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BENEFIT PLANS | 12 Months Ended
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Dec. 31, 2019
BENEFIT PLANS: |
BENEFIT PLANS: | ​ NOTE 12—BENEFIT PLANS: ​ Post retirement defined benefit plans and defined contribution plan ​ The Company has two noncontributory defined benefit pension plans covering former salaried employees in the United States and certain former expatriate employees in Peru (the “Expatriate Plan”). Effective October 31, 2000, the Board of Directors amended the qualified pension plan to suspend the accrual of benefits. In addition, the Company’s Mexican subsidiaries have a defined contribution pension plan for salaried employees and a non-contributory defined benefit pension plan for union employees (the “Mexican Plan”). ​ The components of net periodic benefit costs calculated in accordance with ASC 715 “Compensation retirement benefits,” using December 31 as a measurement date, consist of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in millions) |  | 2019 |  | 2018 |  | 2017
Service cost | ​ | $ | 1.1 | ​ | $ | 1.0 | ​ | $ | 0.8
Interest cost | ​ |  | 1.8 | ​ |  | 1.6 | ​ |  | 1.4
Expected return on plan assets | ​ |  | (3.5) | ​ |  | (3.4) | ​ |  | (2.9)
Amortization of prior service cost / (credit) | ​ |  | 0.2 | ​ |  | 0.2 | ​ |  | 0.1
Settlement / Curtailment | ​ | ​ | — | ​ | ​ | (0.2) | ​ | ​ | 0.1
Amortization of net loss/(gain) | ​ |  | 0.3 | ​ |  | 0.2 | ​ |  | 0.2
Net periodic benefit cost | ​ | $ | (0.1) | ​ | $ | (0.6) | ​ | $ | (0.3)
​ The change in benefit obligation and plan assets and a reconciliation of funded status are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of December 31,
(in millions) |  | 2019 |  | 2018
Change in benefit obligation: | ​ | ​ | ​ | ​ | ​ | ​
Projected benefit obligation at beginning of year | ​ | $ | 27.4 | ​ | $ | 27.5
Service cost | ​ |  | 1.1 | ​ |  | 1.0
Interest cost | ​ |  | 1.8 | ​ |  | 1.6
Settlement | ​ |  | — | ​ |  | —
Benefits paid | ​ |  | (1.8) | ​ |  | (1.6)
Actuarial (gain)/loss | ​ |  | 3.6 | ​ |  | (0.2)
Actuarial gain assumption changes | ​ |  | 0.9 | ​ |  | (0.8)
Inflation adjustment | ​ |  | 0.7 | ​ |  | (0.1)
Projected benefit obligation at end of year | ​ | $ | 33.7 | ​ | $ | 27.4
Change in plan assets: | ​ | ​ | ​ | ​ | ​ | ​
Fair value of plan assets at beginning of year | ​ | $ | 46.7 | ​ | $ | 51.6
Actual return on plan assets | ​ |  | 4.8 | ​ |  | (3.5)
Employer contributions | ​ |  | (0.6) | ​ |  | (0.4)
Benefits paid | ​ |  | (0.9) | ​ |  | (1.0)
Currency exchange rate adjustment | ​ |  | 1.6 | ​ |  | —
Fair value of plan assets at end of year | ​ | $ | 51.6 | ​ | $ | 46.7
Funded status at end of year: | ​ | $ | 17.9 | ​ | $ | 19.3
ASC-715 amounts recognized in statement of financial position consists of: | ​ | ​ | ​ | ​ | ​ | ​
Non-current assets | ​ | $ | 17.9 | ​ | $ | 19.4
Total | ​ | $ | 17.9 | ​ | $ | 19.4
ASC-715 amounts recognized in accumulated other comprehensive income (net of income taxes of $(5.4) million and $(4.3) million in 2019 and 2018, respectively) consists of: | ​ | ​ | ​ | ​ | ​ | ​
Net loss (gain) | ​ | $ | 7.6 | ​ | $ | 5.8
Prior service cost | ​ |  | 1.4 | ​ |  | 1.4
Total | ​ | $ | 9.0 | ​ | $ | 7.2
​ The following table summarizes the changes in accumulated other comprehensive income for the years ended December 31, related to the defined benefit pension plan, net of income tax: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(in millions) |  | 2019 |  | 2018
Reconciliation of accumulated other comprehensive income: | ​ | ​ | ​ | ​ | ​ | ​
Accumulated other comprehensive income at beginning of plan year | ​ | $ | 7.2 | ​ | $ | 3.8
Net loss/(gain) amortized during the year | ​ |  | 1.9 | ​ |  | 3.6
Net loss/(gain) occurring during the year | ​ |  | (0.2) | ​ |  | (0.1)
Prior service cost (credit) | ​ | ​ | — | ​ | ​ | —
Currency exchange rate adjustment | ​ |  | 0.1 | ​ |  | (0.1)
Net adjustment to accumulated other comprehensive income (net of income taxes of $(2.2) million and $(2.2) million in 2019 and 2018, respectively) | ​ |  | 1.8 | ​ |  | 3.4
Accumulated other comprehensive income at end of plan year | ​ | $ | 9.0 | ​ | $ | 7.2
​ The following table summarizes the amounts in accumulated other comprehensive income amortized and recognized as a component of net periodic benefit cost in 2019 and 2018, net of income tax: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(in millions) |  | 2019 |  | 2018
Net loss / (gain) | ​ | $ | 1.8 | ​ | $ | 3.6
Amortization of net (loss) gain | ​ |  | (0.2) | ​ |  | (0.1)
Amortization of prior services cost (credit) | ​ | ​ | — | ​ | ​ | —
Total amortization expenses | ​ | $ | 1.6 | ​ | $ | 3.5
​ The assumptions used to determine the pension obligations are: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Expatriate Plan |  | 2019 |  | 2018 |  | 2017 |
Discount rate |  | 2.85 | % | 3.90 | % | 3.25 | %
Expected long-term rate of return on plan asset |  | 4.00 | % | 4.00 | % | 4.00 | %
Rate of increase in future compensation level |  | N/A | ​ | N/A | ​ | N/A | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Mexican Plan(*) |  | 2019 |  | 2018 |  | 2017 |
Discount rate |  | 7.15 | % | 8.45 | % | 7.80 | %
Expected long-term rate of return on plan asset |  | 7.15 | % | 8.45 | % | 7.55 | %
Rate of increase in future compensation level |  | 4.50 | % | 4.50 | % | 4.50 | %
(*)These rates are based on Mexican pesos as pension obligations are denominated in pesos. ​ The scheduled maturities of the benefits expected to be paid in each of the next five years, and thereafter, are as follows: ​
​ | ​ | ​ | ​
​ |  | Expected
Years | ​ | Benefit Payments
​ | ​ | (in millions)
2020 | ​ | $ | 3.2
2021 | ​ |  | 1.9
2022 | ​ |  | 2.0
2023 | ​ |  | 2.0
2024 | ​ |  | 2.3
2025 to 2027 | ​ |  | 14.7
Total | ​ | $ | 26.1
​ Expatriate Plan ​ The Company’s funding policy is to contribute amounts to the qualified plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974 plus such additional amounts as the Company may determine to be appropriate. ​ Plan assets are invested in a group annuity contract with Metropolitan Life Insurance Company (“MetLife”). The Contract invests in the MetLife General Account Payment Fund (the "Money Fund") and the MetLife Broad Market Core Bond Fund (the “Bond Fund”) managed by BlackRock, Inc. ​ The Money Fund seeks to earn interest and maintain a $1.00 per share net asset value, by investing in U.S. Dollar-denominated money market securities. ​ The Bond Fund seeks to outperform the Bloomberg Barclays ® U.S. Aggregate Bond Index, net of fees, over a full market cycle. The Bond Fund invests in publicly traded, investment grade securities. These may include corporate securities, mortgage securities, treasuries and cash, agency securities, commercial mortgage backed securities and other investment vehicles adhering to the fund’s investment objectives. These investments are classified as Level 1 because they are valued using quoted prices of the same securities as they consist of instruments which are publicly traded. ​ Plan assets are invested with the objective of maximizing returns with an acceptable level of risk and maintaining adequate liquidity to fund expected benefit payments. The Company's policy for determining asset mix-targets to meet investment objectives includes periodic consultation with recognized third party investment consultants. ​ The expected long-term rate of return on plan assets is reviewed annually, taking into consideration asset allocations, historical returns and the current economic environment. Based on these factors the Company expects its assets will earn an average of 4.00% per annum assuming its long-term mix will be consistent with its current mix. ​ Mexican Plan ​ Minera Mexico’s policy for determining asset mix targets includes periodic consultation with recognized third party investment consultants. The expected long-term rate of return on plan assets is updated periodically, taking into consideration assets allocations, historical returns and the current economic environment. The fair value of plan assets is impacted by general market conditions. If actual returns on plan assets vary from the expected returns, actual results could differ. ​ The plan assets are managed by three financial institutions, Scotiabank Inverlat S.A., Banco Santander and GBM Grupo Bursatil Mexicano, S.A. 80% of the funds are invested in Mexican government securities, including treasury certificates and development bonds of the Mexican government. The remaining 20% is invested in common shares of Grupo Mexico. The plan assets are invested without restriction in active markets that are accessible when required and are therefore considered as level 1, in accordance with ASC 820 “Fair Value Measurement.” ​ These plans accounted for approximately 100% of benefit obligations. The following table represents the asset mix of the investment portfolio as of December 31: ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2019 |  | 2018 |
Asset category: | ​ | ​ | ​ | ​ | ​
Treasury bills |  | 80 | % | 78 | %
Equity securities |  | 20 | % | 22 | %
​ |  | 100 | % | 100 | %
​ The amount of contributions that the Company expects to pay to the plan during 2020 is $2.5 million, which excludes $1.7 million of pending payments to former Buenavista workers. ​ Post-retirement Health Care Plan: ​ United States: The Company adopted a post-retirement health care plan for retired salaried employees eligible for Medicare in 1996. The Company manages the plan and is currently providing health benefits to retirees. The plan is accounted for in accordance with ASC 715 “Compensation retirement benefits.” ​ In Mexico, health services are provided by the Mexican Social Security Institute. ​ The components of net period benefit costs for the three years ended December 31, 2019 are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in millions) |  | 2019 |  | 2018 |  | 2017
Interest cost | ​ | $ | 0.9 | ​ | $ | 0.9 | ​ | $ | 0.9
Amortization of prior service cost/ (credit) | ​ |  | (0.2) | ​ |  | (0.2) | ​ |  | (0.2)
Net periodic benefit cost | ​ | $ | 0.7 | ​ | $ | 0.7 | ​ | $ | 0.7
​ The change in benefit obligation and a reconciliation of funded status are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of December 31,
(in millions) |  | 2019 |  | 2018
Change in benefit obligation: | ​ | ​ | ​ | ​ | ​ | ​
Projected benefit obligation at beginning of year | ​ | $ | 11.9 | ​ | $ | 12.5
Interest cost | ​ |  | 0.9 | ​ |  | 0.9
Actuarial loss/ (gain)-claims cost | ​ |  | — | ​ |  | 0.2
Benefits paid | ​ |  | (1.3) | ​ |  | (0.9)
Actuarial (gain)/loss | ​ |  | 8.6 | ​ |  | (0.9)
Inflation adjustment | ​ |  | 0.5 | ​ |  | 0.1
Projected benefit obligation at end of year | ​ | $ | 20.6 | ​ | $ | 11.9
Change in plan assets: | ​ | ​ | ​ | ​ | ​ | ​
Fair value of plan assets at beginning of year | ​ | $ | — | ​ | $ | —
Employer contributions | ​ |  | 0.1 | ​ |  | 0.1
Benefits paid | ​ |  | (0.1) | ​ |  | (0.1)
Fair value of plan assets at end of year | ​ | $ | — | ​ | $ | —
Funded status at end of year: | ​ | $ | 20.6 | ​ | $ | 11.9
ASC-715 amounts recognized in statement of financial position consists of: | ​ | ​ | ​ | ​ | ​ | ​
Current liabilities | ​ | $ | (0.1) | ​ | $ | (0.1)
Non-current liabilities | ​ |  | (20.5) | ​ |  | (11.8)
Total | ​ | $ | (20.6) | ​ | $ | (11.9)
ASC-715 amounts recognized in accumulated other comprehensive income consists of: | ​ | ​ | ​ | ​ | ​ | ​
Net loss (gain) | ​ | $ | 1.5 | ​ | $ | (4.4)
Total (net of income taxes of $(0.7) million and $1.9 million in 2019 and 2018, respectively) | ​ | $ | 1.5 | ​ | $ | (4.4)
​ The following table summarizes the changes in accumulated other comprehensive income for the years ended December 31, related to the post-retirement health care plan, net of income tax: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of December 31,
(in millions) |  | 2019 |  | 2018
Reconciliation of accumulated other comprehensive income: | ​ | ​ | ​ | ​ | ​ | ​
Accumulated other comprehensive income at beginning of plan year | ​ | $ | (4.4) | ​ | $ | (3.9)
Net loss/(gain) occurring during the year | ​ |  | 6.0 | ​ |  | (0.6)
Net loss/(gain) amortized during the year | ​ |  | 0.1 | ​ |  | 0.1
Currency exchange rate adjustment | ​ |  | (0.2) | ​ |  | —
Net adjustment to accumulated other comprehensive income (net of income taxes of $(2.6) million and $0.2 million in 2019 and 2018, respectively) | ​ |  | 5.9 | ​ |  | (0.5)
Accumulated other comprehensive income at end of plan year | ​ | $ | 1.5 | ​ | $ | (4.4)
​ The following table summarizes the amounts in accumulated other comprehensive income amortized and recognized as a component of net periodic benefit cost in 2019 and 2018, net of income tax: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of December 31,
(in millions) |  | 2019 |  | 2018
Net loss / (gain) | ​ | $ | 5.9 | ​ | $ | (0.6)
Amortization of net (loss) gain | ​ |  | 0.2 | ​ |  | 0.2
Total amortization expenses | ​ | $ | 6.1 | ​ | $ | (0.4)
​ The discount rates used in the calculation of other post-retirement benefits and cost as of December 31 were: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2019 |  | 2018 |  | 2017 |
Expatriate health plan | ​ | ​ | ​ | ​ | ​ | ​ | ​
Discount rate |  | 2.85 | % | 3.90 | % | 3.25 | %
Mexican health plan | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average discount rate |  | 7.15 | % | 8.45 | % | 7.80 | %
​ The benefits expected to be paid in each of the next five years, and thereafter, are as follows: ​
​ | ​ | ​ | ​
​ |  | Expected
Year | ​ | Benefit Payments
​ | ​ | (in millions)
2020 | ​ | $ | 1.3
2021 | ​ | ​ | 1.3
2022 | ​ |  | 1.3
2023 | ​ |  | 1.4
2024 | ​ |  | 1.4
2025 to 2029 | ​ |  | 7.3
Total | ​ | $ | 14.0
​ Expatriate Health Plan ​ For measurement purposes for pre 65 year old participants, a 5.8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019 which gradually decrease to 4.2%. For post 65 year old the annual rate of increase in the per capita cost for 2019 is 5.2% which is assumed to decrease gradually to 4.0%. ​ Assumed health care cost trend rates can have a significant effect on amounts reported for health care plans. However, because of the size of the Company’s plan, a one percentage-point change in assumed health care trend rate would not have a significant effect. Mexican Health Plan ​ For measurement purposes, a 4.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019 and remains at that level thereafter. ​ An increase in other benefit cost trend rates have a significant effect on the amount of the reported obligations, as well as component cost of the other benefit plan. One percentage-point change in assumed other benefits cost trend rates would have the following effects: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | One Percentage
​ | ​ | Point
(in millions) |  | Increase |  | Decrease
Effect on total service and interest cost components | ​ | $ | 1.4 | ​ | $ | 0.9
Effect on the post-retirement benefit obligation | ​ | $ | 18.8 | ​ | $ | 12.2
​

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