Pension and Other Postretirement Benefits

The accounting standards related to employers’ accounting for defined benefit pension and other postretirement plans requires the Company to recognize the funded status of its defined benefit postretirement plans as assets or liabilities in the accompanying consolidated balance sheets and to recognize changes in the funded status of the plans in comprehensive income.

The Company has various defined contribution plans, the largest of which is its Retirement Savings Plan. Most U.S. salaried and non-union hourly employees are eligible to participate in this plan. See Note 16 for further discussion of the Retirement Savings Plan. The Company also maintains various other defined contribution plans which cover certain other employees. Company contributions under these plans are based primarily on the performance of the business units and employee compensation. Contribution expense under these other defined contribution plans was $5,907, $5,347 and $5,213 in 2016, 2015 and 2014, respectively.

Defined benefit pension plans in the U.S. cover a majority of the Company’s U.S. employees at the Associated Spring and Nitrogen Gas Products businesses of Industrial, the Company’s Corporate Office and certain former U.S. employees, including retirees. Plan benefits for salaried and non-union hourly employees are based on years of service and average salary. Plans covering union hourly employees provide benefits based on years of service. In 2012, the Company closed the U.S. salaried defined benefit pension plan (the "U.S. Salaried Plan") to employees hired on or after January 1, 2013, with no impact to the benefits of existing participants. Effective January 1, 2013, the Retirement Savings Plan was amended to provide certain salaried employees hired on or after January 1, 2013 with an additional annual retirement contribution of 4% of eligible earnings, in place of pensionable benefits under the closed U.S. Salaried Plan. The Company funds U.S. pension costs in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Non-U.S. defined benefit pension plans cover certain employees of certain international locations in Europe and Canada.

The Company provides other medical, dental and life insurance postretirement benefits for certain of its retired employees in the U.S. and Canada. It is the Company’s practice to fund these benefits as incurred.

The accompanying balance sheets reflect the funded status of the Company’s defined benefit pension plans at December 31, 2016 and 2015, respectively. Reconciliations of the obligations and funded status of the plans follow:



	2016									2015
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Benefit obligation, January 1	$	385,629		$	75,406		$	461,035		$	433,079		$	80,305		$	513,384
Service cost	3,892			1,503			5,395			4,160			1,348			5,508
Interest cost	17,523			1,971			19,494			17,967			2,052			20,019
Amendments	2,405			(174		)	2,231			—			(463		)	(463		)
Actuarial loss (gain)	6,661			10,814			17,475			(16,622		)	(2,288		)	(18,910		)
Benefits paid	(26,497		)	(4,691		)	(31,188		)	(52,490		)	(4,244		)	(56,734		)
Transfers in	—			25,968			25,968			—			3,951			3,951
Plan curtailments	—			—			—			(465		)	—			(465		)
Plan settlements	—			—			—			—			(375		)	(375		)
Participant contributions	—			1,444			1,444			—			368			368
Foreign exchange rate changes	—			(7,902		)	(7,902		)	—			(5,248		)	(5,248		)
Benefit obligation, December 31	389,613			104,339			493,952			385,629			75,406			461,035
Fair value of plan assets, January 1	326,829			68,553			395,382			380,937			71,750			452,687
Actual return on plan assets	13,051			7,276			20,327			(5,045		)	1,264			(3,781		)
Company contributions	17,877			2,224			20,101			3,427			1,100			4,527
Participant contributions	—			1,444			1,444			—			368			368
Benefits paid	(26,497		)	(4,691		)	(31,188		)	(52,490		)	(4,244		)	(56,734		)
Plan settlements	—			—			—			—			(376		)	(376		)
Transfers in	—			18,320			18,320			—			3,434			3,434
Foreign exchange rate changes	—			(7,474		)	(7,474		)	—			(4,743		)	(4,743		)
Fair value of plan assets, December 31	331,260			85,652			416,912			326,829			68,553			395,382
Underfunded status, December 31	$	(58,353	)	$	(18,687	)	$	(77,040	)	$	(58,800	)	$	(6,853	)	$	(65,653	)

In September 2015, the Company announced a limited-time program offering (the "Program") to certain eligible, vested, terminated participants ("eligible participants") for a voluntary lump-sum pension payout or reduced annuity option (the "payout") that, if accepted, would settle the Company's pension obligation to them. The Program provided the eligible participants with a limited time opportunity of electing to receive a lump-sum settlement of their remaining pension benefit, or reduced annuity. The scheduled payments of $27,986 were made in December 2015, and are included within the "Benefits Paid" of $52,490 above. The payouts were funded by the assets of the Company's pension plan and therefore the Program did not require significant cash outflows by the Company. The resultant pre-tax settlement charge of $9,856 represents accelerated amortization of actuarial losses and was reflected within costs of sales and selling and administrative expenses within the Consolidated Statements of Income.

Projected benefit obligations related to pension plans with benefit obligations in excess of plan assets follow:



	2016						2015
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	389,613	$	61,060	$	450,673	$	271,459	$	31,613	$	303,072
Fair value of plan assets	331,260		39,356		370,616		204,270		20,199		224,469

Information related to pension plans with accumulated benefit obligations in excess of plan assets follows:



	2016						2015
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	389,613	$	61,014	$	450,627	$	271,459	$	30,560	$	302,019
Accumulated benefit obligation	378,431		59,568		437,999		262,172		26,998		289,170
Fair value of plan assets	331,260		39,356		370,616		204,270		19,256		223,526

The accumulated benefit obligation for all defined benefit pension plans was $481,241 and $447,591 at December 31, 2016 and 2015, respectively.

Amounts related to pensions recognized in the accompanying balance sheets consist of:



	2016									2015
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Other assets	$	—		$	3,017		$	3,017		$	8,389		$	4,561		$	12,950
Accrued liabilities	2,813			367			3,180			2,806			379			3,185
Accrued retirement benefits	55,540			21,337			76,877			64,383			11,035			75,418
Accumulated other non-owner changes to equity, net	(91,530		)	(19,458		)	(110,988		)	(83,014		)	(16,812		)	(99,826		)

Amounts related to pensions recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2016 and 2015, respectively, consist of:



	2016									2015
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Net actuarial loss	$	(89,772	)	$	(19,822	)	$	(109,594	)	$	(82,643	)	$	(16,999	)	$	(99,642	)
Prior service costs	(1,758		)	364			(1,394		)	(371		)	187			(184		)
	$	(91,530	)	$	(19,458	)	$	(110,988	)	$	(83,014	)	$	(16,812	)	$	(99,826	)

The accompanying balance sheets reflect the underfunded status of the Company’s other postretirement benefit plans at December 31, 2016 and 2015. Reconciliations of the obligations and underfunded status of the plans follow:



	2016			2015
Benefit obligation, January 1	$	41,706		$	46,814
Service cost	122			145
Interest cost	1,766			1,836
Actuarial gain	(3,495		)	(2,521		)
Benefits paid	(5,621		)	(6,970		)
Participant contributions	2,281			2,486
Foreign exchange rate changes	94			(84		)
Benefit obligation, December 31	36,853			41,706
Fair value of plan assets, January 1	—			—
Company contributions	3,340			4,484
Participant contributions	2,281			2,486
Benefits paid	(5,621		)	(6,970		)
Fair value of plan assets, December 31	—			—
Underfunded status, December 31	$	36,853		$	41,706

Amounts related to other postretirement benefits recognized in the accompanying balance sheets consist of:



	2016			2015
Accrued liabilities	$	5,081		$	5,259
Accrued retirement benefits	31,772			36,447
Accumulated other non-owner changes to equity, net	(3,582		)	(5,877		)

Amounts related to other postretirement benefits recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2016 and 2015 consist of:



	2016			2015
Net actuarial loss	$	(3,532	)	$	(6,061	)
Prior service credits	(50		)	184
	$	(3,582	)	$	(5,877	)

The sources of changes in accumulated other non-owner changes to equity, net, during 2016 were:



	Pension			Other Postretirement Benefits
Prior service cost	$	(1,334	)	$	—
Net (loss) gain	(18,378		)	2,194
Amortization of prior service costs (credits)	142			(234		)
Amortization of actuarial loss	7,030			332
Foreign exchange rate changes	1,378			3
	$	(11,162	)	$	2,295

Weighted-average assumptions used to determine benefit obligations at December 31, are:



	2016		2015
U.S. plans:
Discount rate	4.50	%	4.65	%
Increase in compensation	2.56	%	3.71	%
Non-U.S. plans:
Discount rate	1.60	%	2.80	%
Increase in compensation	2.29	%	2.71	%

The investment strategy of the plans is to generate a consistent total investment return sufficient to pay present and future plan benefits to retirees, while minimizing the long-term cost to the Company. Target allocations for asset categories are used to earn a reasonable rate of return, provide required liquidity and minimize the risk of large losses. Targets may be adjusted, as necessary, to reflect trends and developments within the overall investment environment. The weighted-average target investment allocations by asset category were as follows during 2016: 65% in equity securities, 30% in fixed income securities and 5% in other investments, including cash.

The fair values of the Company’s pension plan assets at December 31, 2016 and 2015, by asset category are as follows:



			Fair Value Measurements Using
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2016
Cash and short-term investments	$	3,207	$	3,207	$	—	$	—
Equity securities:
U.S. large-cap	39,162		—		39,162		—
U.S. mid-cap	12,724		12,724		—		—
U.S. small-cap	19,551		19,551		—		—
International equities	135,514		—		135,514		—
Global equity	47,445		47,445		—		—
Fixed income securities:
U.S. bond funds	103,399		—		103,399		—
International bonds	53,783		—		53,783		—
Other	2,127		—		—		2,127
	$	416,912	$	82,927	$	331,858	$	2,127
December 31, 2015
Cash and short-term investments	18,795		18,795		—		—
Equity securities:
U.S. large-cap	67,274		28,190		39,084		—
U.S. mid-cap	38,790		38,790		—		—
U.S. small-cap	38,248		38,248		—		—
International equities	91,563		—		91,563		—
Global equity	17,928		17,928
Fixed income securities:
U.S. bond funds	84,645		—		84,645		—
International bonds	36,282		—		36,282		—
Other	1,857		—		—		1,857
	$	395,382	$	141,951	$	251,574	$	1,857

The fair values of the Level 1 assets are based on quoted market prices from various financial exchanges. The fair values of the Level 2 assets are based primarily on quoted prices in active markets for similar assets or liabilities. The Level 2 assets are comprised primarily of commingled funds and fixed income securities. Commingled equity funds are valued at their net asset values based on quoted market prices of the underlying assets. Fixed income securities are valued using a market approach which considers observable market data for the underlying asset or securities. The Level 3 assets relate to the defined benefit pension plan at the Synventive business. These pension assets are fully insured and have been estimated based on accrued pension rights and actuarial rates. These pension assets are limited to fulfilling the Company's pension obligations.

The Company expects to contribute approximately $4,935 to the pension plans in 2017.

The following are the estimated future net benefit payments, which include future service, over the next 10 years:



	Pensions		Other Postretirement Benefits
2017	$	28,703	$	3,983
2018	28,577		3,352
2019	28,878		3,176
2020	28,810		3,294
2021	28,994		3,095
Years 2022-2026	144,566		12,906
Total	$	288,528	$	29,806

Pension and other postretirement benefit expenses consist of the following:



	Pensions									Other Postretirement Benefits
	2016			2015			2014			2016			2015			2014
Service cost	$	5,395		$	5,508		$	4,546		$	122		$	145		$	139
Interest cost	19,494			20,019			22,026			1,766			1,836			2,179
Expected return on plan assets	(30,302		)	(32,404		)	(34,232		)	—			—			—
Amortization of prior service cost (credit)	210			305			648			(373		)	(564		)	(871		)
Recognized losses	10,791			15,004			8,617			535			1,011			1,017
Curtailment loss (gain)	—			—			219			—			—			4
Settlement loss	—			9,939			871			—			—			—
Special termination benefits	—			—			715			—			—			—
Net periodic benefit cost	$	5,588		$	18,371		$	3,410		$	2,050		$	2,428		$	2,468

The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other non-owner changes to equity into net periodic benefit cost in 2017 are $9,997 and $441, respectively. The estimated net actuarial loss and prior service credit for other defined benefit postretirement plans that will be amortized from accumulated other non-owner changes to equity into net periodic benefit cost in 2017 are $276 and $(68), respectively.

Weighted-average assumptions used to determine net benefit expense for years ended December 31, are:



	2016		2015		2014
U.S. plans:
Discount rate	4.65	%	4.25	%	5.20	%
Long-term rate of return	8.25	%	8.25	%	9.00	%
Increase in compensation	3.71	%	3.71	%	3.72	%
Non-U.S. plans:
Discount rate	2.80	%	2.74	%	3.93	%
Long-term rate of return	4.73	%	5.00	%	5.07	%
Increase in compensation	2.71	%	2.72	%	2.76	%

The expected long-term rate of return is based on projected rates of return and the historical rates of return of published indices that are used to measure the plans’ target asset allocation. The historical rates are then discounted to consider fluctuations in the historical rates as well as potential changes in the investment environment.

The Company’s accumulated postretirement benefit obligations, exclusive of pensions, take into account certain cost-sharing provisions. The annual rate of increase in the cost of covered benefits (i.e., health care cost trend rate) is assumed to be 6.44% and 6.65% at December 31, 2016 and 2015, respectively, decreasing gradually to a rate of 4.50% by December 31, 2029. A one percentage point change in the assumed health care cost trend rate would have the following effects:



	One Percentage Point Increase		One Percentage Point Decrease
Effect on postretirement benefit obligation	$	319	$	(295	)
Effect on postretirement benefit cost	14		(13		)

The Company actively contributes to a Swedish pension plan that supplements the Swedish social insurance system. The pension plan guarantees employees a pension based on a percentage of their salary and represents a multi-employer pension plan, however the pension plan was not significant in any year presented. This pension plan is not underfunded.

Contributions related to the individually insignificant multi-employer plans, as disclosure is required pursuant to the applicable accounting standards, are as follows:



	Contributions by the Company
Pension Fund:	2016		2015		2014
Swedish Pension Plan (ITP2)	673		$	343	$	379
Total Contributions	$	673	$	343	$	379