| EMPLOYEE RETIREMENT BENEFIT PLANS The Company sponsors various retirement plans, including defined benefit pension plans and defined contribution plans. Substantially all of the Company’s domestic non-union employees are eligible to participate in employer-sponsored retirement savings plans, which include plans created under Section 401(k) of the Internal Revenue Code that provide for the Company to match a portion of employee contributions. The Company’s contributions to the plans are discretionary but are subject to certain minimum requirements as specified in the plans. The Company uses a measurement date of June 30 for all of its retirement and postretirement benefit plans. The Company recorded obligations related to its withdrawal from one multi-employer pension plan related to three former sites. Its withdrawal has been classified as a mass withdrawal under the Multiemployer Pension Plan Amendments Act of 1980, as amended, and the Pension Protection Act of 2006 and resulted in the recognition of liabilities associated with the Company’s long-term obligations in prior-year periods not presented, which were primarily recorded as an expense within discontinued operations. The estimated discounted value of the projected contributions related to these plans is $38.8 million and $39.0 million as of June 30, 2019 and 2018, respectively. The annual cash impact associated with the Company’s long-term obligation arising from this plan is $1.7 million per year. The following table provides a reconciliation of the change in projected benefit obligation and fair value of plan assets for the defined benefit retirement and other retirement plans, excluding the multi-employer pension plan liability: | | | | | | | | | | | | | | | | | | | | | | | | | Retirement Benefits | | | | Other Post-Retirement Benefits | | | | June 30, | | | | June 30, | | | | (Dollars in millions) | 2019 | | 2018 | | 2019 | | 2018 | | Accumulated Benefit Obligation | $ | 341.7 | | $ | 322.7 | | $ | 2.9 | | $ | 2.8 | | | | | | | | | | Change in Benefit Obligation | | | | | | | | | Benefit obligation at beginning of year | 331.1 | | 330.6 | | 2.8 | | 2.8 | | Company service cost | 3.6 | | 3.5 | | — | | — | | Interest cost | 7.5 | | 7.3 | | 0.1 | | — | | Employee contributions | 0.3 | | 0.3 | | — | | — | | Plan amendments | — | | — | | — | | — | | Curtailments | — | | — | | — | | — | | Settlements | — | | (0.2) | | — | | — | | Special termination benefits | — | | — | | — | | — | | Divestitures | — | | — | | — | | — | | Other | — | | — | | — | | — | | Benefits paid | (11.5) | | (14.8) | | (0.2) | | (0.2) | | Actual expenses | (0.1) | | — | | — | | — | | Actuarial (gain)/loss | 27.5 | | (4.5) | | 0.2 | | 0.2 | | Exchange rate gain/(loss) | (8.7) | | 8.9 | | — | | — | | Benefit obligation at end of year | $ | 349.7 | | $ | 331.1 | | $ | 2.9 | | $ | 2.8 | | | | | | | | | | Change in Plan Assets | | | | | | | | | Fair value of plan assets at beginning of year | 258.1 | | 244.6 | | — | | — | | Actual return on plan assets | 23.2 | | 10.6 | | — | | — | | Company contributions | 9.7 | | 11.2 | | 0.2 | | 0.2 | | Employee contributions | 0.3 | | 0.3 | | — | | — | | Settlements | — | | (0.2) | | — | | — | | Special company contributions to fund termination benefits | — | | — | | — | | — | | Divestitures | — | | — | | — | | — | | Other | — | | — | | — | | — | | Benefits paid | (11.5) | | (14.8) | | (0.2) | | (0.2) | | Actual expenses | (0.1) | | — | | — | | — | | Exchange rate gain/(loss) | (7.4) | | 6.4 | | — | | — | | Fair value of plan assets at end of year | $ | 272.3 | | $ | 258.1 | | $ | — | | $ | — | | | | | | | | | | Funded Status | | | | | | | | | Funded status at end of year | (77.4) | | (73.0) | | (2.9) | | (2.8) | | Employer contributions between measurement date and reporting date | — | | — | | — | | — | | Net pension asset (liability) | $ | (77.4) | | $ | (73.0) | | $ | (2.9) | | $ | (2.8) |
The following table provides a reconciliation of the net amount recognized in the consolidated balance sheets: | | | | | | | | | | | | | | | | | | | | | | | | | Retirement Benefits | | | | Other Post-Retirement Benefits | | | | June 30, | | | | June 30, | | | | (Dollars in millions) | 2019 | | 2018 | | 2019 | | 2018 | | Amounts Recognized in Statement of Financial Position | | | | | | | | | Noncurrent assets | $ | 25.8 | | $ | 18.0 | | $ | — | | $ | — | | Current liabilities | (0.8) | | (0.8) | | (0.3) | | (0.3) | | Noncurrent liabilities | (102.4) | | (90.2) | | (2.6) | | (2.5) | | Total asset/(liability) | (77.4) | | (73.0) | | (2.9) | | (2.8) | | | | | | | | | | Amounts Recognized in Accumulated Other Comprehensive Income | | | | | | | | | Transition (asset)/obligation | — | | — | | — | | — | | Prior service cost | (0.5) | | (0.5) | | — | | — | | Net (gain)/loss | 65.7 | | 53.0 | | (0.8) | | (1.1) | | Total accumulated other comprehensive income at the end of the year | 65.2 | | 52.5 | | (0.8) | | (1.1) | | | | | | | | | | Additional Information for Plan with ABO in Excess of Plan Assets | | | | | | | | | Projected benefit obligation | 174.6 | | 157.8 | | 2.9 | | 2.8 | | Accumulated benefit obligation | 168.4 | | 152.1 | | 2.9 | | 2.8 | | Fair value of plan assets | 71.5 | | 66.7 | | — | | — | | | | | | | | | | Additional Information for Plan with PBO in Excess of Plan Assets | | | | | | | | | Projected benefit obligation | 174.6 | | 157.8 | | 2.9 | | 2.8 | | Accumulated benefit obligation | 168.4 | | 152.1 | | 2.9 | | 2.8 | | Fair value of plan assets | 71.5 | | 66.7 | | — | | — | | | | | | | | | | Components of Net Periodic Benefit Cost | | | | | | | | | Service cost | 3.6 | | 3.5 | | — | | — | | Interest cost | 7.5 | | 7.3 | | 0.1 | | — | | Expected return on plan assets | (11.5) | | (11.9) | | — | | — | | Amortization of unrecognized: | | | | | | | | Transition (asset)/obligation | — | | — | | — | | — | | Prior service cost | — | | — | | — | | — | | Net (gain)/loss | 2.5 | | 2.4 | | (0.1) | | (0.1) | | | | | | | | | | | | | | | | | | Net periodic benefit cost | $ | 2.1 | | $ | 1.3 | | $ | — | | $ | (0.1) |
| | | | | | | | | | | | | | | | | | | | | | | | | Retirement Benefits | | | | Other Post-Retirement Benefits | | | | June 30, | | | | June 30, | | | | (Dollars in millions) | 2019 | | 2018 | | 2019 | | 2018 | | Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income | | | | | | | | | Net (gain)/loss arising during the year | $ | 15.8 | | $ | (3.1) | | $ | 0.2 | | $ | 0.2 | | Prior service cost (credit) during the year | — | | — | | — | | — | | Transition asset/(obligation) recognized during the year | — | | — | | — | | — | | Prior service cost recognized during the year | — | | — | | — | | — | | Net gain/(loss) recognized during the year | (2.5) | | (2.4) | | 0.1 | | 0.1 | | Exchange rate gain/(loss) recognized during the year | (0.6) | | 0.3 | | — | | — | | Total recognized in other comprehensive income | $ | 12.7 | | $ | (5.2) | | $ | 0.3 | | $ | 0.3 | | Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income | | | | | | | | | Total recognized in net periodic benefit cost and other comprehensive income | $ | 14.8 | | $ | (3.9) | | $ | 0.3 | | $ | 0.3 | | Estimated Amounts to be Amortized from Accumulated Other Comprehensive Income into Net Periodic Benefit Cost | | | | | | | | | Amortization of: | | | | | | | | | Transition (asset)/obligation | $ | — | | $ | — | | $ | — | | $ | — | | Prior service cost/(credit) | — | | — | | — | | — | | Net (gain)/loss | 4.5 | | 2.6 | | (0.1) | | (0.1) | | Financial Assumptions Used to Determine Benefit Obligations at the Balance Sheet Date | | | | | | | | | Discount rate (%) | 1.90 | % | | 2.50 | % | | 2.96 | % | | 3.79 | % | | Rate of compensation increases (%) | 2.03 | % | | 2.03 | % | | n/a | | n/a | | Financial Assumptions Used to Determine Net Periodic Benefit Cost for Financial Year | | | | | | | | | Discount rate (%) | 2.50 | % | | 2.49 | % | | 3.79 | % | | 3.28 | % | | Rate of compensation increases (%) | 2.03 | % | | 2.04 | % | | n/a | | n/a | | Expected long-term rate of return (%) | 4.70 | % | | 5.09 | % | | n/a | | n/a | | Expected Future Contributions | | | | | | | | | Fiscal year 2020 | $ | 11.3 | | $ | 9.4 | | $ | 0.3 | | $ | 0.3 |
| | | | | | | | | | | | | | | | | | | | | | | | | Retirement Benefits | | | | Other Post-Retirement Benefits | | | | June 30, | | | | June 30, | | | | (Dollars in millions) | 2019 | | 2018 | | 2019 | | 2018 | | Expected Future Benefit Payments | | | | | | | | | Financial year | | | | | | | | | 2020 | $ | 12.8 | | $ | 11.0 | | $ | 0.3 | | $ | 0.3 | | 2021 | 12.1 | | 12.2 | | 0.3 | | 0.3 | | 2022 | 12.4 | | 11.8 | | 0.3 | | 0.3 | | 2023 | 13.3 | | 12.3 | | 0.3 | | 0.3 | | 2024 | 14.1 | | 13.2 | | 0.2 | | 0.2 | | 2025-2029 | 77.5 | | 77.7 | | 1.0 | | 1.0 | | | | | | | | | | Actual Asset Allocation (%) | | | | | | | | | Equities | 17.6 | % | | 22.7 | % | | — | % | | — | % | | Government bonds | 29.8 | % | | 28.9 | % | | — | % | | — | % | | Corporate bonds | 15.2 | % | | 14.1 | % | | — | % | | — | % | | Property | 2.6 | % | | 2.4 | % | | — | % | | — | % | | Insurance contracts | 11.0 | % | | 9.3 | % | | — | % | | — | % | | Other | 23.8 | % | | 22.6 | % | | — | % | | — | % | | Total | 100.0 | % | | 100.0 | % | | — | % | | — | % | | | | | | | | | | Actual Asset Allocation (Amount) | | | | | | | | | Equities | $ | 47.9 | | $ | 58.7 | | $ | — | | $ | — | | Government bonds | 80.8 | | 74.5 | | — | | — | | Corporate bonds | 41.4 | | 36.4 | | — | | — | | Property | 7.2 | | 6.2 | | — | | — | | Insurance contracts | 30.0 | | 24.0 | | — | | — | | Other | 65.0 | | 58.3 | | — | | — | | Total | $ | 272.3 | | $ | 258.1 | | $ | — | | $ | — | | | | | | | | | | Target Asset Allocation (%) | | | | | | | | | Equities | 21.4 | % | | 22.8 | % | | — | % | | — | % | | Government bonds | 30.2 | % | | 29.7 | % | | — | % | | — | % | | Corporate bonds | 13.8 | % | | 13.6 | % | | — | % | | — | % | | Property | 2.9 | % | | 2.9 | % | | — | % | | — | % | | Insurance contracts | 11.2 | % | | 10.1 | % | | — | % | | — | % | | Other | 20.5 | % | | 20.9 | % | | — | % | | — | % | | Total | 100.0 | % | | 100.0 | % | | — | % | | — | % |
The Company employs a building-block approach in determining the long-term rate of return for plan assets, with proper consideration of diversification and rebalancing. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data are reviewed to check for reasonability and appropriateness. Plan assets are recognized and measured at fair value in accordance with the accounting standards regarding fair value measurements. The following are valuation techniques used to determine the fair value of each major category of assets: •Short-term investments, equity securities, fixed-income securities, and real estate are valued using quoted market prices or other valuation methods, and thus are classified within Level 1 or Level 2. •Insurance contracts and other types of investments include investments with some observable and unobservable prices that are adjusted by cash contributions and distributions, and thus are classified within Level 2 or Level 3. •Other assets as of June 30, 2019 and June 30, 2018, including $24.3 million and $26.9 million of investments in hedge funds related to the Company's U.K. pension plan, are classified as Level 2. The following table provides a summary of plan assets that are measured in fair value as of June 30, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Dollars in millions) | Level 1 | | Level 2 | | Level 3 | | Investments Measured at Net Asset Value | | Total Assets | | | | | | | | | | | | Equity securities | $ | 1.8 | | $ | 46.0 | | $ | — | | $ | — | | $ | 47.8 | | Debt securities | 0.1 | | 122.2 | | — | | — | | 122.3 | | Real estate | 0.4 | | 4.9 | | — | | 1.9 | | 7.2 | | Other | 0.6 | | 73.4 | | 21.0 | | — | | 95.0 | | Total | $ | 2.9 | | $ | 246.5 | | $ | 21.0 | | $ | 1.9 | | $ | 272.3 |
Level 3 other assets consist of an insurance contract in the U.K. to fulfill the benefit obligations for a portion of the participant benefits. The value of this commitment is determined using the same assumptions and methods used to value the U.K. Retirement & Death Benefit Plan pension liability. Level 3 other assets also include the partial funding of a pension liability relating to current and former employees of the Company’s Eberbach, Germany facility through a Company promissory note or loan with an annual rate of interest of 5%. The value of this commitment fluctuates due to contributions and benefit payments in addition to loan interest. The following table provides a summary of plan assets that are measured in fair value as of June 30, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Dollars in millions) | Level 1 | | Level 2 | | Level 3 | | Investments Measured at Net Asset Value | | Total Assets | | | | | | | | | | | | Equity securities | $ | 1.8 | | $ | 56.9 | | $ | — | | $ | — | | $ | 58.7 | | Debt securities | 0.1 | | 110.8 | | — | | — | | 110.9 | | Real estate | 0.4 | | 3.9 | | — | | 1.9 | | 6.2 | | Other | 0.7 | | 60.7 | | 20.9 | | — | | 82.3 | | Total | $ | 3.0 | | $ | 232.3 | | $ | 20.9 | | $ | 1.9 | | $ | 258.1 |
Level 3 other assets consist of an insurance contract in the U.K. to fulfill the benefit obligations for a portion of the participant benefits. The value of this commitment is determined using the same assumptions and methods used to value the U.K. Retirement & Death Benefit Plan pension liability. Level 3 other assets also include the partial funding of a pension liability relating to current and former employees of the Company’s Eberbach, Germany facility through a Company promissory note or loan with an annual rate of interest of 5%. The value of this commitment fluctuates due to contributions and benefit payments in addition to loan interest. The following table provides a reconciliation of the beginning and ending balances of level 3 assets as well as the changes during the period attributable to assets held and those purchases, sales, settlements, contributions and benefits that were paid: Asset Category Allocations - June 30, 2019 | | | | | | | | | | | | | | | | | | | Fair Value Measurement Using Significant Unobservable Inputs Total (Level 3) | | Fair Value Measurement Using Significant Unobservable Inputs Insurance Contracts | | Fair Value Measurement Using Significant Unobservable Inputs Other | | Total (Level 3) | | | | | | | (Dollars in millions) | | | | | | | Beginning Balance at June 30, 2018 | $ | 20.9 | | $ | 2.9 | | $ | 18.0 | | Actual return on plan assets: | | | | | | | Relating to assets still held at the reporting date | 0.8 | | 0.4 | | 0.4 | | Relating to assets sold during the period | — | | — | | — | | Purchases, sales, settlements, contributions and benefits paid | (1.8) | | (0.2) | | (1.6) | | Transfers in and/or out of Level 3 | 1.1 | | — | | 1.1 | | Ending Balance at June 30, 2019 | $ | 21.0 | | $ | 3.1 | | $ | 17.9 |
The investment policy reflects the long-term nature of the plans’ funding obligations. The assets are invested to provide the opportunity for both income and growth of principal. This objective is pursued as a long-term goal designed to provide required benefits for participants without undue risk. It is expected that this objective can be achieved through a well-diversified asset portfolio. All equity investments are made within the guidelines of quality, marketability, and diversification mandated by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (for plans subject to ERISA) and other relevant legal requirements. Investment managers are directed to maintain equity portfolios at a risk level approximately equivalent to that of the specific benchmark established for that portfolio. Assets invested in fixed income securities and pooled fixed-income portfolios are managed actively to pursue opportunities presented by changes in interest rates, credit ratings, or maturity premiums. | | | | | | | | | | | | | Other Post-Retirement Benefits | | | | 2019 | | 2018 | | | | | | Assumed Healthcare Cost Trend Rates at the Balance Sheet Date | | | | | Healthcare cost trend rate – initial (%) | | | | | Pre-65 | n/a | | | n/a | | | Post-65 | 19.86 | % | | (1.42) | % | | Healthcare cost trend rate – ultimate (%) | | | | | Pre-65 | n/a | | | n/a | | | Post-65 | 4.83 | % | | 4.83 | % | | Year in which ultimate rates are reached | | | | | Pre-65 | n/a | | n/a | | Post-65 | 2026 | | 2026 | | Effect of 1% Change in Healthcare Cost Trend Rate | | | | | Healthcare cost trend rate up 1% | | | | | on APBO at balance sheet date | $ | 117,555 | | $ | 120,821 | | on total service and interest cost | 3,640 | | 3,118 | | Effect of 1% Change in Healthcare Cost Trend Rate | | | | | Healthcare cost trend rate down 1% | | | | | on APBO at balance sheet date | $ | (106,088) | | $ | (108,873) | | on total service and interest cost | (3,284) | | (2,804) | | | | | | Expected Future Contributions | | | | | Fiscal year 2020 | $ | 319,469 | | $ | 311,318 |
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