Note 10. Employee Retirement Plans

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 10. Employee Retirement Plans

We sponsor defined benefit plans and a defined contribution plan (the "401(k) plan") 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.

Pension Plan Termination

In September 2019, our Board of Directors approved the termination of the Trinity Industries, Inc. Consolidated Pension Plan (the "Pension Plan"), effective December 31, 2019. The Pension Plan was settled in the fourth quarter of 2020, which resulted in the Company no longer having any remaining funded pension plan obligations. Upon settlement, we recognized a pre-tax non-cash pension settlement charge in the fourth quarter of 2020 of $151.5 million, which was inclusive of all unamortized losses previously recorded in AOCI.

As of December 31, 2020, the remaining surplus of the Pension Plan was $23.6 million. During the year ended December 31, 2021, as permitted by applicable regulations, we used $10.9 million of the Pension Plan surplus to fund obligations associated with the Company's profit sharing plans and used $2.5 million to fund pension administrative expenses required to finalize the settlement of the Pension Plan. Additionally, we received a $6.4 million net refund upon final settlement of the annuity contract, which resulted in a remaining surplus of the Pension Plan of $16.6 million. During the fourth quarter of 2021, we reverted $16.0 million of the surplus pension assets to the Company and incurred an excise tax of approximately $3.2 million. These activities are included in the pension plan settlement line in our Consolidated Statements of Operations. As of December 31, 2021, the remaining surplus of the Pension Plan was $0.6 million.

During the year ended December 31, 2022, we used $0.2 million to fund pension administrative expenses, resulting in a remaining surplus of the Pension Plan of $0.4 million at December 31, 2022.

Actuarial assumptions

	Year Ended December 31,
	2022	2021	2020
Assumptions used to determine benefit obligations at the annual measurement date were:
Obligation discount rate (1)	N/A	N/A	N/A
Assumptions used to determine net periodic benefit costs were:
Obligation discount rate (1)	N/A	N/A	2.71	%
Long-term rate of return on plan assets (1)	N/A	N/A	3.90	%

(1) Not applicable as of December 31, 2022 and 2021 and for the years ended December 31, 2022 and 2021 as all qualified pension plans were settled as of December 31, 2020.

Prior to the settlement of our Pension Plan, the obligation discount rate assumption was 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 was 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 settled as of December 31, 2020.

Components of Net Periodic Benefit Cost and Other Retirement Expenses

	Year Ended December 31,
	2022		2021		2020
	(in millions)
Expense Components
Service cost	$	—	$	—	$	—
Interest	0.4		0.4		14.8
Expected return on plan assets	—		—		(20.9)
Amortization of actuarial loss	0.3		0.3		6.0
Amortization of prior service cost	—		—		1.2
Settlement loss	—		—		151.5
Net periodic benefit cost	0.7		0.7		152.6
Defined contribution expense	9.1		8.6		7.5
Net expense	$	9.8	$	9.3	$	160.1

The expected return on plan assets for the year ended December 31, 2020 was 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. The non-service cost components of net periodic benefit cost are included in other, net (income) expense in our Consolidated Statements of Operations.

Obligations and funded status

At December 31, 2022 and 2021, the projected benefit obligations and net funded status of our Supplemental Executive Retirement Plan ("SERP") were $11.2 million and $14.5 million, respectively, which are included in accrued liabilities in our Consolidated Balance Sheets.

Amounts recognized in other comprehensive income (loss)

	Year Ended December 31,
	2022		2021		2020
	(in millions)
Settlement of pension plan	$	—	$	—	$	151.5
Actuarial gain (loss)	2.6		0.4		10.4
Amortization of actuarial loss	0.3		0.3		6.0
Amortization of prior service cost	—		—		1.2
Total before income taxes	2.9		0.7		169.1
Income tax (benefit) expense	0.6		0.2		39.2
Net amount recognized in other comprehensive income (loss)	$	2.3	$	0.5	$	129.9

At December 31, 2022, AOCI included unrecognized actuarial losses related to our SERP of $2.3 million ($1.2 million net of related income taxes). Actuarial losses included in AOCI and expected to be recognized in net periodic pension cost for the year ended December 31, 2023 are $0.1 million ($0.1 million net of related income taxes).

Plan assets

The target and actual investment allocation strategy at December 31, 2022 and 2021 is 100% cash and cash equivalents. The estimated fair value of the plans' assets at December 31, 2022 and 2021 was $0.4 million and $0.6 million, respectively, of temporary cash investments (Level 1).

The pension plans' assets are valued at fair value. Temporary cash investments consist of U.S. dollars held in master trust accounts with the trustee. These temporary cash investments are classified as Level 1 instruments. See Note 3 for a description of the valuation methodologies used in determining fair value.

Funding of Defined Contribution Plans

The Company's 401(k) plan utilizes a qualified automatic contribution arrangement safe harbor plan structure. The matching structure provides for a dollar-for-dollar Company match on up to 6% of participants' eligible compensation, subject to a two-year cliff vesting period. Employer contributions to the 401(k) plan and the Trinity Industries, Inc. Deferred Compensation Plan for the year ending December 31, 2023 are expected to be $8.7 million, compared to $8.6 million contributed during 2022.