BENEFIT PLANS

12 Months Ended

Dec. 31, 2022

BENEFIT PLANS [Abstract]

BENEFIT PLANS

NOTE 10: BENEFIT PLANS

PENSION PLANS

We sponsor two qualified, noncontributory defined benefit pension plans, the Vulcan Materials Company Pension Plan (VMC Pension Plan) and the CMG Hourly Pension Plan (CMG Pension Plan). The VMC Pension Plan has been closed to new entrants since 2007, and benefit accruals ceased in 2005 for hourly participants and 2013 for salaried participants. The CMG Pension Plan is closed to new entrants other than through one small union, and benefits continue to accrue 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 (PBO) presented in the table below includes $44.4 million and $59.2 million related to these unfunded, nonqualified pension plans for 2022 and 2021, respectively.

During October 2021, we purchased (using pension plan assets) an irrevocable group annuity contract (pension lift-out) from an insurance company for $87.2 million, representing approximately 10% of the total PBO as of the purchase date. As a result of this transaction: 1) we incurred a settlement charge of $12.1 million, 2) we were relieved of all responsibility for these pension obligations, and 3) the insurance company is now required to pay and administer the retirement benefits owed to approximately 2,700 U.S. retirees and beneficiaries (representing approximately 50% of retirees in payment status at that time), with no change to the amount, timing or form of retirement benefit payments.

At November 30, 2020, the plans were remeasured to reflect settlement accounting for the CMG Pension Plan and the VMC Pension Plan as a result of voluntary lump sum distributions to certain fully vested plan participants (resulting in a $22.7 million settlement charge). 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 millions	2022	2021
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$          915.4	$      1,059.5
Service cost	4.0	4.8
Interest cost	21.1	19.7
Actuarial gain	(200.7)	(25.0)
Benefits paid	(48.7)	(56.4)
Annuity purchase	0.0	(87.2)
Projected benefit obligation at end of year	$          691.1	$         915.4
Change in Fair Value of Plan Assets
Fair value of assets at beginning of year	$          860.5	$         944.2
Actual return on plan assets	(181.8)	51.9
Employer contribution	7.8	8.0
Benefits paid	(48.7)	(56.4)
Annuity purchase	0.0	(87.2)
Fair value of assets at end of year	$          637.8	$         860.5
Funded status	(53.3)	(54.9)
Net amount recognized	$           (53.3)	$          (54.9)
Amounts Recognized in the Consolidated
Balance Sheets
Noncurrent assets	$              0.0	$           18.2
Current liabilities	(7.8)	(8.2)
Noncurrent liabilities	(45.5)	(64.9)
Net amount recognized	$           (53.3)	$          (54.9)
Amounts Recognized in Accumulated
Other Comprehensive Income
Net actuarial loss	$          183.4	$         176.4
Prior service cost	2.4	3.8
Total amount recognized	$          185.8	$         180.2

The increase in actuarial gain as of December 31, 2022 was primarily attributable to the increase in discount rates for the plans (approximately 2.2 to 2.6 percentage points) compared with the prior year.

The following table sets forth the pension plans for which their accumulated benefit obligation (ABO) or projected benefit obligation (PBO) exceeds the fair value of their respective plan assets at December 31:

in millions	2022	2021
Pension plans with ABO in excess of plan assets
Accumulated benefit obligation	$          690.9	$        249.2
Fair value of assets	637.8	176.6
Pension plans with PBO in excess of plan assets
Projected benefit obligation	$          691.1	$        249.7
Fair value of assets	637.8	176.6

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 millions	2022	2021	2020
Components of Net Periodic Pension
Benefit Cost
Service cost	$             4.0	$            4.8	$            4.9
Interest cost	21.1	19.7	29.3
Expected return on plan assets	(30.1)	(42.8)	(48.6)
Settlement charge	0.0	12.1	22.7
Amortization of prior service cost	1.4	1.3	1.4
Amortization of actuarial loss	4.2	8.0	11.9
Net periodic pension benefit cost	$             0.6	$            3.1	$          21.6
Changes in Plan Assets and Benefit
Obligations Recognized in Other
Comprehensive Income
Net actuarial loss (gain)	$           11.2	$         (34.0)	$           (3.4)
Reclassification of prior service cost	(1.4)	(1.3)	(1.4)
Reclassification of actuarial loss	(4.2)	(20.1)	(34.6)
Amount recognized in other comprehensive
income	$             5.6	$         (55.4)	$         (39.4)
Amount recognized in net periodic pension
benefit cost and other comprehensive
income	$             6.2	$         (52.3)	$         (17.8)
Assumptions
Weighted-average assumptions used to
determine net periodic benefit cost for
years ended December 31
Discount rate — PBO	2.92%	2.63%	3.22%
Discount rate — service cost 1	3.17%	2.94% / 3.21%	3.49% / 2.89%
Discount rate — interest cost	2.37%	1.90%	2.78%
Expected return on plan assets 2	4.00%	5.25% / 3.75%	5.75% / 5.25%
Weighted-average assumptions used to
determine benefit obligation at
December 31
Discount rate	5.19%	2.91%	2.57%

1	As a result of remeasurements, the 2021 service cost discount rates were revised from 2.94% at 12/31/2020 to 3.21% at 10/31/2021 and the 2020 service cost discount rates were revised from 3.49% at 12/31/2019 to 2.89% at 11/30/2020.
2	As a result of remeasurements, the 2021 expected return on plan assets were revised from 5.25% at 12/31/2020 to 3.75% at 10/31/2021 and the 2020 expected return on plan assets were revised from 5.75% at 12/31/2019 to 5.25% at 11/30/2020.

Plan assets are invested according to an investment policy that allocates investments to return seeking assets and liability hedging assets based on the plans’ funded ratio (fair value of assets/PBO). At December 31, 2022, the total pension asset allocation was approximately 0% return seeking and 100% liability hedging compared to 20% return seeking and 80% liability hedging at December 31, 2021. Return seeking assets include index and actively managed mutual funds and collective investment trusts that hold public equity securities (less than 1% of the plans’ assets are in private equity and debt securities via private partnerships). Liability hedging assets include money market securities, inflation linked debt securities, public corporate debt securities and government debt securities that are actively managed to match the duration of the plans’ liabilities.

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, 2022 and 2021 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.

Fair Value Measurements at December 31, 2022

in millions	Level 1	Level 2	Level 3	Total
Asset Category
Debt funds	$             0.0	$        628.6	$            0.0	$        628.6
Equity funds	0.0	0.0	0.0	0.0
Investments in the fair value hierarchy	$             0.0	$        628.6	$            0.0	$        628.6
Interest in common/collective trusts (at NAV)				5.6
Private partnerships (at NAV)				3.6
Total pension plan assets				$        637.8

Fair Value Measurements at December 31, 2021

in millions	Level 1	Level 2	Level 3	Total
Asset Category
Debt funds	$             0.0	$        662.9	$            0.0	$        662.9
Equity funds	0.1	59.0	0.0	59.1
Investments in the fair value hierarchy	$             0.1	$        721.9	$            0.0	$        722.0
Interest in common/collective trusts (at NAV)				134.3
Private partnerships (at NAV)				4.2
Total pension plan assets				$        860.5

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, 2022 and 2021.

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 equity funds category consists primarily of a mutual fund investing in non-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 an index fund investing primarily in domestic equities and a short-term investment fund for highly liquid, short-term debt securities. Investments are valued at the 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 reference to third-party transactions and valuations of comparable companies.

Total employer contributions to the pension plans are presented below:

in millions	Pension
Employer Contributions
2020	$             8.8
2021	8.0
2022	7.8
2023 (estimated)	7.8

For our qualified pension plans, we made no contributions during 2022, 2021 and 2020. We do not anticipate making contributions to our qualified pension plans in 2023. For our nonqualified pension plans, we contributed $7.8 million, $8.0 million and $8.8 million during 2022, 2021 and 2020, respectively, and expect to contribute $7.8 million during 2023.

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

in millions	Pension
Estimated Future Benefit Payments
2023	$           49.1
2024	50.3
2025	48.2
2026	48.7
2027	49.6
2028-2032	247.9

We contribute to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements for union-represented employees. 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 plans did not exceed 5% of the plans’ total contributions in the three years ended December 31, 2022, 2021 and 2020. Total contributions to multiemployer pension plans were $48.6 million in 2022, $16.9 million in 2021 and $10.3 million in 2020. The 2022 increase was primarily attributable to the addition of U.S. Concrete multiemployer pension plans and subsequent settlement of the outstanding withdrawal liability for several of those plans.

As of December 31, 2022, a total of 12.9% of our domestic hourly labor force was covered by collective-bargaining agreements. Of such employees covered by collective-bargaining agreements, 27.9% were covered by agreements that expire in 2023. We also employed 296 union employees in Mexico who are covered by a collective-bargaining agreement that will expire in 2023. 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, 2022 and 2021. The accrued costs for the supplemental retirement plan were $1.0 million at December 31, 2022 and $1.1 million at December 31, 2021.

POSTRETIREMENT PLANS

In addition to pension benefits, we provide certain healthcare and life insurance benefits for some retired employees. In 2021, we amended our postretirement healthcare plan to increase our employer contribution rate from the previously capped level to a higher level effective 2022. This served as a cost reduction for retirees in 2022 and beyond as we use this new benchmark for future employer contributions. Previously (in 2012), we amended our postretirement healthcare plan to cap our employer 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 millions	2022	2021
Change in Benefit Obligation
Projected benefit obligation at beginning of year	$           46.0	$          33.9
Service cost	2.3	1.3
Interest cost	0.9	0.5
Plan amendments	0.0	14.9
Actuarial (gain) loss	(2.5)	0.9
Benefits paid	(4.9)	(5.5)
Projected benefit obligation at end of year	$           41.8	$          46.0
Change in Fair Value of Plan Assets
Fair value of assets at beginning of year	$             0.0	$            0.0
Actual return on plan assets	0.0	0.0
Fair value of assets at end of year	$             0.0	$            0.0
Funded status	$          (41.8)	$         (46.0)
Net amount recognized	$          (41.8)	$         (46.0)
Amounts Recognized in the Consolidated
Balance Sheets
Current liabilities	$            (5.1)	$           (4.6)
Noncurrent liabilities	(36.7)	(41.4)
Net amount recognized	$          (41.8)	$         (46.0)
Amounts Recognized in Accumulated
Other Comprehensive Income
Net actuarial gain	$          (17.9)	$         (16.7)
Prior service cost	13.1	12.8
Total amount recognized	$            (4.8)	$           (3.9)

The increase in actuarial gain as of December 31, 2022 was primarily attributable to the increase in discount rates for the plans (approximately 2.3 to 2.9 percentage points) compared with the prior year.

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 millions	2022	2021	2020
Components of Net Periodic Postretirement
Benefit Cost
Service cost	$             2.2	$            1.2	$            1.5
Interest cost	0.9	0.5	1.0
Amortization of prior service credit	(0.3)	(1.5)	(3.9)
Amortization of actuarial gain	(1.3)	(1.4)	(0.8)
Net periodic postretirement benefit cost (credit)	$             1.5	$           (1.2)	$           (2.2)
Changes in Plan Assets and Benefit
Obligations Recognized in Other
Comprehensive Income
Net actuarial (gain) loss	$            (2.4)	$            0.9	$           (5.1)
Prior service cost	0.0	14.9	0.0
Reclassification of prior service credit	0.3	1.5	3.9
Reclassification of actuarial gain	1.3	1.4	0.8
Amount recognized in other comprehensive
income	$            (0.8)	$          18.7	$           (0.4)
Amount recognized in net periodic
postretirement benefit cost and other
comprehensive income	$             0.7	$          17.5	$           (2.6)
Assumptions
Assumed Healthcare Cost Trend Rates
at December 31
Healthcare cost trend rate assumed
for next year (Pre-65/Post-65)	7.04% / n/a	6.60% / 6.50%	n/a
Rate to which the cost trend rate gradually
declines	4.50%	4.50%	n/a
Year that the rate reaches the rate it is
assumed to maintain	2030	2028	n/a
Weighted-average assumptions used to
determine net periodic benefit cost for
years ended December 31
Discount rate — PBO	2.59%	2.19%	2.84%
Discount rate — service cost 1	2.89%	2.45% / 2.84%	3.09%
Discount rate — interest cost	2.06%	1.60%	2.42%
Weighted-average assumptions used to
determine benefit obligation at
December 31
Discount rate	5.08%	2.59%	2.09%

¹ As a result of remeasurements, the 2021 service cost discount rates were revised from 2.45% at 12/31/2020 to 2.84% at 9/30/2021.

Total employer contributions to the postretirement plans are presented below:

in millions	Postretirement
Employer Contributions
2020	$             4.7
2021	5.5
2022	4.9
2023 (estimated)	5.1

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 millions	Postretirement
Estimated Future Benefit Payments
2023	$             5.1
2024	5.0
2025	5.0
2026	4.8
2027	4.8
2028–2032	20.6

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

in millions	Postretirement
Participants Contributions
2020	$             2.6
2021	2.3
2022	2.0

PENSION AND OTHER POSTRETIREMENT BENEFITS ASSUMPTIONS

Each year, we review our assumptions for discount rates (used for PBO, service cost, and interest cost calculations), the per capita cost of healthcare benefits and the expected return on plan assets. Due to plan changes made in 2013, annual pay increases 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, 2022, the discount rates used were as follows:

PBO for various plans – ranged from 4.97% to 5.25% (December 31, 2021 ranged from 2.09% to 3.07%)

Service cost – weighted average of 3.17% and 2.89%, respectively, for our pension plans and our other postretirement plans (2021 figures were 2.99% and 2.55%, respectively)

Interest cost – weighted average of 2.37% and 2.06%, respectively, for our pension plans and our other postretirement plans (2021 figures were 1.90% and 1.60%, respectively)

In selecting the rate of increase in the per capita cost of covered healthcare benefits, we consider past performance and forecast of future healthcare cost trends. At December 31, 2022, our assumed rate of increase in the per capita cost of covered healthcare benefits was 7.04% for pre-65 coverage, with rates decreasing each year until reaching 4.50% in 2030 and remaining level thereafter.

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. As a result of remeasurements, the 2021 expected return on plan assets was revised from 5.25% at 12/31/2020 to 3.75% at 10/31/2021. For 2023 and 2022, the expected return on plan assets used to measure plan benefit costs was set at 4.85% and 4.00%, respectively.

DEFINED CONTRIBUTION PLANS

In addition to our pension and postretirement plans, we sponsor five 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 $68.2 million in 2022, $67.5 million in 2021 and $50.8 million in 2020.