Employee Benefit And Retirement Plans
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Dec. 31, 2014
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Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit And Retirement Plans | Employee Benefit and Retirement Plans The Company and its subsidiaries have noncontributory pension, profit sharing and contributory 401(k) plans covering substantially all of their international and domestic employees. Plan benefits are generally based on years of service and/or compensation. The Company’s funding policy is to contribute not less than the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended, the Internal Revenue Code of 1986, as amended, or foreign statutes to ensure that plan assets will be adequate to provide retirement benefits. Included in AOCI at December 31, 2014 is $750.0 million ($511.7 million net of tax) related to net unrecognized actuarial losses and unrecognized prior service credit that have not yet been recognized in net periodic pension cost. The Company’s primary U.S. defined benefit plan has $589.9 million of unrecognized actuarial losses (pretax) in AOCI as of December 31 2014. Losses in AOCI for the Company’s primary U.S. defined benefit plan greater than 10% of the projected benefit obligation are amortized over the average remaining life expectancy of the participants of 23 years. The Company expects to recognize $22.8 million ($14.9 million net of tax) of costs in 2015 associated with amortizing net actuarial losses and prior service credit. In 2014, the Company updated its mortality estimates for its U.S. defined benefit plans, which resulted in a pretax actuarial loss of $111.9 million recorded to AOCI. The total pretax (losses) gains recognized in AOCI for all of the Company’s defined benefit plans were $(120.5) million and $183.2 million for 2014 and 2013, respectively. The Company’s tax-qualified defined benefit pension plan is frozen for the entire U.S. workforce, and the Company has replaced the defined benefit pension plan with an additional defined contribution benefit arrangement, which benefit vests after three years of employment. The Company recorded $15.8 million, $16.7 million and $19.0 million in expense for the defined contribution benefit arrangement for 2014, 2013 and 2012, respectively. The liability associated with the defined contribution benefit arrangement as of December 31, 2014 and 2013 is $16.5 million and $17.2 million, respectively, and is included in other accrued liabilities in the Consolidated Balance Sheets. In September 2014, the Company commenced an offer to approximately 5,700 former employees with deferred vested benefits under the Company’s tax-qualified U.S. pension plan. These former employees had the opportunity to make a one-time election to receive a lump-sum distribution of the present value of their benefits by the end of 2014. The benefit obligations associated with these former employees is approximately $200.0 million, equivalent to approximately 20% of the Company’s benefit obligation for its U.S. tax-qualified pension plan. Cash payments of $98.6 million were made from plan assets in December 2014 to those electing the lump-sum distribution. Based on the lump-sum distributions that were paid, the Company incurred a non-cash settlement charge of $65.4 million in the fourth quarter of 2014. As of December 31, 2014 and 2013, the Company maintained various nonqualified deferred compensation plans with varying terms. The total liability associated with these plans was $49.1 million and $55.5 million as of December 31, 2014 and 2013, respectively. These liabilities are included in other accrued liabilities and other noncurrent liabilities in the Consolidated Balance Sheets. The Company maintains assets to offset the impact of the market gains and losses associated with the deferred compensation liabilities, and the values of these assets were $54.5 million and $52.3 million as of December 31, 2014 and 2013, respectively. These assets are included in other assets in the Consolidated Balance Sheets. The Company has a Supplemental Executive Retirement Plan (“SERP”), which is a nonqualified defined benefit and defined contribution plan pursuant to which the Company will pay supplemental benefits to certain key employees upon retirement based upon the employees’ years of service and compensation. The SERP is partially funded through a trust agreement with the Northern Trust Company, as trustee, that owns life insurance policies on approximately 310 active and former key employees with aggregate net death benefits of $275.4 million. At December 31, 2014 and 2013, the life insurance contracts were accounted for using the investment method and had a cash surrender value of $106.0 million and $102.5 million, respectively. All premiums paid and proceeds received associated with the life insurance policies are included in accrued liabilities and other in the Consolidated Statements of Cash Flows. The SERP is also partially funded through cash and mutual fund investments, which had a combined value of $8.8 million and $10.3 million at December 31, 2014 and 2013, respectively. These assets, as well as the cash surrender value of the life insurance contracts, are included in other assets in the Consolidated Balance Sheets. The projected benefit obligation was $139.3 million and $110.2 million at December 31, 2014 and 2013, respectively. The SERP liabilities are included in the pension table below; however, the value of the Company’s investments in the life insurance contracts, cash and mutual funds are excluded from the table, as they do not qualify as plan assets. The Company’s matching contributions to the contributory 401(k) plan were $13.6 million, $13.9 million and $14.2 million for 2014, 2013 and 2012, respectively. Defined Benefit Pension Plans The following provides a reconciliation of benefit obligations, plan assets and funded status of the Company’s noncontributory defined benefit pension plans, including the SERP, as of December 31, (in millions, except percentages):
The international amounts as of December 31, 2014 include a projected benefit obligation of $10.8 million and plan assets of $12.8 million for plans in which the benefit obligation is less than the fair value of plan assets. Net pension cost includes the following components for the years ended December 31, (in millions, except percentages):
The Company made a voluntary cash contribution of $70.0 million to its U.S. defined benefit plan in January 2015. The Company expects to make additional cash contributions of approximately $9.8 million and $15.7 million to its domestic and international defined benefit plans, respectively, in 2015. Plan Assets Current Allocation The fair value of each major category of pension plan assets as of December 31, 2014 and 2013 is as follows (in millions):
A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) for 2014 and 2013 is as follows (in millions):
Investment Strategy The Company has established formal investment policies for the assets associated with its pension plans. The objectives of the investment strategies generally include maximizing long-term return at acceptable risk levels, diversifying among asset classes, if appropriate, as well as establishing relevant risk parameters within each asset class. Investment policies reflect the unique circumstances of the respective plans, and risk tolerance is established through consideration of plan liabilities, plan funded status and corporate financial condition. Asset allocation targets are based on periodic asset liability and/or risk budgeting study results, which help determine the appropriate investment strategies for acceptable risk levels. The investment policies permit variances from the targets within certain parameters. The target asset allocations for the Company’s U.S. pension plan and primary international pension plans are as follows as of December 31, 2014:
(1) Other investments include private equity funds, hedge funds and real estate funds. Expected Long-term Rate of Return on Plan Assets The Company employs a building-block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors, such as inflation and interest rates, are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is based on the fair value of plan assets and is established giving consideration to investment diversification and rebalancing. Peer data and historical returns are reviewed to assess for reasonableness and appropriateness. The weighted-average expected long-term rates of return are based on reviews of the target investment allocation and the historical and expected rates of return of the asset classes included in the pension plans’ target asset allocations. Other Postretirement Benefit Plans Several of the Company’s subsidiaries currently provide retiree health care and life insurance benefits for certain employee groups. The following provides a reconciliation of benefit obligations and funded status of the Company’s other postretirement benefit plans as of December 31, (in millions, except percentages):
There are no plan assets associated with the Company’s other postretirement benefit plans. Other postretirement benefit costs include the following components for the years ended December 31, (in millions):
The following are the weighted-average assumptions used to determine net periodic benefit cost for the other postretirement benefit plans for the years ended December 31,:
Assumed health care cost trends have been used in the valuation of the benefit obligations for postretirement benefits. The trend rate used to measure the benefit obligation is 7.2% for all retirees in 2015, declining to 4.5% in 2028 and thereafter. The health care cost trend rate significantly affects the reported postretirement benefit costs and obligations. A one-percentage-point change in the assumed rate would have the following effects (in millions):
Estimated Future Benefit Payments Estimated future benefit payments under the Company’s defined benefit pension plans and other postretirement benefit plans are as follows as of December 31, 2014 (in millions):
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