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Pensions and Postretirement Benefits
 12 Months Ended
Dec. 31, 2018
Retirement Benefits [Abstract]  
Pensions and Postretirement Benefits
16.
Pensions and Post-retirement Benefits
We have non-contributory defined benefit pension plans covering eligible employees in the United States, Mexico and several European countries. Salaried employees’ benefit payments are generally determined using a formula that is based on an employee’s compensation and length of service. We closed our defined benefit pension plan for new salaried employees in the United States who joined the Company after January 1, 2006, and, effective January 1, 2007, benefits were frozen for all salaried employees who were not age 40 or older as of December 31, 2006. Hourly employees’ benefit payments are generally determined using stated amounts for each year of service.
Our employees also participate in voluntary contributory retirement savings plans for salaried and hourly employees maintained by us. Under these plans, eligible employees can receive matching contributions up to the first 6% of their eligible earnings. Effective January 1, 2007, those employees whose defined benefit pension plan benefits were frozen receive an additional 2% company contribution each year. Beginning on August 1, 2016, this additional contribution ceased being provided to future hires at the company, but was retained for those employees already receiving it. We recorded $13.3 million, $11.5 million and $9.6 million in expenses in 2018, 2017 and 2016, respectively, for matching contributions under these plans.
Our general funding policy for qualified defined benefit pension plans historically has been to contribute amounts that are at least sufficient to satisfy regulatory funding standards. During 2018, 2017 and 2016, we contributed $20.0 million, $8.8 million and $14.8 million, respectively, in cash to our U.S. pension plans. The contributions were made in these years in order to meet a funding level sufficient to avoid variable fees from the PBGC on the underfunded portion of our pension liability. We do not anticipate making any contributions in 2019 to our U.S. defined benefit pension plans, but we expect to make total contributions of approximately $1.0 million in 2019 to the foreign pension plans.
On June 26, 2018, we entered into an agreement to purchase a group annuity contract to transfer approximately $68 million of our outstanding pension projected benefit obligations related to certain U.S. retirees or beneficiaries. The transaction closed on July 3, 2018 and was funded with pension plan assets with a value of $70.9 million. As a result of this transaction a pre-tax pension settlement charge of $12.8 million was recognized in the third quarter of 2018. This charge was recorded in other (non-operating) expense on the Consolidated Statement of Operations for the year ended December 31, 2018.
The projected benefit obligation and fair value of plan assets for the defined benefit pension plans with projected benefit obligations in excess of plan assets were $53.0 million and $41.1 million at December 31, 2018, and $311.3 million and $291.9 million at December 31, 2017, respectively. The accumulated benefit obligation and fair value of plan assets for the defined benefit pension plans with accumulated benefit obligations in excess of plan assets were $47.6 million and $38.7 million at December 31, 2018, and $302.6 million and $289.7 million at December 31, 2017, respectively.
We provide, through non-qualified plans, supplemental pension benefits to a limited number of employees. Certain of our subsidiaries also sponsor unfunded postretirement plans that provide certain health-care and life insurance benefits to eligible employees. The health-care plans are contributory, with retiree contributions adjusted periodically, and contain other cost-sharing features, such as deductibles and coinsurance. The life insurance plans are generally noncontributory. The amounts included in “Other Benefits” in the following tables include the non-qualified plans and the other postretirement plans discussed above.
The following table sets forth the changes in projected benefit obligations and plan assets of our defined benefit pension and other non-qualified and postretirement plans as of and for the years ended December 31, 2018 and 2017.
 
Pension Benefits
 
Other Benefits
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Change in Projected Benefit Obligations
 
 
 
 
 
 
 
Projected benefit obligations at beginning of year
$
369.2

 
$
289.7

 
$
4.7

 
$
3.2

Service cost
4.8

 
4.5

 
0.1

 
0.1

Interest cost
12.8

 
12.9

 
0.1

 
0.1

Actuarial loss (gain)
(23.5
)
 
16.1

 
(0.6
)
 
—

Amendments
—

 
0.2

 
—

 
—

Settlements
(71.1
)
 
(0.6
)
 
—

 
—

Benefits paid
(14.0
)
 
(13.0
)
 
(0.7
)
 
(0.9
)
Reconsolidation of GST and OldCo
—

 
58.8

 
—

 
2.1

Other
(1.4
)
 
0.6

 
0.5

 
0.1

Projected benefit obligations at end of year
276.8

 
369.2

 
4.1

 
4.7



Change in Plan Assets
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
350.7

 
256.9

 
 
 
 
Actual return on plan assets
(17.9
)
 
42.3

 
 
 
 
Administrative expenses
(0.9
)
 
(0.8
)
 
 
 
 
Benefits paid
(14.0
)
 
(13.0
)
 
 
 
 
Settlements
(71.1
)
 
(0.6
)
 
 
 
 
Company contributions
20.8

 
9.4

 
 
 
 
Reconsolidation of GST and OldCo
—

 
56.5

 
 
 
 
Fair value of plan assets at end of year
267.6

 
350.7

 
 
 
 
Underfunded Status at End of Year
$
(9.2
)
 
$
(18.5
)
 
$
(4.1
)
 
$
(4.7
)


Amounts Recognized in the Consolidated Balance Sheets
 
 
 
 
 
 
 
Long-term assets
$
2.7

 
$
0.8

 
$
—

 
$
—

Current liabilities
(0.8
)
 
(0.5
)
 
(0.3
)
 
(0.3
)
Long-term liabilities
(11.1
)
 
(18.8
)
 
(3.8
)
 
(4.4
)
 
$
(9.2
)
 
$
(18.5
)
 
$
(4.1
)
 
$
(4.7
)


Pre-tax charges recognized in accumulated other comprehensive loss as of December 31, 2018 and 2017 consist of:
 
Pension Benefits
 
Other Benefits
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Net actuarial (gain) loss
$
60.8

 
$
65.3

 
$
(0.9
)
 
$
(0.3
)
Prior service cost
1.1

 
1.4

 
0.2

 
0.3

 
$
61.9

 
$
66.7

 
$
(0.7
)
 
$
—



The accumulated benefit obligation for all defined benefit pension plans was $269.0 million and $361.7 million at December 31, 2018 and 2017, respectively. The accumulated postretirement benefit obligation for all other postretirement benefit plans was $3.8 million and $4.5 million at December 31, 2018 and 2017, respectively.

The following table sets forth the components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income for our defined benefit pension and other non-qualified and postretirement plans for the years ended December 31, 2018, 2017 and 2016.
 
 
Pension Benefits
 
Other Benefits
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
 
(in millions)
Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
4.8

 
$
4.5

 
$
4.3

 
$
0.1

 
$
0.1

 
$
0.1

Interest cost
12.8

 
12.9

 
12.7

 
0.1

 
0.1

 
0.2

Expected return on plan assets
(19.0
)
 
(20.1
)
 
(17.2
)
 
—

 
—

 
—

Amortization of prior service cost
0.3

 
0.3

 
0.2

 
0.1

 
0.1

 
0.1

Amortization of net loss
5.1

 
7.3

 
6.9

 
—

 
—

 
—

Settlements
12.7

 
—

 
—

 
—

 
—

 
—

Curtailments
—

 
(0.1
)
 
(0.1
)
 
—

 
—

 
(0.3
)
Deconsolidation of GST
—

 
(0.3
)
 
(0.9
)
 
—

 
—

 
—

Net periodic benefit cost
16.7

 
4.5

 
5.9

 
0.3

 
0.3

 
0.1



Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
Net loss (gain)
13.3

 
(5.8
)
 
8.2

 
(0.6
)
 
0.1

 
(0.4
)
Prior service cost
—

 
0.5

 
—

 
—

 
—

 
—

Amortization of net loss
(5.1
)
 
(7.3
)
 
(6.9
)
 
—

 
—

 
—

Amortization of prior service cost
(0.3
)
 
(0.3
)
 
(0.2
)
 
(0.1
)
 
(0.1
)
 
(0.1
)
Settlements
(12.7
)
 
—

 
—

 
—

 
—

 
—

Other adjustment
—

 
—

 
—

 
—

 
—

 
0.3

Total recognized in other comprehensive income
(4.8
)
 
(12.9
)
 
1.1

 
(0.7
)
 
—

 
(0.2
)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income
$
11.9

 
$
(8.4
)
 
$
7.0

 
$
(0.4
)
 
$
0.3

 
$
(0.1
)



 
 
Pension Benefits
 
Other Benefits
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.375
%
 
3.75
%
 
4.25
%
 
4.375
%
 
3.75
%
 
4.25
%
Rate of compensation increase
3.0
%
 
3.0
%
 
3.0
%
 
4.0
%
 
4.0
%
 
4.0
%
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.0
%
 
4.25
%
 
4.63
%
 
3.75
%
 
4.25
%
 
4.63
%
Expected long-term return on plan assets
6.0
%
 
7.25
%
 
7.25
%
 
—

 
—

 
—

Rate of compensation increase
3.0
%
 
3.0
%
 
3.0
%
 
4.0
%
 
4.0
%
 
4.0
%


The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. The discount rate was determined with a model which uses a theoretical portfolio of high quality corporate bonds specifically selected to produce cash flows closely related to how we would settle our retirement obligations. This produced a discount rate of 4.375% at December 31, 2018. As of the date of these financial statements, there are no known or anticipated changes in our discount rate assumption that will impact our pension expense in 2019. A 25 basis point decrease (increase) in our discount rate, holding constant our expected long-term return on plan assets and other assumptions, would increase (decrease) pension expense by approximately $0.9 million per year.
The overall expected long-term rate of return on assets was determined based upon weighted-average historical returns over an extended period of time for the asset classes in which the plans invest according to our current investment policy.
We use the RP-2014 mortality table with the MP-2018 projection scale to value our domestic pension liabilities.
Assumed Health Care Cost Trend Rates at December 31
2018
 
2017
Health care cost trend rate assumed for next year
8.0
%
 
8.0
%
Rate to which the cost trend rate is assumed to decline (the ultimate rate)
4.5
%
 
4.5
%
Year that the rate reaches the ultimate trend rate
2026

 
2025



Plan Assets
The asset allocation for pension plans at the end of 2018 and 2017, and the target allocation for 2019, by asset category are as follows:
 
Target
Allocation
 
Plan Assets at December 31,
 
2019
 
2018
 
2017
Asset Category
 
 
 
 
 
Equity securities
30
%
 
27
%
 
30
%
Fixed income
70
%
 
73
%
 
70
%
 
100
%
 
100
%
 
100
%


Our investment goal is to maximize the return on assets, over the long term, by investing in equities and fixed income investments while diversifying investments within each asset class to reduce the impact of losses in individual securities. Equity investments include a mix of U.S. large capitalization equities, U.S. small capitalization equities and non-U.S. equities. Fixed income investments include a mix of treasury obligations and high-quality money market instruments. The asset allocation policy is reviewed and any significant variation from the target asset allocation mix is rebalanced periodically. The plans have no direct investments in EnPro common stock.
The plans invest exclusively in mutual funds whose holdings are marketable securities traded on recognized markets and, as a result, would be considered Level 1 assets. The investment portfolios of the various funds at December 31, 2018 and 2017 are summarized as follows:
 
 
2018
 
2017
 
(in millions)
Mutual funds – U.S. equity
$
42.7

 
$
61.6

Mutual funds - fixed income treasury and money market
194.6

 
244.6

Mutual funds – international equity
29.5

 
43.3

Cash equivalents
0.8

 
1.2

 
$
267.6

 
$
350.7



Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
 
Pension
Benefits
 
Other
Benefits
 
(in millions)
2019
$
11.8

 
$
0.4

2020
12.1

 
1.5

2021
13.4

 
0.4

2022
14.5

 
0.5

2023
15.8

 
0.3

Years 2024 – 2028
93.6

 
1.1