(8) Pension and Other Postretirement Benefit Plans

The Company has noncontributory defined benefit pension plans covering certain domestic employees and certain employees in foreign countries, principally Canada. The Company’s salaried pension plans provide benefits based on final average earnings formulas. The Company’s hourly pension plans provide benefits under flat benefit and cash balance formulas. The Company also has contractual arrangements with certain employees which provide for supplemental retirement benefits. In general, the Company’s policy is to fund its pension benefit obligation based on legal requirements, tax and liquidity considerations and local practices.

The Company has postretirement benefit plans covering certain domestic and Canadian employees. The Company’s postretirement benefit plans generally provide for the continuation of medical benefits for all eligible employees who complete a specified number of years of service and retire from the Company at age 55 or older. The Company does not fund its postretirement benefit obligation. Rather, payments are made as costs are incurred by covered retirees.

Obligations and Funded Status

A reconciliation of the change in benefit obligation and the change in plan assets for the years ended December 31, 2013 and 2012, is shown below (in millions):


	Pension												Other Postretirement
	December 31, 2013						December 31, 2012						December 31, 2013						December 31, 2012
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Change in benefit obligation:
Benefit obligation at beginning of period	$	656.3		$	509.2		$	533.9		$	416.1		$	102.0		$	73.8		$	113.0		$	70.9
Service cost		2.9			10.2			3.2			9.6			0.1			1.1			0.5			1.0
Interest cost		26.2			20.7			25.4			21.0			3.6			2.0			4.4			3.2
Amendments and settlements		—			(13.8	)		—			—			—			(25.5	)		(3.2	)		(3.3	)
Actuarial (gain) loss		(79.9	)		(24.3	)		28.9			14.2			(8.4	)		(2.5	)		(6.9	)		1.5
Benefits paid		(18.8	)		(22.8	)		(22.2	)		(21.6	)		(5.7	)		(2.4	)		(5.8	)		(1.9	)
Acquisition and other		—			—			87.1			55.5			—			—			—			—
Special termination benefits		—			0.1			—			—			—			0.8			—			0.3
Translation adjustment		—			(19.8	)		—			14.4			—			(4.9	)		—			2.1

Benefit obligation at end of period	$	586.7		$	459.5		$	656.3		$	509.2		$	91.6		$	42.4		$	102.0		$	73.8


	Pension												Other Postretirement
	December 31, 2013						December 31, 2012						December 31, 2013						December 31, 2012
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Change in plan assets:
Fair value of plan assets at beginning of period	$	417.6		$	390.6		$	329.9		$	314.0		$	—		$	—		$	—		$	—
Acquisition and other		—			—			46.8			37.8			—			—			—			—
Actual return on plan assets		79.1			57.6			46.3			31.2			—			—			—			—
Employer contributions		25.6			27.4			16.8			18.0			5.7			2.4			5.8			1.9
Benefits paid		(18.8	)		(22.8	)		(22.2	)		(21.6	)		(5.7	)		(2.4	)		(5.8	)		(1.9	)
Settlements		—			(13.8	)		—			—			—			—			—			—
Translation adjustment		—			(22.0	)		—			11.2			—			—			—			—

Fair value of plan assets at end of period	$	503.5		$	417.0		$	417.6		$	390.6		$	—		$	—		$	—		$	—

Funded status	$	(83.2	)	$	(42.5	)	$	(238.7	)	$	(118.6	)	$	(91.6	)	$	(42.4	)	$	(102.0	)	$	(73.8	)


	Pension												Other Postretirement
	December 31, 2013						December 31, 2012						December 31, 2013						December 31, 2012
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Amounts recognized in the consolidated balance sheet:
Other long-term assets	$	0.3		$	62.7		$	—		$	7.2		$	—		$	—		$	—		$	—
Accrued liabilities		(2.3	)		(3.5	)		(1.7	)		(3.3	)		(6.9	)		(2.3	)		(6.8	)		(2.9	)
Other long-term liabilities		(81.2	)		(101.7	)		(237.0	)		(122.5	)		(84.7	)		(40.1	)		(95.2	)		(70.9	)

In 2013, the Company settled foreign defined benefit pension obligations related to the closure of a foreign facility in 2010. In 2011, the Company settled foreign defined benefit pension obligations related to the closure of a foreign facility in 2008. These settlement transactions were subject to and in accordance with regulatory requirements and were accomplished through both the purchase of individual non-participating life annuity contracts and lump-sum payments made directly to plan participants by the plans’ trust. In conjunction with these settlement transactions, the Company recognized settlement losses of $2.5 million and $17.1 million in 2013 and 2011, respectively, as disclosed in Note 4, “Restructuring,” and in “— Net Periodic Benefit Cost (Credit)” below.

As of December 31, 2013 and 2012, the accumulated benefit obligation for all of the Company’s pension plans was $1,031.7 million and $1,151.7 million, respectively. As of December 31, 2013 and 2012, the majority of the Company’s pension plans had accumulated benefit obligations in excess of plan assets. The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets of pension plans with accumulated benefit obligations in excess of plan assets were $731.1 million, $717.5 million and $542.3 million, respectively, as of December 31, 2013, and $1,109.6 million, $1,095.8 million and $745.1 million, respectively, as of December 31, 2012.

Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

Pretax amounts recognized in other comprehensive income (loss) for the years ended December 31, 2013 and 2012, are shown below (in millions):


	Pension										Other Postretirement
	December 31, 2013				December 31, 2012						December 31, 2013						December 31, 2012
	U.S.		Foreign		U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
Actuarial gains (losses) recognized:
Reclassification adjustments	$	4.1	$	8.9	$	4.5		$	5.8		$	(0.1	)	$	2.9		$	(1.8	)	$	0.3
Actuarial gain (loss) arising during the period		126.6		55.9		(11.0	)		(14.3	)		8.4			2.5			6.9			(1.5	)
Prior service (cost) credit recognized:
Reclassification adjustments		—		—		—			—			—			(0.4	)		(3.2	)		(0.2	)
Prior service credit arising during the period		—		—		—			—			—			—			3.2			3.3
Translation adjustment		—		6.6		—			(3.1	)		—			0.5			—			(0.3	)

	$	130.7	$	71.4	$	(6.5	)	$	(11.6	)	$	8.3		$	5.5		$	5.1		$	1.6

In addition, the Company recognized tax benefits (expense) in other comprehensive income (loss) related to its defined benefit plans of ($70.1) million, $2.8 million and $19.8 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Pretax amounts recorded in accumulated other comprehensive loss not yet recognized in net periodic benefit cost as of December 31, 2013 and 2012, are shown below (in millions):


	Pension												Other Postretirement
	December 31, 2013						December 31, 2012						December 31, 2013					December 31, 2012
	U.S.			Foreign			U.S.			Foreign			U.S.		Foreign			U.S.			Foreign
Net unrecognized actuarial gain (loss)	$	(14.2	)	$	(50.1	)	$	(144.9	)	$	(121.5	)	$	4.4	$	(4.9	)	$	(3.9	)	$	(11.0	)
Prior service credit		—			—			—			—			—		2.5			—			3.1

	$	(14.2	)	$	(50.1	)	$	(144.9	)	$	(121.5	)	$	4.4	$	(2.4	)	$	(3.9	)	$	(7.9	)

Pretax amounts recorded in accumulated other comprehensive loss as of December 31, 2013, that are expected to be recognized as components of net periodic benefit cost in the year ending December 31, 2014, are shown below (in millions):


	Pension					Other Postretirement
	U.S.		Foreign			U.S.		Foreign
Net unrecognized actuarial gain (loss)	$	0.3	$	(1.3	)	$	0.7	$	(0.1	)
Prior service credit		—		—			—		0.4

	$	0.3	$	(1.3	)	$	0.7	$	0.3

Net Periodic Pension and Other Postretirement Benefit Cost

The components of the Company’s net periodic pension benefit cost are shown below (in millions):


	Year Ended December 31,
Pension	2013						2012						2011
	U.S.			Foreign			U.S			Foreign			U.S.			Foreign
Service cost	$	2.9		$	10.2		$	3.2		$	9.6		$	2.9		$	6.6
Interest cost		26.2			20.7			25.4			21.0			23.4			24.3
Expected return on plan assets		(32.4	)		(25.1	)		(28.4	)		(23.1	)		(26.2	)		(30.3	)
Amortization of actuarial loss		4.1			6.4			3.9			5.8			—			0.3
Settlement (gain) loss		—			2.5			0.6			—			(0.1	)		17.1

Net periodic benefit cost	$	0.8		$	14.7		$	4.7		$	13.3		$	—		$	18.0

The components of the Company’s net periodic other postretirement benefit cost (credit) are shown below (in millions):


	Year Ended December 31,
Other Postretirement	2013						2012						2011
	U.S.			Foreign			U.S			Foreign			U.S.		Foreign
Service cost	$	0.1		$	1.1		$	0.5		$	1.0		$	0.4	$	1.1
Interest cost		3.6			2.0			4.4			3.2			5.4		3.8
Amortization of actuarial (gain) loss		(0.1	)		0.3			0.3			0.3			0.3		0.1
Amortization of prior service credit		—			(0.4	)		—			(0.2	)		—		—
Special termination benefits		—			0.7			—			0.4			—		0.1
Settlement gain		—			(5.9	)		(5.4	)		—			—		—

Net periodic benefit cost (credit)	$	3.6		$	(2.2	)	$	(0.2	)	$	4.7		$	6.1	$	5.1

For the years ended December 31, 2013 and 2011, the Company recognized settlement losses of $2.5 million and $17.1 million, respectively, related to its restructuring actions (Note 4, “Restructuring”).

Assumptions

The weighted average actuarial assumptions used in determining the benefit obligations are shown below:


	Pension						Other Postretirement
December 31,	2013			2012			2013			2012
Discount rate:
Domestic plans		5.0	%		4.1	%		4.5	%		3.7	%
Foreign plans		4.6	%		4.3	%		5.0	%		4.4	%
Rate of compensation increase:
Foreign plans		4.1	%		4.2	%		N/A			N/A

The weighted average actuarial assumptions used in determining the net periodic benefit cost are shown below:


For the year ended December 31,	2013			2012			2011
Pension
Discount rate:
Domestic plans		4.1	%		4.5	%		5.5	%
Foreign plans		4.3	%		4.8	%		5.2	%
Expected return on plan assets:
Domestic plans		8.0	%		8.0	%		8.0	%
Foreign plans		6.7	%		6.7	%		6.9	%
Rate of compensation increase:
Foreign plans		4.8	%		5.2	%		3.6	%
Other postretirement
Discount rate:
Domestic plans		3.7	%		4.0	%		5.0	%
Foreign plans		4.4	%		4.5	%		5.6	%

The expected return on plan assets is determined based on several factors, including adjusted historical returns, historical risk premiums for various asset classes and target asset allocations within the portfolio. Adjustments made to the historical returns are based on recent return experience in the equity and fixed income markets and the belief that deviations from historical returns are likely over the relevant investment horizon.

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the postretirement benefit plans. A 1% increase in the assumed rate of healthcare cost increases each year would increase the postretirement benefit obligation by $18.5 million as of December 31, 2013, and increase the net periodic postretirement benefit cost by $1.9 million for the year then ended. A 1% decrease in the assumed rate of healthcare cost increases each year would decrease the postretirement benefit obligation by $15.1 million as of December 31, 2013, and decrease the net periodic postretirement benefit cost by $1.5 million for the year then ended.

For the measurement of postretirement benefit obligation as of December 31, 2013, domestic healthcare costs were assumed to increase 7.6% in 2014, grading down over time to 4.5% in 2021. Foreign healthcare costs were assumed to increase 5.8% in 2014, grading down over time to 4.5% in 2031 on a weighted average basis.

Plan Assets

With the exception of alternative investments, plan assets are valued at fair value using a market approach and observable inputs, such as quoted market prices in active markets (Level 1 and Level 2 inputs based on the GAAP fair value hierarchy). Alternative investments are valued at fair value based on net asset per share or unit provided for each investment fund (Level 2 input based on the GAAP fair value hierarchy). For further information on the GAAP fair value hierarchy, see Note 13, “Financial Instruments.”

The Company’s pension plan assets by asset category are shown below (in millions). Pension plan assets for the foreign plans relate to the Company’s pension plans in Canada and the United Kingdom.


December 31,	2013		2012
Equity securities:
Domestic plans	$	321.2	$	245.2
Foreign plans		237.4		215.9
Debt securities:
Domestic plans		114.6		118.4
Foreign plans		125.7		136.4
Alternative investments:
Domestic plans		51.0		45.1
Foreign plans		31.5		28.1
Cash and other:
Domestic plans		16.7		8.9
Foreign plans		22.4		10.2

The Company’s investment policies incorporate an asset allocation strategy that emphasizes the long-term growth of capital. The Company believes that this strategy is consistent with the long-term nature of plan liabilities and ultimate cash needs of the plans. For the domestic portfolio, the Company targets an equity allocation of 50% - 75% of plan assets, a fixed income allocation of 15% - 40%, an alternative investment allocation of 0% - 30% and a cash allocation of 0% - 10%. For the foreign portfolio, the Company targets an equity allocation of 45% - 65% of plan assets, a fixed income allocation of 30% - 40%, an alternative investment allocation of 0% - 20% and a cash allocation of 0% - 10%. Differences in the target allocations of the domestic and foreign portfolios are reflective of differences in the underlying plan liabilities. Diversification within the investment portfolios is pursued by asset class and investment management style. The investment portfolios are reviewed on a quarterly basis to maintain the desired asset allocations, given the market performance of the asset classes and investment management styles.

The Company utilizes investment management firms to manage these assets in accordance with the Company’s investment policies. Excluding alternative investments, mutual funds and ETF funds, retained investment managers are provided investment guidelines that indicate prohibited assets, which include commodities contracts, futures contracts, options, venture capital, real estate, interest-only or principal-only strips and investments in the Company’s own debt or equity. Derivative instruments are also prohibited without the specific approval of the Company. Investment managers are limited in the maximum size of individual security holdings and the maximum exposure to any one industry relative to the total portfolio. Fixed income managers are provided further investment guidelines that indicate minimum credit ratings for debt securities and limitations on weighted average maturity and portfolio duration.

The Company evaluates investment manager performance against market indices which the Company believes are appropriate to the investment management style for which the investment manager has been retained. The Company’s investment policies incorporate an investment goal of aggregate portfolio returns which exceed the returns of the appropriate market indices by a reasonable spread over the relevant investment horizon.

Contributions

The Company expects contributions to its domestic and foreign pension plans to be approximately $20 to $25 million in 2014. The Company may elect to make contributions in excess of minimum funding requirements in response to investment performance or changes in interest rates or when the Company believes that it is financially advantageous to do so and based on its other cash requirements. The Company’s minimum funding requirements after 2014 will depend on several factors, including investment performance and interest rates. The Company’s minimum funding requirements may also be affected by changes in applicable legal requirements.

Benefit Payments

As of December 31, 2013, the Company’s estimate of expected benefit payments, excluding expected settlements relating to its restructuring actions, in each of the five succeeding years and in the aggregate for the five years thereafter are shown below (in millions):


	Pension				Other Postretirement
Year	U.S.		Foreign		U.S.		Foreign
2014		22.6		19.3		6.9		2.3
2015		23.7		19.0		7.0		1.4
2016		24.9		19.4		7.1		1.4
2017		25.8		20.2		7.0		1.5
2018		26.3		20.5		6.9		1.6
Five years thereafter		154.4		118.0		33.1		10.1

Multi-Employer Pension Plans

The Company currently participates in two multi-employer pension plans, the U.A.W. Labor-Management Group Pension Plan and UNITE Here National Retirement Fund, for certain of its employees. Contributions to these plans are based on three collective bargaining agreements. Two of the agreements expire on July 1, 2016, and one expires on April 23, 2015. Detailed information related to these plans is shown below (amounts in millions):

Pension Protection Act
Zone Status

Contributions to Multiemployer Pension Plans

Employer Identification Number

December 31,
2013
Certification

December 31,
2012
Certification

FIP/RP
Pending or
Implemented

Surcharge

Year Ended
December 31,
2013

Year Ended
December 31,
2012

Year Ended
December 31,
2011

516099782-001

Unavailable ⁽¹⁾

0.4

0.5

⁽³⁾

13-6130178

Unavailable ⁽²⁾

Yes

0.2

0.1

—

(1)	As of December 31, 2012, the date of the most recent plan financial statements provided, total plan assets exceeded the plan accumulated benefit obligation.

(2)	As of December 31, 2011, the date of the most recent plan financial statements provided, total plan assets were less than 65% of the plan accumulated benefit obligation.

(3)	Contributions made by the Company represent more than 5% of total contributions.

Defined Contribution Plan

The Company also sponsors defined contribution plans and participates in government-sponsored programs in certain foreign countries. Contributions are determined as a percentage of each covered employee’s salary. For the years ended December 31, 2013, 2012 and 2011, the aggregate cost of the defined contribution pension plans was $11.1 million, $7.6 million and $7.4 million, respectively.

The Company also has a defined contribution retirement program for its salaried employees. Contributions to this program are determined as a percentage of each covered employee’s eligible compensation. For the years ended December 31, 2013, 2012 and 2011, the Company recorded expense of $16.4 million, $13.4 million and $14.8 million, respectively, related to this program.