Annual report pursuant to Section 13 and 15(d)

Benefit Plans

v3.20.4
Benefit Plans
 12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
Benefit Plans
21. Benefit Plans:
The Company sponsors defined benefit pension plans covering employees in the United States and certain employees at its foreign subsidiaries. Benefits for a majority of the plans are based on average final pay and years of service. The Company’s funding policy is to fund the minimum required contribution under local statutory requirements.
The Company sponsors unfunded plans to provide certain health care benefits to retired employees in the United States and Canada. The plans pay a stated percentage of medical expenses reduced by deductibles and other coverage. The plans are unfunded and obligations are paid out of the Company’s operations.
The Company also has defined benefit supplementary retirement plans which provide benefits for certain U.S. employees in excess of qualified plan limitations. The obligations are paid out of the Company’s general assets, including assets held in a Rabbi trust, or restoration plan assets.
The Company uses a December 31 measurement date for all of its defined benefit pension, postretirement medical and supplementary retirement plans. The following discussion includes information for the Eco Services benefit plans for all periods presented, and the acquired PQ Holdings benefit plans beginning on the date of a former business combination.
The Eco Services benefit plans include two defined benefit pension plans and one retiree health plan, all based in the U.S. The PQ Holdings benefit plans include a U.S. defined benefit pension plan as well as the defined benefit pension plans for all of the Company’s foreign subsidiaries, two retiree health plans (one each in the U.S and Canada), and the Company’s defined benefit supplementary retirement plans.
Of the Company’s three defined benefit pension plans covering employees in the U.S., only the Eco Services Hourly Pension Plan continues to accrue benefits for certain participants; however, this plan will be frozen to future accruals as of December 31, 2020. All future accruals were frozen for the PQ Corporation Retirement Plan as of December 31, 2006 and for the Eco Services Pension Equity Plan as of December 31, 2016. With respect to the Company’s three retiree health plans, the PQ Holdings plans in the U.S. and Canada were closed to new retirees as of December 31, 2006. The Eco Services Postretirement Life and Dental Plan was closed to new retirees effective July 1, 2017. The Company’s defined benefit supplementary retirement plans were frozen to future accruals as of December 31, 2006.
Defined Benefit Pension Plans
The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s significant defined benefit pension plans as well as the components of net periodic benefit cost, including key assumptions:
U.S. Foreign
December 31, December 31,
2020 2019 2020 2019
Change in benefit obligation:
Benefit obligation at beginning of period $ 267,392  $ 246,311  $ 101,192  $ 84,435 
Service cost 769  978  3,895  3,210 
Interest cost 8,595  10,281  2,193  2,627 
Participant contributions —  —  574  550 
Plan curtailments —  (2,795) (1,603) — 
Plan settlements (1,455) (1,669) (105) (102)
Benefits paid (12,713) (10,862) (1,759) (1,833)
Expenses paid —  —  (353) (328)
Actuarial (gains) losses 25,894  25,148  4,664  13,459 
Translation adjustment —  —  6,191  (826)
Benefit obligation at end of the period $ 288,482  $ 267,392  $ 114,889  $ 101,192 
Change in plan assets:
Fair value of plan assets at beginning of period $ 231,413  $ 195,755  $ 85,308  $ 74,050 
Actual return on plan assets 41,405  43,116  6,646  10,564 
Employer contributions 5,187  5,073  3,348  3,084 
Employee contributions —  —  574  550 
Plan settlements (1,455) (1,669) (105) (102)
Benefits paid (12,713) (10,862) (1,759) (1,833)
Expenses paid —  —  (353) (328)
Translation adjustment —  —  5,209  (677)
Fair value of plan assets at end of the period $ 263,837  $ 231,413  $ 98,868  $ 85,308 
Funded status of the plans (underfunded) $ (24,645) $ (35,979) $ (16,021) $ (15,884)
The total actuarial losses for the year ended December 31, 2020 across the Company’s U.S. plans was $25,894, which was driven by declines in the discount rates of $26,642 and declines in general demographic experience of $1,261, which was offset by favorable changes in mortality assumptions of $2,009. The total actuarial losses for the year ended December 31, 2020 across the Company’s foreign plans was $4,664, which was driven by declines in the discount rates of $5,981 and declines in general demographic experience of $56 and favorable changes in mortality assumptions of $1,372.
The total actuarial losses for the year ended December 31, 2019 across the Company’s U.S. was $25,148, which was driven by declines in the discount rates of $26,604 and declines in general demographic experience of $2,953, which was offset by favorable changes in mortality assumptions of $4,409. The total actuarial losses for the year ended December 31, 2019 across the Company’s foreign plans was $13,459, which was driven by declines in the discount rates of $13,837, which was offset by favorable changes in general demographic experience of $312 and favorable changes in mortality assumptions of $66.
Amounts recognized in the consolidated balance sheets consist of:
U.S. Foreign
December 31, December 31,
2020 2019 2020 2019
Current liability —  —  (46) (6)
Noncurrent liability (24,645) (35,979) (15,975) (15,878)
Accumulated other comprehensive income (loss) (4,463) 8,687  1,075  (4,988)
Net amount recognized $ (29,108) $ (27,292) $ (14,946) $ (20,872)
Amounts recognized in accumulated other comprehensive income (loss) consist of:
U.S. Foreign
December 31, December 31,
2020 2019 2020 2019
Net gain (loss) 13,964  10,922  (6,550) (7,634)
Gross amount recognized 13,964  10,922  (6,550) (7,634)
Deferred income taxes (18,427) (2,235) 7,625  2,646 
Net amount recognized $ (4,463) $ 8,687  $ 1,075  $ (4,988)
Components of net periodic benefit cost consist of:
U.S. Foreign
Years ended
December 31,		 Years ended
December 31,
2020 2019 2018 2020 2019 2018
Service cost $ 769  $ 978  $ 1,019  $ 3,895  $ 3,210  $ 3,104 
Interest cost 8,595  10,281  9,599  2,193  2,627  2,637 
Expected return on plan assets (12,547) (11,508) (12,851) (2,270) (2,427) (2,490)
Amortization of prior service cost
 —  —  —  —  24  — 
Amortization of net (gain) loss —  —  —  148  (29) 49 
Curtailment gain recognized —  —  (576) —  —  — 
Settlement (gain) loss recognized 78  49  —  (14) (1) — 
Net periodic expense (benefit) $ (3,105) $ (200) $ (2,809) $ 3,952  $ 3,404  $ 3,300 
All components of net periodic benefit cost other than service cost are presented within other expense (income), net in the Company’s consolidated statements of income.
The net amount of projected benefit obligation and plan assets for all underfunded and unfunded plans was $53,081 and $63,514 as of December 31, 2020 and 2019, respectively, and was classified as noncurrent liabilities. The total accumulated benefit obligation as of December 31, 2020 and 2019 for the Company’s U.S. pension plans was $288,482 and $266,992, respectively. The total accumulated benefit obligation as of December 31, 2020 and 2019 for the Company’s foreign pension plans was $110,605 and $96,891, respectively.
The following table presents selected information about the Company’s pension plans with accumulated benefit obligations in excess of plan assets:
U.S. Foreign
December 31, December 31,
2020 2019 2020 2019
Projected benefit obligation $ 288,482  $ 267,392  $ 92,679  82,662 
Accumulated benefit obligation 288,482  266,992  88,394  80,021 
Fair value of plan assets 263,837  231,413  76,658  68,104 
The following table presents selected information about the Company’s pension plans with projected benefit obligations in excess of plan assets:
U.S. Foreign
December 31, December 31,
2020 2019 2020 2019
Projected benefit obligation $ 288,482  $ 267,392  $ 92,679  101,192 
Fair value of plan assets 263,837  231,413  76,658  85,308 
Significant weighted average assumptions used in determining the pension obligations include the following:
U.S. Foreign
December 31, December 31,
2020 2019 2020 2019
Discount rate 2.42  % 3.32  % 1.78  % 2.34  %
Rate of compensation increase(1)
N/A 3.00  % 2.05  % 2.07  %
Significant weighted average assumptions used in determining net periodic benefit cost include the following:
U.S. Foreign
Years ended
December 31,		 Years ended
December 31,
2020 2019 2018 2020 2019 2018
Discount rate 3.32  % 4.32  % 3.74  % 2.34  % 3.19  % 3.11  %
Rate of compensation increase(1)
3.00  % 3.00  % 3.00  % 2.07  % 2.08  % 2.22  %
Expected return on assets 5.55  % 6.00  % 6.00  % 2.82  % 3.30  % 3.37  %

(1)    Includes only plans not frozen to benefit accruals for the respective periods.
The discount rate for each of the U.S. plans was determined by utilizing a yield curve model. The model develops a spot rate curve based on the yields available from a broad-based universe of high quality corporate bonds. The discount rate is then set as the weighted average spot rate, using the respective plan’s expected benefit cash flows as the weights.
The investment objective for the U.S. plans is to generate returns sufficient to meet future obligations. The strategy to meet the objective includes generating attractive returns using higher returning assets such as equity securities and balancing risk using less volatile assets such as fixed income securities. The U.S. plans invest in an allocation of assets across the two broadly-defined financial asset categories of equity and fixed income securities. The target allocations for the plan assets across the three U.S. plans are as follows: 45% equity securities and 55% fixed income investments for the PQ Corporation Retirement Plan; 40% equity securities and 60% fixed income investments for the Eco Services Pension Equity Plan; and 60% equity securities and 40% fixed income investments for the Eco Services Hourly Pension Plan.
Similar considerations are applied to the investment objectives of the non-U.S. plans as well as the asset classes available in each location and any legal restrictions on plan investments.
The Company classifies plan assets based upon a fair value hierarchy (see Note 6 to these consolidated financial statements for further information). The classification of each asset within the hierarchy is based on the lowest level input that is significant to its measurement. The fair value hierarchy consists of three levels as follows:
•Level 1—Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets. Level 1 assets primarily include investments in publicly traded equity securities and mutual funds. These securities (or the underlying investments of the funds) are actively traded and valued using quoted prices for identical securities from the market exchanges.
•Level 2—Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves. Level 2 assets primarily consist of fixed-income securities and commingled funds that are not actively traded or whose underlying investments are valued using observable marketplace inputs. The fair value of plan assets invested in fixed-income securities is generally determined using valuation models that use observable inputs such as interest rates, bond yields, low-volume market quotes and quoted prices for similar assets. Plan assets that are invested in commingled funds are valued using a unit price or net asset value (“NAV”) that is based on the underlying investments of the fund.
•Level 3—Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date. Level 3 assets include investments covered by insurance contracts and real estate funds valued using significant unobservable inputs.
The following tables set forth by level, within the fair value hierarchy, plan assets at fair value:
December 31, 2020
Total Level 1 Level 2 Level 3
Cash and cash equivalents $ 787  $ 787  $ —  $ — 
Equity securities:
U.S. investment funds 79,777  79,777  —  — 
International investment funds 64,986  53,792  11,194  — 
Fixed income securities:
Government securities 39,541  33,505  6,036  — 
Corporate bonds 16,771  16,668  103  — 
Investment fund bonds 112,024  —  112,024  — 
Other:
Insurance contracts 48,819  —  42,983  5,836 
Total $ 362,705  $ 184,529  $ 172,340  $ 5,836 
December 31, 2019
Total Level 1 Level 2 Level 3
Cash and cash equivalents $ 950  $ 950  $ —  $ — 
Equity securities:
U.S. investment funds 67,374  67,374  —  — 
International investment funds 54,908  44,905  10,003  — 
Fixed income securities:
Government securities 31,040  23,500  7,540  — 
Corporate bonds 14,900  14,782  118  — 
Investment fund bonds 106,198  1,170  105,028  — 
Other:
Insurance contracts 41,351  —  36,637  4,714 
Total $ 316,721  $ 152,681  $ 159,326  $ 4,714 
The changes in the Level 3 pension plan assets are as follows for the years ended December 31:
Insurance Contracts
2020 2019
Beginning balance $ 4,714  $ 4,322 
Actual return on plan assets 113  111 
Benefits paid (78) (69)
Contributions 577  441 
Exchange rate changes and other 510  (91)
Ending balance $ 5,836  $ 4,714 
The Company expects to contribute $446 to the U.S. pension plans and $3,559 to the foreign pension plans in 2021.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year U.S. Foreign
2021 $ 17,138  $ 2,204 
2022 16,200  2,384 
2023 16,278  2,610 
2024 16,254  2,898 
2025 15,968  3,144 
Years 2026-2030 78,910  19,027 
Certain of the Company’s foreign subsidiaries maintain other defined benefit plans that are consistent with statutory practices. These plans are not included in the disclosures above as they are not significant to the Company’s consolidated financial statements.
Supplemental Retirement Plans
The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s defined benefit supplementary retirement plans, as well as the components of net periodic benefit cost, including key assumptions:
December 31,
2020 2019
Change in benefit obligation:
Benefit obligation at beginning of period $ 11,652  $ 11,868 
Interest cost 352  465 
Benefits paid (1,001) (1,045)
Actuarial (gains) losses 1,412  364 
Benefit obligation at end of period $ 12,415  $ 11,652 
Change in plan assets:
Fair value of plan assets at beginning of period $ —  $ — 
Employer contributions 1,001  1,045 
Benefits paid (1,001) (1,045)
Fair value of plan assets at end of period $ —  $ — 
Funded status of the plans (underfunded) $ (12,415) $ (11,652)
The total actuarial losses for the year ended December 31, 2020 across the Company’s supplemental retirement plans was $1,412, which was driven by declines in the discount rates of $871, declines in general demographic experience of $234 and declines in mortality assumptions of $307.
The total actuarial losses for the year ended December 31, 2019 across the Company’s supplemental retirement plans was $364, which was driven by declines in the discount rates of $971, which was offset by favorable changes in general demographic experience of $281 and favorable changes in mortality assumptions of $326.
Amounts recognized in the consolidated balance sheets consist of:
December 31,
2020 2019
Current liability $ (1,039) $ (1,019)
Noncurrent liability (11,376) (10,633)
Accumulated other comprehensive income 633  253 
Net amount recognized $ (11,782) $ (11,399)
Amounts recognized in accumulated other comprehensive income consist of:
December 31,
2020 2019
Net gain $ (731) $ 681 
Gross amount recognized (731) 681 
Deferred income taxes 1,364  (428)
Net amount recognized $ 633  $ 253 
Components of net periodic benefit cost consist of:
Years ended
December 31,
2020 2019 2018
Interest cost $ 352  $ 465  $ 450 
Amortization of net (gain) loss —  (10) — 
Net periodic expense $ 352  $ 455  $ 450 
Interest cost is presented within other expense (income), net in the Company’s consolidated statements of income.
The accumulated benefit obligation of the Company’s defined benefit supplemental retirement plans as of December 31, 2020 and 2019 was $12,415 and $11,652, respectively. The discount rate used in determining the defined benefit supplemental retirement plan obligation was 2.20% and 3.10% as of December 31, 2020 and 2019, respectively. The discount rate used in determining net periodic benefit cost was 3.10%, 4.20% and 3.60% for the years ended December 31, 2020, 2019 and 2018, respectively. There was no rate of compensation increase for any of the periods presented, as all future accruals were frozen for the defined benefit supplementary retirement plans as of December 31, 2006. There was no rate of interest crediting rate, as there are no cash balance accounts associated with these plans.
The Company expects to contribute $1,039 to the defined benefit supplementary retirement plans in 2021.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year Amount
2021 $ 1,039 
2022 1,010 
2023 977 
2024 944 
2025 908 
Years 2025-2029 3,944 

Other Postretirement Benefit Plans
The following tables summarize changes in the benefit obligation, plan assets and funded status of the Company’s other postretirement benefit plans as well as the components of net periodic benefit cost, including key assumptions:
December 31,
2020 2019
Change in benefit obligation:
Benefit obligation at beginning of period $ 3,452  $ 3,814 
Service cost —  10 
Interest cost 99  152 
Employee contributions 241  253 
Plan amendments —  (460)
Benefits paid (658) (751)
Premiums paid (7) (7)
Actuarial (gains) losses 225  412 
Translation adjustment 15  29 
Benefit obligation at end of period $ 3,367  $ 3,452 
Change in plan assets:
Fair value of plan assets at beginning of period —  — 
Employer contributions 424  505 
Employee contributions 241  253 
Benefits paid (658) (751)
Premiums paid (7) (7)
Fair value of plan assets at end of period $ —  $ — 
Funded status of the plans (underfunded) $ (3,367) $ (3,452)
The total actuarial losses for the year ended December 31, 2020 across the Company’s U.S. plans was $225, which was driven by declines in the discount rates of $235, and offset by favorable declines in general demographic experience of $1, which was offset by favorable changes in mortality assumptions of $8.
The total actuarial losses for the year ended December 31, 2019 across the Company’s U.S. plans was $412, which was driven by declines in the discount rates of $334 and declines in general demographic experience of $172, which was offset by favorable changes in mortality assumptions of $94.
Amounts recognized in the consolidated balance sheets consist of:
December 31,
2020 2019
Current liability $ (443) $ (537)
Noncurrent liability (2,924) (2,915)
Accumulated other comprehensive income 680  524 
Net amount recognized $ (2,687) $ (2,928)
Amounts recognized in accumulated other comprehensive income consist of:
December 31,
2020 2019
Prior service credit $ 596  $ 828 
Net gain (182) 67 
Gross amount recognized 414  895 
Deferred income taxes 266  (371)
Net amount recognized $ 680  $ 524 
Components of net periodic benefit cost consist of:
Years ended
December 31,
2020 2019 2018
Service cost $ —  $ 10  $ 16 
Interest cost 99  152  150 
Amortization of prior service credit (232) (157) (112)
Amortization of net gain (29) (33) (26)
Net periodic expense (benefit) $ (162) $ (28) $ 28 
All components of net periodic benefit cost other than service cost are presented within other expense (income), net in the Company’s consolidated statements of income.
The discount rate used in determining the other postretirement benefit plan obligation was 2.18% and 3.06% as of December 31, 2020 and 2019, respectively. The discount rate used in determining net periodic benefit cost was 3.06%, 4.09% and 3.53% for the years ended December 31, 2020, 2019 and 2018, respectively. There was no rate of interest crediting rate, as there are no cash balance accounts associated with these plans.
Assumed health care cost trend rates were as follows:
December 31,
2020 2019
Immediate trend rate 5.67% 5.91%
Ultimate trend rate 4.38% 4.39%
Year that the rate reaches ultimate trend rate 2038 2038
The Company expects to contribute $443 to the retiree health plans in 2021.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year Amount
2021 $ 443 
2022 372 
2023 297 
2024 281 
2025 163 
Years 2025-2029 816 
There are no expected Medicare subsidy receipts expected in future periods.
Certain of the Company’s foreign subsidiaries maintain other postretirement benefit plans that are consistent with statutory practices. These plans are not included in the disclosures above as they are not significant to the Company’s consolidated financial statements.
Defined Contribution Plans
The Company also has defined contribution plans covering domestic employees of the Company and certain subsidiaries. The Company recorded expenses of $11,490, $11,366 and $11,253 related to these plans for the years ended December 31, 2020, 2019 and 2018, respectively.