Retirement Plans

We have a number of noncontributory defined benefit pension plans ("pension plans") covering approximately 1% of our active employees. Pension plans covering salaried employees provide pension benefits that are based on the employees´ years of service and compensation prior to retirement. Pension plans covering hourly employees generally provide benefits of stated amounts for each year of service.

We also provide post-retirement life insurance benefits for certain retired employees. Domestic employees who were hired prior to 1982 and certain domestic union employees are eligible for life insurance benefits upon retirement. We fund life insurance benefits through term life insurance policies and intend to continue funding all of the premiums on a pay-as-you-go basis.

We recognize the funded status of a benefit plan in our consolidated balance sheets. The funded status is measured as the difference between plan assets at fair value and the projected benefit obligation. We also recognize, as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit/cost.

The measurement dates for the pension plans for our U.S. and non-U.S. locations were December 31, 2018, and 2017.

During 2017, we offered certain former vested employees in our U.S. pension plan a one-time option to receive a lump sum distribution of their benefits from pension plan assets. The pension plan made approximately $23,912 in lump sum payments to settle its obligation to these participants. These settlement payments decreased the projected benefit obligation and plan assets by $23,912, and resulted in a non-cash settlement charge of $13,476 related to unrecognized net actuarial losses that were previously included in accumulated other comprehensive loss. The measurement date of this settlement was December 31, 2017.

The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the pension plans for U.S. and non-U.S. locations at the measurement dates.



	U.S. Pension Plans						Non-U.S. Pension Plans
	2018			2017			2018			2017
Accumulated benefit obligation	$	205,319		$	228,934		$	1,936		$	2,535
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	228,934		$	247,276		$	3,140		$	2,866
Service cost	—			—			43			48
Interest cost	7,123			8,273			42			34
Benefits paid	(14,781		)	(39,177		)	(669		)	(210		)
Actuarial (gain) loss	(15,957		)	12,562			287			164
Foreign exchange impact	—			—			(87		)	238
Projected benefit obligation at December 31	$	205,319		$	228,934		$	2,756		$	3,140
Change in plan assets:
Assets at fair value at January 1	$	284,762		$	292,044		$	1,777		$	1,523
Actual return on assets	(11,757		)	31,559			67			17
Company contributions	103			336			300			319
Benefits paid	(14,781		)	(39,177		)	(669		)	(210		)
Foreign exchange impact	—			—			(50		)	128
Assets at fair value at December 31	$	258,327		$	284,762		$	1,425		$	1,777
Funded status (plan assets less projected benefit obligations)	$	53,008		$	55,828		$	(1,331	)	$	(1,363	)

The measurement dates for the post-retirement life insurance plan were December 31, 2018, and 2017. The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the post-retirement life insurance plan at those measurement dates.



	Post-Retirement Life Insurance Plan
	2018			2017
Accumulated benefit obligation	$	4,595		$	5,134
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	5,134		$	4,952
Service cost	2			2
Interest cost	156			161
Benefits paid	(157		)	(165		)
Actuarial loss	(540		)	184
Projected benefit obligation at December 31	$	4,595		$	5,134
Change in plan assets:
Assets at fair value at January 1	$	—		$	—
Actual return on assets	—			—
Company contributions	157			165
Benefits paid	(157		)	(165		)
Other	—			—
Assets at fair value at December 31	$	—		$	—
Funded status (plan assets less projected benefit obligations)	$	(4,595	)	$	(5,134	)

The components of the prepaid (accrued) cost of the domestic and foreign pension plans are classified in the following lines in the Consolidated Balance Sheets at December 31:



	U.S.Pension Plans						Non-U.S. Pension Plans
	2018			2017			2018			2017
Prepaid pension asset	$	54,100		$	57,050		$	—		$	—
Accrued expenses and other liabilities	(100		)	(100		)	—			—
Long-term pension obligations	(992		)	(1,122		)	(1,331		)	(1,363		)
Net prepaid (accrued) cost	$	53,008		$	55,828		$	(1,331	)	$	(1,363	)

The components of the accrued cost of the post-retirement life insurance plan are classified in the following lines in the Consolidated Balance Sheets at December 31:



	Post-Retirement Life Insurance Plan
	2018			2017
Accrued expenses and other liabilities	$	(407	)	$	(418	)
Long-term pension obligations	(4,188		)	(4,716		)
Total accrued cost	$	(4,595	)	$	(5,134	)

We have also recorded the following amounts to accumulated other comprehensive loss for the U.S. and non-U.S. pension plans, net of tax:



	U.S.Pension Plans			Non-U.S. Pension Plans
	Unrecognized Loss			Unrecognized Loss
Balance at January 1, 2017	$	89,763		$	1,743
Amortization of retirement benefits, net of tax	(3,685		)	10
Settlements	(8,585		)	—
Net actuarial (loss) gain	(1,753		)	2
Foreign exchange impact	—			143
Balance at January 1, 2018	$	75,740		$	1,898
Amortization of retirement benefits, net of tax	(4,538		)	(126		)
Settlements	19,083			—
Net actuarial (loss) gain	(12,351		)	196
Foreign exchange impact	—			(52		)
Tax impact due to implementation of ASU 2018-02	17,560			—
Balance at December 31, 2018	$	95,494		$	1,916

We have recorded the following amounts to accumulated other comprehensive loss for the post-retirement life insurance plan, net of tax:



	Unrecognized Gain
Balance at January 1, 2017	$	(560	)
Amortization of retirement benefits, net of tax	64
Net actuarial gain	117
Balance at January 1, 2018	$	(379	)
Amortization of retirement benefits, net of tax	36
Net actuarial loss	(418		)
Tax impact due to implementation of ASU No. 2018-02	(88		)
Balance at December 31, 2018	$	(849	)

The accumulated actuarial gains and losses and prior service costs and credits included in other comprehensive income are amortized in the following manner:

The component of unamortized net gains or losses related to our qualified pension plans is amortized based on the expected future life expectancy of the plan participants (estimated to be approximately 17 years at December 31, 2018), because substantially all of the participants in those plans are inactive. The component of unamortized net gains or losses related to our post-retirement life insurance plan is amortized based on the estimated remaining future service period of the plan participants (estimated to be approximately 4 years at December 31, 2018). The Company uses a market-related approach to value plan assets, reflecting changes in the fair value of plan assets over a five-year period. The variance resulting from the difference between the expected and actual return on plan assets is included in the amortization calculation upon reflection in the market-related value of plan assets.

In 2019, we expect to recognize approximately $5,270 and $0 of pre-tax losses included in accumulated other comprehensive loss related to our pension plans and post-retirement life insurance plan, respectively.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for those Pension Plans with accumulated benefit obligation in excess of fair value of plan assets is shown below:



	As of December 31,
	2018		2017
Projected benefit obligation	$	3,848	$	4,361
Accumulated benefit obligation	$	3,028	$	3,757
Fair value of plan assets	$	1,426	$	1,776

Net pension expense (income) includes the following components:



	Years Ended December 31,									Years Ended December 31,
	U.S. Pension Plans									Non-U.S. Pension Plans
	2018			2017			2016			2018			2017			2016
Service cost	$	—		$	—		$	87		$	43		$	48		$	51
Interest cost	7,123			8,273			11,024			42			34			46
Expected return on plan assets⁽¹⁾	(12,898		)	(16,243		)	(18,976		)	(25		)	(20		)	(26		)
Amortization of unrecognized loss	5,863			5,785			5,994			162			155			140
Settlement loss	—			13,476			—			—			—			—
Net expense (income)	$	88		$	11,291		$	(1,871	)	$	222		$	217		$	211
Weighted-average actuarial assumptions⁽²⁾
Benefit obligation assumptions:
Discount rate	4.30		%	3.63		%	4.16		%	1.13		%	1.38		%	1.13		%
Rate of compensation increase	0.00		%	0.00		%	0.00		%	3.00		%	2.00		%	2.00		%
Pension income/expense assumptions:
Discount rate	3.63		%	4.16		%	4.43		%	1.38		%	1.13		%	1.63		%
Expected return on plan assets⁽¹⁾	4.72		%	5.61		%	6.63		%	1.38		%	1.13		%	1.63		%
Rate of compensation increase	0.00		%	0.00		%	0.00		%	2.00		%	2.00		%	2.00		%


(1)	Expected return on plan assets is net of expected investment expenses and certain administrative expenses.


(2)	During the fourth quarter of each year, we review our actuarial assumptions in light of current economic factors to determine if the assumptions need to be adjusted.

Net post-retirement expense includes the following components:



	Post-Retirement Life Insurance Plan
	Years Ended December 31,
	2018			2017			2016
Service cost	$	2		$	2		$	3
Interest cost	156			161			207
Amortization of unrecognized gain	(46		)	(101		)	(149		)
Net expense	$	112		$	62		$	61
Weighted-average actuarial assumptions ⁽¹⁾
Benefit obligation assumptions:
Discount rate	4.26		%	3.59		%	4.10		%
Rate of compensation increase	0		%	0		%	0		%
Pension income/post-retirement expense assumptions:
Discount rate	3.59		%	4.10		%	4.43		%
Rate of compensation increase	0		%	0		%	0		%


(1)	During the fourth quarter of each year, we review our actuarial assumptions in light of current economic factors to determine if the assumptions need to be adjusted.

The discount rate utilized to estimate our pension and post-retirement obligations is based on market conditions at December 31, 2018, and is determined using a model consisting of high quality bond portfolios that match cash flows of the plans' projected benefit payments based on the plan participants' service to date and their expected future compensation. Use of the rate produced by this model generates a projected benefit obligation that equals the current market value of a portfolio of high quality bonds whose maturity dates match the timing and amount of expected future benefit payments.

The discount rate used to determine 2018 pension and post-retirement expense is based on market conditions at December 31, 2017, and is the interest rate used to estimate interest incurred on the outstanding projected benefit obligations during the period.

We utilize a building block approach in determining the long-term rate of return for plan assets. Historical markets are reviewed and long-term relationships between equities and fixed-income are preserved consistent with the generally accepted capital market principle that assets with higher volatility generate a greater return over the long term. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established via a building block approach with proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed to ensure for reasonableness and appropriateness.

Our pension plan asset allocation at December 31, 2018, and 2017, and target allocation for 2019 by asset category are as follows:



	Target Allocations	Percentage of Plan Assets at December 31,
Asset Category	2019	2018	2017
Equity securities	13%	12%	11%
Debt securities	83%	84%	82%
Other	4%	4%	7%
Total	100%	100%	100%

We employ a liability-driven investment strategy whereby a mix of equity and fixed-income investments are used to pursue a de-risking strategy which over time seeks to reduce interest rate mismatch risk and other risks while achieving a return that matches or exceeds the growth in projected pension plan liabilities. Risk tolerance is established through careful consideration of plan liabilities and funded status. The investment portfolio primarily contains a diversified mix of equity and fixed-income investments. Other assets such as private equity are used modestly to enhance long-term returns while improving portfolio diversification. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and asset/liability studies at regular intervals.

The following table summarizes the fair values of our pension plan assets:



	As of December 31,
	2018		2017
Equity securities - U.S. holdings⁽¹⁾	$	20,469	$	19,487
Equity securities - non-U.S. holdings⁽¹⁾	—		1,131
Equity funds - U.S. holdings^{(1) (8)}	54		1,314
Bond funds - government^{(5) (8)}	19,146		3,126
Bond funds - other^{(6) (8)}	202,393		231,710
Real estate^{(7) (8)}	2,652		1,235
Cash and cash equivalents⁽²⁾	5,866		11,145
Partnerships⁽⁴⁾	9,172		10,787
International hedge funds⁽³⁾	—		6,604
Total fair value of plan assets	$	259,752	$	286,539

The fair values at December 31, 2018, are classified within the following categories in the fair value hierarchy:



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Not Leveled		Total
Equity securities - U.S. holdings⁽¹⁾	$	20,469	$	—	$	—	$	—	$	20,469
Equity funds - U.S. holdings^{(1) (8)}	—		—		—		54		54
Bond funds - government⁽⁵⁾	—		—		—		19,146		19,146
Bond funds - other^{(6) (8)}	—		—		—		202,393		202,393
Real estate^{(7) (8)}	—		—		—		2,652		2,652
Cash and cash equivalents⁽²⁾	5,866		—		—		—		5,866
Partnerships⁽⁴⁾	—		—		9,172		—		9,172
Total	$	26,335	$	—	$	9,172	$	224,245	$	259,752

The fair values at December 31, 2017, are classified within the following categories in the fair value hierarchy:



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Not Leveled		Total
Equity securities - U.S. holdings⁽¹⁾	$	19,487	$	—	$	—	$	—	$	19,487
Equity securities - non-U.S. holdings⁽¹⁾	1,131		—		—		—		1,131
Equity funds - U.S.holdings^{(1) (8)}	—		—		—		1,314		1,314
Bond funds - government^{(5) (8)}	—		—		—		3,126		3,126
Bond funds - other^{(6) (8)}	—		—		—		231,710		231,710
Real estate^{(7) (8)}	—		—		—		1,235		1,235
Cash and cash equivalents⁽²⁾	11,145		—		—		—		11,145
Partnerships⁽⁴⁾	—		—		10,787		—		10,787
International hedge funds^{(3) (8)}	—		—		—		6,604		6,604
Total	$	31,763	$	—	$	10,787	$	243,989	$	286,539

(1)

Comprised of common stocks of companies in various industries. The Pension Plan fund manager may shift investments from value to growth strategies or vice-versa, from small cap to large cap stocks or vice-versa, in order to meet the Pension Plan's investment objectives, which are to provide for a reasonable amount of long-term growth of capital without undue exposure to volatility, and protect the assets from erosion of purchasing power.


(2)	Comprised of investment grade short-term investment and money-market funds.

(3)

This fund allocates its capital across several direct hedge fund organizations. This fund invests with hedge funds that employ "non-directional" strategies. These strategies do not require the direction of the markets to generate returns. The majority of these hedge funds generate returns by the occurrence of key events such as bankruptcies, mergers, spin-offs, etc. Investments can be redeemed at the share Net Asset Value ("NAV") as of the last business day of each calendar quarter with at least a sixty-five day prior written notice to the administrator.


(4)	Comprised of partnerships that invest in various U.S. and international industries.


(5)	Comprised of long-term government bonds with a minimum maturity of 10 years and zero-coupon Treasury securities ("Treasury Strips") with maturities greater than 20 years.


(6)	Comprised predominately of investment grade U.S. corporate bonds with maturities greater than 10 years and U.S. high-yield corporate bonds; emerging market debt (local currency sovereign bonds, U.S. dollar-denominated sovereign bonds and U.S. dollar-denominated corporate bonds); and U.S. bank loans.

(7)

Comprised of investments in securities of U.S. and non-U.S. real estate investment trusts (REITs), real estate operating companies and other companies that are principally engaged in the real estate industry and of investments in global private direct commercial real estate. Investments can be redeemed immediately following the valuation date with a notice of at least fifteen business days before valuation.


(8)	Comprised of investments that are measured at fair value using the NAV per share practical expedient. In accordance with the provisions of ASC 820-10, these investments have not been classified in the fair value hierarchy. The fair value amount not leveled is presented to allow reconciliation of the fair value hierarchy to total fund pension plan assets.

The pension plan assets recorded at fair value are measured and classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs available in the marketplace used to measure fair value as discussed below:


•	Level 1: Fair value measurements that are based on quoted prices (unadjusted) in active markets that the pension plan trustees have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•

Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs include quoted prices for similar assets in active or inactive markets, and inputs other than quoted prices that are observable for the asset, such as interest rates and yield curves that are observable at commonly quoted intervals.


•	Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable.

The table below reconciles the Level 3 partnership assets within the fair value hierarchy:



	Amount
Fair value of Level 3 partnership assets at January 1, 2017	$	12,862
Capital contributions	343
Realized and unrealized gain	2,107
Capital distributions	(4,525		)
Fair value of Level 3 partnership assets at December 31, 2017	10,787
Capital contributions	78
Realized and unrealized gain	1,154
Capital distributions	(2,847		)
Fair value of Level 3 partnership assets at December 31, 2018	$	9,172

The partnership fund manager uses a market approach in estimating the fair value of the plan's Level 3 asset. The market approach estimates fair value by first determining the entity's earnings before interest, taxes, depreciation and amortization and then multiplying that value by an estimated multiple. When establishing an appropriate multiple, the fund manager considers recent comparable private company transactions and multiples paid. The entity's net debt is then subtracted from the calculated amount to arrive at an estimated fair value for the entity.

We expect to make $100 of contributions to the U.S. plans and $271 of contributions to the non-U.S. plans during 2019.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



	U.S. Pension Plans		Non-U.S. Pension Plans		Post-Retirement Life Insurance Plan
2019	$	15,537	$	52	$	407
2020	15,519		57		393
2021	15,409		66		379
2022	15,226		91		365
2023	14,988		82		351
2024-2027	70,462		658		1,551
Total	$	147,141	$	1,006	$	3,446

Defined Contribution Plans

We sponsor a 401(k) plan that covers substantially all of our U.S. employees. Contributions and costs are generally determined as a percentage of the covered employee's annual salary.

Expenses related to defined contribution plans include the following:



	Years Ended December 31,
	2018		2017		2016
401(k) and other plan expense	$	3,256	$	3,141	$	2,841