Pension

The Company maintains defined benefit pension plans covering employees located in the United States as well as certain international locations. The majority of these plans are frozen, and all are closed to new employees. Benefits generally are based on compensation, length of service and age for salaried employees and on length of service for hourly employees. The Company’s policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements and contribute amounts deductible for United States federal income tax purposes or amounts required by local statute.

The Company also sponsors voluntary defined contribution plans for certain salaried and hourly U.S. employees of the Company. The Company matches contributions of participants, up to various limits in all plans. The Company also sponsors retirement plans that include Company non-elective contributions. Non-elective and matching contributions under these plans totaled $16,747, $16,581 and $16,296 for the years ended December 31, 2017, 2016 and 2015, respectively.

Information related to the Company’s defined benefit pension plans was as follows:



	Year Ended December 31,
	2017						2016
	U.S.			Non-U.S.			U.S.			Non-U.S.
Change in projected benefit obligation:
Projected benefit obligations at beginning of period	$	303,446		$	191,184		$	306,760		$	179,896
Service cost	814			4,025			807			3,346
Interest cost	11,700			4,341			12,580			5,041
Actuarial loss	17,230			4,450			3,633			17,582
Benefits paid	(17,492		)	(7,048		)	(20,334		)	(7,735		)
Foreign exchange translation	—			20,809			—			(5,085		)
Settlements	—			(20,667		)	—			(1,950		)
Other	—			75			—			89
Projected benefit obligations at end of period	$	315,698		$	197,169		$	303,446		$	191,184

Change in plan assets:
Fair value of plan assets at beginning of period	$	253,483		$	63,220		$	248,387		$	64,940
Actual return on plan assets	35,233			5,039			18,109			2,560
Employer contributions	4,543			7,238			7,321			6,969
Benefits paid	(17,492		)	(7,048		)	(20,334		)	(7,735		)
Foreign exchange translation	—			4,008			—			(1,753		)
Settlements	—			(20,431		)	—			(1,761		)
Fair value of plan assets at end of period	$	275,767		$	52,026		$	253,483		$	63,220

Funded status of the plans	$	(39,931	)	$	(145,143	)	$	(49,963	)	$	(127,964	)



	December 31, 2017						December 31, 2016
	U.S.			Non-U.S.			U.S.			Non-U.S.
Amounts recognized in the consolidated balance sheet:
Other assets	$	—		$	405		$	—		$	—
Accrued liabilities	(1,011		)	(4,295		)	(1,030		)	(3,947		)
Pension benefits (long term)	(38,920		)	(141,253		)	(48,933		)	(124,017		)

Pre-tax amounts included in accumulated other comprehensive loss that have not yet been recognized in net periodic benefit (income) cost as of December 31, 2017 and 2016 were as follows:



	December 31, 2017						December 31, 2016
	U.S.			Non-U.S.			U.S.			Non-U.S.
Prior service costs	$	(136	)	$	(1,206	)	$	(156	)	$	(1,273	)
Actuarial losses	$	(74,711	)	$	(48,491	)	$	(78,552	)	$	(49,862	)

Pre-tax amounts included in accumulated other comprehensive loss that are expected to be recognized in net periodic benefit cost during the year ended December 31, 2018 are as follows:



	U.S.			Non-U.S.
Prior service costs	$	(20	)	$	(240	)
Actuarial losses	$	(2,383	)	$	(2,553	)

The Company uses the corridor approach when amortizing actuarial gains or losses. Under the corridor approach, net unrecognized actuarial losses in excess of 10% of the greater of i) the projected benefit obligation or ii) the fair value of plan assets are amortized over future periods.

The accumulated benefit obligation for all domestic and international defined benefit pension plans was $315,698 and $185,179 as of December 31, 2017 and $303,446 and $179,854 as of December 31, 2016, respectively. As of December 31, 2017, the fair value of plan assets for one of the Company’s defined benefit plans exceeded the projected benefit obligation of $21,993 by $405.

The components of net periodic benefit (income) cost for the Company’s defined benefit plans were as follows:



	Year Ended December 31,
	2017						2016						2015
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
Service cost	$	814		$	4,025		$	807		$	3,346		$	926		$	3,489
Interest cost	11,700			4,341			12,580			5,041			12,334			5,084
Expected return on plan assets	(16,012		)	(2,617		)	(15,835		)	(3,133		)	(17,685		)	(3,373		)
Amortization of prior service cost and actuarial loss	1,871			2,898			1,714			2,186			1,110			2,666
Settlements	—			6,427			—			538			—			132
Other	—			—			—			—			—			221
Net periodic benefit (income) cost	$	(1,627	)	$	15,074		$	(734	)	$	7,978		$	(3,315	)	$	8,219

U.K. Pension Settlement

During 2016, the Company undertook an initiative to de-risk pension obligations in the U.K. by purchasing a bulk annuity policy designed to match the liabilities of the plan, and subsequently entered into a wind-up process. During the year ended December 31, 2017, the Company completed the wind-up process, resulting in a non-cash settlement charge of $5,717 and administrative expenses of $185, both of which are recorded in selling, administration & engineering expenses in the consolidated statements of net income. As a result of the settlement, the Company’s overall projected benefit obligation as of December 31, 2016 was reduced by $17,100.

Plan Assumptions

Weighted average assumptions used to determine benefit obligations as of December 31, 2017 and 2016 were as follows:



	2017				2016
	U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	3.55	%	2.17	%	3.99	%	2.23	%
Rate of compensation increase	N/A		3.17	%	N/A		3.15	%

Weighted average assumptions used to determine net periodic benefit costs for the years ended December 31, 2017, 2016 and 2015 were as follows:



	2017				2016				2015
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Discount rate	3.99	%	2.23	%	4.24	%	2.80	%	3.94	%	2.66	%
Expected return on plan assets	6.60	%	5.94	%	6.60	%	4.39	%	6.70	%	4.80	%
Rate of compensation increase	N/A		3.15	%	N/A		3.15	%	N/A		3.11	%

To develop the expected return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. As the U.S. plans are frozen, the rate of compensation increase was not applicable in determining net periodic benefit cost.

Plan Assets

The goals and investment objectives of the asset strategy are to ensure that there is an adequate level of assets to meet benefit obligations to participants and retirees over the life of the participants and maintain liquidity in the plan assets sufficient to cover monthly benefit obligations. Risk is managed by investing in a broad range of investment vehicles, e.g., equity mutual funds, bond mutual funds, real estate mutual funds, hedge funds, etc. There are no equity securities of the Company in the equity asset category.

Investments in equity securities and debt securities are valued at fair value using a market approach and observable inputs, such as quoted market prices in active markets (Level 1). Investments in balanced funds are valued at fair value using a market approach and inputs that are primarily directly or indirectly observable (Level 2). Investments in equity securities and balanced funds in which the Company holds participation units in a fund, the net asset value of which is based on the underlying assets and liabilities of the respective fund, are considered an unobservable input (Level 3). Investments in real estate funds are primarily valued at net asset value depending on the investment.

The fair value of the Company’s pension plan assets by category using the three-level hierarchy (see Note 9. “Fair Value Measurements and Financial Instruments”) as of December 31, 2017 and 2016 was as follows:



2017	Level 1		Level 2		Level 3		Total
Equity funds	$	41,080	$	22,419	$	—	$	63,499
Equity funds measured at net asset value ⁽¹⁾	—		—		—		76,405
Bond funds	34,997		29,607		—		64,604
Bond funds measured at net asset value ⁽¹⁾	—		—		—		69,823
Real estate measured at net asset value⁽¹⁾	—		—		—		15,656
Hedge funds	3,603		—		110		3,713
Hedge funds measured at net asset value ⁽¹⁾	—		—		—		29,195
Insurance contracts	—		—		—		—
Cash and cash equivalents	4,898		—		—		4,898
Total	$	84,578	$	52,026	$	110	$	327,793



2016	Level 1		Level 2		Level 3		Total
Equity funds	$	36,710	$	18,531	$	—	$	55,241
Equity funds measured at net asset value ⁽¹⁾	—		—		—		76,961
Bond funds	35,339		28,070		—		63,409
Bond funds measured at net asset value ⁽¹⁾	—		—		—		47,123
Real estate measured at net asset value ⁽¹⁾	—		—		—		14,472
Hedge funds	339		—		341		680
Hedge funds measured at net asset value ⁽¹⁾	—		—		—		30,676
Insurance contracts	—		—		16,113		16,113
Cash and cash equivalents	12,028		—		—		12,028
Total	$	84,416	$	46,601	$	16,454	$	316,703

⁽¹⁾In accordance with ASC 820, investments measured at fair value using the net asset value (“NAV”) practical expedient are excluded from the fair value hierarchy. These fair value amounts are presented in this table to allow for reconciliation to the fair value of plan assets presented within the statement of financial position.

The reconciliation for which Level 3 inputs were used in determining fair value is as follows:



Beginning balance of assets classified as Level 3 as of January 1, 2016	$	4,709
Purchases, sales and settlements, net	(4,380		)
Total gain	12
Transfers into (out of) Level 3	16,113
Ending balance of assets classified as Level 3 as of December 31, 2016	$	16,454
Purchases, sales and settlements, net	(16,348		)
Total gain	4
Transfers into (out of) Level 3	—
Ending balance of assets classified as Level 3 as of December 31, 2017	$	110

Expected Future Benefit Payments

The Company estimates its benefit payments for its domestic and foreign pension plans during the next ten years to be as follows:



Years Ending December 31,	U.S		Non-U.S		Total
2018	$	21,183	$	6,337	$	27,520
2019	18,893		8,168		27,061
2020	18,875		7,908		26,783
2021	19,035		8,737		27,772
2022	19,236		10,767		30,003
2023-2027	95,413		57,731		153,144

Contributions

The Company estimates it will make minimum funding cash contributions of approximately $8,500 to its U.S. pension plans and funding cash contributions of approximately $6,210 to its non-U.S. pension plans in 2018.