Employee Benefit Plans

Pension Benefits

The Company has defined benefit pension plans covering a substantial number of employees. The defined benefits for salaried employees generally are based on years of service and the employee's level of compensation during specified periods of employment. Defined benefit pension plans covering hourly employees generally provide benefits of stated amounts for each year of service. The multiemployer pension plans ("MEPPs"), in which the Company participates, provide benefits to certain unionized employees. The Company's funding policy for qualified plans is consistent with statutory regulations and customarily equals the amount deducted for income tax purposes. Periodic voluntary contributions are made, as recommended, by the Company's Pension Committee. The Company's policy is to amortize prior service costs of defined benefit pension plans over the average future service period of active plan participants.

For most U.S. defined benefit pension plans and a majority of international defined benefit pension plans, accrued service is no longer granted. In place of these plans, the Company has established defined contribution plans providing for the Company to contribute a specified matching amount for participating employees' contributions to the plan. For U.S. employees, this match is made on employee contributions up to 4% of eligible compensation. Additionally, the Company may provide a discretionary contribution for eligible employees. There have been no discretionary contributions provided for the years 2016, 2015 and 2014. For non-U.S. employees, this match is up to 6% of eligible compensation with an additional 2% going towards insurance and administrative costs.

Net periodic pension cost ("NPPC") for U.S. and international plans for 2016, 2015 and 2014 is as follows:



	U.S. Plans									International Plans
(In thousands)	2016			2015			2014			2016			2015			2014
Defined benefit pension plans:
Service cost	$	3,783		$	2,889		$	2,233		$	1,585		$	1,648		$	1,610
Interest cost	10,165			12,357			12,868			26,822			36,282			43,230
Expected return on plan assets	(14,402		)	(16,812		)	(16,786		)	(42,979		)	(50,091		)	(49,927		)
Recognized prior service costs	63			81			90			189			188			184
Recognized losses	5,493			4,919			3,352			12,002			16,875			14,102
Settlement/curtailment loss (gain)	276			—			—			79			(23		)	60
Defined benefit pension plan cost (income)	5,378			3,434			1,757			(2,302		)	4,879			9,259
Multiemployer pension plans	636			853			1,199			1,368			1,463			1,762
Defined contribution plans	3,833			3,921			4,704			5,807			6,765			8,033
Net periodic pension cost	$	9,847		$	8,208		$	7,660		$	4,873		$	13,107		$	19,054

The change in the financial status of the defined benefit pension plans and amounts recognized on the Consolidated Balance Sheets at December 31, 2016 and 2015 are as follows:



	U.S. Plans						International Plans
(In thousands)	2016			2015			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	307,390		$	325,319		$	900,104		$	1,049,603
Service cost	3,783			2,889			1,585			1,648
Interest cost	10,165			12,357			26,822			36,282
Plan participants' contributions	—			—			68			61
Amendments	—			—			—			47
Actuarial (gain) loss	5,223			(14,417		)	194,469			(85,028		)
Settlements/curtailments	—			—			(1,527		)	(250		)
Benefits paid	(20,909		)	(18,758		)	(32,079		)	(38,197		)
Effect of foreign currency	—			—			(137,082		)	(64,062		)
Benefit obligation at end of year	$	305,652		$	307,390		$	952,360		$	900,104
Change in plan assets:
Fair value of plan assets at beginning of year	$	208,870		$	233,350		$	755,966		$	791,045
Actual return on plan assets	15,289			(8,011		)	105,027			22,602
Employer contributions	2,021			2,289			17,192			27,402
Plan participants' contributions	—			—			68			61
Settlements/curtailments	—			—			(1,527		)	(250		)
Benefits paid	(20,909		)	(18,758		)	(31,485		)	(37,693		)
Effect of foreign currency	—			—			(112,498		)	(47,201		)
Fair value of plan assets at end of year	$	205,271		$	208,870		$	732,743		$	755,966

Funded status at end of year	$	(100,381	)	$	(98,520	)	$	(219,617	)	$	(144,138	)

Amounts recognized on the Consolidated Balance Sheets for defined benefit pension plans consist of the following at December 31, 2016 and 2015:



	U.S. Plans				International Plans
	December 31				December 31
(In thousands)	2016		2015		2016		2015
Noncurrent assets	$	668	$	229	$	1,118	$	1,229
Current liabilities	2,278		2,072		505		479
Noncurrent liabilities	98,771		96,678		220,230		144,888
Accumulated other comprehensive loss before tax	161,075		162,571		434,868		376,641

Amounts recognized in Accumulated other comprehensive loss, before tax, for defined benefit pension plans consist of the following at December 31, 2016 and 2015:



	U.S. Plans				International Plans
(In thousands)	2016		2015		2016		2015
Net actuarial loss	$	161,042	$	162,475	$	433,626	$	375,725
Prior service cost	33		96		1,242		916
Total	$	161,075	$	162,571	$	434,868	$	376,641

The estimated amounts that will be amortized from Accumulated other comprehensive loss into defined benefit pension plan NPPC in 2017 are as follows:



(In thousands)	U.S. Plans		International Plans
Net actuarial loss	$	5,701	$	15,627
Prior service cost	33		175
Total	$	5,734	$	15,802

The Company's estimate of expected contributions to be paid in 2017 for the U.S. and international defined benefit plans are $6.3 million and $16.6 million, respectively.

Future Benefit Payments

The expected benefit payments for defined benefit pension plans over the next ten years are as follows:



(In millions)	2017		2018		2019		2020		2021		2022-2026
U.S. Plans	$	19.8	$	19.3	$	19.0	$	19.0	$	19.0	$	95.0
International Plans	32.7		33.6		34.5		35.9		37.4		203.2

Net Periodic Pension Cost and Defined Benefit Pension Obligation Assumptions

The weighted-average actuarial assumptions used to determine the defined benefit pension plan NPPC for 2016, 2015 and 2014 were as follows:



	U.S. Plans December 31						International Plans December 31						Global Weighted-Average December 31
	2016		2015		2014		2016		2015		2014		2016		2015		2014
Discount rates	4.2	%	3.9	%	4.7	%	3.8	%	3.7	%	4.7	%	3.9	%	3.7	%	4.7	%
Expected long-term rates of return on plan assets	7.3	%	7.5	%	7.5	%	6.5	%	6.8	%	6.8	%	6.7	%	7.0	%	7.0	%
Rates of compensation increase	3.0	%	3.0	%	3.0	%	3.2	%	3.2	%	3.4	%	3.2	%	3.2	%	3.4	%

The expected long-term rates of return on defined benefit pension plan assets for the 2017 NPPC are 7.3% for the U.S. plans and 5.9% for the international plans. The expected global long-term rate of return on assets for 2017 is 6.2%.

The weighted-average actuarial assumptions used to determine the defined benefit pension plan obligations at

December 31, 2016 and 2015 were as follows:



	U.S. Plans				International Plans				Global Weighted-Average
	December 31				December 31				December 31
	2016		2015		2016		2015		2016		2015
Discount rates	4.0	%	4.2	%	2.8	%	3.8	%	3.1	%	3.9	%
Rates of compensation increase	—	%	3.0	%	3.3	%	3.2	%	3.3	%	3.2	%

The U.S. discount rate was determined using a yield curve that was produced from a universe containing approximately 700 U.S. dollar-denominated, AA-graded corporate bonds, all of which were noncallable (or callable with make-whole provisions), and excluding the10% of the bonds with the highest yields and the 10% with the lowest yields within each maturity group. The discount rate was then developed as the level-equivalent rate that would produce the same present value as that using spot rates to discount the projected benefit payments. For international plans, the discount rate is aligned to corporate bond yields in the local markets, normally AA-rated corporations. The process and selection seeks to approximate the cash inflows with the timing and amounts of the expected benefit payments.

The Company changed the method utilized to estimate the service cost and interest cost components of NPPC for defined benefit pension plans for 2016 and later. The more precise application of discount rates for measuring both service costs and interest costs employs yield curve spot rates on a year-by-year expected cash flow basis, using the same yield curves that the Company has previously used. This change in method represents a change in accounting estimate and has been accounted for in the period of change. This change in method decreased the Company's NPPC by approximately $7 million for 2016, compared to what NPPC would have been under the prior method.

Accumulated Benefit Obligation

The accumulated benefit obligation for all defined benefit pension plans at December 31, 2016 and 2015 was as follows:



	U.S. Plans				International Plans
	December 31				December 31
(In millions)	2016		2015		2016		2015
Accumulated benefit obligation	$	305.7	$	307.4	$	946.3	$	894.8

Defined Benefit Pension Plans with Accumulated Benefit Obligation in Excess of Plan Assets

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for defined benefit pension plans with accumulated benefit obligations in excess of plan assets at December 31, 2016 and 2015 were as follows:



	U.S. Plans				International Plans
	December 31				December 31
(In millions)	2016		2015		2016		2015
Projected benefit obligation	$	296.7	$	297.5	$	913.0	$	876.9
Accumulated benefit obligation	296.7		297.5		910.0		871.9
Fair value of plan assets	195.6		198.8		694.9		731.6

The asset allocations attributable to the Company's U.S. defined benefit pension plans at December 31, 2016 and 2015, and the long-term target allocation of plan assets, by asset category, are as follows:



	Target Long-Term Allocation	Percentage of Plan Assets December 31
U.S. Plans Asset Category	Target Long-Term Allocation	2016		2015
Domestic equity securities	33%-43%	39.7	%	37.2	%
International equity securities	14%-24%	18.5	%	18.5	%
Fixed income securities	28%-38%	30.9	%	32.6	%
Cash and cash equivalents	Less than 5%	1.0	%	1.7	%
Other (a)	5%-15%	9.9	%	10.0	%


(a)	Investments within this caption include diversified global asset allocation funds.

Defined benefit pension plan assets are allocated among various categories of equities, fixed income securities and cash and cash equivalents with professional investment managers whose performance is actively monitored. The primary investment objective is long-term growth of assets in order to meet present and future benefit obligations. The Company periodically conducts an asset/liability modeling study and accordingly adjusts investments among and within asset categories to ensure the long-term investment strategy is aligned with the profile of benefit obligations.

The Company reviews the long-term expected return on asset assumption on a periodic basis taking into account a variety of factors including the historical investment returns achieved over a long-term period, the targeted allocation of plan assets and future expectations based on a model of asset returns for an actively managed portfolio. The model simulates 1,000 different capital market results over 20 years. For both 2017 and 2016, the expected return-on-asset assumption for U.S. defined benefit pension plans was 7.3%.

The U.S. defined benefit pension plans' assets include 450,000 shares of the Company's common stock at both

December 31, 2016 and 2015, valued at $6.1 million and $3.5 million, respectively. These shares represented 3.0% and 1.7% of total U.S. plan assets at December 31, 2016 and 2015, respectively. There was less than $0.1 million of dividends paid to the U.S. defined benefit pension plan on the Company's common stock during 2016. Dividends paid to the U.S. defined benefit pension plan on the Company's common stock amounted to $0.4 million in 2015.

The asset allocations attributable to the Company's international defined benefit pension plans at December 31, 2016 and 2015 and the long-term target allocation of plan assets, by asset category, are as follows:



International Plans Asset Category	Target Long-Term Allocation		Percentage of Plan Assets December 31
International Plans Asset Category	Target Long-Term Allocation		2016		2015
Equity securities	32.5	%	37.1	%	33.7	%
Fixed income securities	42.5	%	43.9	%	43.3	%
Cash and cash equivalents	—		0.3	%	0.3	%
Other (b)	25.0	%	18.7	%	22.7	%

(b) Investments within this caption include diversified growth funds, real estate funds and infrastructure funds.

International defined benefit pension plan assets at December 31, 2016 in the U.K. defined benefit pension plan amounted to approximately 94% of the international defined benefit pension plan assets. The U.K. plan assets are allocated among various categories of equities, fixed income securities and cash and cash equivalents with professional investment managers whose performance is actively monitored. The primary investment objective is long-term growth of assets in order to meet present and future benefit obligations. The Company periodically conducts asset/liability modeling studies and accordingly adjusts investment amounts within asset categories to ensure the long-term investment strategy is aligned with the profile of benefit obligations.

For the international long-term rate of return assumption, the Company considered the current level of expected returns in risk-free investments (primarily government bonds); the historical level of the risk premium associated with other asset classes in which the portfolio is invested; and the expectations for future returns of each asset class and plan expenses. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets. The 2017 and 2016, the expected return on asset assumption for the U.K. plan was 5.8% and 6.6%, respectively. The remaining international defined benefit pension plans, with plant assets representing approximately 6% of the international defined benefit pension plan assets, are under the guidance of professional investment managers and have similar investment objectives.

The fair values of the Company's U.S. defined benefit pension plans' assets at December 31, 2016 by asset class are as follows:



(In thousands)	Total		Level 1		Level 2
Domestic equities:
Common stocks	$	27,339	$	27,339	$	—
Mutual funds—equities	54,102		9,928		44,174
International equities—mutual funds	37,948		37,948		—
Fixed income investments:
U.S. Treasuries and collateralized securities	14,240		—		14,240
Corporate bonds and notes	11,457		11,457		—
Mutual funds—bonds	37,745		11,927		25,818
Other—mutual funds	20,346		20,346		—
Cash and money market accounts	2,094		2,094		—
Total	$	205,271	$	121,039	$	84,232

The fair values of the Company's U.S. defined benefit pension plans' assets at December 31, 2015 by asset class are as follows:



(In thousands)	Total		Level 1		Level 2
Domestic equities:
Common stocks	$	35,619	$	35,619	$	—
Mutual funds—equities	42,093		11,595		30,498
International equities—mutual funds	38,787		38,787		—
Fixed income investments:
U.S. Treasuries and collateralized securities	15,506		—		15,506
Corporate bonds and notes	12,987		12,987		—
Mutual funds—bonds	39,594		12,094		27,500
Other—mutual funds	20,803		20,803		—
Cash and money market accounts	3,481		3,481		—
Total	$	208,870	$	135,366	$	73,504

The fair values of the Company's international defined benefit pension plans' assets at December 31, 2016 by asset class are as follows:



(In thousands)	Total		Level 1		Level 2		Level 3
Equity securities:
Mutual funds—equities	$	272,070	$	—	$	272,070	$	—
Fixed income investments:
Mutual funds—bonds	314,098		—		314,098		—
Insurance contracts	7,657		—		7,657		—
Other:
Real estate funds/limited partnerships	23,714		—		23,714		—
Other mutual funds	113,345		—		113,345		—
Cash and money market accounts	1,859		1,859		—		—
Total	$	732,743	$	1,859	$	730,884	$	—

The fair values of the Company's international defined benefit pension plans' assets at December 31, 2015 by asset class are as follows:



(In thousands)	Total		Level 1		Level 2		Level 3
Equity securities:
Mutual funds—equities	$	255,937	$	—	$	255,937	$	—
Fixed income investments:
Mutual funds—bonds	320,259		—		320,259		—
Insurance contracts	7,306		—		7,306		—
Other:
Real estate funds / limited partnerships	52,313		—		27,951		24,362
Other mutual funds	117,646		—		117,646		—
Cash and money market accounts	2,505		2,505		—		—
Total	$	755,966	$	2,505	$	729,099	$	24,362

The following table summarizes changes in the fair value of Level 3 assets in international defined benefit pension plans for 2016, 2015 and 2014:



Level 3 Asset Changes for the Twelve Months Ended December 31
(In thousands)	2016			2015			2014
Real Estate Limited Partnership:
Balance at beginning of year	$	24,362		$	22,647		$	20,423
Contributions to partnership	—			109			385
Cash distributions received	—			(10,062		)	(1,614		)
Actual return related to plan assets	(2,387		)	11,668			3,453
Liquidation of investment	(21,975		)	—			—
Balance at end of year	$	—		$	24,362		$	22,647

Following is a description of the valuation methodologies used for the defined benefit pension plans' investments measured at fair value:

•

Level 1 Fair Value Measurements—Investments in interest-bearing cash are stated at cost, which approximates fair value. The fair values of money market accounts and certain mutual funds are based on quoted net asset values of the shares held by the plan at year-end. The fair values of domestic and international stocks and corporate bonds, notes and convertible debentures are valued at the closing price reported in the active market on which the individual securities are traded.

•

Level 2 Fair Value Measurements—The fair values of investments in mutual funds for which quoted net asset values in an active market are not available are valued by the investment advisor based on the current market values of the underlying assets of the mutual fund based on information reported by the investment consistent with audited financial statements of the mutual fund. Further information concerning these mutual funds may be obtained from their separate audited financial statements. Investments in U.S. Treasury notes and collateralized securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings.


•	Level 3 Fair Value Measurements—Real estate limited partnership interests are valued by the general partners based on the underlying assets. The limited partnership interests are valued using unobservable inputs and have been classified within Level 3 of the fair value hierarchy.

Multiemployer Pension Plans

The Company, through the Harsco Metals & Minerals Segment, contributes to several MEPPs under the terms of collective-bargaining agreements that cover union-represented employees, many of whom are temporary in nature. The Company's total contributions to MEPPs were $2.0 million, $2.5 million and $3.0 million for the years ended December 31, 2016, 2015 and 2014, respectively.