12. Defined Benefit Plans

We have a number of pension plans in the United States, covering many of the Company’s employees, however most have been closed to new hires. The plans provide for payment of retirement benefits, mainly commencing between the ages of 55 and 65, and also for payment of certain disability benefits. After meeting certain qualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined on the basis of an employee’s length of service and/or earnings. Employer contributions to the plans are made, as necessary, to ensure legal funding requirements are satisfied. Also, from time to time, we may make contributions in excess of the legal funding requirements.

In addition, the Company provides postretirement health care and life insurance benefits to certain retirees.



(In millions)	Pension Benefits						Postretirement Benefits

Obligations and Funded Status at December 31	2013			2012			2013			2012
Change in the Projected Benefit Obligation (PBO):
Projected benefit obligation at beginning of year	$	722.5		$	639.5		$	73.3		$	93.9
Service cost		11.4			12.1			0.3			0.5
Interest cost		30.1			30.7			1.7			3.9
Plan amendments		—			0.4			(34.7	)		(29.8	)
Actuarial (gain) loss		(73.0	)		66.0			(0.3	)		9.9
Participants’ contributions		—			—			0.5			0.8
Benefits paid		(28.7	)		(26.2	)		(7.0	)		(6.4	)
Medicare Part D reimbursement		—			—			0.4			0.5
Projected benefit obligation at end of year	$	662.3		$	722.5		$	34.2		$	73.3
Accumulated benefit obligation at end of year (excludes the impact of future compensation increases)	$	648.5		$	703.3
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	536.8		$	477.9		$	—		$	—
Actual return on plan assets		74.6			63.7			—			—
Employer contributions		1.1			21.4			6.1			5.1
Participants’ contributions		—			—			0.5			0.8
Medicare Part D reimbursement		—			—			0.4			0.5
Benefits paid		(28.7	)		(26.2	)		(7.0	)		(6.4	)
Fair value of plan assets at end of year	$	583.8		$	536.8		$	—		$	—
Funded status (Fair value of plan assets less PBO)	$	(78.5	)	$	(185.7	)	$	(34.2	)	$	(73.3	)

The accumulated benefit obligation exceeds the fair value of assets for all pension plans.

Amounts recognized in the consolidated balance sheets consist of:



	Pension Benefits						Postretirement Benefits

(In millions)	2013			2012			2013			2012
Current benefit payment liability	$	(0.8	)	$	(0.8	)	$	(3.5	)	$	(5.5	)
Accrued benefit liability		(77.7	)		(184.9	)		(30.7	)		(67.8	)
Net amount recognized	$	(78.5	)	$	(185.7	)	$	(34.2	)	$	(73.3	)

In the fourth quarter of 2012 and first half of 2013, we amended certain postretirement benefit plans to reduce health benefits for certain current and retired employees. The impact of these changes was a reduction in accrued retiree benefit plans of $29.8 million in 2012 and $34.7 million in 2013, and we recognized actuarial losses of $4.0 million in 2013 due to a decrease in the discount rate and a resulting lower threshold for loss recognition because of the reduced postretirement obligation. Liability reduction resulting from these plan amendments are recorded as amortization of prior service credits in net income in accordance with accounting requirements. In addition, in the first quarter of 2013, we communicated to certain employees our decision to freeze an hourly pension plan by December 31, 2016. As a result, we remeasured our pension liability, updating our pension measurement assumptions, and recorded a $20.0 million reduction in the liability. The curtailment charge associated with this pension freeze was insignificant. See Note 22, “Accumulated Other Comprehensive Income,” for information on the impact on accumulated other comprehensive income. In the third and fourth quarters of 2011, we communicated to employees our decision to freeze salaried and certain hourly non-union pension plans by December 31, 2016. As a result, we remeasured our pension liabilities, updated our pension measurement assumptions, and recorded pension curtailment charges totaling $1.8 million.

In the first quarter of 2014, we amended certain postretirement benefit plans to reduce health benefits for certain current and retired employees. The reduction in accrued retiree benefit plans is estimated to be $14.7 million and will be recorded in the first quarter of 2014. Of this reduction, $11.7 million will be recorded as amortization of prior service credit in net income over the next two to three years. In addition, in the first quarter of 2014, we expect to recognize actuarial gains of $0.6 million and one-time prior service credits in net income of $3.7 million.

In 2014, we expect to make pension cash contributions of approximately $10 million.

The amounts in accumulated other comprehensive income on the consolidated balance sheets that have not yet been recognized as components of net periodic benefit cost were as follows:



(In millions)	Pension Benefits			Postretirement Benefits
Net actuarial loss at December 31, 2011		63.5			6.0
Recognition of actuarial loss		(30.6	)		(11.6	)
Current year actuarial loss		39.3			9.9
Net actuarial loss at December 31, 2012	$	72.2		$	4.3
Recognition of actuarial gain		(0.9	)		(4.5	)
Current year actuarial gain		(105.6	)		(0.3	)
Net actuarial gain at December 31, 2013	$	(34.3	)	$	(0.5	)
Net prior service cost at December 31, 2011		0.5			1.0
Prior service cost (credit) recognition due to plan amendments		0.4			(29.8	)
Amortization		(0.3	)		2.6
Net prior service cost (credit) at December 31, 2012	$	0.6		$	(26.2	)
Prior service credit recognition due to plan amendments		—			(34.7	)
Amortization		(0.1	)		27.4
Net prior service cost (credit) at December 31, 2013	$	0.5		$	(33.5	)
Total at December 31, 2013	$	(33.8	)	$	(34.0	)

The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year are amortization of net prior service costs (credits) related pension benefits of $0.1 million and postretirement benefits of $(19.4) million.

Components of net periodic benefit cost were as follows:



Components of Net Periodic Benefit Cost	Pension Benefits									Postretirement Benefits

(In millions)	2013			2012			2011			2013			2012			2011
Service cost	$	11.4		$	12.1		$	12.9		$	0.3		$	0.5		$	0.5
Interest cost		30.1			30.7			31.0			1.7			3.9			4.4
Expected return on plan assets		(41.8	)		(36.8	)		(41.3	)		—			—			—
Recognition of actuarial losses		0.8			30.6			80.0			4.4			11.6			—
Amortization of prior service cost (credits)		0.1			0.3			0.3			(27.4	)		(2.6	)		0.4
Curtailment and settlement losses		0.1			—			1.8			0.1			—			—
Net periodic benefit cost	$	0.7		$	36.9		$	84.7		$	(20.9	)	$	13.4		$	5.3



Assumptions	Pension Benefits			Postretirement Benefits

	2013	2012	2011	2013	2012	2011
Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31:
Discount rate	5.0%	4.2%		4.3%	3.7%
Rate of compensation increase	4.0%	4.0%		—	—
Weighted-Average Assumptions Used to Determine Net Cost for Years Ended December 31:
Discount rate	4.2%	4.9%	5.8%	3.7%	4.6%	5.3%
Expected long-term rate of return on plan assets	7.8%	7.8%	8.5%	—	—	—
Rate of compensation increase	4.0%	4.0%	4.0%	—	—	—



	Postretirement Benefits

	2013			2012
Assumed Health Care Cost Trend Rates Used to Determine Benefit Obligations and Net Cost at December 31:
Health care cost trend rate assumed for next year		7.1/7.5	%^(a)		7.5/7.0	%^(a)
Rate that the cost trend rate is assumed to decline (the ultimate trend rate)		4.5	%		5.0	%
Year that the rate reaches the ultimate trend rate		2022			2017

^(a)	The pre-65 initial health care cost trend rate is shown first / followed by the post-65 rate.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:



(In millions)	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total of service and interest cost	$	0.1	$	(0.1	)
Effect on postretirement benefit obligation		1.8		(2.0	)

Plan Assets

Pension assets by major category of plan assets and the type of fair value measurement as of December 31, 2013 were as follows:


(In millions)	Total as of balance sheet date		Level 2 – Significant other observable inputs		Level 3 – Significant unobservable inputs
Group annuity/insurance contracts	$	21.2	$	—	$	21.2
Commingled funds:
Cash and cash equivalents		8.1		8.1		—
Equity		278.6		278.6		—
Fixed income		232.6		232.6		—
Multi-strategy hedge funds		20.5		—		20.5
Real estate		22.8		—		22.8
Total	$	583.8	$	519.3	$	64.5

A reconciliation of Level 3 measurements as of December 31, 2013 was as follows:



			Commingled Funds

(In millions)	Group annuity/ insurance contracts		Multi-strategy hedge funds		Real estate			Total
January 1, 2013	$	20.6	$	18.8	$	24.4		$	63.8
Actual return on assets related to assets still held		0.6		1.7		3.4			5.7
Purchases, sales and settlements		—		—		(5.0	)		(5.0	)
December 31, 2013	$	21.2	$	20.5	$	22.8		$	64.5

Pension assets by major category of plan assets and the type of fair value measurement as of December 31, 2012 were as follows:



(In millions)	Total as of balance sheet date		Level 2 – Significant other observable inputs		Level 3 – Significant unobservable inputs
Group annuity/insurance contracts	$	20.6	$	—	$	20.6
Commingled funds:
Cash and cash equivalents		6.3		6.3		—
Equity		331.5		331.5		—
Fixed income		135.2		135.2		—
Multi-strategy hedge funds		18.8		—		18.8
Real estate		24.4		—		24.4
Total	$	536.8	$	473.0	$	63.8

A reconciliation of Level 3 measurements as of December 31, 2012 was as follows:



			Commingled Funds

(In millions)	Group annuity/ insurance contracts		Multi-strategy hedge funds		Real estate		Total
January 1, 2012	$	20.0	$	17.5	$	21.9	$	59.4
Actual return on assets related to assets still held		0.6		1.3		2.5		4.4
December 31, 2012	$	20.6	$	18.8	$	24.4	$	63.8

Our defined benefit trust owns a variety of assets including equity, fixed income and real estate securities, as well as group annuity/insurance contracts and fund-of-hedge funds. Equity securities are traded on national stock exchanges and are valued at daily closing prices. Fixed income securities are valued at daily closing prices or institutional mid-evaluation prices provided by independent industry-recognized pricing sources. Real estate securities are valued based on recent market appraisals of underlying property, as well as standard valuation methodologies to determine the most probable cash price in a competitive market. Valuations of group annuity/insurance contracts and fund-of-hedge funds are based on daily closing prices of underlying securities or institutional evaluation prices consistent with industry practices.

Our investment strategy is to optimize investment returns through a diversified portfolio of investments, taking into consideration underlying plan liabilities and asset volatility. A Master Trust was established to hold the assets of our domestic defined benefit plans. The U.S. defined benefit asset allocation policy of the trust allows for an equity allocation of 0% to 75%, a fixed income allocation of 25% to 100%, a cash allocation of up to 25% and other investments up to 20%. Asset allocations are based on the underlying liability structure. All retirement asset allocations are reviewed periodically to ensure the allocation meets the needs of the liability structure.

Our 2014 expected blended long-term rate of return on plan assets of 7.4% was determined based on the nature of the plans’ investments, our current asset allocation and projected long-term rates of return from pension investment consultants.

Estimated Future Retirement Benefit Payments

The following retirement benefit payments are expected to be paid:


(In millions)	Pension Benefits		Postretirement Benefits
2014	$	32.2	$	3.4
2015		34.1		3.4
2016		36.0		3.4
2017		37.5		2.8
2018		39.0		2.8
Years 2019-2023		215.0		12.7

Estimated future retirement benefit payments above are estimates and could change significantly based on differences between actuarial assumptions and actual events and decisions related to lump sum distribution options that are available to participants in certain plans.

Defined Contribution Plan Contributions

We sponsor a number of defined contribution plans. Contributions are determined under various formulas. Cash contributions by the Company related to these plans amounted to $18.7 million, $16.1 million and $17.8 million in 2013, 2012 and 2011, respectively.