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Long-term Employee Benefits
 12 Months Ended
Dec. 31, 2018
Postemployment Benefits [Abstract]  
Long-term Employee Benefits LONG-TERM EMPLOYEE BENEFITS
Defined Benefit Pensions
Axalta has defined benefit plans that cover certain employees worldwide, with over 85% of the projected benefit obligation within the European region as of December 31, 2018.
Obligations and Funded Status
The measurement date used to determine defined benefit obligations was December 31. The following table sets forth the changes to the projected benefit obligations ("PBO") and plan assets for the years ended December 31, 2018 and 2017 and the funded status and amounts recognized in the accompanying consolidated balance sheets at December 31, 2018 and 2017 for our defined benefit pension plans:
 
 
Year Ended December 31,
 
 
2018
 
2017
Change in benefit obligation:
 
 
 
 
Projected benefit obligation at beginning of year
 
$
636.9

 
$
547.6

Service cost
 
8.8

 
9.0

Interest cost
 
13.1

 
13.8

Participant contributions
 
1.3

 
1.3

Actuarial gains, net
 
(3.3
)
 
(13.8
)
Plan curtailments, settlements and special termination benefits
 
(19.4
)
 
(12.9
)
Benefits paid
 
(25.6
)
 
(23.3
)
Business combinations and other adjustments
 
0.7

 
51.2

Foreign currency translation
 
(28.8
)
 
64.0

Projected benefit obligation at end of year
 
$
583.7

 
$
636.9

Change in plan assets:
 
 
 
 
Fair value of plan assets at beginning of year
 
$
365.0

 
$
288.7

Actual return on plan assets
 
(1.4
)
 
22.2

Employer contributions
 
24.6

 
27.4

Participant contributions
 
1.3

 
1.3

Benefits paid
 
(25.6
)
 
(23.3
)
Settlements
 
(12.5
)
 
(13.9
)
Business combinations and other adjustments
 
(0.1
)
 
32.4

Foreign currency translation
 
(19.0
)
 
30.2

Fair value of plan assets at end of year
 
$
332.3

 
$
365.0

Funded status, net
 
$
(251.4
)
 
$
(271.9
)
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
 
Other assets
 
$
22.0

 
$
19.2

Other accrued liabilities
 
(11.5
)
 
(12.0
)
Accrued pensions
 
(261.9
)
 
(279.1
)
Net amount recognized
 
$
(251.4
)
 
$
(271.9
)

The PBO is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases. The accumulated benefit obligation ("ABO") is the actuarial present value of benefits attributable to employee service rendered to date but does not include the effects of estimated future pay increases.
The following table reflects the ABO for all defined benefit pension plans as of December 31, 2018 and 2017. Further, the table reflects the aggregate PBO, ABO and fair value of plan assets for pension plans with PBO in excess of plan assets and for pension plans with ABO in excess of plan assets.
 
 
Year Ended December 31,
 
 
2018
 
2017
ABO
 
$
559.9

 
$
605.4

Plans with PBO in excess of plan assets:
 
 
 
 
PBO
 
$
375.6

 
$
401.2

ABO
 
$
352.0

 
$
370.0

Fair value plan assets
 
$
102.2

 
$
110.1

Plans with ABO in excess of plan assets:
 
 
 
 
PBO
 
$
370.2

 
$
393.3

ABO
 
$
349.1

 
$
364.9

Fair value plan assets
 
$
99.3

 
$
104.7


The pre-tax amounts not yet reflected in net periodic benefit cost and included in AOCI include the following related to defined benefit plans:
 
 
Year Ended December 31,
 
 
2018
 
2017
Accumulated net actuarial losses
 
$
(51.8
)
 
$
(46.4
)
Accumulated prior service credit
 
1.6

 
2.6

Total
 
$
(50.2
)
 
$
(43.8
)

The accumulated net actuarial losses for pensions relate primarily to differences between the actual net periodic expense and the expected net periodic expense resulting from differences in the significant assumptions, including return on assets, discount rates and compensation trends, used in these estimates. For individual plans in which the accumulated net actuarial gains or losses exceed 10% of the higher of the fair value of plan assets or the PBO at the beginning of the year, amortization of such excess has been included in net periodic benefit costs. The amortization period is the average remaining service period of active employees expected to receive benefits unless a plan is mostly inactive in which case the amortization period is the average remaining life expectancy of the plan participants. Accumulated prior service credit is amortized over the future service periods of those employees who are active at the dates of the plan amendments and who are expected to receive benefits.
The estimated pre-tax amounts that are expected to be amortized from AOCI into net periodic benefit cost during 2019 for the defined benefit plans is as follows:
 
 
2019
Amortization of net actuarial losses, net
 
$
(2.0
)
Amortization of prior service credit, net
 
0.1

Total
 
$
(1.9
)

Components of Net Periodic Benefit Cost
The following table sets forth the pre-tax components of net periodic benefit costs for our defined benefit plans for the years ended December 31, 2018, 2017 and 2016.
 
 
Year Ended December 31,
 
 
2018
 
2017
 
2016
Components of net periodic benefit cost and amounts recognized in comprehensive (income) loss:
 
 
 
 
 
 
Net periodic benefit cost:
 
 
 
 
 
 
Service cost
 
$
8.8

 
$
9.0

 
$
10.7

Interest cost
 
13.1

 
13.8

 
15.1

Expected return on plan assets
 
(16.1
)
 
(15.0
)
 
(12.6
)
Amortization of actuarial loss, net
 
1.3

 
1.4

 
0.4

Amortization of prior service credit
 
(0.1
)
 
—

 
—

Curtailment gain
 
(0.7
)
 
—

 
(1.1
)
Settlement (gain) loss
 
0.6

 
0.2

 
(0.5
)
Special termination benefit loss
 
—

 
1.0

 
0.2

Net periodic benefit cost
 
$
6.9

 
$
10.4

 
$
12.2

Changes in plan assets and benefit obligations recognized in other comprehensive (income) loss:
 
 
 
 
 
 
Net actuarial (gain) loss, net
 
$
6.7

 
$
(20.6
)
 
$
27.7

Amortization of actuarial loss, net
 
(1.3
)
 
(1.4
)
 
(0.4
)
Prior service (credit) cost
 
0.8

 
(1.2
)
 
—

Amortization of prior service credit
 
0.1

 
—

 
—

Curtailment gain
 
0.7

 
—

 
1.1

Settlement gain (loss)
 
(0.6
)
 
(0.2
)
 
0.5

Other adjustments
 
—

 
(7.9
)
 
—

Total (gain) loss recognized in other comprehensive (income) loss
 
$
6.4

 
$
(31.3
)
 
$
28.9

Total recognized in net periodic benefit cost and comprehensive (income) loss
 
$
13.3

 
$
(20.9
)
 
$
41.1


Included in the other adjustments recognized in other comprehensive (income) loss for the year ended December 31, 2017 was a pension plan adjustment related to the deconsolidation of our Venezuelan subsidiary and the corresponding write-off of the accumulated actuarial loss on our Venezuela pension plan. This resulted in a decrease of $8.5 million in AOCI ($5.9 million, net of tax), as discussed further in Note 21.
Assumptions
We used the following assumptions in determining the benefit obligations and net periodic benefit cost of our defined benefit plans:
 
 
2018
 
2017
 
2016
Weighted-average assumptions:
 
 
 
 
 
 
Discount rate to determine benefit obligation
 
2.27
%
 
2.13
%
 
2.52
%
Discount rate to determine net cost
 
2.13
%
 
2.52
%
 
3.05
%
Rate of future compensation increases to determine benefit obligation
 
2.68
%
 
2.69
%
 
3.07
%
Rate of future compensation increases to determine net cost
 
2.69
%
 
3.07
%
 
3.03
%
Rate of return on plan assets to determine net cost
 
4.47
%
 
4.73
%
 
4.75
%
The rate of future compensation increases to determine benefit obligation in 2016 includes the impacts of inflationary assumptions of our now deconsolidated Venezuelan subsidiary, which are absent in the 2017-2018 assumptions.
The discount rates used reflect the expected future cash flow based on plan provisions, participant data and the currencies in which the expected future cash flows will occur. For the majority of our defined benefit pension obligations, we utilize prevailing long-term high quality corporate bond indices applicable to the respective country at the measurement date. In countries where established corporate bond markets do not exist, we utilize other index movement and duration analysis to determine discount rates. The long-term rate of return on plan assets assumptions reflect economic assumptions applicable to each country and assumptions related to the preliminary assessments regarding the type of investments to be held by the respective plans.
Estimated future benefit payments
The following reflects the total benefit payments expected to be paid for defined benefits:
Year ended December 31,
 
Benefits
2019
 
$
28.5

2020
 
$
31.2

2021
 
$
29.8

2022
 
$
30.8

2023
 
$
30.7

2024—2028
 
$
184.4

Plan Assets
The defined benefit pension plans for our subsidiaries represent single-employer plans and the related plan assets are invested within separate trusts. Each of the single-employer plans is managed in accordance with the requirements of local laws and regulations governing defined benefit pension plans for the exclusive purpose of providing pension benefits to participants and their beneficiaries. Pension plan assets are typically held in a trust by financial institutions. Our asset allocation targets established are intended to achieve the plan’s investment strategies.
Equity securities include varying market capitalization levels. U.S. equity securities are primarily large-cap companies. Fixed income investments include corporate issued, government issued, and asset backed securities. Corporate debt securities include a range of credit risk and industry diversification. Other investments include real estate and private market securities such as insurance contracts, interests in private equity, and venture capital partnerships. Pension trust liabilities relate to an over funding by DuPont into a pension trust managed by Axalta in conjunction with the Acquisition. The assets continue to be invested and managed by Axalta until required regulatory approvals are received, at which time the over-funded assets will be transferred back to the trust managed by DuPont. Assets measured using NAV as a practical expedient include debt asset backed securities and hedge funds. Debt asset backed securities primarily consist of collateralized debt obligations. The market values for these assets are based on the net asset values multiplied by the number of shares owned.
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although we believe the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The Company’s investment strategy in pension plan assets is to generate earnings over an extended time to help fund the cost of benefits while maintaining an adequate level of diversification for a prudent level of risk. The table below summarizes the weighted average actual and target pension plan asset allocations at December 31st for all funded Axalta defined benefit plans.
Asset Category
 
2018
 
2017
 
Target Allocation
Equity securities
 
15-20%
 
25-30%
 
15-20%
Debt securities
 
25-30%
 
20-25%
 
25-30%
Real estate
 
0-5%
 
0-5%
 
0-5%
Other
 
45-50%
 
45-50%
 
45-50%

The table below presents the fair values of the defined benefit pension plan assets by level within the fair value hierarchy, as described in Note 1, at December 31, 2018 and 2017, respectively.
 
 
Fair value measurements at
 
 
12/31/2018
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Asset Category:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
4.5

 
$
4.4

 
$
0.1

 
$
—

U.S. equity securities
 
23.7

 
23.4

 
—

 
0.3

Non-U.S. equity securities
 
42.9

 
39.9

 
1.0

 
2.0

Debt securities—government issued
 
70.9

 
41.1

 
23.3

 
6.5

Debt securities—corporate issued
 
29.1

 
19.7

 
7.0

 
2.4

Private market securities and other
 
129.6

 
1.2

 
1.5

 
126.9

Real estate investments
 
13.6

 
—

 
—

 
13.6

Total
 
$
314.3

 
$
129.7

 
$
32.9

 
$
151.7

Debt asset backed securities at NAV
 
11.0

 
 
 
 
 
 
Hedge funds at NAV
 
8.5

 
 
 
 
 
 
Pension trust liability
 
(1.5
)
 
 
 
 
 
 
 
 
$
332.3

 
 
 
 
 
 
 
 
Fair value measurements at
 
 
12/31/2017
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Asset Category:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
3.7

 
$
3.7

 
$
—

 
$
—

U.S. equity securities
 
33.3

 
33.0

 
—

 
0.3

Non-U.S. equity securities
 
76.4

 
73.4

 
1.2

 
1.8

Debt—government issued
 
44.6

 
33.1

 
7.3

 
4.2

Debt—corporate issued
 
32.8

 
17.2

 
13.1

 
2.5

Private market securities and other
 
141.2

 
2.7

 
2.8

 
135.7

Real estate investments
 
13.5

 
—

 
—

 
13.5

Total
 
$
345.5

 
$
163.1

 
$
24.4

 
$
158.0

Debt asset backed securities at NAV
 
10.9

 
 
 
 
 
 
Hedge funds at NAV
 
8.6

 
 
 
 
 
 
 
 
$
365.0

 
 
 
 
 
 

Level 3 assets are primarily insurance contracts pledged on behalf of employees with benefits in certain countries, ownership interests in investment partnerships, trusts that own private market securities, real estate investments, and other debt and equity investments. The fair values of our insurance contracts are determined based on the cash surrender value or the present value of the expected future benefits to be paid under the contract, discounted at a rate consistent with the related benefit obligation. Our real estate investments are primarily comprised of investments in commercial property funds externally valued using third party pricing methodologies, which are not actively traded on public exchanges. Debt and equity securities consist primarily of small investments in other investments that are valued at different frequencies based on the value of the underlying investments. The table below presents a roll forward of activity for these assets for the years ended December 31, 2018 and 2017.
 
 
Level 3 assets
 
 
Total
 
Private
market
securities
 
Debt and equity
 
Real
estate investments
Ending balance at December 31, 2016
 
$
77.5

 
$
64.1

 
$
2.2

 
$
11.2

Realized (loss)
 
—

 
—

 
—

 
—

Change in unrealized gain
 
9.9

 
8.3

 
0.4

 
1.2

Purchases, sales, issues and settlements
 
70.6

 
63.3

 
6.2

 
1.1

Transfers in/(out) of Level 3
 
—

 
—

 
—

 
—

Ending balance at December 31, 2017
 
$
158.0

 
$
135.7

 
$
8.8

 
$
13.5

Realized (loss)
 
—

 
—

 
—

 
—

Change in unrealized gain
 
(4.2
)
 
(4.4
)
 
(0.2
)
 
0.4

Purchases, sales, issues and settlements
 
(2.1
)
 
(4.4
)
 
2.6

 
(0.3
)
Transfers in/(out) of Level 3
 
—

 
—

 
—

 
—

Ending balance at December 31, 2018
 
$
151.7

 
$
126.9

 
$
11.2

 
$
13.6


Assumptions and Sensitivities
The discount rate is determined as of each measurement date, based on a review of yield rates associated with long-term, high-quality corporate bonds. The calculation separately discounts benefit payments using the spot rates from a long-term, high-quality corporate bond yield curve.
The long-term rate of return assumption represents the expected average rate of earnings on the funds invested to provide for the benefits included in the benefit obligations. The long-term rate of return assumption is determined based on a number of factors, including historical market index returns, the anticipated long-term asset allocation of the plans, historical plan return data, plan expenses and the potential to outperform market index returns. For 2019, the expected long-term rate of return is 4.21%.
Anticipated Contributions to Defined Benefit Plan
For funded pension plans, our funding policy is to fund amounts for pension plans sufficient to meet minimum requirements set forth in applicable benefit laws and local tax laws. Based on the same assumptions used to measure our benefit obligations at December 31, 2018, we expect to contribute $6.7 million to our defined benefit plans during 2019. No plan assets are expected to be returned to the Company in 2019.
Defined Contribution Plans
The Company sponsors defined contribution plans in both its U.S. and non-U.S. subsidiaries, under which salaried and certain hourly employees may defer a portion of their compensation. Eligible participants may contribute to the plan up to the allowable amount as determined by the plan of their regular compensation before taxes. All contributions and Company matches are invested at the direction of the employee. Company matching contributions vest immediately and aggregated to $43.8 million, $45.1 million and $43.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.