Page 83 - 2019 Annual Report

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Management’s selection of the rate of increase in future compensation levels is generally based on the Company’s historical
salary increases, including cost of living adjustments and merit and promotion increases, considering any known future
trends. A higher rate of increase results in higher pension expense. The assumed long-term rate of increase is 4.5%.

Management’s selection of the expected long-term rate of return on pension fund assets is based on a building-block
approach, whereby the components are weighted based on the allocation of pension plan assets. Given that these returns
are long term, there are generally not significant fluctuations in the expected rate of return from year to year. Based on the
currently projected returns on these assets and related expenses, the Company selected an expected return on assets of
6.75%, the same as the prior-year rate. The following table presents the expected return on pension assets as compared with
the actual return on pension assets:

(in millions) Expected Return on Pension Assets Actual Return on Pension Assets
2019 $47.9 $131.3
2018 $46.0 $(40.8)

The difference between the expected return and the actual return on pension assets is not immediately recognized in the
consolidated statements of earnings. Rather, pension accounting rules require the difference to be included in actuarial gains
and losses, which are amortized into annual pension expense as previously described.
At December 31, 2019, the Company estimates the remaining lives of participants in the pension plans using the Society of
Actuaries’ Pri-2012 Base Mortality Table. The no-collar table was used for salaried participants and the blue-collar table was
used for hourly participants, both reflecting the experience of the Company’s participants. The Company selected the MP-
2018 scale for mortality improvement.

Assumptions are selected on December 31 to calculate the succeeding year’s expense. For the 2019 pension expense,
assumptions selected at December 31, 2018 were as follows:

Discount rate 4.38%
Rate of increase in future compensation levels 4.50%
Expected long-term rate of return on assets 6.75%
Average remaining service period for participants 10 years
Mortality Tables:
Base Table RP-2014
Mortality Improvement Scale MP-2018

Using these assumptions, 2019 pension expense was $36.5 million. A change in the assumptions would have had the
following impact on 2019 expense:
• A 25-basis-point change in the discount rate would have changed the 2019 expense by approximately $3.6 million.
• A 25-basis-point change in the expected long-term rate of return on assets would have changed the 2019
expense by approximately $1.8 million.

For 2020 pension expense, assumptions selected at December 31, 2019 were as follows:

Discount rate 3.69%
Rate of increase in future compensation levels 4.50%
Expected long-term rate of return on assets 6.75%
Average remaining service period for participants 10 years
Mortality Tables:
Base Table Pri-2012
Mortality Improvement Scale MP-2018

Celebrating 25 Years as a Public Company Annual Report ♦ Page 81