BENEFIT PLANS

12 Months Ended

Dec. 31, 2019

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 $70,298,000 and $71,435,000 related to these unfunded, nonqualified pension plans for 2019 and 2018, respectively.

In 2005, benefit accruals for our Chemicals Hourly Plan participants ceased upon the sale of our Chemicals business. Effective July 2007, we amended our defined benefit pension plans to no longer accept new participants with the exception of two unions that continue to add new participants. Future benefit accruals for participants in our salaried defined benefit pension plan ceased on December 31, 2013, while salaried participants’ earnings considered for benefit calculations were frozen on December 31, 2015.

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	2019	2018
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$ 958,936	$ 1,091,223
Service cost	4,995	5,716
Interest cost	37,640	35,503
Actuarial (gain) loss	141,922	(118,827)
Benefits paid	(52,600)	(54,679)
Projected benefit obligation at end of year	$ 1,090,893	$ 958,936
Change in Fair Value of Plan Assets
Fair value of assets at beginning of year	$ 836,770	$ 840,901
Actual return on plan assets	155,955	(59,083)
Employer contribution	8,882	109,631
Benefits paid	(52,600)	(54,679)
Fair value of assets at end of year	$ 949,007	$ 836,770
Funded status	(141,886)	(122,166)
Net amount recognized	$ (141,886)	$ (122,166)
Amounts Recognized in the Consolidated
Balance Sheets
Noncurrent assets	$ 9,056	$ 6,488
Current liabilities	(8,579)	(9,067)
Noncurrent liabilities	(142,363)	(119,587)
Net amount recognized	$ (141,886)	$ (122,166)
Amounts Recognized in Accumulated
Other Comprehensive Income
Net actuarial loss	$ 268,483	$ 240,199
Prior service cost	6,488	7,828
Total amount recognized	$ 274,971	$ 248,027

The accumulated benefit obligation (ABO) and the projected benefit obligation (PBO) exceeded plan assets for all of our defined benefit plans at December 31, 2019 and December 31, 2018, except for one where the plan assets exceeded the ABO by $9,056,000 and $6,525,000, respectively. The ABO for all of our defined benefit pension plans totaled $1,090,239,000 (unfunded, nonqualified plans of $70,298,000) at December 31, 2019 and $958,899,000 (unfunded, nonqualified plans of $71,435,000) at December 31, 2018.

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	2019	2018	2017
Components of Net Periodic Pension
Benefit Cost
Service cost	$ 4,995	$ 5,716	$ 6,715
Interest cost	37,640	35,503	36,230
Expected return on plan assets	(47,751)	(59,188)	(48,506)
Amortization of prior service cost	1,340	1,340	1,340
Amortization of actuarial loss	5,433	9,826	7,397
Net periodic pension benefit cost (credit)	$ 1,657	$ (6,803)	$ 3,176
Changes in Plan Assets and Benefit
Obligations Recognized in Other
Comprehensive Income
Net actuarial loss (gain)	$ 33,717	$ (555)	$ 7,879
Prior service cost	0	0	10,868
Reclassification of prior service cost	(1,340)	(1,340)	(1,340)
Reclassification of actuarial loss	(5,433)	(9,826)	(7,397)
Amount recognized in other comprehensive
income	$ 26,944	$ (11,721)	$ 10,010
Amount recognized in net periodic pension
benefit cost and other comprehensive
income	$ 28,601	$ (18,524)	$ 13,186
Assumptions
Weighted-average assumptions used to
determine net periodic benefit cost for
years ended December 31
Discount rate — PBO	4.39%	3.72%	4.29%
Discount rate — service cost	4.59%	3.90%	4.63%
Discount rate — interest cost	4.02%	3.35%	3.63%
Expected return on plan assets	5.75%	7.00%	7.00%
Weighted-average assumptions used to
determine benefit obligation at
December 31
Discount rate	3.28%	4.39%	3.72%

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 2020 are $12,905,000 and $1,339,000, respectively.

Plan assets are invested according to an investment policy that allocates investments in return seeking assets and liability hedging assets based on the plans’ funded ratio (fair value of assets/PBO). Return seeking assets include public and private equity securities and public and private debt securities. Liability hedging assets include money market securities, inflation linked debt securities, public corporate debt securities, and government debt securities.

At each measurement date, we estimate the net asset values and fair values of our pension assets using various valuation techniques. For certain investments, we use the net asset value (NAV) as a practical expedient to estimating fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as described below:

Level 1: Quoted prices in active markets for identical assets or liabilities
‎Level 2: Inputs that are derived principally from or corroborated by observable market data
‎Level 3: Inputs that are unobservable and significant to the overall fair value measurement

The fair values and net asset values of our pension plan assets at December 31, 2019 and 2018 are in the tables below. The assets in the common/collective trusts and in the private partnerships consist of both return seeking and liability hedging investments. At December 31, 2019, the total pension asset allocation was approximately 50% return seeking and 50% liability hedging, compared to the December 31, 2018 allocation of approximately 70% return seeking and 30% liability hedging.

Fair Value Measurements at December 31, 2019



in thousands	Level 1	Level 2	Level 3	Total
Asset Category
Debt funds	$ 0	$ 435,692	$ 0	$ 435,692
Equity funds	549	120,253	0	120,802
Investments in the fair value hierarchy	$ 549	$ 555,945	$ 0	$ 556,494
Interest in common/collective trusts (at NAV)				387,785
Private partnerships (at NAV)				4,728
Total pension plan assets				$ 949,007

Fair Value Measurements at December 31, 2018



in thousands	Level 1	Level 2	Level 3	Total
Asset Category
Debt funds	$ 0	$ 168,953	$ 0	$ 168,953
Commodity funds	0	14,697	0	14,697
Equity funds	246	135,656	0	135,902
Investments in the fair value hierarchy	$ 246	$ 319,306	$ 0	$ 319,552
Interest in common/collective trusts (at NAV)				462,566
Private partnerships (at NAV)				54,652
Total pension plan assets				$ 836,770

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, 2019 and 2018.

The debt funds category consists of U.S. federal, state and local government debt securities, corporate debt securities, foreign government debt securities, 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.

The commodity funds category (eliminated in 2019) consists of a single open-end commodity mutual fund. The equity funds category consists of a 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 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 private partnerships category consists of various venture capital funds, mezzanine debt funds and leveraged buyout funds. 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
2017			$ 20,023
2018			109,631
2019			8,882
2020 (estimated)			8,579

For our qualified pension plans, we made discretionary contributions of $100,000,000 and $10,600,000 during 2018 and 2017, respectively, and made no contributions during 2019. We do not anticipate making contributions to our qualified pension plans in 2020. For our nonqualified pension plans, we contributed $8,882,000, $9,631,000 and $9,423,000 during 2019, 2018 and 2017, respectively, and expect to contribute $8,579,000 during 2020.

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



in thousands			Pension
Estimated Future Benefit Payments
2020			$ 58,857
2021			58,914
2022			60,476
2023			61,475
2024			62,138
2025-2029			303,663

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, 2019, 2018 and 2017. Total contributions to multiemployer pension plans were $10,385,000 in 2019, $10,081,000 in 2018 and $9,253,000 in 2017.

As of December 31, 2019, a total of 7.4% of our domestic hourly labor force was covered by collective-bargaining agreements. Of such employees covered by collective-bargaining agreements, 11.4% were covered by agreements that expire in 2020. We also employed 330 union employees in Mexico who are covered by a collective-bargaining agreement that will expire in 2020. 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, 2019 and 2018. The accrued costs for the supplemental retirement plan were $1,069,000 at December 31, 2019 and $1,122,000 at December 31, 2018.

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	2019	2018
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$ 40,834	$ 43,480
Service cost	1,317	1,357
Interest cost	1,388	1,240
Actuarial loss	2,677	856
Benefits paid	(5,029)	(6,099)
Projected benefit obligation at end of year	$ 41,187	$ 40,834
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	$ (41,187)	$ (40,834)
Net amount recognized	$ (41,187)	$ (40,834)
Amounts Recognized in the Consolidated
Balance Sheets
Current liabilities	$ (5,339)	$ (5,560)
Noncurrent liabilities	(35,848)	(35,274)
Net amount recognized	$ (41,187)	$ (40,834)
Amounts Recognized in Accumulated
Other Comprehensive Income
Net actuarial gain	$ (14,642)	$ (18,624)
Prior service credit	(7,575)	(11,494)
Total amount recognized	$ (22,217)	$ (30,118)

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	2019	2018	2017
Components of Net Periodic Postretirement
Benefit Cost
Service cost	$ 1,317	$ 1,358	$ 1,167
Interest cost	1,388	1,240	1,260
Amortization of prior service credit	(3,919)	(3,962)	(4,236)
Amortization of actuarial gain	(1,309)	(1,298)	(1,587)
Net periodic postretirement benefit credit	$ (2,523)	$ (2,662)	$ (3,396)
Changes in Plan Assets and Benefit
Obligations Recognized in Other
Comprehensive Income
Net actuarial loss	$ 2,673	$ 835	$ 342
Reclassification of prior service credit	3,919	3,962	4,236
Reclassification of actuarial gain	1,309	1,298	1,587
Amount recognized in other comprehensive
income	$ 7,901	$ 6,095	$ 6,165
Amount recognized in net periodic
postretirement benefit cost and other
comprehensive income	$ 5,378	$ 3,433	$ 2,769
Assumptions
Weighted-average assumptions used to
determine net periodic benefit cost for
years ended December 31
Discount rate — PBO	4.01%	3.34%	3.59%
Discount rate — service cost	4.23%	3.56%	3.96%
Discount rate — interest cost	3.63%	2.90%	2.89%
Weighted-average assumptions used to
determine benefit obligation at
December 31
Discount rate	2.84%	4.01%	3.33%

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 2020 are $(956,000) and $(3,919,000), respectively.

Total employer contributions to the postretirement plans are presented below:



in thousands			Postretirement
Employer Contributions
2017			$ 4,871
2018			6,099
2019			5,029
2020 (estimated)			5,340

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
2020			$ 5,340
2021			5,049
2022			4,669
2023			4,500
2024			4,257
2025–2029			16,282

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



in thousands			Postretirement
Participants Contributions
2017			$ 2,025
2018			1,984
2019			2,239

PENSION AND OTHER POSTRETIREMENT BENEFITS ASSUMPTIONS

Each year, we review our assumptions for discount rates (used for PBO, service cost, and interest cost calculations) and the expected return on plan assets. Due to plan changes made in 2012 and 2013, annual pay increases and the per capita cost of healthcare benefits do not materially impact plan obligations.

We use a high-quality bond full yield curve approach (specific spot rates for each annual expected cash flow) to establish the discount rates at each measurement date. At December 31, 2019, the discount rates used were as follows:

PBO for various plans – ranged from 2.67% to 3.37% (December 31, 2018 ranged from 3.92% to 4.47%)

Service cost – weighted average of 4.59% and 4.23%, respectively, for our pension plans and our other postretirement plans (2018 figures were 3.90% and 3.56%, respectively)

Interest cost – weighted average of 4.02% and 3.63%, respectively, for our pension plans and our other postretirement plans (2018 figures were 3.35% and 2.90%, respectively)

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. The expected return on plan assets used to measure plan benefit costs was 5.75% in 2019 and 7.0% in 2018. For 2020, we set the expected return on plan assets to 5.75%.

DEFINED CONTRIBUTION PLANS

In addition to our pension and postretirement 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 $53,853,000 in 2019, $40,718,000 in 2018 and $44,562,000 in 2017.