7. Pension Benefit Obligations

In the U.S., the Company sponsors various qualified defined benefit pension plans. Benefits under these plans generally are based on the employee’s years of creditable service and compensation; however, all U.S. defined benefit plans are closed to new participants and have frozen accruals.

The Company also sponsors various non-qualified plans in the U.S.; all of these plans are frozen. Outside the U.S., the Company sponsors various pension plans, which are appropriate to the country in which the Company operates, some of which are government mandated.

The following tables provide reconciliations of the changes in the U.S. and international plans’ benefit obligations, reconciliations of the changes in the fair value of assets for the last three years ended September 30, and reconciliations of the funded status as of September 30 of each year.


	Fiscal Year Ended
	September 30,				September 30,				September 30,
	2018				2017				2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
	(in millions)
Change in benefit obligation:
Benefit obligation at beginning of year	$	683.0	$	1,333.5	$	720.0	$	1,406.2	$	718.2	$	1,239.2
Service cost		4.9		1.1		4.3		1.3		4.3		1.0
Participant contributions		0.2		0.4		0.1		0.4		0.1		0.5
Interest cost		20.7		32.0		19.2		28.3		22.0		39.2
Benefits and expenses paid		(37.8)		(53.7)		(37.9)		(48.3)		(37.4)		(41.9)
Actuarial (gain) loss		(38.5)		(87.7)		(22.7)		(98.6)		52.3		377.1
Plan settlements		—		(3.0)		—		—		(32.9)		(0.7)
Plan amendments		0.6		—		—		—		0.2		—
Plan curtailments		—		(0.1)		—		—		(6.8)		—
Foreign currency translation (gain) loss		—		(33.7)		—		44.2		—		(208.2)
Benefit obligation at end of year	$	633.1	$	1,188.8	$	683.0	$	1,333.5	$	720.0	$	1,406.2


	Fiscal Year Ended
	September 30,				September 30,				September 30,
	2018				2017				2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
	(in millions)
Change in plan assets
Fair value of plan assets at beginning of year	$	470.4	$	993.1	$	456.9	$	973.2	$	459.0	$	925.8
Actual return on plan assets		11.1		29.3		39.0		9.6		49.6		215.9
Employer contributions		11.6		27.8		12.3		25.8		18.5		20.2
Participant contributions		0.2		0.4		0.1		0.4		0.1		0.5
Benefits and expenses paid		(37.8)		(53.7)		(37.9)		(48.3)		(37.4)		(41.9)
Plan settlements		—		(3.0)		—		—		(32.9)		(0.7)
Foreign currency translation gain (loss)		—		(28.0)		—		32.4		—		(146.6)
Fair value of plan assets at end of year	$	455.5	$	965.9	$	470.4	$	993.1	$	456.9	$	973.2


	Fiscal Year Ended
	September 30, 2018				September 30, 2017				September 30, 2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
	(in millions)
Reconciliation of funded status:
Funded status at end of year	$	(177.6)	$	(222.9)	$	(212.6)	$	(340.4)	$	(263.1)	$	(433.0)
Contribution made after measurement date		N/A		N/A		N/A		N/A		N/A		N/A
Net amount recognized at end of year	$	(177.6)	$	(222.9)	$	(212.6)	$	(340.4)	$	(263.1)	$	(433.0)

The following table sets forth the amounts recognized in the consolidated balance sheets as of September 30, 2018, 2017 and 2016:


	Fiscal Year Ended
	September 30, 2018				September 30, 2017				September 30, 2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
	(in millions)
Amounts recognized in the consolidated balance sheets:
Other non-current assets	$	2.5	$	19.1	$	2.3	$	13.9	$	2.0	$	5.3
Accrued expenses and other current liabilities		(9.5)		—		(10.1)		—		(9.3)		—
Pension benefit obligations		(170.6)		(242.0)		(204.8)		(354.3)		(255.8)		(438.3)
Net amount recognized in the balance sheet	$	(177.6)	$	(222.9)	$	(212.6)	$	(340.4)	$	(263.1)	$	(433.0)

The following table details the reconciliation of amounts in the consolidated statements of stockholders’ equity for the fiscal years ended September 30, 2018, 2017 and 2016:


	Fiscal Year Ended
	September 30, 2018				September 30, 2017				September 30, 2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
	(in millions)
Reconciliation of amounts in consolidated statements of stockholders’ equity:
Prior service (cost) credit	$	(0.8)	$	4.1	$	(0.2)	$	4.4	$	(0.2)	$	4.4
Net loss		(72.5)		(186.4)		(94.6)		(263.7)		(129.6)		(343.3)
Total recognized in accumulated other comprehensive loss	$	(73.3)	$	(182.3)	$	(94.8)	$	(259.3)	$	(129.8)	$	(338.9)

The following table details the components of net periodic benefit cost for the Company’s pension plans for fiscal years ended September 30, 2018, 2017 and 2016:


	Fiscal Year Ended
	September 30, 2018				September 30, 2017				September 30, 2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
	(in millions)
Components of net periodic (benefit) cost:
Service costs	$	4.9	$	1.1	$	4.3	$	1.3	$	4.3	$	1.0
Interest cost on projected benefit obligation		20.7		32.0		19.2		28.3		22.0		39.2
Expected return on plan assets		(31.5)		(43.1)		(31.0)		(41.5)		(30.8)		(48.0)
Amortization of prior service credits		0.1		(0.1)		—		(0.2)		—		(0.2)
Amortization of net loss		4.0		8.2		4.3		13.0		4.0		5.4
Curtailment gain recognized		—		—		—		—		(6.8)		—
Settlement (gain) loss recognized		—		0.3		—		—		(0.9)		0.1
Net periodic (benefit) cost	$	(1.8)	$	(1.6)	$	(3.2)	$	0.9	$	(8.2)	$	(2.5)

The amount of applicable deferred income taxes included in other comprehensive income arising from a change in net prior service cost and net gain/loss was $19.1 million, $27.6 million, and $26.2 million in the years ended September 30, 2018, 2017 and 2016, respectively.

Amounts included in accumulated other comprehensive loss as of September 30, 2018 that are expected to be recognized as components of net periodic benefit cost during fiscal 2019 are (in millions):


	U.S.		Int’l
Amortization of prior service credit	$	(0.1)	$	0.2
Amortization of net actuarial losses		(3.6)		(4.1)
Total	$	(3.7)	$	(3.9)

The table below provides additional year‑end information for pension plans with accumulated benefit obligations in excess of plan assets.


	Fiscal Year Ended
	September 30,				September 30,				September 30,
	2018				2017				2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
	(in millions)
Projected benefit obligation	$	610.4	$	1,002.6	$	658.4	$	1,158.3	$	694.8	$	1,220.3
Accumulated benefit obligation		610.4		991.9		658.4		1,145.7		694.8		1,215.7
Fair value of plan assets		451.5		760.7		466.4		804.2		453.2		782.1

Funding requirements for each pension plan are determined based on the local laws of the country where such pension plan resides. In certain countries, the funding requirements are mandatory while in other countries, they are discretionary. The Company currently intends to contribute $27.2 million to the international plans in fiscal 2019. The required minimum contributions for U.S. plans are not significant. In addition, the Company may make discretionary contributions. The Company currently intends to contribute $14.3 million to U.S. plans in fiscal 2019.

The table below provides the expected future benefit payments, in millions:


Year Ending September 30,	U.S.		Int’l
2019	$	42.9	$	59.0
2020		42.6		54.9
2021		41.7		56.6
2022		41.7		58.4
2023		41.3		60.5
2024-2028		204.4		327.9
Total	$	414.6	$	617.3

The underlying assumptions for the pension plans are as follows:


	Fiscal Year Ended
	September 30,				September 30,				September 30,
	2018				2017				2016
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
Weighted-average assumptions to determine benefit obligation:
Discount rate	4.15	%	2.91	%	3.64	%	2.67	%	3.41	%	2.35	%
Salary increase rate	N/A		2.79	%	N/A		2.76	%	N/A		2.61	%
Weighted-average assumptions to determine net periodic benefit cost:
Discount rate	3.60	%	2.67	%	3.41	%	2.35	%	4.10	%	3.80	%
Salary increase rate	N/A		2.76	%	N/A		2.61	%	N/A		2.65	%
Expected long-term rate of return on plan assets	7.00	%	4.73	%	7.00	%	5.10	%	6.72	%	5.74	%

Pension costs are determined using the assumptions as of the beginning of the plan year. The funded status is determined using the assumptions as of the end of the plan year.

The following table summarizes the Company’s target allocation for 2018 and pension plan asset allocation, both U.S. and international, as of September 30, 2018 and 2017:


					Percentage of Plan Assets
					as of September 30,
	Target Allocations				2018				2017
	U.S.		Int’l		U.S.		Int’l		U.S.		Int’l
Asset Category:
Equities	40	%	25	%	40	%	38	%	43	%	27	%
Debt	51		35		50		36		47		38
Cash	1		10		1		7		1		2
Property and other	8		30		9		19		9		33
Total	100	%	100	%	100	%	100	%	100	%	100	%

The Company’s domestic and foreign plans seek a competitive rate of return relative to an appropriate level of risk depending on the funded status and obligations of each plan and typically employ both active and passive investment management strategies. The Company’s risk management practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets. The target asset allocation selected for each plan reflects a risk/return profile that the Company believes is appropriate relative to each plan’s liability structure and return goals.

To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio and the diversification of the portfolio. This resulted in the selection of a 7.00% and 4.73% weighted-average long-term rate of return on assets assumption for the fiscal year ended September 30, 2018 for U.S. and non-U.S. plans, respectively.

As of September 30, 2018, the fair values of the Company’s pension plan assets by major asset categories were as follows:


			Fair Value Measurement as of
			September 30, 2018
	Total		Quoted		Significant
	Carrying		Prices in		Other		Significant
	Value as of		Active		Observable		Unobservable		Investments
	September 30,		Markets		Inputs		Inputs		measured at
	2018		(Level 1)		(Level 2)		(Level 3)		NAV
	(in millions)
Cash and cash equivalents	$	71.7	$	37.1	$	34.6	$	—	$	—
Equity and debt securities		153.4		153.4		—		—		—
Investment funds
Diversified and equity funds		152.0		82.4		69.6		—		—
Fixed income funds		55.3		3.6		51.7		—		—
Hedge funds		15.0		—		—		15.0		—
Common collective funds		951.0		—		—		—		951.0
Assets held by insurance company		30.0		—		—		30.0		—
Derivative instruments		(7.0)		—		(7.0)		—		—
Total	$	1,421.4	$	276.5	$	148.9	$	45.0	$	951.0

As of September 30, 2017, the fair values of the Company’s pension plan assets by major asset categories were as follows:


			Fair Value Measurement as of
			September 30, 2017
	Total		Quoted		Significant
	Carrying		Prices in		Other		Significant
	Value as of		Active		Observable		Unobservable		Investments
	September 30,		Markets		Inputs		Inputs		measured at
	2017		(Level 1)		(Level 2)		(Level 3)		NAV
	(in millions)
Cash and cash equivalents	$	22.9	$	13.1	$	9.8	$	—	$	—
Equity and debt securities		7.9		6.2		1.7		—		—
Investment funds
Diversified and equity funds		180.0		6.4		173.6		—		—
Fixed income funds		153.7		3.5		150.2		—		—
Hedge funds		14.0		—		—		14.0		—
Common collective funds		1,068.9		—		—		—		1,068.9
Assets held by insurance company		31.3		—		—		31.3		—
Derivative instruments		(15.2)		—		(15.2)		—		—
Total	$	1,463.5	$	29.2	$	320.1	$	45.3	$	1,068.9

Changes for the year ended September 30, 2018 in the fair value of the Company’s recurring post-retirement plan Level 3 assets are as follows:

Actual return

Actual return on

on plan assets,

Change

September 30,

plan assets,

relating to

Transfer

due to

2017

relating to assets

assets sold

Purchases,

into /

exchange

September 30,

Beginning

still held at

during the

sales and

(out of)

rate

2018

balance

reporting date

period

settlements

Level 3

changes

Ending balance

(in millions)

Investment funds

Hedge funds

45.3

0.4

—

0.2

—

(0.9)

45.0

Changes for the year ended September 30, 2017, in the fair value of the Company’s recurring post-retirement plan Level 3 assets are as follows:

Actual return

Actual return on

on plan assets,

Change

September 30,

plan assets,

relating to

Transfer

due to

2016

relating to assets

assets sold

Purchases,

into /

exchange

September 30,

Beginning

still held at

during the

sales and

(out of)

rate

2017

balance

reporting date

period

settlements

Level 3

changes

Ending balance

(in millions)

Investment funds

Hedge funds

43.3

(0.7)

—

1.7

—

1.0

45.3

Cash equivalents are mostly comprised of short‑term money‑market instruments and are valued at cost, which approximates fair value.

For equity investment funds 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 funds are categorized as Level 2 if the custodian obtains corroborated quotes from a pricing vendor or categorized as Level 3 if the custodian obtains uncorroborated quotes from a broker or investment manager.

Fixed income investment funds categorized as Level 2 are valued by the trustee using pricing models that use verifiable observable market data (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers, or quoted prices of securities with similar characteristics.

Hedge funds categorized as Level 3 are valued based on valuation models that include significant unobservable inputs and cannot be corroborated using verifiable observable market data. Hedge funds are valued by independent administrators. Depending on the nature of the assets, the general partners or independent administrators use both the income and market approaches in their models. The market approach consists of analyzing market transactions for comparable assets while the income approach uses earnings or the net present value of estimated future cash flows adjusted for liquidity and other risk factors. As of September 30, 2018, there were no material changes to the valuation techniques.

Common collective funds are valued based on net asset value (NAV) per share or unit as a practical expedient as reported by the fund manager, multiplied by the number of shares or units held as of the measurement date. Accordingly, these NAV-based investments have been excluded from the fair value hierarchy. These collective investment funds have minimal redemption notice periods and are redeemable daily at the NAV, less transaction fees, without significant restrictions. There are no significant unfunded commitments related to these investments.

Multiemployer Pension Plans

The Company participates in over 200 construction-industry multiemployer pension plans. Generally, the plans provide defined benefits to substantially all employees covered by collective bargaining agreements. Under the Employee Retirement Income Security Act, a contributor to a multiemployer plan is liable, upon termination or withdrawal from a plan, for its proportionate share of a plan’s unfunded vested liability. The Company’s aggregate contributions to these multiemployer plans were $49.8 million and $48.8 million for the years ended September 30, 2018 and 2017, respectively. At September 30, 2018 and 2017, none of the plans in which the Company participates are individually significant to its consolidated financial statements.