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Pension and Other Retiree Benefits
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
Pension and Other Retiree Benefits

6. Pension and Other Retiree Benefits

 

We have a number of pension plans, principally in Germany, the U.K. and the U.S. The plans provide for payment of retirement benefits, primarily commencing between the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meeting certain qualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined based on an employee’s length of service and earnings. The majority of these plans have been frozen and are no longer accruing additional service benefits. Cash contributions to the plans are made as necessary to ensure legal funding requirements are satisfied.

 

In the Esselte acquisition, we acquired numerous pension plans, primarily in Germany (which is frozen to new participants) and the U.K. The Esselte U.K. plan is frozen and was merged into the legacy ACCO U.K. plan in 2019, which was frozen on September 30, 2012.

 

On January 20, 2009, the Company’s Board of Directors approved plan amendments to temporarily freeze our ACCO Brands Corporation Pension Plan for Salaried and Certain Hourly Paid Employees in the U.S. (the "U.S. Salaried Plan") effective March 7, 2009. During the fourth quarter of 2014, the U.S. Salaried Plan became permanently frozen and, as of December 31, 2014, we permanently froze a portion of our U.S. pension plan for certain bargained hourly employees. During the first quarter of 2021, the Company froze the pension benefit for the Sidney, New York bargained hourly employees under the ACCO Brands Corporation Pension Plan.

 

As of December 31, 2016, all of our Canadian pension plans were frozen. Effective July 1, 2022 the Company announced its plan to terminate the Canadian pension plans. We expect this to be finalized in 2024.

 

We also provide post-retirement health care and life insurance benefits to certain employees and retirees in the U.S., U.K. and Canada. All but one of these benefit plans is no longer open to new participants. Many employees and retirees outside of the U.S. are covered by government health care programs.

 

Our German Esselte Leitz Pension Plan had an unfunded liability of $103.0 million and $151.7 million for the years ended December 31, 2022, and 2021, respectively. As is customary, there are no plans to, and there is no requirement to, fund the German Pension Plan other than to meet the current liabilities.

 

The following table sets forth our defined benefit pension and post-retirement plans funded status and the amounts recognized in our Consolidated Balance Sheets:

 

 

 

Pension

 

Post-retirement

 

 

U.S.

 

International

 

 

(in millions)

 

2022

 

2021

 

2022

 

2021

 

2022

 

2021

Change in projected benefit obligation (PBO)

 

 

 

 

 

 

 

 

 

 

Projected benefit obligation at beginning of year

$

212.5

$

226.1

$

673.6

$

748.7

$

4.3

$

5.1

Service cost

 

—

 

0.5

 

1.0

 

1.5

 

—

 

—

Interest cost

 

4.9

 

4.5

 

9.6

 

6.3

 

0.1

 

0.1

Actuarial gain

 

(45.2)

 

(3.1)

 

(158.7)

 

(33.2)

 

(0.6)

 

(0.5)

Participants’ contributions

 

—

 

—

 

0.1

 

0.1

 

—

 

—

Benefits paid

 

(9.9)

 

(15.5)

 

(25.7)

 

(28.4)

 

(0.4)

 

(0.5)

Settlement

 

—

 

—

 

—

 

(0.3)

 

—

 

—

Termination benefits

 

—

 

—

 

0.8

 

—

 

—

 

—

Foreign exchange rate changes

 

—

 

—

 

(59.6)

 

(21.4)

 

(0.2)

 

0.1

Acquisitions

 

—

 

—

 

—

 

0.3

 

—

 

—

Projected benefit obligation at end of year

 

162.3

 

212.5

 

441.1

 

673.6

 

3.2

 

4.3

Change in plan assets

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

180.9

 

170.6

 

481.7

 

484.8

 

—

 

—

Actual return on plan assets

 

(33.3)

 

18.6

 

(117.2)

 

16.5

 

—

 

—

Employer contributions

 

2.5

 

7.2

 

13.4

 

15.0

 

0.4

 

0.5

Participants’ contributions

 

—

 

—

 

0.1

 

0.1

 

—

 

—

Benefits paid

 

(9.9)

 

(15.5)

 

(25.7)

 

(28.4)

 

(0.4)

 

(0.5)

Settlement

 

—

 

—

 

—

 

(0.3)

 

—

 

—

Foreign exchange rate changes

 

—

 

—

 

(45.9)

 

(6.0)

 

—

 

—

Fair value of plan assets at end of year

 

140.2

 

180.9

 

306.4

 

481.7

 

—

 

—

Funded status (Fair value of plan assets less PBO)

$

(22.1)

$

(31.6)

$

(134.7)

$

(191.9)

$

(3.2)

$

(4.3)

Amounts recognized in the Consolidated Balance Sheets consist of:

 

 

 

 

 

 

 

 

 

 

 

 

Other non-current assets

$

—

$

—

$

2.8

$

2.0

$

—

$

—

Other current liabilities

 

—

 

—

 

6.9

 

7.1

 

0.4

 

0.4

Pension and post-retirement benefit obligations

 

22.1

 

31.6

 

130.6

 

186.8

 

2.8

 

3.9

Components of accumulated other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrecognized actuarial loss (gain)

 

91.3

 

96.1

 

120.6

 

166.5

 

(4.2)

 

(4.3)

Unrecognized prior service cost (credit)

 

—

 

—

 

5.2

 

6.1

 

—

 

(0.1)

 

Pension and post-retirement benefit obligations of $155.5 million as of December 31, 2022, decreased from $222.3 million as of December 31, 2021, primarily due to the higher discount rate assumptions compared to the prior year, partly offset by investment losses in 2022. These factors were the primary reasons for the actuarial gains recognized in 2022.

 

The accumulated benefit obligation for all pension plans was $598.1 million and $870.7 million at December 31, 2022 and 2021, respectively.

 

The following table sets out information for pension plans with an accumulated benefit obligation in excess of plan assets:

 

 

 

U.S.

 

International

(in millions)

 

2022

 

2021

 

2022

 

2021

Accumulated benefit obligation

$

162.3

$

212.5

$

406.1

$

616.7

Fair value of plan assets

 

140.2

 

180.9

 

273.7

 

437.8

 

 

The following table sets out information for pension plans with a projected benefit obligation in excess of plan assets:

 

 

 

U.S.

 

International

(in millions)

 

2022

 

2021

 

2022

 

2021

Projected benefit obligation

$

162.3

$

212.5

$

411.3

$

631.7

Fair value of plan assets

 

140.2

 

180.9

 

273.7

 

437.8

 

The components of net periodic benefit (income) expense for pension and post-retirement plans for the years ended December 31, 2022, 2021, and 2020, were as follows:

 

 

 

Year Ended December 31,

 

 

 

 

Pension

 

Post-retirement

 

 

U.S.

 

International

 

 

 

 

 

 

(in millions)

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

Service cost

$

—

$

0.5

$

1.6

$

1.0

$

1.5

$

1.5

$

—

$

—

$

—

Interest cost

 

4.9

 

4.5

 

5.9

 

9.6

 

6.3

 

9.7

 

0.1

 

0.1

 

0.1

Expected return on plan assets

 

(10.9)

 

(11.4)

 

(11.4)

 

(17.5)

 

(19.3)

 

(18.6)

 

—

 

—

 

—

Amortization of net loss (gain)

 

3.7

 

3.6

 

3.2

 

5.0

 

7.1

 

4.9

 

(0.5)

 

(0.5)

 

(0.5)

Amortization of prior service cost

 

—

 

0.1

 

0.4

 

0.3

 

0.3

 

0.3

 

—

 

—

 

—

Special termination benefit(1)

 

—

 

—

 

—

 

0.8

 

—

 

—

 

—

 

—

 

—

Curtailment loss(2)

 

—

 

1.4

 

—

 

—

 

—

 

—

 

—

 

—

 

—

Settlement loss

 

—

 

—

 

—

 

—

 

—

 

0.4

 

—

 

—

 

—

Net periodic benefit (income) cost (3)

$

(2.3)

$

(1.3)

$

(0.3)

$

(0.8)

$

(4.1)

$

(1.8)

$

(0.4)

$

(0.4)

$

(0.4)
(1)
Special termination benefit of $0.8 million due to the plan wind up of the ACCO Brands Canada Salaried and Hourly plans effective July 1, 2022. The plan wind up is considered an irrevocable event that triggers special accounting, specifically a one-time special termination benefit. The plan wind up is expected to be completed in 2024.
(2)
Curtailment loss of $1.4 million due to the pension benefit freeze for the Sidney group under the ACCO Brands Corporation Pension Plan.
(3)
The components of net periodic benefit (income) cost, other than service cost, are included in the line "Non-operating pension income" in the Consolidated Statements of Income.

 

Other changes in plan assets and benefit obligations that were recognized in accumulated other comprehensive income (loss) during the years ended December 31, 2022, 2021, and 2020 were as follows:

 

 

 

Pension

 

Post-retirement

 

 

U.S.

 

International

 

 

 

 

 

 

(in millions)

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

Current year actuarial (gain) loss

$

(1.0)

$

(10.3)

$

10.6

$

(23.9)

$

(30.5)

$

36.5

$

(0.6)

$

(0.5)

$

—

Amortization of actuarial (loss) gain

 

(3.7)

 

(3.6)

 

(3.2)

 

(5.1)

 

(7.1)

 

(5.3)

 

0.5

 

0.5

 

0.5

Amortization of prior service cost

 

—

 

(1.5)

 

(0.4)

 

(0.3)

 

(0.3)

 

(0.3)

 

—

 

—

 

—

Foreign exchange rate changes

 

—

 

—

 

—

 

(21.5)

 

(4.1)

 

8.5

 

0.2

 

—

 

—

Total recognized in other comprehensive income (loss)

 

(4.7)

 

(15.4)

 

7.0

 

(50.8)

 

(42.0)

 

39.4

 

0.1

 

—

 

0.5

Total recognized in net periodic benefit cost (income) and other comprehensive income (loss)

$

(7.0)

$

(16.7)

$

6.7

$

(51.6)

$

(46.1)

$

37.6

$

(0.3)

$

(0.4)

$

0.1

 

 

Assumptions

 

The weighted average assumptions used to determine benefit obligations for the years ended December 31, 2022, 2021, and 2020 were as follows:

 

 

 

Pension

 

Post-retirement

 

 

U.S.

 

International

 

 

 

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

Discount rate

 

5.1 %

 

2.9 %

 

2.6 %

 

4.5 %

 

1.8 %

 

1.2 %

 

3.8 %

 

2.4 %

 

1.9 %

Rate of compensation increase

 

N/A

 

N/A

 

N/A

 

3.0 %

 

3.0 %

 

2.9 %

 

N/A

 

N/A

 

N/A

 

 

The weighted average assumptions used to determine net periodic benefit (income) expense for the years ended December 31, 2022, 2021, and 2020 were as follows:

 

 

 

Pension

 

Post-retirement

 

 

U.S.

 

International

 

 

 

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

Discount rate

 

2.9 %

 

3.1 %

 

3.2 %

 

1.8 %

 

1.0 %

 

1.6 %

 

2.4 %

 

2.2 %

 

2.7 %

Expected long-term rate of return

 

6.5 %

 

6.8 %

 

7.0 %

 

4.0 %

 

4.0 %

 

4.2 %

 

N/A

 

N/A

 

N/A

Rate of compensation increase

 

N/A

 

N/A

 

N/A

 

3.0 %

 

2.7 %

 

2.9 %

 

N/A

 

N/A

 

N/A

 

The weighted average health care cost trend rates used to determine post-retirement benefit obligations and net periodic benefit (income) expense as of December 31, 2022, 2021, and 2020 were as follows:

 

 

 

Post-retirement

 

 

2022

 

2021

 

2020

Health care cost trend rate assumed for next year

 

6 %

 

6 %

 

6 %

Rate that the cost trend rate is assumed to decline (the ultimate trend rate)

 

5 %

 

5 %

 

4 %

Year that the rate reaches the ultimate trend rate

 

2030

 

2030

 

2028

 

Plan Assets

 

The investment strategy for the Company is to optimize investment returns through a diversified portfolio of investments, taking into consideration underlying plan liabilities and asset volatility. Each plan has a different target asset allocation, which is reviewed periodically and is based on the underlying liability structure. The target asset allocation for our U.S. plan is 35 percent in equity securities, 58 percent in fixed income securities and 7 percent in alternative assets. The target asset allocation for non-U.S. plans is set by the local plan trustees.

 

Our pension plan weighted average asset allocations as of December 31, 2022 and 2021 were as follows:

 

 

2022

2021

 

U.S.

International

U.S.

International

Asset category

 

 

 

 

Equity securities

35 %

9 %

63 %

15 %

Fixed income

58 %

56 %

28 %

59 %

Real estate

4 %

3 %

5 %

4 %

Other(4)

3 %

32 %

4 %

22 %

Total

100 %

100 %

100 %

100 %

 

(4)
Multi-strategy hedge funds, commodity linked funds, private equity funds, and cash and cash equivalents for certain of our plans.

 

U.S. Pension Plan Assets

 

The fair value measurements of our U.S. pension plan assets by asset category as of December 31, 2022 were as follows:

 

(in millions)

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

Significant Other Observable Inputs (Level 2)

 

Significant Unobservable Inputs (Level 3)

 

Fair Value as of December 31, 2022

Mutual funds

$

105.3

$

—

$

—

$

105.3

Exchange traded funds

 

33.8

 

—

 

—

 

33.8

Common collective trust funds

 

—

 

1.1

 

—

 

1.1

Total

$

139.1

$

1.1

$

—

$

140.2

 

The fair value measurements of our U.S. pension plan assets by asset category as of December 31, 2021 were as follows:

 

(in millions)

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

Significant Other Observable Inputs (Level 2)

 

Significant Unobservable Inputs (Level 3)

 

Fair Value as of December 31, 2021

Mutual funds

$

104.9

$

—

$

—

$

104.9

Exchange traded funds

 

75.1

 

—

 

—

 

75.1

Common collective trust funds

 

—

 

0.9

 

—

 

0.9

Total

$

180.0

$

0.9

$

—

$

180.9

 

Mutual funds and exchange traded funds: The fair values of mutual fund and common stock fund investments are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs).

 

Common collective trusts: The fair values of participation units held in common collective trusts are based on their net asset values, as reported by the managers of the common collective trusts and as supported by the unit prices of actual purchase and sale transactions occurring as of or close to the financial statement date (level 2 inputs).

 

 

International Pension Plans Assets

 

The fair value measurements of our international pension plans assets by asset category as of December 31, 2022 were as follows:

 

(in millions)

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

Significant Other Observable Inputs (Level 2)

 

Significant Unobservable Inputs (Level 3)

 

Fair Value as of December 31, 2022

Cash and cash equivalents

$

16.6

$

—

$

—

$

16.6

Equity securities

 

25.2

 

—

 

—

 

25.2

Corporate debt securities

 

—

 

61.0

 

—

 

61.0

Multi-strategy hedge funds

 

—

 

32.1

 

—

 

32.1

Insurance contracts

 

—

 

3.8

 

—

 

3.8

Real estate

 

—

 

2.2

 

—

 

2.2

Government debt securities

 

—

 

109.1

 

—

 

109.1

Investments measured at net asset value(5)

 

 

 

 

 

 

 

 

Multi-strategy hedge funds

 

 

 

 

 

 

 

30.2

Real estate

 

 

 

 

 

 

 

6.0

Private equity

 

 

 

 

 

 

 

20.2

Total

$

41.8

$

208.2

$

—

$

306.4

 

(5)
Certain investments that are measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in these tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the table that presents our defined benefit pension and post-retirement plans funded status.

 

The fair value measurements of our international pension plans assets by asset category as of December 31, 2021 were as follows:

 

(in millions)

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

Significant Other Observable Inputs (Level 2)

 

Significant Unobservable Inputs (Level 3)

 

Fair Value as of December 31, 2021

Cash and cash equivalents

$

10.2

$

—

$

—

$

10.2

Equity securities

 

71.1

 

—

 

—

 

71.1

Exchange traded funds

 

0.1

 

—

 

—

 

0.1

Corporate debt securities

 

—

 

99.6

 

—

 

99.6

Multi-strategy hedge funds

 

—

 

39.0

 

—

 

39.0

Insurance contracts

 

—

 

3.8

 

—

 

3.8

Real estate

 

—

 

6.7

 

—

 

6.7

Government debt securities

 

—

 

186.2

 

—

 

186.2

Investments measured at net asset value(5)

 

 

 

 

 

 

 

 

Multi-strategy hedge funds

 

 

 

 

 

 

 

46.1

Real estate

 

 

 

 

 

 

 

11.3

Private equity

 

 

 

 

 

 

 

7.6

Total

$

81.4

$

335.3

$

—

$

481.7

 

Equity securities and exchange traded funds: The fair values of equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs).

 

Debt securities: Fixed income securities, such as corporate and government bonds and other debt securities, consist of index-linked securities. These debt securities are valued using quotes from independent pricing vendors based on recent trading

activity and other relevant information, including market interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).

 

Insurance contracts: Valued at contributions made, plus earnings, less participant withdrawals and administrative expenses, which approximate fair value (level 2 inputs).

 

Multi-strategy hedge funds: The fair values of participation units held in multi-strategy hedge funds are based on their net asset values, as reported by the managers of the funds and are based on the daily closing prices of the underlying investments (level 2 inputs).

 

Real estate: Real estate consists of managed real estate investment trust securities (level 2 inputs).

 

Cash Contributions

 

We contributed $16.3 million to our pension and post-retirement plans in 2022 and expect to contribute approximately $16.6 million in 2023.

 

The following table presents estimated future benefit payments to participants for the next ten fiscal years:

 

(in millions)

 

Pension Benefits

 

Post-retirement Benefits

2023

$

38.7

$

0.4

2024

 

37.6

 

0.4

2025

 

38.7

 

0.4

2026

 

38.9

 

0.3

2027

 

39.1

 

0.3

Years 2028 - 2032

 

205.0

 

1.3

 

We also sponsor a number of defined contribution plans. Contributions are determined under various formulas. Costs related to such plans amounted to $13.2 million, $12.7 million and $6.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.

 

Multi-Employer Pension Plan

 

We are a participant in a multi-employer pension plan. The plan has reported significant underfunded liabilities and declared itself in critical and declining status (red). As a result, the trustees of the plan adopted a rehabilitation plan ("RP") in an effort to forestall insolvency. Our required contributions to this plan could increase due to the shrinking contribution base resulting from the insolvency of or withdrawal of other participating employers, from the inability or the failure of withdrawing participating employers to pay their withdrawal liability, from lower than expected returns on pension fund assets, and from other funding deficiencies. In the event that we withdraw from participation in the plan, we will be required to make withdrawal liability payments for a period of 20 years or longer in certain circumstances. The present value of our withdrawal liability payments would be recorded as an expense in our Consolidated Statements of Income and as a liability on our Consolidated Balance Sheets in the first year of our withdrawal. The most recent Pension Protection Act ("PPA") zone status available in 2022 and 2021 is for the plan’s years ended December 31, 2021, and 2020, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Plans in the red zone (critical or critical and declining) are generally less than 65 percent funded, plans in the yellow zone (endangered) are less than 80 percent funded, and plans in the green zone (safe) are at least 80 percent funded.

 

The Company's contributions are not more than 5 percent of the total contributions to the plan. Details regarding the plan are outlined in the table below.

 

 

 

 

 

Pension Protection Act Zone Status

 

 

 

Contributions Year Ended December 31,

 

 

 


 

Pension Fund

 

EIN/Pension Plan Number

 

2022

 

2021

 

FIP/RP Status Pending/Implemented

 

2022

 

2021

 

2020

 

Surcharge Imposed

 

Expiration Date of Collective-Bargaining Agreement

PACE Industry Union-Management Pension Fund

 

11-6166763 / 001

 

Red

 

Red

 

Implemented

$

0.1

$

0.1

$

0.1

 

Yes

 

6/30/2023