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Retirement Plans and Other Postretirement Benefits | 12 Months Ended
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Dec. 31, 2020
Retirement Benefits [Abstract] |
Retirement Plans and Other Postretirement Benefits | Retirement Plans and Other Postretirement Benefits Retirement and Pension Plans The Company sponsors several retirement and pension plans covering eligible salaried and hourly employees. The plans generally provide benefits based on participants’ years of service and/or compensation. The following is a brief description of the Company’s retirement and pension plans. The Company maintains contributory and non-contributory defined benefit pension plans. Benefits for eligible salaried and hourly employees under all defined benefit plans are funded through trusts established in conjunction with the plans. The Company’s funding policy with respect to its defined benefit plans is to contribute amounts that provide for benefits based on actuarial calculations and the applicable requirements of U.S. federal and local foreign laws. The Company estimates that it will make both required and discretionary cash contributions of approximately $6 million to $10 million to its worldwide defined benefit pension plans in 2021. The Company uses a measurement date of December 31 (its fiscal year end) for its U.S. and foreign defined benefit pension plans. The Company sponsors a 401(k) retirement and savings plan for eligible U.S. employees. Participants in the retirement and savings plan may contribute a specified portion of their compensation on a pre-tax basis, which varies by location. The Company matches employee contributions ranging from 20% to 100%, up to a maximum percentage ranging from 1% to 8% of eligible compensation or up to a maximum of $1,200 per participant in some locations. The Company’s retirement and savings plan has a defined contribution retirement feature principally to cover U.S. salaried employees joining the Company after December 31, 1996. Under the retirement feature, the Company makes contributions for eligible employees based on a pre-established percentage of the covered employee’s salary subject to pre-established vesting. Employees of certain of the Company’s foreign operations participate in various local defined contribution plans. The Company has non-qualified unfunded retirement plans for certain Directors and retired employees. It also provides supplemental retirement benefits, through contractual arrangements and/or a Supplemental Executive Retirement Plan (“SERP”) covering certain current and former executives of the Company. These supplemental benefits are designed to compensate the executive for retirement benefits that would have been provided under the Company’s primary retirement plan, except for statutory limitations on compensation that must be taken into account under those plans. The projected benefit obligations of the SERP and the contracts will primarily be funded by a grant of shares of the Company’s common stock upon retirement or termination of the executive. The Company is providing for these obligations by charges to earnings over the applicable periods. The following tables set forth the changes in net projected benefit obligation and the fair value of plan assets for the funded and unfunded defined benefit plans for the years ended December 31: U.S. Defined Benefit Pension Plans:
| 2020 |  | 2019
| (In thousands)
Change in projected benefit obligation: |  |  |
Net projected benefit obligation at the beginning of the year | $ | 510,514 |  |  | $ | 471,506 |
Service cost | 3,015 |  |  | 3,248 |
Interest cost | 17,235 |  |  | 20,287 |
Actuarial losses (gains) | 32,963 |  |  | 46,269 |
Gross benefits paid | (31,370) |  |  | (30,796) |
Net projected benefit obligation at the end of the year | $ | 532,357 |  |  | $ | 510,514 |
Change in plan assets: |  |  |
Fair value of plan assets at the beginning of the year | $ | 621,632 |  |  | $ | 552,187 |
Actual return on plan assets | 71,281 |  |  | 99,573 |
Employer contributions | 755 |  |  | 668 |
Gross benefits paid | (31,370) |  |  | (30,796) |
Fair value of plan assets at the end of the year | $ | 662,298 |  |  | $ | 621,632 |
Foreign Defined Benefit Pension Plans:
| 2020 |  | 2019
| (In thousands)
Change in projected benefit obligation: |  |  |
Net projected benefit obligation at the beginning of the year | $ | 311,783 |  |  | $ | 268,763 |
Service cost | 4,246 |  |  | 3,307 |
Interest cost | 5,376 |  |  | 6,692 |
Foreign currency translation adjustments | 13,955 |  |  | 9,042 |
Employee contributions | 92 |  |  | 110 |
Actuarial losses (gains) | 27,055 |  |  | 35,021 |
Expenses paid from assets | (838) |  |  | (747) |
Gross benefits paid | (10,615) |  |  | (8,421) |
Settlements | — |  |  | (1,984) |
Plan amendments | 530 |  |  | — |
Net projected benefit obligation at the end of the year | $ | 351,584 |  |  | $ | 311,783 |
Change in plan assets: |  |  |
Fair value of plan assets at the beginning of the year | $ | 224,347 |  |  | $ | 196,801 |
Actual return on plan assets | 20,966 |  |  | 25,391 |
Employer contributions | 8,772 |  |  | 4,941 |
Employee contributions | 92 |  |  | 110 |
Foreign currency translation adjustments | 8,011 |  |  | 8,256 |
Expenses paid from assets | (838) |  |  | (747) |
Settlements | — |  |  | (1,984) |
Gross benefits paid | (10,615) |  |  | (8,421) |
Fair value of plan assets at the end of the year | $ | 250,735 |  |  | $ | 224,347 |
The projected benefit obligation assumptions impacting net actuarial losses (gains) consist of changes in discount and mortality rates, as well as changes in plan experience. A significant component of the decrease in actuarial losses in 2020 for both the U.S. and Foreign Defined Benefit Plans was the change in discount rates. The accumulated benefit obligation consisted of the following at December 31: U.S. Defined Benefit Pension Plans:
| 2020 |  | 2019
| (In thousands)
Funded plans | $ | 515,667 |  |  | $ | 493,756 |
Unfunded plans | 4,494 |  |  | 5,213 |
Total | $ | 520,161 |  |  | $ | 498,969 |
Foreign Defined Benefit Pension Plans:
| 2020 |  | 2019
| (In thousands)
Funded plans | $ | 295,998 |  |  | $ | 264,675 |
Unfunded plans | 53,090 |  |  | 45,315 |
Total | $ | 349,088 |  |  | $ | 309,990 |
Weighted average assumptions used to determine benefit obligations at December 31:
| 2020 |  | 2019
U.S. Defined Benefit Pension Plans: |  |  |
Discount rate | 2.69 | % |  | 3.45 | %
Rate of compensation increase (where applicable) | 3.75 | % |  | 3.75 | %
Foreign Defined Benefit Pension Plans: |  |  |
Discount rate | 1.27 | % |  | 1.83 | %
Rate of compensation increase (where applicable) | 2.50 | % |  | 2.50 | %
The following is a summary of the fair value of plan assets for U.S. plans at December 31:
| 2020 |  | 2019
Asset Class | Total |  | Level 1 |  | Level 2 |  | Total |  | Level 1 |  | Level 2
| (In thousands)
Corporate debt instruments | $ | 3,442 |  |  | $ | — |  |  | $ | 3,442 |  |  | $ | 3,152 |  |  | $ | — |  |  | $ | 3,152 |
Corporate debt instruments – Preferred | 12,196 |  |  | — |  |  | 12,196 |  |  | 10,781 |  |  | — |  |  | 10,781 |
Corporate stocks – Common | 62,897 |  |  | 62,897 |  |  | — |  |  | 127,221 |  |  | 127,221 |  |  | — |
Municipal bonds | 876 |  |  |  |  | 876 |  |  | 574 |  |  | — |  |  | 574 |
Registered investment companies | 236,530 |  |  | 236,530 |  |  | — |  |  | 288,076 |  |  | 288,076 |  |  | — |
U.S. Government securities | 526 |  |  | — |  |  | 526 |  |  | 240 |  |  | — |  |  | 240 |
Total investments | 316,467 |  |  | 299,427 |  |  | 17,040 |  |  | 430,044 |  |  | 415,297 |  |  | 14,747 |
Investments measured at net asset value | 345,831 |  |  | — |  |  | — |  |  | 191,588 |  |  | — |  |  | — |
Total investments | $ | 662,298 |  |  | $ | 299,427 |  |  | $ | 17,040 |  |  | $ | 621,632 |  |  | $ | 415,297 |  |  | $ | 14,747 |
U.S. equity securities and global equity securities categorized as level 1 are traded on national and international exchanges and are valued at their closing prices on the last trading day of the year. For U.S. equity securities and global equity securities not traded on an active exchange, or if the closing price is not available, the trustee obtains indicative quotes from a pricing vendor, broker or investment manager. These securities are categorized as level 2 if the custodian obtains corroborated quotes from a pricing vendor. Additionally, some U.S. equity securities and global equity securities are public investment vehicles valued using the Net Asset Value (“NAV”) provided by the fund manager. The NAV is the total value of the fund divided by the number of shares outstanding. Fixed income securities categorized as level 1 are traded on national and international exchanges and are valued at their closing prices on the last trading day of the year and categorized as level 2 if valued by the trustee using pricing models that use verifiable observable market data, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. The expected long-term rate of return on these plan assets was 7.00% in 2020 and 7.50% in 2019. Equity securities included 384,788 shares of AMETEK, Inc. common stock with a market value of $46.5 million (7.0% of total plan investment assets) at December 31, 2020 and 384,788 shares of AMETEK, Inc. common stock with a market value of $38.4 million (6.2% of total plan investment assets) at December 31, 2019. The objectives of the Company’s U.S. defined benefit plans’ investment strategy are to maximize the plans’ funded status and minimize Company contributions and plan expense. Because the goal is to optimize returns over the long term, an investment policy that favors equity holdings has been established. Since there may be periods of time where both equity and mutual fund markets provide poor returns, an allocation to alternative assets may be made to improve the overall portfolio’s diversification and return potential. The Company periodically reviews its asset allocation, taking into consideration plan liabilities, plan benefit payment streams and the investment strategy of the pension plans. The actual asset allocation is monitored frequently relative to the established targets and ranges and is re-balanced when necessary. The target allocations for the U.S. defined benefits plans are approximately 50% equity securities, 20% fixed income securities and 30% other securities and/or cash. The equity portfolio is diversified by market capitalization and style. The equity portfolio also includes international components. The objective of the mutual fund portion of the pension assets is to provide interest rate sensitivity for a portion of the assets and to provide diversification. The mutual fund portfolio is diversified within certain quality and maturity guidelines to minimize the adverse effects of interest rate fluctuations. Certain investments are prohibited and include venture capital, private placements, unregistered or restricted stock, margin trading, commodities, short selling and rights and warrants. Foreign currency futures, options and forward contracts may be used to manage foreign currency exposure. The following is a summary of the fair value of plan assets for foreign defined benefit pension plans at December 31:
| 2020 |  | 2019
Asset Class | Total |  | Level 3 |  | Total |  | Level 3
| (In thousands)
Life insurance | $ | 20,908 |  |  | $ | 20,908 |  |  | $ | 19,298 |  |  | $ | 19,298 |
Total investments | 20,908 |  |  | 20,908 |  |  | 19,298 |  |  | 19,298 |
Investments measured at net asset value | 229,827 |  |  | — |  |  | 205,049 |  |  | — |
Total investments | $ | 250,735 |  |  | $ | 20,908 |  |  | $ | 224,347 |  |  | $ | 19,298 |
Life insurance assets are considered level 3 investments as their values are determined by the sponsor using unobservable market data. Life insurance assets categorized as level 3 are valued based on unobservable inputs and cannot be corroborated using verifiable observable market data. Investments in level 3 funds are redeemable, however, cash reimbursement may be delayed, or a portion held back until asset finalization. The following is a summary of the changes in the fair value of the foreign plans’ level 3 investments (fair value determined using significant unobservable inputs):
| Life Insurance
| (In thousands)
Balance, December 31, 2018 | $ | 18,685 |
Actual return on assets: |
Unrealized losses relating to instruments still held at the end of the year | $ | 613 |
Realized gains (losses) relating to assets sold during the year | $ | — |
Purchases, sales, issuances and settlements, net | $ | — |
Balance, December 31, 2019 | $ | 19,298 |
Actual return on assets: |
Unrealized gains (losses) relating to instruments still held at the end of the year | $ | 1,610 |
Realized gains (losses) relating to assets sold during the year | $ | — |
Purchases, sales, issuances and settlements, net | $ | — |
Balance, December 31, 2020 | $ | 20,908 |
The objective of the Company’s foreign defined benefit plans’ investment strategy is to maximize the long-term rate of return on plan investments, subject to a reasonable level of risk. Liability studies are also performed on a regular basis to provide guidance in setting investment goals with an objective to balance risks against the current and future needs of the plans. The trustees consider the risk associated with the different asset classes, relative to the plans’ liabilities and how this can be affected by diversification, and the relative returns available on equities, mutual fund investments, real estate and cash. Also, the likely volatility of those returns and the cash flow requirements of the plans are considered. It is expected that equities will outperform mutual fund investments over the long term. However, the trustees recognize the fact that mutual fund investments may better match the liabilities for pensioners. Because of the relatively young active employee group covered by the plans and the immature nature of the plans, the trustees have chosen to adopt an asset allocation strategy more heavily weighted toward equity investments. This asset allocation strategy will be reviewed, from time to time, in view of changes in market conditions and in the plans’ liability profile. The target allocations for the foreign defined benefit plans are approximately 22% equity securities, 21% fixed income securities, 51% multi-asset funds and 6% other securities, insurance or cash. The assumption for the expected return on plan assets was developed based on a review of historical investment returns for the investment categories for the defined benefit pension assets. This review also considered current capital market conditions and projected future investment returns. The estimates of future capital market returns by asset class are lower than the actual long-term historical returns. The current low interest rate environment influences this outlook. Therefore, the assumed rate of return for U.S. plans is 6.75% and 5.47% for foreign plans in 2021. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and pension plans with an accumulated benefit obligation in excess of plan assets were as follows at December 31: U.S. Defined Benefit Pension Plans:
| Projected Benefit Obligation Exceeds Fair Value of Assets |  | Accumulated Benefit Obligation Exceeds Fair Value of Assets
| 2020 |  | 2019 |  | 2020 |  | 2019
| (In thousands)
Benefit obligation | $ | 6,842 |  |  | $ | 7,119 |  |  | $ | 6,842 |  |  | $ | 7,119 |
Fair value of plan assets | 1,155 |  |  | 958 |  |  | 1,155 |  |  | 958 |
Foreign Defined Benefit Pension Plans:
| Projected Benefit Obligation Exceeds Fair Value of Assets |  | Accumulated Benefit Obligation Exceeds Fair Value of Assets
| 2020 |  | 2019 |  | 2020 |  | 2019
| (In thousands)
Benefit obligation | $ | 349,762 |  |  | $ | 311,783 |  |  | $ | 347,267 |  |  | $ | 309,990 |
Fair value of plan assets | 248,914 |  |  | 224,347 |  |  | 248,914 |  |  | 224,347 |
The following table provides the amounts recognized in the consolidated balance sheet at December 31:
| 2020 |  | 2019
| (In thousands)
Funded status asset (liability): |  |  |
Fair value of plan assets | $ | 913,034 |  |  | $ | 845,979 |
Projected benefit obligation | (883,940) |  |  | (822,297) |
Funded status at the end of the year | $ | 29,094 |  |  | $ | 23,682 |
Amounts recognized in the consolidated balance sheet consisted of: |  |  |
Non-current asset for pension benefits (other assets) | $ | 135,628 |  |  | $ | 117,278 |
Current liabilities for pension benefits | (2,174) |  |  | (1,954) |
Non-current liability for pension benefits | (104,360) |  |  | (91,642) |
Net amount recognized at the end of the year | $ | 29,094 |  |  | $ | 23,682 |
The following table provides the amounts recognized in accumulated other comprehensive income, net of taxes, at December 31:
Net amounts recognized: | 2020 |  | 2019
| (In thousands)
Net actuarial loss | $ | 249,468 |  |  | $ | 242,696 |
Prior service costs | 4,247 |  |  | 4,189 |
Transition asset | 5 |  |  | 6 |
Total recognized | $ | 253,720 |  |  | $ | 246,891 |
The following table provides the components of net periodic pension benefit expense (income) for the years ended December 31
| 2020 |  | 2019 |  | 2018
| (In thousands)
Defined benefit plans: |  |  |  |  |
Service cost | $ | 7,261 |  |  | $ | 6,556 |  |  | $ | 6,879 |
Interest cost | 22,611 |  |  | 26,979 |  |  | 25,678 |
Expected return on plan assets | (54,629) |  |  | (52,402) |  |  | (59,325) |
Settlement | — |  |  | 739 |  |  | — |
Amortization of: |  |  |  |  |
Net actuarial loss | 15,479 |  |  | 15,685 |  |  | 12,092 |
Prior service costs | 486 |  |  | 484 |  |  | (49) |
Transition asset | 1 |  |  | 1 |  |  | 1 |
Total net periodic benefit income | (8,791) |  |  | (1,958) |  |  | (14,724) |
Other plans: |  |  |  |  |
Defined contribution plans | 30,829 |  |  | 32,508 |  |  | 28,829 |
Foreign plans and other | 7,902 |  |  | 9,406 |  |  | 6,185 |
Total other plans | 38,731 |  |  | 41,914 |  |  | 35,014 |
Total net pension expense | $ | 29,940 |  |  | $ | 39,956 |  |  | $ | 20,290 |
The total net periodic benefit expense (income) is included in Cost of sales, General and administrative expense and Other income and expense in the consolidated statement of income. The following weighted average assumptions were used to determine the above net periodic pension benefit income for the years ended December 31:
| 2020 |  | 2019 |  | 2018
U.S. Defined Benefit Pension Plans: |  |  |  |  |
Discount rate | 3.45 | % |  | 4.40 | % |  | 4.40 | %
Expected return on plan assets | 7.00 | % |  | 7.50 | % |  | 7.50 | %
Rate of compensation increase (where applicable) | 3.75 | % |  | 3.75 | % |  | 3.75 | %
Foreign Defined Benefit Pension Plans: |  |  |  |  |
Discount rate | 1.83 | % |  | 2.59 | % |  | 2.59 | %
Expected return on plan assets | 5.97 | % |  | 6.52 | % |  | 6.52 | %
Rate of compensation increase (where applicable) | 2.50 | % |  | 2.50 | % |  | 2.50 | %
Estimated Future Benefit Payments The estimated future benefit payments for U.S. and foreign plans are as follows: 2021 – $43.2 million; 2022 – $43.1 million; 2023 – $44.2 million; 2024 – $44.6 million; 2025 – $44.3 million; 2026 to 2030 - $220.9 million. Future benefit payments primarily represent amounts to be paid from pension trust assets. Amounts included that are to be paid from the Company’s assets are not significant in any individual year. Postretirement Plans and Post employment Benefits The Company provides limited postretirement benefits other than pensions for certain retirees and a small number of former employees. Benefits under these arrangements are not funded and are not significant. The Company also provides limited post employment benefits for certain former or inactive employees after employment but before retirement. Those benefits are not significant in amount. The Company has a deferred compensation plan, which allows employees whose compensation exceeds the statutory IRS limit for retirement benefits to defer a portion of earned bonus compensation. The plan permits deferred amounts to be deemed invested in either, or a combination of, (a) an interest-bearing account, benefits from which are payable out of the general assets of the Company, or (b) the equivalent of a fund which invests in shares of the Company’s common stock on behalf of the employee. The amount deferred under the plan, including income earned, was $25.1 million and $19.0 million at December 31, 2020 and 2019, respectively. Administrative expense for the deferred compensation plan is borne by the Company and is not significant.

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