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Retirement Plans, Postretirement and Postemployment Benefits
 12 Months Ended
Dec. 31, 2019
Compensation And Retirement Disclosure [Abstract]  
Retirement Plans, Postretirement and Postemployment Benefits

Note K: Retirement Plans, Postretirement and Postemployment Benefits

The Company sponsors defined benefit retirement plans that cover substantially all employees. Additionally, the Company provides other postretirement benefits for certain employees, including medical benefits for retirees and their spouses and retiree life insurance. Employees starting on or after January 1, 2002 are not eligible for postretirement welfare plans. The Company also provides certain benefits, such as disability benefits, to former or inactive employees after employment but before retirement.  

The measurement date for the Company’s defined benefit plans, postretirement benefit plans and postemployment benefit plans is December 31.

Defined Benefit Retirement Plans. Retirement plan assets are invested in listed stocks, bonds, hedge funds, real estate and cash equivalents. Defined retirement benefits for salaried employees are based on each employee’s years of service and average compensation for a specified period of time before retirement. Defined retirement benefits for hourly employees are generally stated amounts for specified periods of service.

The Company sponsors a Supplemental Excess Retirement Plan (SERP) that generally provides for the payment of retirement benefits in excess of allowable Internal Revenue Code limits. The SERP generally provides for a lump-sum payment of vested benefits. When these benefit payments exceed the sum of the service and interest costs for the SERP during a year, the Company recognizes a pro rata portion of the SERP’s unrecognized actuarial loss as settlement expense.  

The net periodic retirement benefit cost of defined benefit plans includes the following components:

 

years ended December 31

(in millions)

 

2019

 

 

2018

 

 

2017

 

Service cost

 

$

30.8

 

 

$

31.7

 

 

$

26.9

 

Interest cost

 

 

37.6

 

 

 

33.2

 

 

 

36.1

 

Expected return on assets

 

 

(47.9

)

 

 

(46.0

)

 

 

(39.8

)

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost

 

 

—

 

 

 

0.1

 

 

 

0.3

 

Actuarial loss

 

 

16.0

 

 

 

12.8

 

 

 

14.1

 

Settlement charge

 

 

—

 

 

 

2.9

 

 

 

—

 

Net periodic benefit cost

 

$

36.5

 

 

$

34.7

 

 

$

37.6

 

 

The components of net periodic benefit cost, other than service cost, are included in the line item Other nonoperating expenses and (income), net, in the consolidated statements of earnings.

The expected return on assets is calculated by applying an annually selected expected rate of return assumption to the estimated fair value of the plan assets, giving consideration to contributions and benefits paid.

The Company recognized the following amounts in consolidated comprehensive earnings:

 

years ended December 31

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

 

2017

 

Actuarial loss

 

$

11.7

 

 

$

32.1

 

 

$

13.3

 

Net prior service cost

 

 

6.4

 

 

 

—

 

 

 

—

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost

 

 

—

 

 

 

(0.1

)

 

 

(0.3

)

Actuarial loss

 

 

(16.0

)

 

 

(12.8

)

 

 

(14.1

)

Settlement charge

 

 

—

 

 

 

(2.9

)

 

 

—

 

Total

 

$

2.1

 

 

$

16.3

 

 

$

(1.1

)

 

Accumulated other comprehensive loss includes the following amounts that have not yet been recognized in net periodic benefit cost:

 

December 31

 

2019

 

 

2018

 

(in millions)

 

Gross

 

 

Net of tax

 

 

Gross

 

 

Net of tax

 

Prior service cost

 

$

6.4

 

 

$

4.0

 

 

$

—

 

 

$

—

 

Actuarial loss

 

 

229.4

 

 

 

144.5

 

 

 

233.7

 

 

 

146.6

 

Total

 

$

235.8

 

 

$

148.5

 

 

$

233.7

 

 

$

146.6

 

 

The prior service cost and actuarial loss expected to be recognized in net periodic benefit cost during 2020 are $0.7 million (net of deferred taxes of $0.2 million) and $13.5 million (net of deferred taxes of $3.3 million), respectively. These amounts are included in accumulated other comprehensive loss at December 31, 2019.

The defined benefit plans’ change in projected benefit obligation is as follows:

 

years ended December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Net projected benefit obligation at beginning of year

 

$

847.9

 

 

$

879.3

 

Service cost

 

 

30.8

 

 

 

31.7

 

Interest cost

 

 

37.6

 

 

 

33.2

 

Actuarial loss (gain)

 

 

95.2

 

 

 

(54.6

)

Plan amendments

 

 

6.4

 

 

 

—

 

Gross benefits paid

 

 

(40.1

)

 

 

(41.7

)

Net projected benefit obligation at end of year

 

$

977.8

 

 

$

847.9

 

 

The Company’s change in plan assets, funded status and amounts recognized on the Company’s consolidated balance sheets are as follows:

 

years ended December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Fair value of plan assets at beginning of year

 

$

717.9

 

 

$

638.1

 

Actual return on plan assets, net

 

 

131.3

 

 

 

(40.8

)

Employer contributions

 

 

58.9

 

 

 

162.3

 

Gross benefits paid

 

 

(40.1

)

 

 

(41.7

)

Fair value of plan assets at end of year

 

$

868.0

 

 

$

717.9

 

 

December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Funded status of the plan at end of year

 

$

(109.8

)

 

$

(130.0

)

Accrued benefit cost

 

$

(109.8

)

 

$

(130.0

)

 

December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Amounts recognized on consolidated balance sheets consist of:

 

 

 

 

 

 

 

 

Current liability

 

$

(6.4

)

 

$

(9.0

)

Noncurrent liability

 

 

(103.4

)

 

 

(121.0

)

Net amount recognized at end of year

 

$

(109.8

)

 

$

(130.0

)

 

The accumulated benefit obligation for all defined benefit pension plans was $878.7 million and $771.9 million at December 31, 2019 and 2018, respectively.

Benefit obligations and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets are as follows:

 

December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Projected benefit obligation

 

$

107.1

 

 

$

98.7

 

Accumulated benefit obligation

 

$

96.4

 

 

$

85.5

 

Fair value of plan assets

 

$

0.6

 

 

$

0.6

 

 

Weighted-average assumptions used to determine benefit obligations as of December 31 are:

 

 

 

2019

 

 

2018

 

Discount rate

 

3.69%

 

 

4.38%

 

Rate of increase in future compensation levels

 

4.50%

 

 

4.50%

 

 

Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 are:

 

 

 

2019

 

 

2018

 

 

2017

 

Discount rate

 

4.38%

 

 

3.76%

 

 

4.29%

 

Rate of increase in future compensation levels

 

4.50%

 

 

4.50%

 

 

4.50%

 

Expected long-term rate of return on assets

 

6.75%

 

 

6.75%

 

 

6.75%

 

 

The expected long-term rate of return on assets is based on a building-block approach, whereby the components are weighted based on the allocation of pension plan assets.

As of December 31, 2019 and 2018, the Company estimated the remaining lives of participants in the pension plans using the Pri-2012 and RP-2014 Base tables, respectively.  The no-collar table was used for salaried participants and the blue-collar table was used for hourly participants; both tables were adjusted to reflect the experience of the Company’s participants.  The Company used the MP-2018 mortality improvement scale for the years 2019 and 2018.

The target allocation for 2019 and the actual pension plan asset allocation by asset class are as follows:

 

 

Percentage of Plan Assets

 

 

 

2019

 

 

 

 

 

 

Target

 

 

December 31

 

Asset Class

 

Allocation

 

 

2019

 

 

2018

 

Equity securities

 

56%

 

 

64%

 

 

57%

 

Debt securities

 

30%

 

 

28%

 

 

32%

 

Hedge funds

 

4%

 

 

3%

 

 

6%

 

Real estate

 

10%

 

 

5%

 

 

5%

 

Total

 

100%

 

 

100%

 

 

100%

 

 

The Company’s investment strategy is for approximately 45% of equity securities, excluding hedge funds and real estate, to be invested in mid-sized to large capitalization U.S. funds, with the remaining invested in small capitalization, emerging markets and international funds. Debt securities, or fixed income investments, are invested in funds benchmarked to the Barclays U.S. Aggregate Bond Index.

The fair values of pension plan assets by asset class and fair value hierarchy level are as follows:

 

 

Fair Value Measurements

 

 

 

 

 

 

 

 

 

December 31

 

Quoted Prices

in Active

Markets

for Identical

Assets

(Level 1)

 

 

Significant

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

 

Net Asset

Value

 

 

Total Fair

Value

 

(in millions)

 

2019

 

Equity securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-sized to large cap

 

$

—

 

 

$

—

 

 

$

—

 

 

$

262.5

 

 

$

262.5

 

Small cap, international and emerging growth funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

290.3

 

 

 

290.3

 

Debt securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core fixed income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

242.9

 

 

 

242.9

 

Real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

42.9

 

 

 

42.9

 

Hedge funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

26.4

 

 

 

26.4

 

Cash equivalents

 

 

3.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3.0

 

Total

 

$

3.0

 

 

$

—

 

 

$

—

 

 

$

865.0

 

 

$

868.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

Equity securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-sized to large cap

 

$

—

 

 

$

—

 

 

$

—

 

 

$

196.5

 

 

$

196.5

 

Small cap, international and emerging growth funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

210.4

 

 

 

210.4

 

Debt securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core fixed income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

228.2

 

 

 

228.2

 

Real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

35.5

 

 

 

35.5

 

Hedge funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

44.4

 

 

 

44.4

 

Cash equivalents

 

 

2.9

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2.9

 

Total

 

$

2.9

 

 

$

—

 

 

$

—

 

 

$

715.0

 

 

$

717.9

 

1

These investments are common collective investment trusts valued using the net asset value (NAV) unit price provided by the fund administrator. The NAV is based on the value of the underlying assets owned by the fund. 

Real estate investments are stated at estimated fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of real estate investments generally do not reflect transaction costs that may be incurred upon disposition of the real estate investments and do not necessarily represent the prices at which the real estate investments would be sold or repaid, since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller. An independent valuation consultant is employed to determine the fair value of the real estate investments. The value of hedge funds is based on the values of the sub-fund investments. In determining the fair value of each sub-fund’s investment, the hedge funds’ Board of Trustees uses the values provided by the sub-funds and any other considerations that may, in its judgment, increase or decrease such estimated value.

In 2019 and 2018, the Company made combined pension plan and SERP contributions of $58.9 million and $162.3 million, respectively. The Company currently estimates that it will contribute $60.2 million to its pension plans in 2020.

The expected benefit payments to be paid from plan assets for each of the next five years and the five-year period thereafter are as follows:

 

(in millions)

 

 

 

 

2020

 

$

43.5

 

2021

 

$

44.8

 

2022

 

$

46.2

 

2023

 

$

47.6

 

2024

 

$

50.9

 

Years 2025 - 2029

 

$

271.0

 

 

Postretirement Benefits. The net periodic postretirement benefit credit for postretirement plans includes the following components:

 

years ended December 31

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

 

2017

 

Service cost

 

$

0.1

 

 

$

0.1

 

 

$

0.1

 

Interest cost

 

 

0.6

 

 

 

0.5

 

 

 

0.7

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

Prior service credit

 

 

(0.8

)

 

 

(2.1

)

 

 

(1.7

)

Actuarial gain

 

 

(0.5

)

 

 

(0.2

)

 

 

(0.4

)

Total net periodic benefit credit

 

$

(0.6

)

 

$

(1.7

)

 

$

(1.3

)

 

The components of net periodic benefit credit, other than service cost, are included in the line item Other nonoperating expenses and (income), net, in the consolidated statements of earnings.

The Company recognized the following amounts in consolidated comprehensive earnings:

 

years ended December 31

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

 

2017

 

Actuarial loss (gain)

 

$

1.0

 

 

$

(1.7

)

 

$

1.2

 

Net prior service credit

 

 

—

 

 

 

—

 

 

 

(3.9

)

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

Prior service credit

 

 

0.8

 

 

 

2.1

 

 

 

1.7

 

Actuarial gain

 

 

0.5

 

 

 

0.2

 

 

 

0.4

 

Total

 

$

2.3

 

 

$

0.6

 

 

$

(0.6

)

 

Accumulated other comprehensive loss includes the following amounts that have not yet been recognized in net periodic benefit credit:

 

December 31

 

2019

 

 

2018

 

(in millions)

 

Gross

 

 

Net of tax

 

 

Gross

 

 

Net of tax

 

Prior service credit

 

$

(3.0

)

 

$

(1.9

)

 

$

(3.8

)

 

$

(2.4

)

Actuarial gain

 

 

(2.7

)

 

 

(1.7

)

 

 

(4.2

)

 

 

(2.7

)

Total

 

$

(5.7

)

 

$

(3.6

)

 

$

(8.0

)

 

$

(5.1

)

 

The prior service credit and actuarial gain expected to be recognized in net periodic benefit cost during 2020 are $0.8 million (net of deferred taxes of $0.2 million) and $0.3 million (net of deferred taxes of $0.1 million), respectively, and are included in accumulated other comprehensive loss at December 31, 2019.

The postretirement health care plans’ change in benefit obligation is as follows:

 

years ended December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Net benefit obligation at beginning of year

 

$

13.3

 

 

$

15.3

 

Service cost

 

 

0.1

 

 

 

0.1

 

Interest cost

 

 

0.6

 

 

 

0.5

 

Participants’ contributions

 

 

1.2

 

 

 

0.3

 

Actuarial loss (gain)

 

 

1.0

 

 

 

(1.6

)

Gross benefits paid

 

 

(3.2

)

 

 

(1.3

)

Net benefit obligation at end of year

 

$

13.0

 

 

$

13.3

 

 

The postretirement health care plans’ change in plan assets, funded status and amounts recognized on the Company’s consolidated balance sheets are as follows:

 

years ended December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Fair value of plan assets at beginning of year

 

$

—

 

 

$

—

 

Employer contributions

 

 

2.0

 

 

 

1.0

 

Participants’ contributions

 

 

1.2

 

 

 

0.3

 

Gross benefits paid

 

 

(3.2

)

 

 

(1.3

)

Fair value of plan assets at end of year

 

$

—

 

 

$

—

 

 

December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Funded status of the plan at end of year

 

$

(13.0

)

 

$

(13.3

)

Accrued benefit cost

 

$

(13.0

)

 

$

(13.3

)

 

December 31

 

 

 

 

 

 

 

 

(in millions)

 

2019

 

 

2018

 

Amounts recognized on consolidated balance sheets consist of:

 

 

 

 

 

 

 

 

Current liability

 

$

(2.0

)

 

$

(1.0

)

Noncurrent liability

 

 

(11.0

)

 

 

(12.3

)

Net amount recognized at end of year

 

$

(13.0

)

 

$

(13.3

)

 

Weighted-average assumptions used to determine the postretirement benefit obligation as of December 31 are:

 

 

 

2019

 

 

2018

 

Discount rate

 

3.29%

 

 

4.15%

 

 

Weighted-average assumptions used to determine net postretirement benefit credit for the years ended December 31 are:

 

 

 

2019

 

 

2018

 

 

2017

 

Discount rate

 

4.15%

 

 

3.47%

 

 

3.78%

 

 

As of December 31, 2019 and 2018, the Company estimated the remaining lives of participants in the postretirement benefit plans using the Pri-2012 and RP-2014 Base tables, respectively.  The no-collar table was used for salaried participants and the blue-collar table was used for hourly participants; both tables were adjusted to reflect the experience of the Company’s participants.  The Company used the MP-2018 mortality improvement scale for the years 2019 and 2018.

Assumed health care cost trend rates at December 31 are:

 

 

 

2019

 

 

2018

 

Health care cost trend rate assumed for next year

 

6.75%

 

 

7.0%

 

Rate to which the cost trend rate gradually declines

 

4.75%

 

 

5.0%

 

Year the rate reaches the ultimate rate

 

2028

 

 

2023

 

 

Assumed health care cost trend rates have a significant effect on the amounts reported for the Company’s health care plans. A one percentage-point change in assumed health care cost trend rates would have the following effects:  

 

 

 

One Percentage Point

 

(in millions)

 

Increase

 

 

(Decrease)

 

Total service and interest cost components

 

$

—

 

 

$

—

 

Postretirement benefit obligation

 

$

0.7

 

 

$

(0.6

)

 

The Company estimates that it will contribute $2.0 million to its postretirement health care plans in 2020.

The total expected benefit payments to be paid by the Company, net of participant contributions, for each of the next five years and the five-year period thereafter are as follows:

 

(in millions)

 

 

 

 

2020

 

$

2.0

 

2021

 

$

1.4

 

2022

 

$

1.4

 

2023

 

$

1.3

 

2024

 

$

1.2

 

Years 2025 - 2029

 

$

4.7

 

 

Defined Contribution Plan. The Company maintains a defined contribution plan that covers substantially all employees. This plan, qualified under Section 401(a) of the Internal Revenue Code, is a retirement savings and investment plan for the Company’s salaried and hourly employees. Under certain provisions of the plan, the Company, at established rates, matches employees’ eligible contributions. The Company’s matching obligations were $17.6 million in 2019, $16.5 million in 2018 and $14.9 million in 2017.