Retirement Plans

12 Months Ended

Dec. 31, 2021

Compensation And Retirement Disclosure [Abstract]

Retirement Plans

NOTE 7 — Retirement Plans

We have 2 active noncontributory defined benefit pension plans ("pension plans") covering less than 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. All benefits for the U.S.-based pension plan were frozen in 2017 and 2013 for union and non-union employees, respectively.

We also provide post-retirement life insurance benefits for certain retired employees. Domestic employees who were hired prior to 1982 and certain former 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 earnings, 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, 2021, and 2020.

In February 2020, the CTS Board of Directors authorized management to explore termination of the U.S.-based pension plan ("Plan"), subject to certain conditions. On June 1, 2020, we entered into the Fifth Amendment to the Plan whereby we set an effective termination date for the Plan of July 31, 2020. In February 2021, we received a determination letter from the Internal Revenue Service that allowed us to proceed with the termination process for the Plan. During the second quarter of 2021, the Company offered the option of receiving a lump sum payment to eligible participants with vested qualified Plan benefits in lieu of receiving monthly annuity payments. Approximately 365 participants elected to receive the settlement, and lump sum payments of approximately $35,594 were made from Plan assets to these participants in June 2021.

As required under U.S. GAAP, the Company recognizes a settlement gain or loss when the aggregate amount of lump-sum distributions to participants equals or exceeds the sum of the service and interest cost components of the net periodic pension cost.  The amount of settlement gain or loss recognized is the pro rata amount of the existing unrealized gain or loss immediately prior to the settlement.  In general, both the projected benefit obligation and fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss.

Upon the partial settlement of the pension liability due to the lump sum offering in the second quarter of 2021, the Company recognized a non-cash and non-operating settlement charge of $20,063 related to pension losses, reclassified from accumulated other comprehensive loss to other (income) expense in the Company's Condensed Consolidated Statements of (Loss) Earnings.

On July 29, 2021, the Plan purchased a group annuity contract that transferred our benefit obligations for approximately 2,700 CTS participants and beneficiaries in the United States (“Transferred Participants”). As part of the purchase of the group annuity contract, Plan benefit obligations and related annuity administration services for Transferred Participants were irrevocably assumed and guaranteed by the insurance company effective as of August 3, 2021.  There will be no change to pension benefits for Transferred Participants. The purchase of the group annuity contract was fully funded directly by Plan assets.

As a result of the final settlement of the pension liability with the purchase of annuities, we reclassified the remaining related unrecognized pension losses of $106,206 that were previously recorded in accumulated other comprehensive loss to the Consolidated Statements of (Loss) Earnings.

In January 2022, we transferred approximately $17,500 of funds from Plan assets to a qualified replacement plan (QRP) managed by the Company. This plan requires that these assets be used to fund future annual Company contributions to our U.S. 401(k) program. The Plan assets of $49,382 as of December 31, 2021, net of the $17,500 noted above, will remain in the Plan until final administrative tasks are completed. This process is expected to be completed in the first half of 2022, whereby the remaining Plan assets will liquidate and revert to CTS. At that time, the funds will be subject to income and excise taxes.

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
	2021			2020			2021			2020
Accumulated benefit obligation	$	1,008		$	230,205		$	1,957		$	1,983
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	230,205		$	220,339		$	2,686		$	2,633
Service cost		—			—			26			31
Interest cost		2,861			5,773			17			28
Benefits paid		(12,206	)		(14,590	)		(476	)		(285	)
Actuarial (gain) loss		(3,533	)		18,683			44			95
Plan settlements		(216,319	)		—			—			—
Foreign exchange impact		—			—			38			184
Projected benefit obligation at December 31	$	1,008		$	230,205		$	2,335		$	2,686
Change in plan assets:
Assets at fair value at January 1	$	285,675		$	281,276		$	1,595		$	1,419
Actual return on assets		(7,967	)		18,886			28			95
Company contributions		199			103			252			268
Benefits paid		(12,206	)		(14,590	)		(476	)		(285	)
Plan settlements		(216,319	)		—			—			—
Foreign exchange impact		—			—			22			98
Assets at fair value at December 31	$	49,382		$	285,675		$	1,421		$	1,595
Funded status (plan assets less projected benefit obligations)	$	48,374		$	55,470		$	(914	)	$	(1,091	)

*Actual return on plan assets is net of expected investment expenses and certain administrative expenses.

The measurement dates for the post-retirement life insurance plan were December 31, 2021, and 2020. 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
	2021			2020
Accumulated benefit obligation	$	5,231		$	5,376
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	5,376		$	4,766
Service cost		1			1
Interest cost		80			122
Benefits paid		(151	)		(154	)
Actuarial (gain) loss		(75	)		641
Projected benefit obligation at December 31	$	5,231		$	5,376
Change in plan assets:
Assets at fair value at January 1	$	—		$	—
Actual return on assets		—			—
Company contributions		151			154
Benefits paid		(151	)		(154	)
Other		—			—
Assets at fair value at December 31	$	—		$	—
Funded status (plan assets less projected benefit obligations)	$	(5,231	)	$	(5,376	)

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
	2021			2020			2021			2020
Prepaid pension asset	$	49,382		$	56,642		$	—		$	—
Accrued expenses and other liabilities		(100	)		(100	)		—			—
Long-term pension obligations		(908	)		(1,072	)		(914	)		(1,091	)
Net prepaid (accrued) cost	$	48,374		$	55,470		$	(914	)	$	(1,091	)

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
	2021			2020
Accrued expenses and other liabilities	$	(489	)	$	(451	)
Long-term pension obligations		(4,742	)		(4,924	)
Total accrued cost	$	(5,231	)	$	(5,375	)

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, 2020	$	88,830		$	1,900
Amortization of retirement benefits, net of tax		(4,995	)		(146	)
Net actuarial gain		7,402			14
Foreign exchange impact		—			133
Balance at January 1, 2021	$	91,237		$	1,901
Amortization of retirement benefits, net of tax		(2,851	)		(152	)
Net actuarial gain (loss)		3,777			27
Settlement charges		(91,851	)		—
Foreign exchange impact		—			27
Balance at December 31, 2021	$	312		$	1,803

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, 2020	$	(608	)
Amortization of retirement benefits, net of tax		64
Net actuarial gain		493
Balance at January 1, 2021	$	(51	)
Amortization of retirement benefits, net of tax		0
Net actuarial loss		(58	)
Balance at December 31, 2021	$	(109	)

The accumulated actuarial gains and losses included in other comprehensive earnings 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 14 years at December 31, 2021), 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 3 years at December 31, 2021). 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.

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,
	2021		2020
Projected benefit obligation	$	3,343	$	3,859
Accumulated benefit obligation	$	2,965	$	3,155
Fair value of plan assets	$	1,421	$	1,595

Net pension expense includes the following components:

	Years Ended December 31,									Years Ended December 31,
	U.S. Pension Plans									Non-U.S. Pension Plans
	2021			2020			2019			2021			2020			2019
Service cost	$	—		$	—		$	—		$	26		$	31		$	37
Interest cost		2,861			5,773			7,724			17			28			31
Expected return on plan assets(1)		(474	)		(9,817	)		(12,187	)		(17	)		(16	)		(17	)
Amortization of unrecognized loss		3,703			6,488			5,246			184			174			170
Settlement charges		126,269			—			—			—			—			—
Net expense	$	132,359		$	2,444		$	783		$	210		$	217		$	221
Weighted-average actuarial assumptions(2)
Benefit obligation assumptions:
Discount rate		2.46	%		2.26	%		3.15	%		0.63	%		0.63	%		1.00	%
Rate of compensation increase	N/A			N/A			N/A				3.00	%		3.00	%		3.00	%
Pension income/expense assumptions:
Discount rate		2.10	%		3.15	%		4.30	%		0.63	%		0.63	%		1.13	%
Expected return on plan assets(1)		1.44	%		3.76	%		4.61	%		0.63	%		0.63	%		1.13	%
Rate of compensation increase	N/A			N/A			N/A				3.00	%		3.00	%		3.00	%

(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. 2020 assumptions reflect termination basis accounting.

Net post-retirement expense includes the following components:

	Post-Retirement Life Insurance Plan
	Years Ended December 31,
	2021			2020			2019
Service cost	$	1		$	1		$	1
Interest cost		80			122			170
Amortization of unrecognized gain		—			(84	)		(166	)
Net expense	$	81		$	39		$	5
Weighted-average actuarial assumptions(1)
Benefit obligation assumptions:
Discount rate		2.66	%		2.27	%		3.09	%
Rate of compensation increase	N/A			N/A			N/A
Pension income/post-retirement expense assumptions:
Discount rate		2.27	%		3.09	%		4.26	%
Rate of compensation increase	N/A			N/A			N/A

(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.

Our pension plan asset allocation at December 31, 2021, and 2020, and target allocation for 2022 by asset category are as follows:

	Target Allocations	Percentage of Plan Assets at December 31,
Asset Category	2022	2021	2020
Equity securities	0%	0%	13%
Fixed income/Debt securities	100%	100%	83%
Other	0%	0%	4%
Total	100%	100%	100%

Historically, we employed 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 contained 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.

As part of the planned termination of the U.S. Plan, a new investment allocation strategy was put in place to protect the funded status of the U.S. plan assets subsequent to Board approval of the U.S. Plan termination. The target allocation for U.S. plan assets for 2022 is 100% fixed income investments including cash and cash equivalents. 

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

	As of December 31,
	2021		2020
Equity securities - U.S. holdings(1)	$	8	$	7
Bond funds - government(4) (6)		—		53,239
Bond funds - other(5) (6)		31,380		173,853
Cash and cash equivalents(2)		19,415		53,379
Partnerships(3)		—		6,792
Total fair value of plan assets	$	50,803	$	287,270

The fair values at December 31, 2021, 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)		Total
Equity securities - U.S. holdings(1)	$	8	$	—	$	—	$	8
Bond funds - other(5)		31,380		—		—		31,380
Cash and cash equivalents(2)		19,415		—		—		19,415
Total	$	50,803	$	—	$	—	$	50,803

The fair values at December 31, 2020, 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)	$	7	$	—	$	—	$	—	$	7
Bond funds - government(4) (6)		—		—		—		53,239		53,239
Bond funds - other(5) (6)		—		—		—		173,853		173,853
Cash and cash equivalents(2)		53,379		—		—		—		53,379
Partnerships(3)		—		—		6,792		—		6,792
Total	$	53,386	$	—	$	6,792	$	227,092	$	287,270

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

(4) 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.

(5) Comprised predominately of investment grade U.S. corporate bonds with various maturities 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.

(6) 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, 2020	$	7,539
Capital contributions		44
Realized and unrealized loss		(269	)
Capital distributions		(522	)
Fair value of Level 3 partnership assets at December 31, 2020	$	6,792
Capital contributions		13
Realized and unrealized loss		(2,075	)
Capital distributions		(4,730	)
Fair value of Level 3 partnership assets at December 31, 2021	$	—

The partnership fund manager used a market approach in estimating the fair value of the plan's Level 3 assets. 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 considered recent comparable private company transactions and multiples paid. The entity's net debt was 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 $235 of contributions to the non-U.S. plans during 2022.

Expected benefit payments under the defined benefit pension plans and the postretirement benefit plan, for the next five years subsequent to 2021 and in the aggregate for the following five years are as follows:

	U.S. Pension Plans		Non-U.S. Pension Plans		Post- Retirement Life Insurance Plan
2022	$	100	$	54	$	489
2023		96		58		455
2024		92		73		425
2025		88		81		398
2026		84		89		373
2027-2030		349		667		1,571
Total	$	809	$	1,022	$	3,711

Defined Contribution Plans

We sponsor a 401(k) plan that covers substantially all of our U.S. employees as well as offer similar defined contribution plans at certain foreign locations. Contributions and costs were generally determined as a percentage of the covered employee's annual salary. We ceased matching employee contributions in the second quarter of 2020 in light of COVID-19 concerns, and we reimplemented the match in February 2021.

Effective January 1, 2022, in connection with the U.S. Plan termination process, we amended our 401(k) plan and transitioned to a non-elective contribution for all U.S. employees that is also determined as a percentage of the covered employee's salary, provides for immediate vesting and is provided regardless of individual contribution plans. In addition, we began offering a Roth 401(k) option to employees.

Expenses related to defined contribution plans include the following:

	Years Ended December 31,
	2021		2020		2019
401(k) and other defined contribution plan expense	$	3,242	$	1,636	$	3,125