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Retirement Benefit Plans | 12 Months Ended
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Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract] |
Retirement benefit plans | RETIREMENT BENEFIT PLANS The Company sponsors various defined contribution savings plans, primarily in the U.S., that allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan specified guidelines. Under specified conditions, the Company will make contributions to the plans and/or match a percentage of the employee contributions up to certain limits. Total expense related to the defined contribution plans was $28.3 million, $28.0 million and $27.6 million in the years ended December 31, 2016, 2015 and 2014, respectively. The Company has a number of defined benefit pension plans and other postretirement employee benefit plans covering eligible salaried and hourly employees and their dependents. The defined pension benefits provided are primarily based on (i) years of service and (ii) average compensation or a monthly retirement benefit amount. The Company provides defined benefit pension plans in France, Germany, Ireland, Italy, Japan, Mexico, Monaco, South Korea, Sweden, U.K. and the U.S. The other postretirement employee benefit plans, which provide medical benefits, are unfunded plans. All pension and other postretirement employee benefit plans in the U.S. have been closed to new employees. The measurement date for all plans is December 31. During the fourth quarter of 2015, the Company settled approximately $48 million of its projected benefit obligation by transferring approximately $48 million in plan assets through a lump-sum pension de-risking disbursement made to an insurance company. This agreement unconditionally and irrevocably guarantees all future payments to certain participants that were receiving payments from the U.S. pension plan. The insurance company assumes all investment risk associated with the assets that were delivered as part of this transaction. As a result, the Company recorded a non-cash settlement loss of $25.7 million related to the accelerated recognition of unamortized losses. During the third quarter of 2014, the Company discharged certain U.S. pension plan obligations by making lump-sum payments to former employees of the Company. As a result of this action, the Company recorded a settlement loss of $3.1 million in the U.S. pension plan. The following table summarizes the expenses for the Company's defined contribution and defined benefit pension plans and the other postretirement defined employee benefit plans.
| Year Ended December 31,
(millions of dollars) | 2016 |  | 2015 |  | 2014
Defined contribution expense | $ | 28.3 |  |  | $ | 28.0 |  |  | $ | 27.6 |
Defined benefit pension expense | 10.1 |  |  | 35.5 |  |  | 18.6 |
Other postretirement employee benefit expense | 1.4 |  |  | 3.3 |  |  | 3.3 |
Total | $ | 39.8 |  |  | $ | 66.8 |  |  | $ | 49.5 |
The following provides a roll forward of the plans’ benefit obligations, plan assets, funded status and recognition in the Consolidated Balance Sheets.
| Pension benefits |  | Other postretirement
| Year Ended December 31, |  | employee benefits
| 2016 |  | 2015 |  | Year Ended December 31,
(millions of dollars) | US |  | Non-US |  | US |  | Non-US |  | 2016 |  | 2015
Change in projected benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Projected benefit obligation, January 1 | $ | 300.7 |  |  | $ | 508.5 |  |  | $ | 306.2 |  |  | $ | 527.8 |  |  | $ | 145.3 |  |  | $ | 169.7 |
Service cost | — |  |  | 16.2 |  |  | — |  |  | 14.9 |  |  | 0.2 |  |  | 0.2 |
Interest cost | 9.6 |  |  | 12.5 |  |  | 11.2 |  |  | 14.1 |  |  | 4.0 |  |  | 5.7 |
Plan participants’ contributions | — |  |  | 0.4 |  |  | — |  |  | 0.3 |  |  | — |  |  | — |
Plan amendments | — |  |  | 0.2 |  |  | — |  |  | — |  |  | — |  |  | — |
Settlement and curtailment | — |  |  | (1.3 | ) |  | (48.1 | ) |  | (4.7 | ) |  | — |  |  | — |
Actuarial (gain) loss | (5.7 | ) |  | 70.2 |  |  | (12.1 | ) |  | (9.0 | ) |  | (14.4 | ) |  | (16.8 | )
Currency translation | — |  |  | (45.3 | ) |  | — |  |  | (42.9 | ) |  | — |  |  | — |
(Divestiture) Acquisition | — |  |  | (12.8 | ) |  | 68.1 |  |  | 23.9 |  |  | — |  |  | 1.7 |
Benefits paid | (22.1 | ) |  | (20.4 | ) |  | (24.6 | ) |  | (15.9 | ) |  | (15.2 | ) |  | (15.2 | )
Projected benefit obligation, December 31 | $ | 282.5 |  |  | $ | 528.2 |  |  | $ | 300.7 |  |  | $ | 508.5 |  |  | $ | 119.9 |  |  | $ | 145.3 |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets, January 1 | $ | 235.8 |  |  | $ | 395.1 |  |  | $ | 265.6 |  |  | $ | 395.6 |  |  |  |  |  |  |
Actual return on plan assets | 12.7 |  |  | 54.0 |  |  | (0.6 | ) |  | 10.3 |  |  |  |  |  |  |
Employer contribution | 2.7 |  |  | 17.0 |  |  | — |  |  | 19.3 |  |  |  |  |  |  |
Plan participants’ contribution | — |  |  | 0.4 |  |  | — |  |  | 0.3 |  |  |  |  |  |  |
Settlements | — |  |  | (1.3 | ) |  | (48.1 | ) |  | (2.5 | ) |  |  |  |  |  |
Currency translation | — |  |  | (40.8 | ) |  | — |  |  | (30.8 | ) |  |  |  |  |  |
(Divestiture) Acquisition | — |  |  | (10.2 | ) |  | 43.5 |  |  | 18.8 |  |  |  |  |  |  |
Benefits paid | (21.7 | ) |  | (20.4 | ) |  | (24.6 | ) |  | (15.9 | ) |  |  |  |  |  |
Fair value of plan assets, December 31 | $ | 229.5 |  |  | $ | 393.8 |  |  | $ | 235.8 |  |  | $ | 395.1 |  |  |  |  |
Funded status | $ | (53.0 | ) |  | $ | (134.4 | ) |  | $ | (64.9 | ) |  | $ | (113.4 | ) |  | $ | (119.9 | ) |  | $ | (145.3 | )
Amounts in the Consolidated Balance Sheets consist of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-current assets | $ | — |  |  | $ | 4.9 |  |  | $ | — |  |  | $ | 9.4 |  |  | $ | — |  |  | $ | — |
Current liabilities | (0.1 | ) |  | (3.5 | ) |  | (0.3 | ) |  | (3.0 | ) |  | (14.5 | ) |  | (16.8 | )
Non-current liabilities | (52.9 | ) |  | (135.8 | ) |  | (64.6 | ) |  | (119.8 | ) |  | (105.4 | ) |  | (128.5 | )
Net amount | $ | (53.0 | ) |  | $ | (134.4 | ) |  | $ | (64.9 | ) |  | $ | (113.4 | ) |  | $ | (119.9 | ) |  | $ | (145.3 | )
Amounts in accumulated other comprehensive loss consist of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net actuarial loss | $ | 116.9 |  |  | $ | 163.7 |  |  | $ | 125.4 |  |  | $ | 144.2 |  |  | $ | 19.9 |  |  | $ | 36.5 |
Net prior service (credit) cost | (7.4 | ) |  | 0.8 |  |  | (8.2 | ) |  | 0.7 |  |  | (19.2 | ) |  | (24.0 | )
Net amount* | $ | 109.5 |  |  | $ | 164.5 |  |  | $ | 117.2 |  |  | $ | 144.9 |  |  | $ | 0.7 |  |  | $ | 12.5 |
Total accumulated benefit obligation for all plans | $ | 282.5 |  |  | $ | 505.5 |  |  | $ | 300.7 |  |  | $ | 486.2 |  |  |  |  |  |  |
________________
* | AOCI shown above does not include our equity investee, NSK-Warner. NSK-Warner had an AOCI loss of $10.8 million and $7.1 million at December 31, 2016 and 2015, respectively.
The funded status of pension plans with accumulated benefit obligations in excess of plan assets at December 31 is as follows:
| December 31,
(millions of dollars) | 2016 |  | 2015
Accumulated benefit obligation | $ | (594.0 | ) |  | $ | (597.6 | )
Plan assets | 423.3 |  |  | 431.0 |
Deficiency | $ | (170.7 | ) |  | $ | (166.6 | )
Pension deficiency by country: |  |  |  |  |
United States | $ | (53.0 | ) |  | $ | (64.9 | )
Germany | (77.5 | ) |  | (64.3 | )
Other | (40.2 | ) |  | (37.4 | )
Total pension deficiency | $ | (170.7 | ) |  | $ | (166.6 | )
The weighted average asset allocations of the Company’s funded pension plans and target allocations by asset category are as follows:
| December 31, |  | Target Allocation
| 2016 |  | 2015 |
U.S. Plans: |  |  |  |  |  |  |
Real estate and other | 9 | % |  | 12 | % |  | 0% - 14%
Fixed income securities | 50 | % |  | 53 | % |  | 41% - 61%
Equity securities | 41 | % |  | 35 | % |  | 30% - 50%
| 100 | % |  | 100 | % |  |
Non-U.S. Plans: |  |  |  |  |  |  |
Real estate and other | 5 | % |  | 5 | % |  | 0% - 6%
Fixed income securities | 47 | % |  | 46 | % |  | 43% - 53%
Equity securities | 48 | % |  | 49 | % |  | 46% - 56%
| 100 | % |  | 100 | % |  |
The Company's investment strategy is to maintain actual asset weightings within a preset range of target allocations. The Company believes these ranges represent an appropriate risk profile for the planned benefit payments of the plans based on the timing of the estimated benefit payments. In each asset category, separate portfolios are maintained for additional diversification. Investment managers are retained in each asset category to manage each portfolio against its benchmark. Each investment manager has appropriate investment guidelines. In addition, the entire portfolio is evaluated against a relevant peer group. The defined benefit pension plans did not hold any Company securities as investments as of December 31, 2016 and 2015. A portion of pension assets is invested in common and commingled trusts. In December 2014, the Company made a discretionary contribution of $30.2 million to its German pension plans. The Company expects to contribute a total of $15 million to $25 million into its defined benefit pension plans during 2017. Of the $15 million to $25 million in projected 2017 contributions, $3.2 million are contractually obligated, while any remaining payments would be discretionary. Refer to the Fair Value Measurements footnote to the Consolidated Financial Statements for more detail surrounding the fair value of each major category of plan assets as well as the inputs and valuation techniques used to develop the fair value measurements of the plans' assets at December 31, 2016 and 2015. See the table below for a breakout of net periodic benefit cost between U.S. and non-U.S. pension plans:
| Pension benefits |  | Other postretirement employee benefits
| Year Ended December 31, |
| 2016 |  | 2015 |  | 2014 |  | Year Ended December 31,
(millions of dollars) | US |  | Non-US |  | US |  | Non-US |  | US |  | Non-US |  | 2016 |  | 2015 |  | 2014
Service cost | $ | — |  |  | $ | 16.2 |  |  | $ | — |  |  | $ | 14.9 |  |  | $ | — |  |  | $ | 12.8 |  |  | $ | 0.2 |  |  | $ | 0.2 |  |  | $ | 0.3 |
Interest cost | 9.6 |  |  | 12.5 |  |  | 11.2 |  |  | 14.1 |  |  | 12.1 |  |  | 18.1 |  |  | 4.0 |  |  | 5.7 |  |  | 6.7 |
Expected return on plan assets | (15.0 | ) |  | (24.3 | ) |  | (17.0 | ) |  | (24.8 | ) |  | (17.6 | ) |  | (21.1 | ) |  | — |  |  | — |  |  | — |
Settlements, curtailments and other | — |  |  | — |  |  | 25.7 |  |  | (0.8 | ) |  | 3.1 |  |  | 0.7 |  |  | — |  |  | — |  |  | — |
Amortization of unrecognized prior service (credit) cost | (0.8 | ) |  | 0.6 |  |  | (0.8 | ) |  | 0.1 |  |  | (0.8 | ) |  | — |  |  | (4.9 | ) |  | (5.7 | ) |  | (6.4 | )
Amortization of unrecognized loss | 5.1 |  |  | 6.2 |  |  | 6.3 |  |  | 6.6 |  |  | 6.5 |  |  | 4.8 |  |  | 2.1 |  |  | 3.1 |  |  | 2.7 |
Net periodic (income) cost | $ | (1.1 | ) |  | $ | 11.2 |  |  | $ | 25.4 |  |  | $ | 10.1 |  |  | $ | 3.3 |  |  | $ | 15.3 |  |  | $ | 1.4 |  |  | $ | 3.3 |  |  | $ | 3.3 |
The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $11.6 million. The estimated net loss and prior service credit for the other postretirement employee benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $1.3 million and $4.1 million, respectively. The Company's weighted-average assumptions used to determine the benefit obligations for its defined benefit pension and other postretirement employee benefit plans as of December 31, 2016 and 2015 were as follows:
| December 31,
(percent) | 2016 |  | 2015
U.S. pension plans: |  |  |
Discount rate | 3.94 |  | 4.15
Rate of compensation increase | N/A |  | N/A
U.S. other postretirement employee benefit plans: |  |  |
Discount rate | 3.61 |  | 3.84
Rate of compensation increase | N/A |  | N/A
Non-U.S. pension plans: |  |  |
Discount rate | 2.25 |  | 2.99
Rate of compensation increase | 3.00 |  | 3.01
The Company’s weighted-average assumptions used to determine the net periodic benefit cost for its defined benefit pension and other postretirement employee benefit plans for the years ended December 31, 2016, 2015 and 2014 were as follows:
| Year Ended December 31,
(percent) | 2016 |  | 2015 |  | 2014
U.S. pension plans: |  |  |  |  |
Discount rate | 4.15 |  | 3.89 |  | 4.41
Rate of compensation increase | N/A |  | N/A |  | N/A
Expected return on plan assets | 6.70 |  | 6.71 |  | 6.75
U.S. other postretirement plans: |  |  |  |  |
Discount rate | 3.84 |  | 3.50 |  | 4.00
Rate of compensation increase | N/A |  | N/A |  | N/A
Expected return on plan assets | N/A |  | N/A |  | N/A
Non-U.S. pension plans: |  |  |  |  |
Discount rate | 2.99 |  | 2.84 |  | 3.90
Rate of compensation increase | 3.01 |  | 2.84 |  | 2.77
Expected return on plan assets | 6.41 |  | 6.53 |  | 6.24
The Company's approach to establishing the discount rate is based upon the market yields of high-quality corporate bonds, with appropriate consideration of each plan's defined benefit payment terms and duration of the liabilities. The Company determines its expected return on plan asset assumptions by evaluating estimates of future market returns and the plans' asset allocation. The Company also considers the impact of active management of the plans' invested assets. The estimated future benefit payments for the pension and other postretirement employee benefits are as follows:
|  | Pension benefits |  | Other postretirement employee benefits
(millions of dollars) |  |  |  |  |
Year |  | U.S. |  | Non-U.S. |
2017 |  | $ | 22.8 |  |  | $ | 17.7 |  |  | $ | 14.8 |
2018 |  | 19.8 |  |  | 18.7 |  |  | 13.7 |
2019 |  | 19.7 |  |  | 17.3 |  |  | 12.6 |
2020 |  | 19.6 |  |  | 19.1 |  |  | 12.1 |
2021 |  | 19.3 |  |  | 19.5 |  |  | 11.0 |
2022-2026 |  | 89.8 |  |  | 110.7 |  |  | 39.6 |
The weighted-average rate of increase in the per capita cost of covered health care benefits is projected to be 6.79% in 2017 for pre-65 and post-65 participants, decreasing to 5.0% by the year 2022. A one-percentage point change in the assumed health care cost trend would have the following effects:
| One Percentage Point
(millions of dollars) | Increase |  | Decrease
Effect on other postretirement employee benefit obligation | $ | 7.9 |  |  | $ | (7.0 | )
Effect on total service and interest cost components | $ | 0.3 |  |  | $ | (0.3 | )

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