Defined Benefit Plans

The Company sponsors various defined benefit plans, defined contribution plans and other post-retirement benefits plans, including health and life insurance, for certain eligible employees or former employees. The Company uses December 31^st as the measurement date for all of its employee benefit plans.

The following table summarizes the total changes in the Company’s pension and accrued post-retirement benefits and plan assets and includes a statement of the plans’ funded status:



	Pension Benefits						Other Post-Retirement Benefits
	Year Ended December 31,						Year Ended December 31,
	2015			2014			2015			2014
	(In thousands)
Change in benefit obligation:
Projected benefit obligation, beginning of year	$	1,765,493		$	1,640,418		$	35,085		$	28,823
Acquisitions	31,914			48,938			4,983			1,011
Service cost	4,612			4,883			33			155
Interest cost	54,807			70,469			1,170			1,304
Actuarial (gain) loss	(93,878		)	211,170			(6,410		)	5,553
Foreign exchange effect	(77,854		)	(97,525		)	—			—
Benefits paid	(105,589		)	(111,971		)	(1,942		)	(1,761		)
Settlements	(29,811		)	(1,387		)	—			—
Other	949			498			174			—
Projected benefit obligation, end of year	$	1,550,643		$	1,765,493		$	33,093		$	35,085
Accumulated benefit obligation, end of year	$	1,530,327		$	1,739,642		$	33,093		$	35,085
Change in plan assets:
Fair value of plan assets, beginning of year	$	1,469,103		$	1,367,315		$	—		$	—
Acquisitions	28,591			42,051			—			—
Actual return on plan assets	(9,390		)	174,065			—			—
Employer contribution⁽¹⁾	45,594			69,714			1,942			1,761
Foreign exchange effect	(63,060		)	(70,851		)	—			—
Benefits paid	(105,589		)	(111,971		)	(1,942		)	(1,761		)
Settlements	(28,399		)	(1,387		)	—			—
Other	555			167			—			—
Fair value of plan assets, end of year	$	1,337,405		$	1,469,103		$	—		$	—
Funded status, end of year	$	(213,238	)	$	(296,390	)	$	(33,093	)	$	(35,085	)
Amounts recognized on the Consolidated Balance Sheet at December 31:
Non-current assets	$	73,914		$	58,997		$	—		$	—
Current liabilities	(4,741		)	(5,328		)	(2,915		)	(2,749		)
Non-current liabilities	(282,411		)	(350,059		)	(30,178		)	(32,336		)
Total	$	(213,238	)	$	(296,390	)	$	(33,093	)	$	(35,085	)


⁽¹⁾	Contributions during the years ended December 31, 2015 and 2014 include contributions of 66,000 and 183,000 shares of Colfax Common stock, respectively, with values on the contribution dates of approximately $3.4 million and $11.9 million, respectively.

The accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $1.0 billion and $0.7 billion, respectively, as of December 31, 2015 and $1.3 billion and $1.0 billion, respectively, as of December 31, 2014.

The projected benefit obligation and fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets were $1.0 billion and $0.7 billion, respectively, as of December 31, 2015 and $1.4 billion and $1.1 billion, respectively, as of December 31, 2014.

The following table summarizes the changes in the Company’s foreign pension benefit obligation, which is determined based upon an employee’s expected date of separation, and plan assets, included in the table above, and includes a statement of the plans’ funded status:



	Foreign Pension Benefits
	Year Ended December 31,
	2015			2014
	(In thousands)
Change in benefit obligation:
Projected benefit obligation, beginning of year	$	1,265,143		$	1,205,554
Acquisitions	—			21,578
Service cost	4,506			4,883
Interest cost	37,253			51,658
Actuarial (gain) loss	(64,801		)	144,232
Foreign exchange effect	(77,854		)	(97,525		)
Benefits paid	(60,162		)	(64,347		)
Settlements	(29,811		)	(1,387		)
Other	949			497
Projected benefit obligation, end of year	$	1,075,223		$	1,265,143
Accumulated benefit obligation, end of year	$	1,054,907		$	1,239,292
Change in plan assets:
Fair value of plan assets, beginning of year	$	1,079,497		$	999,197
Acquisitions	—			20,873
Actual return on plan assets	11,159			139,460
Employer contribution	41,659			56,384
Foreign exchange effect	(63,060		)	(70,851		)
Benefits paid	(60,162		)	(64,347		)
Settlements	(28,399		)	(1,387		)
Other	555			168
Fair value of plan assets, end of year	$	981,249		$	1,079,497
Funded status, end of year	$	(93,974	)	$	(185,646	)

Expected contributions to the Company’s pension and other post-employment benefit plans for the year ending December 31, 2016, related to plans as of December 31, 2015, are $34.9 million. The following benefit payments are expected to be paid during each respective fiscal year:



	Pension Benefits				Other Post-Retirement Benefits
	All Plans		Foreign Plans		Other Post-Retirement Benefits
	(In thousands)
2016	$	88,062	$	53,907	$	2,915
2017	88,781		54,821		2,823
2018	89,611		55,994		2,717
2019	88,702		55,459		2,490
2020	89,083		56,074		2,268
2021- 2025	445,740		289,491		9,076

The Company’s primary investment objective for its pension plan assets is to provide a source of retirement income for the plans’ participants and beneficiaries. The assets are invested with the goal of preserving principal while providing a reasonable real rate of return over the long term. Diversification of assets is achieved through strategic allocations to various asset classes. Actual allocations to each asset class vary due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions, and the timing of benefit payments and contributions. The asset allocation is monitored and rebalanced as required, as frequently as on a quarterly basis in some instances. The following are the actual and target allocation percentages for the Company’s pension plan assets:



	Actual Asset Allocation December 31,				Target
	2015		2014		Allocation
U.S. Plans:
Equity securities:
U.S.	42	%	43	%	30% - 45%
International	16	%	15	%	10% - 20%
Fixed income	41	%	41	%	30% - 50%
Other	1	%	1	%	0% - 20%
Cash and cash equivalents	—	%	—	%	0% - 5%
Foreign Plans:
Equity securities	32	%	30	%	10% - 50%
Fixed income securities	64	%	66	%	50% - 90%
Cash and cash equivalents	1	%	1	%	0% - 25%
Other	3	%	3	%	0% - 5%

A summary of the Company’s pension plan assets for each fair value hierarchy level for the periods presented follows (see Note 14, “Financial Instruments and Fair Value Measurements” for further description of the levels within the fair value hierarchy):



	December 31, 2015
	Measured at Net Asset Value⁽¹⁾		Level One		Level Two		Level Three		Total
	(In thousands)
U.S. Plans:
Equity securities:
U.S. large cap	$	100,226	$	—	$	—	$	—	$	100,226
U.S. small/mid cap	40,899		7,874		—		—		48,773
International	58,642		—		—		—		58,642
Fixed income mutual funds:
U.S. government and corporate	143,787		—		—		—		143,787
Other⁽²⁾	2,917		1,811		—		—		4,728
Foreign Plans:
Cash and cash equivalents	—		12,832		—		—		12,832
Equity securities	130,078		150,376		32,398		—		312,852
Non-U.S. government and corporate bonds	—		282,504		343,870		—		626,374
Other⁽²⁾	—		1,964		27,227		—		29,191
	$	476,549	$	457,361	$	403,495	$	—	$	1,337,405

⁽¹⁾

In accordance with ASU No. 2015-07, certain investments that are measured at fair value using the net asset value per share (or its equivalent)practical expedient (the “NAV”) have not been classified in the fair value hierarchy. These investments, consisting of common/collective trusts, are valued using the NAV provided by the Trustee. The NAV is based on the underlying investments held by the fund, that are traded in an active market, less its liabilities. These investments are able to be redeemed in the near-term. See further discussion in Note 3, “Recently Issued Accounting Pronouncements”.

⁽²⁾ Represents diversified portfolio funds, real estate and reinsurance contracts and money market funds.



	December 31, 2014
	Measured at Net Asset Value⁽¹⁾		Level One		Level Two		Level Three		Total
	(In thousands)
U.S. Plans:
Equity securities:
U.S. large cap	$	100,263	$	3,901	$	—	$	—	$	104,164
U.S. small/mid cap	43,670		19,540		—		—		63,210
International	56,252		2,461		—		—		58,713
Fixed income mutual funds:
U.S. government and corporate	147,364		10,508		—		—		157,872
Structured loan fund	1,226		—		—		—		1,226
Other⁽²⁾	2,798		1,623		—		—		4,421
Foreign Plans:
Cash and cash equivalents	—		12,951		—		—		12,951
Equity securities	125,273		161,524		39,310		—		326,107
Non-U.S. government and corporate bonds	—		308,705		399,285		—		707,990
Other⁽²⁾	—		2,040		30,409		—		32,449
	$	476,846	$	523,253	$	469,004	$	—	$	1,469,103

⁽¹⁾

In accordance with ASU No. 2015-07, certain investments that are measured at fair value using the net asset value per share (or its equivalent)practical expedient (the “NAV”) have not been classified in the fair value hierarchy. These investments, consisting primarily of common/collective trusts, are valued using the NAV provided by the Trustee. The NAV is based on the underlying investments held by the fund, that are traded in an active market, less its liabilities. These investments are able to be redeemed in the near-term. See further discussion in Note 3, “Recently Issued Accounting Pronouncements”.

⁽²⁾ Represents diversified portfolio funds and reinsurance contracts maintained for certain plans.

The following table sets forth the components of net periodic benefit cost and Other comprehensive (loss) income of the Company’s defined benefit pension plans and other post-retirement employee benefit plans:



	Pension Benefits									Other Post-Retirement Benefits
	Year Ended December 31,									Year Ended December 31,
	2015			2014			2013			2015			2014			2013
	(In thousands)
Components of Net Periodic Benefit Cost:
Service cost	$	4,612		$	4,883		$	3,985		$	33		$	155		$	179
Interest cost	54,807			70,469			63,132			1,170			1,304			1,090
Amortization	11,515			6,608			9,672			259			468			609
Settlement (gain) loss	(582		)	190			(592		)	—			—			—
Other	525			328			(154		)	174			—			125
Expected return on plan assets	(58,107		)	(69,055		)	(58,511		)	—			—			—
Net periodic benefit cost	$	12,770		$	13,423		$	17,532		$	1,636		$	1,927		$	2,003
Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Loss) Income:
Current year net actuarial (gain) loss	$	(33,558	)	$	96,005		$	(69,463	)	$	(6,410	)	$	5,553		$	(6,072	)
Less amounts included in net periodic benefit cost:
Amortization of net loss	(11,515		)	(6,608		)	(9,672		)	(11		)	(220		)	(361		)
Settlement loss	(952		)	(190		)	(32		)	—			—			—
Amortization of prior service cost	—			—			—			(248		)	(248		)	(248		)
Total recognized in Other comprehensive (loss) income	$	(46,025	)	$	89,207		$	(79,167	)	$	(6,669	)	$	5,085		$	(6,681	)

The following table sets forth the components of net periodic benefit cost and Other comprehensive (loss) income of the foreign defined benefit pension plans, included in the table above:



	Foreign Pension Benefits
	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Components of Net Periodic Benefit Cost:
Service cost	$	4,506		$	4,883		$	3,985
Interest cost	37,253			51,658			46,775
Amortization	4,272			1,669			2,305
Settlement (gain) loss	(582		)	190			(592		)
Other	525			328			(154		)
Expected return on plan assets	(32,921		)	(44,287		)	(34,541		)
Net periodic benefit cost	$	13,053		$	14,441		$	17,778
Change in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Loss) Income:
Current year net actuarial (gain) loss	$	(50,216	)	$	38,904		$	(16,121	)
Less amounts included in net periodic benefit cost:
Amortization of net loss	(4,272		)	(1,669		)	(2,305		)
Settlement loss	(952		)	(190		)	(32		)
Amortization of prior service cost	—			—			—
Total recognized in Other comprehensive (loss) income	$	(55,440	)	$	37,045		$	(18,458	)

The components of net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss in the Consolidated Balance Sheets that have not been recognized as a component of net periodic benefit cost are as follows:



	Pension Benefits				Other Post-Retirement Benefits
	December 31,				December 31,
	2015		2014		2015			2014
	(In thousands)
Net actuarial loss (gain)	$	239,225	$	285,250	$	(1,845	)	$	4,576
Prior service cost	—		—		559			807
Total	$	239,225	$	285,250	$	(1,286	)	$	5,383

The components of net unrecognized pension and other post-retirement benefit cost included in Accumulated other comprehensive loss in the Consolidated Balance Sheet that are expected to be recognized as a component of net periodic benefit cost during the year ending December 31, 2016 are as follows:



	Pension Benefits		Other Post- Retirement Benefits
	(In thousands)
Net actuarial loss	$	8,336	$	8
Prior service cost	—		248
Total	$	8,336	$	256

The key economic assumptions used in the measurement of the Company’s pension and other post-retirement benefit obligations are as follows:



	Pension Benefits				Other Post-Retirement Benefits
	December 31,				December 31,
	2015		2014		2015		2014
Weighted-average discount rate:
All plans	3.6	%	3.3	%	4.0	%	3.6	%
Foreign plans	3.5	%	3.3	%	—		—
Weighted-average rate of increase in compensation levels for active foreign plans	1.5	%	1.6	%	—		—

The key economic assumptions used in the computation of net periodic benefit cost are as follows:



	Pension Benefits						Other Post-Retirement Benefits
	Year Ended December 31,						Year Ended December 31,
	2015		2014		2013		2015		2014		2013
Weighted-average discount rate:
All plans	3.3	%	4.4	%	4.0	%	3.6	%	4.4	%	3.5	%
Foreign plans	3.3	%	4.4	%	4.2	%	—		—		—
Weighted-average expected return on plan assets:
All plans	4.7	%	5.4	%	5.1	%	—		—		—
Foreign plans	3.9	%	4.9	%	4.3	%	—		—		—
Weighted-average rate of increase in compensation levels for active foreign plans	1.6	%	1.7	%	1.5	%	—		—		—

In determining discount rates, the Company utilizes the single discount rate equivalent to discounting the expected future cash flows from each plan using the yields at each duration from a published yield curve as of the measurement date.

For measurement purposes, a weighted-average annual rate of increase in the per capita cost of covered health care benefits of approximately 6.0% was assumed. The rate was assumed to decrease gradually to 5.0% by 2021 for one the Company’s plans and to 4.5% by 2027 for the remaining plans and remain at those levels thereafter for benefits covered under the plans.

The expected long-term rate of return on plan assets was based on the Company’s investment policy target allocation of the asset portfolio between various asset classes and the expected real returns of each asset class over various periods of time that are consistent with the long-term nature of the underlying obligations of these plans.

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



	1% Increase		1% Decrease
	(in thousands)
Effect on total service and interest cost components for the year ended December 31, 2015	$	118	$	(95	)
Effect on post-retirement benefit obligation at December 31, 2015	3,035		(2,471		)

The Company maintains defined contribution plans covering certain union and non-union employees. The Company’s expense for the years ended December 31, 2015, 2014 and 2013 was $26.5 million, $25.3 million and $21.5 million, respectively.