We recognize actuarial gains and losses, after consideration of inventory capitalization, in our operating results in the year in which the gains or losses occur. These gains and losses are generally only measured annually as of December 31 and, accordingly, are recorded during the fourth quarter of each year. In the fourth quarter of 2013, we recognized a pre-tax benefit of $44.0 million related to the actuarial gains during the year. We recognized a pre-tax charge of $42.0 million and $83.8 million in the fourth quarter of 2012 and 2011, respectively.

We have several pension plans; however, as of December 31, 2013, only certain foreign plans accrue benefits. The plans generally provide benefit payments using a formula that is based upon employee compensation and length of service. All U.S. defined benefit pension plans are frozen, no longer accrue benefits and are closed to new participants.

We sponsor several unfunded defined benefit post-retirement plans that provide subsidized health care and life insurance benefits to certain retirees and a closed group of eligible employees. In 2009, we adopted changes to our U.S. post-retirement healthcare plan whereby, effective January 1, 2010, the plan, for certain eligible retirees, was discontinued, and benefits were phased out through December 31, 2012. When this plan change was recognized in 2009, prior service cost amortization was calculated to fully amortize the prior service cost by the end of 2012, consistent with the period of continued benefits. Only certain employees hired prior to December 31,1999 are eligible to participate in our subsidized post-retirement health care and life insurance plans.

The following tables present the change in benefit obligation, change in plan assets and components of funded status for defined benefit pension and post-retirement health care benefit plans. Actuarial assumptions that were used are also included.



	Pension Benefits						Health Care Benefits
(In millions)	2013			2012			2013			2012
Change in benefit obligation:
Projected benefit obligation — beginning of year	$	597.2		$	543.5		$	18.9		$	21.9
Service cost	1.7			1.5			—			—
Interest cost	23.9			27.2			0.6			0.8
Actuarial (gain) loss	(35.5		)	63.4			(1.0		)	(2.0		)
Benefits paid	(51.5		)	(39.8		)	(2.0		)	(2.7		)
Other	1.2			1.4			(0.1		)	0.9
Projected benefit obligation — end of year	$	537.0		$	597.2		$	16.4		$	18.9
Projected salary increases	2.8			2.8			—			—
Accumulated benefit obligation	$	534.2		$	594.4		$	16.4		$	18.9
Change in plan assets:
Plan assets — beginning of year	$	410.4		$	335.6		$	—		$	—
Actual return on plan assets	44.9			46.9			—			—
Company contributions	68.0			66.8			1.8			2.0
Plan participants’ contributions	—			—			0.2			0.5
Benefits paid	(51.5		)	(39.8		)	(2.0		)	(2.7		)
Other	0.4			0.9			—			0.2
Plan assets — end of year	$	472.2		$	410.4		$	—		$	—
Under-funded status at end of year	$	(64.8	)	$	(186.8	)	$	(16.4	)	$	(18.9	)

Amounts included in the accompanying Consolidated Balance Sheets are as follows:



	Pension Benefits				Health Care Benefits
(In millions)	2013		2012		2013		2012
Non-current assets	$	1.8	$	—	$	—	$	—
Accrued expenses and other liabilities	4.0		4.0		1.7		1.9
Other non-current liabilities	62.6		182.8		14.7		17.0

Change in accumulated other comprehensive loss before tax:



	Pension Benefits				Health Care Benefits
(In millions)	2013		2012		2013		2012
Prior year	$	0.3	$	0.3	$	—	$	(17.4	)
Prior service credit recognized during year	—		—		—		17.4
Current year	$	0.3	$	0.3	$	—	$	—

As of December 31, 2013 and 2012, we had plans with total projected and accumulated benefit obligations in excess of the related plan assets as follows:



	Pension Benefits				Health Care Benefits
(In millions)	2013		2012		2013		2012
Projected benefit obligation	$	528.5	$	596.4	$	16.4	$	18.9
Accumulated benefit obligation	525.6		593.6		16.4		18.9
Fair value of plan assets	461.9		409.6		—		—

Weighted-average assumptions used to determine benefit obligations at December 31:



	Pension Benefits				Health Care Benefits
	2013		2012		2013		2012
Discount rate	4.83	%	4.12	%	4.38	%	3.71	%
Assumed health care cost trend rates at December 31:
Health care cost trend rate assumed for next year	N/A		N/A		7.02	%	7.39	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	N/A		N/A		4.50	%	4.63	%
Year that the rate reaches the ultimate trend rate	N/A		N/A		2027		2025

Assumed health care cost trend rates have an effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following impact:



(In millions)	One Percentage Point Increase		One Percentage Point Decrease
Effect on total of service and interest cost	$	—	$	—
Effect on post-retirement benefit obligation	1.1		(1.0		)

The following table summarizes the components of net period benefit cost or gain that was recognized during each of the years in the three-year period ended December 31, 2013. Actuarial assumptions that were used are also included.



	Pension Benefits									Health Care Benefits
(In millions)	2013			2012			2011			2013			2012			2011
Components of net periodic benefit (gains) costs:
Service cost	$	1.7		$	1.5		$	1.6		$	—		$	—		$	—
Interest cost	23.9			27.2			28.3			0.6			0.8			1.0
Expected return on plan assets	(37.4		)	(27.6		)	(29.2		)	—			—			—
Amortization of prior service cost	—			—			0.2			—			(17.4		)	(17.4		)
Mark-to-market actuarial net (gains) losses	(43.0		)	44.0			83.4			(1.0		)	(2.0		)	0.4
Net periodic benefit (gain) cost	$	(54.8	)	$	45.1		$	84.3		$	(0.4	)	$	(18.6	)	$	(16.0	)

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



	Pension Benefits						Health Care Benefits
	2013		2012		2011		2013		2012		2011
Discount rate	4.12	%	5.11	%	5.71	%	3.71	%	4.66	%	5.07	%
Expected long-term return on plan assets	8.41	%	8.43	%	8.50	%	—	%	—	%	—	%
Assumed health care cost trend rates at December 31:
Health care cost trend rate assumed for next year	N/A		N/A		N/A		7.39	%	8.35	%	8.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	N/A		N/A		N/A		4.63	%	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	N/A		N/A		N/A		2025		2019		2018

The expected long-term rate of return on pension assets was determined after considering the historical experience of long-term asset returns by asset category, the expected investment portfolio mix and estimated future long-term investment returns. As our funded levels have improved during 2013, we have shifted our U.S. qualified pension assets to a larger fixed income weighting. As a result, we have lowered our weighted average expected return on plan assets to 6.85% in 2014. While this change will lower our expected return on plan assets, our strategy is for our assets to increase/decrease proportionally with our liability such that our funding levels do not deteriorate.

Our pension investment strategy is to diversify the portfolio among asset categories to enhance the portfolio’s risk-adjusted return as well as insulate it from exposure to changes in interest rates. Our asset mix considers the duration of plan liabilities, historical and expected returns of the investments, and the funded status of the plan. The pension asset allocation is reviewed and actively managed based on the funded status of the plan. As the funded status of the plan increases, the asset allocation is adjusted to increase the mix of fixed income investments and match the duration of those investments with the duration of the plan liabilities. Based on the current funded status of the plan, our pension asset investment allocation guidelines are to invest 70% to 80% in fixed income securities, 20% to 30% in equity securities and 0% to 10% in alternative investments and cash. These alternative investments may include funds of multiple asset investment strategies and funds of hedge funds.

The fair values of pension plan assets at December 31, 2013 and 2012, by asset category, are as follows:



	Fair Value of Plan Assets at December 31, 2013								Fair Value of Plan Assets at December 31, 2012
(In millions)	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Asset category
Cash	$	6.6	$	—	$	—	$	6.6	$	3.4	$	—	$	—	$	3.4
Common collective trusts	—		14.8		—		14.8		—		44.9		—		44.9
Large-cap equity	28.4		30.0		—		58.4		43.2		51.1		—		94.3
Mid-cap equity	—		—		—		—		42.3		—		—		42.3
Small-cap equity	22.0		—		—		22.0		39.8		—		—		39.8
International equity	59.6		—		—		59.6		80.6		—		—		80.6
Fixed-income funds	275.5		—		—		275.5		39.3		—		—		39.3
Multi-asset mutual fund	—		—		—		—		32.6		—		—		32.6
Floating rate income funds	35.3		—		—		35.3		33.2		—		—		33.2
Totals	$	427.4	$	44.8	$	—	$	472.2	$	314.4	$	96.0	$	—	$	410.4

Large cap equity funds invest primarily in U.S. publicly-traded equity securities of companies with a market capitalization typically in excess of $10 billion with a focus on growth or value. Mid cap equity funds invest primarily in U.S. publicly-traded equity securities of companies with a market capitalization typically greater than $2 billion but less than $10 billion with a focus on growth or value. Small cap equity funds invest primarily in U.S. publicly-traded equity securities of companies with a market capitalization typically less than $2 billion with a focus on growth or value. International equity funds invest in publicly-traded equity securities of companies predominantly in the United States, developed international countries and emerging markets typically with a market capitalization greater than $2 billion with a focus on growth or value and are invested across the capitalization spectrum. Fixed income funds invest primarily in investment grade fixed income securities. The multi-asset mutual fund strategy is based on a diverse range of investments including, but not limited to, investment grade and high yield bonds, international and emerging market bonds, inflation-indexed bonds, equities and commodities. The floating rate income fund strategy is to invest primarily in a diversified portfolio of first and second lien high-yield senior floating rate loans and other floating rate debt securities. The common collective trust fund invests primarily in cash and other short-term investments, and is used as a temporary investment for our contributions to the pension plans until the contributions are allocated to other investments according to our investment strategy.

The fair value of the common collective trust fund is based on the net asset value per share of the fund, which is based on the fair market value of the underlying fund's assets. Level 2 investments included within large cap equity are commingled trusts and are valued using a net asset value per share that is based on quoted market prices and/or other market data for the same or comparable instruments and transactions of the underlying equity investments. All other investments are Level 1 and are valued based on quoted market prices.

The estimated future benefit payments for our pension and health care plans are as follows:



(In millions)	Pension Benefits		Health Care Benefits
2014	$	39.1	$	1.7
2015	40.0		1.6
2016	39.5		1.6
2017	39.5		1.5
2018	39.8		1.5
2019 through 2023	195.5		6.2

We currently estimate that 2014 employer contributions will be $19.9 million to all qualified and non-qualified pension plans and $1.7 million to all healthcare benefit plans.

PolyOne sponsors various voluntary retirement savings plans (RSP). Under the provisions of the plans, eligible employees receive defined Company contributions and are eligible for Company matching contributions based on their eligible earnings contributed to the plan. In addition, we may make discretionary contributions to the plans for eligible employees based on a specific percentage of each employee’s compensation.

Following are our contributions to the RSP:



(In millions)	2013		2012		2011
Retirement savings match	$	9.8	$	7.6	$	7.1
Retirement benefit contribution	4.0		3.8		3.9
Total contributions	$	13.8	$	11.4	$	11.0