Retirement Benefits

We sponsor funded and unfunded pension plans and other postretirement benefit plans for our employees. The pension plans provide for monthly pension payments to eligible employees after retirement. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees are primarily based on specified benefit amounts and years of service. Effective July 1, 2010, we closed participation in our U.S. and Canada pension plans to employees hired after June 30, 2010. Employees hired after June 30, 2010 are instead eligible to participate in defined contribution plans. Effective October 1, 2010, we also closed participation in our U.K. pension plan to employees hired after September 30, 2010 and these employees are now eligible for a defined contribution plan. Benefits to be provided to plan participants hired before July 1, 2010 or October 1, 2010, respectively, are not affected by these changes. Our policy with respect to funding our pension obligations is to fund at a minimum the amount required by applicable laws and governmental regulations. We were not required to make contributions to satisfy minimum funding requirements in our U.S. pension plans in 2018, 2017 or 2016. We did not make voluntary contributions to our U.S. qualified pension plan in 2018. We made a voluntary contribution of $200.0 million to our U.S. qualified pension plan in 2017. We did not make voluntary contributions to our U.S. qualified pension plan in 2016.

We sponsor various defined contribution savings plans that allow eligible employees to contribute a portion of their income in accordance with plan specific guidelines. We contribute to savings plans and/or will match a percentage of the employee contributions up to certain limits. The Company contributions to defined contribution plans are based on age and years of service and range from 3% to 7% of eligible compensation. Expense related to these plans was $47.0 million in 2018, $41.5 million in 2017 and $38.6 million in 2016.

Other postretirement benefits are primarily in the form of retirement medical plans that cover most of our employees in the U.S. and Canada and provide for the payment of certain medical costs of eligible employees and dependents after retirement.

Net Periodic Benefit Cost

The components of net periodic benefit cost (income) are (in millions):



	Pension Benefits									Other Postretirement Benefits
	2018			2017			2016			2018			2017			2016
Service cost	$	88.9		$	97.0		$	88.0		$	1.3		$	1.4		$	1.3
Interest cost	155.3			151.6			169.5			2.4			2.5			3.3
Expected return on plan assets	(244.8		)	(225.2		)	(218.3		)	—			—			—
Amortization:
Prior service cost (credit)	0.6			(3.7		)	(2.9		)	(5.5		)	(6.1		)	(11.1		)
Net actuarial loss	113.4			152.9			124.5			1.7			2.3			2.3
Special termination benefit	—			0.5			0.5			—			—			—
Settlements	0.7			2.8			—			—			—			—
Net periodic benefit cost (income)	$	114.1		$	175.9		$	161.3		$	(0.1	)	$	0.1		$	(4.2	)

Significant assumptions used in determining net periodic benefit cost (income) are (in weighted averages):



	Pension Benefits						Other Postretirement Benefits
	2018		2017		2016		2018		2017		2016
U.S. Plans
Discount rate	3.90	%	3.75	%	4.55	%	3.40	%	3.10	%	3.85	%
Expected return on plan assets	7.50	%	7.50	%	7.50	%	—		—		—
Compensation increase rate	3.50	%	3.50	%	3.75	%	—		—		—
Non-U.S. Plans
Discount rate	2.30	%	1.77	%	2.67	%	3.20	%	2.80	%	3.60	%
Expected return on plan assets	5.19	%	5.12	%	5.21	%	—		—		—
Compensation increase rate	2.99	%	2.86	%	3.11	%	—		—		—

Net Benefit Obligation

Benefit obligation, plan assets, funded status and net liability information is summarized as follows (in millions):



	Pension Benefits						Other Postretirement Benefits
	2018			2017			2018			2017
Benefit obligation at beginning of year	$	4,585.0		$	4,785.9		$	77.8		$	86.9
Service cost	88.9			97.0			1.3			1.4
Interest cost	155.3			151.6			2.4			2.5
Actuarial gains	(257.1		)	(221.9		)	(8.5		)	(3.8		)
Plan amendments	(0.3		)	(6.9		)	—			—
Plan participant contributions	3.7			3.9			3.4			3.4
Benefits paid	(277.7		)	(251.9		)	(13.5		)	(13.4		)
Special termination benefit	—			0.5			—			—
Settlements	(10.4		)	(13.8		)	—			—
Curtailments	(3.5		)	(1.0		)	—			—
Currency translation and other	(24.4		)	41.6			(0.5		)	0.8
Benefit obligation at end of year	4,259.5			4,585.0			62.4			77.8
Plan assets at beginning of year	3,788.3			3,447.9			—			—
Actual return on plan assets	220.6			315.5			—			—
Company contributions	50.3			254.9			10.1			10.0
Plan participant contributions	3.7			3.9			3.4			3.4
Benefits paid	(277.7		)	(251.9		)	(13.5		)	(13.4		)
Settlements	(10.4		)	(13.8		)	—			—
Currency translation and other	(20.0		)	31.8			—			—
Plan assets at end of year	3,754.8			3,788.3			—			—
Funded status of plans	$	(504.7	)	$	(796.7	)	$	(62.4	)	$	(77.8	)



Net amount on balance sheet consists of:
Other assets	$	30.6		$	10.6		$	—		$	—
Compensation and benefits	(12.3		)	(11.7		)	(10.1		)	(9.5		)
Retirement benefits	(523.0		)	(795.6		)	(52.3		)	(68.3		)
Net amount on balance sheet	$	(504.7	)	$	(796.7	)	$	(62.4	)	$	(77.8	)

The actuarial gains recorded in 2018 were primarily the result of an increase in the discount rate for U.S. Plans, which increased from 3.90% in 2017 to 4.35% in 2018. The actuarial gains recorded in 2017 were primarily the result of an increase in the discount rate for U.S. Plans, which increased from 3.75% in 2016 to 3.90% in 2017.

Amounts included in accumulated other comprehensive loss, net of tax, at September 30, 2018 and 2017 which have not yet been recognized in net periodic benefit cost are as follows (in millions):



	Pension Benefits				Other Postretirement Benefits
	2018		2017		2018			2017
Prior service cost (credit)	$	4.3	$	5.3	$	(8.2	)	$	(12.2	)
Net actuarial loss	657.6		921.9		4.4			12.0
Total	$	661.9	$	927.2	$	(3.8	)	$	(0.2	)

During 2018, we recognized prior service credits of $4.9 million ($3.8 million net of tax) and net actuarial losses of $115.1 million ($84.3 million net of tax) in pension and other postretirement net periodic benefit cost, which were included in accumulated other comprehensive loss at September 30, 2017.

The accumulated benefit obligation for our pension plans was $3,962.3 million and $4,252.2 million at September 30, 2018 and 2017, respectively.

Information regarding our pension plans with projected benefit obligations in excess of the fair value of plan assets (underfunded plans) at September 30, 2018 and 2017 are as follows (in millions):



	2018		2017
Projected benefit obligation	$	3,755.5	$	4,280.9
Fair value of plan assets	3,220.2		3,473.6

Information regarding our pension plans with accumulated benefit obligations in excess of the fair value of plan assets (underfunded plans) at September 30, 2018 and 2017 are as follows (in millions):



	2018		2017
Accumulated benefit obligation	$	679.7	$	3,956.8
Fair value of plan assets	392.9		3,473.6

Significant assumptions used in determining the benefit obligations are (in weighted averages):



	Pension Benefits				Other Postretirement Benefits
	2018		2017		2018		2017
U.S. Plans
Discount rate	4.35	%	3.90	%	4.15	%	3.40	%
Compensation increase rate	3.50	%	3.50	%	—		—
Health care cost trend rate⁽¹⁾	—		—		6.50	%	6.50	%
Non-U.S. Plans
Discount rate	2.48	%	2.30	%	3.30	%	3.20	%
Compensation increase rate	3.02	%	2.99	%	—		—
Health care cost trend rate⁽¹⁾	—		—		4.50	%	4.50	%

⁽¹⁾

The health care cost trend rate reflects the estimated increase in gross medical claims costs. As a result of the plan amendment adopted effective October 1, 2002, our effective per person retiree medical cost increase is zero percent beginning in 2005 for the majority of our postretirement benefit plans. For our other plans, we assume the gross health care cost trend rate will decrease to 5.50% in 2020 for U.S. Plans and will not change in 2019 for Non-U.S. Plans.

Estimated Future Payments

We expect to contribute $32.0 million related to our global pension plans and $10.3 million to our postretirement benefit plans in 2019.

The following benefit payments, which include employees’ expected future service, as applicable, are expected to be paid (in millions):



	Pension Benefits		Other Postretirement Benefits
2019	$	288.9	$	10.3
2020	268.5		6.8
2021	282.1		5.5
2022	301.7		5.1
2023	278.4		4.8
2024 – 2028	1,417.0		19.8

Plan Assets

In determining the expected long-term rate of return on assets assumption, we consider actual returns on plan assets over the long term, adjusted for forward-looking considerations, such as inflation, interest rates, equity performance and the active management of the plan’s invested assets. We also considered our current and expected mix of plan assets in setting this assumption. This resulted in the selection of the weighted average long-term rate of return on assets assumption. Our global weighted-average targeted and actual asset allocations at September 30, by asset category, are:



	Allocation			Target	September 30,
Asset Category	Range			Allocations	2018	2017
Equity securities	40%	–	65%	55%	53%	50%
Debt securities	30%	–	50%	39%	39%	42%
Other	0%	–	15%	6%	8%	8%

The investment objective for pension funds related to our defined benefit plans is to meet the plan’s benefit obligations, while maximizing the long-term growth of assets without undue risk. We strive to achieve this objective by investing plan assets within target allocation ranges and diversification within asset categories. Target allocation ranges are guidelines that are adjusted periodically based on ongoing monitoring by plan fiduciaries. Investment risk is controlled by rebalancing to target allocations on a periodic basis and ongoing monitoring of investment manager performance relative to the investment guidelines established for each manager.

As of September 30, 2018 and 2017, our pension plans do not directly own our common stock.

In certain countries where we operate, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations. In these instances, we typically make benefit payments directly from cash as they become due, rather than by creating a separate pension fund.

The valuation methodologies used for our pension plans’ investments measured at fair value are described as follows. There have been no changes in the methodologies used at September 30, 2018 and 2017.

Common stock — Valued at the closing price reported on the active market on which the individual securities are traded.

Mutual funds — Valued at the net asset value (NAV) reported by the fund.

Corporate debt — Valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.

Government securities — Valued at the most recent closing price on the active market on which the individual securities are traded or, absent an active market, utilizing observable inputs such as closing prices in less frequently traded markets.

Common collective trusts — Valued at the NAV as determined by the custodian of the fund. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units outstanding.

Private equity and alternative equity — Valued at the estimated fair value, as determined by the respective fund manager, based on the NAV of the investment units held at year end, which is subject to judgment.

Real estate funds — Consists of the real estate funds, which provide an indirect investment into a diversified and multi-sector portfolio of property assets. Publicly-traded real estate funds are valued at the most recent closing price reported on the SIX Swiss Exchange. The remainder is valued at the estimated fair value, as determined by the respective fund manager, based on the NAV of the investment units held at year end, which is subject to judgment.

Insurance contracts — Valued at the aggregate amount of accumulated contribution and investment income less amounts used to make benefit payments and administrative expenses which approximates fair value.

Other — Consists of other fixed income investments and common collective trusts with a mix of equity and fixed income underlying assets. Other fixed income investments are valued at the most recent closing price reported in the markets in which the individual securities are traded, which may be infrequently.

Refer to Note 1 for further information regarding levels in the fair value hierarchy.

In accordance with ASC Subtopic 820-10, certain investments that are measured at fair value using the NAV (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the consolidated financial statements. The guidance under this subtopic was effective for us beginning in fiscal 2017.

The following table presents our pension plans’ investments measured at fair value as of September 30, 2018:



	Level 1		Level 2		Level 3		Total
U.S. Plans
Cash and cash equivalents	$	2.0	$	—	$	—	$	2.0
Equity securities:
Mutual funds	222.1		—		—		222.1
Common stock	964.7		—		—		964.7
Common collective trusts	—		422.2		—		422.2
Fixed income securities:
Corporate debt	—		627.7		—		627.7
Government securities	242.9		105.8		—		348.7
Common collective trusts	—		141.4		—		141.4
Other types of investments:
Insurance contracts	—		—		0.9		0.9
Total U.S. Plans investments in fair value hierarchy	$	1,431.7	$	1,297.1	$	0.9	2,729.7
U.S. Plans investments measured at NAV:
Private equity							36.5
Alternative equity							61.1
Total U.S. Plans investments							2,827.3
Non-U.S. Plans
Cash and cash equivalents	$	12.8	$	—	$	—	12.8
Equity securities:
Common stock	59.2		—		—		59.2
Common collective trusts	—		320.7		—		320.7
Fixed income securities:
Corporate debt	—		33.8		—		33.8
Government securities	1.1		15.5		—		16.6
Common collective trusts	—		310.4		—		310.4
Other types of investments:
Real estate funds	—		80.5		—		80.5
Insurance contracts	—		—		79.1		79.1
Other	—		—		4.6		4.6
Total Non-U.S. Plans investments in fair value hierarchy	$	73.1	$	760.9	$	83.7	917.7
Non-U.S. Plans investments measured at NAV:
Real estate funds							9.8
Total Non-U.S. Plans investments							927.5
Total investments measured at fair value							$	3,754.8

The following table presents our pension plans’ investments measured at fair value as of September 30, 2017:



	Level 1		Level 2		Level 3		Total
U.S. Plans
Cash and cash equivalents	$	1.1	$	—	$	—	$	1.1
Equity securities:
Mutual funds	230.1		—		—		230.1
Common stock	911.7		—		—		911.7
Common collective trusts	—		411.2		—		411.2
Fixed income securities:
Corporate debt	—		663.7		—		663.7
Government securities	247.0		109.4		—		356.4
Common collective trusts	—		204.1		—		204.1
Other types of investments:
Insurance contracts	—		—		0.9		0.9
Total U.S. Plans investments in fair value hierarchy	$	1,389.9	$	1,388.4	$	0.9	2,779.2
U.S. Plans investments measured at NAV:
Private equity							49.9
Alternative equity							61.0
Total U.S. Plans investments							2,890.1
Non-U.S. Plans
Cash and cash equivalents	$	3.3	$	—	$	—	3.3
Equity securities:
Common stock	57.3		—		—		57.3
Common collective trusts	—		311.1		—		311.1
Fixed income securities:
Corporate debt	—		37.0		—		37.0
Government securities	1.2		14.8		—		16.0
Common collective trusts	—		301.1		—		301.1
Other types of investments:
Real estate funds	—		86.6		—		86.6
Insurance contracts	—		—		71.5		71.5
Other	—		—		4.8		4.8
Total Non-U.S. Plans investments in fair value hierarchy	$	61.8	$	750.6	$	76.3	888.7
Non-U.S. Plans investments measured at NAV:
Real estate funds							9.5
Total Non-U.S. Plans investments							898.2
Total investments measured at fair value							$	3,788.3

The table below sets forth a summary of changes in fair market value of our pension plans’ Level 3 assets for the year ended September 30, 2018:



	Balance October 1, 2017		Realized Gains (Losses)		Unrealized Gains (Losses)			Purchases, Sales, Issuances, and Settlements, Net		Balance September 30, 2018
U.S. Plans
Insurance contracts	$	0.9	$	—	$	—		$	—	$	0.9
Non-U.S. Plans
Insurance contracts	71.5		—		(0.4		)	8.0		79.1
Other	4.8		—		(0.2		)	—		4.6
	$	77.2	$	—	$	(0.6	)	$	8.0	$	84.6

The table below sets forth a summary of changes in fair market value of our pension plans’ Level 3 assets for the year ended September 30, 2017:



	Balance October 1, 2016		Realized Gains (Losses)		Unrealized Gains (Losses)			Purchases, Sales, Issuances, and Settlements, Net		Balance September 30, 2017
U.S. Plans
Insurance contracts	$	0.9	$	—	$	—		$	—	$	0.9
Non-U.S. Plans
Insurance contracts	79.7		—		(13.4		)	5.2		71.5
Other	4.8		—		—			—		4.8
	$	85.4	$	—	$	(13.4	)	$	5.2	$	77.2

In August 2018, the FASB issued a new standard which adds, removes and modifies various disclosures for defined benefit and other postretirement benefit plans. This standard is effective for us for reporting periods beginning October 1, 2020; however, we elected to adopt this standard early as of September 30, 2018 and applied the changes retrospectively to all periods presented herein. The adoption of this standard did not have a material impact on our disclosures.