PENSION, POST-RETIREMENT AND OTHER LONG-TERM EMPLOYEE BENEFIT PLANS

The Company has several contributory and non-contributory defined contribution plans and defined benefit plans for substantially all its employees in Canada and the US.

Defined contribution plans

In the US, the Company maintains a savings retirement plan (401(k) Plan) for the benefit of certain employees who have been employed for at least 90 days. Contribution to this plan is at the discretion of the Company. Among investment options available to participants is a common trust fund that holds cash and common shares of the Company. The Company also maintains 401(k) plans according to the terms of certain collective bargaining agreements.

The Company also contributes to multi-employer plans for employees covered by certain collective bargaining agreements.

In Canada, the Company maintains defined contribution pension plans for its salaried employees and contributes amounts equal to 4% of each participant’s eligible salary. Among investment options available to participants is a common trust fund that holds cash and common shares of the Company.

The amount expensed with respect to the defined contribution plans for the years ended December 31, was $7.1 million in 2019, $3.5 million in 2018 and $4.7 million in 2017.

Defined benefit plans

The Company has, in the US, three defined benefit pension plans (hourly and salaried). Benefits for employees are based on compensation and years of service for salaried employees and fixed benefits per month for each year of service for hourly employees.

In Canada, certain non-union hourly employees of the Company are covered by a plan which provides a fixed benefit per month for each year of service.

In the US, the Company provides group health care benefits to certain retirees. In Canada, the Company provides group health care, dental and life insurance benefits for eligible retired employees.

All defined benefit plans described above are closed to new entrants.

Supplementary executive retirement plans

The Company has Supplementary Executive Retirement Plans (“SERPs”) to provide supplemental pension benefits to certain key executives. The SERPs are not funded and provide for an annual pension benefit, from retirement or termination date, in amounts ranging from $0.2 million to $0.6 million, annually.

Other long-term employee benefit plans

In the US, the Company provides a deferred compensation plan to certain employees. Earnings and losses on the deferral and amounts due to the participants are payable based on participant elections. Assets are held in a Rabbi trust and are composed of corporate owned life insurance policies. Participant investment selections are used to direct the allocation of funds underlying the corporate owned life insurance policies. As of December 31, 2019, the deferred compensation plans assets and liabilities totalled $4.0 million ($2.4 million as of December 31, 2018) and $4.0 million ($2.6 million as of December 31, 2018), respectively, and are presented in other assets and other liabilities, respectively, in the consolidated balance sheets.

Governance and oversight

The defined benefit pension plans sponsored by the Company are subject to the requirements of the Employee Retirement Income Security Act and related legislation in the US and the Canadian Income Tax Act and provincial legislation in Ontario and Nova Scotia. In addition, all actuarial computations related to defined benefit plans are based on actuarial assumptions and methods determined in accordance with the generally recognized and accepted actuarial principles and practices prescribed by the Actuarial Standards Board, the American Academy of Actuaries and the Canadian Institute of Actuaries.

Minimum funding requirements are computed based on methodologies and assumptions dictated by regulation in the US and Canada. The Company’s practice is to fund at least the statutory minimum required amount for each defined benefit plan’s plan year. However, on September 12, 2018, the Company made an $11.3 million discretionary contribution to its US defined benefit pension plans. These plans are near wholly funded on an accounting basis and as a result, the Company expects to reduce future contribution requirements and certain plan administration expenses. During the year ended December 31, 2018, the Company recognized a net federal tax benefit of approximately $1.3 million primarily due to the discretionary contribution deducted on the 2017 tax return at the higher 2017 US corporate tax rate, partially offset by the reversal of the related deferred tax asset recorded using the lower US corporate tax rate provided under the TCJA. Refer to Note 5 for additional information on the TCJA.

The Company’s Investment Committee, composed of the Company’s Chief Financial Officer, Vice President of Human Resources, Vice President of Treasury, Corporate Controller and General Counsel, makes investment decisions for the Company’s pension plans. The asset liability matching strategy of the pension plans and plan asset performance is reviewed semi-annually in terms of risk and return profiles with external investment management advisors, actuaries and plan trustees. The Investment Committee, together with external investment management advisors, actuaries and plan trustees, has established a target mix of equity, fixed income, and alternative securities based on funded status level and other variables of each defined benefit plan.

The assets of the funded or partially funded defined benefit pension plans are held separately from those of the Company in funds under the control of trustees.

Information Relating to the Various Benefit Plans

A reconciliation of the defined benefit obligations and plan assets is presented in the table below for the years ended:



	Pension Plans				Other plans
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
	$		$		$		$
Defined benefit obligations
Balance, beginning of year	80,696		86,462		2,780		3,152
Current service cost	1,036		1,193		60		44
Interest cost	3,228		3,031		106		106
Benefits paid	(5,476	)	(3,701	)	(70	)	(71	)
Actuarial (gains) losses from demographic assumptions	(542	)	(163	)	17		21
Actuarial losses (gains) from financial assumptions	10,924		(5,186	)	209		(210	)
Experience losses (gains)	692		266		(273	)	(113	)
Foreign exchange rate adjustment	590		(1,206	)	78		(149	)
Balance, end of year	91,148		80,696		2,907		2,780
Fair value of plan assets
Balance, beginning of year	68,578		60,316		—		—
Interest income	2,713		2,217		—		—
Return on plan assets (excluding amounts included in net interest expense)	11,789		(2,369	)	—		—
Contributions by the employer	1,261		13,805		—		—
Benefits paid	(5,476	)	(3,701	)	—		—
Administration expenses	(422	)	(611	)	—		—
Foreign exchange rate adjustment	560		(1,079	)	—		—
Balance, end of year	79,003		68,578		—		—
Funded status – deficit	12,145		12,118		2,907		2,780

The defined benefit obligations and fair value of plan assets broken down by geographical locations is as follows for the years ended:



	December 31, 2019
	US		Canada		Total
	$		$		$
Defined benefit obligations	75,571		18,484		94,055
Fair value of plan assets	(63,877	)	(15,126	)	(79,003	)
Deficit in plans	11,694		3,358		15,052

	December 31, 2018
	US		Canada		Total
	$		$		$
Defined benefit obligations	68,411		15,065		83,476
Fair value of plan assets	(56,186	)	(12,392	)	(68,578	)
Deficit in plans	12,225		2,673		14,898

The defined benefit obligations for pension plans broken down by funding status are as follows for the years ended:



	December 31, 2019	December 31, 2018
	$	$
Wholly unfunded	12,187	10,567
Wholly funded or partially funded	78,961	70,129
Total obligations	91,148	80,696

A reconciliation of pension and other post-retirement benefits recognized in the consolidated balance sheets is as follows for the years ended:



	December 31, 2019	December 31, 2018
	$	$
Pension Plans
Present value of the defined benefit obligations	91,148	80,696
Fair value of the plan assets	79,003	68,578
Deficit in plans	12,145	12,118
Assets recognized in Other assets	1,966	—
Liabilities recognized	14,111	12,118
Pension benefits recognized in balance sheets	12,145	12,118
Other plans
Present value of the defined benefit obligations and deficit in the plans	2,907	2,780
Liabilities recognized	2,907	2,780
Total plans
Total assets recognized in Other assets	1,966	—
Total liabilities recognized	17,018	14,898
Total pension and other post-retirement benefits recognized in balance sheets	15,052	14,898

The composition of plan assets based on the fair value was as follows for the years ended:



	December 31, 2019	December 31, 2018
	$	$
Asset category
Cash	110	106
Equity instruments	13,753	10,682
Fixed income instruments	65,140	57,790
Total	79,003	68,578

Approximately 100% of equity and fixed income instruments as of December 31, 2019 and 2018, respectively, were held in mutual funds or pooled separate accounts valued at 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, and then divided by the number of shares outstanding. Units of participation in pooled separate accounts invested in mutual funds and common stock, are valued based on the NAV of the underlying investments held in the pooled separate accounts at year-end. None of the benefit plan assets were invested in any of the Company’s own equity or financial instruments or in any property or other asset that was used by the Company.

The following tables present the defined benefit expenses recognized in consolidated earnings for each of the years in the three-year period ended December 31, 2019:



	Pension Plans			Other plans
	2019	2018	2017	2019	2018	2017
	$	$	$	$	$	$
Current service cost	1,036	1,193	1,076	60	44	46
Administration expenses	422	611	507	—	—	—
Net interest expense	515	814	1,071	106	106	111
Net costs recognized in the statement of consolidated earnings	1,973	2,618	2,654	166	150	157



	Total Plans
	2019	2018	2017
	$	$	$
Current service cost	1,096	1,237	1,122
Administration expenses	422	611	507
Net interest expense	621	920	1,182
Net costs recognized in the statement of consolidated earnings	2,139	2,768	2,811

The table below presents the defined benefit liability or asset remeasurement recognized in OCI for each of the years in the three-year period ended December 31, 2019:



	Pension Plans						Other plans
	2019		2018		2017		2019		2018		2017
	$		$		$		$		$		$
Actuarial gains (losses) from demographic assumptions	542		163		1,052		(17	)	(21	)	565
Actuarial (losses) gains from financial assumptions	(10,924	)	5,186		(3,989	)	(209	)	210		(133	)
Experience (losses) gains	(692	)	(266	)	(2,077	)	273		113		(707	)
Return on plan assets (excluding amounts included in net interest expense)	11,789		(2,369	)	5,591		—		—		—
Total amounts recognized in OCI	715		2,714		577		47		302		(275	)

The Company currently expects to contribute a total of $1.2 million to its defined benefit pension plans and $0.2 million to its health and welfare plans in 2020.

The weighted average duration of the defined benefit obligations as of December 31, 2019 and 2018 is 12 years for US plans and 18 years for Canadian plans, for both periods.

The significant weighted average assumptions which were used to measure defined benefit obligations are as follows for the years ended:



	US plans				Canadian plans
	12/31/2019		12/31/2018		12/31/2019		12/31/2018
Discount rate
Pension plans (End of the Year)⁽¹⁾	2.98	%	4.05	%	3.15	%	3.95	%
Pension plans (Current Service Cost) ⁽²⁾	4.13	%	3.69	%	4.10	%	3.55	%
Other plans (End of the Year) ⁽¹⁾	2.60	%	3.71	%	3.15	%	3.95	%
Other plans (Current Service Cost) ⁽²⁾	3.91	%	4.17	%	4.10	%	3.55	%
Life expectancy at age 65 (in years) ⁽³⁾
Current pensioner - Male	20		20		22		22
Current pensioner - Female	22		22		25		25
Current member aged 45 - Male	21		22		23		23
Current member aged 45 - Female	23		24		26		26


⁽¹⁾	Represents the discount rate used to calculate the accrued benefit obligation at the end of the year and applied to other components such as interest cost in the following year.


⁽²⁾	Represents the discount rate used to calculate annual service cost.


⁽³⁾	Utilizes mortality tables issued by the Society of Actuaries and the Canadian Institute of Actuaries.

Significant actuarial assumptions for defined benefit obligation measurement purposes are the discount rate and mortality rate. The sensitivity analysis below has been determined based on reasonably possible changes in the assumptions, in isolation from one another, occurring at the end of the reporting period. This analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in the assumptions would occur in isolation from one another as some of the assumptions may be correlated. An increase or decrease of 1% in the discount rate or an increase or decrease of one year in mortality rate would result in the following increase (decrease) in the defined benefit obligations:



	12/31/2019		12/31/2018
	$		$
Discount rate
Increase of 1%	(11,157	)	(9,539	)
Decrease of 1%	13,812		11,729
Mortality rate
Life expectancy increased by one year	2,891		2,263
Life expectancy decreased by one year	(3,155	)	(2,392	)