We sponsor several defined contribution plans, which cover substantially all U.S. and non-U.S. employees. Eligible employees may defer a portion of their pre-tax covered compensation on an annual basis. We match employee contributions up to pre-defined percentages. Employee contributions are 100% vested. Employer contributions are vested based on pre-defined requirements. Costs for defined contribution benefit plans were $9.1 million in 2021, $8.1 million in 2020 and $7.7 million in 2019.

Benefits from defined benefit pension plans are based primarily on an employee's compensation and years of service. We fund our pension plans when appropriate.

Our U.S. defined benefit pension plans include both the qualified, funded RIP and the Retirement Benefit Equity Plan (“RBEP”), which is a nonqualified, unfunded plan designed to provide pension benefits in excess of the limits defined under Sections 415 and 401(a)(17) of the Internal Revenue Code.

In the first quarter of 2020, we entered into agreements with Athene Annuity and Life Company (“AAIA”) and Athene Annuity & Life Assurance Company of New York (“AANY”) to transfer certain benefit obligations and assets of our RIP to AAIA and AANY. Under the agreements, we effectively settled $1,045.3 million of retiree defined benefit pension obligations related to approximately 10,000 retirees and beneficiaries (the “Transferred Participants”), which were irrevocably transferred to AAIA and AANY and which guarantees the pension benefits of the Transferred Participants. During the third quarter of 2020, these amounts were immaterially adjusted due to customary data reconciliations with AAIA and AANY. The Agreement did not impact our benefit obligations under the RBEP.

As a result of the transaction, we recorded a $374.4 million settlement loss in the first quarter of 2020, which represented the release of amounts previously recorded in AOCI to other non-operating expense. The RIP’s assets and liabilities were remeasured as of the settlement date, resulting in a remaining projected benefit obligation of $387.5 million, immediately after remeasurement, which covered approximately 3,000 deferred vested and active participants, and fair value of plan assets of $499.6 million. The discount rate used to determine the projected benefit obligation at the settlement date was 3.07%, compared to 3.16% used as of December 31, 2019. The expected long-term return on plan assets remained at 5.25% and did not change as a result of the settlement.

During the third quarter of 2020, we offered an early retirement incentive benefit to employees at one of our manufacturing plants who met certain age and years of service criteria. The consideration period for eligible employees ended on September 30, 2020. Based on eligible employee elections to participate, we recorded a charge of $2.0 million within other non-operating expense, which increased the projected benefit obligation of the RIP. The enhanced retirement benefits did not result in a curtailment.

We have a defined benefit pension plan in Germany which was not acquired by Knauf in connection with the Sale. This plan uses assumptions which are consistent with, but not identical to, those of the U.S. plans. The accumulated benefit obligation for the non-U.S. defined benefit pension plan was $2.5 million and $2.9 million as of December 31, 2021 and 2020, respectively.

The following tables summarize the balance sheet impact of our U.S. defined benefit pension plans, as well as the related benefit obligations, assets, funded status and rate assumptions. We use a December 31 measurement date for all our defined benefit pension plans.


	2021			2020
Change in benefit obligations:
Benefit obligations as of beginning of period	$	441.7		$	1,431.4
Service cost		4.8			5.5
Interest cost		9.0			15.5
Settlement payments		-			(1,006.3	)
Special termination benefits		-			2.0
Actuarial (gain) loss		(10.9	)		31.2
Benefits paid		(9.5	)		(37.6	)
Benefit obligations as of end of period	$	435.1		$	441.7


	2021			2020
Change in plan assets:
Fair value of plan assets as of beginning of period	$	520.7		$	1,478.4
Actual return on plan assets		(7.4	)		83.1
Employer contributions		2.9			3.1
Settlement payments		-			(1,006.3	)
Benefits paid		(9.5	)		(37.6	)
Fair value of plan assets as of end of period	$	506.7		$	520.7
Funded status	$	71.6		$	79.0


	2021			2020
Weighted-average assumptions used to determine benefit obligations at end of period:
Discount rate		2.98	%		2.68	%
Rate of compensation increase		3.05	%		3.05	%
Weighted-average assumptions used to determine net periodic benefit cost for the period:
Discount rate		2.67	%		3.07	%
Expected return on plan assets		3.25	%		5.25	%
Rate of compensation increase		3.05	%		3.05	%

Long-term asset class return assumptions for the RIP are determined based on input from investment professionals on the expected performance of the asset classes over 10 to 30 years. The forecasts were averaged to come up with consensus passive return forecasts for each asset class. Incremental components were added for the expected return from active management and asset class rebalancing based on historical information obtained from investment consultants. These forecasted gross returns were reduced by estimated management fees and expenses, yielding a long-term return forecast of 3.25% and 5.25% for the years ended December 31, 2021 and 2020, respectively.

The accumulated benefit obligation for the U.S. defined benefit pension plans was $433.2 million and $439.6 million as of December 31, 2021 and 2020, respectively. In 2021, the largest contributor to the net actuarial gains affecting the benefit obligations for the defined benefit pension plans was an increase in the discount rates, which was partially offset by other changes in assumptions and changes in census data. In 2020, the largest contributor to the net actuarial losses affecting the benefit obligations for the defined benefit pension plans was a decrease in the discount rates, partially offset by the annuity premium gain in the RIP, an experience gain in the RBEP and other changes in assumptions.

The components of the pension cost (credit) for the U.S. defined benefit pension plans are as follows:


	2021			2020			2019
Service cost of benefits earned during the period	$	4.8		$	5.5		$	4.8
Interest cost on projected benefit obligation		9.0			15.5			50.3
Expected return on plan assets		(16.5	)		(34.5	)		(80.1	)
Recognized net actuarial loss		3.5			6.3			19.2
Settlement		-			374.4			-
Special termination benefits		-			2.0			-
Net periodic pension cost (credit)	$	0.8		$	369.2		$	(5.8	)

For 2021, 2020 and 2019, actuarial gains and losses were amortized over the remaining life expectancy of plan participants, which was approximately 27 years for 2021, 28 years for 2020 and 17 years for 2019 for our U.S. defined benefit pension plans.

The RIP’s primary investment objective is to maintain the funded status of the plan such that the likelihood we will be required to make significant contributions to the plan is limited. This objective is expected to be achieved by (a) investing a substantial portion of the plan assets in high quality corporate bonds whose duration is at least equal to that of the plan’s liabilities, (b) investing in publicly traded equities in order to increase the ratio of plan assets to liabilities over time, (c) limiting investment return volatility by diversifying among additional asset classes with differing expected rates of return and return correlations, and/or (d) using derivatives to either implement investment positions efficiently or to hedge risk but not to create investment leverage.

Each asset class utilized by the RIP has defined asset allocation targets and allowable ranges. The table below shows the asset allocation targets and the December 31, 2021 and 2020 positions for each asset class:


	Target
	Weight at
	December 31,			Position at December 31,
Asset Class	2021			2021 (1)			2020 (1)
Long duration bonds		90.0	%		89.0	%		89.0	%
Equities, real estate and private equity		10.0	%		11.0	%		11.0	%

(1)

Investments in collective trust funds as of December 31, 2021 and 2020 have been categorized within the asset classes above based on the underlying investments in those funds.

Pension plan assets are required to be reported and disclosed at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Three levels of inputs may be used to measure fair value:

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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 following table sets forth by level within the fair value hierarchy a summary of the RIP plan assets measured at fair value on a recurring basis:


	Value at December 31, 2021
Description	Level 1			Level 2		Level 3		Total
Collective trust funds - bonds	$	-		$	451.9	$	-	$	451.9
Collective trust funds - equities		-			46.8		-		46.8
Cash, other short-term investments and payables, net		(0.3	)		1.9		-		1.6
Net assets measured at fair value	$	(0.3	)	$	500.6	$	-	$	500.3
Investments measured at net asset value as a practical expedient									6.4
Net assets								$	506.7


	Value at December 31, 2020
Description	Level 1			Level 2		Level 3		Total
Collective trust funds - bonds	$	-		$	460.9	$	-	$	460.9
Collective trust funds - equities		-			51.4		-		51.4
Cash, other short-term investments and payables, net		(0.3	)		0.9		-		0.6
Net assets measured at fair value	$	(0.3	)	$	513.2	$	-	$	512.9
Investments measured at net asset value as a practical expedient									7.8
Net assets								$	520.7

The RIP has investments in alternative investment funds as of December 31, 2021 and 2020 which are reported at fair value. These investments that are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets. We have concluded that the NAV reported by the underlying fund approximates the fair value of the investment. These investments are redeemable at NAV under agreements with the underlying funds. However, it is possible that these redemption rights may be restricted or eliminated by the funds in the future in accordance with the underlying fund agreements. Due to the nature of the investments held by the funds, changes in market conditions and the economic environment may significantly impact the NAV of the funds and, consequently, the fair value of the U.S. defined benefit pension plan asset’s interest in the funds. Furthermore, changes to the liquidity provisions of the funds may significantly impact the fair value of the U.S. defined benefit pension plan asset’s interest in the funds. As of December 31, 2021, there were no restrictions on redemption of these investments.

The following table sets forth a summary of the RIP’s investments measured at NAV:

Value at December 31, 2021

Description

Fair Value

Unfunded
Commitments

Redemption
Frequency

Redemption
Notice
Period

Real estate

6.4

2.2

Quarterly

60 days

Value at December 31, 2020

Description

Fair Value

Unfunded
Commitments

Redemption
Frequency

Redemption
Notice
Period

Real estate

7.8

2.2

Quarterly

60 days

Following is a description of the valuation methodologies used for assets measured at fair value and at NAV.

Bonds: Consists of registered investment funds and common and collective trust funds investing in fixed income securities tailored to institutional investors. There are no readily available market quotations for registered investment company funds. The fair value of investment funds and common and collective trust funds have been classified as Level 2 assets above as their values were derived based on the underlying securities in the fund’s portfolio which is typically the amount which the fund might reasonably expect to receive for the security upon a current sale. Investments in pooled funds traded in a non-active market were valued at bid price and classified as Level 2 assets above.

Collective trust fund: Represents collective trust and funds holding equity investments, fixed income securities, commodity futures contracts, cash and other short-term securities. The fair value of collective trust funds have been classified as Level 2 assets above as

their values were derived based on the underlying securities in the fund’s portfolio which is typically the amount which the fund might reasonably expect to receive for the security upon a current sale.

Real estate: Consists of both open-end and closed-end funds. There are no readily available market quotations for these real estate funds. These investments were measured at fair value using the NAV practical expedient.

Cash, other short-term investments and payables: Consists primarily of cash and cash equivalents, and plan receivables/payables. The carrying amounts of cash and cash equivalents and receivables/payables approximate fair value due to the short-term nature of these instruments. Other payables and receivables consist primarily of accrued fees and receivables related to investment positions liquidated for which proceeds had not been received as of December 31.

We fund postretirement benefits on a pay-as-you-go basis, with the retiree paying a portion of the cost for health care benefits by means of deductibles and contributions.

The following tables summarize the balance sheet impact of the U.S. postretirement benefit pension plan, as well as the related benefit obligations, funded status and rate assumptions. We use a December 31 measurement date for all our defined benefit postretirement benefit plans.


	2021			2020
Change in benefit obligations:
Benefit obligation as of beginning of period	$	81.4		$	77.5
Interest cost		1.2			1.9
Plan participants' contributions		1.9			1.9
Actuarial loss		2.0			8.2
Benefits paid		(8.5	)		(8.1	)
Benefit obligations as of end of period	$	78.0		$	81.4


	2021			2020
Change in plan assets:
Fair value of plan assets as of beginning of period	$	-		$	-
Employer contributions		6.6			6.2
Plan participants' contributions		1.9			1.9
Benefits paid		(8.5	)		(8.1	)
Fair value of plan assets as of end of period	$	-		$	-
Funded status	$	(78.0	)	$	(81.4	)

In 2021, the largest contributor to the actuarial losses affecting the benefit obligations for the postretirement plans was the update to the per capita claims assumption, which was partially offset by an increase in the discount rate. In 2020, the largest contributors to the actuarial losses affecting the benefit obligations for the postretirement plans were the decreases in the discount rates and updates to the per capita claims assumptions.

The components of postretirement benefit (credit) are as follows:


	2021			2020			2019
Service cost of benefits earned during the period	$	-		$	-		$	0.1
Interest cost on accumulated postretirement benefit obligation		1.2			1.9			2.4
Amortization of prior service (credit)		(0.3	)		(0.3	)		(0.2	)
Amortization of net actuarial gain		(2.2	)		(6.6	)		(8.5	)
Net periodic postretirement benefit (credit)	$	(1.3	)	$	(5.0	)	$	(6.2	)

For measurement purposes, an average rate of annual increase in the per capita cost of covered health care benefits of 6.6% for pre-65 retirees and 7.1% for post-65 retirees was assumed for 2021, decreasing ratably to an ultimate rate of 4.5% in 2029 and 2027, respectively.

Amounts recognized in assets (liabilities) on the consolidated balance sheets at year end consist of:


	U.S. Pension Plans						Non-U.S. Pension Plan						Retiree Health and Life Insurance Benefits
	2021			2020			2021			2020			2021			2020
Prepaid pension costs	$	109.0		$	119.5		$	-		$	-		$	-		$	-
Accounts payable and accrued expenses		(2.9	)		(2.9	)		(0.1	)		(0.1	)		(6.9	)		(6.5	)
Postretirement benefit liabilities		-			-			-			-			(71.1	)		(74.9	)
Pension benefit liabilities		(34.5	)		(37.6	)		(2.4	)		(2.8	)		-			-
Net amount recognized	$	71.6		$	79.0		$	(2.5	)	$	(2.9	)	$	(78.0	)	$	(81.4	)

Pre-tax amounts recognized in accumulated other comprehensive (loss) income at year end consist of:


	U.S. Pension Plans						Retiree Health and Life Insurance Benefits
	2021			2020			2021		2020
Net actuarial (loss) gain	$	(152.1	)	$	(142.6	)	$	13.7	$	17.9
Prior service credit		-			-			1.4		1.7
Accumulated other comprehensive (loss) income	$	(152.1	)	$	(142.6	)	$	15.1	$	19.6

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years for our U.S. plans:


	U.S. Pension Benefits (1)		Retiree Health and Life Insurance Benefits, Net
2022	$	15.7	$	6.9
2023		17.4		6.6
2024		19.6		6.3
2025		20.6		6.0
2026		21.8		5.7
2027 - 2031		118.4		23.7

(1)

We were not required and did not make contributions to the RIP during 2021, 2020 or 2019 as, based on guidelines established by the Pension Benefit Guaranty Corporation, the RIP had sufficient assets to fund its distribution obligations. Benefit payments to RIP participants have been made directly from the RIP while benefit payments under the RBEP are made from Company cash.