Employee Benefits

3 Months Ended

Mar. 31, 2019

Pension and Similar Benefit Plans. We provide contributions to: (i) defined contribution 401(k) savings plans for salaried employees and certain hourly employees; (ii) a non-qualified, unfunded, unsecured plan of deferred compensation (see "Deferred Compensation Plan" below); (iii) multi-employer pension plans sponsored by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC, the International Association of Machinists and certain other unions at certain of our production facilities; and (iv) a defined benefit pension plan for salaried employees at our London, Ontario (Canada) facility.

Deferred Compensation Plan. We have a non-qualified, unfunded, unsecured plan of deferred compensation for certain employees who would otherwise suffer a loss of benefits under our defined contribution plan as a result of the limitations imposed by the Internal Revenue Code of 1986. Despite the plan being an unfunded plan, we make an annual contribution to a rabbi trust to fulfill future funding obligations as contemplated by the terms of the plan. The assets in the trust are held in various investment funds at certain registered investment companies and are accounted for as equity investments with changes in fair value recorded within Other income, net. During the quarter ended March 31, 2019, we recognized a $0.5 million gain on equity securities still held at March 31, 2019 related to our deferred compensation plan. For the quarter ended March 31, 2018, the corresponding amount was immaterial. Assets of our deferred compensation plan are classified within Level 2 of the fair value hierarchy and are measured and recorded at fair value based on their quoted market prices. The fair value of these assets at March 31, 2019 and December 31, 2018 was $11.0 million and $9.8 million, respectively, and are included in Other assets. Offsetting liabilities relating to the deferred compensation plan are included in Other accrued liabilities and Long-term liabilities.

Salaried VEBA Postretirement Obligation. Certain retirees who retired prior to 2004 and certain employees who were hired prior to February 2002 and have subsequently retired or will retire with the requisite age and service, along with their surviving spouses and eligible dependents, are eligible to participate in a voluntary employees' beneficiary association ("VEBA") that provides healthcare cost, medical cost and long-term care insurance cost reimbursement benefits ("Salaried VEBA"). We have an ongoing obligation with no express termination date to make annual variable cash contributions up to a maximum of $2.9 million to the Salaried VEBA. We paid $2.1 million with respect to 2018 during the quarter ended March 31, 2019. We account for the Salaried VEBA as a defined benefit plan in our financial statements.

Union VEBA Postretirement Obligation. Certain other eligible retirees represented by certain unions, along with their surviving spouses and eligible dependents, participate in a separate VEBA ("Union VEBA"). During the first quarter of 2018,

we made a $12.8 million cash contribution to the Union VEBA with respect to the nine months ended September 30, 2017. This was our final contribution. We have no ongoing obligation to make further contributions to the Union VEBA.

Fair Value of Plan Assets. The plan assets of our Canadian pension plan and the Salaried VEBA are measured annually on December 31 and reflected in our Consolidated Balance Sheets at fair value. In determining the fair value of the plan assets at an annual period end, we utilize primarily the results of valuations supplied by the investment advisors responsible for managing the assets of each plan, which we independently review for reasonableness.

The following tables present the total expense related to all benefit plans for the periods presented (in millions of dollars):



	Quarter Ended
	March 31,
	2019		2018
Defined contribution plans¹	$	3.9	$	4.3
Deferred compensation plan¹	0.7		0.1
Multiemployer pension plans¹	1.2		1.2
Net periodic postretirement benefit cost relating to Salaried VEBA²	1.7		1.5
Total	$	7.5	$	7.1

____________________


¹	Substantially all of the expense related to employee benefits are in COGS with the remaining balance in Selling, general, administrative, research and development ("SG&A and R&D").


²	The current service cost component of Net periodic postretirement benefit cost relating to Salaried VEBA is included within our Statements of Consolidated Income in SG&A and R&D for all periods presented. All other components of Net periodic postretirement benefit cost relating to Salaried VEBA are included within Other income, net in our Statements of Consolidated Income.

Components of Net Periodic Benefit Cost. Our results of operations included the following impacts associated with our Canadian pension plan and the Salaried VEBA: (i) a charge for service rendered by employees; (ii) a charge for accretion of interest; (iii) a benefit for the return on plan assets; and (iv) amortization of prior service costs associated with plan amendments, net gains or losses on assets and actuarial differences. Net periodic benefit cost related to our Canadian pension plan was not material for the quarters ended March 31, 2019 and March 31, 2018.

The following table presents the components of Net periodic postretirement benefit cost relating to Salaried VEBA for the periods presented (in millions of dollars):



	Quarter Ended
	March 31,
	2019			2018
Salaried VEBA¹:
Interest cost	$	0.8		$	0.7
Expected return on plan assets	(0.6		)	(0.7		)
Amortization of prior service cost²	1.4			1.3
Amortization of net actuarial loss	0.1			0.2
Total net periodic postretirement benefit cost relating to Salaried VEBA	$	1.7		$	1.5

____________________


¹	The service cost was insignificant for all periods presented.

We amortize prior service cost on a straight-line basis over the average remaining years of service to full eligibility for benefits of the active plan participants.