Pensions and Other Post-retirement Benefits

We maintain various defined benefit and defined contribution plans covering the majority of our employees. Our principal U.S. plan is funded in compliance with the Employee Retirement Income Security Act (ERISA). It is our general policy to fund current costs for the international plans, except in Germany and Mexico, where it is common practice and permissible under tax laws to accrue book reserves.

We provide health care benefits and limited life insurance for certain retired employees who are covered by our principal U.S. defined benefit pension plan until they become Medicare-eligible.

Information pertaining to defined benefit pension plans and other post-retirement benefits plans is provided in the following table:



	Pension Benefits						Other Benefits
(In thousands)	2014			2013			2014			2013
Change in Benefit Obligations
Benefit obligations at January 1	$	440,359		$	463,806		$	26,732		$	30,551
Service cost	9,425			11,132			538			687
Interest cost	19,340			17,934			1,107			1,050
Participant contributions	130			136			259			144
Plan amendments	(302		)	(239		)	—			—
Actuarial losses (gains)	88,069			(34,248		)	(200		)	(4,107		)
Benefits paid	(19,193		)	(19,232		)	(1,585		)	(1,593		)
Settlements	(717		)	(1,474		)	—			—
Currency translation	(17,917		)	2,544			—			—
Benefit obligations at December 31	519,194			440,359			26,851			26,732
Change in Plan Assets
Fair value of plan assets at January 1	434,569			384,452			—			—
Actual return on plan assets	30,209			67,391			—			—
Employer contributions	4,077			4,053			1,326			1,449
Participant contributions	130			136			259			144
Settlements	(717		)	(1,474		)	—			—
Benefits paid	(16,507		)	(16,316		)	(1,585		)	(1,593		)
Reimbursement of German benefits	(2,686		)	(2,916		)	—			—
Currency translation	(3,776		)	(757		)	—			—
Fair value of plan assets at December 31	445,299			434,569			—			—
Funded Status
Funded status at December 31	(73,895		)	(5,790		)	(26,851		)	(26,732		)
Unrecognized transition losses	16			21			—			—
Unrecognized prior service cost (credit)	10			374			(1,858		)	(2,193		)
Unrecognized net actuarial losses	192,692			116,945			6,450			6,832
Net amount recognized	118,823			111,550			(22,259		)	(22,093		)
Amounts Recognized in the Balance Sheet
Noncurrent assets	75,017			121,054			—			—
Current liabilities	(5,380		)	(5,518		)	(1,457		)	(1,695		)
Noncurrent liabilities	(143,532		)	(121,326		)	(25,394		)	(25,037		)
Net amount recognized	(73,895		)	(5,790		)	(26,851		)	(26,732		)
Amounts Recognized in Accumulated Other Comprehensive Loss
Net actuarial losses	192,692			116,945			6,450			6,832
Prior service cost (credit)	10			374			(1,858		)	(2,193		)
Unrecognized net initial obligation	16			21			—			—
Total (before tax effects)	192,718			117,340			4,592			4,639
Accumulated Benefit Obligations for all Defined Benefit Plans	479,764			403,682			—			—



	Pension Benefits									Other Benefits
(In thousands)	2014			2013			2012			2014			2013			2012
Components of Net Periodic Benefit Cost
Service cost	$	9,425		$	11,132		$	9,511		$	538		$	687		$	694
Interest cost	19,340			17,934			19,018			1,107			1,050			1,265
Expected return on plan assets	(32,944		)	(30,884		)	(32,328		)	—			—			—
Amortization of transition amounts	2			3			2			—			—			—
Amortization of prior service cost (credit)	84			102			101			(335		)	(424		)	(454		)
Recognized net actuarial losses	8,639			13,323			6,235			182			552			529
Settlement loss	290			658			747			—			—			—
Termination benefits	—			—			387			—			—			—
Net periodic benefit cost	4,836			12,268			3,673			1,492			1,865			2,034

Amounts included in accumulated other comprehensive income expected to be recognized in 2015 net periodic benefit costs.



(In thousands)	Pension Benefits		Other Benefits
Loss recognition	$	15,937	$	320
Prior service cost (credit) recognition	66		(335		)
Transition obligation recognition	2		—



	Pension Benefits				Other Benefits
	2014		2013		2014		2013
Assumptions used to determine benefit obligations
Average discount rate	3.63	%	4.54	%	3.85	%	4.62	%
Rate of compensation increase	3.03	%	3.06	%	—		—
Assumptions used to determine net periodic benefit cost
Average discount rate	4.54	%	3.96	%	4.62	%	3.75	%
Expected return on plan assets	8.20	%	8.15	%	—		—
Rate of compensation increase	3.06	%	3.81	%	—		—

Discount rates were determined using various corporate bond indexes as indicators of interest rate levels and movements and by matching our projected benefit obligation payment stream to current yields on high quality bonds.

The expected return on assets for the 2014 net periodic pension cost was determined by multiplying the expected returns of each asset class (based on historical returns) by the expected percentage of the total portfolio invested in that asset class. A total return was determined by summing the expected returns over all asset classes.



	Pension Plan Assets at December 31,
	2014		2013
Equity securities	65	%	71	%
Fixed income securities	26		19
Pooled investment funds	5		5
Insurance contracts	3		3
Cash and cash equivalents	1		2
Total	100	%	100	%

The overall objective of our pension investment strategy is to earn a rate of return over time to satisfy the benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and meet other cash requirements of our pension funds. Investment policies for our primary U.S. pension plan are determined by the plan’s Investment Committee and set forth in the plan’s investment policy. Asset managers are granted discretion for determining sector mix, selecting securities and timing transactions, subject to the guidelines of the investment policy. An aggressive, flexible management of the portfolio is permitted and encouraged, with shifts of emphasis among equities, fixed income securities and cash equivalents at the discretion of each manager. No target asset allocations are set forth in the investment policy. For our non-U.S. pension plans, our investment objective is generally met through the use of pooled investment funds and insurance contracts.

The following table summarizes our pension plan assets measured at fair value on a recurring basis by fair value hierarchy level (See Note 17):



	December 31, 2014
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Equity securities	$	233,156	$	54,614	$	248	$	288,018
Fixed income securities	41,447		72,412		505		114,364
Pooled investment funds	—		22,623		—		22,623
Insurance contracts	—		—		15,069		15,069
Cash and cash equivalents	5,225		—		—		5,225
Total	279,828		149,649		15,822		445,299



	December 31, 2013
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Equity securities	$	307,486	$	—	$	428	$	307,914
Fixed income securities	36,749		47,545		—		84,294
Pooled investment funds	—		22,430		—		22,430
Insurance contracts	—		—		13,512		13,512
Cash and cash equivalents	6,067		—		352		6,419
Total	350,302		69,975		14,292		434,569

Equity securities consist primarily of publicly traded U.S. and non-U.S. common stocks. Equities are valued at closing prices reported on the listing stock exchange.

Fixed income securities consist primarily of U.S. government and agency bonds and U.S. corporate bonds. Fixed income securities are valued at closing prices reported in active markets or based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the bond is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, and may include adjustments, for certain risks that may not be observable, such as credit and liquidity risks.

Pooled investment funds consist of mutual and collective investment funds that invest primarily in publicly traded non-U.S. equity and fixed income securities. Pooled investment funds are valued at net asset values calculated by the fund manager based on fair value of the underlying securities. The underlying securities are generally valued at closing prices reported in active markets, quoted prices of similar securities, or discounted cash flows approach that maximizes observable inputs such as current value measurement at the reporting date.

Insurance contracts are valued in accordance with the terms of the applicable collective pension contract.

Cash equivalents consist primarily of money market and similar temporary investment funds. Cash equivalents are valued at closing prices reported in active markets.

The preceding methods may produce fair value measurements that are not indicative of net realizable value or reflective of future fair values. Although we believe the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table presents a reconciliation of Level 3 assets:



(In thousands)	Insurance Contracts		Other
Balance January 1, 2013	$	12,254	$	—
Net realized and unrealized gains included in earnings	1,074		—
Net purchases, issuances and settlements	173		428
Transfers into Level 3	11		352
Balance December 31, 2013	13,512		780
Net realized and unrealized gains included in earnings	1,345		(180		)
Net purchases, issuances and settlements	212		505
Transfers out of Level 3	—		(352		)
Balance December 31, 2014	15,069		753

We expect to make net contributions of $4.1 million to our pension plans in 2015.

For the 2014 beginning of the year measurement purposes (net periodic benefit expense), 7.0% increase in the costs of covered health care benefits was assumed decreasing by 0.5% for each successive year to 4.5% in 2019 and thereafter. For the 2014 end of the year measurement purposes (benefit obligation), 7.0% increase in the costs of covered health care benefits was assumed decreasing by 0.5% for each successive year to 4.5% in 2020 and thereafter. A one-percentage-point change in assumed health care cost trend rates would have increased or decreased the other post-retirement benefit obligations and current year plan expense by approximately $1.6 million and $1.4 million, respectively.

Expense for defined contribution pension plans was $6.5 million in 2014, $5.8 million in 2013 and $5.9 million in 2012.

Estimated pension benefits to be paid under our defined benefit pension plans during the next five years are $20.6 million in 2015, $20.9 million in 2016, $21.8 million in 2017, $22.7 million in 2018, $23.2 million in 2019, and are expected to aggregate $134.3 million for the five years thereafter. Estimated other post-retirement benefits to be paid during the next 5 years are $1.5 million in 2015, $1.6 million in 2016, $1.8 million in 2017, $2.0 million in 2018, $2.1 million in 2019, and are expected to aggregate $10.3 million for the five years thereafter.