EMPLOYER SPONSORED BENEFIT PLANS

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

EMPLOYER SPONSORED BENEFIT PLANS

EMPLOYER SPONSORED BENEFIT PLANSAs of December 31, 2020, the Company maintained one domestic pension plan: the Retirement Income Plan for Employees of Interface Performance Materials, Inc. ("IPM Pension Plan"). During the three-month period ended March 31, 2020, the Company settled the pension obligation of the previously terminated Interface Sealing Solutions, Inc. Pension Plan ("ISS Pension Plan") through lump sum distributions to participants or by irrevocably transferring pension liabilities to an insurance company through the purchase of a group annuity contract. This purchase, which was funded with pension assets, resulted in a pre-tax settlement loss of $0.4 million in the three-month period ended March 31, 2020 related to the recognition of accumulated deferred actuarial losses. The settlement loss and expenses were included as non-operating expense in the Consolidated Statements of Operations.

The IPM Pension Plan covers a portion of Interface Performance Materials' union and non-union employees. This plan is closed to new employees and benefits are no longer accruing for the majority of participants. The Company contributed $1.9 million to the IPM Pension Plan and the ISS Pension Plan during 2020. The Company’s general funding policy is not to fund less than the ERISA minimum funding standard and not more than the maximum amount that can be deducted for federal income tax purposes.

During 2019, the Company terminated and 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 for the 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.

During 2019 and 2018, certain union employees of Interface Performance Materials 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 for the Company's withdrawal from the plan and the Company satisfied all outstanding obligations with a payment of $2.2 million, which was previously accrued on the Company's Consolidated Balance Sheets in the amount of $2.7 million, resulting in a pension settlement gain of $0.5 million in 2019.

The plan assets and benefit obligations for the period ended December 31, 2020 were composed of the IPM Pension Plan and the plan assets and benefit obligations for the period ended December 31, 2019 were composed of the IPM Pension Plan, the former U.S. Lydall Pension Plan and the former ISS Pension Plan as follows:

	For the Year Ended December 31,
In thousands	2020		2019
Change in benefit obligation:
Net benefit obligation at beginning of year	$	55,101	$	102,679
Service cost	134		136
Interest cost	1,706		2,132
Actuarial loss (1)	7,257		5,149
Gross benefits paid	(2,835)		(2,932)
Net effect of remeasurement	—		(3,290)
Settlement	(2,920)		(48,773)
Net benefit obligation at end of year	$	58,443	$	55,101
Change in plan assets:
Fair value of plan assets at beginning of year	$	43,938	$	87,452
Actual return/(loss) on plan assets	6,430		6,987
Contributions	1,949		1,415
Gross benefits paid	(2,835)		(2,932)
Net effect of remeasurement	—		(211)
Settlement	(2,920)		(48,773)
Fair value of plan assets at end of year	$	46,562	$	43,938

(1) The Actuarial loss for both the years ended December 31, 2020 and 2019 was a function of a reduction in the discount rate, which serves to increase the benefit obligation.

Aggregated information for the domestic defined benefit pension plans with an accumulated benefit obligation in excess of plan assets is provided in the tables below. The domestic defined benefit plans were approximately 80% funded at December 31, 2020 and 2019.

	For the Year Ended December 31,
In thousands	2020		2019
Funded Status
Fair value of plan assets	$	46,562	$	43,938
Accumulated Benefit obligations	58,443		55,101
Funded status of plans	$	(11,881)	$	(11,163)

The Company has recorded liabilities and amounts recognized in accumulated other comprehensive income related to the domestic defined benefit pension plans as follows:

	For the Year Ended December 31,
In thousands	2020		2019
Amounts recognized in the Consolidated Balance Sheets consist of:
Current liabilities	$	—	$	787
Noncurrent liabilities	11,881		10,376
Total liabilities	$	11,881	$	11,163
Loss recognized in Accumulated Other Comprehensive Loss, net of tax, consist of:
Net actuarial loss	$	4,503	$	2,579

In addition to the amounts disclosed in the tables above for the Company’s domestic defined benefit pension plans, the Company had both foreign pension plans, and post-retirement benefit plans with life insurance and medical benefits for certain domestic and foreign employees. The accrued benefit liabilities and amounts recognized in other comprehensive income for these other plans are as follows:

	For the Year Ended December 31,
In thousands	2020		2019
Foreign Plans:
Net benefit obligation in excess of plan assets	$	5,981	$	5,274
Loss recognized in accumulated other comprehensive loss, net of tax	$	940	$	861
Domestic Post-retirement Plans
Net benefit obligation in excess of plan assets	$	4,215	$	3,621
Loss (gain) recognized in accumulated other comprehensive loss, net of tax	$	165	$	(360)

Total expenses of approximately $0.5 million were recognized related to the foreign pension and post-retirement benefit plans in both years ended December 31, 2020 and 2019.

The ISS Pension Plan, net of tax, included in other comprehensive income decreased by $0.3 million at December 31, 2020 as a result of the settlement. The IPM Pension Plan liability, net of tax, included in other comprehensive income increased by $2.2 million at December 31, 2020. The U.S. Lydall Pension Plan liability, net of tax, included in other comprehensive income decreased by $19.4 million at December 31, 2019 as a result of the settlement. The IPM and ISS Pension Plans liability, net of tax, included in other comprehensive income increased by $0.3 million at December 31, 2019.

The components of net periodic benefit cost for the domestic defined benefit pension plans is as follows:

	For the Year Ended December 31,
In thousands	2020		2019		2018
Service cost	$	134	$	136	$	46
Interest cost	1,706		2,886		2,595
Expected return on plan assets	(2,119)		(2,601)		(3,339)
Amortization of actuarial net loss	2		464		1,024
Total net periodic (benefit) cost	$	(277)	$	885	$	326
Settlement loss	385		25,247		—
Total employer pension plan cost	$	108	$	26,132	$	326

The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs in operating expenses and the non-service cost components of net periodic benefit cost in other income and expense.

The major assumptions used in determining the year-end benefit obligation and annual net cost for the domestic defined benefit pension plans are presented in the following table:

	Benefit Obligation				Net Cost
For the Year Ended December 31,	2020		2019		2020		2019		2018
Discount rate	2.14	%	3.37	%	3.39	%	3.88	%	3.75	%
Expected return on plan assets	5.20	%	5.06	%	5.20	%	4.65	%	5.79	%

Plan Assets

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 IPM Pension Plan is 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 other indicators of future performance.

Investment management objectives for the IPM Pension Plan include achieving fully funded status with a target of eventual plan termination, maintaining an adequate level of diversification to balance market risk and provide sufficient liquidity for near-term payments of benefits accrued and to pay the administration expenses. Investment decisions are based on the returns and risk relative to the IPM Pension Plan's liabilities, an approach commonly referred to as liability-driven investing. The long-term investment objective of the IPM 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 following table presents the target allocation of the IPM Pension Plan assets for 2021 and the actual allocation of all domestic defined benefit pension plan assets as of December 31, 2020 and 2019 by major asset category:

	Target Allocation	Actual Allocation of Plan Assets At December 31,
Asset Category	2021	2020		2019
Domestic equities	20% - 40%	32	%	38	%
International equities	15% - 35%	27	%	25	%
Fixed income	20% - 45%	26	%	18	%
Real assets	0% - 10%	5	%	7	%
Hedge fund of funds	5% - 15%	9	%	9	%
Cash and cash equivalents	0% - 10%	1	%	3	%

The investments of the domestic defined benefit plans are valued at fair value, as defined in Note 9, "Fair Value Measurements”, in these Notes to the Consolidated Financial Statements. Certain hedge funds that were measured at fair value using the Net Asset Value ("NAV") practical expedient are included as a reconciling item to the fair value table.

The following tables set forth the fair value of the assets by major asset category as of December 31, 2020 and December 31, 2019:

At December 31, 2020
In thousands	Level 1		Level 2		Measured at NAV		Total Carrying Value
Domestic equity	$	15,004	$	—	$	—	$	15,004
International equity	12,473		—		—		12,473
Fixed income	12,293		—		—		12,293
Real assets	2,219		—		—		2,219
Hedge fund of funds	—		—		4,280		4,280
Cash and cash equivalents	293		—		—		293
Total assets at fair value	$	42,282	$	—	$	4,280	$	46,562

At December 31, 2019
In thousands	Level 1		Level 2		Measured at NAV		Total Carrying Value
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

Domestic, international equities, and fixed income consist primarily of mutual funds valued at the closing price reported in the active market in which individual securities are traded and classified as Level 1 investments.

Real assets include 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. These investments are classified as Level 1 investments.

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 as Level 1 investments. Non-government money market funds are classified as Level 2 investments.

U.S. government securities include U.S. Treasury Notes and Bonds which represent middle range and long-term fixed income investments, and are valued using pricing models maximizing the use of observable inputs for similar securities and classified as Level 2 investments.

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. These investments are classified as Level 2 investments.

Estimated Future Contributions and Benefit Payments

The Company expects to contribute approximately $0.7 million in cash to the IPM Pension Plan in 2021. Estimated future benefit payments for the IPM Pension Plan are as follows:

In thousands	2021		2022		2023		2024		2025		Thereafter
Benefit payments	$	3,011	$	3,054	$	3,072	$	3,132	$	3,183	$	15,867

Employee Savings Plan

The Company also sponsors a 401(k) Plan. Employer contributions amounted to $3.8 million in 2020, $3.7 million in 2019, and $2.9 million in 2018. Matching contributions by the Company are made on employee pretax contributions up to five percent of compensation, with the first three percent matched at 100% and the next two percent matched at 50%.