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 $6,644, $5,907 and $5,347 in 2017, 2016 and 2015, 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, 2017 and 2016, respectively. Reconciliations of the obligations and funded status of the plans follow:



	2017									2016
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Benefit obligation, January 1	$	389,613		$	104,339		$	493,952		$	385,629		$	75,406		$	461,035
Service cost	3,931			2,124			6,055			3,892			1,503			5,395
Interest cost	17,151			1,668			18,819			17,523			1,971			19,494
Amendments	1,233			27			1,260			2,405			(174		)	2,231
Actuarial loss (gain)	28,350			(4,397		)	23,953			6,661			10,814			17,475
Benefits paid	(24,909		)	(4,240		)	(29,149		)	(26,497		)	(4,691		)	(31,188		)
Transfers in	—			2,743			2,743			—			25,968			25,968
Plan curtailments	—			(7,030		)	(7,030		)	—			—			—
Plan settlements	—			(21,074		)	(21,074		)	—			—			—
Participant contributions	—			1,355			1,355			—			1,444			1,444
Foreign exchange rate changes	—			7,226			7,226			—			(7,902		)	(7,902		)
Benefit obligation, December 31	415,369			82,741			498,110			389,613			104,339			493,952
Fair value of plan assets, January 1	331,260			85,652			416,912			326,829			68,553			395,382
Actual return on plan assets	56,131			6,150			62,281			13,051			7,276			20,327
Company contributions	12,896			2,027			14,923			17,877			2,224			20,101
Participant contributions	—			1,355			1,355			—			1,444			1,444
Benefits paid	(24,909		)	(4,240		)	(29,149		)	(26,497		)	(4,691		)	(31,188		)
Plan settlements	—			(20,857		)	(20,857		)	—			—			—
Transfers in	—			2,743			2,743			—			18,320			18,320
Foreign exchange rate changes	—			6,230			6,230			—			(7,474		)	(7,474		)
Fair value of plan assets, December 31	375,378			79,060			454,438			331,260			85,652			416,912
Underfunded status, December 31	$	(39,991	)	$	(3,681	)	$	(43,672	)	$	(58,353	)	$	(18,687	)	$	(77,040	)

In 2017, the Company authorized the closure of it's FOBOHA facility located in Muri, Switzerland, resulting in the pension curtailments and settlements noted above. See Note 8 of the Consolidated Financial Statements for additional information related to this Closure.

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



	2017						2016
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	311,320	$	40,931	$	352,251	$	389,613	$	61,060	$	450,673
Fair value of plan assets	267,087		26,205		293,292		331,260		39,356		370,616

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



	2017						2016
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	40,572	$	40,931	$	81,503	$	389,613	$	61,014	$	450,627
Accumulated benefit obligation	40,090		40,877		80,967		378,431		59,568		437,999
Fair value of plan assets	4,797		26,205		31,002		331,260		39,356		370,616

The accumulated benefit obligation for all defined benefit pension plans was $485,777 and $481,241 at December 31, 2017 and 2016, respectively.

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



	2017									2016
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Other assets	$	4,242		$	11,045		$	15,287		$	—		$	3,017		$	3,017
Accrued liabilities	2,823			407			3,230			2,813			367			3,180
Accrued retirement benefits	41,410			14,319			55,729			55,540			21,337			76,877
Accumulated other non-owner changes to equity, net	(84,990		)	(13,016		)	(98,006		)	(91,530		)	(19,458		)	(110,988		)

Amounts related to pensions recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2017 and 2016, respectively, consist of:



	2017									2016
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Net actuarial loss	$	(82,736	)	$	(13,237	)	$	(95,973	)	$	(89,772	)	$	(19,822	)	$	(109,594	)
Prior service costs	(2,254		)	221			(2,033		)	(1,758		)	364			(1,394		)
	$	(84,990	)	$	(13,016	)	$	(98,006	)	$	(91,530	)	$	(19,458	)	$	(110,988	)

The accompanying balance sheets reflect the underfunded status of the Company’s other postretirement benefit plans at December 31, 2017 and 2016. Reconciliations of the obligations and underfunded status of the plans follow:



	2017			2016
Benefit obligation, January 1	$	36,853		$	41,706
Service cost	83			122
Interest cost	1,561			1,766
Actuarial loss (gain)	3,806			(3,495		)
Benefits paid	(7,251		)	(5,621		)
Participant contributions	2,209			2,281
Foreign exchange rate changes	309			94
Benefit obligation, December 31	37,570			36,853
Fair value of plan assets, January 1	—			—
Company contributions	5,042			3,340
Participant contributions	2,209			2,281
Benefits paid	(7,251		)	(5,621		)
Fair value of plan assets, December 31	—			—
Underfunded status, December 31	$	37,570		$	36,853

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



	2017			2016
Accrued liabilities	$	5,064		$	5,081
Accrued retirement benefits	32,506			31,772
Accumulated other non-owner changes to equity, net	(5,838		)	(3,582		)

Amounts related to other postretirement benefits recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2017 and 2016 consist of:



	2017			2016
Net actuarial loss	$	(5,746	)	$	(3,532	)
Prior service loss	(92		)	(50		)
	$	(5,838	)	$	(3,582	)

The sources of changes in accumulated other non-owner changes to equity, net, during 2017 were:



	Pension			Other Postretirement Benefits
Prior service cost	$	(800	)	$	—
Net (loss) gain	7,787			(2,392		)
Amortization of prior service (credits) costs	117			(43		)
Amortization of actuarial loss	7,140			170
Foreign exchange rate changes	(1,262		)	9
	$	12,982		$	(2,256	)

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



	2017		2016
U.S. plans:
Discount rate	3.90	%	4.50	%
Increase in compensation	2.56	%	2.56	%
Non-U.S. plans:
Discount rate	1.90	%	1.60	%
Increase in compensation	2.17	%	2.29	%

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 2017: 65% in equity securities and 35% in fixed income securities, including cash.

The fair values of the Company’s pension plan assets at December 31, 2017 and 2016, 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, 2017
Cash and short-term investments	$	10,731	$	10,731	$	—	$	—
Equity securities:
U.S. large-cap	46,786		—		46,786		—
U.S. mid-cap	15,576		15,576		—		—
U.S. small-cap	16,157		16,157		—		—
International equities	159,803		—		159,803		—
Global equity	51,945		51,945		—		—
Fixed income securities:
U.S. bond funds	109,033		—		109,033		—
International bonds	41,742		—		41,742		—
Other	2,665		—		—		2,665
	$	454,438	$	94,409	$	357,364	$	2,665
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

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 $4,600 to the pension plans in 2018. No contributions to the U.S. Qualified pension plans, specifically, are required, and the Company does not currently plan to make any discretionary contributions to such plans in 2018.

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



	Pensions		Other Postretirement Benefits
2018	$	29,261	$	3,653
2019	29,243		3,485
2020	29,086		3,204
2021	29,205		3,014
2022	29,378		2,848
Years 2023-2027	144,074		11,722
Total	$	290,247	$	27,926

Pension and other postretirement benefit costs consist of the following:



	Pensions									Other Postretirement Benefits
	2017			2016			2015			2017			2016			2015
Service cost	$	6,055		$	5,395		$	5,508		$	83		$	122		$	145
Interest cost	18,819			19,494			20,019			1,561			1,766			1,836
Expected return on plan assets	(28,082		)	(30,302		)	(32,404		)	—			—			—
Amortization of prior service cost (credit)	446			210			305			(68		)	(373		)	(564		)
Recognized losses	10,557			10,791			15,004			276			535			1,011
Curtailment gain	(7,217		)	—			—			—			—			—
Settlement (gain) loss	(119		)	—			9,939			—			—			—
Net periodic benefit cost	$	459		$	5,588		$	18,371		$	1,852		$	2,050		$	2,428

In 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 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 resultant pre-tax settlement charge of $9,856 represents accelerated amortization of actuarial losses and is included the settlement loss above. This settlement charge was reflected within costs of sales and selling and administrative expenses within the Consolidated Statements of Income.

The Closure of the Company's FOBOHA facility located in Muri, Switzerland, as discussed above, resulted in a pre-tax curtailment gain of $7,217 during the 2017 period. See Note 8 of the Consolidated Financial Statements.

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 2018 are $11,222 and $562, 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 2018 are $641 and $20, respectively.

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



	2017		2016		2015
U.S. plans:
Discount rate	4.50	%	4.65	%	4.25	%
Long-term rate of return	7.75	%	8.25	%	8.25	%
Increase in compensation	2.56	%	3.71	%	3.71	%
Non-U.S. plans:
Discount rate	1.60	%	2.80	%	2.74	%
Long-term rate of return	3.59	%	4.73	%	5.00	%
Increase in compensation	2.29	%	2.71	%	2.72	%

The expected long-term rate of return is based on consideration of projected rates of return and the historical rates of return of published indices that reflect the plans’ target asset allocation.

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 6.86% and 6.44% at December 31, 2017 and 2016, respectively, decreasing gradually to a rate of 4.50% by December 31, 2038. 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	$	261	$	(242	)
Effect on postretirement benefit cost	11		(10		)

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:	2017		2016		2015
Swedish Pension Plan	739		$	673	$	343
Total Contributions	$	739	$	673	$	343