Retirement Benefits

12 Months Ended

Dec. 31, 2019

The Company sponsors several qualified and nonqualified defined benefit and defined contribution pension plans and other post-retirement plans for its employees. The Company uses a measurement date of December 31 for its defined benefit pension plans and post-retirement medical plans. The Company employs the measurement date provisions of ASC 715, Compensation-Retirement Benefits, which require the measurement date of plan assets and liabilities to coincide with the sponsor’s year end.

Effective September 30, 2019, the IDEX Corporation Retirement Plan (“Plan”), a U.S. defined benefit plan, was amended to freeze the accrual of retirement benefits for all participants. This action impacted fewer than 60 participants, as the Plan had been closed to new entrants as of December 31, 2004 and frozen as of December 31, 2005 for all but certain older, longer service participants. The overall financial impact of the freeze was to reduce the Plan liabilities by approximately $1.2 million. In addition, the Company recorded a settlement charge of $0.7 million which was recorded in Other (income) expense - net in the Consolidated Statements of Operations for the year ended December 31, 2019. Subsequent to the freeze, termination of the Plan was approved in November 2019. Participants were notified in February 2020 and the Plan will be terminated in May 2020. As a result, the disclosures for the year ended December 31, 2019 were prepared on a liquidation basis of accounting.

The following table provides a reconciliation of the changes in the benefit obligations and fair value of plan assets over the two-year period ended December 31, 2019 and a statement of the funded status at December 31 for both years.



	Pension Benefits												Other Benefits
	2019						2018						2019			2018
	U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
CHANGE IN BENEFIT OBLIGATION
Obligation at January 1	$	85,175		$	89,789		$	91,335		$	97,451		$	22,593		$	26,068
Service cost	653			1,844			886			2,105			561			668
Interest cost	2,796			1,440			2,634			1,389			849			810
Plan amendments	—			(156		)	—			52			—			—
Benefits paid	(3,520		)	(1,507		)	(5,171		)	(2,791		)	(676		)	(847		)
Actuarial loss (gain)	16,931			9,903			(4,497		)	(3,378		)	(161		)	(3,930		)
Currency translation	—			66			—			(3,335		)	91			(176		)
Settlements	(4,826		)	—			(12		)	(2,313		)	—			—
Curtailments	(1,538		)	—			—			—			—			—
Acquisition/Divestiture	—			—			—			—			—			—
Other	276			637			—			609			—			—
Obligation at December 31	$	95,947		$	102,016		$	85,175		$	89,789		$	23,257		$	22,593
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	$	83,580		$	33,532		$	76,041		$	36,316		$	—		$	—
Actual return on plan assets	17,446			3,406			2,070			496			—			—
Employer contributions	733			2,320			10,652			2,345			676			847
Benefits paid	(3,520		)	(1,507		)	(5,171		)	(2,791		)	(676		)	(847		)
Currency translation	—			916			—			(1,130		)	—			—
Settlements	(4,826		)	—			—			(2,313		)	—			—
Acquisition/Divestiture	—			—			—			—			—			—
Other	—			637			(12		)	609			—			—
Fair value of plan assets at December 31	$	93,413		$	39,304		$	83,580		$	33,532		$	—		$	—
Funded status at December 31	$	(2,534	)	$	(62,712	)	$	(1,595	)	$	(56,257	)	$	(23,257	)	$	(22,593	)
COMPONENTS ON THE CONSOLIDATED BALANCE SHEETS
Other noncurrent assets	$	1,921		$	14		$	3,058		$	—		$	—		$	—
Current liabilities	$	(564	)	$	(1,270	)	$	(556	)	$	(1,174	)	$	(1,127	)	$	(1,116	)
Other noncurrent liabilities	(3,891		)	(61,456		)	(4,097		)	(55,083		)	(22,130		)	(21,477		)
Net liability at December 31	$	(2,534	)	$	(62,712	)	$	(1,595	)	$	(56,257	)	$	(23,257	)	$	(22,593	)

The accumulated benefit obligation (“ABO”) for all defined benefit pension plans was $193.3 million and $169.5 million at December 31, 2019 and 2018, respectively.

The weighted average assumptions used in the measurement of the Company’s benefit obligation at December 31, 2019 and 2018 were as follows:



	U.S. Plans				Non-U.S. Plans				Other Benefits
	2019		2018		2019		2018		2019		2018
Discount rate	3.06	%	4.10	%	1.33	%	2.07	%	3.09	%	4.11	%
Rate of compensation increase	—	%	4.00	%	2.29	%	2.13	%	4.00	%	4.00	%

The pretax amounts recognized in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets as of December 31, 2019 and 2018 were as follows:



	Pension Benefits									Other Benefits
	2019					2018				2019			2018
	U.S.		Non-U.S.			U.S.		Non-U.S.
	(In thousands)
Prior service cost (credit)	$	46	$	(100	)	$	62	$	64	$	(46	)	$	(117	)
Net loss (gain)	21,432		19,304			22,478		12,955		(6,009		)	(6,386		)
Total	$	21,478	$	19,204		$	22,540	$	13,019	$	(6,055	)	$	(6,503	)

The amounts in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheet as of December 31, 2019 that are expected to be recognized as components of net periodic benefit cost during 2020 are as follows:



	U.S. Pension Benefit Plans		Non-U.S. Pension Benefit Plans			Other Benefit Plans			Total
	(In thousands)
Prior service cost (credit)	$	13	$	(21	)	$	(37	)	$	(45	)
Net loss (gain)	1,755		1,726			(506		)	2,975
Total	$	1,768	$	1,705		$	(543	)	$	2,930

The components of, and the weighted average assumptions used to determine, the net periodic benefit cost for the plans in 2019, 2018 and 2017 are as follows:



	Pension Benefits
	2019						2018						2017
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
Service cost	$	653		$	1,844		$	886		$	2,105		$	976		$	1,975
Interest cost	2,796			1,440			2,634			1,389			2,677			1,283
Expected return on plan assets	(3,319		)	(1,047		)	(3,943		)	(1,120		)	(3,832		)	(1,088		)
Settlement loss recognized	713			—			(1		)	(307		)	—			234
Special termination benefit recognized	276			—			—			—			—			—
Net amortization	1,614			1,117			2,712			1,271			2,566			1,809
Net periodic benefit cost	$	2,733		$	3,354		$	2,288		$	3,338		$	2,387		$	4,213



	Other Benefits
	2019			2018			2017
	(In thousands)
Service cost	$	561		$	668		$	610
Interest cost	849			810			818
Net amortization	(635		)	(737		)	(795		)
Net periodic benefit cost	$	775		$	741		$	633



	U.S. Plans						Non-U.S. Plans
	2019		2018		2017		2019		2018		2017
Discount rate	4.11%/2.99%*		3.46	%	3.91	%	2.07	%	1.82	%	1.76	%
Expected return on plan assets	4.00	%	5.50	%	5.50	%	3.12	%	3.09	%	3.20	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%	2.13	%	2.37	%	2.29	%

* A discount rate of 4.11% was used to determine the net periodic benefit cost for the period January 1, 2019 through August 31, 2019 and a discount rate of 2.99% was used to determine the net periodic benefit cost for the period September 1, 2019 through December 31, 2019 as a result of the remeasurement that occurred in conjunction with the decision to freeze the Plan.



	Other Benefits
	2019		2018		2017
Discount rate	4.11	%	3.50	%	3.94	%
Expected return on plan assets	—	%	—	%	—	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%

The pretax change recognized in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheet in 2019 is as follows:



	Pension Benefits						Other Benefits
	U.S.			Non-U.S.
	(In thousands)
Net gain (loss) in current year	$	(1,265	)	$	(7,544	)	$	161
Prior service cost	—			156			—
Amortization of prior service cost (credit)	15			6			(70		)
Amortization of net loss (gain)	2,312			1,111			(565		)
Exchange rate effect on amounts in OCI	—			86			26
Total	$	1,062		$	(6,185	)	$	(448	)

The discount rates for our plans are derived by matching the plan’s cash flows to a yield curve that provides the equivalent yields on zero-coupon bonds for each maturity. The discount rate selected is the rate that produces the same present value of cash flows.

In selecting the expected rate of return on plan assets, the Company considers the historical returns and expected returns on plan assets. The expected returns are evaluated using asset return class, variance and correlation assumptions based on the plan’s target asset allocation and current market conditions.

Prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the benefit obligation or the market value of assets are amortized over the average remaining service period of active participants.

Costs of defined contribution plans were $12.4 million, $12.2 million and $10.2 million for 2019, 2018 and 2017, respectively.

The Company, through its subsidiaries, participates in certain multi-employer pension plans covering approximately 259 participants under U.S. collective bargaining agreements. None of these plans are considered individually significant to the Company as contributions to these plans totaled $1.1 million, $1.1 million, and $1.0 million for 2019, 2018 and 2017, respectively.

For measurement purposes, a 5.84% weighted average annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019. The rate was assumed to decrease gradually each year to a rate of 4.45% for 2038, and remain at that level thereafter. Assumed health care cost trend rates have an effect on the amounts reported for the health care plans. A 1% increase in the assumed health care cost trend rates would increase the service and interest cost components of the net periodic benefit cost by $0.1 million and the health care component of the accumulated postretirement benefit obligation by $1.9 million.

A 1% decrease in the assumed health care cost trend rate would decrease the service and interest cost components of the net periodic benefit cost by $0.1 million and the health care component of the accumulated postretirement benefit obligation by $1.6 million.

Plan Assets

The Company’s pension plan weighted average asset allocations at December 31, 2019 and 2018, by asset category, were as follows:



	U.S. Plans				Non-U.S. Plans
	2019		2018		2019		2018
Equity securities	10	%	9	%	17	%	13	%
Fixed income securities	90	%	90	%	24	%	31	%
Cash/Commingled Funds/Other (1)	—	%	1	%	59	%	56	%
Total	100	%	100	%	100	%	100	%

The basis used to measure the defined benefit plans’ assets at fair value at December 31, 2019 and 2018 is summarized as follows:



	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2019	(In thousands)
Equity
U.S. Large Cap	$	4,734	$	4,734	$	—	$	—
U.S. Small / Mid Cap	455		—		455		—
International	10,845		5,258		5,587		—
Fixed Income
U.S. Intermediate	640		—		640		—
U.S. Long Term	83,628		—		83,628		—
U.S. High Yield	1,346		—		1,346		—
International	7,516		296		7,220		—
Other Commingled Funds (1)	19,438		—		—		19,438
Cash and Equivalents	1,094		517		577		—
Other	3,021		—		3,021		—
	$	132,717	$	10,805	$	102,474	$	19,438


(1)	Other commingled funds represent pooled institutional investments in non-U.S. plans.



	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2018	(In thousands)
Equity
U.S. Large Cap	$	3,759	$	3,759	$	—	$	—
U.S. Small / Mid Cap	770		—		770		—
International	7,532		4,445		3,087		—
Fixed Income
U.S. Intermediate	581		—		581		—
U.S. Long Term	75,096		—		75,096		—
U.S. High Yield	1,098		—		1,098		—
International	8,604		244		8,360		—
Other Commingled Funds (1)	15,555		—		—		15,555
Cash and Equivalents	1,944		1,074		870		—
Other	2,173		—		2,173		—
	$	117,112	$	9,522	$	92,035	$	15,555


(1)	Other commingled funds represent pooled institutional investments in non-U.S. plans.

Equities that are valued using quoted prices are valued at the published market prices. Equities in a common collective trust or a registered investment company that are valued using significant other observable inputs are valued at the net asset value (“NAV”) provided by the fund administrator. The NAV is based on the value of the underlying assets owned by the fund minus its liabilities. Fixed income securities that are valued using significant other observable inputs are valued at prices obtained from independent financial service industry-recognized vendors.

Investment Policies and Strategies

The investment objective of the U.S. plan, consistent with prudent standards for preservation of capital and maintenance of liquidity, is to earn the highest possible total rate of return consistent with the plan’s tolerance for risk. The general asset allocation guidelines for plan assets are that “equities” will constitute 10% and “fixed income” obligations, including cash, will constitute from 90% of the market value of total fund assets. The investment objective of the UK plan, consistent with prudent standards for preservation of capital and maintenance of liquidity, is to earn a target return of UK Gilts plus 2.5% per year. The general asset allocation guidelines for plan assets are that “equities” will constitute from 40% to 50% of the market value of total fund assets with a target of 40%, and “fixed income” obligations, including cash, will constitute from 50% to 60% with a target of 60%. The term “equities” includes common stock, while the term “fixed income” includes obligations with contractual payments and a specific maturity date. The Company, through the use of a professional independent advisor, will monitor the asset allocation daily and maintain an asset allocation that closely replicates the designated targets. Diversification of assets is employed to ensure that adverse performance of one security or security class does not have an undue detrimental impact on the portfolio as a whole. Diversification is interpreted to include diversification by type, characteristic and number of investments as well as by investment style of designated investment fund managers. No restrictions are placed on the selection of individual investments by the investment fund managers. The total fund performance and the performance of the investment fund managers is reviewed on a regular basis using an appointed professional independent advisor. As of December 31, 2019, there were no shares of the Company’s stock held in plan assets.

Cash Flows

The Company expects to contribute approximately $3.0 million to its defined benefit plans and $1.1 million to its other postretirement benefit plans in 2020. The Company also expects to contribute approximately $12.8 million to its defined contribution plan and $10.2 million to its 401(k) savings plan in 2020.

Estimated Future Benefit Payments

The future estimated benefit payments for the next five years and the five years thereafter are as follows: 2020 — $49.4 million; 2021 — $49.2 million; 2022 — $5.7 million; 2023 — $5.6 million; 2024 — $5.9 million; 2025 to 2029 — $30.7 million.