L.	EMPLOYEE BENEFITS

Severance Costs: The Company incurred severance expense in 2014, 2013 and 2012 of $1.8, $3.5 and $4.8, respectively.

Defined Benefit Pension Plans: PACCAR has several defined benefit pension plans, which cover a majority of its employees. The Company evaluates its actuarial assumptions on an annual basis and considers changes based upon market conditions and other factors. For its U.S. plans, the Company adopted the revised mortality tables published in October 2014 by the U.S. Society of Actuaries. As a result of this change in actuarial assumption, the Company’s projected benefit obligation increased by $96.4.

The expected return on plan assets is determined by using a market-related value of assets, which is calculated based on an average of the previous five years of asset gains and losses.

Generally, accumulated unrecognized actuarial gains and losses are amortized using the 10% corridor approach. The corridor is defined as the greater of either 10% of the projected benefit obligation or the market-related value of plan assets. The amortization amount is the excess beyond the corridor divided by the average remaining estimated service life of participants on a straight-line basis.

The Company funds its pensions in accordance with applicable employee benefit and tax laws. The Company contributed $81.1 to its pension plans in 2014 and $26.2 in 2013. The Company expects to contribute in the range of $50.0 to $100.0 to its pension plans in 2015, of which $7.7 is estimated to satisfy minimum funding requirements. Annual benefits expected to be paid beginning January 1, 2015 are $72.7, $76.6, $84.0, $88.6, $94.3 and for the five years thereafter, a total of $555.8.

Plan assets are invested in global equity and debt securities through professional investment managers with the objective to achieve targeted risk adjusted returns and maintain liquidity sufficient to fund current benefit payments. Typically, each defined benefit plan has an investment policy that includes a target for asset mix, including maximum and minimum ranges for allocation percentages by investment category. The actual allocation of assets may vary at times based upon rebalancing policies and other factors. The Company periodically assesses the target asset mix by evaluating external sources of information regarding the long-term historical return, volatilities and expected future returns for each investment category. In addition, the long-term rates of return assumptions for pension accounting are reviewed annually to ensure they are appropriate. Target asset mix and forecast long-term returns by asset category are considered in determining the assumed long-term rates of return, although historical returns realized are given some consideration.

The fair value of mutual funds, common stocks and U.S. treasuries is determined using the market approach and is based on the quoted prices in active markets. These securities are categorized as Level 1. The fair value of commingled trust funds is determined using the market approach and is based on the unadjusted net asset value per unit as determined by the sponsor of the fund based on the fair values of underlying investments. These securities are categorized as Level 2. The fair value of debt securities is determined using the market approach and is based on the quoted market prices of the securities or other observable inputs. These securities are categorized as Level 2.

The following information details the allocation of plan assets by investment type. See Note P for definitions of fair value levels.


*At December 31, 2014*	TARGET			LEVEL 1		LEVEL 2			TOTAL
*Equities:*
U.S. equities						$	666.4		$	666.4
Global equities							691.3			691.3

Total equities		50 - 70	%				1,357.7			1,357.7


*Fixed income:*
U.S. fixed income				$	269.4		339.2			608.6
Non-U.S. fixed income							286.5			286.5

Total fixed income		30 - 50	%		269.4		625.7			895.1

Cash and other					7.7		48.9			56.6

Total plan assets				$	277.1	$	2,032.3		$	2,309.4


At December 31, 2013	TARGET			LEVEL 1		LEVEL 2			TOTAL
Equities:
U.S. equities						$	585.5		$	585.5
Global equities							661.7			661.7

Total equities		50 - 70	%				1,247.2			1,247.2


Fixed income:
U.S. fixed income				$	252.5		299.6			552.1
Non-U.S. fixed income							260.3			260.3

Total fixed income		30 - 50	%		252.5		559.9			812.4

Cash and other					1.2		47.6			48.8

Total plan assets				$	253.7	$	1,854.7		$	2,108.4

The following additional data relates to all pension plans of the Company:
At December 31,						2014			2013
Weighted average assumptions:
Discount rate							3.8	%		4.7	%
Rate of increase in future compensation levels							3.8	%		3.9	%
Assumed long-term rate of return on plan assets							6.5	%		6.6	%

The components of the change in projected benefit obligation and change in plan assets are as follows:


	2014			2013
Change in projected benefit obligation:
Benefit obligation at January 1	$	1,961.6		$	2,068.0
Service cost		67.3			73.5
Interest cost		91.8			81.0
Benefits paid		(72.5	)		(68.4	)
Actuarial loss (gain)		412.8			(199.2	)
Currency translation and other		(47.6	)		3.2
Participant contributions		4.0			3.5

Projected benefit obligation at December 31	$	2,417.4		$	1,961.6


Change in plan assets:
Fair value of plan assets at January 1	$	2,108.4		$	1,901.0
Employer contributions		81.1			26.2
Actual return on plan assets		235.8			242.5
Benefits paid		(72.5	)		(68.4	)
Currency translation and other		(47.4	)		3.6
Participant contributions		4.0			3.5

Fair value of plan assets at December 31	$	2,309.4		$	2,108.4

Funded status at December 31	$	(108.0	)	$	146.8


	2014			2013
Amounts recorded on balance sheet:
Other noncurrent assets	$	15.0		$	217.7
Other liabilities		123.0			70.9
Accumulated other comprehensive (loss) income:
Actuarial loss		428.9			257.0
Prior service cost		3.9			4.9
Net initial transition amount		.3			.3
Of the December 31, 2014 amounts in accumulated other comprehensive (loss) income, $40.8 of unrecognized actuarial loss and $1.3 of unrecognized prior service cost are expected to be amortized into net pension expense in 2015. The accumulated benefit obligation for all pension plans of the Company was $2,113.7 and $1,742.2 at December 31, 2014 and 2013, respectively. Information for all plans with an accumulated benefit obligation in excess of plan assets is as follows:
At December 31,	2014			2013
Projected benefit obligation	$	224.2		$	78.6
Accumulated benefit obligation		212.1			63.4
Fair value of plan assets		139.1			9.2

The components of pension expense are as follows:


Year Ended December 31,	2014			2013			2012
Service cost	$	67.3		$	73.5		$	64.1
Interest on projected benefit obligation		91.8			81.0			81.4
Expected return on assets		(128.0	)		(119.4	)		(110.8	)
Amortization of prior service costs		1.2			1.3			1.4
Recognized actuarial loss		20.8			44.0			39.2
Curtailment gain					(.3	)
Settlement loss								4.8

Net pension expense	$	53.1		$	80.1		$	80.1

Multi-employer Plans: The Company participates in multi-employer plans in the U.S. and Europe. These are typically under collective bargaining agreements and cover its union-represented employees. The Company’s participation in the following multi-employer plans for the years ended December 31 are as follows:


			PENSION PLAN		COMPANY CONTRIBUTIONS
PENSION PLAN	EIN		NUMBER		2014		2013		2012
Metal and Electrical Engineering Industry Pension Fund				135668	$	27.1	$	24.5	$	22.0
Western Metal Industry Pension Plan		91-6033499		001		2.0		1.5		1.6
Other plans						1.0		.9		1.0

					$	30.1	$	26.9	$	24.6

The Company contributions shown in the table above approximates the multi-employer pension expense for each of the years ended December 31, 2014, 2013 and 2012, respectively.

Metal and Electrical Engineering Industry Pension Fund is a multi-employer union plan incorporating all DAF employees in the Netherlands and is covered by a collective bargaining agreement that will expire on April 30, 2015. The Company’s contributions were less than 5% of the total contributions to the plan for the last two reporting periods ending December 2014. The plan is required by law (the Netherlands Pension Act) to have a coverage ratio in excess of 104.3%. Because the coverage ratio of the plan was 104.1% at December 31, 2014, a funding improvement plan is in place.

The Western Metal Industry Pension Plan is located in the U.S. and is covered by a collective bargaining agreement that will expire on November 1, 2015. In accordance with the U.S. Pension Protection Act of 2006, the plan was certified as critical (red) status and a funding improvement plan was implemented requiring additional contributions through 2022 as long as the plan remains in critical status. For the last two reporting periods ending December 2014, contributions by the Company were greater than 5% and less than 12% of the total contributions to the plan.

Other plans are principally located in the U.S. For the last two reporting periods, none were under funding improvement plans and Company contributions to these plans are less than 5% of each plan’s total contributions.

There were no significant changes for the multi-employer plans in the periods presented that affected comparability between periods.

Defined Contribution Plans: The Company maintains several defined contribution benefit plans whereby it contributes designated amounts on behalf of participant employees. The largest plan is for U.S. salaried employees where the Company matches a percentage of employee contributions up to an annual limit. The match was 5% of eligible pay in 2014, 2013 and 2012. Other plans are located in Australia, Brasil, Canada, the Netherlands, Belgium and Germany. Expenses for these plans were $36.3, $34.0 and $33.6 in 2014, 2013 and 2012, respectively.