Retirement Plans

We have various pension plans (“Pension Plans”), which we fund in accordance with their requirements and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws. The Pension Plans provide benefits based on years of service and compensation or at stated amounts for each year of service. The measurement date for all Pension Plans was September 30. Our U.S. pension plan (“Plan”) comprised 98% of the Pension Plans’ obligations and 98% of the Pension Plans’ assets at September 30, 2017.

We made a voluntary contribution of $35.0 million to the Plan in 2017. We do not anticipate making any contributions to the Plan in 2018.

During 2016, the Plan completed a pension obligation settlement program targeting vested, terminated participants not yet receiving benefits. Approximately 75% of eligible participants accepted settlement offers. The Plan distributed assets totaling $58.5 million. We incurred a non-cash pension settlement charge of $16.6 million as a result of the program, which had an immaterial impact on the Plan’s funded ratio.

During 2015, we contributed $1.2 million to fully fund two of our Canadian plans and recorded a pension settlement charge of $0.5 million. We currently plan to make $1.2 million of contributions to a Canadian pension plan in 2018.

During March 2017, the Financial Accounting Standards Board issued Accounting Standards Update No. 2017-07 (“ASU 2017-07”). This amendment to GAAP will require us to exclude from operating income the components of net periodic benefit cost other than service cost. We adopted this amendment on October 1, 2017, and this adoption will require reclassification of amounts included in 2017 and 2016 results. The components of net periodic benefit cost for our Pension Plans and the effects this adoption will have on operating income are presented below.



	2017			2016			2015
	(in millions)
Service cost	$	2.0		$	1.7		$	1.9
Components of net periodic benefit cost that will be excluded from operating income upon adoption of ASU 2017-07:
Interest cost	14.3			18.9			20.1
Expected return on plan assets	(16.9		)	(19.7		)	(24.6		)
Amortization of actuarial net loss	4.0			3.4			3.2
Pension settlement	—			16.6			0.5
Other	—			0.1			—
	1.4			19.3			(0.8		)
Net periodic benefit cost	$	3.4		$	21.0		$	1.1

Balance sheet information for Pension Plans with accumulated benefit obligations in excess of plan assets is presented below.



	September 30,
	2017		2016
	(in millions)
Projected benefit obligations	$	379.5	$	402.0
Accumulated benefit obligations	379.5		402.0
Fair value of plan assets	364.2		337.9

Balance sheet information for Pension Plans with accumulated benefit obligations less than plan assets is presented below.



	September 30,
	2017		2016
	(in millions)
Projected benefit obligations	$	1.0	$	1.1
Accumulated benefit obligations	1.0		1.1
Fair value of plan assets	2.1		2.1

Pension Plan activity in accumulated other comprehensive loss, before tax, in 2017 is presented below, in millions.



Balance at beginning of year	$	110.8
Actuarial loss	(13.5		)
Prior year actuarial loss amortization to net periodic cost	(4.0		)
Other	0.1
Balance at end of year	$	93.4

We amortize amounts in accumulated other comprehensive loss representing unrecognized prior year service cost and unrecognized loss related to the Pension Plans over the weighted average life expectancy of their inactive participants.

The components of accumulated other comprehensive loss related to Pension Plans that we expect to amortize into net periodic benefit cost in 2018 are presented below, in millions.



Amortization of unrecognized prior year service cost	$	—
Amortization of unrecognized loss	3.2
	$	3.2

Amounts recognized for Pension Plans and other postretirement benefit plans are presented below.



	Pension Plans
	2017			2016
	(in millions)
Projected benefit obligations:
Beginning of year	$	403.1		$	428.2
Service cost	2.0			1.7
Interest cost	14.3			18.9
Actuarial loss (gain)	(14.5		)	37.7
Benefits paid	(24.8		)	(25.1		)
Currency translation	0.4			0.2
Decrease in obligation due to curtailment / settlement	—			(58.5		)
End of year	$	380.5		$	403.1
Accumulated benefit obligations at end of year	$	380.5		$	403.1
Plan assets:
Beginning of year	$	340.0		$	383.4
Actual return on plan assets	15.8			40.1
Employer contributions	35.0			—
Settlement	—			(58.5		)
Currency translation	0.4			0.1
Benefits paid	(24.8		)	(25.1		)
Other	(0.1		)	—
End of year	$	366.3		$	340.0
Accrued benefit cost at end of year:
Unfunded status	$	(14.2	)	$	(63.1	)
Recognized on balance sheet:
Other noncurrent assets	$	1.1		$	1.0
Other current liabilities	(1.1		)	(1.2		)
Other noncurrent liabilities	(14.2		)	(62.9		)
	$	(14.2	)	$	(63.1	)
Recognized in accumulated other comprehensive loss, before tax:
Prior year service cost	$	—		$	—
Net actuarial loss	93.4			110.8
	$	93.4		$	110.8

The discount rates for determining the present value of pension obligations were selected using a “bond settlement” approach, which constructs a hypothetical bond portfolio that could be purchased such that the coupon payments and maturity values could be used to satisfy the projected benefit payments. The discount rate is the equivalent rate that results in the present value of the projected benefit payments equaling the market value of this bond portfolio. Only high quality (AA graded or higher), non-callable corporate bonds are included in this bond portfolio. We rely on the Pension Plans’ actuaries to assist in the development of the discount rate model. The actuarial loss in 2016 was primarily due to the decrease in the discount rate at September 30, 2016 compared to September 30, 2015.

Management’s expected returns on plan assets were determined with the assistance of the Pension Plans’ actuaries and investment consultants. Expected returns on plan assets were developed using forward looking returns over a time horizon of 10 to 15 years for major asset classes along with projected risk and historical correlations.

A summary of key assumptions for our pension plans is below.



	Pension Plans
	2017		2016		2015
Weighted average used to determine benefit obligations:
Discount rate	3.88	%	3.68	%	4.84	%
Weighted average used to determine net periodic cost:
Discount rate	3.68	%	3.92	%	4.49	%
Expected return on plan assets	5.16		5.50		6.21

We maintain a single trust to hold the assets of the U.S. pension plan. Throughout 2015 and most of 2016, the strategic asset allocation was about 40% equity investments. Near the end of 2016, we directed our investment manager to adjust the asset allocation to about 30% equity investments. Near the end of 2017, we directed our investment manager to adjust the asset allocation to about 20% equity investments. This trust’s strategic asset allocations, tactical range at September 30, 2017 and actual asset allocations are presented below.



	Strategic asset allocation						Actual asset allocations at
							September 30,
			Tactical range				2017		2016		2015
Equity investments:
Large capitalization stocks	12	%
Small capitalization stocks	3
International stocks	5
	20		15	-	20	%	21	%	29	%	39	%
Fixed income investments	80				80		78		69		60
Cash	—		0	-	5		1		2		1
	100	%					100	%	100	%	100	%

Assets of the Pension Plans are allocated to various investments to attain diversification and reasonable risk-adjusted returns while also managing the exposure to asset and liability volatility. These ranges are targets and deviations may occur from time to time due to market fluctuations. Portfolio assets are typically rebalanced to the allocation targets at least annually.

The valuation methodologies used to measure the assets of the Pension Plans at fair value are:


•	Equity investments are valued at the closing price reported on the active market when reliable market quotations are readily available. When market quotations are not readily available, assets of the Pension Plans are valued by a method the trustees of the Pension Plans believe accurately reflects fair value;


•	Fixed income fund investments are valued using the closing price reported in the active market in which the investment is traded or based on yields currently available on comparable securities of issuers with similar credit ratings; and


•	Other investments are valued as determined by the trustees of the Pension Plans based on their net asset values and supported by the value of the underlying securities and by the unit prices of actual purchase and sale transactions occurring at or close to the financial statement date.

The assets of the Pension Plans by level within the fair value hierarchy are presented below.



	September 30, 2017
	Level 1		Level 2		Total
	(in millions)
Equity:
Large cap stocks:
Large cap growth funds	$	—	$	32.6	$	32.6
Mid cap stocks:
Mid cap index funds	—		10.9		10.9
Small cap stocks:
Small cap growth funds	—		11.3		11.3
International stocks:
Mutual funds	15.4		—		15.4
International funds	—		7.4		7.4
Total equity	15.4		62.2		77.6
Fixed income	—		284.4		284.4
Cash and cash equivalents	4.3		—		4.3
	$	19.7	$	346.6	$	366.3



	September 30, 2016
	Level 1		Level 2		Total
	(in millions)
Equity:
Large cap stocks:
Large cap growth funds	$	—	$	7.3	$	7.3
Large cap index funds	—		38.2		38.2
Large cap value funds	—		7.2		7.2
Small cap stocks:
Small cap growth funds	—		15.1		15.1
International stocks:
Mutual funds	13.5		—		13.5
International funds	—		18.1		18.1
Total equity	13.5		85.9		99.4
Fixed income	—		233.3		233.3
Cash and cash equivalents	7.3		—		7.3
	$	20.8	$	319.2	$	340.0

Our estimated future pension benefit payments are presented below in millions.



2018	$	32.1
2019	25.4
2020	25.4
2021	25.2
2022	25.0
2023-2027	120.1

Defined Contribution Retirement Plans-Certain of our employees participate in defined contribution 401(k) plans or similar non-U.S plans. We make matching contributions as a function of employee contributions. Matching contributions were $4.1 million, $4.0 million and $4.2 million during 2017, 2016 and 2015, respectively.