Pension and Other Postretirement Benefits

We sponsor defined benefit pension plans and defined contribution plans that cover substantially all employees in Canada, the Netherlands, the United Kingdom, the U.S., and certain employees in Germany and Japan. Our plans in the United Kingdom include SAM's defined contribution and defined benefit plans which we acquired during 2018 (see Note 4). The SAM defined benefit plans are frozen and additional benefits are not being earned by the participants. We closed the U.S. defined benefit pension plan to new entrants effective January 1, 2010. Employees who were not active participants in the U.S. defined benefit pension plan on December 31, 2009, are not eligible to participate in the plan. During 2017, we sold our MCS business and its associated pension liabilities. Annual contributions to retirement plans equal or exceed the minimum funding requirements of applicable local regulations. The assets of the funded pension plans we sponsor are maintained in various trusts and are invested primarily in equity and fixed income securities.

Benefits provided to employees under defined contribution plans include cash contributions by the Company based on either hours worked by the employee or a percentage of the employee’s compensation. Defined contribution expense for 2018, 2017, and 2016 was $15.2 million, $13.9 million, and $13.5 million, respectively.

We sponsor unfunded postretirement medical and life insurance benefit plans for certain of our employees in Canada and the U.S. The medical benefit portion of the U.S. plan is only for employees who retired prior to 1989 as well as certain other employees who were near retirement and elected to receive certain benefits.

The following tables provide a reconciliation of the changes in the plans’ benefit obligations and fair value of assets as well as a statement of the funded status and balance sheet reporting for these plans.



	Pension Benefits						Other Benefits
Years Ended December 31,	2018			2017			2018			2017
				(In thousands)
Change in benefit obligation:
Benefit obligation, beginning of year	$	(272,025	)	$	(256,481	)	$	(30,333	)	$	(32,038	)
Service cost	(4,705		)	(4,978		)	(47		)	(49		)
Interest cost	(11,690		)	(7,671		)	(945		)	(1,139		)
Participant contributions	(85		)	(91		)	(6		)	(7		)
Actuarial gain (loss)	15,032			(3,291		)	1,681			3,370
Divestitures (acquisitions)	(185,692		)	794			—			—
Settlements	7,437			49			—			—
Plan amendments	(2,822		)	—			—			—
Foreign currency exchange rate changes	23,454			(14,299		)	2,020			(2,022		)
Benefits paid	12,849			13,943			1,487			1,552
Benefit obligation, end of year	$	(418,247	)	$	(272,025	)	$	(26,143	)	$	(30,333	)



	Pension Benefits						Other Benefits
Years Ended December 31,	2018			2017			2018			2017
				(In thousands)
Change in plan assets:
Fair value of plan assets, beginning of year	$	198,156		$	182,370		$	—		$	—
Actual return on plan assets	(8,364		)	18,746			—			—
Employer contributions	5,397			4,425			1,481			1,545
Plan participant contributions	85			91			6			7
Acquisitions	153,919			—			—			—
Settlements	(7,054		)	—			—			—
Foreign currency exchange rate changes	(17,616		)	6,467			—			—
Benefits paid	(12,849		)	(13,943		)	(1,487		)	(1,552		)
Fair value of plan assets, end of year	$	311,674		$	198,156		$	—		$	—



Funded status, end of year	$	(106,573	)	$	(73,869	)	$	(26,143	)	$	(30,333	)
Amounts recognized in the balance sheets:
Prepaid benefit cost	$	4,801		$	3,174		$	—		$	—
Accrued benefit liability (current)	(3,320		)	(3,736		)	(1,405		)	(1,555		)
Accrued benefit liability (noncurrent)	(108,054		)	(73,307		)	(24,738		)	(28,778		)
Net funded status	$	(106,573	)	$	(73,869	)	$	(26,143	)	$	(30,333	)

The accumulated benefit obligation for all defined benefit pension plans was $412.4 million and $269.2 million at December 31, 2018 and 2017, respectively.

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with a projected benefit obligation in excess of plan assets were $368.5 million, $362.6 million, and $257.1 million, respectively, as of December 31, 2018 and were $215.6 million, $212.7 million, and $138.5 million, respectively, as of December 31, 2017.

The accumulated benefit obligation and fair value of plan assets for other postretirement benefit plans with an accumulated benefit obligation in excess of plan assets were $26.1 million and $0.0 million, respectively, as of December 31, 2018 and were $30.3 million and $0.0 million, respectively, as of December 31, 2017.

The following table provides the components of net periodic benefit costs for the plans.



	Pension Benefits									Other Benefits
Years Ended December 31,	2018			2017			2016			2018			2017		2016
							(In thousands)
Components of net periodic benefit cost:
Service cost	$	4,705		$	4,978		$	4,981		$	47		$	49	$	46
Interest cost	11,690			7,671			8,909			945			1,139		1,259
Expected return on plan assets	(16,391		)	(10,644		)	(12,013		)	—			—		—
Amortization of prior service credit	(42		)	(41		)	(42		)	—			—		(42		)
Curtailment gain	—			—			(227		)	—			—		—
Settlement loss (gain)	1,342			(8		)	7,630			—			—		—
Net loss (gain) recognition	2,810			2,597			2,670			(12		)	—		86
Net periodic benefit cost	$	4,114		$	4,553		$	11,908		$	980		$	1,188	$	1,349

We recorded settlement losses totaling $1.3 million and $7.6 million during 2018 and 2016, respectively. These settlement losses were the result of lump-sum payments to participants that exceeded the sum of the pension plan's respective annual service cost and interest cost amounts.

The following table presents the assumptions used in determining the benefit obligations and the net periodic benefit cost amounts.



	Pension Benefits				Other Benefits
Years Ended December 31,	2018		2017		2018		2017
Weighted average assumptions for benefit obligations at year end:
Discount rate	3.1	%	2.8	%	3.7	%	3.3	%
Salary increase	3.6	%	3.6	%	N/A		N/A
Cash balance interest credit rate	4.7	%	4.7	%	N/A		N/A
Weighted average assumptions for net periodic cost for the year:
Discount rate	2.8	%	3.1	%	3.3	%	3.7	%
Salary increase	3.6	%	3.6	%	N/A		N/A
Cash balance interest credit rate	4.7	%	4.7	%	N/A		N/A
Expected return on assets	5.5	%	6.0	%	N/A		N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year	N/A		N/A		5.8	%	6.2	%
Rate that the cost trend rate gradually declines to	N/A		N/A		5.0	%	5.0	%
Year that the rate reaches the rate it is assumed to remain at	N/A		N/A		2025		2024

Plan assets are invested using a total return investment approach whereby a mix of equity securities and fixed income securities are used to preserve asset values, diversify risk, and achieve our target investment return benchmark. Investment strategies and asset allocations are based on consideration of the plan liabilities, the plan’s funded status, and our financial condition. Investment performance and asset allocation are measured and monitored on an ongoing basis.

Plan assets are managed in a balanced portfolio comprised of two major components: an asset growth portion and an asset protection portion. The expected role of asset growth investments is to maximize the long-term real growth of assets, while the role of asset protection investments is to generate current income, provide for more stable periodic returns, and provide some protection against a permanent loss of capital.

Absent regulatory or statutory limitations, the target asset allocation for the investment of the assets for our ongoing pension plans is 30-40% in asset protection investments and 60-70% in asset growth investments and for our pension plans where the majority of the participants are in payment or terminated vested status is 55-90% in asset protection investments and 10-45% in asset growth investments. Asset growth investments include a diversified mix of U.S. and international equity, primarily invested through investment funds. Asset protection investments include government securities and investment grade corporate bonds, primarily invested through investment funds and group insurance contracts. We develop our expected long-term rate of return assumptions based on the historical rates of returns for securities and instruments of the type in which our plans invest.

The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the invested assets and future assets to be invested to provide for the benefits included in the projected benefit obligation. We use historic plan asset returns combined with current market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption based on an analysis of historical and forward looking returns considering the plan’s actual and target asset mix.

The following table presents the fair values of the pension plan assets by asset category.



	December 31, 2018								December 31, 2017
	Fair Market Value at December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Market Value at December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)								(In thousands)
Asset Category:
Equity securities(a)
U.S. equities fund	$	96,417	$	1,465	$	—	$	—	$	95,425	$	—	$	—	$	—
Non-U.S. equities fund	47,274		5,755		—		—		11,571		—		—		—
Debt securities(b)
Government bond fund	66,439		—		1,253		—		28,429		—		—		—
Corporate bond fund	39,366		—		7,116		—		24,421		—		—		—
Fixed income fund(c)	41,167		—		39,340		—		38,072		—		38,072		—
Other investments(d)	17,274		—		—		—		—		—		—		—
Cash & equivalents	3,737		301		—		—		238		238		—		—
Total	$	311,674	$	7,521	$	47,709	$	—	$	198,156	$	238	$	38,072	$	—

(a)

This category includes investments in actively managed and indexed investment funds that invest in a diversified pool of equity securities of companies located in the U.S., Canada, Western Europe and other developed countries throughout the world. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund. Equity securities held in separate accounts are valued based on observable quoted prices on active exchanges. Funds which are valued using the net asset value method are not included in the fair value hierarchy.

(b)

This category includes investments in investment funds that invest in U.S. treasuries; other national, state and local government bonds; and corporate bonds of highly rated companies from diversified industries. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund. Funds valued using the net asset value method are not included in the fair value hierarchy.


(c)	This category includes guaranteed insurance contracts and annuity policies.


(d)	This category includes investments in hedge funds that pursue multiple strategies in order to provide diversification and balance risk/return objectives, real estate funds, and private equity funds. Funds valued using the net asset method are not included in the fair value hierarchy.

The plans do not invest in individual securities. All investments are through well diversified investment funds. As a result, there are no significant concentrations of risk within the plan assets.

The following table reflects the benefits as of December 31, 2018 expected to be paid in each of the next five years and in the aggregate for the five years thereafter from our pension and other postretirement plans. Because our other postretirement plans are unfunded, the anticipated benefits with respect to these plans will come from our own assets. Because our pension plans are primarily funded plans, the anticipated benefits with respect to these plans will come primarily from the trusts established for these plans.



	Pension Plans		Other Plans
	(In thousands)
2019	$	21,667	$	1,432
2020	22,965		1,436
2021	22,199		1,438
2022	23,157		1,438
2023	22,081		1,432
2024-2028	111,338		7,196
Total	$	223,407	$	14,372

We anticipate contributing $6.3 million and $1.4 million to our pension and other postretirement plans, respectively, during 2019.

The pre-tax amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31, 2018 and the changes in these amounts during the year ended December 31, 2018 are as follows.



	Pension Benefits		Other Benefits
	(In thousands)
Components of accumulated other comprehensive loss:
Net actuarial loss (gain)	$	48,466	$	(3,047	)
Net prior service cost	2,734		—
	$	51,200	$	(3,047	)



	Pension Benefits			Other Benefits
	(In thousands)
Changes in accumulated other comprehensive loss:
Net actuarial loss (gain), beginning of year	$	44,359		$	(1,545	)
Amortization of actuarial gain (loss)	(2,810		)	12
Actuarial gain	(15,032		)	(1,681		)
Asset loss	24,755			—
Settlement loss recognized	(1,342		)	—
Currency impact	(1,464		)	167
Net actuarial loss (gain), end of year	$	48,466		$	(3,047	)
Prior service cost, beginning of year	$	11		$	—
Amortization of prior service credit	42			—
Prior service cost occurring during the year	2,822			—
Currency impact	(141		)	—
Prior service cost, end of year	$	2,734		$	—