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.

The Company expects to recognize $17.0 million of costs in 2017 associated with amortizing net actuarial losses and prior service credits. Substantially all of the unrecognized pension and postretirement costs included in AOCI (see Footnote 4) are due to unrecognized actuarial losses.

Effective December 31, 2015, the Company changed the method used to estimate the service and interest components of net periodic benefit cost for its defined benefit pension and postretirement plans. The new estimation approach discounts the individual expected cash flows underlying the service cost and interest cost using the applicable spot rates derived from the yield curve used to discount the cash flows used to measure the benefit obligations. Historically, the estimated service and interest cost components utilized a single weighted-average discount rate derived from the yield curve used to measure the benefit obligations at the beginning of the period.

The Company elected this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and the corresponding spot yield curve rates. The change was accounted for as a change in accounting estimate that is inseparable from a change in accounting principle and accordingly was accounted for prospectively.

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 $17.4 million, $16.5 million and $15.8 million in expense for the defined contribution benefit arrangement for 2016, 2015 and 2014, respectively. The liability associated with the defined contribution benefit arrangement as of December 31, 2016 and 2015 is $17.6 million and $16.7 million, respectively, and is included in other accrued liabilities in the Consolidated Balance Sheets.

In September 2015 and September 2014, the Company commenced offers to approximately 3,300 and 5,700 former employees, respectively, who have 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 the year of the offer. Cash payments of $70.6 million and $98.6 million were made from the pension plan assets in December 2015 and December 2014, respectively, to those electing the lump-sum distribution.

As of December 31, 2016 and 2015, the Company maintained various nonqualified deferred compensation plans with varying terms. The total liability associated with these plans was $41.7 million and $44.2 million as of December 31, 2016 and 2015, 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 $57.1 million and $55.3 million as of December 31, 2016 and 2015, 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 primarily funded through a trust agreement with a trustee that owns life insurance policies on both active and former key employees with aggregate net death benefits of $289.7 million. At December 31, 2016 and 2015, the life insurance contracts were accounted for using the investment method and had a cash surrender value of $116.0 million and $108.4 million, respectively, and are included in other assets in the Consolidated Balance Sheets. 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 projected benefit obligation was $122.5 million and $119.5 million at December 31, 2016 and 2015, 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 $25.5 million, $14.0 million and $13.6 million for 2016, 2015 and 2014, 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, (dollars in millions):



	U.S.						International
	2016			2015			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	937.7		$	1,060.7		$	613.6		$	671.7
Service cost	2.7			3.2			6.6			5.8
Interest cost	45.1			41.3			17.5			19.6
Actuarial (gain) loss	(16.3		)	(91.9		)	104.2			(51.8		)
Currency translation	—			—			(107.9		)	(34.7		)
Benefits paid	(98.2		)	(140.4		)	(25.3		)	(28.7		)
Acquisitions	721.2			64.8			64.8			11.2
Curtailments, settlements and other	—			—			(26.1		)	20.5
Benefit obligation at end of year ⁽¹⁾	$	1,592.2		$	937.7		$	647.4		$	613.6



Change in plan assets:
Fair value of plan assets at beginning of year	$	722.9		$	752.0		$	560.3		$	584.4
Actual return on plan assets	70.7			(14.0		)	112.4			(7.0		)
Contributions	12.0			83.1			16.4			14.5
Currency translation	—			—			(105.9		)	(26.9		)
Benefits paid	(98.2		)	(140.4		)	(25.3		)	(28.7		)
Acquisitions	523.2			42.2			34.0			15.0
Settlements and other	—			—			(26.6		)	9.0
Fair value of plan assets at end of year	$	1,230.6		$	722.9		$	565.3		$	560.3
Funded status at end of year	$	(361.6	)	$	(214.8	)	$	(82.1	)	$	(53.3	)
Amounts recognized in the Consolidated Balance Sheets:
Prepaid benefit cost, included in other assets	$	—		$	—		$	48.7		$	35.9
Accrued current benefit cost, included in other accrued liabilities	(12.5		)	(9.6		)	(4.4		)	(3.3		)
Accrued noncurrent benefit cost, included in other noncurrent liabilities	(349.1		)	(205.2		)	(126.4		)	(85.9		)
Total	$	(361.6	)	$	(214.8	)	$	(82.1	)	$	(53.3	)



	U.S.						International
	2016			2015			2016			2015
Assumptions:
Weighted-average assumptions used to determine benefit obligation:
Discount rate	3.98		%	4.23		%	2.35		%	3.37		%
Long-term rate of compensation increase	2.50		%	2.50		%	3.53		%	3.58		%

Accumulated benefit obligation ⁽¹⁾	$	1,592.2		$	937.7		$	635.1		$	604.6

Summary of under-funded or non-funded pension benefit plans with projected benefit obligation in excess of plan assets at December 31, (in millions):



	Pension Benefits
	2016		2015
Projected benefit obligation	$	1,941.9	$	1,253.7
Fair value of plan assets	1,449.5		948.4

Summary of pension plans with accumulated obligations in excess of plan assets at December 31, (in millions):



	Pension Benefits
	2016		2015
Accumulated benefit obligation	$	1,933.2	$	1,249.9
Fair value of plan assets	1,449.5		948.4

Net pension cost includes the following components for the years ended December 31, (dollars in millions):



	U.S.									International
	2016			2015			2014			2016			2015			2014
Service cost	$	2.7		$	3.2		$	4.1		$	6.6		$	5.8		$	5.9
Interest cost	45.1			41.3			45.1			17.5			19.6			25.3
Expected return on plan assets	(69.1		)	(58.0		)	(57.5		)	(20.8		)	(22.1		)	(26.6		)
Amortization of:
Prior service (credit) cost	(0.1		)	(0.1		)	—			0.5			—			(0.1		)
Actuarial loss	21.8			26.2			24.2			2.2			3.4			3.2
Curtailment, settlement and termination benefit costs	—			52.1			65.4			2.9			0.4			(0.1		)
Net pension cost	$	0.4		$	64.7		$	81.3		$	8.9		$	7.1		$	7.6



	U.S.						International
Assumptions:	2016		2015		2014		2016		2015		2014
Weighted-average assumptions used to determine net periodic benefit cost:
Effective discount rate for benefit obligations	4.06	%	4.00	%	4.50	%	3.29	%	3.03	%	4.21	%
Effective rate for interest on benefit obligations	3.21	%	4.00	%	4.50	%	2.92	%	3.03	%	4.21	%
Effective rate for service cost	4.16	%	4.00	%	4.50	%	3.39	%	3.03	%	4.21	%
Effective rate for interest on service cost	3.67	%	4.00	%	4.50	%	3.35	%	3.03	%	4.21	%
Long-term rate of return on plan assets	6.34	%	7.25	%	7.25	%	3.93	%	3.86	%	5.01	%
Long-term rate of compensation increase	2.50	%	2.50	%	2.50	%	3.51	%	3.60	%	4.21	%

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 cash contributions of approximately $12.5 million and $14.1 million to its domestic and international defined benefit plans, respectively, in 2017.

Plan Assets

The Company employs a total return investment approach for its pension plans whereby a mix of equities and fixed income investments are used to maximize the long-term return of pension plan assets. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and the Company’s financial condition. The domestic investment portfolios contain a diversified blend of equity and fixed-income investments. The domestic equity investments are diversified across geography and market capitalization through investments in U.S. large-capitalization stocks, U.S. small-capitalization stocks and international securities. The domestic fixed income investments are primarily comprised of investment-grade and high-yield securities through investments in corporate and government bonds, government agencies and asset-backed securities. The Level 1 investments are primarily based upon quoted market prices. The domestic Level 3 investments are primarily comprised of hedge funds whose assets are primarily valued based upon the net asset value (“NAV’) per share and insurance contracts valued at contract value. The investments excluded from the fair value hierarchy are NAV-based hedge fund investments that generally have a redemption frequency of 90 days or less, with various redemption notice periods that are generally less than a month. The notice periods for certain investments may vary based on the size of the redemption. The international Level 2 investments are primarily comprised of insurance contracts whose fair values are estimated based on the future cash flows to be received under the contracts discounted to the present using a discount rate that approximates the discount rate used to measure the associated pension plan liabilities. The international Level 3 investments are primarily comprised of insurance contracts valued at contract value. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.

The expected long-term rate of return for plan assets is based upon many factors, including expected asset allocations, historical asset returns, current and expected future market conditions, risk and active management premiums. The expected long-term rate of return is adjusted when there are fundamental changes in expected returns on the Company’s defined benefit pension plan’s investments. The target asset allocations for the Company’s domestic pension plans may vary by plan, based in part due to plan demographics, funded status and liability duration. In general, the Company’s target asset allocations are as follows: equities approximately 25% to 40%; bonds approximately 20% to 40%; and cash, alternative investments and other, approximately 25% to 45%. Actual asset allocations may vary from the targeted allocations for various reasons, including market conditions and the timing of transactions. The Company maintains numerous international defined benefit pension plans. The asset allocations for the international investment may vary by plan and jurisdiction and are primarily based upon the plan structure and plan participant profile.

The composition of domestic pension plan assets at December 31, 2016 and 2015 is as follows:



	Plan Assets - Domestic Plans
	December 31, 2016
	Fair Value Measurements								NAV-Based
Asset Category	Level 1		Level 2		Level 3		Subtotal		Assets		Total
Equity securities and funds:
Domestic	$	149.8	$	—	$	—	$	149.8	$	120.6	$	270.4
International	80.4		—		—		80.4		101.2		181.6
Fixed income securities and funds	372.7		—		—		372.7		211.0		583.7
Alternative investments	23.5		—		61.4		84.9		81.2		166.1
Cash and other	12.5		15.2		1.1		28.8		—		28.8
Total	$	638.9	$	15.2	$	62.5	$	716.6	$	514.0	$	1,230.6

	December 31, 2015
	Fair Value Measurements								NAV-Based
Asset Category	Level 1		Level 2		Level 3		Subtotal		Assets		Total
Equity securities and funds:
Domestic	$	25.8	$	—	$	—	$	25.8	$	129.1	$	154.9
International	20.3		—		—		20.3		85.7		106.0
Fixed income securities and funds	307.7		19.7		—		327.4		82.1		409.5
Alternative investments	—		—		26.3		26.3		—		26.3
Cash and other	2.6		23.6		—		26.2		—		26.2
Total	$	356.4	$	43.3	$	26.3	$	426.0	$	296.9	$	722.9

The composition of international pension plan assets at December 31, 2016 and 2015 is as follows:



	Plan Assets - International Plans
	December 31, 2016
	Fair Value Measurements								NAV-Based
Asset Category	Level 1		Level 2		Level 3		Subtotal		Assets		Total
Equity securities and funds	$	26.2	$	—	$	—	$	26.2	$	44.8	$	71.0
Fixed income securities and funds	164.0		—		5.3		169.3		46.3		215.6
Cash and other	4.7		217.8		13.5		236.0		42.7		278.7
Total	$	194.9	$	217.8	$	18.8	$	431.5	$	133.8	$	565.3

	December 31, 2015
	Fair Value Measurements								NAV-Based
Asset Category	Level 1		Level 2		Level 3		Subtotal		Assets		Total
Equity securities and funds	$	70.0	$	—	$	—	$	70.0	$	34.4	$	104.4
Fixed income securities and funds	—		96.2		—		96.2		81.5		177.7
Cash and other	3.5		207.4		0.6		211.5		66.7		278.2
Total	$	73.5	$	303.6	$	0.6	$	377.7	$	182.6	$	560.3

A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) for 2016 and 2015 is as follows (in millions):



	Total
Fair value as of December 31, 2014	$	68.3
Realized gains	5.2
Unrealized (losses) gains	(4.9		)
Purchases, sales, settlements, and other, net	(41.7		)
Fair value as of December 31, 2015	$	26.9
Acquisitions	73.6
Realized gains	2.2
Unrealized losses	(0.6		)
Purchases, sales, settlements and other, net	(20.8		)
Fair value as of December 31, 2016	$	81.3

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 postretirement benefit plans as of December 31, (dollars in millions):



	2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	67.9		$	88.1
Service cost	0.1			0.3
Interest cost	2.2			3.4
Actuarial loss (gain)	3.0			(18.3		)
Benefits paid, net	(6.1		)	(5.6		)
Acquisitions	7.2			—
Changes in plan benefits	0.3			—
Benefit obligation at end of year	$	74.6		$	67.9
Funded status and net liability recognized at end of year	$	(74.6	)	$	(67.9	)

Amounts recognized in the Consolidated Balance Sheets:
Accrued current benefit cost, included in other accrued liabilities	$	(6.4	)	$	(5.8	)
Accrued noncurrent benefit cost, included in other noncurrent liabilities	(68.2		)	(62.1		)
Total	$	(74.6	)	$	(67.9	)



	2016		2015
Assumptions:
Weighted-average assumptions used to determine benefit obligation:
Discount rate	3.75	%	4.00	%
Current health care cost trend rate	8.67	%	8.70	%
Ultimate health care cost trend rate	4.50	%	4.50	%

There are no plan assets associated with the Company’s postretirement benefit plans.

Postretirement benefit costs include the following components for the years ended December 31, (in millions):



	2016			2015			2014
Service cost	$	0.1		$	0.3		$	1.0
Interest cost	2.2			3.4			4.8
Amortization of:
Prior service benefit	(5.2		)	(6.6		)	(6.4		)
Actuarial (gain) loss	(5.2		)	(1.2		)	—
Net postretirement benefit (income) expense	$	(8.1	)	$	(4.1	)	$	(0.6	)



	2016		2015		2014
Assumptions:
Weighted-average assumptions used to determine net periodic benefit cost:
Effective discount rate for benefits obligations	3.97	%	4.00	%	4.50	%
Effective rate for interest on benefit obligations	3.10	%	4.00	%	4.50	%
Effective rate for service cost	3.46	%	4.00	%	4.50	%
Effective rate for interest on service cost	3.19	%	4.00	%	4.50	%

The current healthcare cost trend rate gradually declines through 2037 to the ultimate trend rate and remains level thereafter. A one percentage point change in assumed healthcare cost trend rate would not have a material effect on the postretirement benefit obligation or the service and interest cost components of postretirement benefit costs.

Estimated Future Benefit Payments

Estimated future benefit payments under the Company’s defined benefit pension plans and postretirement benefit plans are as follows as of December 31, 2016 (in millions):



	2017		2018		2019		2020		2021		Thereafter
Pension benefits	$	126.8	$	126.4	$	127.3	$	130.3	$	130.1	$	647.4
Postretirement benefits	$	6.5	$	6.4	$	6.3	$	6.1	$	5.9	$	27.0