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Pension and Other Postretirement Benefits (Notes)
 12 Months Ended
Dec. 31, 2019
Retirement Benefits, Description [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
 

Summary

We provide noncontributory pension and various healthcare and life insurance benefits to a significant portion of our employees and retirees. Benefits are provided through defined benefit and defined contribution plans that we sponsor, as well as multiemployer plans for certain union members. Our defined benefit pension plans are not fully funded. We will be required to make pension contributions of approximately $45.0 for 2020. Based on current actuarial assumptions, we expect to make required pension contributions of approximately $45.0 for 2021 and $35.0 for 2022. Factors that affect future funding projections include differences between expected and actual returns on plan assets, actuarial data and assumptions relating to plan participants, the discount rate used to measure the pension obligations and changes to regulatory funding requirements. We expect to make OPEB payments, after receipt of Medicare subsidy reimbursements, of approximately $35.6 in 2020.

Defined Benefit Plans

Plan Obligations

Amounts presented below are calculated based on benefit obligation and asset valuation measurement dates of December 31, 2019 and 2018:
 
Pension Benefits
 
Other Benefits
 
2019
 
2018
 
2019
 
2018
Change in benefit obligations:
 
 
 
 
 
 
 
Benefit obligations at beginning of year
$
2,210.0

 
$
2,808.0

 
$
398.2

 
$
448.5

Service cost
2.5

 
3.2

 
3.5

 
4.5

Interest cost
85.9

 
94.5

 
16.4

 
15.6

Plan participants’ contributions
—

 
—

 
24.3

 
24.7

Actuarial loss (gain)
206.5

 
(148.8
)
 
16.2

 
(23.7
)
Amendments
—

 
—

 
—

 
(11.1
)
Benefits paid
(211.3
)
 
(268.1
)
 
(53.2
)
 
(62.6
)
Annuity settlement
(615.6
)
 
(278.8
)
 
—

 
—

Termination benefits—Ashland Works
9.7

 
—

 
3.6

 
—

Medicare subsidy reimbursement received
—

 
—

 
2.1

 
2.3

Benefit obligations at end of year
$
1,687.7

 
$
2,210.0

 
$
411.1

 
$
398.2

 
 
 
 
 
 
 
 
Change in plan assets:
 

 
 

 
 

 
 

Fair value of plan assets at beginning of year
$
1,739.6

 
$
2,322.2

 
$
—

 
$
—

Actual gain (loss) on plan assets
382.5

 
(87.0
)
 
—

 
—

Employer contributions
44.8

 
51.3

 
26.8

 
35.6

Plan participants’ contributions
—

 
—

 
24.3

 
24.7

Benefits paid
(211.3
)
 
(268.1
)
 
(53.2
)
 
(62.6
)
Annuity settlement
(615.6
)
 
(278.8
)
 
—

 
—

Medicare subsidy reimbursement received
—

 
—

 
2.1

 
2.3

Fair value of plan assets at end of year
$
1,340.0

 
$
1,739.6

 
$
—

 
$
—

Funded status
$
(347.7
)
 
$
(470.4
)
 
$
(411.1
)
 
$
(398.2
)
 
 
 
 
 
 
 
 
Amounts recognized in the consolidated balance sheets:
 

 
 

 
 

 
 

Current liabilities
$
(5.4
)
 
$
(1.2
)
 
$
(35.6
)
 
$
(37.5
)
Noncurrent liabilities
(342.3
)
 
(469.2
)
 
(375.5
)
 
(360.7
)
Total
$
(347.7
)
 
$
(470.4
)
 
$
(411.1
)
 
$
(398.2
)
 
 
 
 
 
 
 
 
Amounts recognized in accumulated other comprehensive loss, before taxes:
 

 
 

 
 

 
 

Actuarial loss (gain)
$
48.5

 
$
134.1

 
$
(15.5
)
 
$
(35.4
)
Prior service cost (credit)
15.9

 
19.4

 
(69.2
)
 
(82.4
)
Total
$
64.4

 
$
153.5

 
$
(84.7
)
 
$
(117.8
)


The accumulated benefit obligation for all defined benefit pension plans was $1,675.8 and $2,188.6 at December 31, 2019 and 2018. All our defined benefit pension plans have an accumulated benefit obligation in excess of plan assets. The amounts included in current liabilities represent only the amounts of our unfunded pension and OPEB benefit plans that we expect to pay in the next year.

During the fourth quarter of 2019, we transferred to a highly rated insurance company $615.6 of pension obligations for approximately 4,250 retirees or their beneficiaries. As part of this transaction, we transferred a similar amount of pension trust assets to purchase a non-participating annuity contract that requires the insurance company to pay the transferred pension obligations to the
pension participants. As a result of the transfer of pension assets in November 2019, we recorded a settlement loss of $26.9 in the fourth quarter of 2019 to recognize the portion of the unrealized actuarial loss associated with the transferred obligations.

During the fourth quarter of 2018, we transferred to a highly rated insurance company $278.8 of pension obligations for approximately 5,400 retirees or their beneficiaries. As part of this transaction, we transferred a similar amount of pension trust assets to purchase a non-participating annuity contract. As a result of the transfer of pension assets in October 2018, we recorded a settlement loss of $14.5 in the fourth quarter of 2018.

During 2019, we recognized pension and OPEB termination benefits of $13.3 related to the Ashland Works closure.

The 2019 change in the actuarial loss (gain) for the pension plans in the table above primarily consisted of gains of $272.8 for actual pension asset return greater than expected and changes in demographic assumptions, partially offset by a loss of $182.4 for the decrease in discount rate used to value the benefit obligations and a loss of $31.0 for changes in mortality tables. The 2019 change in the actuarial loss (gain) for the OPEB plan in the table above primarily consisted of a loss of $33.7 for the decrease in discount rate used to value the benefit obligations, partly offset by gains related to changes in demographic assumptions and lower than expected benefit payments.

Assumptions used to value benefit obligations and determine pension and OPEB (income) expense are presented below:
 
Pension Benefits
 
Other Benefits
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Assumptions used to determine benefit obligations at December 31:
 
 
 
 
 
 
 
 
 
 
 
Discount rate
3.29
%
 
4.22
%
 
3.54
%
 
3.33
%
 
4.27
%
 
3.59
%
Rate of compensation increase
4.00
%
 
4.00
%
 
4.00
%
 
 
 
 
 
 
Interest crediting rate
3.80
%
 
3.80
%
 
3.80
%
 
 
 
 
 
 
Subsequent year healthcare cost trend rate
 
 
 
 
 
 
6.17
%
 
6.50
%
 
6.65
%
Ultimate healthcare cost trend rate
 
 
 
 
 
 
4.50
%
 
4.50
%
 
4.50
%
Year ultimate healthcare cost trend rate begins
 
 
 
 
 
 
2025

 
2025

 
2025

 
 
 
 
 
 
 
 
 
 
 
 
Assumptions used to determine pension and OPEB (income) expense for the year ended December 31:
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.14
%
 
3.69
%
 
3.93
%
 
4.27
%
 
3.59
%
 
4.04
%
Expected return on plan assets
6.75
%
 
7.00
%
 
7.25
%
 
 
 
 
 
 
Rate of compensation increase
4.00
%
 
4.00
%
 
4.00
%
 
 
 
 
 
 
Interest crediting rate
3.80
%
 
3.80
%
 
3.80
%
 
 
 
 
 
 


We determine the discount rate at each remeasurement by finding a hypothetical portfolio of individual high-quality corporate bonds available at the measurement date with coupon and principal payments that could satisfy the plans’ expected future benefit payments that we use to calculate the projected benefit obligation. The discount rate is the single rate that is equivalent to the average yield on that hypothetical portfolio of bonds. We changed our assumption for future expected returns on pension plan assets to 7.50% from 6.75%, effective January 1, 2020 in response to a change in asset allocation.

Estimated future benefit payments to beneficiaries are presented below:
 
Pension
Plans
 
Other
Benefits
2020
$
142.6

 
$
35.6

2021
134.7

 
34.7

2022
137.2

 
34.0

2023
125.4

 
32.1

2024
130.7

 
30.4

2025 through 2029
592.7

 
129.4


Plan Assets

Our investments in the master pension trust primarily include indexed and actively-managed funds. A fiduciary committee sets the target asset mix and monitors asset performance. We determine the master pension trust’s projected long-term rate of return based on the asset allocation, the trust’s investment policy statement and our long-term capital market return assumptions for the master trust.

We have developed an investment policy that considers liquidity requirements, expected investment return, funded status and expected asset risk, as well as standard industry practices. The investment policy also dictates a target allocation based primarily on the funded status of the plan. The target asset allocation for the master pension trust at December 31, 2019 was 60% equity and 40% fixed income. Equity investments consist of individual securities, equity mutual funds and common/collective trusts with equity investment strategies, which are diversified across multiple industry sectors, company market capitalizations and geographical investment strategies. The equity mutual funds and common/collective trusts have no unfunded commitments or significant redemption restrictions. Fixed-income investments consist of individual securities and common/collective trusts, which invest primarily in investment-grade and high-yield corporate bonds and U.S. Treasury securities. The fixed-income investments are diversified by ratings, maturities, industries and other factors. Plan assets contain no significant concentrations of risk from individual securities or industry sectors. The master pension trust has no direct investments in our common stock or fixed-income securities.

Master pension trust investments measured at fair value on a recurring basis at December 31, 2019 and 2018 are presented below, with certain assets presented by level within the fair value hierarchy. As a practical expedient, we estimate the value of common/collective trusts and equity mutual funds by using the net asset value (“NAV”) per share multiplied by the number of shares of the trust investment held as of the measurement date. If we have the ability to redeem our investment in the respective alternative investment at the NAV with no significant restrictions on the redemption at the consolidated balance sheet date, excluding equity mutual funds, we categorized the alternative investment as a reconciliation of pension investments reported in the fair value hierarchy to the master pension trust’s balance. See Note 17 for more information on the determination of fair value.
 
 
Quoted Prices
in Active
Markets for
Identical Assets
 
Significant Other
Observable Inputs
 
 
 
 
 
 
(Level 1)
 
(Level 2)
 
Total
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Investments in fair value hierarchy
 
 
 
 
 
 
 
 
 
 
 
 
Equity investments:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. securities
 
$
39.1

 
$
35.4

 
$
—

 
$
—

 
$
39.1

 
$
35.4

Global securities
 
—

 
—

 
140.2

 
131.4

 
140.2

 
131.4

Fixed-income investments:
 


 


 


 


 


 


High-yield U.S. securities
 
—

 
—

 
87.2

 
84.5

 
87.2

 
84.5

Other U.S. securities
 
—

 
—

 
318.2

 
700.8

 
318.2

 
700.8

Global securities
 
—

 
—

 
66.1

 
82.8

 
66.1

 
82.8

Other investments
 
—

 
—

 
79.1

 
78.0

 
79.1

 
78.0

Total pension investments in fair value hierarchy
 
$
39.1

 
$
35.4

 
$
690.8

 
$
1,077.5

 
$
729.9

 
$
1,112.9

 
 
 
 
 
 
 
 
 
 
 
 
 
Investments with fair values measured at net asset value
 
 

 
 

 
 

 
 

 
 

 
 

Common/collective trusts:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. equity securities (a)
 
 
 
 
 
 
 
 
 
367.2

 
355.8

Global equity securities (a)
 
 
 
 
 
 
 
 
 
196.9

 
178.2

Global fixed-income securities (b)
 
 
 
 
 
 
 
 
 
46.0

 
92.7

Total pension assets at fair value
 
 
 
 
 
 
 
 
 
$
1,340.0

 
$
1,739.6


(a)
Investments may include common stocks, options and futures.
(b)
Investments may include investment-grade and high-yield corporate bonds, interest rate swaps, options and futures.

Periodic Benefit Costs

Components of pension and OPEB (income) expense for the years 2019, 2018 and 2017 are presented below:
 
Pension Benefits
 
Other Benefits
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Components of pension and OPEB (income) expense:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
2.5

 
$
3.2

 
$
2.8

 
$
3.5

 
$
4.5

 
$
4.7

Interest cost
85.9

 
94.5

 
108.2

 
16.4

 
15.6

 
17.3

Expected return on plan assets
(109.7
)
 
(148.8
)
 
(149.9
)
 
—

 
—

 
—

Amortization of prior service cost (credit)
3.6

 
3.8

 
4.7

 
(13.2
)
 
(13.6
)
 
(58.5
)
Recognized net actuarial loss (gain):
 
 
 
 
 
 
 
 
 
 
 
Annual amortization
(7.6
)
 
16.1

 
10.5

 
(3.6
)
 
(1.3
)
 
(4.2
)
Settlement loss
26.9

 
14.5

 
—

 
—

 
—

 
—

Termination benefits—Ashland Works
9.7

 
—

 
—

 
3.6

 
—

 
—

Pension and OPEB (income) expense
$
11.3

 
$
(16.7
)
 
$
(23.7
)
 
$
6.7

 
$
5.2

 
$
(40.7
)


Defined Contribution Plans

All employees are eligible to participate in various defined contribution plans. Certain of these plans have features with matching contributions or other company contributions based on our financial results. Total expense from these plans was $29.0, $31.1 and $24.9 in 2019, 2018 and 2017.

Multiemployer Pension Plans

We contribute to multiemployer pension plans according to collective bargaining agreements that cover certain union-represented employees. The following risks of participating in these multiemployer plans differ from single employer pension plan risks:
•
Employer contributions to a multiemployer plan may be used to provide benefits to employees of other participating employers.
•
If a participating employer stops contributing to a multiemployer plan, the remaining participating employers may need to assume the unfunded obligations of the plan.
•
If the multiemployer plan becomes significantly underfunded or is unable to pay its benefits, we may be required to contribute additional amounts in excess of the rate required by the collective bargaining agreements.
•
If we choose to stop participating in a multiemployer plan, we may be required to pay that plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

We are a party to a collective bargaining agreement at Ashland Works that requires contributions to the Steelworkers Pension Trust multiemployer pension plan. We recorded an estimated withdrawal liability of $10.0 in 2019 as a result of the closure of that facility. The actual withdrawal liability will not be known until a future year and is expected to be paid over a number of years. See Note 3 for further information.

In April 2019, the trustees for the IAM National Pension Fund (the “Fund”) voluntarily elected to place the Fund in the Red Zone for 2019 and implement a rehabilitation plan. The rehabilitation plan provides two options for a new schedule to be adopted by employers and their covered bargaining employees to both increase employer contributions and reduce certain employee pension benefits. Depending on the schedule selected, our contributions to the Fund could increase approximately $2.0 in 2020, with gradually increasing requirements through 2031.

Our participation in these multiemployer plans for the years ended December 31, 2019, 2018 and 2017, is presented below. We do not provide more than five percent of the total contributions to any multiemployer plan. Forms 5500 are not yet available for plan years ending in 2019.
Pension Fund
 
EIN/Pension Plan Number
 
Pension Protection Act Zone Status (a)
 
FIP/RP Status Pending/Implemented (b)
 
Contributions
 
Surcharge Imposed (c)
 
Expiration Date of Collective Bargaining Agreement
 
 
 
 
2019
 
2018
 
 
 
2019
 
2018
 
2017
 
 
 
 
Steelworkers Pension Trust
 
23-6648508/499
 
Green
 
Green
 
No
 
$
3.9

 
$
4.2

 
$
6.3

 
No
 
1/22/2021 to 5/14/2021 (d)
IAM National Pension Fund’s National Pension Plan
 
51-6031295/002
 
Red
 
Green
 
Yes
 
18.9

 
17.7

 
18.4

 
Yes
 
3/15/2020 to 6/15/2022 (e)
 
 
 
 
 
 
 
 
 
 
$
22.8

 
$
21.9

 
$
24.7

 
 
 
 
(a)
The most recent Pension Protection Act zone status available in 2019 and 2018 is for each plan’s year-end at December 31, 2018 and 2017, except that the IAM National Pension Fund’s National Pension Plan reflects the election by the Fund to place the Fund in Red Zone in April 2019. The plan’s actuary certifies the zone status. Generally, plans in the red zone are less than 65% funded, plans in the yellow zone are between 65% and 80% funded, and plans in the green zone are at least 80% funded. The Steelworkers Pension Trust and IAM National Pension Fund’s National Pension Plan elected funding relief under section 431(b)(8) of the Internal Revenue Code and section 304(b)(8) of the Employment Retirement Income Security Act of 1974 (ERISA). This election allows those plans’ investment losses for the plan year ended December 31, 2008, to be amortized over 29 years for funding purposes.
(b)
The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented, as defined by ERISA.
(c)
The surcharge represents an additional required contribution due as a result of the critical funding status of the plan.
(d)
We are a party to three collective bargaining agreements at our Ashland Works, Mansfield Works and at the AK Tube Walbridge plant that require contributions to the Steelworkers Pension Trust. The labor contract for approximately 100 hourly employees at the AK Tube Walbridge plant expires January 22, 2021. The labor contract for approximately 300 hourly employees at Mansfield Works expires on March 31, 2021. The labor contract for approximately 10 active hourly employees at the Ashland Works currently expires May 14, 2021.
(e)
We are a party to three collective bargaining agreements at our Butler Works, Middletown Works and Zanesville Works that require contributions to the IAM National Pension Fund’s National Pension Plan. The labor contract for approximately 1,750 hourly employees at Middletown Works expires on March 15, 2020. The labor contract for approximately 100 hourly employees at Zanesville Works expires on May 31, 2022. The labor contract for approximately 1,100 hourly employees at Butler Works expires on June 15, 2022.