Note 10: Employee Benefits

The Company accounts for its pension and postretirement plans in accordance with FASB ASC 715, “Compensation – Retirement Benefits” (“ASC 715”). In addition to requirements for an employer to recognize in its consolidated balance sheet an asset for a plan’s overfunded status or a liability for a plan’s underfunded status and to recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur, ASC 715 requires an employer to measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year.

Prior to January 1, 1998, the Company’s non-contributory defined benefit pension plan covered certain employees, retirees and their beneficiaries. Benefits provided to participants of the plan were based on pay and years of service for salaried employees and years of service and a fixed rate or a rate determined by job grade for all wage employees, including employees under collective bargaining agreements.

Effective January 1, 1998, the Company froze the benefits accrued under its defined benefit pension plan for certain salaried employees and instituted a defined contribution plan. Effective March 31, 2000, benefits for certain salaried employees of J. M. Tull Metals Company and AFCO Metals, subsidiaries that were merged into JT Ryerson, were similarly frozen, with the employees becoming participants in the Company’s defined contribution plan. Salaried employees who vested in their benefits accrued under the defined benefit plan at December 31, 1997 and March 31, 2000, are entitled to those benefits upon retirement. For the years ended December 31, 2013, 2012 and 2011, expense recognized for its defined contribution plans was $6.9 million, $6.8 million and $7.0 million, respectively.

In 2012, the Company amended the terms of one of our Canadian post-retirement medical and life insurance plans which effectively eliminated benefits to a group of employees unless these individuals agreed to retire by December 31, 2015. These actions meet the definition of a curtailment under FASB ASC 715-30-15 and resulted in a curtailment gain of $1.7 million for the year ended December 31, 2012.

The Company has other deferred employee benefit plans, including supplemental pension plans, the liability for which totaled $16.6 million and $18.5 million at December 31, 2013 and 2012, respectively.

Summary of Assumptions and Activity

The tables included below provide reconciliations of benefit obligations and fair value of plan assets of the Company plans as well as the funded status and components of net periodic benefit costs for each period related to each plan. The Company uses a December 31 measurement date to determine the pension and other postretirement benefit information. The assumptions used to determine benefit obligations at the end of the periods and net periodic benefit costs for the Pension Benefits for U.S. plans were as follows:


	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Discount rate for calculating obligations		4.80	%		4.00	%		4.90	%
Discount rate for calculating net periodic benefit cost		4.00			4.90			5.35
Expected rate of return on plan assets		8.20			8.75			8.75
Rate of compensation increase – benefit obligations		2.80			3.00			3.00
Rate of compensation increase – net periodic benefit cost		3.00			3.00			3.00

The expected rate of return on U.S. plan assets is 8.00% for 2014.

The assumptions used to determine benefit obligations at the end of the periods and net periodic benefit costs for the Other Postretirement Benefits, primarily health care, for U.S. plans were as follows:


	Year Ended December 31,
	2013			2012			2011
Discount rate for calculating obligations		4.35	%		3.60	%		4.60	%
Discount rate for calculating net periodic benefit cost		3.60			4.60			5.25
Rate of compensation increase – benefit obligations		2.80			3.00			3.00
Rate of compensation increase – net periodic benefit cost		3.00			3.00			3.00

The assumptions used to determine benefit obligations at the end of the periods and net periodic benefit costs for the Pension Benefits for Canadian plans were as follows:


	Year Ended December 31,
	2013			2012			2011
Discount rate for calculating obligations		4.60	%		4.20	%		4.75	%
Discount rate for calculating net periodic benefit cost		4.20			4.75			5.25
Expected rate of return on plan assets		6.50			6.50			7.00
Rate of compensation increase		3.50			3.50			3.50

The expected rate of return on Canadian plan assets is 6.50% for 2014.


	Year Ended December 31,
	2013			2012			2011
Discount rate for calculating obligations		4.40	%		4.10	%		4.80	%
Discount rate for calculating net periodic benefit cost		4.10			4.80			5.25
Rate of compensation increase		3.50			3.50			3.50


	Year Ended December 31,
	Pension Benefits						Other Benefits
	2013			2012			2013			2012
	(In millions)
Change in Benefit Obligation
Benefit obligation at beginning of year	$	930		$	856		$	130		$	143
Service cost		3			3			1			1
Interest cost		36			41			4			6
Plan amendments		—			—			—			(11	)
Actuarial (gain) loss		(68	)		81			(7	)		6
Special termination benefits		—			1			—			—
Effect of changes in exchange rates		(4	)		1			(1	)		1
Curtailment gain		—			—			—			(2	)
Benefits paid (net of participant contributions and Medicare subsidy)		(55	)		(53	)		(13	)		(14	)

Benefit obligation at end of year	$	842		$	930		$	114		$	130

Accumulated benefit obligation at end of year	$	838		$	925			N/A			N/A

Change in Plan Assets
Plan assets at fair value at beginning of year	$	560		$	497		$	—		$	—
Actual return on plan assets		89			69			—			—
Employer contributions		48			46			14			15
Effect of changes in exchange rates		(3	)		1			—			—
Benefits paid (net of participant contributions)		(55	)		(53	)		(14	)		(15	)

Plan assets at fair value at end of year	$	639		$	560		$	—		$	—

Reconciliation of Amount Recognized
Funded status	$	(203	)	$	(370	)	$	(114	)	$	(130	)

Amounts recognized in balance sheet consist of:
Current liabilities	$	—		$	—		$	(12	)	$	(13	)
Non-current liabilities		(203	)		(370	)		(102	)		(117	)

Net benefit liability at the end of the year	$	(203	)	$	(370	)	$	(114	)	$	(130	)

Canadian benefit obligations represented $55 million and $60 million of the Company’s total Pension Benefits obligations at December 31, 2013 and 2012, respectively. Canadian plan assets represented $47 million and $48 million of the Company’s total plan assets at fair value at December 31, 2013 and 2012, respectively. In addition, Canadian benefit obligations represented $15 million and $16 million of the Company’s total Other Benefits obligation at December 31, 2013 and 2012, respectively.

Amounts recognized in accumulated other comprehensive income (loss) at December 31, 2013 and 2012 consist of the following:


	At December 31,
	Pension Benefits				Other Benefits
	2013		2012		2013			2012
	(In millions)
Amounts recognized in accumulated other comprehensive income (loss), pre–tax, consists of
Net actuarial (gain) loss	$	276	$	403	$	(73	)	$	(73	)
Prior service cost (credit)		2		1		(10	)		(12	)

Total	$	278	$	404	$	(83	)	$	(85	)

Net actuarial losses of $10.4 million and prior service costs of $0.2 million for pension benefits and net actuarial gains of $7.9 million and prior service credits of $1.6 million for other postretirement benefits are expected to be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year.

Amounts recognized in other comprehensive income (loss) for the years ended December 31, 2013 and 2012 consist of the following:


	Year Ended December 31,
	Pension Benefits						Other Benefits
	2013			2012			2013			2012
	(In millions)
Amounts recognized in other comprehensive income (loss),
pre–tax, consists of
Net actuarial loss (gain)	$	(112	)	$	58		$	(7	)	$	6
Amortization of net actuarial loss (gain)		(14	)		(11	)		7			8
Prior service cost (credit)		—			—			2			(11	)

Total	$	(126	)	$	47		$	2		$	3

For benefit obligation measurement purposes for U.S. plans at December 31, 2013, the annual rate of increase in the per capita cost of covered health care benefits for participants under 65 was 7.5 percent, grading down to 5 percent in 2020, the level at which it is expected to remain. At December 31, 2013 the rate for participants over 65 was 7.25 percent, grading down to 5 percent in 2018, plus a risk adjustment of 0.6 percent grading down to zero percent in 2062, the level at which it is expected to remain. For measurement purposes for U.S. plans at December 31, 2012, the annual rate of increase in the per capita cost of covered health care benefits for participants under 65 was 7 percent, grading down to 5 percent in 2020, the level at which it is expected to remain. At December 31, 2012 the rate for participants over 65 was 6.5 percent, grading down to 5 percent in 2018, plus a risk adjustment of 0.6 percent grading down to zero percent in 2062, the level at which it is expected to remain. For measurement purposes for U.S. plans at December 31, 2011, the annual rate of increase in the per capita cost of covered health care benefits was 8.0 percent for all participants, grading down to 5 percent in 2017, the level at which it is expected to remain.

For benefit obligation measurement purposes for Canadian plans at December 31, 2013 and December 31, 2012, the annual rate of increase in the per capita cost of covered health care benefits was 8 percent per annum, grading down to 4.5 percent in 2033, the level at which it is expected to remain. For measurement purposes for Canadian plans at December 31, 2011, the annual rate of increase in the per capita cost of covered health care benefits was 12 percent per annum, grading down to 5 percent in 2023, the level at which it is expected to remain.

The components of the Company’s net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011 are as follows:


	Year Ended December 31,
	Pension Benefits									Other Benefits
	2013			2012			2011			2013			2012			2011
	(In millions)
Components of net periodic benefit cost
Service cost	$	3		$	3		$	3		$	1		$	1		$	1
Interest cost		36			41			42			4			6			8
Expected return on assets		(45	)		(45	)		(47	)		—			—			—
Recognized actuarial loss (gain)		14			11			6			(7	)		(7	)		(4	)
Amortization of prior service credit		—			—			—			(2	)		—			—
Special termination benefits		—			—			1			—			—			1
Curtailment gain		—			—			—			—			(2	)		—

Net periodic benefit cost (credit)	$	8		$	10		$	5		$	(4	)	$	(2	)	$	6

The assumed health care cost trend rate has an effect on the amounts reported for the health care plans. For purposes of determining net periodic benefit cost for U.S plans, the annual rate of increase in the per capita cost of covered health care benefits for participants under 65 was 7 percent, grading down to 5 percent in 2020, the level at which it is expected to remain. At December 31, 2013 the rate for participants over 65 was 6.5 percent, grading down to 5 percent in 2018, plus a risk adjustment of 0.6 percent grading down to zero percent in 2062, the level at which it is expected to remain. For purposes of determining net periodic benefit cost for Canadian plans, the annual rate of increase in the per capita cost of covered health care benefits was 8 percent for the year ended December 31, 2013, grading down to 4.5 percent in 2033.

A one-percentage-point change in the assumed health care cost trend rate would have the following effects:


	1% increase		1% decrease
	(In millions)
Effect on service cost plus interest cost	$	0.2	$	(0.2	)
Effect on postretirement benefit obligation		4.1		(3.4	)

Pension Trust Assets

The expected long-term rate of return on pension trust assets is 6.50% to 8.00% based on the historical investment returns of the trust, the forecasted returns of the asset classes and a survey of comparable pension plan sponsors.

The Company’s pension trust weighted-average asset allocations at December 31, 2013 and 2012, by asset category are as follows:


	Trust Assets at December 31,
	2013			2012
Equity securities		70	%		64	%
Debt securities		19			22
Real Estate		3			3
Other		8			11

Total		100.0	%		100.0	%

The Board of Directors of Ryerson has general supervisory authority over the Pension Trust Fund and approves the investment policies and plan asset target allocation. An internal management committee provides on-going oversight of plan assets in accordance with the approved policies and asset allocation ranges and has the authority to appoint and dismiss investment managers. The investment policy objectives are to maximize long-term return from a diversified pool of assets while minimizing the risk of large losses, and to maintain adequate liquidity to permit timely payment of all benefits. The policies include diversification requirements and restrictions on concentration in any one single issuer or asset class. The currently approved asset investment classes are cash; fixed income; domestic equities; international equities; real estate; private equities and hedge funds of funds. Company management allocates the plan assets among the approved investment classes and provides appropriate directions to the investment managers pursuant to such allocations.

The approved target ranges and allocations as of the December 31, 2013 measurement date were as follows:


	Range			Target
Equity securities		35-85	%		63	%
Debt securities		10-30			22
Real Estate		0-10			9
Other		0-10			6

Total					100	%

The fair value of Ryerson’s pension plan assets at December 31, 2013 by asset category are as follows: See Note 16 for the definitions of Level 1, 2, and 3 fair value measurements.


	Fair Value Measurements at December 31, 2013
Asset Category	Total		Level 1		Level 2		Level 3
	(In millions)
Cash and cash equivalents	$	11.9	$	11.9	$	—	$	—
Equity securities:
US large cap		158.9		—		158.9		—
US small/mid cap		62.6		—		62.6		—
Canadian large cap		5.7		—		5.7		—
Canadian small cap		1.4		—		1.4		—
Other international companies		218.8		—		218.8		—
Fixed income securities:
Investment grade debt		118.8		—		118.8		—
Other types of investments:
Commodity funds		1.4		—		1.4		—
Multi-strategy funds		28.6		—		—		28.6
Private equity funds		12.7		—		—		12.7
Real estate		18.1		—		17.5		0.6

Total	$	638.9	$	11.9	$	585.1	$	41.9

The fair value of Ryerson’s pension plan assets at December 31, 2012 by asset category are as follows:


	Fair Value Measurements at December 31, 2012
Asset Category	Total		Level 1		Level 2		Level 3
	(In millions)
Cash and cash equivalents	$	11.1	$	11.1	$	—	$	—
Equity securities:
US large cap		121.0		—		121.0		—
US small/mid cap		45.4		—		45.4		—
Canadian large cap		6.4		—		6.4		—
Canadian small cap		1.6		—		1.6		—
Other international companies		183.1		—		183.1		—
Fixed income securities:
Investment grade debt		122.7		—		122.7		—
Other types of investments:
Commodity funds		1.5		—		1.5		—
Multi-strategy funds		26.7		—		—		26.7
Private equity funds		22.5		—		—		22.5
Real estate		17.7		—		17.0		0.7

Total	$	559.7	$	11.1	$	498.7	$	49.9

The pension assets classified as Level 2 investments in both 2013 and 2012 are part of common collective trust investments.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Multi- Strategy Hedge funds			Private Equity Funds			Real Estate			Total
	(In millions)
Beginning balance at January 1, 2011	$	6.0		$	31.5		$	3.8		$	41.3
Actual return on plan assets:
Relating to assets still held at the reporting date		0.2			0.3			0.2			0.7
Relating to assets sold during the period		—			0.7			(0.2	)		0.5
Purchases		—			1.4			—			1.4
Sales		(3.5	)		(5.6	)		(1.3	)		(10.4	)

Ending balance at December 31, 2011	$	2.7		$	28.3		$	2.5		$	33.5
Actual return on plan assets:
Relating to assets still held at the reporting date		1.7			0.5			(0.3	)		1.9
Relating to assets sold during the period		(0.5	)		2.4			0.8			2.7
Purchases		25.0			0.5			—			25.5
Sales		(2.2	)		(9.2	)		(2.3	)		(13.7	)

Ending balance at December 31, 2012	$	26.7		$	22.5		$	0.7		$	49.9
Actual return on plan assets:
Relating to assets still held at the reporting date		1.9			(1.1	)		—			0.8
Relating to assets sold during the period		—			2.6			0.1			2.7
Sales		—			(11.3	)		(0.2	)		(11.5	)

Ending balance at December 31, 2013	$	28.6		$	12.7		$	0.6		$	41.9

Securities listed on one or more national securities exchanges are valued at their last reported sales price on the date of valuation. If no sale occurred on the valuation date, the security is valued at the mean of the last “bid” and “ask” prices on the valuation date.

Corporate and government bonds which are not listed or admitted to trading on any securities exchanges are valued at the average mean of the last bid and ask prices on the valuation date based on quotations supplied by recognized quotation services or by reputable broker dealers.

The non-publicly traded securities, other securities or instruments for which reliable market quotations are not available are valued at each investment manager’s discretion. Valuations will depend on facts and circumstances known as of the valuation date and application of certain valuation methods.

Contributions

The Company contributed $48.0 million, $45.9 million, and $43.9 million for the years ended December 31, 2013, 2012 and 2011, respectively, to improve the funded status of the plans. The Company anticipates that it will have a minimum required pension contribution funding of approximately $68 million in 2014.

Estimated Future Benefit Payments


	Pension Benefits		Other Benefits
	(In millions)
2014	$	56.5	$	12.7
2015		56.9		11.6
2016		57.3		11.1
2017		57.6		10.4
2018		57.9		9.8
2019-2023		291.3		40.1

Multiemployer Pension and Other Postretirement Plans

Ryerson participates in two multiemployer pension plans covering 66 employees at 4 locations. Total contributions to the plans were $0.5 million, $0.5 million, and $0.4 million for the years ended December 31, 2013, 2012, and 2011, respectively. Ryerson’s contributions represent less than 5% of the total contributions to the plans. Ryerson maintains positive employee relations at all locations. During 2012, the Company exited and reentered the pension plan at one of the covered locations in an effort to reduce the overall pension liability. The transaction resulted in a withdrawal liability of $1.0 million, which will be paid over a period of 25 years. The balance of the withdrawal liability as of December 31, 2013 and 2012 was $0.5 million and $0.6 million, respectively. The Company’s participation in these plans is not material to our financial statements.