PENSIONS AND OTHER POSTRETIREMENT BENEFITS

DEFINED BENEFIT PLANS

The Company maintains both defined benefit pension plans and postretirement health care plans that provide medical and life insurance coverage to eligible salaried and hourly retired employees in North America and their dependents. The Company maintains international defined benefit pension plans which are both noncontributory and contributory and are funded in accordance with applicable local laws. Pension or termination benefits are based primarily on years of service and the employees’ compensation.

Currently, the North American plans are closed to newly-hired employees except as noted below. Effective July 1, 2011, the North American plans were frozen for most salaried and non-union hourly employees and replaced with a defined contribution plan. During 2015, the remaining union plans were closed to newly-hired employees. Also in 2015, the Company assumed defined benefit pension and postretirement benefit plans in the Cascades acquisition. These plans are closed to newly-hired employees. In 2016, the Company assumed a defined benefit plan in the WG Anderson acquisition, which was frozen for all participants on December 31, 2016.

During the fourth quarter of 2017, the Company made an additional $75 million contribution to its U.S. defined benefit plan. Since this plan is closed and mostly frozen, the Company has hedged a significant portion of the liabilities. This additional contribution will allow the Company to begin the process of settling these liabilities.

During 2018, the Company began the process of terminating its largest U.S. pension plan. This included freezing the plan as of December 31 and spinning off the active participants to the plan established as part of the NACP Combination. This plan is open for union and non-union hourly employees of locations that were part of the NACP Combination. During 2019, the Company expects to offer a lump-sum benefit payout option to certain plan participants prior to completing the purchase of group annuity contracts that will transfer the pension benefit obligation to an insurance company. The expected benefit obligation associated with the termination is approximately $800 million.

In the fourth quarter of 2017, the Company also made an additional contribution of $6.8 million to its U.K. defined benefit plan and will continue de-risking that plan.

Pension and Postretirement Expense

The pension and postretirement expenses related to the Company’s plans consisted of the following:



	Pension Benefits									Postretirement Benefits
	Year Ended December 31,
In millions	2018			2017			2016			2018			2017			2016
Components of Net Periodic Cost:
Service Cost	$	17.3		$	8.2		$	10.0		$	0.6		$	0.8		$	0.8
Interest Cost	41.8			42.6			43.8			1.2			1.3			1.3
Expected Return on Plan Assets	(63.6		)	(64.1		)	(61.3		)	—			—			—
Amortization:
Prior Service Cost (Credit)	0.4			0.5			0.8			(0.3		)	(0.3		)	(0.2		)
Actuarial Loss (Gain)	5.9			6.5			27.3			(1.8		)	(2.1		)	(2.1		)
Net Curtailment/Settlement Loss	1.0			—			1.0			—			—			—
Other	0.5			0.8			0.8			—			—			—
Net Periodic (Benefit) Cost	$	3.3		$	(5.5	)	$	22.4		$	(0.3	)	$	(0.3	)	$	(0.2	)

Certain assumptions used in determining the pension and postretirement expenses were as follows:



	Pension Benefits						Postretirement Benefits
	Year Ended December 31,
	2018		2017		2016		2018		2017		2016
Weighted Average Assumptions:
Discount Rate	3.49	%	4.01	%	4.41	%	3.64	%	4.10	%	4.29	%
Rate of Increase in Future Compensation Levels	2.09	%	1.45	%	1.49	%	—		—		—
Expected Long-Term Rate of Return on Plan Assets	4.86	%	5.79	%	5.90	%	—		—		—
Initial Health Care Cost Trend Rate	—		—		—		9.00	%	7.45	%	7.80	%
Ultimate Health Care Cost Trend Rate	—		—		—		4.50	%	4.50	%	4.50	%
Ultimate Year	—		—		—		2027		2024		2024

For the largest plan, the actuarial loss is amortized over the average remaining life expectancy period of employees expected to receive benefits.

Funded Status

The following table sets forth the funded status of the Company’s pension and postretirement plans as of December 31:



	Pension Benefits						Postretirement Benefits
In millions	2018			2017			2018			2017
Change in Benefit Obligation:
Benefit Obligation at Beginning of Year	$	1,367.1		$	1,279.0		$	37.3		$	40.6
Service Cost	17.3			8.2			0.6			0.8
Interest Cost	41.8			42.6			1.2			1.3
Actuarial Loss (Gain)	(101.9		)	76.4			(3.0		)	(3.4		)
Foreign Currency Exchange	(14.8		)	22.9			(0.2		)	0.1
Settlement/Curtailment (Gain)	—			(0.2		)	—			—
Benefits Paid	(65.4		)	(62.7		)	(1.9		)	(2.2		)
Acquisition	—			—			—			—
Other	1.1			0.9			0.1			0.1
Benefit Obligation at End of Year	$	1,245.2		$	1,367.1		$	34.1		$	37.3

Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year	$	1,340.7		$	1,115.6		$	—		$	—
Actual Return on Plan Assets	(79.6		)	147.1			—			—
Employer Contributions	5.8			119.1			1.9			2.2
Foreign Currency Exchange	(15.0		)	21.6			—			—
Benefits Paid	(65.4		)	(62.7		)	(1.9		)	(2.2		)
Acquisition	—			—			—			—
Settlements	—			—			—			—
Other	—			—			—			—
Fair Value of Plan Assets at End of Year	$	1,186.5		$	1,340.7		$	—		$	—
Plan Assets Less than Projected Benefit Obligation	$	(58.7	)	$	(26.4	)	$	(34.1	)	$	(37.3	)

Amounts Recognized in the Consolidated Balance Sheets Consist of:
Pension Assets	$	19.0		$	20.4		$	—		$	—
Accrued Pension and Postretirement Benefits Liability — Current	$	(1.8	)	$	(1.7	)	$	(2.5	)	$	(2.4	)
Accrued Pension and Postretirement Benefits Liability — Noncurrent	$	(75.9	)	$	(45.1	)	$	(31.6	)	$	(34.9	)
Accumulated Other Comprehensive Income:
Net Actuarial Loss (Gain)	$	297.3		$	267.1		$	(1.6	)	$	(20.1	)
Prior Service Cost (Credit)	$	3.6		$	0.7		$	(20.2	)	$	(0.8	)
Weighted Average Calculations:
Discount Rate	4.14		%	3.49		%	4.29		%	3.64		%
Rates of Increase in Future Compensation Levels	2.37		%	2.09		%	—			—
Initial Health Care Cost Trend Rate	—			—			9.00		%	9.00		%
Ultimate Health Care Cost Trend Rate	—			—			4.50		%	4.50		%
Ultimate Year	—			—			2027			2027

The Company determined pension expense using both the fair value of assets and a calculated value that averages gains and losses over a period of years. Investment gains or losses represent the difference between the expected and actual return on assets. As of December 31, 2018, the net actuarial loss was $297.3 million. These net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, or (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, including whether such accumulated actuarial losses at each measurement date exceed the “corridor” determined under the Compensation — Retirement Benefits topic of the FASB Codification. For the largest plan, the actuarial loss is amortized over the average remaining life expectancy period of employees expected to receive benefits.

The discount rate used to determine the present value of future pension obligations at December 31, 2018 was based on a yield curve constructed from a portfolio of high-quality corporate debt securities with maturities ranging from 1 year to 30 years. Each year’s expected future benefit payments were discounted to their present value at the spot yield curve rate thereby generating the overall discount rate for the Company’s pension obligations. The weighted average discount rate used to determine the pension obligations was 4.14% and 3.49% in 2018 and 2017, respectively.

Accumulated Benefit Obligation

The accumulated benefit obligation, (“ABO”), for all defined benefit pension plans was $1,240.2 million and $1,359.4 million at December 31, 2018 and 2017, respectively. There are three plans where the ABO and projected benefit obligation ("PBO") exceed plan assets. The aggregate ABO, PBO and fair value of plan assets for these plans are $1,047.2 million, $1,052.2 million and $977.3 million, respectively.

Employer Contributions

The Company made contributions of $5.8 million and $119.1 million to its pension plans during 2018 and 2017, respectively. The Company also made postretirement health care benefit payments of $1.9 million and $2.2 million during 2018 and 2017, respectively. For 2019, the Company expects to make contributions of approximately $10 million to its pension plans and approximately $2 million to its postretirement health care plans.

Pension Assets

The Company’s overall investment strategy is to achieve a mix of investments for long-term growth and near-term benefit payments through diversification of asset types, fund strategies and fund managers. Investment risk is measured on an on-going basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. The plans invest in the following major asset categories: cash, equity securities, fixed income securities, real estate and diversified growth funds. At December 31, 2018 and 2017, pension investments did not include any direct investments in the Company’s stock or the Company’s debt.

The weighted average allocation of plan assets and the target allocation by asset category is as follows:



	Target		2018		2017
Cash	—	%	5.0	%	2.4	%
Equity Securities	8.4		8.1		11.2
Fixed Income Securities	86.4		79.5		82.7
Other Investments	5.2		7.4		3.7
Total	100.0	%	100.0	%	100.0	%

The plans’ investment in equity securities primarily includes investments in U.S. and international companies of varying sizes and industries. The strategy of these investments is to 1) exceed the return of an appropriate benchmark for such equity classes and 2) through diversification, reduce volatility while enhancing long term real growth.

The plans’ investment in fixed income securities includes government bonds, investment grade bonds and non-investment grade bonds across a broad and diverse issuer base. The strategy of these investments is to provide income and stability and to diversify the fixed income exposure of the plan assets, thereby reducing volatility.

The Company’s approach to developing the expected long-term rate of return on pension plan assets is based on fair values and combines an analysis of historical investment performance by asset class, the Company’s investment guidelines and current and expected economic fundamentals.

In 2016, the Company implemented a de-risking or liability driven investment strategy for its U.S. pension plans. This strategy moved assets from return seeking (equities) to investments that mirror the underlying benefit obligations (fixed income). The allocation of equities and fixed income changed from 45% and 55% at December 31, 2016, to 10% and 90% at December 31, 2017.

The following tables set forth, by category and within the fair value hierarchy, the fair value of the Company’s pension assets at December 31, 2018 and 2017:



	Fair Value Measurements at December 31, 2018
In millions	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category:
Cash ^(a)	$	58.8	$	0.3	$	58.5	$	—
Equity Securities:
Domestic ^(a)	86.4		3.6		82.8		—
Foreign ^(a)	9.2		5.3		3.8		—
Fixed Income Securities ^(a)	980.1		15.0		962.3		2.8
Other Investments:
Real estate	9.2		—		7.6		1.6
Diversified growth fund ^(b)	42.8		—		41.5		1.4
Total	$	1,186.5	$	24.2	$	1,156.5	$	5.8



	Fair Value Measurements at December 31, 2017
In millions	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category:
Cash ^(a)	$	32.2	$	0.3	$	31.9	$	—
Equity Securities:
Domestic ^(a)	140.5		4.1		136.4		—
Foreign ^(a)	9.1		5.8		3.3		—
Fixed Income Securities ^(a)	1,108.6		16.1		1,092.5		—
Other Investments:
Real estate	10.4		9.6		—		0.8
Diversified growth fund ^(b)	39.9		—		39.9		—
Total	$	1,340.7	$	35.9	$	1,304.0	$	0.8


^(a)	The Level 2 investments are held in pooled funds and fair value is determined by net asset value, based on the underlying investments, as reported on the valuation date.


^(b)	The fund invests in a combination of traditional investments (equities, bonds, and foreign exchange), seeking to achieve returns through active asset allocation over a three to five-year horizon.

A reconciliation of fair value measurements of plan assets using significant unobservable inputs (Level 3) is as follows:




In millions	2018		2017
Balance at January 1,	$	0.8	$	—
Transfers In	5.0		0.8
Return on Assets Held at December 31	—		—
Balance at December 31,	$	5.8	$	0.8

Postretirement Health Care Trend Rate Sensitivity

Assumed health care cost trend rates affect the amounts reported for postretirement health care benefit plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on 2018 data:



	One Percentage Point
In millions	Increase		Decrease
Health Care Cost Trend Rate Sensitivity:
Effect on Total Interest and Service Cost Components	$	0.1	$	(0.1	)
Effect on Year-End Postretirement Benefit Obligation	$	1.9	$	(1.7	)

Estimated Future Benefit Payments

The following represents the Company’s estimated future pension and postretirement health care benefit payments through the year 2028:



In millions	Pension Plans		Postretirement Health Care Benefits
2019	$	69.4	$	2.4
2020	71.9		2.6
2021	74.6		2.6
2022	77.0		2.8
2023	79.1		2.8
2024— 2028	416.3		12.6

Amounts in Accumulated Other Comprehensive Loss Expected to Be Recognized in Net Periodic Benefit Costs in 2019

During 2019, amounts recorded in Accumulated Other Comprehensive Loss expected to be recognized in Net Periodic Benefit Costs are as follows:



In millions	Pension Benefits		Postretirement Health Care Benefits
Recognition of Prior Service Cost	$	0.2	$	(0.3	)
Recognition of Actuarial Loss (Gain)	9.9		(2.1		)

Multi-Employer Plans

Certain of the Company’s employees participate in multi-employer plans that provide both pension and other postretirement health care benefits to employees under union-employer organization agreements. Expense related to ongoing participation in these plans for the years ended December 31, 2018 and 2017 was $3.4 million and $2.3 million, respectively.

Estimated liabilities have been established related to the partial or complete withdrawal from certain multi-employment benefit plans for facilities which have been closed. At December 31, 2018, and December 31, 2017, the Company has $32.4 million and $29.0 million, respectively, recorded in Other Noncurrent Liabilities for these withdrawal liabilities which represents the Company's best estimate of the expected withdrawal liability.

In December 2018, the Company submitted formal notification to withdraw from the PACE Industry Union-Management Pension Fund ("PIUMPF") and recorded a liability of $4 million which includes an estimate of the Company's portion of the accumulated funding deficiency. This estimate is subject to future revisions.

The Company's remaining participation in multi-employer pension plans consists of contributions to three plans under the terms contained in collective bargaining agreements. The risks of participating in these multi-employer plans are different from single-employer plans in the following ways:


a.	Assets contributed to the multi-employers plan by one employer may be used to provide benefits to employees of other participating employers.


b.	If a participating employer stops contributing to the plan, the unfunded obligation of the plan may be borne by the remaining participating employers.


c.	If a company chooses to stop participating in a multi-employer plan, a company may be required to pay that plan an amount based on the underfunded status of the plan, referred to as the withdrawal liability.

The Company's participation in these plans for the year ended December 31, 2018, 2017 and 2016 is shown in the table below:



		Pension Protection Act Zone Status			Company Contributions (in millions)
Multi-employer Pension Fund	EIN/Pension Plan Number	2018	2017	FIP/RP Status Implemented	2018		2017		2016		Surcharge Imposed	Expiration Date of Bargaining Agreement
Central States Southeast and Southwest Areas Pension Fund	36-6044243/001	Red	Red	Yes	$	0.1	$	0.1	$	0.1	Yes	7/31/2023
PIUMPF^(a)	11-6166763/001	Red	Red	Yes	0.1		0.1		0.1		Yes	6/15/2022
Graphic Communications Conference of International Brotherhood of Teamster Pension Fund^(a)	52-6118568/001	Red	Red	Yes	0.3		0.3		0.2		Yes	5/01/2019
Total					$	0.5	$	0.5	$	0.4

^(a) In 2016, the WG Anderson acquisition included facilities with these plans.

The EIN Number column provides the Employer Identification Number (EIN). Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2018 and 2017 is for the plan's year-end at December 31, 2017 and December 31, 2016, respectively. The zone status is based on information that the Company receives from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The "FIP/RP Status Implemented" column indicates plans for which a Financial Improvement Plan (FIP) or Rehabilitation Plan (RP) has been implemented. The Company's share of the contributions to these plans did not exceed 5% of total plan contributions for the most recent plan year.

DEFINED CONTRIBUTION PLANS

The Company provides defined contribution plans for certain eligible employees. The Company’s contributions to the plans are based upon employee contributions, a percentage of eligible compensation, and the Company’s annual operating results. Contributions to these plans for the years ended December 31, 2018, 2017 and 2016 were $54.6 million, $37.7 million and $34.7 million, respectively. The increase of $16.9 million from the prior year is due primarily to the NACP Combination.