Retirement and Postretirement Plans |
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement and Postretirement Plans | Note 15 - Retirement and Postretirement Plans Eligible TimkenSteel employees, including certain employees in foreign countries, participate in the following TimkenSteel-sponsored plans: TimkenSteel Corporation Retirement Plan ("Salaried Plan"); TimkenSteel Corporation Bargaining Unit Pension Plan ("Bargaining Plan"), Supplemental Pension Plan of TimkenSteel Corporation ("Supplemental Plan"), TimkenSteel U.K. Pension Scheme ("Pension Scheme"), Mexico Pension Plan, and Postretirement Plans made up of TimkenSteel Corporation Bargaining Unit Welfare Benefit Plan for Retirees and TimkenSteel Corporation Welfare Benefit Plan for Retirees. Plan Amendments Bargaining Plan On October 29, 2021, the United Steelworkers ("USW") Local 1123 voted to ratify a new four-year contract (the “Contract”). The Contract is in effect until September 27, 2025 and resulted in several changes to the Bargaining Plan which increased the pension liability by $14.2 million in 2021. These plan amendments were recognized in other comprehensive income (loss) in 2021 and will be amortized as part of the pension net periodic benefit cost in future periods. The main change that drove the increase in the pension liability was the addition of a full lump sum form of payment for participants commencing benefits on or after January 1, 2022. In addition, the plan is now closed to new entrants effective January 1, 2022. Salaried Plan During the fourth quarter of 2019, the Company amended the Salaried Plan, which provides payments of tax-qualified pension benefits to certain salaried employees of the Company and its subsidiaries, to cease benefit accruals under the Salaried Plan for all remaining active participants, effective as of December 31, 2020. This plan amendment reduced the pension liability, resulting in a curtailment gain of $8.1 million for the year ended December 31, 2019. This curtailment gain was recognized in other (income) expense, net in the Consolidated Statements of Operations. During the fourth quarter of 2021, termination of the Salaried Plan was approved by the TimkenSteel Board of Directors. Participants were notified in January 2022 and the plan will be terminated effective March 31, 2022. The purchase of an annuity from an insurance company is expected to occur in 2023. Supplemental Plan During the fourth quarter of 2019, the Company amended the Supplemental Plan, which provides for the payment of nonqualified supplemental pension benefits to certain salaried participants in the Salaried Plan. The amendment provides for the cessation of benefit accruals under the Supplemental Plan, effective as of December 31, 2020. Effective January 1, 2021, there were no new accruals of benefits, including with respect to service accruals and the final average compensation determination. Certain of the Company’s current and prior named executive officers are participants in the plan. Existing benefits under the plan, as of December 31, 2020, will otherwise continue in accordance with the terms of the plan. This amendment reduced the pension liability, resulting in a curtailment gain of $0.8 million for the year ended December 31, 2019. This curtailment gain was recognized in other (income) expense, net in the Consolidated Statements of Operations. Postretirement Plans During the second quarter of 2019, the Company amended the TimkenSteel Corporation Bargaining Unit Welfare Plan for Retirees related to moving Medicare-eligible retirees to an individual plan on a Medicare healthcare exchange. The amendment reduced the postretirement liability by $70.2 million and required the Company to perform a full remeasurement of its obligation and plan assets as of April 30, 2019. The $70.2 million reduction in the APBO was recognized in other comprehensive income (loss) in 2019 and is being amortized as an offset to postretirement benefit cost over a period of 12 years (average remaining service period). In addition to the reduction of the APBO, the Company recognized a net remeasurement loss of $4.4 million for the year ended December 31, 2019. During the fourth quarter of 2019, the Company also amended the TimkenSteel Corporation Welfare Benefit Plan for Retirees, under which certain retired salaried employees of the Company and its subsidiaries are eligible to receive a Company contribution for their medical and prescription drug benefits under the retiree welfare plan. The amendment eliminated the retiree medical subsidy, effective as of December 31, 2019, for all remaining active salaried participants who retire after December 31, 2019 (provided, however, that participants who were laid off on or before March 31, 2020 and who otherwise qualified for the retiree medical subsidy under the terms of the retiree welfare plan remained entitled to receive the retiree medical subsidy). This plan amendment reduced the postretirement liability by $2.3 million in 2019, was recognized in other comprehensive income (loss) in 2019 and is being amortized as an offset to postretirement benefit cost in future periods. Pension benefits earned are generally based on years of service and compensation during active employment. TimkenSteel’s funding policy is consistent with the funding requirements of applicable laws and regulations. Asset allocations are established in a manner consistent with projected plan liabilities, benefit payments and expected rates of return for the various asset classes. The expected rate of return for the investment portfolio is based on expected rates of return for various asset classes, as well as historical asset class and fund performance.
The following table sets forth the change in benefit obligation for the defined benefit pension plans as of December 31, 2021:
The following table sets forth the change in benefit obligation for the defined benefit pension plans as of December 31, 2020:
Significant actuarial gains related to changes in benefit obligations for 2021 primarily resulted from an increase in discount rates. Significant actuarial losses related to changes in benefit obligations for 2020 primarily resulted from a decrease in discount rates.
The following table sets forth the change in plan assets and funded status for the defined benefit pension plans as of December 31, 2021:
The following table sets forth the change in plan assets and funded status for the defined benefit pension plans as of December 31, 2020:
The Salaried Plan has a provision that permits employees to elect to receive their pension benefits in a lump sum. In the first quarter of 2021, the cumulative cost of all lump sum payments was projected to exceed the sum of the service cost and interest cost components of net periodic pension cost for the Salaried Plan. As a result, the Company completed a full remeasurement of its pension obligations and plan assets associated with the Salaried Plan during each quarter of 2021. A full remeasurement of the pension obligations and plan assets associated with the Salaried Plan was also required throughout each quarter of 2020. For the years ended December 31, 2021 and December 31, 2020, total settlements were $31.1 million and $24.7 million, respectively. These settlements are included in the tables above and in the net remeasurement losses (gains) as a component of net periodic benefit cost. For the years ended December 31, 2021 and 2020, all pension plans had administrative expenses of $3.0 million and $3.8 million, respectively. These expenses are included in benefits paid in the tables above. The accumulated benefit obligation at December 31, 2021 exceeded the fair value of plan assets for the Bargaining Plan and the unfunded Supplemental Plan. For the Bargaining Plan and Supplemental Plan, the accumulated benefit obligation was $1,009.6 million and $23.6 million, respectively, as of December 31, 2021. The total pension accumulated benefit obligation for all plans was $1,303.2 million and $1,377.6 million as of December 31, 2021 and 2020, respectively. Amounts recognized on the balance sheet at December 31, 2021 for TimkenSteel’s pension and postretirement benefit plans include:
Amounts recognized on the balance sheet at December 31, 2020 for TimkenSteel’s pension and postretirement benefit plans include:
Included in accumulated other comprehensive income (loss) at December 31, 2021 were the following before-tax amounts that had not been recognized in net periodic benefit cost:
Included in accumulated other comprehensive income (loss) at December 31, 2020 were the following before-tax amounts that had not been recognized in net periodic benefit cost:
The weighted average assumptions used in determining benefit obligation as of December 31, 2021 and 2020 were as follows:
The weighted average assumptions used in determining benefit cost for the years ended December 31, 2021 and 2020 were as follows:
The discount rate assumption is based on current rates of high-quality long-term corporate bonds over the same period that benefit payments will be required to be made. The expected rate of return on plan assets assumption is based on the weighted-average expected return on the various asset classes in the plans’ portfolios. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance. For measurement purposes, TimkenSteel assumed a weighted-average annual rate of increase in the per capita cost ("health care cost trend rate") of 10.00% and 5.50% for 2021 and 2020, respectively. The components of net periodic benefit cost (income) for the year ended December 31, 2021 were as follows:
The components of net periodic benefit cost (income) for the year ended December 31, 2020 were as follows:
The components of net periodic benefit cost (income) for the year ended December 31, 2019 were as follows:
TimkenSteel recognizes its overall responsibility to ensure that the assets of its various defined benefit pension plans are managed effectively and prudently and in compliance with its policy guidelines and all applicable laws. Preservation of capital is important; however, TimkenSteel also recognizes that appropriate levels of risk are necessary to allow its investment managers to achieve satisfactory long-term results consistent with the objectives and the fiduciary character of the pension funds. Asset allocations are established in a manner consistent with projected plan liabilities, benefit payments and expected rates of return for various asset classes. The expected rate of return for the investment portfolios is based on expected rates of return for various asset classes, as well as historical asset class and fund performance. The target allocations for each plan's assets are as follows:
As of December 31, 2021, we were in the process of transitioning to these target investment allocations, which have been updated to reflect the respective risk profiles of each plan at the end of the year. 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 at the measurement date ("exit price"). The inputs used to measure fair value are classified into the following hierarchy: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 - Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3 - Unobservable inputs for the asset or liability. The following table presents the fair value hierarchy for those investments of TimkenSteel’s pension assets measured at fair value on a recurring basis as of December 31, 2021:
The following table presents the fair value hierarchy for those investments of TimkenSteel’s pension assets measured at fair value on a recurring basis as of December 31, 2020:
The following table presents the fair value hierarchy for those investments of TimkenSteel’s postretirement assets measured at fair value on a recurring basis as of December 31, 2021:
The following table presents the fair value hierarchy for those investments of TimkenSteel’s postretirement assets measured at fair value on a recurring basis as of December 31, 2020:
Future benefit payments are expected to be as follows:
The Company expects to make required contributions and payments to its pension and postretirement plans of $5.3 million in the next 12 months and $33.0 million from 2023 through 2031. Due to the provisions of the ARPA, required Company contributions related to the Bargaining Plan are not projected to begin until after 2031 based on current forecasts. As such, all Bargaining Plan benefit payments noted above are anticipated to be made from plan assets. Refer to "Note 2 - Significant Accounting Policies" for additional details.
Defined Contribution Plans The Company recorded expense primarily related to employer matching and non-discretionary contributions to these defined contribution plans of $2.8 million in 2021, $3.2 million in 2020, and $7.1 million in 2019. Effective June 1, 2020, the Company suspended employer matching contributions for all salaried employees. The Company reinstated employer matching contributions effective March 1, 2021. Additionally, the Company discontinued non-discretionary contributions as of January 1, 2021. |