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 17 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 $6,921, $6,644 and $5,907 in 2018, 2017 and 2016, respectively.

Defined benefit pension plans in the U.S. cover a majority of the Company’s U.S. employees at the Associated Spring and Force & Motion Control (formerly "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, 2018 and 2017, respectively. Reconciliations of the obligations and funded status of the plans follow:



	2018									2017
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Benefit obligation, January 1	$	415,369		$	82,741		$	498,110		$	389,613		$	104,339		$	493,952
Service cost	4,290			1,671			5,961			3,931			2,124			6,055
Interest cost	15,875			1,508			17,383			17,151			1,668			18,819
Amendments	—			826			826			1,233			27			1,260
Actuarial (gain) loss	(22,193		)	(2,256		)	(24,449		)	28,350			(4,397		)	23,953
Benefits paid	(25,007		)	(6,607		)	(31,614		)	(24,909		)	(4,240		)	(29,149		)
Transfers in	—			3,462			3,462			—			2,743			2,743
Plan curtailments	—			—			—			—			(7,030		)	(7,030		)
Plan settlements	—			—			—			—			(21,074		)	(21,074		)
Participant contributions	—			1,120			1,120			—			1,355			1,355
Foreign exchange rate changes	—			(3,158		)	(3,158		)	—			7,226			7,226
Benefit obligation, December 31	388,334			79,307			467,641			415,369			82,741			498,110
Fair value of plan assets, January 1	375,378			79,060			454,438			331,260			85,652			416,912
Actual return on plan assets	(30,681		)	(1,928		)	(32,609		)	56,131			6,150			62,281
Company contributions	2,925			1,807			4,732			12,896			2,027			14,923
Participant contributions	—			1,120			1,120			—			1,355			1,355
Benefits paid	(25,007		)	(6,607		)	(31,614		)	(24,909		)	(4,240		)	(29,149		)
Plan settlements	—			—			—			—			(20,857		)	(20,857		)
Transfers in	—			3,462			3,462			—			2,743			2,743
Foreign exchange rate changes	—			(3,307		)	(3,307		)	—			6,230			6,230
Fair value of plan assets, December 31	322,615			73,607			396,222			375,378			79,060			454,438
Underfunded status, December 31	$	(65,719	)	$	(5,700	)	$	(71,419	)	$	(39,991	)	$	(3,681	)	$	(43,672	)

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 9 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:



	2018						2017
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	388,334	$	42,000	$	430,334	$	311,320	$	40,931	$	352,251
Fair value of plan assets	322,615		28,595		351,210		267,087		26,205		293,292

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



	2018						2017
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Projected benefit obligation	$	388,334	$	42,000	$	430,334	$	40,572	$	40,931	$	81,503
Accumulated benefit obligation	378,285		41,946		420,231		40,090		40,877		80,967
Fair value of plan assets	322,615		28,595		351,210		4,797		26,205		31,002

The accumulated benefit obligation for all defined benefit pension plans was $457,539 and $485,777 at December 31, 2018 and 2017, respectively.

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



	2018									2017
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Other assets	$	—		$	7,705		$	7,705		$	4,242		$	11,045		$	15,287
Accrued liabilities	2,826			378			3,204			2,823			407			3,230
Accrued retirement benefits	62,893			13,027			75,920			41,410			14,319			55,729
Accumulated other non-owner changes to equity, net	(121,927		)	(14,047		)	(135,974		)	(84,990		)	(13,016		)	(98,006		)

Amounts related to pensions recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2018 and 2017, respectively, consist of:



	2018									2017
	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Net actuarial loss	$	(119,601	)	$	(13,637	)	$	(133,238	)	$	(82,736	)	$	(13,237	)	$	(95,973	)
Prior service costs	(2,326		)	(410		)	(2,736		)	(2,254		)	221			(2,033		)
	$	(121,927	)	$	(14,047	)	$	(135,974	)	$	(84,990	)	$	(13,016	)	$	(98,006	)

The accompanying balance sheets reflect the underfunded status of the Company’s other postretirement benefit plans at December 31, 2018 and 2017. Reconciliations of the obligations and underfunded status of the plans follow:



	2018			2017
Benefit obligation, January 1	$	37,570		$	36,853
Service cost	85			83
Interest cost	1,358			1,561
Actuarial (gain) loss	(3,791		)	3,806
Benefits paid	(3,435		)	(7,251		)
Participant contributions	1,280			2,209
Foreign exchange rate changes	9			309
Benefit obligation, December 31	33,076			37,570
Fair value of plan assets, January 1	—			—
Company contributions	2,155			5,042
Participant contributions	1,280			2,209
Benefits paid	(3,435		)	(7,251		)
Fair value of plan assets, December 31	—			—
Underfunded status, December 31	$	33,076		$	37,570

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



	2018			2017
Accrued liabilities	$	5,414		$	5,064
Accrued retirement benefits	27,662			32,506
Accumulated other non-owner changes to equity, net	(2,716		)	(5,838		)

Amounts related to other postretirement benefits recognized in accumulated other non-owner changes to equity, net of tax, at December 31, 2018 and 2017 consist of:



	2018			2017
Net actuarial loss	$	(2,618	)	$	(5,746	)
Prior service loss	(98		)	(92		)
	$	(2,716	)	$	(5,838	)

The sources of changes in accumulated other non-owner changes to equity, net, during 2018 were:



	Pension			Other Postretirement Benefits
Prior service cost	$	(669	)	$	—
Net (loss) gain	(29,108		)	3,800
Amortization of prior service costs	423			15
Amortization of actuarial loss	8,878			428
Foreign exchange rate changes	821			(14		)
Amounts reclassified from accumulated other comprehensive income to retained earnings^(A)	(18,313		)	(1,107		)
	$	(37,968	)	$	3,122

(A) This amount represents the reclassification of stranded tax effects resulting from the Act, as permitted by amended guidance issued by the FASB in February 2018. See Note 1.

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



	2018		2017
U.S. plans:
Discount rate	4.40	%	3.90	%
Increase in compensation	2.56	%	2.56	%
Non-U.S. plans:
Discount rate	2.07	%	1.90	%
Increase in compensation	2.72	%	2.17	%

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 2018: 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, 2018 and 2017, 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, 2018
Cash and short-term investments	$	3,750	$	3,750	$	—	$	—
Equity securities:
U.S. large-cap	36,821		—		36,821		—
U.S. mid-cap	13,337		13,337		—		—
U.S. small-cap	13,244		13,244		—		—
International equities	123,084		—		123,084		—
Global equity	43,337		43,337		—		—
Fixed income securities:
U.S. bond funds	117,249		—		117,249		—
International bonds	42,920		—		42,920		—
Other	2,480		—		—		2,480
	$	396,222	$	73,668	$	320,074	$	2,480
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

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 $4,706 to the pension plans in 2019. 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 2019.

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



	Pensions		Other Postretirement Benefits
2019	$	29,550	$	3,515
2020	29,414		3,332
2021	29,573		3,065
2022	29,224		2,892
2023	29,042		2,688
Years 2024-2028	144,754		11,093
Total	$	291,557	$	26,585

Pension and other postretirement benefit costs consist of the following:



	Pensions									Other Postretirement Benefits
	2018			2017			2016			2018		2017			2016
Service cost	$	5,961		$	6,055		$	5,395		$	85	$	83		$	122
Interest cost	17,383			18,819			19,494			1,358		1,561			1,766
Expected return on plan assets	(29,900		)	(28,082		)	(30,302		)	—		—			—
Amortization of prior service cost (credit)	560			446			210			20		(68		)	(373		)
Recognized losses	11,628			10,557			10,791			561		276			535
Curtailment gain	—			(7,217		)	—			—		—			—
Settlement gain	—			(119		)	—			—		—			—
Net periodic benefit cost	$	5,632		$	459		$	5,588		$	2,024	$	1,852		$	2,050

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 9 of the Consolidated Financial Statements.

The components of net periodic benefit cost other than the service cost component are included in Other Expense (Income) on the Consolidated Statements of Income. The amended guidance related to the presentation of net periodic pension and other postretirement benefit cost (see Note 1) provides for a practical expedient that allows use of amounts disclosed in prior year filings for the prior year comparable periods as an estimation basis for applying the retrospective presentation requirements. The Company has elected to use this practical expedient.

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 2019 are $8,618 and $404, respectively. The estimated net actuarial loss and prior service cost for other defined benefit postretirement plans that will be amortized from accumulated other non-owner changes to equity into net periodic benefit cost in 2019 are $40 and $25, respectively.

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



	2018		2017		2016
U.S. plans:
Discount rate	3.90	%	4.50	%	4.65	%
Long-term rate of return	7.75	%	7.75	%	8.25	%
Increase in compensation	2.56	%	2.56	%	3.71	%
Non-U.S. plans:
Discount rate	1.90	%	1.60	%	2.80	%
Long-term rate of return	4.09	%	3.59	%	4.73	%
Increase in compensation	2.17	%	2.29	%	2.71	%

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 7.30% and 6.86% at December 31, 2018 and 2017, 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	$	215	$	(200	)
Effect on postretirement benefit cost	9		(8		)

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:	2018		2017		2016
Swedish Pension Plan	792		$	739	$	673
Total Contributions	$	792	$	739	$	673