Pension and Postretirement Benefit Costs

9 Months Ended

Sep. 30, 2020

Pension and Postretirement Benefit Costs

The components of net periodic pension and postretirement benefit costs, excluding the service cost for benefits earned, are included in “Net periodic benefit costs, excluding service cost” in the unaudited condensed consolidated statements of operations.

Net periodic pension (benefit) cost included the following components:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Dollars in millions)
Service cost for benefits earned	$	0.1	$	0.5	$	0.2	$	1.5
Interest cost on projected benefit obligation	7.0		8.4		21.0		25.1
Expected return on plan assets	(7.5)		(7.9)		(22.3)		(23.5)

Net periodic pension (benefit) cost	$	(0.4)	$	1.0	$	(1.1)	$	3.1

Annual contributions to the qualified plans are made in accordance with minimum funding standards and the Company’s agreement with the Pension Benefit Guaranty Corporation. Funding decisions also consider certain funded status thresholds defined by the Pension Protection Act of 2006 (generally 80%). As of September 30, 2020, the Company’s qualified plans were expected to be at or above the Pension Protection Act thresholds. Minimum funding standards are legislated by ERISA and are modified by pension funding stabilization provisions included in the Moving Ahead for Progress in the 21st Century Act of 2012, the Highway and Transportation Funding Act of 2014 and the Bipartisan Budget Act of 2015. The Company is not required to make any contributions to its qualified pension plans in 2020 based on minimum funding requirements and does not expect to make any discretionary contributions in 2020.

Net periodic postretirement benefit cost included the following components:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Dollars in millions)
Service cost for benefits earned	$	1.1	$	1.2	$	3.3	$	3.6
Interest cost on accumulated postretirement benefit obligation	5.4		6.3		16.3		18.9
Expected return on plan assets	(0.3)		(0.2)		(1.1)		(0.4)
Amortization of prior service credit	(2.2)		(2.2)		(6.6)		(6.6)
Net actuarial loss	13.0		—		13.0		—
Net periodic postretirement benefit cost	$	17.0	$	5.1	$	24.9	$	15.5

During September 2020, the Company announced changes to one of its postretirement health care benefit plans. Effective January 1, 2021, the Company will no longer subsidize medical costs for Medicare eligible individuals or provide life insurance to retirees. The Company will provide non-Medicare eligible retirees and eligible dependents a health reimbursement arrangement.

The changes triggered a remeasurement event that resulted in a mark-to-market loss of $13.0 million recorded to “Net mark-to-market adjustment on actuarially determined liabilities” during the three and nine months ended September 30, 2020, primarily due to the decrease in discount rate from 3.40% at December 31, 2019 to 2.70% at September 30, 2020. The impact of the changes on future benefits reduced the Company’s accumulated postretirement benefit obligation by $174.5 million. The reduction was attributable to the elimination of health care benefits upon covered individuals’ attainment of Medicare eligibility. The reduction in liability was recorded with an offsetting balance in “Accumulated other comprehensive income,” which is being amortized to earnings over an average remaining service period to full eligibility for participating employees of 5.1 years.

In October 2018, the Company amended one of its postretirement health care benefit plans which reduced its accumulated postretirement benefit obligation, as further described in Note 17. “Postretirement Health Care and Life Insurance Benefits” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The reduction in liability has been recorded with an offsetting balance in “Accumulated other comprehensive income,” net of a deferred tax provision, and is being amortized to earnings over an average remaining service period to full eligibility for participating employees.

In 2018, the Company established a Voluntary Employees Beneficiary Association (VEBA) trust to pre-fund a portion of benefits for non-represented retirees. The Company does not expect to make any discretionary contributions to the VEBA in 2020 and plans to utilize VEBA assets to make benefit payments.