Footnote 14 — 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 amount of AOCI expected to be recognized in pension and postretirement benefit expense for the year ending December 31, 2019 is $8.3 million and is substantially comprised of net unrecognized actuarial losses.

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 $313.2 million. At December 31, 2018 and 2017, the life insurance contracts were accounted for using the investment method and had a cash surrender value of $135 million and $123 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 $115 million and $127 million at December 31, 2018 and 2017, 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) plans were $24.8 million, $30.2 million and $25.5 million for 2018, 2017 and 2016, 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):


	Pension Benefits												Postretirement Benefits
	U.S.						International
Change in benefit obligation:	2018			2017			2018			2017			2018			2017
Benefit obligation at beginning of year	$	1,553.7		$	1,561.0		$	666.2		$	626.4		$	65.1		$	74.6
Service cost		0.8			2.8			5.3			6.4			0.3			0.1
Interest cost		46.4			49.6			13.0			13.2			1.8			2.2
Actuarial (gain) loss		(147.7	)		81.9			(32.7	)		3.2			(8.9	)		(0.4	)
Amendments		—			—			2.5			0.4			—			(5.0	)
Currency translation		—			—			(31.5	)		69.4						—
Benefits paid		(105.2	)		(100.4	)		(30.0	)		(22.8	)		(4.9	)		(6.4	)
Acquisitions and dispositions, net		—			—			0.8			(13.9	)		—			—
Curtailments, settlements and other		—			(41.2	)		(23.4	)		(16.1	)		(0.4	)		—

Benefit obligation at end of year (1)	$	1,348.0		$	1,553.7		$	570.2		$	666.2		$	53.0		$	65.1

Change in plan assets:
Fair value of plan assets at beginning of year	$	1,271.1		$	1,230.6		$	602.1		$	547.6		$	—		$	—
Actual return (loss) on plan assets		(71.2	)		171.4			(11.0	)		24.2			—			—
Contributions		10.2			10.7			14.0			15.2			—			—
Currency translation		—			—			(29.2	)		58.5			—			—
Benefits paid		(105.2	)		(100.4	)		(30.7	)		(22.1	)		—			—
Acquisitions and dispositions, net		—			—			0.8			(5.5	)		—			—
Settlements and other		—			(41.2	)		(22.4	)		(15.8	)		—			—

Fair value of plan assets at end of year	$	1,104.9		$	1,271.1		$	523.6		$	602.1		$	—		$	—

Funded status at end of year	$	(243.1	)	$	(282.6	)	$	(46.6	)	$	(64.1	)	$	(53.0	)	$	(65.1	)

Amounts recognized in the Consolidated Balance Sheets:
Prepaid benefit cost, included in other assets	$	—		$	—		$	71.5		$	63.5		$			$	—
Accrued current benefit cost—other accrued liabilities		(9.9	)		(10.3	)		(4.7	)		(5.0	)		(5.3	)		(5.8	)
Accrued noncurrent benefit cost— other noncurrent liabilities		(233.2	)		(272.3	)		(113.4	)		(122.6	)		(47.7	)		(59.3	)

Net amount recognized	$	(243.1	)	$	(282.6	)	$	(46.6	)	$	(64.1	)	$	(53.0	)	$	(65.1	)

Assumptions:
Weighted-average assumptions used to determine benefit obligation:
Discount rate		4.12	%		3.48	%		2.53	%		2.25	%		3.97	%		3.32	%
Long-term rate of compensation increase		3.00	%		2.50	%		2.43	%		3.53	%		—			—
Current health care cost trend rates		—			—			—			—			6.99	%		6.70	%
Ultimate health care cost trend rates		—			—			—			—			4.50	%		4.50	%

(1)	The accumulated benefit obligation for all defined benefit pension plans was $1.9 billion and $2.2 billion at December 31, 2018 and 2017, respectively.

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

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.

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


	Pension Benefits
	2018		2017
Projected benefit obligation	$	1,653.6	$	1,895.6
Fair value of plan assets		1,292.6		1,485.2

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


	Pension Benefits
	2018		2017
Accumulated benefit obligation	$	1,648.9	$	1,887.1
Fair value of plan assets		1,292.6		1,485.2

Pension and Postretirement Benefit Expense

The components of pension and postretirement benefit expense for the periods indicated are as follows (dollars in millions):


	Pension Benefits
	U.S.									International
	2018			2017			2016			2018			2017			2016
Service cost	$	0.8		$	2.8		$	2.7		$	5.3		$	6.4		$	6.0
Interest cost		46.4			49.6			44.4			13.0			13.2			17.2
Expected return on plan assets		(67.5	)		(73.3	)		(69.1	)		(14.7	)		(18.2	)		(20.3	)
Amortization:
Prior service cost (credit)		(0.1	)		(0.1	)		(0.1	)		0.4			0.4			0.5
Net actuarial loss		21.4			23.7			21.8			2.0			2.0			2.4
Curtailment, settlement and termination (benefit) costs		—			(3.7	)		—			1.3			1.3			2.9

Total expense (income)	$	1.0		$	(1.0	)	$	(0.3	)	$	7.3		$	5.1		$	8.7

Assumptions
Weighted average assumption used to calculate net periodic cost:
Effective discount rate for benefit obligations		3.48	%		3.99	%		4.07	%		2.25	%		2.12	%		3.30	%
Effective rate for interest on benefit obligations		3.09	%		3.28	%		3.22	%		1.96	%		1.72	%		2.94	%
Effective rate for service cost		3.32	%		3.83	%		4.16	%		2.34	%		2.46	%		3.41	%
Effective rate for interest on service cost		2.98	%		3.38	%		3.67	%		2.29	%		2.41	%		3.38	%
Long-term rate of return on plan assets		5.75	%		6.04	%		6.34	%		2.58	%		3.21	%		3.94	%
Long-term rate of compensation increase		2.54	%		2.50	%		2.50	%		3.53	%		3.59	%		3.55	%


	Postretirement Benefits
	2018			2017			2016
Service cost	$	0.3		$	0.1		$	0.1
Interest cost		1.8			2.2			2.2
Amortization:
Prior service credit		(6.6	)		(5.2	)		(5.2	)
Net actuarial gain		(3.6	)		(3.9	)		(5.2	)

Total income	$	(8.1	)	$	(6.8	)	$	(8.1	)

Assumptions
Weighted average assumption used to calculate net periodic cost:
Effective discount rate for benefit obligations		3.09	%		3.76	%		3.97	%
Effective rate for interest on benefit obligations		2.71	%		3.07	%		3.10	%
Effective rate for service cost		2.98	%		3.25	%		3.46	%
Effective rate for interest on service cost		2.78	%		3.02	%		3.19	%

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 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 alternative investments. 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 20% to 40%; fixed income approximately 40% to 60%; and cash, alternative investments and other, approximately 10% to 30% as of December 31, 2018. 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, 2018 and 2017 is as follows (in millions):


	Plan Assets — Domestic Plans
	December 31, 2018
	Fair Value Measurements
Asset Category	Level 1		Level 2		Level 3		Subtotal		NAV-based assets		Total
Equity securities and funds:
Global equities	$	—	$	—	$	—	$	—	$	179.8	$	179.8
Fixed income securities and funds		413.3		—		—		413.3		269.3		682.6
Alternative investments		40.7		—		—		40.7		177.1		217.8
Cash and other		8.9		14.8		1.0		24.7		—		24.7

Total	$	462.9	$	14.8	$	1.0	$	478.7	$	626.2	$	1,104.9


	Plan Assets — Domestic Plans
	December 31, 2017
	Fair Value Measurements
Asset Category	Level 1		Level 2		Level 3		Subtotal		NAV-based assets		Total
Equity securities and funds:
Global equities	$	205.3	$	—	$	—	$	205.3	$	89.0	$	294.3
Fixed income securities and funds		395.4		—		—		395.4		207.5		602.9
Alternative investments		23.8		—		—		23.8		149.9		173.7
Cash and other		183.9		15.2		1.1		200.2		—		200.2

Total	$	808.4	$	15.2	$	1.1	$	824.7	$	446.4	$	1,271.1

The composition of international pension plan assets at December 31, 2018 and 2017 is as follows (in millions):


	Plan Assets – International Plans
	December 31, 2018
	Fair Value Measurements
Asset Category	Level 1		Level 2		Level 3		Subtotal		NAV-based assets		Total
Equity securities and funds	$	14.3	$	—	$	—	$	14.3	$	9.1	$	23.4
Fixed income securities and funds		266.7		—		—		266.7		6.6		273.3
Cash and other		6.2		204.9		1.5		212.6		14.3		226.9

Total	$	287.2	$	204.9	$	1.5	$	493.6	$	30.0	$	523.6


	Plan Assets – International Plans
	December 31, 2017
	Fair Value Measurements
Asset Category	Level 1		Level 2		Level 3		Subtotal		NAV-based assets		Total
Equity securities and funds	$	38.8	$	—	$	—	$	38.8	$	14.1	$	52.9
Fixed income securities and funds		258.8		—		—		258.8		14.4		273.2
Cash and other		5.1		233.7		5.4		244.2		31.8		276.0

Total	$	302.7	$	233.7	$	5.4	$	541.8	$	60.3	$	602.1

A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs (Level 3) for 2018 and 2017 is as follows (in millions):


	Total
Balance, December 31, 2016	$	12.9
Realized gains		—
Unrealized losses		(0.4	)
Purchases, sales, settlements, and other, net		(6.0	)

Balance, December 31, 2017	$	6.5
Realized gains		0.1
Unrealized gains		—
Purchases, sales, settlements and other, net		(4.1	)

Balance, December 31, 2018	$	2.5

Contributions and Estimated Future Benefit Payments

During 2019, the Company expects to make cash contributions of approximately $9.9 million and $14.0 million to its domestic and international defined benefit plans, respectively.

Estimated future benefit payments under the Company’s defined benefit pension plans and postretirement benefit plans are as follows as of December 31, 2018 (in millions):


	2019		2020		2021		2022		2023		Thereafter
Pension benefits	$	121.2	$	121.4	$	121.3	$	120.8	$	120.6	$	579.4
Postretirement benefits	$	5.3	$	5.3	$	5.2	$	5.1	$	5.0	$	20.6