Note 13—Retirement Plans

Defined Benefit Plans

The Company maintains defined benefit retirement plans, primarily for certain domestic employees, as presented below. All plans are frozen to new entrants, with the exception of the executive supplemental and director defined benefit pension plans. Benefits are based primarily on years of service and earnings of the employee.

In 2016, the Company moved from utilizing a weighted-average discount rate, which was derived from the yield curve used to measure the benefit obligation at the beginning of the period, to a spot yield rate curve to estimate the pension benefit obligation and net periodic benefit costs. This change in estimate provides a more accurate measurement of service and interest costs by applying the spot rate that could be used to settle each projected cash flow individually. This change in estimate did not have a material effect on net periodic benefit costs for 2016.

The following are the significant assumptions used in the measurement of the projected benefit obligation and net periodic benefit cost:

Weighted‑average assumptions for the projected benefit obligation at December 31:

Weighted‑average assumptions for net periodic benefit cost for the years ended December 31:


	2016		2015		2014
Discount rate		4.35%		3.87%		4.58%
Rate of compensation increase		4.29%		4.29%		4.29%
Expected long-term return on plan assets		6.20%		6.30%		6.48%

The Company considers several factors in determining the long-term rate of return for plan assets. Asset-class return expectations are set using a combination of empirical and forward-looking analyses. Capital market assumptions for the composition of the Company’s asset portfolio are intended to capture the behavior of asset classes observed over several market cycles. The Company also looks to historical returns for reasonability and appropriateness.

The following table reconciles the change in the projected benefit obligation, the change in plan assets and the funded status recognized in the Consolidated Balance Sheets for the years ended December 31:


(in millions)	2016		2015
Funded status
Projected benefit obligation
Beginning of year	$	174.3	$	192.3
Change in benefit obligation:
Service cost		3.4		3.7
Interest cost		5.4		7.1
Plan amendments		(0.1)		-
Actuarial (gain)/loss		1.2		(16.7)
Benefits paid		(11.7)		(12.1)
End of year	$	172.5	$	174.3

Fair value of plan assets
Beginning of year	$	162.7	$	177.3
Change in plan assets:
Actual return on plan assets		11.2		(3.5)
Company contributions		1.0		1.0
Benefits paid		(11.7)		(12.1)
End of year	$	163.2	$	162.7

(Unfunded) status end of year	$	(9.3)	$	(11.6)

Accumulated benefit obligation at end of year	$	171.5	$	173.5

In accordance with FASB guidance, the projected benefit obligation, accumulated benefit obligation and the fair value of plan assets are required to be disclosed for all plans where the accumulated benefit obligation is in excess of plan assets. The difference between the projected benefit obligation and the accumulated benefit obligation is that the projected benefit obligation includes projected compensation increases.

The Company’s projected benefit obligation at December 31, 2016 and 2015 includes approximately $21.7 million and $21.3 million, respectively, related to the Company’s executive supplemental and director defined benefit pension plans. The executive supplemental and director defined benefit plans have no plan assets and the Company is not required to fund the obligations. The U.S. plans required to be funded by the Company were fully funded at December 31, 2016 and 2015.

The net assets (liabilities) included in the Consolidated Balance Sheets at December 31 were as follows:


(in millions)	2016		2015
Noncurrent assets	$	12.4	$	9.7
Current liabilities		(1.4)		(1.0)
Noncurrent liabilities		(20.3)		(20.3)
Asset (liability) at end of year	$	(9.3)	$	(11.6)

The amounts included in accumulated other comprehensive loss at December 31 are as follows:


(in millions)	2016		2015
Unrecognized actuarial losses (gross)	$	40.2	$	42.2
Unrecognized actuarial losses (net of tax)		25.3		26.4
Unrecognized prior service costs (gross)		0.9		1.1
Unrecognized prior service costs (net of tax)		0.5		0.7

The Company estimates that $0.2 million ($0.1 million net of tax) of prior service cost and $2.3 million ($1.5 million net of tax) of actuarial losses will be amortized from accumulated other comprehensive loss into net periodic pension expense in 2017.

The components of net periodic benefit cost for 2016, 2015 and 2014 were as follows:


(in millions)	2016		2015		2014
Service cost	$	3.4	$	3.7	$	4.0
Interest cost		5.4		7.1		7.7
Expected return on plan assets		(10.1)		(10.2)		(10.8)
Amortization of unrecognized net loss		2.1		4.1		3.3
Amortization of unrecognized prior service credit		0.2		0.2		0.3
Net periodic benefit cost	$	1.0	$	4.9	$	4.5

Disclosures on investment policies and strategies, categories of plan assets and the fair value measurements of plan assets are included below.

The Company employs a liability driven investment approach whereby plan assets are invested primarily in fixed income investments to match the changes in the projected benefit obligation of funded plans that occur as a result of changes in the discount rate. Risk tolerance is established through careful consideration of projected benefit obligations, plan funded status, and the Company’s other obligations and strategic investments.

The established target allocation is 88% fixed income securities and 12% equity securities. Fixed income investments are diversified across core fixed income, long duration, and high yield bonds. Equity investments are diversified across large capitalization U.S. and international stocks. Investment risk is measured and monitored on an ongoing basis through investment portfolio reviews, annual projected benefit liability measurements and asset/liability studies.

The fair value measurement of the plans’ assets by asset category at December 31 were as follows:


	Quoted Prices in Active Markets
	for Identical Assets (Level 1)
Asset Category (in millions)	2016		2015
Cash	$	0.6	$	0.6
Mutual funds:
Equity mutual funds(1)	$	20.6	$	19.8
Fixed income mutual funds (2)		142.0		142.3
Total	$	163.2	$	162.7

(1)

This category is comprised of investments in mutual funds that invest in equity securities such as large publicly traded companies listed in the S&P 500 Index; small to medium sized companies with market capitalization in the range of the Russell 2500 Index; and foreign issuers in emerging markets.

(2)

This category is comprised of investments in mutual funds that invest in U.S. corporate and government fixed income securities, including asset‑backed securities; high yield fixed income securities primarily rated BB, B, CCC, CC, C and D; and US dollar denominated debt securities of government, government related and corporate issuers in emerging market countries.

The Company made contributions of $1.0 million during 2016 and 2015 which pertain to the Company’s executive supplemental and director defined benefit pension plans. This contribution covers current participant benefits as these plans have no plan assets. No minimum contributions to the pension plans were required in 2016 and 2015. During 2017, the Company expects to pay approximately $1.4 million in participant benefits under the executive supplemental and director plans. In light of the plans’ funded status, the Company does not expect to make discretionary contributions to its pension plans in 2017.

The following is a summary of estimated future benefits to be paid for the Company’s defined benefit pension plans at December 31, 2016:


(in millions)	Estimated Benefit
Year	Payments
2017	$	15.7
2018		15.4
2019		14.8
2020		14.8
2021		14.4
2022-2026		63.1

Defined Contribution Plan

The Company maintains defined contribution savings plans covering a significant portion of its eligible employees. Participant contributions are matched by the Company up to a 4.0% maximum of eligible compensation, subject to compensation and contribution limits as defined by the Internal Revenue Service. Employer contributions for the savings plan were $13.3 million, $12.2 million and $11.1 million in 2016, 2015 and 2014, respectively.

Matching contributions are invested in funds as directed by participants. Eligible participants may also elect to invest up to 50.0% of the Company’s matching contribution in Company common stock. Common shares held by the contribution savings plan at December 31 were as follows:


(in millions)	2016		2015		2014
Common shares held		1.2		1.3		1.4

Discount rate

Rate of compensation increase