Employee Benefit Plans

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

Pension Benefits

The Company has defined benefit pension plans covering a certain 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. 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 2020, 2019 and 2018. 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 2020, 2019 and 2018 is as follows:

	U.S. Plans						International Plans
(In thousands)	2020		2019		2018		2020		2019		2018
Net Periodic Pension Cost:
Defined benefit pension plans:
Service cost	$	—	$	39	$	42	$	1,838	$	1,447	$	1,669
Interest cost	7,381		10,551		9,562		17,720		22,280		21,589

	U.S. Plans						International Plans
(In thousands)	2020		2019		2018		2020		2019		2018
Expected return on plan assets	(11,368)		(10,297)		(12,068)		(41,252)		(37,430)		(42,685)
Recognized prior service costs	—		—		1		511		326		(140)
Recognized losses	5,100		5,585		5,207		14,723		14,345		14,807
Settlement/curtailment loss (gain)	—		129		285		(92)		19		(36)
Defined benefit pension plan cost (income)	1,113		6,007		3,029		(6,552)		987		(4,796)
Multiemployer pension plans	620		727		686		969		1,167		1,313
Defined contribution plans	5,025		4,178		3,466		4,708		6,031		5,608
Net periodic pension cost (income)	$	6,758	$	10,912	$	7,181	$	(875)	$	8,185	$	2,125

The change in the financial status of the defined benefit pension plans and amounts recognized on the Consolidated Balance Sheets at December 31, 2020 and 2019 are as follows:

	U.S. Plans				International Plans
(In thousands)	2020		2019		2020		2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	294,693	$	286,027	$	988,288	$	874,679
Service cost	—		39		1,838		1,447
Interest cost	7,381		10,551		17,720		22,280
Plan participants' contributions	—		—		35		36
Amendments	—		—		1,088		1,254
Actuarial (gain) loss	25,212		20,064		129,495		93,330
Settlements/curtailments	—		—		(256)		(343)
Benefits paid	(17,675)		(15,842)		(45,293)		(37,396)
Effect of foreign currency	—		—		29,526		33,010
Acquisitions/divestitures	(12,951)		(6,146)		(41)		(9)
Benefit obligation at end of year	$	296,660	$	294,693	$	1,122,400	$	988,288
Change in plan assets:
Fair value of plan assets at beginning of year	$	226,268	$	205,388	$	864,636	$	744,538
Actual return on plan assets	24,975		37,665		95,219		108,235
Employer contributions	3,528		8,306		21,962		21,121
Plan participants' contributions	—		—		35		36
Settlements/curtailments	—		—		(256)		(343)
Benefits paid	(17,675)		(15,842)		(44,869)		(37,217)
Effect of foreign currency	—		—		23,831		28,275
Acquisitions/divestitures	(10,971)		(9,249)		—		(9)
Fair value of plan assets at end of year	$	226,125	$	226,268	$	960,558	$	864,636
Funded status at end of year	$	(70,535)	$	(68,425)	$	(161,842)	$	(123,652)

Significant items impacting actuarial gains and losses for 2020 for U.S. plans included: the discount rate used to measure the benefit obligation decreased compared with the prior year, which caused the funded position to deteriorate; partially offset by the actual return on the fair value of plan assets since the prior measurement date was greater than assumed, which improved the funded position; and improvements in the mortality improvement projection assumption, which improved the funded position. The U.S. plans benefit obligation and the fair value of assets were also impacted by the divestiture of IKG in 2020, as these transferred to the buyer. See Note 3, Acquisitions and Dispositions, for additional information.

Significant items impacting actuarial gains and losses for 2020 for international plans, principally the U.K. plan, included: the discount rate used to measure the benefit obligation decreased compared with the prior year, which caused the funded position to deteriorate; partially offset by the actual return on the fair value of plan assets since the prior measurement date was greater than assumed, which improved the funded position.

Amounts recognized on the Consolidated Balance Sheets for defined benefit pension plans consist of the following at December 31, 2020 and 2019:

	U.S. Plans				International Plans
	December 31				December 31
(In thousands)	2020		2019		2020		2019
Noncurrent assets	$	—	$	—	$	533	$	987
Current liabilities	1,970		1,980		907		697
Noncurrent liabilities	68,565		64,465		161,468		123,942
Liabilities of assets held-for-sale	—		1,980		—		—
AOCI	135,281		133,806		487,697		415,781

Amounts recognized in AOCI for defined benefit pension plans consist of the following at December 31, 2020 and 2019:

	U.S. Plans				International Plans
(In thousands)	2020		2019		2020		2019
Net actuarial loss	$	135,281	$	133,806	$	477,253	$	408,709
Prior service cost	—		—		10,444		7,072
Total	$	135,281	$	133,806	$	487,697	$	415,781

The Company's estimate of expected contributions to be paid in 2021 for the U.S. and international defined benefit plans total $4.4 million and $25.2 million, respectively.

Future Benefit Payments

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

(In millions)	2021		2022		2023		2024		2025		2026-2030
U.S. Plans	$	25.6	$	17.1	$	17.0	$	16.8	$	16.7	$	80.6
International Plans	45.1		46.0		47.4		48.3		49.8		264.2

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 2020, 2019 and 2018 were as follows:

	U.S. Plans December 31						International Plans December 31						Global Weighted-Average December 31
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Discount rates	3.2	%	4.2	%	3.5	%	2.1	%	2.9	%	2.6	%	2.4	%	3.2	%	2.8	%
Expected long-term rates of return on plan assets	7.0	%	7.3	%	7.3	%	5.2	%	5.5	%	5.6	%	5.6	%	5.9	%	6.0	%

The expected long-term rates of return on defined benefit pension plan assets for the 2021 NPPC are 6.8% for the U.S. plans and 4.7% for the international plans. The expected global long-term rate of return on assets for 2021 is 5.1%.

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

December 31, 2020 and 2019 were as follows:

	U.S. Plans				International Plans				Global Weighted-Average
	December 31				December 31				December 31
	2020		2019		2020		2019		2020		2019
Discount rates	2.4	%	3.2	%	1.4	%	2.1	%	1.6	%	2.4	%

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, 2020 and 2019 or the defined benefit pension plan NPPC for the years ended 2020, 2019 and 2018.

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, 2020 and 2019 was as follows:

	U.S. Plans				International Plans
	December 31				December 31
(In millions)	2020		2019		2020		2019
Accumulated benefit obligation	$	296.7	$	294.7	$	1,116.1	$	982.7

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, 2020 and 2019 were as follows:

	U.S. Plans				International Plans
	December 31				December 31
(In millions)	2020		2019		2020		2019
Projected benefit obligation	$	296.7	$	294.7	$	1,115.7	$	966.3
Accumulated benefit obligation	296.7		294.7		1,109.8		961.1
Fair value of plan assets	226.1		226.3		953.5		841.9

The asset allocations attributable to the Company's U.S. defined benefit pension plans at December 31, 2020 and 2019, 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		2020		2019
Domestic equity securities	25%-35%	30.8	%	30.8	%
International equity securities	20%-30%	26.5	%	25.3	%
Fixed income securities	31%-41%	33.4	%	34.8	%
Cash and cash equivalents	Less than 5%	0.7	%	0.8	%
Other (a)	4%-14%	8.6	%	8.3	%

(a)    Investments within this caption include diversified global asset allocation funds and credit collection 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 considering a variety of factors including 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 2021 and 2020 are 6.8% and 7.0%, respectively.

The U.S. defined benefit pension plans' assets include 330,000 shares at December 31, 2020 and 360,000 shares at December 31, 2019 of the Company's common stock, valued at $5.9 million and $8.3 million, respectively. These shares represented 2.6% and 3.7% of total U.S. plan assets at December 31, 2020 and 2019, respectively.

The asset allocations attributable to the Company's international defined benefit pension plans at December 31, 2020 and 2019 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
			2020		2019
Equity securities	29.0	%	32.1	%	31.6	%
Fixed income securities	50.0	%	49.3	%	48.5	%
Cash and cash equivalents	—		0.2	%	0.3	%
Other (b)	21.0	%	18.4	%	19.6	%

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

International defined benefit pension plan assets at December 31, 2020 in the U.K. defined benefit pension plan totaled 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 is 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. defined benefit pension plan for 2021 and 2020 are 4.7% and 5.2%, respectively. 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, 2020 by asset class are as follows:

(In thousands)	Total		Level 1		Investments Valued at Net Asset Value (c)
Domestic equities:
Common stocks	$	5,934	$	5,934	$	—
Mutual funds—equities	63,651		63,651		—
International equities:
Mutual funds—equities	59,933		59,933		—
Fixed income investments:
Mutual funds—bonds	75,441		75,441		—
Other—mutual funds	8,944		8,944		—
Cash and money market accounts	1,691		1,691		—
Other—partnerships/joint ventures	10,531		—		10,531
Total	$	226,125	$	215,594	$	10,531

(c)     Certain investments that are measured at fair value using 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, 2019 by asset class are as follows:

(In thousands)	Total		Level 1		Investments Valued at Net Asset Value
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

The fair values of the Company's international defined benefit pension plans' assets at December 31, 2020 by asset class are as follows:

(In thousands)	Total		Level 1		Level 2
Equity securities:
Mutual funds—equities	$	308,002	$	—	$	308,002
Fixed income investments:
Mutual funds—bonds	467,864		—		467,864
Insurance contracts	6,282		—		6,282
Other:
Other mutual funds	176,679		—		176,679
Cash and money market accounts	1,731		1,731		—
Total	$	960,558	$	1,731	$	958,827

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

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 $1.6 million, $1.9 million and $2.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.