RETIREMENT ANNUITY AND GUARANTEED CONTINUOUS EMPLOYMENT PLANS

The Company maintains a number of defined benefit and defined contribution plans to provide retirement benefits for employees. These plans are maintained and contributions are made in accordance with the Employee Retirement Income Security Act of 1974 ("ERISA"), local statutory law or as determined by the Board of Directors. The plans generally provide benefits based upon years of service and compensation. Pension plans are funded except for a domestic non-qualified pension plan for certain key employees and certain foreign plans. The Company uses a December 31 measurement date for its plans.

The Company does not have, and does not provide for, any postretirement or postemployment benefits other than pensions and certain non-U.S. statutory termination benefits.

Defined Benefit Plans

Contributions are made in amounts sufficient to fund current service costs on a current basis and to fund past service costs, if any, over various amortization periods.

Obligations and Funded Status



	December 31,
	2018						2017
	U.S. pension plans			Non-U.S. pension plans			U.S. pension plans			Non-U.S. pension plans
Change in benefit obligations
Benefit obligations at beginning of year	$	507,075		$	193,523		$	484,758		$	79,972
Service cost	139			3,252			608			2,678
Interest cost	18,084			3,703			19,497			3,253
Plan participants' contributions	—			196			—			176
Acquisitions & other adjustments ⁽¹⁾	—			(5,322		)	—			100,551
Actuarial (gain) loss	(46,924		)	(5,674		)	46,144			4,926
Benefits paid	(7,973		)	(9,723		)	(6,409		)	(4,909		)
Settlements/curtailments ⁽²⁾	(31,456		)	(1,886		)	(37,523		)	(700		)
Currency translation	—			(9,258		)	—			7,576
Benefit obligations at end of year	438,945			168,811			507,075			193,523

Change in plan assets
Fair value of plan assets at beginning of year	568,388			113,344			528,744			70,341
Actual return on plan assets	(23,012		)	(2,855		)	82,732			5,770
Employer contributions	690			2,087			55			1,684
Plan participants' contributions	—			196			—			176
Acquisitions ⁽¹⁾	—			586			—			32,599
Benefits paid	(7,047		)	(5,904		)	(5,620		)	(3,196		)
Settlements ⁽²⁾	(26,941		)	(1,455		)	(37,523		)	(22		)
Currency translation	—			(5,812		)	—			5,992
Fair value of plan assets at end of year	512,078			100,187			568,388			113,344

Funded status at end of year	73,133			(68,624		)	61,313			(80,179		)
Unrecognized actuarial net loss	85,624			25,581			90,679			25,987
Unrecognized prior service cost	—			534			—			(11		)
Unrecognized transition assets, net	—			32			—			35
Net amount recognized	$	158,757		$	(42,477	)	$	151,992		$	(54,168	)


(1)	Acquisitions in 2017 relate to acquisition of Air Liquide Welding as discussed in Note 4 to the consolidated financial statements.


(2)	Settlements in 2018 and 2017 resulting from lump sum pension payments.

In October 2016, The Lincoln Electric Company amended the plan to freeze all benefit accruals for participants under the Lincoln Electric Retirement Annuity Program ("RAP") effective as of December 31, 2016. The RAP includes approximately 1,500 domestic employees who fully transitioned to The Lincoln Electric Company Employee Savings Plan (“Savings Plan”), a defined contribution retirement savings plan. The Company recorded pension curtailment gains of $2,206 for the year ended December 31, 2016 related to the amendment. The Company did not make significant contributions to the defined benefit plans in the United States in 2018 or 2017.

The after-tax amounts of unrecognized actuarial net loss, prior service costs and transition assets included in Accumulated other comprehensive loss at December 31, 2018 were $81,580, $446 and $23, respectively. The actuarial loss represents changes in the estimated obligation not yet recognized in the Consolidated Income Statement. The pre-tax amounts of unrecognized actuarial net loss, prior service credits and transition obligations expected to be recognized as components of net periodic benefit cost during 2019 are $3,924, $59 and $3, respectively.

Amounts Recognized in Consolidated Balance Sheets



				December 31,
	2018						2017
	U.S. pension plans			Non-U.S. pension plans			U.S. pension plans			Non-U.S. pension plans
Prepaid pensions ⁽¹⁾	$	87,786		$	77		$	81,485		$	368
Accrued pension liability, current ⁽²⁾	(786		)	(2,996		)	(5,332		)	(3,483		)
Accrued pension liability, long-term ⁽³⁾	(13,867		)	(65,705		)	(14,840		)	(77,064		)
Accumulated other comprehensive loss, excluding tax effects	85,624			26,147			90,679			26,011
Net amount recognized in the balance sheets	$	158,757		$	(42,477	)	$	151,992		$	(54,168	)

(1) Included in Other assets.

(2) Included in Other current liabilities.

(3) Included in Other liabilities.

Components of Pension Cost for Defined Benefit Plans



	Year Ended December 31,
	2018						2017						2016
	U.S. pension plans			Non-U.S. pension plans			U.S. pension plans			Non-U.S. pension plans			U.S. pension plans			Non-U.S. pension plans
Service cost	$	139		$	3,252		$	608		$	2,678		$	15,474		$	2,215
Interest cost	18,084			3,703			19,497			3,253			20,676			2,902
Expected return on plan assets	(27,052		)	(5,057		)	(31,530		)	(4,270		)	(31,682		)	(4,034		)
Amortization of prior service cost	—			1			—			15			(412		)	18
Amortization of net loss ⁽¹⁾	1,498			2,211			2,133			1,881			7,717			2,176
Settlement/curtailment loss (gain) ⁽²⁾	6,686			(397		)	8,150			102			(1,062		)	—
Pension cost for defined benefit plans ⁽³⁾	$	(645	)	$	3,713		$	(1,142	)	$	3,659		$	10,711		$	3,277

(1) The amortization of net loss includes a $959 charge resulting from the deconsolidation of the Venezuelan subsidiary during the year ended December 31, 2016.


(2)	Pension settlement charges for the years ended December 31, 2018 and 2017 resulting from lump sum pension payments.


(3)	The decrease in pension cost for defined benefit plans for the years ended December 31, 2018 and 2017 was due to the U.S. plan freeze effective December 31, 2016.

The components of Pension cost for defined benefit plans, other than service cost, are included in Other income (expense) in the Company's Consolidated Statements of Income.

Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets



	December 31,
	2018				2017
	U.S. pension plans		Non-U.S. pension plans		U.S. pension plans		Non-U.S. pension plans
Projected benefit obligation	$	14,653	$	158,746	$	26,149	$	182,512
Accumulated benefit obligation	14,406		152,724		25,870		174,667
Fair value of plan assets	—		90,076		5,977		102,107

The total accumulated benefit obligation for all plans was $600,998 as of December 31, 2018 and $691,827 as of December 31, 2017.

Benefit Payments for Plans

Benefits expected to be paid for the plans are as follows:



	U.S. pension plans		Non-U.S. pension plans
Estimated Payments
2019	$	28,101	$	8,278
2020	31,581		8,243
2021	26,998		8,513
2022	28,754		8,055
2023	30,593		7,966
2024 through 2028	137,369		42,925

Assumptions

Weighted average assumptions used to measure the benefit obligation for the Company's significant defined benefit plans as of December 31, 2018 and 2017 were as follows:



	December 31,
	2018				2017
	U.S. pension plans		Non-U.S. pension plans		U.S. pension plans		Non-U.S. pension plans
Discount Rate	4.4	%	2.3	%	3.7	%	2.0	%
Rate of increase in compensation	2.5	%	2.6	%	2.5	%	2.7	%

Weighted average assumptions used to measure the net periodic benefit cost for the Company's significant defined benefit plans for each of the three years ended December 31 were as follows:



	December 31,
	2018				2017				2016
	U.S. pension plans		Non-U.S. pension plans		U.S. pension plans		Non-U.S. pension plans		U.S. pension plans		Non-U.S. pension plans
Discount rate	3.7	%	2.0	%	4.2	%	2.2	%	4.5	%	3.9	%
Rate of increase in compensation	2.5	%	2.7	%	2.5	%	2.5	%	2.6	%	3.7	%
Expected return on plan assets	5.0	%	4.6	%	6.0	%	4.5	%	6.2	%	5.7	%

To develop the discount rate assumptions, the Company refers to the yield derived from matching projected pension payments with maturities of bonds rated AA or an equivalent quality. The expected long-term rate of return assumption is based on the weighted average expected return of the various asset classes in the plans' portfolio and the targeted allocation of plan assets. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance. The rate of compensation increase is determined by the Company based upon annual reviews.

Pension Plans' Assets

The primary objective of the pension plans' investment policy is to ensure sufficient assets are available to provide benefit obligations when such obligations mature. Investment management practices must comply with ERISA or any other applicable regulations and rulings. The overall investment strategy for the defined benefit pension plans' assets is to achieve a rate of return over a normal business cycle relative to an acceptable level of risk that is consistent with the long-term objectives of the portfolio. The target allocation for plan assets is 10% to 20% equity securities and 80% to 90% debt securities.

The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of December 31, 2018:



	Pension Plans' Assets at Fair Value as of December 31, 2018
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	13,029	$	—	$	—	$	13,029
Equity securities ⁽¹⁾	3,851		—		—		3,851
Fixed income securities ⁽²⁾
U.S. government bonds	16,743		—		—		16,743
Corporate debt and other obligations	—		392,090		—		392,090
Investments measured at NAV ⁽³⁾
Common trusts and 103-12 investments ⁽⁴⁾							151,153
Private equity funds ⁽⁵⁾							35,399
Total investments at fair value	$	33,623	$	392,090	$	—	$	612,265

The following table sets forth, by level within the fair value hierarchy, the pension plans' assets as of December 31, 2017:



	Pension Plans' Assets at Fair Value as of December 31, 2017
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	8,922	$	—	$	—	$	8,922
Equity securities ⁽¹⁾	4,566		—		—		4,566
Fixed income securities ⁽²⁾
U.S. government bonds	33,205		—		—		33,205
Corporate debt and other obligations	—		398,578		—		398,578
Investments measured at NAV ⁽³⁾
Common trusts and 103-12 investments ⁽⁴⁾							199,066
Private equity funds ⁽⁵⁾							37,395
Total investments at fair value	$	46,693	$	398,578	$	—	$	681,732


(1)	Equity securities are primarily comprised of corporate stock and mutual funds directly held by the plans. Equity securities are valued using the closing price reported on the active market on which the individual securities are traded.


(2)	Fixed income securities are primarily comprised of governmental and corporate bonds directly held by the plans. Governmental and corporate bonds are valued using both market observable inputs for similar assets that are traded on an active market and the closing price on the active market on which the individual securities are traded.


(3)	Certain assets that are measured at fair value using the net asset value ("NAV") practical expedient have not been classified in the fair value hierarchy.

(4)

Common trusts and 103-12 investments (collectively "Trusts") are comprised of a number of investment funds that invest in a diverse portfolio of assets including equity securities, corporate and governmental bonds, equity and credit indexes and money markets. Trusts are valued at the NAV as determined by their custodian. NAV represents the accumulation of the unadjusted quoted close prices on the reporting date for the underlying investments divided by the total shares outstanding at the reporting dates.

(5)

Private equity funds consist of four funds seeking capital appreciation by investing in private equity investment partnerships and venture capital companies. Private equity fund valuations are based on the NAV of the underlying assets. Funds are comprised of unrestricted and restricted publicly traded securities and privately held securities. Unrestricted securities are valued at the closing market price on the reporting date. Restricted securities may be valued at a discount from such closing public market price, depending on facts and circumstances. Privately held securities are valued at fair value as determined by the fund directors and general partners.

Supplemental Executive Retirement Plan

The Company maintained a domestic unfunded Supplemental Executive Retirement Plan ("SERP") under which non-qualified supplemental pension benefits are paid to certain employees in addition to amounts received under the Company's qualified retirement plan which is subject to Internal Revenue Service ("IRS") limitations on covered compensation. The annual cost of this program has been included in the determination of total net pension costs shown above and was $1,268, $772 and $2,113 in 2018, 2017 and 2016, respectively. The projected benefit obligation associated with this plan is also included in the pension disclosure shown above and was $12,183, $17,047 and $16,738 at December 31, 2018, 2017 and 2016, respectively.

In October 2016, the Company announced an amendment to freeze and vest all benefit accruals under the SERP, effective November 30, 2016. The Company recorded a curtailment loss of $1,144 for the year ended December 31, 2016 related to the amendment. The value of the frozen vested benefit was converted into an account balance and deferred. In addition, the Company created The Lincoln Electric Company Restoration Plan (“Restoration Plan”) effective January 1, 2017. The Restoration Plan is a domestic unfunded plan maintained for the purpose of providing certain employees the ability to fully participate in standard employee retirement offerings, which are limited by IRS regulations on covered compensation.

Defined Contribution Plans

Substantially all U.S. employees are covered under defined contribution plans. In October 2016, the Company announced a plan redesign of the Savings Plan that was effective January 1, 2017. The Savings Plan provides that eligible employees receive up to 6% of employees' annual compensation through Company matching contributions of 100% of the first 3% of employee compensation contributed to the plan, and automatic Company contributions equal to 3% of annual compensation. In addition, certain employees affected by the RAP freeze are also eligible to receive employer contributions equal to 6% of annual compensation for a minimum period of five years or to the end of the year in which they complete thirty years of service.

The annual costs recognized for defined contribution plans were $26,477, $25,285 and $8,361 in 2018, 2017 and 2016, respectively.

Other Benefits

The Cleveland, Ohio, area operations have a Guaranteed Continuous Employment Plan covering substantially all employees which, in general, provides that the Company will provide work for at least 75% of every standard work week (presently 40 hours). This plan does not guarantee employment when the Company's ability to continue normal operations is seriously restricted by events beyond the control of the Company. The Company has reserved the right to terminate this plan effective at the end of a calendar year by giving notice of such termination not less than six months prior to the end of such year.