XML 85 R24.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Employee Benefit Obligations
12 Months Ended
Dec. 31, 2019
Employee Benefit Obligations  
Employee Benefit Obligations

17. Employee Benefit Obligations

December 31,

December 31,

($ in millions)

2019

    

2018

Underfunded defined benefit pension liabilities

$

918

$

954

Less: Current portion

(24)

(25)

Long-term defined benefit pension liabilities

894

929

Long-term retiree medical liabilities

156

157

Deferred compensation plans

362

291

Other

74

78

$

1,486

$

1,455

The company’s defined benefit plans for salaried employees, as well as those for hourly employees in Sweden, Switzerland, the U.K. and Ireland, provide pension benefits based on employee compensation and years of service. Plans for North American hourly employees provide benefits based on fixed rates for each year of service. While the German, Swedish and certain U.S. plans are not funded, the company maintains liabilities, and annual additions to such liabilities are generally tax-deductible. With the exception of the unfunded German, Swedish and certain U.S. plans, the company’s policy is to fund the defined benefit plans in amounts at least sufficient to satisfy statutory funding requirements, taking into consideration deductibility under existing tax laws and regulations.

In October 2018, the U.K. High Court passed a judgment that certain pension calculations needed to be adjusted to comply with gender discrimination legislation. The judgment specifically related to the calculation of guaranteed minimum pensions for U.K. defined benefit pension schemes that contracted out of an element of the state pension system between May 1990 and April 1997. The Ball U.K. Pension Plan was affected by this judgment and hence a calculation of the impact of the required equalization was carried out as of the date of the judgment. The effect was an increase in the pension obligation, which reduced the over-funded position by $52 million. This adjustment was accounted for as a prior service cost and initially recorded in accumulated other comprehensive earnings (loss) and it will be amortized to the consolidated statement of earnings over the average life expectancy of plan participants

Defined Benefit Pension Plans

Amounts recognized in the consolidated balance sheets for the funded status of the company’s defined benefit pension plans consisted of:

December 31,

2019

2018

($ in millions)

    

U.S.

    

Foreign

    

Total

    

U.S.

    

Foreign

    

Total

Long-term pension asset

$

$

437

$

437

$

$

559

$

559

Defined benefit pension liabilities (a)

(647)

(271)

(918)

(678)

(276)

(954)

Funded status

$

(647)

$

166

$

(481)

$

(678)

$

283

$

(395)

(a)Included is an unfunded, non-qualified U.S. plan obligation of $32 million at December 31, 2019, that has been annuitized with a corresponding asset of $27 million ($3 million in other current assets and $24 million in other assets). At December 31, 2018, the unfunded non-qualified U.S. plan obligation of $30 million was annuitized with a corresponding asset of $30 million ($3 million in other current assets and $27 million in other assets).

An analysis of the change in benefit accounts for 2019 and 2018 follows:

December 31,

2019

2018

($ in millions)

    

U.S.

    

Foreign

    

Total

    

U.S.

    

Foreign

    

Total

Change in projected benefit obligation:

Benefit obligation at prior year end

$

2,579

$

2,991

$

5,570

$

3,061

$

3,432

$

6,493

Service cost

50

11

61

51

14

65

Interest cost

101

72

173

99

72

171

Benefits paid

(205)

(191)

(396)

(191)

(194)

(385)

Net actuarial (gains) losses

324

391

715

(189)

(210)

(399)

Curtailments and settlements including special termination benefits

(34)

(a)

(34)

(252)

(a)

(252)

Plan amendments

52

52

Other

1

1

2

2

Effect of exchange rates

107

107

(177)

(177)

Benefit obligation at year end

2,849

3,348

6,197

2,579

2,991

5,570

Change in plan assets:

Fair value of assets at prior year end

1,901

3,274

5,175

2,420

3,632

6,052

Actual return on plan assets

313

311

624

(119)

3

(116)

Employer contributions

188

4

192

32

6

38

Contributions to unfunded plans

6

18

24

7

20

27

Benefits paid

(205)

(191)

(396)

(191)

(194)

(385)

Curtailments and settlements including special termination benefits

(34)

(a)

(34)

(256)

(a)

(256)

Other

(1)

1

8

2

10

Effect of exchange rates

131

131

(195)

(195)

Fair value of assets at end of year

2,202

3,514

5,716

1,901

3,274

5,175

Funded status

$

(647)

$

166

$

(481)

$

(678)

$

283

$

(395)

(a)Includes the purchase of non-participating group annuity contracts discussed below.

The company’s German, Swedish and certain U.S. plans are unfunded and the liabilities are included in the company’s consolidated balance sheets. Benefits are paid directly by the company to the participants.

Amounts recognized in accumulated other comprehensive (earnings) loss, including other postemployment benefits, consisted of:

December 31,

2019

2018

($ in millions)

    

U.S.

    

Foreign

    

Total

    

U.S.

    

Foreign

    

Total

Net actuarial (loss) gain

$

(683)

$

(31)

$

(714)

$

(563)

$

140

$

(423)

Net prior service (cost) credit

15

(49)

(34)

16

(50)

(34)

Tax effect and currency exchange rates

174

16

190

216

(36)

180

$

(494)

$

(64)

$

(558)

$

(331)

$

54

$

(277)

The accumulated benefit obligation for all U.S. defined benefit pension plans was $2,769 million and $2,519 million at December 31, 2019 and 2018, respectively. The accumulated benefit obligation for all foreign defined benefit pension plans was $3,345 million and $2,988 million at December 31, 2019 and 2018, respectively. Following is the information for defined benefit plans with an accumulated benefit obligation in excess of plan assets:

December 31,

2019

2018

($ in millions)

    

U.S.

    

Foreign

    

Total

    

U.S.

    

Foreign

    

Total

Projected benefit obligation

$

2,849

$

328

$

3,177

$

2,579

$

354

$

2,933

Accumulated benefit obligation

2,769

324

3,093

2,519

351

2,870

Fair value of plan assets (a)

2,202

57

2,259

1,901

79

1,980

(a)The German, Swedish and certain U.S. plans are unfunded and, therefore, there is no fair value of plan assets associated with these plans.

Components of net periodic benefit cost were as follows:

Years Ended December 31,

2019

2018

 

2017

($ in millions)

    

U.S.

    

Foreign

    

Total

    

U.S.

    

Foreign

    

Total

U.S.

    

Foreign

    

Total

Ball-sponsored plans:

Service cost

$

50

$

11

$

61

$

51

$

14

$

65

$

49

$

17

$

66

Interest cost

101

72

173

99

72

171

124

92

216

Expected return on plan assets

(116)

(109)

(225)

(108)

(108)

(216)

(126)

(110)

(236)

Amortization of prior service cost

1

3

4

2

2

2

2

Recognized net actuarial loss

22

4

26

33

5

38

34

5

39

Settlement losses

8

8

36

36

47

(1)

46

Net periodic benefit cost for Ball sponsored plans

58

(11)

47

113

(17)

96

130

3

133

Net periodic benefit cost for multi-employer plans

1

1

2

2

2

2

Total net periodic benefit cost

$

59

$

(11)

$

48

$

115

$

(17)

$

98

$

132

$

3

$

135

Ball completed the purchase of non-participating group annuity contracts that were transferred to an insurance company for the company’s Canadian pension benefit obligations in 2019 and the company’s U.S. pension benefit obligations in 2018 and 2017, totaling approximately $32 million in 2019, $176 million in 2018 and $224 million in 2017. The 2019 annuity contract purchase settled Ball’s Canadian defined benefit pension obligation in full. The purchase of the annuity contracts triggered settlement accounting in each year. Regular lump sums paid to certain retirees are also included in the total settlement amounts. These transactions resulted in the recognition of settlement losses recorded in business consolidation and other activities of $8 million in 2019, $36 million in 2018 and $44 million in 2017. The company’s pension obligations were remeasured during 2018 and 2017 for the impacted plans.

Non-service pension income of $22 million in 2019, income of $5 million in 2018 and expense of $21 million in 2017, respectively, is included in selling, general, and administrative (SG&A) expenses. Due to immateriality, the amount in 2017 was not retrospectively adjusted as required by a newly adopted accounting standard for pension and postretirement benefit costs.

The estimated actuarial net loss and net prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive earnings (loss) into net periodic benefit cost during 2020 are a loss of $41 million and a cost of $1 million, respectively.

Contributions to the company’s defined benefit pension plans are expected to be approximately $90 million in 2020. This estimate may change based on changes in the Pension Protection Act, actual plan asset performance and available company cash flow, among other factors. Benefit payments related to the plans are expected to be approximately $393 million, $361 million, $366 million, $370 million and $373 million for the years ending December 31, 2020 through 2024, respectively, and approximately $1.9 billion for the years ending December 31, 2025 through 2029.

Weighted average assumptions used to determine benefit obligations for the company’s significant U.S. plans at December 31 were:

U.S.

    

2019

2018

2017

    

Discount rate

3.35

%  

4.41

%  

3.72

%  

Rate of compensation increase

4.03

%  

4.02

%  

4.15

%  

Weighted average assumptions used to determine benefit obligations for the company’s significant European plans at December 31 were:

U.K.

Germany

    

2019

2018

2017

    

2019

2018

2017

 

Discount rate

2.07

%  

2.90

%  

2.55

%  

1.11

%  

1.74

%  

1.68

%

Rate of compensation increase

3.50

%  

3.50

%  

4.41

%  

2.50

%  

2.50

%  

2.50

%

Pension increase

3.22

%  

3.45

%  

3.41

%  

1.50

%  

1.50

%  

1.50

%

Weighted average assumptions used to determine net periodic benefit cost for the company’s significant U.S. plans for the years ended December 31 were:

U.S.

    

2019

2018

2017

    

Discount rate

4.41

%  

3.72

%  

4.27

%  

Rate of compensation increase

4.02

%  

4.15

%  

4.14

%  

Expected long-term rate of return on assets

5.58

%  

5.14

%  

5.50

%  

Weighted average assumptions used to determine net periodic benefit cost for the company’s significant European plans for the years ended December 31 were as follows:

U.K.

Germany

    

2019

2018

2017

    

2019

2018

2017

 

Discount rate

2.90

%  

2.55

%  

2.70

%  

1.74

1.68

1.52

%

Rate of compensation increase

3.50

%  

4.41

%  

4.30

%  

2.50

%  

2.50

%  

2.50

%

Pension increase

3.45

%  

3.41

%  

3.41

%  

1.50

%  

1.50

%  

1.50

%

Expected long-term rate of return on assets

3.40

%  

3.05

%  

3.20

%  

N/A

N/A

N/A

The discount and compensation increase rates used above to determine the December 31, 2019, benefit obligations will be used to determine net periodic benefit cost for 2020. A reduction of the expected return on pension assets assumption by one quarter of a percentage point would result in an approximate $14 million increase in 2020 pension expense, while a quarter of a percentage point reduction in the discount rate applied to the pension liability would result in an estimated increase of pension expense of approximately $1 million in 2020.

Accounting for pensions and postretirement benefit plans requires that the benefit obligation be discounted to reflect the time value of money at the measurement date and the rates of return currently available on high-quality, fixed-income securities whose cash flows (via coupons and maturities) match the timing and amount of future benefit plan payments. Other factors used in measuring the obligation include compensation increases, health care cost increases, future rates of inflation, mortality and employee turnover.

Actual results may differ from the company’s actuarial assumptions, which may have an impact on the amount of reported expense or liability for pensions or postretirement benefits. In 2019, the company recorded pension expense of $47 million for Ball-sponsored plans, including $8 million of settlement charges and currently expects its 2020 pension expense to be $49 million, using foreign currency exchange rates in effect at December 31, 2019. The expected increase in pension expense, excluding settlement charges, is primarily the result of increased service cost from growth in employee numbers and higher amortization of actuarial losses.

For 2017, the company measured service and interest costs utilizing the expected or hypothetical payments for each plan. The expected or hypothetical payments were discounted using the spot rates from the actuarial yield curve for each plan to obtain a single equivalent discount rate that is appropriate for the duration of each plan. For 2018 and 2019, the company measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The company believes this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change in estimate does not affect the measurement of plan obligations nor the funded status of the plans.

The assumption related to the expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested to provide for pension benefits over the life of the plans. The assumption was based upon Ball’s pension plan asset allocations, investment strategies and the views of its investment managers, consultants and other large pension plan sponsors. Some reliance was placed on the historical and expected asset returns of the company’s plans. An asset-allocation optimization model was used to project future asset returns using simulation and asset class correlation. The analysis included expected future risk premiums, forward-looking return expectations derived from the yield on long-term bonds and the price earnings ratios of major stock market indexes, expected inflation levels and real risk-free interest rate assumptions and the fund’s expected asset allocation.

The expected long-term rates of return on assets were calculated by applying the expected rate of return to a market-related value of plan assets at the beginning of the year, adjusted for the weighted average expected contributions and benefit payments. The market-related value of plan assets used to calculate the expected return was $5,375 million for 2019, $6,052 million for 2018 and $6,121 million for 2017.

Defined Benefit Pension Plan Assets

Policies and Allocation Information

Pension investment committees or scheme trustees of the company and its relevant subsidiaries establish investment policies and strategies for the company’s pension plan assets. The investment policies and strategies include the following common themes to: (1) provide for long-term growth of principal without undue exposure to risk, (2) minimize contributions to the plans, (3) minimize and stabilize pension expense and (4) achieve a rate of return above the market average for each asset class over the long term. The pension investment committees are required to regularly, but no less frequently than annually, review asset mix and asset performance, as well as the performance of the investment managers. Based on their reviews, which are generally conducted quarterly, investment policies and strategies are revised as appropriate.

Target asset allocations are set using a minimum and maximum range for each asset category as a percent of the total funds’ market value. Following are the target asset allocations established as of December 31, 2019:

    

U.S.

Legacy Ball

Legacy Rexam

U.K.

Cash and cash equivalents

0-10

%

0-10

%

60-100

%(c)

Equity securities

10-75

%(a)  

10-25

%(d)

0-20

%

Fixed income securities

25-70

%(b)  

75-90

%

60-100

%(c)

Alternative investments

0-35

%

%

0-20

%

(a)Equity securities may consist of: (1) up to 25 percent large cap equities, (2) up to 10 percent mid cap equities, (3) up to 10 percent small cap equities, (4) up to 35 percent foreign equities and (5) up to 35 percent special equities. Holdings in Ball Corporation common stock or Ball bonds cannot exceed 5 percent of the trust’s assets.
(b)Debt securities may include up to 10 percent non-investment grade bonds, up to 10 percent bank loans and up to 15 percent international bonds.
(c)The combined target allocation for fixed income securities and cash and cash equivalents is 60 to 100 percent.
(d)Equity securities may consist of: (1) up to 20 percent domestic equities, (2) up to 10 percent international equities, and (3) up to 10 percent private equities.

The actual weighted average asset allocations for Ball’s defined benefit pension plans, which individually were within the established targets for each country for that year, were as follows at December 31:

    

2019

    

2018

 

Cash and cash equivalents

2

%  

2

%

Equity securities

17

%  

28

%

Fixed income securities

79

%  

69

%

Alternative investments

2

%  

1

%

100

%  

100

%

Fair Value Measurements of Pension Plan Assets

Following is a description of the valuation methodologies used for pension assets measured at fair value:

Cash and cash equivalents: Consist of cash on deposit with brokers and short-term U.S. Treasury money market funds with a maturity of less than 90 days and are shown net of receivables and payables for securities traded at period end but not yet settled. All cash and cash equivalents are stated at cost, which approximates fair value.

Corporate equity securities: Valued at the closing price reported on the active market on which the individual security is traded.

U.S. government and agency securities: Valued using the pricing of similar agency issues, live trading feeds from several vendors and benchmark yields.

Corporate bonds and notes: Valued using market inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data including market research publications. Inputs may be prioritized differently at certain times based on market conditions.

Commingled funds: The shares held are valued at their net asset value (NAV) at year end.

NAV practical expedient: Includes certain commingled fixed income and equity funds as well as limited partnership and other funds. Certain of the partnership investments receive fair market valuations on a quarterly basis. Certain other commingled funds and partnerships invest in market-traded securities, both on a long and short basis. These investments are valued using quoted market prices.

The preceding methods described may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, although the company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of pension assets and liabilities and their placement within the fair value hierarchy levels. The fair value hierarchy levels assigned to the company’s defined benefit plan assets are summarized in the tables below:

December 31, 2019

($ in millions)

    

Level 1

    

Level 2

    

Total

U.S. pension assets, at fair value:

Cash and cash equivalents

$

$

99

$

99

Corporate equity securities:

Consumer discretionary

83

83

Financials

64

64

Healthcare

63

63

Industrials

76

76

Information technology

111

111

Utilities

48

48

Other

18

18

U.S. government, agency and asset-backed securities:

FHLMC mortgage backed securities

42

42

FNMA mortgage backed securities

73

73

Municipal bonds

27

27

Treasury bonds

69

69

Other

45

45

Corporate bonds and notes:

Communications

79

79

Consumer discretionary

99

99

Consumer staples

100

100

Financials

261

261

Healthcare

91

91

Industrials

101

101

Information technology

78

78

Oil and gas

91

91

Private placement

62

62

Utilities

101

101

Other

50

50

Commingled funds

22

81

103

Total level 1 and level 2

$

554

$

1,480

2,034

Other investments measured at net asset value (a)

168

Total assets

$

2,202

(a)Certain investments measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified within the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the change in plan assets reconciliation.

December 31, 2018

($ in millions)

    

Level 1

    

Level 2

    

Total

U.S. pension assets, at fair value:

Cash and cash equivalents

$

1

$

97

$

98

Corporate equity securities:

Consumer discretionary

61

61

Financials

54

54

Healthcare

49

49

Industrials

59

59

Information technology

73

73

Other

50

50

U.S. government and agency securities:

FHLMC mortgage backed securities

40

40

FNMA mortgage backed securities

65

65

Municipal bonds

52

52

Treasury bonds

45

45

Other

10

10

Corporate bonds and notes:

Communications

67

67

Consumer discretionary

80

80

Consumer staples

41

41

Financials

245

245

Healthcare

88

88

Industrials

100

100

Information technology

54

54

Oil and gas

103

103

Private placement

69

69

Utilities

88

88

Other

60

60

Commingled funds

18

72

90

Total level 1 and level 2

$

410

$

1,331

1,741

Other investments measured at net asset value (a)

160

Total assets

$

1,901

(a)Certain investments measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented within this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the change in plan assets reconciliation.

December 31,

($ in millions)

2019

2018

U.K. pension assets, at fair value:

Cash and cash equivalents

$

40

$

20

Equity commingled funds

162

U.K. government bonds

2,576

2,229

Other

28

33

Total level 1

2,806

2,282

Level 2: Investment funds - corporate bonds

478

Other investments measured at net asset value (a)

173

913

Total assets

$

3,457

$

3,195

(a)Certain investments measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified within the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the change in plan assets reconciliation.

Other Postretirement Benefits

The company sponsors postretirement health care and life insurance plans for certain U.S. and Canadian employees. Also, postretirement health care and life insurance plans were acquired as part of the Rexam acquisition. Employees may also qualify for long-term disability, medical and life insurance continuation and other postemployment benefits upon termination of active employment prior to retirement. All of the Ball-sponsored postretirement health care and life insurance plans are unfunded and, with the exception of life insurance benefits, are self-insured. The benefit obligation associated with these plans was $171 million and $174 million as of December 31, 2019 and 2018, respectively, including current portions of $15 million and $17 million. Net periodic cost associated with these plans was income of $3 million, income of $2 million and expense of $6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Weighted average assumptions used to determine benefit obligations for the other postretirement benefit plans at December 31 were as follows:

U.S.

Canada

    

2019

2018

2017

    

2019

2018

2017

    

Discount rate

3.24

%  

4.35

%  

3.64

%  

3.00

%  

3.50

%  

3.25

%  

Rate of compensation increase (a)

4.50

%  

4.50

%  

4.50

%  

N/A

N/A

N/A

(a)The rate of compensation increase is not applicable for certain U.S. other postretirement benefit plans.

Weighted average assumptions used to determine net periodic benefit cost for the other postretirement benefit plans at December 31 were:

U.S.

Canada

    

2019

2018

2017

    

2019

2018

2017

    

Discount rate

4.35

%  

3.64

%  

4.16

%  

3.50

%  

3.25

%  

3.50

%  

Rate of compensation increase (a)

4.50

%  

4.50

%  

4.50

%  

N/A

N/A

N/A

(a)The rate of compensation increase is not applicable for certain U.S. other postretirement benefit plans.

Deferred Compensation Plans

Certain management employees may elect to defer the payment of all or a portion of their annual incentive compensation into the company’s deferred compensation plan and/or the company’s deferred compensation stock plan. The employee becomes a general unsecured creditor of the company with respect to any amounts deferred.