We sponsor defined benefit plans and defined contribution profit sharing plans that provide retirement income and death benefits for eligible employees. The annual measurement date of the benefit obligations, fair value of plan assets, and funded status is December 31.

On September 4, 2019, our Board of Directors approved the termination of the Trinity Industries, Inc. Consolidated Pension Plan (the "Pension Plan"), effective December 31, 2019. Except for retirees currently receiving payments under the Pension Plan, participants will have the choice of receiving a single lump sum payment or an annuity from a highly-rated insurance company that will pay and administer future benefit payments. The Pension Plan is expected to be settled between late 2020 and early 2021, subject to required governmental approvals, and would then result in the Company no longer having any remaining funded pension plan obligations.

Upon settlement, we expect to incur pre-tax pension settlement charges totaling between $155 million and $185 million. The settlement charges will be recognized in our Statement of Operations in two phases, with the first charge to be recognized when payments are made to those participants electing to receive a lump sum distribution, and the second charge to be recognized when the annuity contracts are purchased to settle all remaining outstanding pension obligations. The range of settlement charges includes: (1) a non-cash charge for the recognition of all pre-tax actuarial losses accumulated in AOCL related to the Pension Plan, which totaled approximately $170.1 million ($131.2 million, net of tax) as of December 31, 2019; and (2) a potential additional cash contribution to settle all of the Pension Plan’s obligations, which is not expected to exceed $15.0 million. The actual amount of the settlement charges and any potential cash contribution will depend on interest rates, Pension Plan asset returns, the lump-sum election rate, and other factors.

In anticipation of the planned settlement of the Pension Plan, our benefit obligations as of December 31, 2019 were valued based on the amounts expected to be required to settle these obligations, which included assumptions regarding the portion of obligations expected to be settled through lump sum payments or annuity contracts, and the current estimates of the cost to purchase such annuity contracts.

Actuarial assumptions



	Year Ended December 31,
	2019	2018	2017
Assumptions used to determine benefit obligations at the annual measurement date were:
Obligation discount rate	2.73%	4.45%	3.79%
Compensation increase rate⁽¹⁾	n/a	n/a	4.00%
Assumptions used to determine net periodic benefit costs were:
Obligation discount rate	4.45%	3.79%	4.34%
Long-term rate of return on plan assets	4.90%	5.65%	6.25%
Compensation increase rate⁽¹⁾	n/a	n/a	4.00%

⁽¹⁾The compensation increase rate pertains to a plan associated with our Former Inland Barge Group. The Inland Barge Group was transferred to Arcosa in connection with the spin-off, but Trinity retained the pension plan. Effective as of November 1, 2018, all participants in this plan have been granted the maximum benefit allowed under the plan; therefore, the compensation increase rate is not applicable.

The obligation discount rate assumption is determined by deriving a single discount rate from a theoretical settlement portfolio of high quality corporate bonds sufficient to provide for the plans' projected benefit payments. The expected long-term rate of return on the plans' assets is an assumption reflecting the anticipated weighted average rate of earnings on the portfolio over the long-term. To arrive at this rate, estimates were developed based upon the anticipated performance of the plans' assets. Substantially all of the accrued benefits of our remaining pension plans were frozen in 2009, with all qualified pension plans frozen as of December 31, 2019.

Components of Net Periodic Benefit Cost and Other Retirement Expenses



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Expense Components
Service cost	$	0.1		$	0.1		$	0.2
Interest	19.7			18.3			19.6
Expected return on plan assets	(23.0		)	(27.4		)	(27.2		)
Amortization of actuarial loss	4.6			4.8			4.9
Other	—			0.6			—
Net periodic benefit cost	1.4			(3.6		)	(2.5		)
Profit sharing	11.0			11.1			7.7
Net expense	$	12.4		$	7.5		$	5.2

The expected return on plan assets is based on the plan assets' fair value. Amortization of actuarial loss is determined using the corridor method. Under the corridor method, unamortized actuarial gains or losses in excess of 10% of the greater of the projected benefit obligation or the fair value of plan assets as of the beginning of the plan year are amortized, for frozen plans, over the average expected remaining lifetime of frozen and inactive participants.

Obligations and funded status



	Year Ended December 31,
	2019			2018
	(in millions)
Accumulated Benefit Obligations	$	557.9		$	453.2
Projected Benefit Obligations:
Beginning of year	$	453.2		$	490.0
Service cost	0.1			0.1
Interest	19.7			18.3
Benefits paid	(22.2		)	(20.2		)
Actuarial (gain) loss	105.6			(35.6		)
Plan amendments	1.5			—
Other	—			0.6
End of year	$	557.9		$	453.2
Plans' Assets:
Beginning of year	$	478.7		$	488.0
Actual return on assets	90.9			(20.7		)
Employer contributions	1.1			31.6
Benefits paid	(22.2		)	(20.2		)
End of year	$	548.5		$	478.7

Consolidated Balance Sheet Components:
Other assets	$	5.5		$	39.4
Accrued liabilities	(14.9		)	(13.9		)
Net funded status	$	(9.4	)	$	25.5
Percent of projected benefit obligations funded	98.3		%	105.6		%

Amounts recognized in other comprehensive (loss) income



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Actuarial (loss) gain	$	(37.7	)	$	(12.5	)	$	5.2
Amortization of actuarial loss	4.6			4.8			4.9
New prior service cost base	(1.5		)	—			—
Total before income taxes	(34.6		)	(7.7		)	10.1
Income tax (benefit) expense	(7.9		)	(1.8		)	3.1
Net amount recognized in other comprehensive (loss) income	$	(26.7	)	$	(5.9	)	$	7.0

At December 31, 2019, AOCL included unrecognized actuarial losses of $173.5 million and prior service cost of $1.5 million ($133.9 million net of related income taxes). Actuarial losses included in AOCL and expected to be recognized in net periodic pension cost for the year ended December 31, 2020 are $6.0 million ($4.6 million net of related income taxes). Amortization of prior service cost included in AOCL and expected to be recognized in net periodic pension cost for the year ended December 31, 2020 is $1.2 million ($0.9 million net of related income taxes).

Our pension plan investment strategies have been developed as part of a comprehensive asset/liability management process that considers the relationship between both the assets and liabilities of the plans for the purpose of providing the capital assets necessary to meet the financial obligations made to participants of our pension plans. These strategies consider not only the expected risk and returns on the plans' assets, but also the actuarial projections of liabilities, projected contributions, and funded status. Our investment policy statement allocates our pension plan assets into two portfolios as follows:

The target allocation between these two portfolios varies based on the pension plans' percentage of projected benefit obligations funded status. The range of target asset allocations has been determined after giving consideration to the expected returns of each asset category within the two portfolios, the expected performance of each asset category, the volatility of asset returns over time, and the complementary nature of the asset mix within the portfolio. The principal pension investment strategies include asset allocation and active asset management within approved guidelines. These assets are managed by an investment advisor.

Following our Board of Directors approval to terminate our Pension Plan, a new investment allocation strategy was implemented to protect the funded status of the plan assets. The target allocation at December 31, 2019 is 100% liability hedging portfolio, compared to 90% liability hedging portfolio and 10% growth portfolio at December 31, 2018.



	Fair Value Measurement as of December 31, 2019
	(in millions)
	Level 1		Level 2		Level 3		Total
Temporary cash investments	$	13.5	$	—	$	—	$	13.5
Fixed Income — Government and agencies	—		121.7		—		121.7
Fixed Income — Corporate	—		370.5		—		370.5
Fixed Income — Asset-backed securities	—		2.2		—		2.2
Fixed Income — Collateralized mortgage-backed	—		4.1		—		4.1
Equity common trust funds	—		29.1		—		29.1
Debt common trust funds	—		—		7.4		7.4
	$	13.5	$	527.6	$	7.4	$	548.5



	Fair Value Measurement as of December 31, 2018
	(in millions)
	Level 1		Level 2		Level 3		Total
Temporary cash investments	$	14.0	$	—	$	—	$	14.0
Fixed Income — Government and agencies	—		77.1		—		77.1
Fixed Income — Corporate	—		309.1		—		309.1
Fixed Income — Collateralized mortgage-backed	—		2.1		—		2.1
Equity common trust funds	—		69.7		—		69.7
Debt common trust funds	—		—		6.7		6.7
	$	14.0	$	458.0	$	6.7	$	478.7

The pension plans' assets are valued at fair value. The following is a description of the valuation methodologies used in determining fair value, including the general classification of such instruments pursuant to the valuation hierarchy as described further in Note 3:

Fixed Income — Government and agencies — These investments consist primarily of U.S. treasury bonds and notes, U.S. treasury inflation protected securities, U.S. government agency debt, municipal bonds, and other global government bonds. The fair value of these securities is based on quoted market prices when available or is based on yields currently available on comparable securities or on an industry valuation model, which maximizes observable inputs. These securities are categorized as Level 2 instruments.

Fixed Income — Corporate — These investments consist of U.S. and global corporate bonds and notes. The fair value of these securities is based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar debt instruments, the fair value is based upon an industry valuation model, which maximizes observable inputs. These securities are categorized as Level 2 instruments.

Fixed Income — Asset-backed securities — Asset-backed securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including market interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable. These securities are categorized as Level 2 instruments.

Fixed Income — Collateralized mortgage-backed — Mortgage-backed securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including market interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable. These securities are categorized as Level 2 instruments.

Common trust funds — Common trust funds are comprised of shares or units in commingled funds that are not publicly traded. The underlying assets in these funds are publicly traded on exchanges and price quotes for the assets held by these funds are readily available. Holdings of common trust funds are classified as a combination of Level 2 and Level 3 instruments.

Employer contributions for the year ending December 31, 2020 are expected to be $1.1 million for the defined benefit plans, which excludes any potential cash contribution that may be required to settle the Company's pension plan obligations as described above, compared to $1.1 million contributed during 2019. Employer contributions to the 401(k) plan and the Supplemental Profit Sharing Plan for the year ending December 31, 2020 are expected to be $11.4 million compared to $10.6 million contributed during 2019.

Participants in the 401(k) plan are eligible to receive future retirement benefits through a company-funded annual retirement contribution provided through the Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates. The contribution ranges from one to three percent of eligible compensation based on service. Both the annual retirement contribution and the company matching contribution are discretionary, requiring board approval, and are made annually with the investment of the funds directed by the participants.