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Postretirement Benefit Plans | 12 Months Ended
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Dec. 31, 2020
Postemployment Benefits [Abstract] |
Postretirement Benefit Plans | POSTRETIREMENT BENEFIT PLANS Defined Contribution Plans Substantially all of ITT’s U.S. and certain international employees are eligible to participate in a defined contribution plan. ITT sponsors numerous defined contribution savings plans, which allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines. Certain plans require us to match a portion of the employee contributions. Company contributions charged to expense amounted to $10.6, $17.6 and $17.1 for 2020, 2019 and 2018, respectively. Contributions during 2020 were impacted by a suspension of select 401(k) benefits for certain U.S. participants as a cost reduction measure in response to the COVID-19 pandemic. The ITT Stock Fund, an investment option in our U.S. based defined contribution plan, is considered an employee stock ownership plan and, as a result, participants in the ITT Stock Fund may receive dividends in cash or may reinvest such dividends into the ITT Stock Fund. The ITT Stock Fund held approximately 0.1 shares of ITT common stock at December 31, 2020. Defined Benefit Plans In the fourth quarter of 2020, the Company terminated its U.S. qualified pension plan and transferred its liabilities to an insurance company. Refer to "U.S. Qualified Pension Plan Termination" below for further information. ITT sponsors a number of defined benefit pension plans, primarily outside of the U.S., which have approximately 900 active participants. As of December 31, 2020, international pension plans represented 88% of our total projected benefit obligation. There is one remaining U.S. pension plan, which is frozen to new participants. International plan benefits are primarily determined based on participant years of service, future compensation, and age at retirement or termination. ITT also provides health care and life insurance benefits for eligible U.S. employees upon retirement. In some cases, the plan is still open to certain union employees, but for the majority of our businesses these plans are closed to new participants. The majority of the liability pertains to retirees with postretirement medical insurance. U.S. Qualified Pension Plan Termination In the fourth quarter of 2020, the Company terminated its U.S. qualified pension plan by purchasing a group annuity contract from MassMutual Life Insurance Company (MassMutual), which fully assumed the responsibility for paying and administering pension benefits to approximately five thousand plan participants and their beneficiaries. MassMutual is a highly rated Fortune 100 insurance company that has a long history of efficiently providing and administering pension benefits. In connection with the plan termination, the Company settled all future obligations under the plan by providing lump sum payments to eligible participants who elected to receive them, and by transferring the remaining projected benefit obligation to the insurance company. The termination was funded with plan assets of approximately $320 and cash of $8.4. Consequently, in the fourth quarter of 2020, the Company recognized a settlement charge of $136.9 within non-operating expenses, which primarily represents the acceleration of deferred charges previously included within accumulated other comprehensive loss and derecognition of the net assets of the plan. Balance Sheet Information The following table provides a summary of the funded status of our postretirement benefit plans and the presentation of the funded status within our Consolidated Balance Sheet as of December 31, 2020 and 2019.
| 2020 |  | 2019
| Pension |  | Other Benefits |  | Total |  | Pension |  | Other Benefits |  | Total
Fair value of plan assets | $ | 0.5 |  |  | $ | — |  |  | $ | 0.5 |  |  | $ | 320.5 |  |  | $ | 1.3 |  |  | $ | 321.8 |
Projected benefit obligation | 124.5 |  |  | 118.3 |  |  | 242.8 |  |  | 408.8 |  |  | 116.6 |  |  | 525.4 |
Funded status | $ | (124.0) |  |  | $ | (118.3) |  |  | $ | (242.3) |  |  | $ | (88.3) |  |  | $ | (115.3) |  |  | $ | (203.6) |
Amounts reported within: |  |  |  |  |  |  |  |  |  |  |
Non-current assets | $ | 0.2 |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | 24.5 |  |  | $ | — |  |  | $ | 24.5 |
Accrued liabilities | (5.8) |  |  | (9.2) |  |  | (15.0) |  |  | (4.9) |  |  | (9.3) |  |  | (14.2) |
Non-current liabilities | (118.4) |  |  | (109.1) |  |  | (227.5) |  |  | (107.9) |  |  | (106.0) |  |  | (213.9) |
A portion of our projected benefit obligation includes amounts that have not yet been recognized as expense in our results of operations. Such amounts are recorded within accumulated other comprehensive loss until they are amortized as a component of net periodic postretirement cost. The following table provides a summary of amounts recorded within accumulated other comprehensive loss at December 31, 2020 and 2019.
| 2020 |  | 2019
| Pension |  | Other Benefits |  | Total |  | Pension |  | Other Benefits |  | Total
Net actuarial loss | $ | 40.9 |  |  | $ | 39.2 |  |  | $ | 80.1 |  |  | $ | 143.4 |  |  | $ | 37.8 |  |  | $ | 181.2 |
Prior service cost (benefit) | 0.4 |  |  | (27.1) |  |  | (26.7) |  |  | 0.4 |  |  | (32.2) |  |  | (31.8) |
Total | $ | 41.3 |  |  | $ | 12.1 |  |  | $ | 53.4 |  |  | $ | 143.8 |  |  | $ | 5.6 |  |  | $ | 149.4 |
The following tables provide a rollforward of the benefit obligation, plan assets and funded status for our U.S. and international pension plans and our other employee-related defined benefit plans for the years ended December 31, 2020 and 2019.
| 2020 |  | 2019
| U.S. Pension |  | Int’l Pension |  | Other Benefits |  | Total |  | U.S. Pension |  | Int’l Pension |  | Other Benefits |  | Total
Change in benefit obligation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation – January 1 | $ | 310.4 |  |  | $ | 98.4 |  |  | $ | 116.6 |  |  | $ | 525.4 |  |  | $ | 291.8 |  |  | $ | 89.4 |  |  | $ | 118.6 |  |  | $ | 499.8 |
Service cost | — |  |  | 1.5 |  |  | 0.8 |  |  | 2.3 |  |  | 0.2 |  |  | 1.2 |  |  | 0.7 |  |  | 2.1 |
Interest cost | 6.9 |  |  | 1.0 |  |  | 2.8 |  |  | 10.7 |  |  | 11.1 |  |  | 1.5 |  |  | 4.0 |  |  | 16.6 |
Amendments | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1.7 |  |  | 1.7 |
Actuarial loss(a) | 45.0 |  |  | 3.3 |  |  | 4.0 |  |  | 52.3 |  |  | 31.0 |  |  | 10.4 |  |  | 3.6 |  |  | 45.0 |
Benefits paid | (18.9) |  |  | (3.6) |  |  | (5.9) |  |  | (28.4) |  |  | (23.7) |  |  | (3.0) |  |  | (12.0) |  |  | (38.7) |
Acquired | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.5 |  |  | — |  |  | 0.5 |
Settlement | (327.9) |  |  | (0.6) |  |  | — |  |  | (328.5) |  |  | — |  |  | — |  |  | — |  |  | — |
Foreign currency translation | — |  |  | 9.0 |  |  | — |  |  | 9.0 |  |  | — |  |  | (1.6) |  |  | — |  |  | (1.6) |
Benefit obligation – December 31 | $ | 15.5 |  |  | $ | 109.0 |  |  | $ | 118.3 |  |  | $ | 242.8 |  |  | $ | 310.4 |  |  | $ | 98.4 |  |  | $ | 116.6 |  |  | $ | 525.4 |
(a)In 2020, the actuarial loss is primarily due to a decrease in discount rates in addition to the annuity premium in connection with the U.S. qualified pension plan termination. In 2019, the actuarial loss was primarily due to a reduction in the discount rate used to measure the benefit obligations.
| 2020 |  | 2019
| U.S. Pension |  | Int’l Pension |  | Other Benefits |  | Total |  | U.S. Pension |  | Int’l Pension |  | Other Benefits |  | Total
Change in plan assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Plan assets – January 1 | $ | 319.9 |  |  | $ | 0.6 |  |  | $ | 1.3 |  |  | $ | 321.8 |  |  | $ | 277.8 |  |  | $ | 0.6 |  |  | $ | 2.9 |  |  | $ | 281.3 |
Actual return on plan assets | 20.0 |  |  | — |  |  | — |  |  | 20.0 |  |  | 57.7 |  |  | — |  |  | 0.4 |  |  | 58.1 |
Employer contributions | 9.3 |  |  | 4.1 |  |  | 4.6 |  |  | 18.0 |  |  | 9.9 |  |  | 3.0 |  |  | 10.0 |  |  | 22.9 |
Benefits and expenses paid | (21.3) |  |  | (3.6) |  |  | (5.9) |  |  | (30.8) |  |  | (25.5) |  |  | (3.0) |  |  | (12.0) |  |  | (40.5) |
Settlement | (327.9) |  |  | (0.6) |  |  | — |  |  | (328.5) |  |  | — |  |  | — |  |  | — |  |  | — |
Plan assets – December 31 | $ | — |  |  | $ | 0.5 |  |  | $ | — |  |  | $ | 0.5 |  |  | $ | 319.9 |  |  | $ | 0.6 |  |  | $ | 1.3 |  |  | $ | 321.8 |
Funded status at end of year | $ | (15.5) |  |  | $ | (108.5) |  |  | $ | (118.3) |  |  | $ | (242.3) |  |  | $ | 9.5 |  |  | $ | (97.8) |  |  | $ | (115.3) |  |  | $ | (203.6) |
The accumulated benefit obligation for all defined benefit pension plans was $121.6 and $406.3 at December 31, 2020 and 2019, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets is included in the following table.
| 2020 |  | 2019
Projected benefit obligation | $ | 124.2 |  |  | $ | 112.8 |
Accumulated benefit obligation | 121.3 |  |  | 110.3 |
Fair value of plan assets | — |  |  | — |
Statements of Operations Information The following table provides the components of net periodic postretirement cost and other amounts recognized in other comprehensive loss for each of the years ended December 31, 2020, 2019 and 2018 as they pertain to our defined benefit pension plans.
| 2020 |  | 2019 |  | 2018
| U.S. Pension |  | Int’l Pension |  | Total |  | U.S. Pension |  | Int’l Pension |  | Total |  | U.S. Pension |  | Int’l Pension |  | Total
Net periodic postretirement cost - pension |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost | $ | — |  |  | $ | 1.5 |  |  | $ | 1.5 |  |  | $ | 0.2 |  |  | $ | 1.2 |  |  | $ | 1.4 |  |  | $ | 0.4 |  |  | $ | 1.3 |  |  | $ | 1.7 |
Interest cost | 6.9 |  |  | 1.0 |  |  | 7.9 |  |  | 11.1 |  |  | 1.5 |  |  | 12.6 |  |  | 10.1 |  |  | 1.4 |  |  | 11.5 |
Expected return on plan assets | (7.2) |  |  | — |  |  | (7.2) |  |  | (14.8) |  |  | — |  |  | (14.8) |  |  | (15.8) |  |  | — |  |  | (15.8) |
Amortization of net actuarial loss | 4.8 |  |  | 1.5 |  |  | 6.3 |  |  | 4.3 |  |  | 0.8 |  |  | 5.1 |  |  | 4.9 |  |  | 0.9 |  |  | 5.8 |
Amortization of prior service cost | — |  |  | — |  |  | — |  |  | 0.7 |  |  | — |  |  | 0.7 |  |  | 0.9 |  |  | — |  |  | 0.9 |
Net periodic postretirement cost | 4.5 |  |  | 4.0 |  |  | 8.5 |  |  | 1.5 |  |  | 3.5 |  |  | 5.0 |  |  | 0.5 |  |  | 3.6 |  |  | 4.1 |
Settlement charges | 136.9 |  |  | 0.1 |  |  | 137.0 |  |  | — |  |  | — |  |  | — |  |  | 1.7 |  |  | — |  |  | 1.7 |
Total net periodic postretirement cost | 141.4 |  |  | 4.1 |  |  | 145.5 |  |  | 1.5 |  |  | 3.5 |  |  | 5.0 |  |  | 2.2 |  |  | 3.6 |  |  | 5.8 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net actuarial loss (gain) | 34.7 |  |  | 3.2 |  |  | 37.9 |  |  | (10.2) |  |  | 10.3 |  |  | 0.1 |  |  | 15.4 |  |  | 0.8 |  |  | 16.2 |
Prior service cost | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (0.1) |  |  | (0.1) |
Amortization of net actuarial loss | (141.7) |  |  | (1.6) |  |  | (143.3) |  |  | (4.3) |  |  | (0.8) |  |  | (5.1) |  |  | (6.6) |  |  | (0.9) |  |  | (7.5) |
Amortization of prior service cost | — |  |  | — |  |  | — |  |  | (0.7) |  |  | — |  |  | (0.7) |  |  | (0.9) |  |  | — |  |  | (0.9) |
Foreign currency translation | — |  |  | 2.9 |  |  | 2.9 |  |  | — |  |  | (0.3) |  |  | (0.3) |  |  | — |  |  | (1.0) |  |  | (1.0) |
Total change recognized in other comprehensive income | (107.0) |  |  | 4.5 |  |  | (102.5) |  |  | (15.2) |  |  | 9.2 |  |  | (6.0) |  |  | 7.9 |  |  | (1.2) |  |  | 6.7 |
Total impact from net periodic postretirement cost and changes in other comprehensive income | $ | 34.4 |  |  | $ | 8.6 |  |  | $ | 43.0 |  |  | $ | (13.7) |  |  | $ | 12.7 |  |  | $ | (1.0) |  |  | $ | 10.1 |  |  | $ | 2.4 |  |  | $ | 12.5 |
In 2020, the Company recorded a settlement charge of $136.9 related to the termination and sale of the U.S. qualified pension plan. In 2018, we recorded a settlement charge of $1.7 related to retiree lump sum pension payments in our Industrial Process segment. The following table provides the components of net periodic postretirement cost and other amounts recognized in other comprehensive loss for each of the years ended December 31, 2020, 2019 and 2018 as they pertain to other employee-related defined benefit plans.
| 2020 |  | 2019 |  | 2018
Net periodic postretirement cost - other postretirement |  |  |  |  |
Service cost | $ | 0.8 |  |  | $ | 0.7 |  |  | $ | 0.9 |
Interest cost | 2.8 |  |  | 4.0 |  |  | 4.5 |
Expected return on plan assets | — |  |  | (0.2) |  |  | (0.1) |
Amortization of net actuarial loss | 2.6 |  |  | 2.3 |  |  | 4.0 |
Amortization of prior service credit | (5.1) |  |  | (5.1) |  |  | (5.3) |
Total net periodic postretirement cost | 1.1 |  |  | 1.7 |  |  | 4.0 |
Other changes in plan assets and benefit obligations recognized in other comprehensive income |  |  |  |  |
Net actuarial loss (gain) | 3.9 |  |  | 3.4 |  |  | (15.6) |
Prior service cost | — |  |  | 1.7 |  |  | — |
Amortization of net actuarial loss | (2.6) |  |  | (2.3) |  |  | (4.0) |
Amortization of prior service credit | 5.1 |  |  | 5.1 |  |  | 5.3 |
Total changes recognized in other comprehensive income | 6.4 |  |  | 7.9 |  |  | (14.3) |
Total impact from net periodic postretirement cost and changes in other comprehensive income | $ | 7.5 |  |  | $ | 9.6 |  |  | $ | (10.3) |
Postretirement Plan Assumptions The determination of projected benefit obligations and the recognition of expenses related to postretirement benefit plans are dependent on various assumptions that are judgmental and developed in consultation with external advisors. Management develops each assumption using relevant Company experience in conjunction with market-related data for each individual country in which such plans exist. Periodically, the Company performs experience studies to validate certain actuarial assumptions such as age of retirement, rates of turnover, utilization of optional forms of payments. The actuarial assumptions are based on the provisions of the applicable accounting pronouncements, review of various market data and discussion with our external advisors. Assumptions are reviewed annually and adjusted as necessary. Changes in these assumptions could materially affect our financial statements. The following table provides the weighted-average assumptions used to determine projected benefit obligations and net periodic postretirement cost, as they pertain to our U.S. and non-U.S. defined benefit pension plans and other employee-related defined benefit plans.
| 2020 |  | 2019
| U.S. Pension |  | Int’l Pension |  | Other Benefits |  | U.S. Pension |  | Int’l Pension |  | Other Benefits
Obligation Assumptions: |  |  |  |  |  |  |  |  |  |  |
Discount rate | 2.4 | % |  | 0.7 | % |  | 2.4 | % |  | 3.2 | % |  | 1.0 | % |  | 3.2 | %
Rate of future compensation increase | N/A |  | 2.9 | % |  | N/A |  | N/A |  | 3.0 | % |  | N/A
Cost Assumptions: |  |  |  |  |  |  |  |  |  |  |
Discount rate | 3.2 | % |  | 1.0 | % |  | 3.2 | % |  | 4.3 | % |  | 1.7 | % |  | 4.3 | %
Expected return on plan assets | 4.0 | % |  | 1.0 | % |  | 6.0 | % |  | 6.0 | % |  | 1.0 | % |  | 6.0 | %
The discount rate is used to calculate the present value of expected future benefit payments at the measurement date. The discount rate assumption is based on current investment yields of high-quality fixed income investments during the retirement benefits maturity period. The pension discount rate is determined by considering an interest rate yield curve comprising AAA/AA bonds, with maturities that are generally between zero and 30 years, developed by the plan's actuaries. Annual benefit payments are then discounted to present value using this yield curve to develop a single discount rate matching the plan's characteristics. We estimate the service and interest components of net periodic benefit cost of the U.S. defined benefit plans by discounting the individual expected cash flows underlying the service cost and interest cost using the applicable spot rates from the yield curve used to discount the cash flows in measuring the benefit obligation. The rate of future compensation increase assumption for foreign plans reflects our long-term actual experience and future and near-term outlook. The rate of future compensation increase assumption is not applicable for U.S. plans because the plan is frozen. The Company has updated the mortality assumption to reflect the most recent projection update. The assumed rate of future increases in the per capita cost of health care (the health care trend rate) is 6.5% for pre-age 65 retirees and 5.8% for post-age 65 retirees for 2021, decreasing ratably to 4.5% in 2028. To the extent that actual experience differs from these assumptions, the effect will be amortized over the average future working life or life expectancy of the plan participants. The expected long-term rate of return on assets reflects the expected returns for each major asset class in which the plans invest, the weight of each asset class in the target mix, the correlations among asset classes, and their expected volatilities. Our expected return on plan assets is estimated by evaluating both historical returns and estimates of future returns based on our target asset allocation. Specifically, we estimate future returns based on independent estimates of asset class returns weighted by the target investment allocation. The expected return on plan assets was reduced in 2020 based on an update to the asset allocation as of December 31, 2019 to reduce risk pursuant to the expected plan termination. Fair Value of Plan Assets In measuring plan assets at fair value, a fair value hierarchy is applied which categorizes and prioritizes the inputs used to estimate fair value into three levels. The fair value hierarchy is based on maximizing the use of observable inputs and minimizing the use of unobservable inputs when measuring fair value. Classification within the fair value hierarchy is based on the lowest level input that is significant to the fair value measurement. The three levels of the fair value hierarchy are defined as follows: •Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2 inputs are other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices (in non-active markets or in active markets for similar assets or liabilities), inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. •Level 3 inputs are unobservable inputs for the assets or liabilities. Collective trusts are valued at net asset value (NAV) as a practical expedient and thus are not leveled in this table, but are included in the totals column to assist in reconciling to fair value of plan assets. Mutual funds are valued at quoted market prices that represent the NAV of shares and are classified within level 1 of the fair value hierarchy. Cash and cash equivalents are held in money market or short-term investment funds and are classified within level 1 of the fair value hierarchy. As of December 31, 2020, our plan assets were not considered material. The following table provides the investments at fair value held by our postretirement benefit plans at December 31, 2019, by asset class.
| Pension |  | Other Benefits
| Level 1 |  | Measured at NAV |  | Total |  | Level 1 |  |
Fixed income - collective trusts | $ | — |  |  | $ | 238.8 |  |  | $ | 238.8 |  |  | $ | — |  |  |
Mutual funds | — |  |  | — |  |  | — |  |  | 1.3 |  |  |
Cash and other | 81.7 |  |  | — |  |  | 81.7 |  |  | — |  |  |
Total | $ | 81.7 |  |  | $ | 238.8 |  |  | $ | 320.5 |  |  | $ | 1.3 |  |  |
Contributions While we make contributions to our postretirement benefit plans when considered necessary or advantageous to do so, the minimum funding requirements established by local government funding or taxing authorities, or established by other agreements, may influence future contributions. Funding requirements under IRS rules are a major consideration in making contributions to our defined benefit pension plans in the U.S. In addition, we fund certain of our international pension plans in countries where funding is allowable and tax-efficient. During 2020 and 2019, we contributed $13.4 and $12.9, respectively, to our global pension plans which includes $8.4 associated with the termination of our U.S. qualified plan in 2020 and a discretionary contribution to our U.S. qualified pension plan of $9.0 in 2019. We anticipate making contributions to our global pension plans of approximately $6 during 2021. We contributed $4.6 and $10.0 to our other employee-related defined benefit plans during 2020 and 2019, respectively. We estimate that the 2021 contributions to our other employee-related defined benefit plans will be approximately $9. Estimated Future Benefit Payments The following table provides the projected timing of payments for benefits earned to date and the expectation that certain future service will be earned by current active employees for our pension and other employee-related benefit plans.
| U.S. Pension |  | Int’l Pension |  | Other Benefits
2021 | $ | 0.9 |  |  | $ | 4.8 |  |  | $ | 9.3 |
2022 | 0.9 |  |  | 3.8 |  |  | 8.8 |
2023 | 0.9 |  |  | 4.0 |  |  | 8.4 |
2024 | 0.9 |  |  | 4.2 |  |  | 8.1 |
2025 | 0.9 |  |  | 3.8 |  |  | 7.7 |
2026 - 2030 | 4.4 |  |  | 20.3 |  |  | 33.5 |

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