
13.	Retirement Benefit Plans

Substantially all U.S. employees are covered by various retirement benefit plans, including postretirement medical plans and defined contribution savings plans. Retirement benefits for eligible employees in foreign locations are funded principally through defined benefit plans, annuity or government programs. The total cost of benefits for our plans was $13,253, $12,108 and $12,428 in 2017, 2016 and 2015, respectively.

We had a qualified, funded defined benefit retirement plan (the “U.S. Pension Plan”) covering certain current and retired employees in the U.S. Pension Plan benefits are based on the years of service and compensation during the highest five consecutive years of service in the final ten years of employment. No new participants have entered the plan since 2000. During 2015, the plan was amended to freeze benefits for all participants effective January 31, 2017. On February 15, 2017, the Board of Directors approved the termination of the U.S. Pension Plan, effective May 15, 2017. Participants who elected an immediate lump sum distribution were paid out in December 2017. Assets for participants who elected or are currently receiving annuity payments and those who have elected to defer their benefits were transferred to the annuity company, Pacific Life, in December 2017. In December 2017, excess assets of $6,305 were transferred from the Tennant Company Pension Trust to the Tennant Company Retirement Savings Plan to deliver future discretionary benefits to plan participants.

We have a U.S. postretirement medical benefit plan (the “U.S. Retiree Plan”) to provide certain healthcare benefits for U.S. employees hired before January 1, 1999. Eligibility for those benefits is based upon a combination of years of service with us and age upon retirement.

Our defined contribution savings plan (“401(k)”) covers substantially all U.S. employees. Under this plan, we match up to 3% of the employee’s annual compensation in cash to be invested per their election. We also make a profit sharing contribution to the 401(k) plan for employees with more than one year of service in accordance with our Profit Sharing Plan. This contribution is based upon our financial performance and can be funded in the form of Tennant stock, cash or a combination of both. Expenses for the 401(k) plan were $4,404, $8,359 and $8,098 during 2017, 2016 and 2015, respectively.

We have a U.S. nonqualified supplemental benefit plan (the “U.S. Nonqualified Plan”) to provide additional retirement benefits for certain employees whose benefits under our 401(k) plan or U.S. Pension Plan are limited by either the Employee Retirement Income Security Act or the Internal Revenue Code.

We also have defined benefit pension plans in the United Kingdom and Germany (the “U.K. Pension Plan” and the “German Pension Plan”). The U.K. Pension Plan and German Pension Plan cover certain current and retired employees and both plans are closed to new participants.

We expect to contribute approximately $140 to our U.S. Nonqualified Plan, $771 to our U.S. Retiree Plan, $292 to our U.K. Pension Plan and $36 to our German Pension Plan in 2018. There were no contributions made to the U.S. Pension Plan during 2017.

Weighted-average asset allocations by asset category of the U.K. Pension Plan and the Tennant Company Retirement Savings Plan are as of December 31, 2017 are as follows:



Asset Category	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and Cash Equivalents	$	6,305	$	6,305	$	—	$	—
Investment Account held by Pension Plan⁽¹⁾	11,163		—		—		11,163
Total	$	17,468	$	6,305	$	—	$	11,163


⁽¹⁾	This category is comprised of investments in insurance contracts.

Weighted-average asset allocations by asset category of the U.S. and U.K. Pension Plans as of December 31, 2016 are as follows:



Asset Category	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and Cash Equivalents	$	663	$	663	$	—	$	—
Mutual Funds:
U.S. Large-Cap	9,803		9,803		—		—
U.S. Small-Cap	2,584		2,584		—		—
International Equities	2,244		2,244		—		—
Fixed-Income Domestic	4,564		4,564		—		—
Collective Investment Funds	26,531		—		26,531		—
Investment Account held by Pension Plan⁽¹⁾	9,562		—		—		9,562
Total	$	55,951	$	19,858	$	26,531	$	9,562


⁽¹⁾	This category is comprised of investments in insurance contracts.

Estimates of the fair value of U.S. and U.K Pension Plan and the Tennant Company Retirement Savings Plan assets are based on the framework established in the accounting guidance for fair value measurements. A brief description of the three levels can be found in Note 12. Equity Securities and Mutual Funds traded in active markets are classified as Level 1. Collective Investment Funds are measured at fair value using quoted market prices. They are classified as Level 2 as they trade in a non-active market for which asset prices are readily available. The Investment Account held by the U.K. Pension Plan invests in insurance contracts for purposes of funding the U.K. Pension Plan and is classified as Level 3. The fair value of the Investment Account is the cash surrender values as determined by the provider which are the amounts the plan would receive if the contracts were cashed out at year end. The underlying assets held by these contracts are primarily invested in assets traded in active markets.

A reconciliation of the beginning and ending balances of the Level 3 investments of our U.K. Pension Plan during the years ended are as follows:



	2017			2016
Fair value at beginning of year	$	9,562		$	10,691
Purchases, sales, issuances and settlements, net	(535		)	7
Net gain	1,190			674
Foreign currency	946			(1,810		)
Fair value at end of year	$	11,163		$	9,562

The primary objective of our U.S. and U.K. Pension Plans is to meet retirement income commitments to plan participants at a reasonable cost to us and to maintain a sound actuarially funded status. This objective is accomplished through growth of capital and safety of funds invested. The pension plans' assets are invested in securities to achieve growth of capital over inflation through appreciation and accumulation and reinvestment of dividend and interest income. Investments are diversified to control risk. The target allocation for the U.S. Pension Plan was 70% debt securities and 30% equity. Equity securities within the U.S. Pension Plan did not include any direct investments in Tennant Company Common Stock. The U.K. Pension Plan is invested in insurance contracts with underlying investments primarily in equity and fixed income securities. Our German Pension Plan is unfunded, which is customary in that country.

Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:



	U.S. Pension Benefits				Non-U.S. Pension Benefits				Postretirement Medical Benefits
	2017		2016		2017		2016		2017		2016
Discount rate	3.28	%	3.92	%	2.45	%	2.64	%	3.26	%	3.58	%
Rate of compensation increase	—	%	3.00	%	3.50	%	3.50	%	—		—

Weighted-average assumptions used to determine net periodic benefit costs as of December 31 are as follows:



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Postretirement Medical Benefits
	2017		2016		2015		2017		2016		2015		2017		2016		2015
Discount rate	3.92	%	4.08	%	3.76	%	2.64	%	3.59	%	3.38	%	3.58	%	3.70	%	3.39	%
Expected long-term rate of return on plan assets	5.10	%	5.20	%	5.20	%	3.90	%	4.60	%	4.40	%	—		—		—
Rate of compensation increase	—	%	3.00	%	3.00	%	3.50	%	3.50	%	3.50	%	—		—		—

The discount rate is used to discount future benefit obligations back to today’s dollars. Our discount rates were determined based on high-quality fixed income investments. The resulting discount rates are consistent with the duration of plan liabilities. The Citigroup Above Median Spot Rate is used in determining the discount rate for the U.S. Plans. The expected return on assets assumption on the investment portfolios for the pension plans is based on the long-term expected returns for the investment mix of assets currently in the portfolio. Management uses historic return trends of the asset portfolio combined with recent market conditions to estimate the future rate of return.

The accumulated benefit obligations as of December 31, for all defined benefit plans are as follows:



	2017		2016
U.S. Pension Plans	$	1,414	$	40,961
U.K. Pension Plan	11,131		10,265
German Pension Plan	1,013		871

Information for our plans with an accumulated benefit obligation in excess of plan assets as of December 31 is as follows:



	2017		2016
Accumulated benefit obligation	$	2,427	$	12,597
Fair value of plan assets	—		9,562

As of December 31, 2017, the U.S. Nonqualified and the German Pension Plans had an accumulated benefit obligation in excess of plan assets. As of December 31, 2016, the U.S. Nonqualified, the U.K. Pension and the German Pension Plans had an accumulated benefit obligation in excess of plan assets.

Information for our plans with a projected benefit obligation in excess of plan assets as of December 31 is as follows:



	2017		2016
Projected benefit obligation	$	2,427	$	12,794
Fair value of plan assets	—		9,562

As of December 31, 2017, the U.S. Nonqualified and the German Pension Plans had a projected benefit obligation in excess of plan assets. As of December 31, 2016, the U.S. Nonqualified, the UK Pension and the German Pension Plans had a projected benefit obligation in excess of plan assets.

Assumed healthcare cost trend rates as of December 31 are as follows:



	2017		2016
Healthcare cost trend rate assumption for the next year	6.56	%	6.56	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2032		2031

Assumed healthcare cost trend rates have a significant effect on the amounts reported for healthcare plans. To illustrate, a one-percentage-point change in assumed healthcare cost trends would have the following effects:



	1-Percentage- Point Decrease			1-Percentage- Point Increase
Effect on total of service and interest cost components	$	(31	)	$	35
Effect on postretirement benefit obligation	$	(724	)	$	820

Summaries related to changes in benefit obligations and plan assets and to the funded status of our defined benefit and postretirement medical benefit plans are as follows:



	U.S. Pension Benefits						Non-U.S. Pension Benefits						Postretirement Medical Benefits
	2017			2016			2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	40,961		$	41,774		$	11,136		$	10,883		$	10,540		$	11,144
Service cost	—			354			132			103			60			76
Interest cost	1,538			1,659			298			358			363			396
Plan participants' contributions	—			—			14			14			—			—
Actuarial loss (gain)	1,811			690			327			1,939			(524		)	6
Foreign exchange	—			—			1,097			(1,852		)	—			—
Benefits paid	(1,950		)	(3,516		)	(860		)	(309		)	(835		)	(1,082		)
Settlement	(40,946		)	—			—			—			—			—
Benefit obligation at end of year	$	1,414		$	40,961		$	12,144		$	11,136		$	9,604		$	10,540
Change in fair value of plan assets and net accrued liabilities:
Fair value of plan assets at beginning of year	$	46,389		$	47,201		$	9,562		$	10,691		$	—		$	—
Actual return on plan assets	2,536			2,457			1,189			673			—			—
Employer contributions	276			247			313			303			835			1,082
Plan participants' contributions	—			—			14			14			—			—
Excess assets transferred to Defined Contribution Plan	(6,305		)	—			—			—			—			—
Foreign exchange	—			—			945			(1,810		)	—			—
Benefits paid	(1,950		)	(3,516		)	(860		)	(309		)	(835		)	(1,082		)
Settlement	(40,946		)	—			—			—			—			—
Fair value of plan assets at end of year	—			46,389			11,163			9,562			—			—
Funded status at end of year	$	(1,414	)	$	5,428		$	(981	)	$	(1,574	)	$	(9,604	)	$	(10,540	)
Amounts recognized in the Consolidated Balance Sheets consist of:
Noncurrent Other Assets	$	—		$	7,087		$	—		$	—		$	—		$	—
Current Liabilities	(140		)	(239		)	(36		)	(30		)	(771		)	(828		)
Long-Term Liabilities	(1,274		)	(1,420		)	(945		)	(1,544		)	(8,833		)	(9,712		)
Net accrued asset (liability)	$	(1,414	)	$	5,428		$	(981	)	$	(1,574	)	$	(9,604	)	$	(10,540	)
Amounts recognized in Accumulated Other Comprehensive Loss consist of:
Net actuarial loss	(915		)	(5,720		)	(1,245		)	(1,802		)	(41		)	(566		)
Accumulated Other Comprehensive Loss	$	(915	)	$	(5,720	)	$	(1,245	)	$	(1,802	)	$	(41	)	$	(566	)

The components of the net periodic benefit (credit) cost for the three years ended December 31 were as follows:



	U.S. Pension Benefits									Non-U.S. Pension Benefits									Postretirement Medical Benefits
	2017			2016			2015			2017			2016			2015			2017		2016		2015
Service cost	$	—		$	354		$	480		$	132		$	103		$	153		$	60	$	76	$	96
Interest cost	1,538			1,659			1,711			298			358			396			363		396		393
Expected return on plan assets	(2,336		)	(2,400		)	(2,613		)	(379		)	(452		)	(433		)	—		—		—
Amortization of net actuarial loss	43			41			835			74			27			54			—		—		—
Amortization of prior service cost	—			41			42			—			—			—			—		—		—
Foreign currency	—			—			—			(1		)	97			(35		)	—		—		—
Net periodic benefit (credit) cost	(755		)	(305		)	455			124			133			135			423		472		489
Curtailment charge	—			—			25			—			—			—			—		—		—
Settlement charge	6,373			—			225			—			—			—			—		—		—
Net benefit cost (credit)	$	5,618		$	(305	)	$	705		$	124		$	133		$	135		$	423	$	472	$	489

The changes in Accumulated Other Comprehensive Loss for the three years ended December 31 were as follows:



	U.S. Pension Benefits									Non-U.S. Pension Benefits									Postretirement Medical Benefits
	2017			2016			2015			2017			2016			2015			2017			2016		2015
Net actuarial loss (gain)	$	1,611		$	633		$	195		$	(465	)	$	1,718		$	(1,517	)	$	(524	)	$	6	$	(1,618	)
Amortization of prior service cost	—			(41		)	(67		)	—			—			—			—			—		—
Amortization of net actuarial loss	(43		)	(41		)	(1,060		)	(74		)	(27		)	(54		)	—			—		—
Settlement Charge	(6,373		)	—			—			—			—			—			—			—		—
Total recognized in other comprehensive (income) loss	$	(4,805	)	$	551		$	(932	)	$	(539	)	$	1,691		$	(1,571	)	$	(524	)	$	6	$	(1,618	)
Total recognized in net benefit cost (credit) and other comprehensive (income) loss	$	813		$	246		$	(227	)	$	(415	)	$	1,824		$	(1,436	)	$	(101	)	$	478	$	(1,129	)

The following benefit payments, which reflect expected future service, are expected to be paid for our U.S. and Non-U.S. plans:



	U.S. Pension Benefits		Non-U.S. Pension Benefits		Postretirement Medical Benefits
2018	$	140	$	247	$	771
2019	133		254		803
2020	132		261		849
2021	124		269		751
2022	117		278		741
2023 to 2027	493		1,538		3,509
Total	$	1,139	$	2,847	$	7,424

The following amounts are included in Accumulated Other Comprehensive Loss as of December 31, 2017 and are expected to be recognized as components of net periodic benefit cost during 2018:



	Pension Benefits		Postretirement Medical Benefits
Net actuarial loss	$	78	$	—