The Company and its subsidiaries sponsor several funded and unfunded postretirement plans that provide health care and life insurance benefits for eligible retirees and dependents. Depending on retirement date and employee classification, certain health care plans contain contribution and cost-sharing features such as deductibles, coinsurance and limitations on employer-provided subsidies. The remaining health care and life insurance plans are noncontributory.

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:



	2015			2014			2013
Components of net periodic benefit cost:
Service cost	$	0.4		$	1.3		$	2.9
Interest cost	10.9			16.7			21.7
Expected return on plan assets	(7.1		)	(8.5		)	(11.1		)
Amortization of prior service credit	0.8			1.0			(0.2		)
Amortization of net actuarial loss	0.1			—			2.3
Less: discontinued operations	—			(3.1		)	(6.4		)
Net periodic benefit cost	$	5.1		$	7.4		$	9.2



Assumptions:	2015		2014		2013
Discount rate	3.95	%	4.33% / 4.59%		3.80	%
Rate of return	6.25	%	5.00	%	5.00	%

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 3.95% to its postretirement benefit plans. For expense purposes in 2016, the Company will apply a discount rate of 4.39% to its postretirement benefit plans.

For expense purposes in 2015, the Company applied an expected rate of return of 6.25% to the VEBA trust assets. For expense purposes in 2016, the Company will apply an expected rate of return of 6.00% to the VEBA trust assets.

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



	2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	284.6		$	515.6
Service cost	0.4			1.3
Interest cost	10.9			16.7
Actuarial (gains) losses	(7.7		)	18.0
International plan exchange rate change	(0.3		)	(0.1		)
Benefits paid	(26.3		)	(37.1		)
Spinoff of TimkenSteel	—			(229.8		)
Acquisition	1.1			—
Benefit obligation at end of year	$	262.7		$	284.6



	2015			2014
Change in plan assets:
Fair value of plan assets at beginning of year	$	120.7		$	240.1
Company contributions / payments	19.0			49.4
Return on plan assets	(1.3		)	12.2
Benefits paid	(26.3		)	(37.1		)
Spinoff of TimkenSteel	—			(143.9		)
Fair value of plan assets at end of year	112.1			120.7
Funded status at end of year	$	(150.5	)	$	(163.9	)



Amounts recognized on the Consolidated Balance Sheets:
Current liabilities	$	(14.4	)	$	(22.1	)
Non-current liabilities	(136.1		)	(141.8		)
	$	(150.5	)	$	(163.9	)



Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	19.2	$	18.5
Net prior service cost	2.1		3.0
Accumulated other comprehensive loss	$	21.3	$	21.5



Changes in plan assets and benefit obligations recognized in AOCL:
AOCL at beginning of year	$	21.5		$	13.3
Net actuarial loss	0.7			14.3
Recognized net actuarial loss	(0.1		)	—
Recognized prior service credit	(0.8		)	(1.0		)
Spinoff of TimkenSteel	—			(5.1		)
Total recognized in accumulated other comprehensive loss at December 31	$	21.3		$	21.5

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 postretirement benefit plans at December 31:



Assumptions:	2015		2014
Discount rate	4.39	%	3.95	%

The current portion of accrued postretirement benefit cost, which was included in salaries, wages and benefits on the Consolidated Balance Sheets, was $14.4 million and $22.1 million at December 31, 2015 and 2014, respectively. In 2015, the current portion of accrued postretirement benefit cost related to unfunded plans and represented the actuarial present value of expected payments related to the plans to be made over the next 12 months.

The estimated net actuarial loss and prior service cost for the postretirement plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $0.1 million and $1.0 million of expense, respectively.

For measurement purposes, the Company assumed a weighted-average annual rate of increase in the per capita cost (health care cost trend rate) for medical benefits of 6.75% for 2015, declining gradually to 5.0% in 2023 and thereafter; and 6.75% for 2015, declining gradually to 5.0% in 2023 and thereafter for prescription drug benefits; and 8.75% for 2015, declining gradually to 5.0% in 2031 and thereafter for HMO benefits. Most of the Company's postretirement plans include caps that limit the amount of the benefit provided by the Company to participants each year, which lessens the impact of health care inflation costs to the Company.

The assumed health care cost trend rate may have a significant effect on the amounts reported. A one percentage point increase in the assumed health care cost trend rate would have increased the 2015 total service and interest cost components by $0.3 million and would have increased the postretirement benefit obligation by $6.4 million. A one percentage point decrease would provide corresponding reductions of $0.2 million and $5.7 million, respectively.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Medicare Act) provides for prescription drug benefits under Medicare Part D and contains a subsidy to plan sponsors who provide “actuarially equivalent” prescription plans. The Company’s actuary determined that the prescription drug benefit provided by the Company’s postretirement plan is considered to be actuarially equivalent to the benefit provided under the Medicare Act. In accordance with ASC Topic 715, “Compensation – Retirement Benefits,” all measures of the accumulated postretirement benefit obligation or net periodic postretirement benefit cost in the financial statements or accompanying notes reflect the effects of the Medicare Act on the plan for the entire fiscal year. The 2015 expected subsidy was $1.8 million, of which zero was received prior to December 31, 2015.

Plan Assets:

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



	Current Target Allocation			Percentage of VEBA Assets at December 31,
Asset Category				2015	2014
Equity securities	34%	to	46%	42%	51%
Debt securities	54%	to	66%	58%	49%
Total				100%	100%

The Company recognizes its overall responsibility to ensure that the assets of its postretirement benefit plan 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 postretirement 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.

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



	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	3.0	$	—	$	3.0	$	—
Common collective fund - U.S. equities	28.2		—		28.2		—
Common collective fund - international equities	18.3		—		18.3		—
Common collective fund - fixed income	62.6		—		62.6		—
Total Assets	$	112.1	$	—	$	112.1	$	—

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



	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	7.9	$	—	$	7.9	$	—
Common collective fund - U.S. equities	39.9		—		39.9		—
Common collective fund - international equities	22.1		—		22.1		—
Common collective fund - fixed income	50.8		—		50.8		—
Total Assets	$	120.7	$	—	$	120.7	$	—

Cash and cash equivalents are valued at redemption value. Common collective funds are valued based on a net asset value per share, which is used as a practical expedient to fair value. When such prices are unavailable, the plan trustee determines a valuation from the market maker dealing in the particular security.

Cash Flows:

Employer Contributions to the VEBA Trust:



2014	$	20.0
2015	—
2016 (planned)	—

Future benefit payments are expected to be as follows:



	Gross		Expected Medicare Subsidies		Net Including Medicare Subsidies
2016	$	29.0	$	1.7	$	27.3
2017	27.7		1.7		26.0
2018	26.5		1.7		24.8
2019	25.1		1.7		23.4
2020	23.7		1.7		22.0
2021-2025	101.4		7.8		93.6