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Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

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.

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 2019, 2018 and 2017. For non-U.S. employees, this match is up to 6% of eligible compensation with an additional 2% going towards insurance and administrative costs.

NPPC for U.S. and international plans for 2019, 2018 and 2017 is as follows:



	U.S. Plans									International Plans
(In thousands)	2019			2018			2017			2019			2018			2017
Defined benefit pension plans:
Service cost	$	39		$	42		$	43		$	1,447		$	1,669		$	1,724
Interest cost	10,551			9,562			9,878			22,280			21,589			21,459
Expected return on plan assets	(10,297		)	(12,068		)	(10,485		)	(37,430		)	(42,685		)	(40,469		)
Recognized prior service costs	—			1			33			326			(140		)	186
Recognized losses	5,585			5,207			5,701			14,345			14,807			16,283
Settlement/curtailment loss (gain)	129			285			—			19			(36		)	(20		)
Defined benefit pension plan cost (income)	6,007			3,029			5,170			987			(4,796		)	(837		)
Multiemployer pension plans	727			686			650			1,167			1,313			1,306
Defined contribution plans	4,178			3,466			3,021			6,031			5,608			5,905
Net periodic pension cost	$	10,912		$	7,181		$	8,841		$	8,185		$	2,125		$	6,374

The change in the financial status of the defined benefit pension plans and amounts recognized on the Consolidated Balance Sheets at December 31, 2019 and 2018 are as follows:



	U.S. Plans						International Plans
(In thousands)	2019			2018			2019			2018
Change in benefit obligation:
Benefit obligation at beginning of year	$	286,027		$	314,861		$	874,679		$	1,015,586
Service cost	39			42			1,447			1,669
Interest cost	10,551			9,562			22,280			21,589
Plan participants' contributions	—			—			36			49
Amendments	—			—			1,254			11,238
Actuarial (gain) loss	20,064			(21,474		)	93,330			(78,658		)
Settlements/curtailments	—			—			(343		)	(313		)
Benefits paid	(15,842		)	(16,964		)	(37,396		)	(37,721		)
Effect of foreign currency	—			—			33,010			(58,760		)
Acquisitions/divestitures	(6,146		)	—			(9		)	—
Benefit obligation at end of year	$	294,693		$	286,027		$	988,288		$	874,679



	U.S. Plans						International Plans
(In thousands)	2019			2018			2019			2018
Change in plan assets:
Fair value of plan assets at beginning of year	$	205,388		$	229,941		$	744,538		$	842,717
Actual return on plan assets	37,665			(17,883		)	108,235			(30,004		)
Employer contributions	8,306			10,294			21,121			18,415
Plan participants' contributions	—			—			36			49
Settlements/curtailments	—			—			(343		)	(313		)
Benefits paid	(15,842		)	(16,964		)	(37,217		)	(37,570		)
Effect of foreign currency	—			—			28,275			(48,756		)
Acquisitions/divestitures	(9,249		)	—			(9		)	—
Fair value of plan assets at end of year	$	226,268		$	205,388		$	864,636		$	744,538
Funded status at end of year	$	(68,425	)	$	(80,639	)	$	(123,652	)	$	(130,141	)

Amounts recognized on the Consolidated Balance Sheets for defined benefit pension plans consist of the following at December 31, 2019 and 2018:



	U.S. Plans				International Plans
	December 31				December 31
(In thousands)	2019		2018		2019		2018
Noncurrent assets	$	—	$	1,953	$	987	$	2,379
Current liabilities	1,980		1,954		697		643
Noncurrent liabilities	64,465		80,638		123,942		131,876
Liabilities of assets held-for-sale	1,980		—		—		—
Accumulated other comprehensive loss	133,806		149,326		415,781		391,849

Amounts recognized in Accumulated other comprehensive loss, for defined benefit pension plans consist of the following at December 31, 2019 and 2018:



	U.S. Plans				International Plans
(In thousands)	2019		2018		2019		2018
Net actuarial loss	$	133,806	$	149,326	$	408,709	$	384,666
Prior service cost	—		—		7,072		7,183
Total	$	133,806	$	149,326	$	415,781	$	391,849

The estimated amounts that will be amortized from Accumulated other comprehensive loss into defined benefit pension plan NPPC in 2020 are as follows:



(In thousands)	U.S. Plans		International Plans
Net actuarial loss	$	5,085	$	15,137
Prior service cost	—		392
Total	$	5,085	$	15,529

The Company's estimate of expected contributions to be paid in 2020 for the U.S. and international defined benefit plans are $11.2 million and $22.4 million, respectively.

Future Benefit Payments

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



(In millions)	2020		2021		2022		2023		2024		2025-2029
U.S. Plans	$	25.7	$	17.5	$	17.6	$	17.5	$	17.4	$	84.7
International Plans	38.9		39.8		40.2		41.3		42.1		224.8

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 2019, 2018 and 2017 were as follows:



	U.S. Plans December 31						International Plans December 31						Global Weighted-Average December 31
	2019		2018		2017		2019		2018		2017		2019		2018		2017
Discount rates	4.2	%	3.5	%	4.0	%	2.9	%	2.6	%	2.8	%	3.2	%	2.8	%	3.1	%
Expected long-term rates of return on plan assets	7.3	%	7.3	%	7.3	%	5.5	%	5.6	%	5.9	%	5.9	%	6.0	%	6.2	%

The expected long-term rates of return on defined benefit pension plan assets for the 2020 NPPC are 7.0% for the U.S. plans and 5.2% for the international plans. The expected global long-term rate of return on assets for 2020 is 5.6%.

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

December 31, 2019 and 2018 were as follows:



	U.S. Plans				International Plans				Global Weighted-Average
	December 31				December 31				December 31
	2019		2018		2019		2018		2019		2018
Discount rates	3.2	%	4.2	%	2.1	%	2.9	%	2.4	%	3.2	%

Since accrued service is no longer granted to the U.S. defined benefit plans and the majority of the international defined benefit pension plans, the rate of compensation increase did not have a significant impact on the defined benefit pension obligation at December 31, 2019 and 2018 or the defined benefit pension plan NPPC for the years ended 2019, 2018 and 2017.

The U.S. discount rate was determined using a yield curve that was produced from a universe containing approximately 1,100 U.S. dollar-denominated, AA-graded corporate bonds, all of which were noncallable (or callable with make-whole provisions) and excluding the 10% of the bonds with the highest deviation from the expected yield and the 10% with the lowest deviation from the expected yield within each duration 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 seek to approximate the cash inflows with the timing and amounts of the expected benefit payments.

Accumulated Benefit Obligation

The accumulated benefit obligation for all defined benefit pension plans at December 31, 2019 and 2018 was as follows:



	U.S. Plans				International Plans
	December 31				December 31
(In millions)	2019		2018		2019		2018
Accumulated benefit obligation	$	294.7	$	286.0	$	982.7	$	869.4

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, 2019 and 2018 were as follows:



	U.S. Plans				International Plans
	December 31				December 31
(In millions)	2019		2018		2019		2018
Projected benefit obligation	$	294.7	$	279.2	$	966.3	$	831.7
Accumulated benefit obligation	294.7		279.2		961.1		828.9
Fair value of plan assets	226.3		196.6		841.9		701.4

The asset allocations attributable to the Company's U.S. defined benefit pension plans at December 31, 2019 and 2018, 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	2019		2018
Domestic equity securities	26%-36%	30.8	%	30.6	%
International equity securities	20%-30%	25.3	%	22.0	%
Fixed income securities	31%-41%	34.8	%	42.9	%
Cash and cash equivalents	Less than 5%	0.8	%	0.7	%
Other (a)	4%-14%	8.3	%	3.8	%


(a)	Investments within this caption include diversified global asset allocation funds and credit collection fund.

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 considering 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. The expected return-on-asset assumption for U.S. defined benefit pension plans for 2020 and 2019 are 7.0% and 7.3%, respectively.

The U.S. defined benefit pension plans' assets include 360,000 shares at December 31, 2019 and 450,000 shares at December 31, 2018 of the Company's common stock, valued at $8.3 million and $8.9 million, respectively. These shares represented 3.7% and 4.4% of total U.S. plan assets at December 31, 2019 and 2018, respectively.

The asset allocations attributable to the Company's international defined benefit pension plans at December 31, 2019 and 2018 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		2019		2018
Equity securities	29.0	%	31.6	%	29.2	%
Fixed income securities	50.0	%	48.5	%	50.7	%
Cash and cash equivalents	—		0.3	%	0.3	%
Other (b)	21.0	%	19.6	%	19.8	%


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

International defined benefit pension plan assets at December 31, 2019 in the U.K. defined benefit pension plan amounted to approximately 95% 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 expected return on asset assumption for the U.K. plan at December 31, 2019 is 5.2% and 5.5% at December 31, 2018. The remaining international defined benefit pension plans, with plan assets representing approximately 5% 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, 2019 by asset class are as follows:



(In thousands)	Total		Level 1		Investments Valued at Net Asset Value (c)
Domestic equities:
Common stocks	$	8,285	$	8,285	$	—
Mutual funds—equities	61,346		61,346		—
International equities:
Mutual funds—equities	57,188		57,188		—
Fixed income investments:
Mutual funds—bonds	78,685		78,685		—
Other—mutual funds	8,764		8,764		—
Cash and money market accounts	1,816		1,816		—
Other—partnerships/joint ventures	10,184		—		10,184
Total	$	226,268	$	216,084	$	10,184


(c)	Certain investments that are measured at fair value using the Net Asset Value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

The fair values of the Company's U.S. defined benefit pension plans' assets at December 31, 2018 by asset class are as follows:



(In thousands)	Total		Level 1		Investments Valued at Net Asset Value
Domestic equities:
Common stocks	$	8,937	$	8,937	$	—
Mutual funds—equities	54,002		54,002		—
International equities:
Mutual funds—equities	45,195		45,195		—
Fixed income investments:
Mutual funds—bonds	88,107		88,107		—
Other—mutual funds	7,703		7,703		—
Cash and money market accounts	1,444		1,444		—
Total	$	205,388	$	205,388	$	—

The fair values of the Company's international defined benefit pension plans' assets at December 31, 2019 by asset class are as follows:



(In thousands)	Total		Level 1		Level 2
Equity securities:
Mutual funds—equities	$	273,568	$	—	$	273,568
Fixed income investments:
Mutual funds—bonds	413,249		—		413,249
Insurance contracts	5,705		—		5,705
Other:
Other mutual funds	169,886		—		169,886
Cash and money market accounts	2,228		2,228		—
Total	$	864,636	$	2,228	$	862,408

The fair values of the Company's international defined benefit pension plans' assets at December 31, 2018 by asset class are as follows:



(In thousands)	Total		Level 1		Level 2
Equity securities:
Mutual funds—equities	$	217,321	$	—	$	217,321
Fixed income investments:
Mutual funds—bonds	372,094		—		372,094
Insurance contracts	5,620				5,620
Other:
Other mutual funds	147,313		—		147,313
Cash and money market accounts	2,190		2,190		—
Total	$	744,538	$	2,190	$	742,348

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.

Multiemployer Pension Plans

The Company, through the Harsco Environmental 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 $1.9 million, $2.0 million and $2.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.