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Pension and Employee Benefit Plans

12 Months Ended

Mar. 31, 2025

Pension and Employee Benefit Plans

Pension and Employee Benefit Plans

Note 18: Pension and Employee Benefit Plans

Defined contribution employee benefit plans

The Company maintains a domestic 401(k) plan that allows employees to contribute a portion of their salary to help them save for retirement. The Company currently matches employee contributions up to 4.5 percent of their compensation. The Company’s expense for defined contribution employee benefit plans during fiscal 2025, 2024, and 2023 was $9.3 million, $8.3 million, and $6.9 million, respectively.

In addition, the Company maintains non-qualified deferred compensation plans for eligible employees, and various non-U.S. subsidiaries have government-required defined contribution plans in place, under which they contribute a percentage of employee earnings into accounts, consistent with local laws.

Statutory termination plans

Certain non-U.S. subsidiaries have statutory termination indemnity plans covering eligible employees. The benefits under these plans are based upon years of service and final average compensation levels or a monthly retirement benefit amount. These programs are substantially unfunded in accordance with local laws.

Pension plans

The Company maintains non-contributory defined benefit pension plans that cover eligible domestic employees. These plans are closed to new participants. The primary domestic plan covers most domestic employees hired on or before December 31, 2003 and provides benefits based primarily upon years of service and average compensation for salaried and some hourly employees. Benefits for other hourly employees are based upon a monthly retirement benefit amount. Currently, the Company’s domestic pension plans do not include increases in annual earnings or future service in calculating the average annual earnings and years of credited service under the pension plan benefit formula. Certain non-U.S. subsidiaries of the Company also have legacy defined benefit plans which cover a smaller number of active employees and are substantially unfunded. The primary non-U.S. plans are maintained in Germany and Italy and are closed to new participants. The Company previously maintained certain pension plans in Germany that conveyed to the buyer of the Germany automotive businesses during fiscal 2024; see Note 2 for additional information.

The Company contributed $6.5 million to its U.S. pension plans during fiscal 2025. In connection with funding relief provisions within the American Rescue Plan Act of 2021, the Company made $0.9 million cash contributions to its U.S. pension plans during fiscal 2024 and no cash contributions in fiscal 2023. In addition, the Company contributed $1.1 million, $1.8 million, and $1.5 million to its non-U.S. pension plans during fiscal 2025, 2024, and 2023, respectively. These contributions are reported within the change in other liabilities in the consolidated statements of cash flows.

In June 2024, the Company approved the termination of its primary U.S. pension plan, subject to approvals from the Internal Revenue Service and the Pension Benefit Guaranty Corporation. The Company intends to offer certain participants the option to receive their pension benefits in the form of a lump-sum distribution prior to purchasing annuity contracts to transfer its remaining obligations under the plan. In connection with the plan termination, the Company expects to make additional cash contributions in the range of $15.0 million to $20.0 million to fully fund the plan, on a plan termination basis, and to record non-cash pension settlement charges totaling approximately $115.0 million to $125.0 million during fiscal 2026. The timing and amount of the final cash contributions and settlement charges could materially differ from the Company’s estimates due to the nature and timing of participant settlements, prevailing market and economic conditions, the duration of the termination process, or other factors.

Postretirement plans

The Company provides selected healthcare and life insurance benefits for eligible retired domestic employees. The Company periodically amends these unfunded plans to change the contribution rate of retirees and the amounts and forms of coverage. An annual limit on the Company’s cost is defined for the majority of these plans. The Company’s net periodic income for its postretirement plans in fiscal 2025, 2024, and 2023 was $0.3 million, $0.4 million, and $0.3 million, respectively.

Measurement date

The Company uses March 31 as the measurement date for its pension and postretirement plans.

Changes in benefit obligations and plan assets, as well as the funded status of the Company’s global pension plans, were as follows:


		Years ended March 31,
		2025			2024
Change in benefit obligation:
Benefit obligation at beginning of year		$	179.3		$	194.9
Service cost			0.2			0.2
Interest cost			9.0			9.3
Actuarial loss (gain)			6.5			(2.7)
Benefits paid			(14.0)			(14.9)
Disposition of Germany automotive businesses			—			(7.4)
Effect of exchange rate changes			0.1			(0.1)
Benefit obligation at end of year		$	181.1		$	179.3

Change in plan assets:
Fair value of plan assets at beginning of year		$	150.5		$	153.3
Actual return on plan assets			6.7			9.4
Benefits paid			(14.0)			(14.9)
Employer contributions			7.6			2.7
Fair value of plan assets at end of year		$	150.8		$	150.5
Funded status at end of year		$	(30.3)		$	(28.8)

Amounts recognized in the consolidated balance sheets:
Current liability		$	(0.9)		$	(1.1)
Noncurrent liability			(29.4)			(27.7)
		$	(30.3)		$	(28.8)

As of March 31, 2025, 2024, and 2023, the benefit obligation associated with the Company’s non-U.S. pension plans totaled $11.8 million, $13.0 million, and $21.2 million, respectively. The $1.2 million decrease in the benefit obligation associated with non-U.S. pension plans as of March 31, 2025, compared with the prior year, was primarily due to employer contributions and net actuarial gains during the year totaling $2.0 million, partially offset by service and interest cost totaling $0.6 million. In fiscal 2024, the $8.2 million decrease was primarily due to the sale of the Germany automotive businesses and employer contributions for benefits paid to plan participants which decreased the obligation by $7.4 million and $1.8 million, respectively, and to a lesser extent, the impact of foreign currency exchange rates. The decreases were partially offset by service and interest cost and net actuarial losses during the year totaling $0.8 million and $0.5 million, respectively.

The accumulated benefit obligation for pension plans was $180.2 million and $178.6 million as of March 31, 2025 and 2024, respectively. The benefit obligation as of March 31, 2025 includes the estimated settlement liability for the U.S. plan in connection with the pending plan termination. The estimated settlement liability includes the Company’s estimates regarding the percentage of participants who will elect a lump sum payment and for annuity pricing. The net actuarial loss related to the pension plans recognized in accumulated other comprehensive loss was $122.0 million and $117.9 million as of March 31, 2025 and 2024, respectively.

Costs for the Company’s global pension plans included the following components:


		Years ended March 31,
		2025			2024			2023
Components of net periodic benefit cost:
Service cost		$	0.2		$	0.2		$	0.2
Interest cost			9.0			9.3			8.1
Expected return on plan assets			(8.7)			(10.3)			(11.6)
Amortization of unrecognized net loss			4.7			4.7			5.7
Settlements (a)			(0.1)			(0.1)			—
Net periodic benefit cost		$	5.1		$	3.8		$	2.4

Other changes in benefit obligation recognized in other comprehensive income:
Net actuarial (loss) gain		$	(8.7)		$	1.7		$	2.1
Amortization of net actuarial loss (b)			4.6			3.9			5.7
Total recognized in other comprehensive income (loss)		$	(4.1)		$	5.6		$	7.8
____

(a)	The settlement charges resulted from activity associated with the Company’s non-U.S. pension plans.

(b)	The fiscal 2024 amount includes $0.6 million of net actuarial gains written-off as a result of the sale of the Germany automotive businesses. See Note 2 for additional information on the sale of these businesses.

The Company amortized $4.6 million, $3.9 million, and $5.7 million of net actuarial loss in fiscal 2025, 2024, and 2023, respectively. Exclusive of the $0.6 million written-off in fiscal 2024 upon the sale of the Germany automotive businesses referenced above, less than $1.0 million of the amortization was attributable to the Company’s non-U.S. pension plans in each of these years.

The Company used a discount rate of 5.5% and 5.4% as of March 31, 2025 and 2024, respectively, for determining its benefit obligations under its U.S. pension plans. The Company used a weighted-average discount rate of 4.0% and 3.7% as of March 31, 2025 and 2024, respectively, for determining its benefit obligations under its non-U.S. pension plans. The Company used a discount rate of 5.4%, 5.2%, and 3.9% to determine its costs under its U.S. pension plans for fiscal 2025, 2024, and 2023, respectively. The Company used a weighted-average discount rate of 3.9%, 4.0%, and 2.9% to determine its costs under its non-U.S. pension plans for fiscal 2025, 2024, and 2023, respectively. The Company determined the discount rates used for its U.S. pension plans by modeling a portfolio of high-quality corporate bonds, with appropriate consideration given to expected defined benefit payment terms and duration of the respective pension obligations. The Company used a similar process to determine the discount rate for its non-U.S. pension obligations.

Plan assets in the Company’s U.S. pension plans comprise 100 percent of the Company’s world-wide pension plan assets. The Company establishes its pension plan investment guidelines considering market conditions, its tolerance for risk, and cash requirements. In connection with the upcoming plan termination, the Company has adjusted its investment portfolio to both protect the plan’s funded status and to match the maturities of the plan assets with the anticipated funding requirements for the upcoming lump-sum offering and future benefit payments. During fiscal 2025, 2024 and 2023, the Company’s pension plans did not directly own shares of Modine common stock. The Company’s U.S. pension plan weighted-average asset allocations at the measurement dates of March 31, 2025 and 2024 were as follows:


		Target allocation		Plan assets
				2025		2024
Debt securities		80	%	97	%	72	%
Cash and cash equivalents		1	%	3	%	5	%
Equity securities		19	%	—	%	18	%
Real estate investments		—		—	%	5	%
		100	%	100	%	100	%

The expected rate of return on U.S. plan assets is based upon historical return experience and forward-looking return expectations for major asset class categories. For fiscal 2025, 2024, and 2023 U.S. pension plan expense, the expected rate of return on plan assets was 5.5 percent, 6.5 percent, and 7.0 percent, respectively. For fiscal 2026 U.S. pension plan expense, the Company has assumed a rate of return on plan assets of 5.5 percent.

Estimated pension benefit payments for the Company’s global pension plans during the next ten fiscal years are shown below. In connection with the pending U.S. pension plan termination, the Company expects to make payments for lump sums to certain participants and for annuity contracts during fiscal 2026.


		Estimated Pension
Fiscal Year		Benefit Payments
2026		$	168.9
2027			1.0
2028			1.0
2029			0.9
2030			0.9
2031-2035			4.7