RETIREMENT PLANS AND OTHER BENEFITS

U.S. Pension Plan

The Company maintains a nonqualified Supplemental Executive Retirement Plan (“U.S. SERP”). The U.S. SERP provides retirement benefits to certain senior executives of the Company. Generally, the U.S. SERP provides a benefit based on average total compensation earned over a participant’s final five years of employment and years of service reduced by benefits earned under any Company retirement program, excluding salary deferrals and matching contributions. In addition, benefits are reduced by Social Security Primary Insurance Amounts attributable to Company contributions. The U.S. SERP is unfunded and participation in the U.S. SERP has been frozen. There is a defined contribution plan for certain senior executives of the Company.

The Company maintained one qualified defined benefit pension plan covering certain domestic employees (the “Terex Plan”). Participation in the Terex Plan for all employees was frozen. Participants were credited with post-freeze service for purposes of determining vesting and retirement eligibility only. The benefits covering salaried employees were based primarily on years of service and employees’ qualifying compensation during the final years of employment. The benefits covering bargaining unit employees were based primarily on years of service and a flat dollar amount per year of service. The Company’s policy was generally to fund the Terex Plan based on the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Plan assets consisted primarily of common stocks, bonds and short-term cash equivalent funds. In November 2018, the Company completed the termination of the Terex Plan as further described below.

There were no minimum contribution requirements for the 2018, 2017 and 2016 plan years.

Non-U.S. Plans

The Company maintains defined benefit plans in France, Germany, India, Switzerland and the United Kingdom for some of its subsidiaries. Participation in the United Kingdom plan has been frozen. The United Kingdom plan is a funded plan and the Company funds this plan in accordance with funding regulations in the United Kingdom and a negotiated agreement between the Company and the plan’s trustee. The Switzerland plan is a funded plan and the Company funds this plan in accordance with funding regulations. The plans in France, Germany and India are unfunded plans. In Italy, there are mandatory termination indemnity plans providing a benefit that is payable upon termination of employment in substantially all cases of termination. The Company records this obligation based on mandated requirements. The measure of current obligation is not dependent on the employees’ future service and therefore is measured at current value.

Other Post-employment Benefits

The Company has several non-pension post-retirement benefit programs. The Company provides post-employment health and life insurance benefits to certain former salaried and hourly employees. The health care programs are contributory, with participants’ contributions adjusted annually, and the life insurance plan is noncontributory.

Savings Plans

The Company sponsors various tax deferred savings plans into which eligible employees may elect to contribute a portion of their compensation. The Company may, but is not obligated to, contribute to certain of these plans. Charges recognized for the deferred compensation plan and these other savings plans were $22.9 million, $16.9 million and $19.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. For the years ended December 31, 2018, 2017 and 2016, Company matching contributions to tax deferred savings plans were invested at the direction of plan participants.

Information regarding the Company’s plans, including U.S. SERP, was as follows (in millions, except percent values):



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Benefits
	2018			2017			2018			2017			2018			2017
Accumulated benefit obligation at end of year	$	35.1		$	153.3		$	208.5		$	229.4
Change in benefit obligation:
Benefit obligation at beginning of year	$	160.4		$	167.6		$	231.6		$	211.5		$	3.4		$	4.2
Service cost	0.4			0.6			3.1			3.2			—			—
Interest cost	5.4			6.4			4.6			5.0			0.1			0.1
Transfer to held for sale	—			—			—			(0.1		)	—			—
Settlements	(108.5		)	—			(2.7		)	(5.0		)	—			—
Plan amendments	—			—			2.6			—			—			—
Actuarial loss (gain)	(8.5		)	0.1			(8.1		)	1.1			(0.2		)	(0.4		)
Benefits paid	(10.1		)	(14.3		)	(8.6		)	(7.1		)	(0.3		)	(0.5		)
Foreign exchange effect	—			—			(11.9		)	23.0			—			—
Benefit obligation at end of year	39.1			160.4			210.6			231.6			3.0			3.4
Change in plan assets:
Fair value of plan assets at beginning of year	118.5			117.1			121.2			108.3			—			—
Actual return on plan assets	(6.0		)	14.5			(4.1		)	6.9			—			—
Settlements	(108.5		)	—			(2.7		)	(5.0		)	—			—
Employer contribution	6.1			1.2			7.9			7.5			0.3			0.5
Employee contribution	—			—			0.5			0.4			—			—
Benefits paid	(10.1		)	(14.3		)	(8.6		)	(7.1		)	(0.3		)	(0.5		)
Foreign exchange effect	—			—			(6.7		)	10.2			—			—
Fair value of plan assets at end of year	—			118.5			107.5			121.2			—			—
Funded status	$	(39.1	)	$	(41.9	)	$	(103.1	)	$	(110.4	)	$	(3.0	)	$	(3.4	)
Amounts recognized in the statement of financial position consist of:
Current liabilities	$	1.3		$	1.2		$	2.7		$	2.8		$	0.4		$	0.4
Non-current liabilities	37.8			40.7			100.4			107.6			2.6			3.0
Total liabilities	$	39.1		$	41.9		$	103.1		$	110.4		$	3.0		$	3.4
Amounts recognized in accumulated other comprehensive loss consist of:
Actuarial net loss	$	(0.9	)	$	64.8		$	61.3		$	68.2		$	0.5		$	0.9
Prior service cost	—			0.1			2.7			0.1			—			—
Total amounts recognized in accumulated other comprehensive loss	$	(0.9	)	$	64.9		$	64.0		$	68.3		$	0.5		$	0.9

Guaranteed Minimum Pension (“GMP”) Payments

On October 26, 2018, the High Court of Justice in the United Kingdom ruled that Lloyds Bank plc was required to provide equal benefits for men and women for GMP payments accrued after May 17, 1990 in pension plans liabilities. Inequalities arose from statutory differences between men and women in both the earliest age from which a GMP is payable and the rates of the GMP accrual. The Company estimated the cost of equalizing the GMP payments and increased its Non-U.S. pension benefit liability by $2.6 million at December 31, 2018 for GMP payments. This is recorded as prior service costs for 2018 and will amortize beginning in 2019.



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Benefits
	2018		2017		2016		2018		2017		2016		2018		2017		2016
Weighted-average assumptions as of December 31:
Discount rate⁽¹⁾	4.41	%	3.78	%	4.03	%	2.39	%	2.15	%	2.27	%	4.14	%	3.58	%	3.81	%
Expected return on plan assets	—	%	7.00	%	7.00	%	4.40	%	4.43	%	5.90	%	N/A		N/A		N/A
Rate of compensation increase⁽¹⁾	3.75	%	3.75	%	3.75	%	0.98	%	0.93	%	0.89	%	N/A		N/A		N/A

(1) The weighted average assumptions as of December 31 are used to calculate the funded status at the end of the current year and the net periodic cost for the subsequent year.



	U.S. Pension Benefits									Non-U.S. Pension Benefits									Other Benefits
	2018			2017			2016			2018			2017			2016			2018		2017			2016
Components of net periodic cost:
Service cost	$	0.4		$	0.6		$	0.6		$	3.1		$	3.2		$	3.1		$	—	$	—		$	—
Interest cost	5.4			6.4			7.1			4.6			5.0			6.5			0.1		0.1			0.2
Expected return on plan assets	(7.3		)	(7.8		)	(8.3		)	(5.0		)	(5.0		)	(6.0		)	—		—			—
Recognition of prior service cost	0.1			0.1			0.2			—			—			—			—		—			—
Amortization of actuarial loss	3.4			4.1			4.2			3.2			3.5			2.5			0.1		(1.2		)	—
Settlements	67.0			—			—			0.8			1.5			—			—		—			—
Other	—			—			—			(1.0		)	(0.4		)	(0.4		)	—		—			—
Net periodic cost	$	69.0		$	3.4		$	3.8		$	5.7		$	7.8		$	5.7		$	0.2	$	(1.1	)	$	0.2

Components of Net periodic cost other than the Service cost component are included in Other income (expense) - Net in the Consolidated Statement of Comprehensive Income (Loss). The Service cost component is included in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period.

Pension Settlements

In November 2018, the Company entered into a contract for a group annuity to transfer the obligation to pay the remaining retirement benefits of all plan participants in the Terex Plan to an insurance company (the “Pension Annuitization”). The transfer of $108.5 million in both plan obligations and plan assets was completed on November 5, 2018. The Company contributed $4.8 million to the plan to facilitate the transaction, secure the remaining plan obligations and take advantage of certain tax benefits. Prior to the transaction, the Terex Plan had approximately 2,600 participants. As a result of the Pension Annuitization, the Company recorded a pretax non-cash settlement loss of $67.0 million (after tax $42.6 million) reflecting the accelerated recognition of unamortized losses in the Terex Plan as a result of the obligation that was settled.

Participants in the Company’s U.K pension plan may elect to receive a lump-sum settlement of remaining pension benefits under the terms of the plan. As a result of participants electing the lump-sum option during the years ended December 31, 2018 and 2017, the Company settled $2.7 million and $5.0 million of Non-U.S. pension obligations, respectively. The settlements were paid from plan assets and did not require a cash contribution from the Company. As a result, the Company recorded settlement losses of $0.8 million and $1.5 million reflecting the accelerated recognition of unamortized losses in the plan proportionate to the obligation that was settled in 2018 and 2017, respectively.



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Benefits
	2018			2017			2018			2017			2018			2017
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):
Net (gain) loss	$	4.7		$	(6.8	)	$	0.9		$	(0.7	)	$	(0.3	)	$	(0.3	)
Amortization of actuarial gain (loss)	(3.4		)	(4.1		)	(3.2		)	(3.5		)	(0.1		)	1.2
Amortization of prior service cost	(0.1		)	(0.1		)	2.5			—			—			—
Disposals	—			—			—			(79.4		)	—			—
Settlements	(67.0		)	—			(0.8		)	(1.5		)	—			—
Foreign exchange effect	—			—			(3.7		)	7.1			—			—
Total recognized in other comprehensive income (loss)	$	(65.8	)	$	(11.0	)	$	(4.3	)	$	(78.0	)	$	(0.4	)	$	0.9



	U.S. Pension Benefits			Non-U.S. Pension Benefits		Other Benefits
Amounts expected to be recognized as components of net periodic cost for the year ending December 31, 2019:
Actuarial net loss	$	(0.3	)	$	3.3	$	—
Prior service cost	0.1			0.1		—
Total amount expected to be recognized as components of net periodic cost for the year ending December 31, 2019	$	(0.2	)	$	3.4	$	—

For the Company’s plans, including the U.S. SERP, that have accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were (in millions):



	U.S. Pension Benefits				Non-U.S. Pension Benefits
	2018		2017		2018		2017
Projected benefit obligation	$	39.1	$	160.4	$	210.6	$	231.6
Accumulated benefit obligation	$	35.1	$	153.3	$	208.5	$	229.4
Fair value of plan assets	$	—	$	118.5	$	107.5	$	121.2

Determination of plan obligations and associated expenses requires the use of actuarial valuations based on certain economic assumptions, which includes discount rates and expected rates of return on plan assets. The discount rate enables the Company to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that matches the duration of expected benefit payments at the December 31 measurement date.

The rate used for the expected return on plan assets for the U.S. plan was based on a review of long-term historical asset performances aligned with the Company’s investment strategy and portfolio mix. While the Company examines performance annually, it also views historic asset portfolios and performance over a long period of years before recommending a change. In the short term, there may be fluctuations of positive and negative yields year-over-year, but over the long-term, in 2018 the return was expected to be approximately 7% for the Terex Plan prior to termination.

The Company’s overall investment strategy for the U.S. defined benefit plan balances had two objectives, investing in fixed income securities whose maturity broadly matches the maturity of the pension liabilities and investing in equities and other assets expected to generate higher returns. The Company invested through a number of investment funds with diversified asset types, strategies and managers. Equity securities, including investments in large to small-cap companies in the U.S. and internationally, constituted approximately 31% of the portfolio at December 31, 2017. Fixed income securities including corporate bonds of companies from diversified industries, U.S. Treasuries and other securities, which may include mortgage-backed securities, asset-backed securities and collateralized mortgage obligations, constituted approximately 69% of the portfolio at December 31, 2017.

The methodology used to determine the rate of return on non-U.S. pension plan assets was based on average rate of earnings on funds invested and to be invested. Based on historical returns and future expectations, the Company believes the investment return assumptions are reasonable. The expected rate of return of plan assets represents an estimate of long-term returns on the investment portfolio. This assumption is reviewed by the trustees and varies with each of the plans.

The overall investment strategy for Non-U.S. defined benefit plans is to achieve a mix of investments to support long-term growth and minimize volatility while maximizing rates of return by diversification of asset types, fund strategies and fund managers. Fixed income investments include investments in European government securities and European corporate bonds and constitute approximately 76% and 72% of the portfolio at December 31, 2018 and 2017, respectively. Equity investments, multi-asset investment funds and real estate investments that invest in a diversified range of property principally in the retail, office and industrial/warehouse sectors constitute approximately 24% and 28% of the portfolio at December 31, 2018 and 2017, respectively. Investments of the plans primarily include investments in companies from diversified industries with 90% invested internationally and 10% invested in North America. The target investment allocations to support the Company’s investment strategy for 2019 are approximately 69% to 71% fixed income securities and approximately 29% to 31% equity securities, multi-asset investment funds and real estate investments.

The fair value of cash in the table below is based on price quotations in an active market and therefore categorized under Level 1 of the ASC 820 hierarchy. The fair value of the investment funds is priced on the market value of the underlying investments in the portfolio and therefore categorized as Level 2 of the ASC 820 hierarchy. See Note A – “Basis of Presentation,” for an explanation of the ASC 820 hierarchy.

The fair value of the Company’s plan assets at December 31, 2018 are as follows (in millions):



	U.S. Pension Plan								Non-U.S. Pension Plans
	Total		Level 1		Level 2		NAV		Total		Level 1		Level 2		NAV
Cash, including money market funds	$	—	$	—	$	—	$	—	$	0.7	$	0.7	$	—	$	—
U.S. equities	—		—		—		—		11.1		—		11.1		—
Non-U.S. equities	—		—		—		—		10.7		—		10.7		—
Non-U.S. corporate bonds	—		—		—		—		2.5		—		2.5		—
Non-U.S. governmental fixed income funds	—		—		—		—		59.7		—		59.7		—
Real estate	—		—		—		—		3.7		—		3.7		—
Other securities	—		—		—		—		19.1		—		19.1		—
Total investments measured at fair value	$	—	$	—	$	—	$	—	$	107.5	$	0.7	$	106.8	$	—

The fair value of the Company’s plan assets at December 31, 2017 are as follows (in millions):



	U.S. Pension Plan								Non-U.S. Pension Plans
	Total		Level 1		Level 2		NAV		Total		Level 1		Level 2		NAV
Cash, including money market funds	$	2.5	$	2.5	$	—	$	—	$	2.9	$	2.9	$	—	$	—
U.S. equities	27.6		—		—		27.6		6.4		—		6.4		—
Non-U.S. equities	8.7		—		—		8.7		24.4		—		24.4		—
U.S. corporate bonds	55.8		—		—		55.8		0.6		—		0.6		—
Non-U.S. corporate bonds	—		—		—		—		19.3		—		19.3		—
U.S. government securities	16.4		—		—		16.4		—		—		—		—
Non-U.S. government securities	0.6		—		—		0.6		32.7		—		32.7		—
Non-U.S. governmental fixed income funds	—		—		—		—		26.0		—		26.0		—
Real estate	—		—		—		—		3.5		—		3.5		—
Other securities	6.9		—		—		6.9		5.4		—		5.4		—
Total investments measured at fair value	$	118.5	$	2.5	$	—	$	116.0	$	121.2	$	2.9	$	118.3	$	—

The Company plans to contribute approximately $1 million to its U.S. post-retirement plans and approximately $8 million to its non-U.S. defined benefit pension plans in 2019. During the year ended December 31, 2018, the Company contributed $6.4 million to its U.S. defined benefit pension plans and post-retirement plans and $7.9 million to its non-U.S. defined benefit pension plans.

The Company’s estimated future benefit payments under its plans are as follows (in millions):



Year Ending December 31,	U.S. Pension Benefits		Non-U.S. Pension Benefits		Other Benefits
2019	$	1.3	$	12.0	$	0.4
2020	$	1.5	$	7.6	$	0.4
2021	$	1.5	$	8.3	$	0.3
2022	$	1.5	$	8.4	$	0.3
2023	$	1.5	$	8.7	$	0.3
2024-2028	$	12.5	$	47.1	$	0.9

For the other benefits, for measurement purposes, a 6.50% rate of increase in the per capita cost of covered health care benefits was assumed for 2019, decreasing one-half percentage point per year until it reaches 4.50% for 2022 and thereafter. Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plan.

A one-percentage-point change in assumed health care cost trend rates would have the following effects (in millions):



	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total service and interest cost components	$	—	$	—
Effect on post-retirement benefit obligation	$	0.1	$	(0.1	)