Employee Benefits

12 Months Ended

Dec. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Employee Benefits

M. EMPLOYEE BENEFITS

Severance Costs: The Company incurred severance expense in 2020, 2019 and 2018 of $6.1, $5.8 and $.7, respectively.

Defined Benefit Pension Plans: The Company 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.

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 $184.9 to its pension plans in 2020 and $35.7 in 2019. The Company expects to contribute in the range of $100 to $150 to its pension plans in 2021, of which $19.7 is estimated to satisfy minimum funding requirements. Annual benefits expected to be paid beginning January 1, 2021 are $125.7, $109.8, $114.8, $121.2, $127.0 and a total of $726.4 for the five years thereafter.

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 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 fair value of commingled and pooled trust funds is determined using the market approach and is based on the unadjusted net asset value (NAV) per unit as determined by the sponsor of the fund based on the fair values of underlying investments. These assets are collective investment trusts and pooled funds, and substantially all of these investments have no redemption restrictions or unfunded commitments. Securities measured at NAV per unit as a practical expedient are not classified in the fair value hierarchy.

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

		FAIR VALUE HIERARCHY
At December 31, 2020	TARGET	LEVEL 1		LEVEL 2		TOTAL		MEASURED AT NAV		TOTAL
Equities:
U.S. equities								$	1,047.0	$	1,047.0
Global equities									1,140.6		1,140.6
Total equities	50 - 70%								2,187.6		2,187.6
Fixed income:
U.S. fixed income		$	83.9	$	296.0	$	379.9	$	719.9	$	1,099.8
Non-U.S. fixed income					30.4		30.4		372.8		403.2
Total fixed income	30 - 50%		83.9		326.4		410.3		1,092.7		1,503.0
Cash and other			2.6		99.8		102.4		.4		102.8
Total plan assets		$	86.5	$	426.2	$	512.7	$	3,280.7	$	3,793.4

		FAIR VALUE HIERARCHY
At December 31, 2019	TARGET	LEVEL 1		LEVEL 2		TOTAL		MEASURED AT NAV		TOTAL
Equities:
U.S. equities								$	860.1	$	860.1
Global equities									973.1		973.1
Total equities	50 - 70%								1,833.2		1,833.2
Fixed income:
U.S. fixed income		$	90.6	$	260.3	$	350.9	$	611.7	$	962.6
Non-U.S. fixed income					28.1		28.1		322.0		350.1
Total fixed income	30 - 50%		90.6		288.4		379.0		933.7		1,312.7
Cash and other			10.6		68.2		78.8		1.7		80.5
Total plan assets		$	101.2	$	356.6	$	457.8	$	2,768.6	$	3,226.4

In 2019, U.S. fixed income Level 1 included $123.4 of investments valued at NAV. The table above reflects these investments as Measured at NAV.

The following weighted average assumptions relate to all pension plans of the Company:

At December 31,	2020			2019
Discount rate		2.2	%		2.9	%
Rate of increase in future compensation levels		3.7	%		3.8	%
Assumed long-term rate of return on plan assets		6.2	%		6.3	%

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

At December 31,	2020			2019
Change in projected benefit obligation:
Benefit obligation at January 1	$	3,234.4		$	2,655.4
Service cost		130.4			102.0
Interest cost		83.0			95.6
Benefits paid		(120.2	)		(127.0	)
Actuarial loss		379.5			478.0
Currency translation and other		54.4			30.0
Participant contributions		.4			.4
Projected benefit obligation at December 31	$	3,761.9		$	3,234.4
Change in plan assets:
Fair value of plan assets at January 1	$	3,226.4		$	2,699.2
Employer contributions		184.9			35.7
Actual return on plan assets		453.4			588.1
Benefits paid		(120.2	)		(127.0	)
Currency translation and other		48.5			30.0
Participant contributions		.4			.4
Fair value of plan assets at December 31	$	3,793.4		$	3,226.4
Funded status at December 31	$	31.5		$	(8.0	)

At December 31,	2020		2019
Amounts recorded on Balance Sheet:
Other noncurrent assets	$	222.1	$	146.5
Accounts payable, accrued expenses and other		25.5		39.9
Other liabilities		165.1		114.6
Accumulated other comprehensive loss:
Actuarial loss		571.7		512.5
Prior service cost		6.3		5.1
Net initial transition amount				.1

Of the December 31, 2020 amounts in accumulated other comprehensive loss, $56.7 of unrecognized actuarial loss and $.8 of unrecognized prior service cost are expected to be amortized into net pension expense in 2021.

The accumulated benefit obligation for all pension plans of the Company was $3,321.5 and $2,806.3 at December 31, 2020 and 2019, respectively.

Information for all plans with an accumulated benefit obligation in excess of plan assets is as follows:

At December 31,	2020		2019
Projected benefit obligation	$	167.9	$	170.6
Accumulated benefit obligation		148.7		150.1
Fair value of plan assets		13.5		23.4

The components of pension expense are as follows:

Year Ended December 31,		2020			2019			2018
Service cost	$	130.4		$	102.0		$	108.3
Interest on projected benefit obligation		83.0			95.6			85.8
Expected return on assets		(190.6	)		(176.6	)		(177.2	)
Amortization of prior service costs		1.5			1.4			1.4
Recognized actuarial loss		44.2			20.5			35.3
Settlement loss		11.6
Net pension expense	$	80.1		$	42.9		$	53.6

The components of net pension expense other than service cost are included in Interest and other (income), net on the Consolidated Statements of Income.

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		2020		2019		2018
Metal and Electrical Engineering Industry Pension Fund		135668	$	33.9	$	27.8	$	27.9
Western Metal Industry Pension Plan	91-6033499	001		3.0		3.8		2.7
Other plans				.9		1.2		1.2
			$	37.8	$	32.8	$	31.8

The Company contributions shown in the table above approximate the multi-employer pension expense for each of the years ended December 31, 2020, 2019 and 2018, 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 expired on November 30, 2020 and is under negotiation. The Company’s contributions were less than 5% of the total contributions to the plan for the last two reporting periods ending December 2020. 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 97.2% at December 31, 2020, a funding improvement plan effective through 2029 is in place. The funding improvement plan includes a possible reduction in pension benefits and delays in future benefit increases.

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 2, 2025. In accordance with the U.S. Pension Protection Act of 2006, the plan continued to be certified as critical (red) status as of December 31, 2020, and a funding improvement plan has been implemented requiring additional contributions through 2022 as long as the plan remains in critical status. Contributions by the Company were 15% and 20% of the total contributions to the plan for the years ended December 31, 2020 and 2019, respectively.

Other plans are principally located in the U.S. and the Company’s contributions to these plans for the years ended December 31, 2020 and 2019 were less than 5% of each plan’s total contributions. As of December 31, 2020, one of the other plans was under a funding improvement plan.

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 2020, 2019 and 2018. Other plans are located in Australia, Brasil, Canada, the Netherlands, Belgium and Germany. Expenses for these plans were $42.5, $48.3 and $45.3 in 2020, 2019 and 2018, respectively.