Page 83 - 2019 Annual Report
P. 83

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











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