RETIREMENT PLANS

12 Months Ended

Dec. 31, 2021

RETIREMENT PLANS

RETIREMENT PLANS

17. RETIREMENT PLANS

Pension and Postretirement Health Care Benefits Plans

The Company has a non-contributory, qualified, defined benefit pension plan covering the majority of its U.S. employees. The Company also has non-contributory, non-qualified, defined benefit plans, which provide for benefits to employees in excess of limits permitted under its U.S. pension plans. Various international subsidiaries have defined benefit pension plans. The Company provides postretirement health care benefits to certain U.S. employees and retirees.

The non-qualified plans are not funded and the recorded benefit obligation for the non-qualified plans was $114 million and $134 million at December 31, 2021 and 2020, respectively. The measurement date used for determining the U.S. pension plan assets and obligations is December 31.

International plans are funded based on local country requirements. The measurement date used for determining the international pension plan assets and obligations is November 30, the fiscal year end of the Company’s international subsidiaries.

The U.S. postretirement health care plans are contributory based on years of service and choice of coverage (family or single), with retiree contributions adjusted annually. The measurement date used to determine the U.S. postretirement health care plan assets and obligations is December 31. Certain employees outside the U.S. are covered under government-sponsored programs, which are not required to be fully funded. The expense and obligation for providing international postretirement health care benefits are not significant.

The following table sets forth financial information related to the Company’s pension and postretirement health care plans:

	U.S.				International				U.S. Postretirement
	Pension				Pension				Health Care
(millions)	2021		2020		2021		2020		2021		2020
Accumulated benefit obligation, end of year		$2,462.7		$2,728.4		$1,696.2		$1,759.8		$155.4		$172.4
Projected benefit obligation
Projected benefit obligation, beginning of year		$2,728.4		$2,562.5		$1,834.2		$1,667.6		$172.4		$165.7
Service cost		43.9		68.4		31.4		30.8		1.0		1.2
Interest cost		51.4		70.3		17.3		22.3		2.9		4.4
Participant contributions		-		-		2.9		2.6		3.3		3.8
Curtailments and settlements		(35.3)		(0.6)		(24.8)		(34.3)		-		-
Plan amendments		-		-		0.7		(1.7)		-		-
Actuarial (gain) loss		(79.6)		241.8		(25.3)		83.6		(12.1)		12.2
Assumed through acquisitions		-		-		34.0		-		-		-
Other events		-		-		4.3		0.3		-		-
Benefits paid		(246.1)		(214.0)		(43.7)		(39.6)		(12.1)		(14.9)
Foreign currency translation		-		-		(51.3)		102.6		-		-
Projected benefit obligation, end of year		$2,462.7		$2,728.4		$1,779.7		$1,834.2		$155.4		$172.4
Plan assets
Fair value of plan assets, beginning of year		$2,372.9		$2,292.9		$1,148.0		$1,027.1		$5.7		$6.1
Actual returns on plan assets		276.8		281.3		107.5		87.7		0.6		0.8
Company contributions		8.5		13.3		40.7		41.3		11.0		13.7
Participant contributions		-		-		2.9		2.6		-		-
Acquired through acquisitions		-		-		12.9				-		-
Curtailments and settlements		(35.3)		(0.6)		(24.8)		(25.7)		-		-
Benefits paid		(246.1)		(214.0)		(43.7)		(39.6)		(12.1)		(14.9)
Foreign currency translation		-		-		(23.6)		54.6		-		-
Fair value of plan assets, end of year		$2,376.8		$2,372.9		$1,219.9		$1,148.0		$5.2		$5.7
Funded Status, end of year		($85.9)		($355.5)		($559.8)		($686.2)		($150.2)		($166.7)
Amounts recognized in the Consolidated Balance Sheets:
Other assets		$28.2		$-		$86.5		$37.0		$-		$-
Other current liabilities		(14.8)		(14.7)		(27.0)		(24.0)		(5.5)		(5.5)
Postretirement healthcare and pension benefits		(99.3)		(340.8)		(619.3)		(699.2)		(144.7)		(161.2)
Net liability		($85.9)		($355.5)		($559.8)		($686.2)		($150.2)		($166.7)
Amounts recognized in accumulated other comprehensive loss (income):
Unrecognized net actuarial loss (gain)		$396.8		$691.3		$485.7		$595.6		($11.7)		$1.3
Unrecognized net prior service costs (benefits)		(25.8)		(32.7)		(0.2)		(1.2)		-		-
Tax (benefit) expense		(95.3)		(165.1)		(117.8)		(151.9)		1.2		(2.0)
Accumulated other comprehensive loss (income), net of tax		$275.7		$493.5		$367.7		$442.5		($10.5)		($0.7)
Change in accumulated other comprehensive loss (income):
Amortization of net actuarial (gain) loss		($56.2)		($51.8)		($28.7)		($29.5)		($0.7)		($0.1)
Amortization of prior service costs		6.9		7.4		0.1		(0.2)		-		11.0
Current period net actuarial loss (gain)		(203.0)		113.3		(56.1)		66.4		(12.3)		11.9
Current period prior service costs		-		-		0.7		(1.7)		-		-
Curtailments and settlements		(35.3)		(2.7)		(3.5)		(2.2)		-		-
Tax (benefit) expense		69.8		(16.0)		25.4		(22.3)		3.2		(5.4)
Foreign currency translation		-		-		(12.7)		33.3		-		-
Other comprehensive loss (income)		($217.8)		$50.2		($74.8)		$43.8		($9.8)		$17.4

Estimate amounts in accumulated other comprehensive loss expected to be reclassified to net period cost during 2022 are as follows:

					U.S. Post-
	U.S.		International		Retirement
(millions)	Pension		Pension		Health Care
Net actuarial loss		$39.9		$24.1		$0.7
Net prior service benefits		(4.6)		(0.2)		-
Total		$35.3		$23.9		$0.7

Service cost is included with employee compensation cost in cost of sales and selling, general and administrative expenses in the Consolidated Statements of Income while all non-service components are included in other (income) expense in the Consolidated Statements of Income.

The aggregate projected benefit obligation, accumulated benefit obligation and fair value of pension plan assets for plans with accumulated benefit obligations in excess of plan assets were as follows:

December 31, (millions)	2021		2020
Aggregate projected benefit obligation		$1,022.3		$4,155.4
Accumulated benefit obligation		964.5		4,098.6
Fair value of plan assets		280.9		3,085.2

These plans include the U.S. non-qualified pension plans which are not funded as well as various international pension plans which are funded consistent with local practices and requirements. As of December 31, 2021, the U.S. qualified plan had plan assets in excess of the aggregate projected benefit obligation and the accumulated benefit obligation.

For the year ended December 31, 2021, the year-over-year decrease in our net benefit obligation was primarily due to the impacts of discounting projected benefit payments. Increased yields on investment grade corporate bonds used to derived out discount rates increased year-over-year. Additionally, the fair value of our pension assets increased year-over-year as asset returns outpaced pension distributions due to strong returns for equities and fixed income investments.

For the year ended December 31, 2020, the most significant driver of the increases in benefit obligations for the plans was the higher actuarial losses experienced by the majority of the Company’s plans. The pension plans incurred actuarial losses primarily due to decreases in bond yields that resulted in decreases to many of the plans’ discount rates.

Net Periodic Benefit Costs and Plan Assumptions

Pension and postretirement health care benefits expense for the Company’s operations are as follows:

	U.S.						International						U.S. Postretirement
	Pension						Pension						Health Care
(millions)	2021		2020		2019		2021		2020		2019		2021		2020		2019
Service cost (a)		$43.9		$68.4		$72.8		$31.4		$30.8		$30.2		$1.0		$1.2		$1.4
Interest cost on benefit obligation		51.4		70.3		89.0		17.3		22.3		31.2		2.9		4.4		5.6
Expected return on plan assets		(152.3)		(152.9)		(149.5)		(70.7)		(63.9)		(59.9)		(0.4)		(0.4)		(0.4)
Recognition of net actuarial loss (gain)		56.7		51.9		23.6		28.7		26.1		16.3		0.7		0.1		(4.1)
Amortization of prior service benefit		(6.9)		(7.4)		(11.5)		(0.1)		(0.1)		(0.9)		-		(11.0)		(23.2)
Curtailments and settlements (b)		35.3		2.5		9.1		3.5		2.2		(1.9)		-		-		0.3
Total expense (benefit)		$28.1		$32.8		$33.5		$10.1		$17.4		$15.0		$4.2		($5.7)		($20.4)

(a) Service cost includes discontinued operations of $2.5 and $7.8 for the years ended December 31, 2020 and 2019, respectively.

(b) Settlement expense of $37.2 million was recognized as special charges in 2021.

During 2021, the Company incurred settlement expense of $35.3 million ($26.8 million after tax) related to U.S. pension plan lump-sum payments to retirees. During 2020 and 2019, the Company recorded other expense of $0.4 million ($0.3 million after tax) and $9.5 million ($7.2 million after tax) related to pension curtailments and settlements due to the ChampionX separation and Accelerate 2020 as discussed further above. These charges have been included as a component of other (income) expense on the Consolidated Statements of Income.

Plan Assumptions	U.S.						International						U.S. Postretirement
	Pension						Pension						Health Care
(percent)	2021		2020		2019		2021		2020		2019		2021		2020		2019
Weighted-average actuarial assumptions
used to determine benefit obligations
as of year end:
Discount rate	2.86	%	2.48	%	3.20	%	1.45	%	1.13	%	1.52	%	2.75	%	2.37	%	3.16	%
Projected salary increase	4.03		4.03		4.03		2.42		2.12		2.50
Weighted-average actuarial assumptions
used to determine net cost:
Interest credit rate for cash balance plans	0.87		1.81		N/A		N/A		N/A		N/A		N/A		N/A		N/A
Discount rate	2.49		3.20		4.34		1.37		1.84		2.66		2.37		3.16		4.29
Expected return on plan assets	7.00		7.25		7.25		6.24		6.24		6.66		7.00		7.25		7.25
Projected salary increase	4.03		4.03		4.03		2.31		2.81		2.70

The discount rate assumptions for the U.S. plans are developed using a bond yield curve constructed from a population of high-quality, non-callable, corporate bond issues with maturities ranging from six months to thirty years. A discount rate is estimated for the U.S. plans and is based on the durations of the underlying plans.

The Company measures service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The Company believes this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve.

The expected long-term rate of return used for the U.S. plans is based on the pension plan’s asset mix. The Company considers expected long-term real returns on asset categories, expectations for inflation, and estimates of the impact of active management of the assets in determining the final rate to use. The Company also considers historical returns.

The expected long-term rate of return used for the Company’s international plans is determined in each local jurisdiction and is based on the assets held in that jurisdiction, the expected rate of returns for the type of assets held and any guaranteed rate of return provided by the investment. The other assumptions used to measure the international pension obligations, including discount rate, vary by country based on specific local requirements and information.

The Company uses most recently available mortality tables as of the respective U.S. and international measurement dates.

For postretirement benefit measurement purposes as of December 31, 2021, the annual rates of increase in the per capita cost of covered health care were assumed to be 6.75% for pre-65 costs and 7.25% for post-65 costs. The rates are assumed to decrease each year until they reach 4.5% in 2029 and remain at those levels thereafter. Health care costs for certain employees which are eligible for subsidy by the Company are limited by a cap on the subsidy.

Plan Asset Management

The Company’s U.S. investment strategy and policies are designed to maximize the possibility of having sufficient funds to meet the long-term liabilities of the qualified pension plan, while achieving a balance between the goals of asset growth of the qualified pension plan and keeping risk at a reasonable level. Current income is not a key goal of the policy.

The asset allocation position reflects the Company’s ability and willingness to accept relatively more short-term variability in the performance of the qualified pension plan asset portfolio in exchange for the expectation of better long-term returns, lower pension costs and better funded status in the long run. The qualified pension plan’s asset are diversified across a number of asset classes and securities. Selected individual portfolios within the asset classes may be undiversified while maintaining the diversified nature of total plan assets. The Company has no significant concentration of risk in its U.S. qualified pension plan assets.

Assets of funded retirement plans outside the U.S. are managed in each local jurisdiction and asset allocation strategy is set in accordance with local rules, regulations and practice. Therefore, no overall target asset allocation is presented. Although non-U.S. equity securities are all considered international for the Company, some equity securities are considered domestic for the local plan. The funds are invested in a variety of equities, bonds and real estate investments and, in some cases, the assets are managed by insurance companies which may offer a guaranteed rate of return. The Company has no significant concentration of risk in the assets of its international pension plans.

The fair value hierarchy is used to categorize investments measured at fair value in one of three levels in the fair value hierarchy. This categorization is based on the observability of the inputs used in valuing the investments. Refer to Note 8 for definitions of these levels.

The fair value of the Company’s U.S. qualified pension plan assets are as follows:

	Fair Value as of						Fair Value as of
(millions)	December 31, 2021						December 31, 2020
	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash		$43.6		$-		$43.6		$38.3		$-		$38.3
Equity securities:
Large cap equity		412.2		-		412.2		610.0		-		610.0
Small cap equity		21.3		40.7		62.0		36.5		68.3		104.8
International equity		62.9		28.0		90.9		95.8		42.9		138.7
Fixed income:
Core fixed income		510.7		589.7		1,100.4		360.3		327.8		688.1
High-yield bonds		49.0		-		49.0		76.3		-		76.3
Emerging markets		-		36.6		36.6		-		55.6		55.6
Total investments at fair value		1,099.7		695.0		1,794.7		1,217.2		494.6		1,711.8
Investments measured at NAV						587.3						666.9
Total		$1,099.7		$695.0		$2,382.0		$1,217.2		$494.6		$2,378.7

The Company had no Level 3 assets as part of its U.S. qualified pension plan assets as of December 31, 2021 or 2020.

The allocation of the Company’s U.S. qualified pension plan assets plans are as follows:

	Target Asset
Asset Category	Allocation				Percentage
	Percentage				of Plan Assets
December 31	2021		2020		2021		2020
Cash	-	%	-	%	2	%	2	%
Equity securities:
Large cap equity	21		27		17		26
Small cap equity	3		4		3		4
International equity	10		16		10		15
Fixed income:
Core fixed income	48		30		46		29
High-yield bonds	3		4		2		3
Emerging markets	4		2		2		2
Other:
Real estate	3		6		4		7
Private equity	5		8		11		9
Distressed debt	3		3		3		3
Total	100	%	100	%	100	%	100	%

The fair value of the Company’s international plan assets for its defined benefit pension plans are as follows:

	Fair Value as of			Fair Value as of
(millions)	December 31, 2021			December 31, 2020
	Level 1	Level 2	Total	Level 1	Level 2	Total
Cash	$7.2	$-	$7.2	$11.0	$-	$11.0
Equity securities:
International equity	-	490.1	490.1	-	467.0	467.0
Fixed income:
Corporate bonds	9.7	220.0	229.7	9.1	218.6	227.7
Government bonds	7.2	298.5	305.7	6.8	241.9	248.7
Insurance company accounts	-	121.2	121.2	-	149.6	149.6
Total investments at fair value	24.1	1,129.8	1,153.9	26.9	1,077.1	1,104.0
Investments measured at NAV			66.0			44.0
Total	$24.1	$1,129.8	$1,219.9	$26.9	$1,077.1	$1,148.0

The Company had no Level 3 assets as part of its international plan assets as of December 31, 2021 or 2020.

The allocation of plan assets of the Company’s international plan assets for its defined benefit pension plans are as follows:

	Percentage
Asset Category	of Plan Assets
December 31	2021		2020
Cash	1	%	1	%
Equity securities:
International equity	40		40
Fixed income:
Corporate bonds	19		20
Government bonds	25		22
Total fixed income	44		42
Other:
Insurance contracts	10		14
Debt securities	2		2
Real estate	3		1
Total	100	%	100	%

Cash Flows

As of year-end 2021, the Company’s estimate of benefits expected to be paid in each of the next five fiscal years and in the aggregate for the five fiscal years thereafter for the Company’s pension and postretirement health care benefit plans are as follows:

(millions)	All Plans
2022		$ 225
2023		234
2024		241
2025		248
2026		246
2027 - 2031		1,208

Depending on plan funding levels, the U.S. qualified pension plan provides certain terminating participants with an option to receive their pension benefits in the form of lump sum payments.

The Company is currently in compliance with all funding requirements of its U.S. pension and postretirement health care plans. The Company is required to fund certain international pension benefit plans in accordance with local legal requirements. There were no voluntary contributions made to its non-contributory qualified U.S. pension plan. In September of 2019, the Company made a voluntary contribution of $120 million to its non-contributory qualified U.S. pension plan. The Company estimates contributions to be made to its international plans will approximate $49 million in 2022.

The Company seeks to maintain an asset balance that meets the long-term funding requirements identified by the projections of the pension plan’s actuaries while simultaneously satisfying the fiduciary responsibilities prescribed in ERISA. The Company also takes into consideration the tax deductibility of contributions to the benefit plans.

Savings Plan and ESOP

The Company provides a 401(k) savings plan for the majority of its U.S. employees under the Company’s 401(k) savings plans, the Ecolab Savings Plan and ESOP (the “Ecolab Savings Plan”).

Effective December 31, 2020, the Ecolab Savings Plan and ESOP for Traditional Benefit Employees (the “Traditional Plan”) merged into and became part of the Ecolab Savings Plan. Following the merger, participants in the Traditional Plan became participants in the Ecolab Savings Plan and $1,710 million of net assets of the Traditional Plan transferred to the Ecolab Savings Plan.

Under the Ecolab Savings Plan, Employee before-tax contributions of up to 4% of eligible compensation are matched 100% by the Company and employee before-tax contributions over 4% and up to 8% of eligible compensation are matched 50% by the Company.

The Company’s matching contributions are 100% vested immediately. The Company’s matching contribution expense was $78 million, $72 million and $76 million in 2021, 2020 and 2019, respectively.