Many of the Company’s employees are participants in various defined benefit pension plans which are administered and sponsored by the Company and are primarily in Germany, Switzerland, The Netherlands, Belgium, China, Indonesia, Taiwan, and Japan.

Company employees who were not previously associated with the acquired pension and postretirement plans are not eligible for enrollment in a number of these plans. Pension benefits are typically based on length of service and the employee’s final average compensation.

The Company provides certain health care and life insurance benefits to Dow-heritage employees in the United States when they retire.

In the U.S., the plan provides for health care benefits, including hospital, physicians’ services, drug and major medical expense coverage. In general, the plan applies to employees hired by Dow before January 1, 2008 and transferred to the Company in connection with the Acquisition, and who are at least 50 years old with 10 years of service. The plan allows for spouse coverage as well. If an employee was hired on or before January 1, 1993, the coverage extends past age 65. For employees hired after January 1, 1993 but before January 1, 2008, coverage ends at age 65. The Company reserves the right to modify the provisions of the plan at any time, including the right to terminate, and does not guarantee the continuation of the plan or its provisions.

The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs are provided below:

The weighted-average assumptions used to determine other postretirement benefit (“OPEB”) obligations and net periodic benefit costs are provided below:

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the pension and postretirement benefit plans. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. The Company sets its rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits. The Company uses a full yield curve approach in the estimation of the future service and interest cost components of net periodic benefit cost for its defined benefit pension and other postretirement benefit plans by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

The expected long-term rate of return on plan assets is determined by performing a detailed analysis of key economic and market factors impacting historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads, and other valuation measures and market metrics. The expected long-term rate of return for each asset class is then weighted based on the strategic asset allocation approved by the governing body for each plan. The historical experience with the pension fund asset performance is also considered.

The net periodic benefit costs for the pension and other postretirement benefit plans for the years ended December 31, 2019, 2018, and 2017 were as follows:

(1)

Service cost related to the Company’s defined benefit pension plans and other postretirement plans is included within “Cost of sales” and “Selling, general and administrative expenses,” whereas all other components of net periodic benefit cost are included within “Other expense (income), net” in the consolidated statements of operations.

(2)

Approximately $21.6 million of this amount related to a curtailment gain on certain of the Company’s pension plans in Europe recorded during the year ended December 31, 2017, which was recorded within “Other expense (income), net” in the consolidated statements of operations. This curtailment was triggered by a plan amendment under which participants will not receive incremental benefits under the existing plan for service provided subsequent to December 31, 2017. Previous participants in the curtailed pension plan became eligible to participate in a new multi-employer plan starting on January 1, 2018.

The changes in the pension benefit obligations, the fair value of plan assets, and the funded status of all significant plans for the years ended December 31, 2019 and 2018 were as follows:


	Defined Benefit				Other Postretirement
	Pension Plans				Benefit Plans
	December 31,				December 31,
	2019		2018		2019		2018
Change in projected benefit obligations
Benefit obligation at beginning of period	$	321.9	$	321.7	$	5.8	$	7.1
Service cost		13.1		12.3		0.1		0.2
Interest cost		5.1		4.9		0.2		0.2
Plan participants’ contributions		1.9		1.8		—		—
Actuarial changes in assumptions and experience ⁽¹⁾		45.7		(0.4)		0.1		(1.3)
Benefits paid from fund		0.1		(0.7)		—		—
Benefit payments by employer		(2.3)		(2.3)		—		—
Acquisitions		44.5		—		—		—
Plan amendments		—		(0.5)		—		(0.4)
Curtailments		(3.8)		—		—		—
Settlements		(7.2)		(3.8)		—		—
Other		(0.1)		1.6		—		—
Currency impact		(2.7)		(12.7)		—		—
Benefit obligation at end of period	$	416.2	$	321.9	$	6.2	$	5.8
Change in plan assets
Fair value of plan assets at beginning of period	$	138.5	$	140.1	$	—	$	—
Actual return on plan assets		16.3		2.4		—		—
Settlements		(7.2)		(3.8)		—		—
Employer contributions		5.7		5.9		—		—
Plan participants’ contributions		1.9		1.8		—		—
Benefits paid		(2.2)		(3.0)		—		—
Currency impact		(1.2)		(4.9)		—		—
Fair value of plan assets at end of period		151.8		138.5		—		—
Funded status at end of period	$	(264.4)	$	(183.4)	$	(6.2)	$	(5.8)

(1)

The actuarial loss for the year ended December 31, 2019 was primarily due to the decrease in discount rates during the year, while the actuarial gain for the year ended December 31, 2018 was primarily due to an increase in discount rates during the year.

The net amounts recognized in the consolidated balance sheets as of December 31, 2019 and 2018 were as follows:


	Defined Benefit				Other Postretirement
	Pension Plans				Benefit Plans
	December 31,				December 31,
	2019		2018		2019		2018
Net amounts recognized in the balance sheets as of December 31
Current liabilities	$	(5.8)	$	(2.7)	$	(0.1)	$	—
Noncurrent liabilities		(258.6)		(180.7)		(6.1)		(5.8)
Net amounts recognized in the balance sheet	$	(264.4)	$	(183.4)	$	(6.2)	$	(5.8)
Accumulated benefit obligation at the end of the period	$	380.6	$	293.7	$	6.2	$	5.8
Pretax amounts recognized in AOCI as of December 31
Net prior service cost (credit)	$	(3.7)	$	(4.8)	$	(0.1)	$	(0.2)
Net loss (gain)		84.3		60.5		(1.9)		(2.1)
Total at end of period	$	80.6	$	55.7	$	(2.0)	$	(2.3)

The estimated future benefit payments, reflecting expected future service, as appropriate, are presented in the following table:


											2025
											through
	2020		2021		2022		2023		2024		2029		Total
Defined benefit pension plans	$	17.6	$	5.8	$	7.1	$	9.9	$	8.6	$	61.3	$	110.3
Other postretirement benefit plans		0.1		0.1		0.1		0.2		0.3		2.1		2.9
Total	$	17.7	$	5.9	$	7.2	$	10.1	$	8.9	$	63.4	$	113.2

The Company estimates it will make cash contributions, including benefit payments for unfunded plans, of $7.8 million in 2020 to the defined benefit pension plans.

The following information relates to pension plans with projected and accumulated benefit obligations in excess of the fair value of plan assets as of December 31, 2019 and 2018:


Projected Benefit Obligation	December 31,
Exceeds the Fair Value of Plan Assets	2019		2018
Projected benefit obligations	$	319.9	$	239.7
Fair value of plan assets	$	55.5	$	56.3


Accumulated Benefit Obligation	December 31,
Exceeds the Fair Value of Plan Assets	2019		2018
Accumulated benefit obligations	$	289.1	$	210.8
Fair value of plan assets	$	55.5	$	50.3

Plan Assets

As of December 31, 2019 and 2018, plan assets totaled $151.8 million and $138.5 million, respectively, consisting of investments in insurance contracts. Investments in the pension plan insurance were valued utilizing unobservable inputs, which are contractually determined based on cash surrender values, returns, fees, and the present value of the future cash flows of the contracts.

Insurance contracts are classified as Level 3 investments. Changes in the fair value of these Level 3 investments during the years ended December 31, 2019 and 2018 are included in the “Change in plan assets” table above.

Concentration of Risk

The Company mitigates the credit risk of investments by establishing guidelines with investment managers that limit investment in any single issue or issuer to an amount that is not material to the portfolio being managed. These guidelines are monitored for compliance both by the Company and external managers. Credit risk related to derivative activity is mitigated by utilizing multiple counterparties and through collateral support agreements.

Supplemental Employee Retirement Plan

The Company established a non-qualified supplemental employee retirement plan in 2010. The net benefit costs recognized for this plan during the years ended December 31, 2019, 2018, and 2017 were $0.3 million, $0.8 million, and $1.1 million, respectively. This plan was concluded in 2019 and all remaining benefit payments were completed during the year ended December 31, 2019. There were no benefit obligations under this plan as of December 31, 2019 and there were $15.5 million of benefit obligations as of December 31, 2018. As of December 31, 2019 and 2018, the amounts of net loss included in AOCI were $0.0 million and $0.3 million, respectively, with $0.3 million and $0.5 million amortized from AOCI into net periodic benefit costs during the years ended December 31, 2019 and 2018, respectively.

Defined Contribution Plans

The Company also offers defined contribution plans to eligible employees in the U.S. and in other countries, including Hong Kong, Korea, The Netherlands, Indonesia, Taiwan, and the United Kingdom. The defined contribution plans are comprised of a non-discretionary elective matching contribution component as well as a discretionary non-elective contribution component. Employees participate in the non-discretionary component by contributing a portion of their eligible compensation to the plan, which is partially matched by the Company. Non-elective contributions are made at the discretion of the Company and are based on a combination of eligible employee compensation and performance award targets. During the years ended December 31, 2019, 2018, and 2017, the Company contributed $11.1 million, $7.9 million, and $8.4 million, respectively, to the defined contribution plans.

Multiemployer Plans

The Company also has a multiemployer plan in The Netherlands for a closed population of employees. The Company’s contributions to the plan are generally determined as a percentage of the participants’ salaries. During the years ended December 31, 2019 and 2018, the Company recorded expense of $4.3 million and $4.5 million, respectively, related to the plan, and made contributions of $4.2 million and $3.8 million, respectively, to the plan.