Retirement plans and retiree health and life insurance plans

The Company provides non-contributory defined benefit pension plans for certain of its employees in the United States, Mexico, Belgium, Germany, Greece, France, and Turkey. The Company also sponsors contributory defined benefit pension plans covering certain of its employees in the United Kingdom, Canada and the Netherlands, and provides postretirement healthcare and life insurance benefits to a limited number of its retirees and their dependents in the United States and Canada, based on certain age and/or service eligibility requirements.

The Company froze participation in its U.S. qualified defined benefit pension plan for newly hired salaried and non-union hourly employees effective December 31, 2003. To replace this benefit, the Company provides non-union U.S. employees hired on or after January 1, 2004, with an annual contribution, called the Sonoco Retirement Contribution (SRC), to their participant accounts in the Sonoco Retirement and Savings Plan.

On February 4, 2009, the U.S. qualified defined benefit pension plan was further amended to freeze plan benefits for all active, non-union participants effective December 31, 2018. Remaining active participants in the U.S. qualified plan became eligible for SRC contributions effective January 1, 2019.

The components of net periodic benefit cost include the following:


	2019		2018		2017
Retirement Plans
Service cost	$	3,968	$	18,652	$	18,543
Interest cost	57,348		54,970		55,873
Expected return on plan assets	(65,143)		(91,021)		(81,212)

Amortization of prior service cost	1,022		916		910
Amortization of net actuarial loss	30,681		37,391		39,209
Effect of settlement loss	2,377		730		32,761
Effect of curtailment loss	—		256		—
Net periodic benefit cost	$	30,253	$	21,894	$	66,084
Retiree Health and Life Insurance Plans
Service cost	$	308	$	297	$	313
Interest cost	467		452		463
Expected return on plan assets	(718)		(1,135)		(1,636)
Amortization of prior service credit	(498)		(498)		(499)
Amortization of net actuarial gain	(823)		(1,120)		(759)
Net periodic benefit income	$	(1,264)	$	(2,004)	$	(2,118)

The following tables set forth the Plans’ obligations and assets at December 31:


	Retirement Plans						Retiree Health and Life Insurance Plans
	2019		2018		2019		2018
Change in Benefit Obligation
Benefit obligation at January 1	$	1,684,277	$	1,837,938	$	14,048	$	15,691
Service cost	3,968		18,652		308		297
Interest cost	57,348		54,970		467		452
Plan participant contributions	224		429		680		620
Plan amendments	1,343		155		—		—
Actuarial loss/(gain)	316,547		(115,153)		589		(398)
Benefits paid	(92,636)		(93,053)		(1,621)		(2,569)
Impact of foreign exchange rates	11,952		(21,636)		24		(45)
Effect of settlements	(8,101)		(2,210)		—		—
Effect of curtailments	—		(253)		—		—
Acquisitions	1,275		4,438		—		—

Benefit obligation at December 31	$	1,976,197	$	1,684,277	$	14,495	$	14,048


	Retirement Plans						Retiree Health and Life Insurance Plans
	2019		2018		2019		2018
Change in Plan Assets
Fair value of plan assets at January 1	$	1,318,832	$	1,494,713	$	10,919	$	27,177
Actual return on plan assets	242,823		(78,447)		2,327		(915)
Company contributions	215,979		24,524		682		(13,302)
Plan participant contributions	224		429		680		620
Benefits paid	(92,636)		(93,053)		(1,621)		(2,569)
Impact of foreign exchange rates	12,869		(22,380)		—		—
Effect of settlements	(8,101)		(2,210)		—		—
Expenses paid	(7,084)		(6,670)		(106)		(92)
Acquisitions	614		1,926		—		—
Fair value of plan assets at December 31	$	1,683,520	$	1,318,832	$	12,881	$	10,919
Funded Status of the Plans	$	(292,677)	$	(365,445)	$	(1,614)	$	(3,129)

The negative contribution reported in 2018 for the Company's Retiree Health and Life Insurance Plans reflects $14,025 of cash withdrawn from a collectively bargained VEBA in 2018 pursuant to an IRS private letter ruling dated April 1, 2018, permitting the Company to amend the VEBA to provide benefits to active, non-collectively bargained employees in addition to retired collectively bargained employees.


	Retirement Plans						Retiree Health and Life Insurance Plans
	2019		2018		2019		2018
Total Recognized Amounts in the Consolidated Balance Sheets
Noncurrent assets	$	24,196	$	18,520	$	—	$	—
Current liabilities	(13,913)		(12,935)		(784)		(983)
Noncurrent liabilities	(302,960)		(371,030)		(830)		(2,146)
Net liability	$	(292,677)	$	(365,445)	$	(1,614)	$	(3,129)

Items not yet recognized as a component of net periodic pension cost that are included in Accumulated Other Comprehensive Loss (Income) as of December 31, 2019 and 2018, are as follows:


	Retirement Plans						Retiree Health and Life Insurance Plans
	2019		2018		2019		2018
Net actuarial loss/(gain)	$	759,610	$	646,254	$	(7,055)	$	(6,964)
Prior service cost/(credit)	6,159		5,514		(279)		(777)

	$	765,769	$	651,768	$	(7,334)	$	(7,741)

The amounts recognized in Other Comprehensive Loss/(Income) include the following:


	Retirement Plans										Retiree Health and Life Insurance Plans
	2019		2018		2017		2019		2018		2017
Adjustments arising during the period:
Net actuarial loss/(gain)	$	146,414	$	58,544	$	(10,732)	$	(914)	$	1,738	$	(3,525)
Prior service cost/(credit)	1,667		2,906		639		—		—		—
Net settlements/curtailments	(2,377)		(986)		(32,761)		—		—		—
Reversal of amortization:
Net actuarial (loss)/gain	(30,681)		(37,391)		(39,209)		823		1,120		759
Prior service (cost)/credit	(1,022)		(916)		(910)		498		498		499

Total recognized in other comprehensive loss/(income)	$	114,001	$	22,157	$	(82,973)	$	407	$	3,356	$	(2,267)
Total recognized in net periodic benefit cost and other comprehensive loss/(income)	$	144,254	$	44,051	$	(16,889)	$	(857)	$	1,352	$	(4,385)

Of the amounts included in Accumulated Other Comprehensive Loss/(Income) as of December 31, 2019, the portions the Company expects to recognize as components of net periodic benefit cost in 2020 are as follows:


	Retirement Plans		Retiree Health and Life Insurance Plans
Net actuarial loss/(gain)	$	22,486	$	(808)
Prior service cost/(credit)	1,037		(279)

	$	23,523	$	(1,087)

The accumulated benefit obligation for all defined benefit plans was $1,959,010 and $1,668,396 at December 31, 2019 and 2018, respectively.

The projected benefit obligation (PBO), accumulated benefit obligation (ABO) and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were, $1,658,018, $1,651,740 and $1,341,556, respectively, as of December 31, 2019, and $1,397,040, $1,391,129 and $1,013,173, respectively, as of December 31, 2018.

The following table sets forth the Company’s projected benefit payments for the next ten years:


Year	Retirement Plans		Retiree Health and Life Insurance Plans
2020	$	96,448	$	1,344
2021	$	93,436	$	1,305
2022	$	94,786	$	1,269
2023	$	95,830	$	1,230
2024	$	97,372	$	1,173
2025-2029	$	508,354	$	5,344

Plan termination, settlements, changes and amendments

In July 2019, the Company's Board of Directors approved a resolution to terminate the Sonoco Pension Plan for Inactive Participants (the "Inactive Plan"), a tax-qualified defined benefit plan, effective September 30, 2019. Upon approval from the Pension Benefit Guaranty Corporation, and following completion of a limited lump sum offering, the Company is expected to settle all remaining liabilities under the Inactive Plan through the purchase of annuities. The Company anticipates making additional contributions to the Inactive Plan of approximately $150,000 in late 2020 or early 2021 in order to be fully funded on a termination basis at the time of the annuity purchase. However, the actual amount of the Company's long-term liability when it is transferred, and the related cash contribution requirement, will depend upon the nature and timing of participant settlements, as well as prevailing market conditions. Non-cash, pretax settlement charges totaling approximately $600,000 are expected to be recognized beginning in 2020 as the lump sum payouts and annuity purchases are made. The termination of the Inactive Plan will apply to participants who have separated service from Sonoco and to non-union active employees who no longer accrue pension benefits. There is no change in the cumulative benefit previously earned by the approximately 11,000 impacted participants as a result of these actions, and the Company will continue to manage and support the Active Plan, comprised of approximately 600 active participants who continue to accrue benefits in accordance with a flat-dollar multiplier formula.

Settlement charges totaling $2,377 and $730 were recognized in 2019 and 2018, respectively, primarily as a result of payments made to certain participants of the Company's Canadian pension plan who elected a lump-sum distribution option upon retirement.

In February 2017, the Company initiated a program to settle a portion of the projected benefit obligation (PBO) relating to terminated vested participants in the U.S. qualified retirement plans through either a single, lump-sum payment or the purchase of an annuity. The terminated vested population comprised approximately 15% of the beginning of year PBO of these plans. The Company successfully settled approximately 47% of the PBO for the terminated vested plan participants. As a result of these and other smaller settlements, the Company recognized non-cash settlement charges of $32,761 in 2017. All settlement payments were funded from plan assets and did not require the Company to make any additional cash contributions.

Assumptions

The following tables set forth the major actuarial assumptions used in determining the benefit obligation and net periodic cost:


Weighted-average assumptions used to determine benefit obligations at December 31	U.S. Retirement Plans		U.S. Retiree Health and Life Insurance Plans		Foreign Plans
Discount Rate
2019	2.87	%	2.89	%	2.28	%
2018	4.24	%	4.02	%	3.11	%
Rate of Compensation Increase
2019	—	%	3.04	%	3.37	%
2018	—	%	3.06	%	3.65	%


Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31	U.S. Retirement Plans		U.S. Retiree Health and Life Insurance Plans		Foreign Plans
Discount Rate
2019	4.24	%	4.02	%	3.11	%
2018	3.59	%	3.36	%	2.78	%
2017	4.12	%	3.70	%	2.95	%
Expected Long-term Rate of Return
2019	6.63	%	6.73	%	4.62	%
2018	6.87	%	6.95	%	4.84	%
2017	6.86	%	6.98	%	4.52	%
Rate of Compensation Increase
2019	—	%	3.06	%	3.65	%
2018	3.40	%	3.28	%	3.62	%
2017	3.60	%	3.32	%	3.65	%

The Company adjusts its discount rates at the end of each fiscal year based on yield curves of high-quality debt instruments over durations that match the expected benefit payouts of each plan. The discount rate used to calculate the benefit obligation and funded status of the Inactive Plan at December 31, 2019, was determined on a plan termination basis. The expected long-term rate of return assumption is based on the Company’s current and expected future portfolio mix by asset class, and expected nominal returns of these asset classes using an economic “building block” approach. Expectations for inflation and real interest rates are developed and various risk premiums are assigned to each asset class based primarily on historical performance. The expected long-term rate of return also gives consideration to the expected level of outperformance to be achieved on that portion of the Company’s investment portfolio under active management. The assumed rate of compensation increase reflects historical experience and management’s expectations regarding future salary and incentive increases.

Medical trends

The U.S. Retiree Health and Life Insurance Plan makes up approximately 96% of the Retiree Health liability. Therefore, the following information relates to the U.S. plan only.


Healthcare Cost Trend Rate	Pre-age 65		Post-age 65
2019	6.25	%	6.25	%
2018	6.50	%	6.50	%
Ultimate Trend Rate	Pre-age 65		Post-age 65
2019	4.50	%	4.50	%
2018	4.50	%	4.50	%
Year at which the Rate Reaches the Ultimate Trend Rate	Pre-age 65		Post-age 65
2019	2026		2026
2018	2026		2026

Increasing the assumed trend rate for healthcare costs by one percentage point would increase the accumulated postretirement benefit obligation (the APBO) and total service and interest cost component approximately $124 and $12, respectively. Decreasing the assumed trend rate for healthcare costs by one percentage point would decrease the APBO and total service and interest cost component approximately $115 and $11, respectively. Based on amendments to the U.S. plan approved in 1999, which became effective in 2003, cost increases borne by the Company are limited to the Urban CPI, as defined.

Retirement plan assets

The following table sets forth the weighted-average asset allocations of the Company’s retirement plans at 2019 and 2018, by asset category.


Asset Category			U.S.				U.K.				Canada
Equity securities	2019		—	%			42.1	%			67.9	%
		2018			48.3	%			38.9	%			55.4	%
Debt securities	2019		91.6	%			57.3	%			31.6	%
		2018			38.4	%			60.5	%			44.0	%
Alternative	2019		5.7	%			—	%			—	%
		2018			13.3	%			—	%			—	%
Cash and short-term investments	2019		2.7	%			0.6	%			0.5	%
		2018			—	%			0.6	%			0.6	%
Total	2019		100.0	%			100.0	%			100.0	%
		2018			100.0	%			100.0	%			100.0	%

The Company employs a total-return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a desired level of risk. Alternative assets such as real estate funds, private equity funds and hedge funds may also be used to enhance expected long-term returns while improving portfolio diversification. Risk tolerance is established through consideration of plan liabilities, plan funded status and corporate financial condition. Investment risk is measured and monitored on an ongoing basis through periodic investment portfolio reviews and periodic asset/liability studies. The assets of the Company's U.S. pension plans were subject to de-risking measures during 2019 and reallocated to a more conservative mix of primarily fixed income investments pending the annuitization of the Inactive Plan expected in late 2020 or early 2021.

At December 31, 2019, postretirement benefit plan assets totaled $1,696,401, of which $1,322,822 were assets of the U.S. Defined Benefit Plans.

U.S. defined benefit plans

The Company completed separate asset/liability studies for both the Active Plan and Inactive Plan during 2011 and adopted investment guidelines for each. These guidelines established a dynamic de-risking framework for gradually shifting the allocation of assets to long-duration domestic fixed income from equity and other asset categories, as the relative funding ratio of each plan increased over time. Beginning in 2019, the Company accelerated the de-risking measures in its U.S. defined benefit plans by making voluntary contributions totaling $200,000 to the plans and by reallocating plan assets to a more conservative mix of primarily fixed income investments. Subsequent to these de-risking actions, the Inactive Plan was terminated effective September 30, 2019. The current target allocation (midpoint) for the Inactive Plan investment portfolio is: Debt Securities – 97% and Cash – 3%. The current target allocation (midpoint) for the Active Plan investment portfolio is: Debt Securities – 97% and Cash – 3%.

United Kingdom defined benefit plan

The equity investments consist of direct ownership and funds and are diversified among U.K. and international stocks of small and large capitalizations. The current target allocation (midpoint) for the investment portfolio is: Equity Securities – 42% and Debt Securities – 58%.

Canada defined benefit plan

The equity investments consist of direct ownership and funds and are diversified among Canadian and international stocks of primarily large capitalizations and short to intermediate duration corporate and government bonds. The current target allocation (midpoint) for the investment portfolio is: Equity Securities – 55%, Debt Securities – 44% and Cash – 1%.

Retiree health and life insurance plan assets

The following table sets forth the weighted-average asset allocations by asset category of the Company’s retiree health and life insurance plan.


Asset Category	2019	2018
Equity securities	—%	48.3%
Debt securities	91.6%	38.4%
Alternative	5.7%	13.3%
Cash	2.7%	—%
Total	100.0%	100.0%

Contributions

Based on current actuarial estimates, the Company anticipates that contributions to its defined benefit plans, excluding the Inactive Plan, will be approximately $25,000 in 2020. Contributions to the Inactive Plan of approximately $150,000 are expected to be made in late 2020 or early 2021 in order for the plan to be fully funded on a termination basis at the time of the annuity purchase. No assurances can be made, however, about funding requirements beyond 2020, as they will depend largely on actual investment returns, future actuarial assumptions, and timing of annuity purchases.

Sonoco Savings and Retirement Plan

The Sonoco Savings and Retirement Plan is a defined contribution retirement plan provided for certain of the Company’s U.S. employees. The plan is comprised of both an elective and non-elective component.

The elective component of the plan, which is designed to meet the requirements of section 401(k) of the Internal Revenue Code, allows participants to set aside a portion of their wages and salaries for retirement and encourages saving by matching a portion of their contributions with contributions from the Company. The plan provides for participant contributions of 1% to 100% of gross pay. Since January 1, 2010, the

Company has matched 50% on the first 4% of compensation contributed by the participant as pretax contributions which are immediately fully vested. The Company’s expenses related to the plan for 2019, 2018 and 2017 were approximately $13,400, $12,500 and $11,200, respectively.

The non-elective component of the plan, the Sonoco Retirement Contribution (SRC), is available to certain employees who are not currently active participants in the Company’s U.S. qualified defined benefit pension plan. The SRC provides for an annual Company contribution of 4% of all eligible pay plus 4% of eligible pay in excess of the Social Security wage base to eligible participant accounts. Participants are fully vested after three years of service or upon reaching age 55, if earlier. The Company’s expenses related to the plan for 2019, 2018 and 2017 were approximately $23,752, $14,995 and $14,540, respectively. Cash contributions to the SRC totaled $14,573, $14,151 and $14,066 in 2019, 2018 and 2017, respectively, and are expected to total approximately $23,000 in 2020.

Other plans

The Company also provides retirement and postretirement benefits to certain other non-U.S. employees through various Company-sponsored and local government sponsored defined contribution arrangements. For the most part, the liabilities related to these arrangements are funded in the period they arise. The Company’s expenses for these plans were not material for all years presented.