The Company and its subsidiaries sponsor a number of defined benefit pension plans, which cover eligible employees, including certain employees in foreign countries. These plans are generally noncontributory. Pension benefits earned are generally based on years of service and compensation during active employment. The cash contributions for the Company’s defined benefit pension plans were $10.8 million, $21.1 million and $120.7 million in 2015, 2014 and 2013, respectively.

The following tables summarize the net periodic benefit cost information and the related assumptions used to measure the net periodic benefit cost for the years ended December 31:



	U.S. Plans									International Plans
	2015			2014			2013			2015			2014			2013
Components of net periodic benefit cost:
Service cost	$	15.4		$	21.5		$	35.7		$	2.2		$	2.4		$	2.8
Interest cost	45.6			98.3			116.2			12.3			17.7			18.5
Expected return on plan assets	(62.6		)	(152.0		)	(207.6		)	(16.7		)	(23.7		)	(24.4		)
Amortization of prior service cost	2.8			3.5			4.5			0.1			0.1			—
Amortization of net actuarial loss	31.1			55.6			109.2			5.2			5.3			7.6
Curtailment	—			—			—			0.6			—			—
Settlement	456.4			32.7			—			4.8			0.8			7.2
Special termination benefits	—			—			—			0.6			—			—
Less: Discontinued operations	—			(8.0		)	(24.2		)	—			0.4			0.4
Net periodic benefit cost	$	488.7		$	51.6		$	33.8		$	9.1		$	3.0		$	12.1



Assumptions	2015		2014		2013
U.S. Plans:
Discount rate	3.98% to 4.64%		4.68% / 5.02%		4.00	%
Future compensation assumption	2.00% to 3.00%		2.00% to 3.00%		2.00% to 3.00%
Expected long-term return on plan assets	6.00	%	7.25	%	8.00	%
International Plans:
Discount rate	1.50% to 8.75%		3.25% to 9.75%		2.75% to 9.00%
Future compensation assumption	2.20% to 8.00%		2.30% to 8.00%		2.30% to 8.00%
Expected long-term return on plan assets	2.25% to 9.25%		3.00% to 8.50%		3.25% to 8.50%

In 2015, the Company entered into two agreements pursuant to which two of the Company's U.S. defined benefit pension plans purchased group annuity contracts from Prudential. The two group annuity contracts require Prudential to pay and administer future pension benefits for approximately 8,400 U.S. Timken retirees in the aggregate. The Company transferred a total of approximately $1.1 billion of its pension obligations and a total of approximately $1.2 billion of pension assets to Prudential in these transactions. In addition to the purchase of the group annuity contracts, the Company made lump-sum distributions of $37.2 million to new retirees in the U.S. The Company also entered into an agreement pursuant to which one of the Company's Canadian defined benefit pension plans purchased a group annuity contract from Canada Life. The group annuity contract requires Canada Life to pay and administer future pension benefits for approximately 40 Canadian retirees. As a result of the group annuity contracts, lump-sum distributions, as well as pension settlement and curtailment charges related to the Company's Canadian pension plans, the Company incurred total pension settlement and curtailment charges of $465.0 million, including professional fees of $2.6 million, in 2015.

In 2014, the Company incurred pension settlement charges of $33.7 million, including professional fees, primarily to settle approximately $110 million of the Company's pension obligations related to one of its defined benefit pension plans in the U.S. as a result of the lump sum distributions for 2014 retirements and certain deferred vested plan participants.

The discount rate assumption is based on current rates of high-quality long-term corporate bonds over the same period that benefit payments will be required to be made. The expected rate of return on plan assets assumption is based on the weighted-average expected return on the various asset classes in the plans’ portfolio. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance.

For expense purposes in 2015, the Company applied a discount rate of 4.20% for one month of 2015 and a discount rate of 3.98% for eleven months for one of its U.S. defined benefit pension plans due to the remeasurement of the defined benefit pension plan as a result of the purchase of a group annuity contract in January 2015. For expense purposes in 2015, the Company applied a discount rate of 4.20% for eleven months of 2015 and a discount rate of 4.64% for one month for another of its U.S. defined benefit pension plans as a result of a remeasurement of the defined benefit pension plan due to the purchase of a group annuity contract in November 2015. For expense purposes in 2016, the Company will apply a discount rate of 4.69% to its U.S. defined benefit pension plans.

For expense purposes in 2015, the Company applied an expected rate of return of 6.00% for the Company’s U.S. pension plan assets. For expense purposes in 2016, the Company will apply an expected rate of return on plan assets of 5.75%. The reduction in expected rate of return on plan assets was due to the Company's move to a greater investment in fixed-income debt securities offset by a reduction in equity securities in an effort to de-risk the assets and maintain its overfunded status on U.S. pension plans.

The following tables set forth the change in benefit obligation, change in plan assets, funded status and amounts recognized on the Consolidated Balance Sheets for the defined benefit pension plans as of December 31, 2015 and 2014:



	U.S. Plans						International Plans
	2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	1,703.9		$	2,642.4		$	415.7		$	491.1
Service cost	15.4			21.5			2.2			2.4
Interest cost	45.6			98.3			12.3			17.7
Amendments	—			—			—			0.3
Actuarial losses (gains)	68.8			239.6			(31.6		)	38.7
Employee contributions	—			—			—			0.3
International plan exchange rate change	—			—			(29.5		)	(29.5		)
Curtailment	—			—			0.5			—
Benefits paid	(100.9		)	(234.6		)	(17.6		)	(23.5		)
Special termination benefits	—			—			0.6			—
Settlements	(1,162.8		)	—			(14.5		)	—
Acquisitions	19.9			—			—			—
Spinoff of TimkenSteel	—			(1,063.3		)	—			(81.8		)
Benefit obligation at end of year	$	589.9		$	1,703.9		$	338.1		$	415.7



	U.S. Plans						International Plans
	2015			2014			2015			2014
Change in plan assets:
Fair value of plan assets at beginning of year	$	1,772.4		$	2,870.0		$	349.4		$	420.6
Actual return on plan assets	23.0			250.5			4.5			42.2
Employee contributions	—			—			—			0.3
Company contributions / payments	4.4			4.5			6.4			16.6
International plan exchange rate change	—			—			(23.6		)	(21.2		)
Acquisitions	17.6			—			—			—
Settlements	(1,162.8		)	—			(14.5		)	—
Benefits paid	(100.9		)	(234.6		)	(17.6		)	(23.5		)
Spinoff of TimkenSteel	—			(1,118.0		)	—			(85.6		)
Fair value of plan assets at end of year	553.7			1,772.4			304.6			349.4
Funded status at end of year	$	(36.2	)	$	68.5		$	(33.5	)	$	(66.3	)



Amounts recognized on the Consolidated Balance Sheets:
Non-current assets	$	69.0		$	176.2		$	17.3		$	—
Current liabilities	(4.2		)	(4.1		)	(4.9		)	(4.0		)
Non-current liabilities	(101.0		)	(103.6		)	(45.9		)	(62.3		)
	$	(36.2	)	$	68.5		$	(33.5	)	$	(66.3	)



Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	187.4	$	566.5	$	93.3	$	132.3
Net prior service cost	9.1		11.9		0.5		0.7
Accumulated other comprehensive loss	$	196.5	$	578.4	$	93.8	$	133.0



Changes in plan assets and benefit obligations recognized in accumulated other comprehensive loss (AOCL):
AOCL at beginning of year	$	578.4		$	865.4		$	133.0		$	142.7
Net actuarial loss (gain)	108.4			141.0			(18.9		)	20.2
Prior service cost	—			—			—			0.3
Recognized net actuarial loss	(31.1		)	(55.6		)	(5.2		)	(5.3		)
Recognized prior service cost	(2.8		)	(3.5		)	(0.1		)	(0.1		)
Loss recognized due to curtailment	—			—			(0.6		)	—
Loss recognized due to settlement	(456.4		)	(32.7		)	(4.8		)	(0.8		)
Foreign currency impact	—			—			(9.6		)	(9.8		)
TimkenSteel Spinoff	—			(336.2		)	—			(14.2		)
Total recognized in accumulated other comprehensive loss at December 31	$	196.5		$	578.4		$	93.8		$	133.0

The presentation in the above tables for amounts recognized in accumulated other comprehensive loss on the Consolidated Balance Sheets is before the effect of income taxes.

The following table summarizes assumptions used to measure the benefit obligation for the defined benefit pension plans at December 31:



Assumptions	2015		2014
U.S. Plans:
Discount rate	4.69	%	4.20	%
Future compensation assumption	2.00% to 3.00%		2.00% to 3.00%
International Plans:
Discount rate	2.00% to 8.50%		1.50% to 8.75%
Future compensation assumption	2.20% to 8.00%		2.20% to 8.00%

Defined benefit pension plans in the United States represent 64% of the benefit obligation and 65% of the fair value of plan assets as of December 31, 2015.

Certain of the Company’s defined benefit pension plans were overfunded as of December 31, 2015. As a result, $86.3 million and $176.2 million at December 31, 2015 and 2014, respectively, are included in non-current pension assets on the Consolidated Balance Sheets. The current portion of accrued pension cost, which was included in salaries, wages and benefits on the Consolidated Balance Sheets, was $9.1 million and $8.1 million at December 31, 2015 and 2014, respectively. In 2015, the current portion of accrued pension cost relates to unfunded plans and represents the actuarial present value of expected payments related to the plans to be made over the next 12 months.

The accumulated benefit obligation at December 31, 2015 exceeded the market value of plan assets for several of the Company’s pension plans. For these plans, the projected benefit obligation was $207.6 million, the accumulated benefit obligation was $196.8 million and the fair value of plan assets was $52.2 million at December 31, 2015.

The total pension accumulated benefit obligation for all plans was $0.9 billion and $2.1 billion at December 31, 2015 and 2014, respectively.

Investment performance increased the value of the Company’s pension assets by 0.6%.

As of December 31, 2015 and 2014, the Company’s defined benefit pension plans did not directly hold any of the Company’s common shares.

The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $16.5 million and $1.7 million, respectively.

Plan Assets:

The Company’s target allocation for pension plan assets, as well as the actual pension plan asset allocations as of December 31, 2015 and 2014, was as follows:



	Current Target Allocation			Percentage of Pension Plan Assets at December 31,
Asset Category				2015	2014
Equity securities	6%	to	12%	15%	10%
Debt securities	70%	to	90%	63%	77%
Other	7%	to	15%	22%	13%
Total				100%	100%

The current asset allocation deviates from the target asset allocation due to the transfer of fixed income assets to Prudential in connection with the annuity purchase for one of the Company's US pension plans that was completed in November 2015. The Company intends to have the actual asset allocations in line with the target allocations by the conclusion of 2016.

The Company recognizes its overall responsibility to ensure that the assets of its various defined benefit pension plans are managed effectively and prudently and in compliance with its policy guidelines and all applicable laws. Preservation of capital is important; however, the Company also recognizes that appropriate levels of risk are necessary to allow its investment managers to achieve satisfactory long-term results consistent with the objectives and the fiduciary character of the pension funds. Asset allocations are established in a manner consistent with projected plan liabilities, benefit payments and expected rates of return for various asset classes. The expected rate of return for the investment portfolio is based on expected rates of return for various asset classes, as well as historical asset class and fund performance.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The FASB provides accounting rules that classify the inputs used to measure fair value into the following hierarchy:


Level 1 -	Unadjusted quoted prices in active markets for identical assets or liabilities.


Level 2 -	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.


Level 3 -	Unobservable inputs for the asset or liability.

The following table presents the fair value hierarchy for those investments of the Company’s pension assets measured at fair value on a recurring basis as of December 31, 2015:



	U.S. Pension Plans								International Pension Plans
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	65.9	$	23.9	$	42.0	$	—	$	31.0	$	12.8	$	18.2	$	—
Government and agency securities	35.1		32.9		2.2		—		—		—		—		—
Corporate bonds - investment grade	56.0		—		56.0		—		3.0		—		3.0		—
Equity securities - U.S. companies	9.8		9.7		0.1		—		—		—		—		—
Equity securities - international companies	6.1		6.1		—		—		0.9		—		0.9		—
Common collective funds - domestic equities	13.0		—		13.0		—		—		—		—		—
Common collective funds - international equities	14.2		—		14.2		—		81.4		—		81.4		—
Common collective funds - fixed income	173.5		—		173.5		—		85.0		—		85.0		—
Common collective funds - other	—		—		—		—		103.3		—		103.3		—
Limited partnerships	52.8		—		—		52.8		—		—		—		—
Real estate partnerships	99.7		—		71.9		27.8		—		—		—		—
Risk parity	27.6		—		27.6		—		—		—		—		—
Total Assets	$	553.7	$	72.6	$	400.5	$	80.6	$	304.6	$	12.8	$	291.8	$	—

The table below sets forth a summary of changes in the fair value of the level 3 assets by fund for the year ended December 31, 2015:



	Limited Partnerships			Real Estate			Total
Beginning balance, January 1	$	66.1		$	27.8		$	93.9
Purchases	0.6			7.0			7.6
Sales	(9.8		)	(8.3		)	(18.1		)
Realized losses	(7.5		)	(4.7		)	(12.2		)
Unrealized gains	3.4			6.0			9.4
Ending balance, December 31	$	52.8		$	27.8		$	80.6

The following table presents the fair value hierarchy for those investments of the Company’s pension assets measured at fair value on a recurring basis as of December 31, 2014:



	U.S. Pension Plans								International Pension Plans
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	55.3	$	0.8	$	54.5	$	—	$	25.5	$	—	$	25.5	$	—
Government and agency securities	505.9		496.4		9.5		—		—		—		—		—
Corporate bonds - investment grade	473.7		—		473.7		—		2.7		—		2.7		—
Equity securities - U.S. companies	22.7		22.7		—		—		30.2		30.2		—		—
Equity securities - international companies	16.3		16.3		—		—		26.6		25.7		0.9		—
Asset backed securities	—		—		—		—		3.4		—		3.4		—
Common collective funds - domestic equities	22.6		—		22.6		—		2.1		—		2.1		—
Common collective funds - international equities	27.4		—		27.4		—		60.6		—		60.6		—
Common collective funds - fixed income	379.5		—		379.5		—		108.9		—		108.9		—
Common collective funds - other	—		—		—		—		89.4		—		89.4		—
Limited partnerships	66.1		—		—		66.1		—		—		—		—
Real estate partnerships	112.6		—		84.8		27.8		—		—		—		—
Risk Parity	90.3		—		90.3		—		—		—		—		—
Total Assets	$	1,772.4	$	536.2	$	1,142.3	$	93.9	$	349.4	$	55.9	$	293.5	$	—

The table below sets forth a summary of changes in the fair value of the level 3 assets by fund for the year ended December 31, 2014:



	Limited Partnerships			Real Estate			Total
Beginning balance, January 1	$	78.8		$	21.1		$	99.9
Purchases	2.1			10.5			12.6
Sales	(16.8		)	(5.6		)	(22.4		)
Realized losses	(11.0		)	(4.1		)	(15.1		)
Unrealized gains	13.0			5.9			18.9
Ending balance, December 31	$	66.1		$	27.8		$	93.9

Cash and cash equivalents are valued at redemption value. Government and agency securities are valued at the closing price reported in the active market in which the individual securities are traded. Certain corporate bonds are valued at the closing price reported in the active market in which the bond is traded. Equity securities (both common and preferred stock) are valued at the closing price reported in the active market in which the individual security is traded. Common collective funds are valued based on a net asset value per share. Asset-backed securities are valued based on quoted prices for similar assets in active markets. When such prices are unavailable, the plan trustee determines a valuation from the market maker dealing in the particular security.

Limited partnerships include investments in funds that invest primarily in private equity, venture capital and distressed debt. Limited partnerships are valued based on the ownership interest in the net asset value of the investment, which is used as a practical expedient to fair value, per the underlying investment fund, which is based upon the general partner's own assumptions about the assumptions a market participant would use in pricing the assets and liabilities of the partnership. Real estate investments include funds that invest in companies that primarily invest in commercial and residential properties, commercial mortgage-backed securities, debt and equity securities of real estate operating companies, and real estate investment trusts. Other real estate investments are valued based on the ownership interest in the net asset value of the investment, which is used as a practical expedient to fair value per the underlying investment fund, which is based on appraised values and current transaction prices. Risk parity investments include funds that invest in diversified global asset classes (equities, bonds, inflation-linked bonds, and commodities) with leverage to balance risk and achieve consistent returns with lower volatility. Risk parity investments are valued based on the closing prices of the underlying securities in the active markets in which they are traded.

Cash Flows:



Employer Contributions to Defined Benefit Plans
2014	$	21.1
2015	10.8
2016 (planned)	15.0

Future benefit payments, including lump sum distributions, are expected to be as follows:



Benefit Payments
2016	$	94.5
2017	67.4
2018	59.5
2019	83.8
2020	63.2
2021-2025	331.6

Employee Savings Plans:

The Company sponsors defined contribution retirement and savings plans covering substantially all employees in the United States and employees at certain non-U.S. locations. The Company has contributed its common shares to certain of these plans based on formulas established in the respective plan agreements. At December 31, 2015, the plans held 4,116,090 of the Company’s common shares with a fair value of $117.7 million. Company contributions to the plans, including performance sharing, were $22.4 million in 2015, $26.1 million in 2014 and $28.5 million in 2013. The Company paid dividends totaling $4.2 million in 2015, $4.7 million in 2014 and $5.5 million in 2013 to plans holding the Company’s common shares. The Spinoff also resulted in a dividend of $81.9 million of TimkenSteel common shares in 2014 to plans holding the Company's common shares.