During 2019, the Company maintained a domestic defined benefit pension plan ("U.S. Lydall Pension Plan") and two domestic defined benefit pension plans acquired in the Interface acquisition: the Retirement Income Plan for Employees of Interface Performance Materials, Inc. ("IPM Pension Plan"), and the Interface Sealing Solutions, Inc. Pension Plan ("ISS Pension Plan"), collectively, the "Interface Pension Plans."

During 2019, the Company settled the pension obligation of the U.S. Lydall Pension Plan through lump sum distributions to participants or by irrevocably transferring pension liabilities to two insurance companies through the purchase of group annuity contracts. These purchases, funded with pension assets, resulted in a pre-tax settlement loss of $25.7 million in 2019 related to the recognition of accumulated deferred actuarial losses U.S. Lydall Pension Plan as well as settlement-related fees and expenses. The settlement loss was included as non-operating expense in the consolidated statements of operations. No contributions were made to the U.S. Lydall Pension Plan during the year ended December 31, 2019.

The Interface Pension Plans cover Interface's union and non-union employees. The plans are closed to new employees and benefits are no longer accruing for the majority of participants. Contributions of $1.4 million were made to the plans during the year ended December 31, 2019. During the fourth quarter of 2019, the Company terminated the ISS Pension Plan. The Company anticipates completing the settlement of this plan in the first half of 2020. At December 31, 2019, the benefit obligations of the ISS Pension Plan have been valued at the amount expected to be required to settle the obligations through a combination of participant-elected lump sums or annuities, and the cost to purchase those annuities. Overall, the Company estimates it will incur expense of approximately $0.4 million to $0.6 million in 2020 when the plan settlement is completed. The Company is expected to make a one-time cash contribution of approximately $0.7 million to $0.9 million to purchase annuities for participants and make lump sum payments. The estimated expense and cash contribution are subject to change based on valuations at the actual date of settlement.

During 2019 and 2018, certain union employees of Interface participated in a separate multi-employer pension plan. There were no significant contributions to the multi-employer plan during 2019 and 2018. In the fourth quarter of 2019, the Company negotiated with its union employees and the multi-employer pension plan the withdrawal from the plan and satisfied all outstanding obligations with a payment of $2.2 million, which was previously accrued on the Company's consolidated balance sheet at $2.7 million, resulting in a pension settlement gain of $0.5 million in 2019.



	December 31,
In thousands	2019			2018
Change in benefit obligation:
Net benefit obligation at beginning of year	$	102,679		$	51,882
Benefit obligation assumed through acquisition	—			52,392
Service Cost	136			46
Interest cost	2,132			2,595
Actuarial loss/(gain)	5,149			(876		)
Gross benefits paid	(2,932		)	(3,360		)
Net effect of remeasurement	(3,290		)	—
Settlement	(48,773		)	—
Net benefit obligation at end of year	$	55,101		$	102,679
Change in plan assets:
Fair value of plan assets at beginning of year	$	87,452		$	44,174
Fair value of plan assets through acquisition	—			43,230
Actual return/(loss) on plan assets	6,987			(4,092		)
Contributions	1,415			7,500
Gross benefits paid	(2,932		)	(3,360		)
Net effect of remeasurement	(211		)	—
Settlement	(48,773		)	—
Fair value of plan assets at end of year	$	43,938		$	87,452
Net benefit obligation in excess of plan assets	$	(11,163	)	$	(15,227	)
Balance sheet amounts:
Current liabilities	$	(787	)	$	(3,078	)
Noncurrent liabilities	$	(10,376	)	$	(12,149	)
Total liabilities	$	(11,163	)	$	(15,227	)
Amounts recognized in accumulated other comprehensive income, net of tax consist of:
Net actuarial loss	$	2,579		$	21,850
Net amount recognized	$	2,579		$	21,850

At December 31, 2019, in addition to the accrued benefit liability of $11.2 million recognized for the Company’s domestic defined benefit pension plans, the Company had foreign pension plans, including those acquired in the Interface acquisition, with an accrued benefit liability of $5.2 million and accumulated other comprehensive loss, net of tax, of $0.9 million. At December 31, 2018, in addition to the accrued benefit liability of $15.2 million recognized for the Company’s domestic defined benefit pension plan, the Company had foreign pension plans, including those acquired in the Interface acquisition, with an accrued benefit liability of $4.7 million and accumulated other comprehensive loss, net of tax, of $0.4 million.

In addition to the Domestic Pension Plans included in the table above, the Interface domestic post-retirement benefits include life insurance and medical benefits for certain domestic employees with an accrued benefit liability of $3.6 million at December 31, 2019 and $4.1 million at December 31, 2018. For the year ended December 31, 2019, benefit expense of approximately $0.1 million was recognized and benefit payments of $0.2 million were made. From the August 31, 2018 acquisition to December 31, 2018, benefit expense of $0.1 million was recognized and benefit payments of $0.1 million were made.

The U.S. Lydall Pension Plan liability, net of tax, included in other comprehensive income decreased by $19.4 million as a result of the settlement. The Interface Pension Plans' liability, net of tax, included in other comprehensive income increased by $0.3 million at December 31, 2019. The U.S. Lydall Pension Plan liability, net of tax, included in other comprehensive income increased by $1.8 million for the year ended December 31, 2018. The Interface Pension Plans liability, net of tax, included in other comprehensive income increased by $1.8 million at December 31, 2018.



	December 31,
In thousands	2019			2018			2017
Service cost	$	136		$	46		$	—
Interest cost	2,886			2,595			2,058
Expected return on plan assets	(2,601		)	(3,339		)	(2,376		)
Amortization of actuarial net loss	464			1,024			1,092
Total net periodic benefit cost	$	885		$	326		$	774
Settlement loss	25,247			$	—		$	—
Total employer pension plan cost	$	26,132		$	326		$	774

The domestic defined benefit pension plans are administered by the Lydall Retirement Committee (the "Committee"), which is appointed by the Board of Directors. The Committee’s responsibilities are to establish a funding policy for the Domestic Pension Plans and to appoint and oversee the investment advisor responsible for the plan investments. The Committee is a named fiduciary under the plan, and the Committee has granted discretion to the investment advisor with respect to management of the investments. The Interface Pension Plans are invested for the purpose of investment diversification. In determining the expected return on plan assets, the Committee considers the relative weighting of plan assets, the historical performance of marketable debt and equity securities and economic and other indicators of future performance.

Investment management objectives for the Interface Pension Plans include maintaining an adequate level of diversification to balance market risk and to provide sufficient liquidity for near-term payments of benefits accrued under the Plans and to pay the expenses of administration. Investment decisions are based on the returns and risk relative to the Plan's liabilities, an approach commonly referred to as liability-driven investing. The long-term investment objective of the Interface Pension Plan is to achieve a total return equal to or greater than the assumed weighted rate of return, currently 5.20%. Though it is the intent of the Committee to achieve income and growth, that intent does not include taking extraordinary risks or engaging in investment activities not commonly considered prudent under the standards imposed by ERISA. The allowable investments include: securities, mutual funds, sub-advisers, independent investment managers and/or programs, and cash or cash equivalents. Prohibited investments include: single strategy hedge funds, investment in individual securities, direct investment in venture capital, and CMO derivatives and commodities.



	Target Allocation	Actual Allocation of Plan Assets December 31,
Asset Category	2020 (1)	2019		2018 (2)
Domestic equities	20% - 40%	38	%	16	%
International equities	15% - 35%	25	%	11	%
Fixed income	20%-45%	18	%	49	%
Real assets	0% - 10%	7	%	3	%
Hedge fund of funds	5% - 15%	9	%	5	%
Cash and cash equivalents	0% - 10%	3	%	16	%

(1) Target allocation percentages reflect the IPM Pension Plan only, as the terminated ISS Pension Plan assets, which comprise 5% of the total domestic defined benefit pension balances at December 31, 2019, has an investment target of primarily fixed income investments in anticipation of 2020 settlement.
(2) Plan Assets as of December 31, 2018 included values associated with the U.S. Lydall Plan, which was settled during 2019.

The investments of the domestic defined benefit plans are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The fixed income long duration fund and certain hedge funds that were measured at fair value using the NAV practical expedient are included as a reconciling item to the fair value table.



December 31, 2019
In thousands	Level 1		Level 2		Level 3		Measured at NAV		Total

Domestic equity	$	16,729	$	—	$	—	$	—	$	16,729
International equity	10,903		—		—		—		10,903
Fixed income	3,724		—		—		—		3,724
U.S. government securities	—		2,686		—		—		2,686
Corporate and foreign bonds	—		1,701		—		—		1,701
Real assets	3,010		—		—		—		3,010
Hedge fund of funds	4,009		—		—		—		4,009
Cash and cash equivalents	145		1,031		—		—		1,176
Total Assets at Fair Value	$	38,520	$	5,418	$	—	$	—	$	43,938



December 31, 2018
In thousands	Level 1		Level 2		Level 3		Measured at NAV		Total

Domestic equity	$	13,941	$	—	$	—	$	—	$	13,941
International equity	9,547		—		—		—		9,547
Fixed income	10,977		—		—		27,727		38,704
U.S. government securities	—		2,466		—		—		2,466
Corporate and foreign bonds	—		1,448		—		—		1,448
Real assets	2,808		—		—		—		2,808
Hedge fund of funds	4,129		—		—		312		4,441
Cash and cash equivalents	12,027		2,070		—		—		14,097
Total Assets at Fair Value	$	53,429	$	5,984	$	—	$	28,039	$	87,452

Fixed income consisted of mutual funds valued using quoted market prices and a long duration fixed income held in proprietary funds pooled with other investor accounts which sometimes uses the net asset value (NAV) per share practical expedient to measure fair value.

Real assets includes inflation hedge mutual funds that invest primarily in a portfolio of inflation-protected debt securities, real-estate related securities and commodity/natural resource-related securities. The mutual fund, which is valued using quoted market prices, is designed to protect against the long-term effects of inflation on an investment portfolio with the long-term objective of preservation of capital with current income.

Corporate and foreign bonds primarily include a diversified portfolio of U.S. corporate debt obligations, and are valued using pricing models maximizing the use of observable inputs for similar securities. This includes basing value on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the bond is valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks or a broker quote if available.

Hedge funds are mutual funds and pooled funds that employ a range of investment strategies for diversification including equity and fixed income, credit driven, macro and multi oriented strategies. Certain hedge funds were measured at fair value using the NAV practical expedient and are not classified in the fair value hierarchy.

Cash and cash equivalents include investments readily converted to cash valued in the active market in which the funds were traded and are classified within Level 1 of the fair value hierarchy. Non-government money market funds are classified as Level 2.