NOTE 10: BENEFIT PLANS

PENSION PLANS

We sponsor three qualified, noncontributory defined benefit pension plans. These plans cover substantially all employees hired before July 2007, other than those covered by union-administered plans. Normal retirement age is 65, but the plans contain provisions for earlier retirement. Benefits for the Salaried Plan and the Chemicals Hourly Plan are generally based on salaries or wages and years of service; the Construction Materials Hourly Plan provides benefits equal to a flat dollar amount for each year of service. In addition to these qualified plans, we sponsor three unfunded, nonqualified pension plans. The projected benefit obligation presented in the table below includes $82,136,000 and $85,021,000 related to these unfunded, nonqualified pension plans for 2017 and 2016, respectively.

Effective July 2007, we amended our defined benefit pension plans to no longer accept new participants. Effective December 2013, we amended our defined benefit pension plans to freeze future benefit accruals for salaried pension participants. Effective December 2015, we amended our defined benefit pension plans to freeze earnings for salaried pension participants.

The following table sets forth the combined funded status of the plans and their reconciliation with the related amounts recognized in our consolidated financial statements at December 31:



in thousands	2017	2016
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$ 1,006,674	$ 988,453
Service cost	6,715	5,343
Interest cost	36,230	36,505
Plan amendment 1	10,869	0
Actuarial (gain) loss	81,969	24,675
Benefits paid	(51,234)	(48,302)
Projected benefit obligation at end of year	$ 1,091,223	$ 1,006,674
Change in Fair Value of Plan Assets
Fair value of assets at beginning of year	$ 749,515	$ 745,686
Actual return on plan assets	122,597	42,555
Employer contribution	20,023	9,576
Benefits paid	(51,234)	(48,302)
Fair value of assets at end of year	$ 840,901	$ 749,515
Funded status	(250,322)	(257,159)
Net amount recognized	$ (250,322)	$ (257,159)
Amounts Recognized in the Consolidated
Balance Sheets
Noncurrent assets	$ 4,605	$ 0
Current liabilities	(9,478)	(9,375)
Noncurrent liabilities	(245,449)	(247,784)
Net amount recognized	$ (250,322)	$ (257,159)
Amounts Recognized in Accumulated
Other Comprehensive Income
Net actuarial loss	$ 250,581	$ 250,099
Prior service cost (credit)	9,167	(361)
Total amount recognized	$ 259,748	$ 249,738


1	Effective January 2017, we amended the Construction Materials Hourly Plan to increase the multiplier for years of service.

The accumulated benefit obligation (ABO) and the projected benefit obligation (PBO) exceeded plan assets for all of our defined benefit plans at December 31, 2017 and December 31, 2016, except for the Chemicals Hourly Plan where the plan assets exceeded the ABO by $5,346,000 and $277,000, respectively. The ABO for all of our defined benefit pension plans totaled $1,090,482,000 (unfunded, nonqualified plans of $82,136,000) at December 31, 2017 and $1,006,001,000 (unfunded, nonqualified plans of $85,021,000) at December 31, 2016.

The following table sets forth the components of net periodic benefit cost, amounts recognized in other comprehensive income and weighted-average assumptions of the plans at December 31:



dollars in thousands	2017	2016	2015
Components of Net Periodic Pension
Benefit Cost
Service cost	$ 6,715	$ 5,343	$ 4,851
Interest cost	36,230	36,505	44,065
Expected return on plan assets	(48,506)	(51,562)	(54,736)
Settlement charge	0	0	2,031
Amortization of prior service cost (credit)	1,340	(43)	48
Amortization of actuarial loss	7,397	6,163	21,641
Net periodic pension benefit cost (credit)	$ 3,176	$ (3,594)	$ 17,900
Changes in Plan Assets and Benefit
Obligations Recognized in Other
Comprehensive Income
Net actuarial loss (gain)	$ 7,879	$ 33,682	$ (3,615)
Prior service cost	10,868	0	0
Reclassification of actuarial loss	(7,397)	(6,163)	(23,672)
Reclassification of prior service (cost) credit	(1,340)	43	(48)
Amount recognized in other comprehensive
income	$ 10,010	$ 27,562	$ (27,335)
Amount recognized in net periodic pension
benefit cost and other comprehensive
income	$ 13,186	$ 23,968	$ (9,435)
Assumptions
Weighted-average assumptions used to
determine net periodic benefit cost for
years ended December 31
Discount rate — PBO	4.29%	4.55%	4.14%
Discount rate — service cost	4.63%	4.68%	4.14%
Discount rate — interest cost	3.63%	3.79%	4.14%
Expected return on plan assets	7.00%	7.50%	7.50%
Weighted-average assumptions used to
determine benefit obligation at
December 31
Discount rate	3.72%	4.29%	4.54%

The 2015 settlement charge noted above relates to a lump sum payment to a former employee from the nonqualified plan. This $2,031,000 charge is reflected within both cost of revenues and selling, administrative and general expenses in our accompanying Consolidated Statement of Comprehensive Income for the year ended December 31, 2015.

The estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive income into net periodic pension benefit cost (credit) during 2018 are $9,782,000 and $1,339,000, respectively.

We establish our pension investment policy by evaluating asset/liability studies periodically performed by our consultants. These studies estimate trade-offs between expected returns on our investments and the variability in anticipated cash contributions to fund our pension liabilities. Our policy balances the variability in potential pension fund contributions to expected returns on our investments.

Our current strategy for implementing this policy is to invest in publicly traded equities and in publicly traded debt and private, nonliquid opportunities, such as venture capital, commodities, buyout funds and mezzanine debt. The target allocation ranges for plan assets are as follows: equity securities — 50% to 77%; debt securities — 15% to 27%; specialty investments — 0% to 20%; commodities — 0% to 6%; and cash reserves — 0% to 5%. Equity securities include domestic investments and foreign equities in the Europe, Australia and Far East (EAFE) and International Finance Corporation (IFC) Emerging Market Indices. Debt securities primarily include domestic debt instruments, while specialty investments include investments in venture capital, buyout funds, mezzanine debt, private partnerships and an interest in a commodity index fund.

The fair values and net asset values of our pension plan assets at December 31, 2017 and 2016 by asset category are as follows:

Fair Value Measurements at December 31, 2017



in thousands	Level 1 1	Level 2 1	Level 3 1	Total
Asset Category
Debt securities	$ 0	$ 178,512	$ 0	$ 178,512
Investment funds
Commodity funds	0	17,041	0	17,041
Equity funds	1,089	143,010	0	144,099
Investments in the fair value hierarchy	$ 1,089	$ 338,563	$ 0	$ 339,652
Interest in common/collective trusts (at NAV)				416,397
Venture capital and partnerships (at NAV)				84,852
Total pension plan assets				$ 840,901

Fair Value Measurements at December 31, 2016



in thousands	Level 1 1	Level 2 1	Level 3 1	Total
Asset Category
Debt securities	$ 0	$ 162,894	$ 0	$ 162,894
Investment funds
Commodity funds	0	16,594	0	16,594
Equity funds	530	124,407	0	124,937
Investments in the fair value hierarchy	$ 530	$ 303,895	$ 0	$ 304,425
Interest in common/collective trusts (at NAV)				358,345
Venture capital and partnerships (at NAV)				86,745
Total pension plan assets				$ 749,515


1	See Note 1 under the caption Fair Value Measurements for a description of the fair value hierarchy.

At each measurement date, we estimate the fair values and net asset values of our pension assets using various valuation techniques. We use, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our pension assets. When quoted market prices or observable market inputs are not available, we use valuation techniques that rely on unobservable inputs to estimate the fair value of our pension assets. The following describes the types of investments included in each asset category listed in the tables above and the valuation techniques we used to determine the fair values or net asset values as of December 31, 2017 and 2016.

The debt securities category consists of bonds issued by U.S. federal, state and local governments, corporate debt securities, fixed income obligations issued by foreign governments, and asset-backed securities. The fair values of U.S. government and corporate debt securities are based on current market rates and credit spreads for debt securities with similar maturities. The fair values of debt securities issued by foreign governments are based on prices obtained from broker/dealers and international indices. The fair values of asset-backed securities are priced using prepayment speed and spread inputs that are sourced from the new issue market.

Investment funds consist of exchange traded and non-exchange traded funds. The commodity funds asset category consists of a single open-end commodity mutual fund. The equity funds asset category consists of a publicly traded mutual fund investing in domestic equities. For investment funds publicly traded on a national securities exchange, the fair value is based on quoted market prices. For investment funds not traded on an exchange, the total fair value of the underlying securities is used to determine the net asset value for each unit of the fund held by the pension fund. The estimated fair values of the underlying securities are generally valued based on quoted market prices. For securities without quoted market prices, other observable market inputs are used to determine the fair value.

Common/collective trust fund investments consist of index funds for domestic equities, an actively managed fund for international equities, and a short-term investment fund for highly liquid, short-term debt securities. Investments are valued at the net asset value (NAV) of units of a bank collective trust. The NAV is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV.

The venture capital and partnerships asset category consists of various limited partnership funds, mezzanine debt funds and leveraged buyout funds. NAV is used as a practical expedient to estimate fair value. The NAV of these investments has been estimated based on methods employed by the general partners, including consideration of, among other things, reference to third-party transactions, valuations of comparable companies operating within the same or similar industry, the current economic and competitive environment, creditworthiness of the corporate issuer, as well as market prices for instruments with similar maturities, terms, conditions and quality ratings. The use of different assumptions, applying different judgment to inherently subjective matters and changes in future market conditions could result in significantly different estimates of fair value of these securities.

Total employer contributions to the pension plans are presented below:



in thousands			Pension
Employer Contributions
2015			$ 14,047
2016			9,576
2017			20,023
2018 (estimated)			109,477

For our qualified pension plans, we made a discretionary contribution of $10,600,000 during 2017 and made no contributions during 2016 and 2015. We anticipate making contributions of $100,000,000 to our qualified pension plans in 2018. For our nonqualified pension plans, we contributed $9,423,000, $9,576,000 and $14,047,000 during 2017, 2016 and 2015, respectively, and expect to contribute $9,477,000 during 2018.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



in thousands			Pension
Estimated Future Benefit Payments
2018			$ 56,227
2019			57,099
2020			58,382
2021			59,356
2022			60,948
2023-2027			309,844

We contribute to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements for union-represented employees. A multiemployer plan is subject to collective bargaining for employees of two or more unrelated companies. Multiemployer plans are managed by boards of trustees on which management and labor have equal representation. However, in most cases, management is not directly represented. The risks of participating in multiemployer plans differ from single employer plans as follows:

assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers

if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers

if we cease to have an obligation to contribute to one or more of the multiemployer plans to which we contribute, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability

None of the multiemployer pension plans that we participate in are individually significant. Our contributions to individual multiemployer pension funds did not exceed 5% of the fund’s total contributions in the three years ended December 31, 2017, 2016 and 2015. Total contributions to multiemployer pension plans were $9,253,000 in 2017, $10,435,000 in 2016 and $9,800,000 in 2015.

As of December 31, 2017, a total of 12.4% of our domestic hourly labor force was covered by collective-bargaining agreements. Of such employees covered by collective-bargaining agreements, 4.3% were covered by agreements that expire in 2018. We also employed 310 union employees in Mexico who are covered by a collective-bargaining agreement that will expire in 2018. None of our union employees in Mexico participate in multiemployer pension plans.

In addition to the pension plans noted above, we had one unfunded supplemental retirement plan as of December 31, 2017 and 2016. The accrued costs for the supplemental retirement plan were $1,252,000 at December 31, 2017 and $1,320,000 at December 31, 2016.

POSTRETIREMENT PLANS

In addition to pension benefits, we provide certain healthcare and life insurance benefits for some retired employees. In 2012, we amended our postretirement healthcare plan to cap our portion of the medical coverage cost at the 2015 level. Substantially all our salaried employees and, where applicable, certain of our hourly employees may become eligible for these benefits if they reach a qualifying age and meet certain service requirements. Generally, Company-provided healthcare benefits end when covered individuals become eligible for Medicare benefits, become eligible for other group insurance coverage or reach age 65, whichever occurs first.

The following table sets forth the combined funded status of the plans and their reconciliation with the related amounts recognized in our consolidated financial statements at December 31:



in thousands	2017	2016
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$ 45,546	$ 48,605
Service cost	1,167	1,123
Interest cost	1,260	1,209
Actuarial loss (gain)	378	(111)
Benefits paid	(4,871)	(5,280)
Projected benefit obligation at end of year	$ 43,480	$ 45,546
Change in Fair Value of Plan Assets
Fair value of assets at beginning of year	$ 0	$ 0
Actual return on plan assets	0	0
Fair value of assets at end of year	$ 0	$ 0
Funded status	$ (43,480)	$ (45,546)
Net amount recognized	$ (43,480)	$ (45,546)
Amounts Recognized in the Consolidated
Balance Sheets
Current liabilities	$ (5,624)	$ (6,013)
Noncurrent liabilities	(37,856)	(39,533)
Net amount recognized	$ (43,480)	$ (45,546)
Amounts Recognized in Accumulated
Other Comprehensive Income
Net actuarial gain	$ (20,757)	$ (22,685)
Prior service credit	(15,456)	(19,692)
Total amount recognized	$ (36,213)	$ (42,377)

The following table sets forth the components of net periodic benefit cost, amounts recognized in other comprehensive income, weighted-average assumptions and assumed trend rates of the plans at December 31:



dollars in thousands	2017	2016	2015
Components of Net Periodic Postretirement
Benefit Cost
Service cost	$ 1,167	$ 1,123	$ 1,894
Interest cost	1,260	1,209	2,485
Amortization of prior service credit	(4,236)	(4,236)	(4,232)
Amortization of actuarial (gain) loss	(1,587)	(1,751)	37
Net periodic postretirement benefit cost (credit)	$ (3,396)	$ (3,655)	$ 184
Changes in Plan Assets and Benefit
Obligations Recognized in Other
Comprehensive Income
Net actuarial loss (gain)	$ 342	$ (111)	$ (35,209)
Reclassification of actuarial gain (loss)	1,587	1,751	(37)
Reclassification of prior service credit	4,236	4,236	4,232
Amount recognized in other comprehensive
income	$ 6,165	$ 5,876	$ (31,014)
Amount recognized in net periodic
postretirement benefit cost and other
comprehensive income	$ 2,769	$ 2,221	$ (30,830)
Assumptions
Weighted-average assumptions used to
determine net periodic benefit cost for
years ended December 31
Discount rate — PBO	3.59%	3.69%	3.50%
Discount rate — service cost	3.96%	3.77%	3.50%
Discount rate — interest cost	2.89%	2.81%	3.50%
Weighted-average assumptions used to
determine benefit obligation at
December 31
Discount rate	3.33%	3.58%	3.69%

The estimated net actuarial gain and prior service credit that will be amortized from accumulated other comprehensive income into net periodic postretirement benefit cost (credit) during 2018 are $(1,525,000) and $(3,962,000), respectively.

Total employer contributions to the postretirement plans are presented below:



in thousands			Postretirement
Employer Contributions
2015			$ 5,915
2016			5,280
2017			4,871
2018 (estimated)			5,624

The employer contributions shown above are equal to the cost of benefits during the year. The plans are not funded and are not subject to any regulatory funding requirements.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



in thousands			Postretirement
Estimated Future Benefit Payments
2018			$ 5,624
2019			5,431
2020			5,201
2021			4,859
2022			4,523
2023–2027			17,359

Contributions by participants to the postretirement benefit plans for the years ended December 31 are as follows:



in thousands			Postretirement
Participants Contributions
2015			$ 2,031
2016			2,085
2017			2,025

PENSION AND OTHER POSTRETIREMENT BENEFITS ASSUMPTIONS

Each year we review our assumptions about the discount rate, the expected return on plan assets, and the rate of increase in the per capita cost of covered healthcare benefits. Annual pay increases after 2015 do not increase our pension plan obligations as a result of a 2013 plan amendment.

We develop our effective discount rate from discounted plan cash flows using the full series of spot rates developed from the yields on high-quality bonds as of the measurement date. At December 31, 2017, the discount rates used to measure the benefit obligation for our various plans ranged from 3.24% to 3.79% (December 31, 2016 ranged from 3.43% to 4.41%).

We use a full yield curve approach to estimate the service and interest cost, applying the specific spot rates along the yield curve to the relevant projected cash flows. The weighted-average discount rates used to measure service and interest costs for 2017 were 4.63% and 3.63%, respectively, for our pension plans and 3.96% and 2.89%, respectively, for our other postretirement plans. The weighted-average discount rates used to measure service and interest costs for 2016 were 4.68% and 3.79%, respectively, for our pension plans and 3.77% and 2.81%, respectively, for our other postretirement plans.

Our expected return on plan assets is: (1) a long-term view based on our current asset allocation, and (2) a judgment informed by consultation with our retirement plans’ consultant and our pension plans’ actuary. In estimating the expected return on plan assets, we consider past performance and long-term future expectations for the types of investments held by the plan as well as the expected long-term allocation of plan assets to these investments. At December 31, 2017, the expected return on plan assets remained at 7.00%.

Future increases in the per capital cost of healthcare benefits will not increase our postretirement medical benefits obligation as a result of a 2012 plan amendment to cap medical coverage cost at the 2015 level.

DEFINED CONTRIBUTION PLANS

We sponsor two defined contribution plans. Substantially all salaried and nonunion hourly employees are eligible to be covered by one of these plans. Under these plans, we match employees’ eligible contributions at established rates. Expense recognized in connection with these matching obligations totaled $44,562,000 in 2017, $45,295,000 in 2016 and $36,085,000 in 2015.