Note 14—Post Retirement Benefit Plans

Defined Contribution Plans

The Company sponsors various defined contribution plans that cover certain domestic and international employees. The Company may make contributions to these plans at its discretion. The Company contributed $8.4 million, $6.4 million and $6.0 million to such plans in the years ended December 31, 2018, 2017 and 2016, respectively.

Defined Benefit Plans

Substantially all of the Company’s employees in Switzerland, France and Japan, as well as certain employees in Germany, are covered by Company‑sponsored defined benefit pension plans. Retirement benefits are generally earned based on years of service and compensation during active employment. Eligibility is generally determined in accordance with local statutory requirements; however, the level of benefits and terms of vesting varies among plans.

The components of net periodic benefit costs for the years ended December 31, 2018, 2017 and 2016 were as follows (in millions):


	2018		2017		2016
Components of net periodic benefit costs:
Service cost	$	7.5	$	7.8	$	6.8
Interest cost		2.0		1.7		2.2
Expected return on plan assets		(1.9)		(1.7)		(1.8)
Settlement loss recognized		—		—		—
Amortization of net loss		3.8		4.8		4.1
Net periodic benefit costs	$	11.4	$	12.6	$	11.3

The Company measures its benefit obligation and the fair value of plan assets as of December 31st each year. The changes in benefit obligations and plan assets under the defined benefit pension plans, projected benefit obligation and funded status of the plans were as follows at December 31, (in millions):


	2018		2017
Change in benefit obligation:
Benefit obligation at beginning of year	$	228.0	$	210.1
Service cost		7.5		7.8
Interest cost		2.0		1.7
Plan participant contributions		4.3		4.1
Plan amendments		(1.3)		—
Plan settlements		(0.4)		—
Benefits paid		(2.0)		(3.6)
Actuarial loss (gain)		(16.2)		(3.6)
Premiums paid		(1.7)		(1.5)
Impact of foreign currency exchange rates		(3.5)		13.0
Benefit obligation at end of year		216.7		228.0
Change in plan assets:
Fair value of plan assets at beginning of year		120.3		105.9
Return on plan assets		(0.6)		5.0
Plan participant and employer contributions		10.2		9.5
Benefits paid		(2.2)		(3.6)
Plan settlements		(0.4)		—
Premiums paid		(1.5)		(1.5)
Impact of foreign currency exchange rates		(1.2)		5.0
Fair value of plan assets at end of year		124.6		120.3
Net under funded status	$	(92.1)	$	(107.7)

In March 2017, the FASB issued ASU No. 2017-07, Compensation- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This new standard intends to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new standard requires the service cost component of net periodic cost be reported in the same line item(s) as other employee compensation costs and all other components of the net periodic cost be reported in the condensed consolidated statements of income and comprehensive income below operating income. The Company adopted this guidance on January 1, 2018 on a retrospective basis. The Company reclassified the non-service pension cost previously reported in operations of $4.8 million and $4.6 million for the years ended December 31, 2017 and 2016, respectively. These amounts were previously reported in cost of sales, selling, general, and administrative, and research and development expenses in the consolidated statements of income and comprehensive income.

The accumulated benefit obligation for the defined benefit pension plans is $206.9 million and $217.2 million at December 31, 2018 and 2017, respectively. All defined benefit pension plans have an accumulated benefit obligation and projected benefit obligation in excess of plan assets at December 31, 2018 and 2017.

The following amounts were recognized in the accompanying consolidated balance sheets for the Company’s defined benefit plans at December 31, (in millions):


	2018		2017
Current liabilities	$	(1.6)	$	(2.1)
Non-current liabilities		(90.5)		(105.6)
Net benefit obligation	$	(92.1)	$	(107.7)

The following pre‑tax amounts were recognized in accumulated other comprehensive income for the Company’s defined benefit plans at December 31, (in millions):


	2018		2017
Reconciliation of amounts recognized in the consolidated balance sheets:
Prior service cost	$	(6.9)	$	(9.7)
Net actuarial loss		(32.0)		(48.9)
Accumulated other comprehensive loss		(38.9)		(58.6)
Accumulated contributions below net periodic benefit cost		(53.2)		(49.1)
Net amount recognized	$	(92.1)	$	(107.7)

The amount in accumulated other comprehensive income at December 31, 2018 expected to be recognized as amortization of net loss within net periodic benefit cost in 2019 is $1.9 million.

For the defined benefit pension plans, the Company uses a corridor approach to amortize actuarial gains and losses. Under this approach, net actuarial gains or losses in excess of ten percent of the larger of the projected benefit obligation or the fair value of plan assets are amortized over the average remaining service of active participants who are expected to receive benefits under the plans.

The range of assumptions used for defined benefit pension plans reflects the different economic environments within the various countries. The range of assumptions used to determine the projected benefit obligations for the years ended December 31, are as follows:


	2018	2017	2016
Discount rates	0.2%-2.3%	0.2%-2.1%	0.2%-2.1%
Expected return on plan assets	0.0%-3.0%	0.0%-3.0%	0.0%-3.0%
Expected rate of compensation increase	1.0%-3.0%	1.0%-3.0%	1.0%-3.0%

To determine the expected long‑term rate of return on pension plan assets, the Company considers current asset allocations, as well as historical and expected returns on various asset categories of plan assets. For the defined benefit pension plans, the Company applies the expected rate of return to a market‑related value of assets, which stabilizes variability in assets to which the expected return is applied.

Asset Allocations by Asset Category

The fair value of the Company’s pension plan assets at December 31, 2018 and 2017, by asset category and by level in the fair value hierarchy, is as follows (in millions):


			Quoted Prices in		Significant Other		Significant
			Active Markets		Observable Inputs		Unobservable Inputs
December 31, 2018	Total		Available (Level 1)		(Level 2)		(Level 3)
Plan Assets:
Group BPCE Life (a)	$	0.8	$	—	$	0.8	$	—
Swiss Life Collective BVG Foundation (b)		123.8		—		123.8		—
Total plan assets	$	124.6	$	—	$	124.6	$	—


			Quoted Prices in		Significant Other		Significant
			Active Markets		Observable Inputs		Unobservable Inputs
December 31, 2017	Total		Available (Level 1)		(Level 2)		(Level 3)
Plan Assets:
Group BPCE Life (a)	$	1.1	$	—	$	1.1	$	—
Swiss Life Collective BVG Foundation (b)		119.2		—		119.2		—
Total plan assets	$	120.3	$	—	$	120.3	$	—

(a)

The Company’s pension plan in France is invested in a larger fund that invests in a variety of instruments. The assets are not directly dedicated to the French pension plan. The Group BPCE Life fund invests in debt securities of foreign corporations and governments, equity securities of foreign government funds and private real estate funds.

(b)

The Company’s pension plan in Switzerland is outsourced to Swiss Life AG, an outside insurance provider. Under the insurance contract, the plan assets are invested in Swiss Life Collective BVG Foundation (the Foundation), which is an umbrella fund for which the retirement savings and interest rates are guaranteed a minimum of 1.0% and 1.75% for the years ended December 31, 2018 and 2017, respectively, on the mandatory withdrawal portion, as defined by Swiss law, and 0.25% and 0.75% for the years ended December 31, 2018 and 2017, respectively on the non-mandatory portion. The Foundation utilizes plan administrators and investment managers to oversee the investment allocation process, set long-term strategic targets and monitor asset allocations. The target allocations are 75% bonds, including cash, 5% equity investments and 20% real estate and mortgages. Should the Foundation yield a return greater than the guaranteed amounts, the Company, according to Swiss law, shall receive 90% of the additional return with Swiss Life AG retaining 10%. The withdrawal benefits and interest allocations are secured at all times by Swiss Life AG.

Contributions and Estimated Future Benefit Payments

During 2019, the Company expects contributions to be consistent with 2018. The estimated future benefit payments are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2018. The following benefit payments reflect future employee service as appropriate (in millions):


2019	$	2.5
2020		2.8
2021		3.3
2022		3.7
2023		4.4
2024-2028		31.0