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 $7.7 million in 2019, $6.3 million in 2018 and $6.2 million in 2017.

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.

Our RIP was amended to freeze accruals for salaried non-production employees, effective December 31, 2017. The impact of this amendment resulted in a reduction to our December 31, 2016 projected benefit obligation with a corresponding increase to unrecognized loss, resulting in no curtailment gain or loss. The impact of this amendment was reflected in the net periodic pension credit for 2017.

In 2017, certain RIP participants with deferred vested benefits were offered an opportunity to elect a lump sum distribution of the participant’s entire accrued benefit. These distributions resulted in a partial plan settlement necessitating a plan remeasurement as of August 31, 2017. Settlement losses of $20.8 million were recorded as components of other non-operating (income) expense, net during 2017.

Effective December 31, 2017, AWI merged the Tectum, Inc. Pension Plan (the “Tectum Plan”) with and into the RIP. Tectum sponsored the Tectum Plan for the benefit of its eligible employees, which are limited to certain union employees at Tectum’s Newark, Ohio plant.

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 $2.8 million and $2.5 million as of December 31, 2019 and 2018, 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.

	2019			2018
Change in benefit obligation:
Benefit obligation as of beginning of period	$	1,359.7		$	1,500.1
Service cost		4.8			5.7
Interest cost		50.3			46.1
Actuarial loss (gain)		117.0			(90.0	)
Benefits paid		(100.4	)		(102.2	)
Benefit obligation as of end of period	$	1,431.4		$	1,359.7

	2019			2018
Change in plan assets:
Fair value of plan assets as of beginning of period	$	1,360.4		$	1,529.7
Actual return on plan assets		214.4			(71.0	)
Employer contributions		4.0			3.9
Benefits paid		(100.4	)		(102.2	)
Fair value of plan assets as of end of period	$	1,478.4		$	1,360.4
Funded status	$	47.0		$	0.7

	2019			2018
Weighted-average assumptions used to determine benefit obligations at end of period:
Discount rate		3.16	%		4.30	%
Rate of compensation increase		3.05	%		3.05	%
Weighted-average assumptions used to determine net periodic benefit cost for the period:
Discount rate		4.28	%		3.62	%
Expected return on plan assets		5.75	%		6.50	%
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 5.75% and 6.50% for the years ended December 31, 2019 and 2018.

The accumulated benefit obligation for the U.S. defined benefit pension plans was $1,429.5 million and $1,356.8 million as of December 31, 2019 and 2018, respectively.

	2019		2018
Pension plans with benefit obligations in excess of assets
RBEP Projected benefit obligation, December 31	$	47.8	$	52.1
RBEP Accumulated benefit obligation, December 31		47.8		52.1

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

	2019			2018			2017
Service cost of benefits earned during the period	$	4.8		$	5.7		$	8.6
Interest cost on projected benefit obligation		50.3			46.1			48.1
Expected return on plan assets		(80.1	)		(95.9	)		(98.7	)
Amortization of prior service cost		-			-			1.5
Recognized net actuarial loss		19.2			20.0			17.5
Partial settlement		-			-			20.8
Net periodic pension (credit) cost	$	(5.8	)	$	(24.1	)	$	(2.2	)

For 2019, 2018 and 2017, actuarial gains and losses were amortized over the remaining life expectancy of plan participants, which was approximately 17 years for 2019, 18 years for 2018 and 19 years for 2017 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 that 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 (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, 2019 and 2018 positions for each asset class:

	Target
	Weight at
	December 31,			Position at December 31,
Asset Class	2019			2019 ⁽¹⁾			2018 ⁽¹⁾
Long duration bonds		70.0	%		69.0	%		62.0	%
Equities, real estate and private equity		30.0	%		30.0	%		30.0	%
High yield bonds and real assets		-			-			2.0	%
Other		-			1.0	%		6.0	%

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, 2019
Description	Level 1		Level 2		Level 3		Total
Bonds	$	-	$	1,017.7	$	-	$	1,017.7
Collective trust fund		-		434.6		-		434.6
Other investments		-		-		2.5		2.5
Cash, other short-term investments and payables, net		0.3		12.6		-		12.9
Net assets measured at fair value	$	0.3	$	1,464.9	$	2.5	$	1,467.7
Investments measured at net asset value								10.7
Net assets							$	1,478.4

	Value at December 31, 2018
Description	Level 1			Level 2		Level 3		Total
Bonds	$	-		$	832.2	$	-	$	832.2
Collective trust fund		-			460.1		-		460.1
Other investments		-			-		2.6		2.6
Cash, other short-term investments and payables, net		(22.7	)		24.2		-		1.5
Net assets measured at fair value	$	(22.7	)	$	1,316.5	$	2.6	$	1,296.4
Investments measured at net asset value									64.0
Net assets								$	1,360.4

RIP Level 3 assets remained relatively unchanged from December 31, 2018 to December 31, 2019, with the change in Level 3 assets during 2019 due primarily to fees, expenses and benefits paid.

The RIP has investments in alternative investment funds as of December 31, 2019 and 2018 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, 2019, 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, 2019
Description	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Real estate	$	10.7	$	2.2	Quarterly	60 days
Investments measured at net asset value	$	10.7	$	2.2

	Value at December 31, 2018
Description	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Real estate	$	60.1	$	2.2	Quarterly	45-90 Days
Other investments		3.9		0.8	None	None
Investments measured at net asset value	$	64.0	$	3.0

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 individual bonds were measured at fair value based on the closing price reported in the active market in which the bond is traded and 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.

Other investments: Consists of investments in a group insurance annuity contract and a limited partnership. Investments in the group insurance annuity contract were classified as Level 3 assets and measured at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations while considering the credit-worthiness of the issuer. The investments in the limited partnership were measured at fair value using the NAV practical expedient.

Cash, other short-term investments and payables: Consist 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 margin on an account for a fund, accrued fees and receivables related to investment positions liquidated for which proceeds had not been received as of December 31.

On February 20, 2020, we entered into a commitment agreement (“the Agreement”), by and among AWI, Athene Annuity and Life Company (“AAIA”), Athene Annuity & Life Assurance Company of New York (“AANY”) and State Street Global Advisors Trust Company (“State Street”), acting solely in its capacity as independent fiduciary of the RIP in connection with the transfer of pension obligations and administration to AAIA and AANY. Under the Agreement, the RIP will use RIP assets to purchase a single premium group annuity contract from each of AAIA and AANY. The annuity contracts will irrevocably transfer approximately $1.0 billion of retiree defined benefit pension obligations related to approximately 10,000 retirees and beneficiaries (“the Transferred Participants”) to AAIA and AANY, which will guarantee the pension benefits of the Transferred Participants.

Under the Agreement, each of AAIA and AANY is required to pay and administer the retirement benefits owed to the Transferred Participants covered by the applicable contract. The Agreement has no impact on the amount or timing of the monthly retirement benefit payments received by the Transferred Participants. We will not have to make any cash contributions to the RIP as a result of the Agreement.

The Agreement is subject to customary closing conditions for a transaction of this nature. Under the Agreement, all Transferred Participants will receive their first annuity payment from either AAIA or AANY on May 1, 2020.

As a result of the transaction, we expect to record a non-cash expense in the range of $350 million and $400 million in the first quarter of 2020 as a component of non-operating expense to reflect a partial plan settlement charge.

After the transaction is complete, we anticipate the RIP will have projected benefit obligations of approximately $370 million covering approximately 3,000 deferred vested and active participants. Benefits payable to participants who will remain in the RIP after the transaction are not being reduced as a result of the transaction.

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.

	2019			2018
Change in benefit obligation:
Benefit obligation as of beginning of period	$	65.4		$	86.6
Service cost		0.1			0.2
Interest cost		2.4			2.6
Plan participants' contributions		2.0			2.9
Plan amendments		(1.1	)		-
Actuarial loss (gain)		18.1			(15.7	)
Benefits paid		(9.4	)		(11.2	)
Benefit obligation as of end of period	$	77.5		$	65.4

	2019			2018
Change in plan assets:
Fair value of plan assets as of beginning of period	$	-		$	-
Employer contributions		7.4			8.3
Plan participants' contributions		2.0			2.9
Benefits paid		(9.4	)		(11.2	)
Fair value of plan assets as of end of period	$	-		$	-
Funded status	$	(77.5	)	$	(65.4	)

	2019			2018			2017
Service cost of benefits earned during the period	$	0.1		$	0.2		$	0.4
Interest cost on accumulated postretirement benefit obligation		2.4			2.6			3.0
Amortization of prior service (credit)		(0.2	)		(0.1	)		-
Amortization of net actuarial gain		(8.5	)		(5.7	)		(3.6	)
Net periodic postretirement benefit (credit)	$	(6.2	)	$	(3.0	)	$	(0.2	)

For measurement purposes, an average rate of annual increase in the per capita cost of covered health care benefits of 7.2% for pre-65 retirees and 8.1% to 8.2% for post-65 retirees (depending on plan type) was assumed for 2019, decreasing ratably to an ultimate rate of 4.5% in 2026. Assumed health care cost trend rates can have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:

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
	2019			2018			2019			2018			2019			2018
Prepaid pension costs	$	94.8		$	52.8		$	-		$	-		$	-		$	-
Accounts payable and accrued expenses		(3.9	)		(4.3	)		(0.1	)		-			(6.5	)		(6.6	)
Postretirement benefit liabilities		-			-			-			-			(71.0	)		(58.8	)
Pension benefit liabilities		(43.9	)		(47.8	)		(2.7	)		(2.5	)		-			-
Net amount recognized	$	47.0		$	0.7		$	(2.8	)	$	(2.5	)	$	(77.5	)	$	(65.4	)

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
	2019			2018			2019		2018
Net actuarial (loss) gain	$	(540.7	)	$	(577.3	)	$	32.8	$	59.3
Prior service (cost) credit		-			-			2.0		1.1
Accumulated other comprehensive (loss) income	$	(540.7	)	$	(577.3	)	$	34.8	$	60.4

For U.S. pension plans, we expect to amortize $20.5 million of previously unrecognized net actuarial losses into pension cost in 2020 and expect to contribute $3.9 million in 2020.

For our U.S. postretirement benefit plans, we expect to amortize $5.9 million of previously unrecognized net actuarial gains and prior service credits into postretirement benefit cost in 2020 and expect to contribute $6.5 million in 2020.

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
2020	$	103.6	$	6.5
2021		101.5		6.3
2022		100.5		6.2
2023		99.4		5.8
2024		97.8		5.6
2025 - 2029		450.7		24.2