Annual report pursuant to Section 13 and 15(d)

PENSIONS AND OTHER POSTRETIREMENT BENEFITS

v3.19.3.a.u2
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
 12 Months Ended
Dec. 31, 2019
Postemployment Benefits [Abstract]  
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
NOTE 8 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We offer defined benefit pension plans, defined contribution pension plans and OPEB plans, primarily consisting of retiree healthcare benefits, to most employees as part of a total compensation and benefits program. The defined benefit pension plans are noncontributory and benefits generally are based on a minimum formula or employees’ years of service and average earnings for a defined period prior to retirement.
We offer retiree medical coverage to hourly retirees of our USW-represented mines. Currently, we have a four-year agreement with the USW which began October 1, 2018 and is effective through September 30, 2022. The 2018 USW agreement established the set fixed monthly medical premiums for participants who retired prior to January 1, 2015. These fixed premiums will expire on December 31, 2020 and revert to increasing premiums based on a cost-sharing formula thereafter. The agreement also provides for an OPEB cap that limits the amount of our contributions toward retiree medical insurance coverage per calendar year for each retiree and spouse of a retiree who retired on or
after January 1, 2015. The amount of the annual OPEB cap is based upon the gross plan costs we incurred in 2014. The OPEB cap does not apply to surviving spouses. In lieu of retiree medical coverage, USW-represented employees hired after September 1, 2016 receive a 401(k) contribution of $0.60 per hour worked to a restricted Retiree Health Care Account.
In addition, we currently provide various levels of OPEB to some full-time employees who meet certain length of service and age requirements (a portion of which is pursuant to collective bargaining agreements). Most plans require retiree contributions and have deductibles, co-pay requirements and benefit limits. Most bargaining unit plans require retiree contributions and co-pays for medical and prescription drug coverage. There is a cap on our cost for medical coverage under the salaried plans. The annual limit applies to each covered participant and equals $7,000 for coverage prior to age 65, with the retiree’s participation adjusted based on the age at which the retiree’s benefits commence. We do not provide OPEB for most salaried employees hired after January 1, 1993. Retiree healthcare coverage is provided through programs administered by insurance companies whose charges are based on benefits paid.
On August 12, 2019, Cliffs Mining Company, our subsidiary, ceased performing manager duties for the Hibbing mine and transitioned those duties to ArcelorMittal USA.  In connection with this transition, Cliffs Mining Company and ArcelorMittal USA entered into a transition agreement, pursuant to which the Ore Mining Companies Pension Plan previously sponsored by Cliffs Mining Company is now sponsored by ArcelorMittal Hibbing Management LLC. In connection with the transfer of manager duties for the Hibbing mine, Hibbing employees previously employed by Cliffs Mining Company became employed by an ArcelorMittal USA controlled group entity. All non-Hibbing active and retired participants were transferred to our Salaried Pension Plan. This transition did not have a material impact on our consolidated financial statements in the year ended December 31, 2019.
The following table summarizes the annual expense (income) recognized related to the retirement plans:
 
(In Millions)
 
2019
 
2018
 
2017
Defined benefit pension plans
$
22.4

 
$
12.7

 
$
18.0

Defined contribution pension plans
3.4

 
3.1

 
2.9

OPEB plans
(2.5
)
 
(5.9
)
 
(6.1
)
Total
$
23.3

 
$
9.9

 
$
14.8


Obligations and Funded Status
The following tables and information provide additional disclosures:
 
(In Millions)
 
Pension Benefits
 
Other Benefits
Change in benefit obligations:
2019
 
2018
 
2019
 
2018
Benefit obligations — beginning of year
$
905.7

 
$
973.1

 
$
241.9

 
$
265.9

Service cost (excluding expenses)
17.3

 
18.7

 
1.7

 
2.2

Interest cost
34.9

 
30.3

 
9.5

 
8.3

Plan amendments
—

 
2.2

 
—

 
12.8

Actuarial (gain) loss
111.8

 
(57.0
)
 
18.9

 
(29.4
)
Benefits paid
(62.2
)
 
(60.7
)
 
(25.6
)
 
(24.4
)
Participant contributions
—

 
—

 
5.8

 
5.6

Other
13.6

 
(0.9
)
 
2.3

 
0.9

Benefit obligations — end of year
$
1,021.1

 
$
905.7

 
$
254.5

 
$
241.9

 
 
 
 
 
 
 
 
Change in plan assets:
 
 
 
 
 
 
 
Fair value of plan assets — beginning of year
$
687.2

 
$
749.8

 
$
240.2

 
$
262.5

Actual return on plan assets
98.1

 
(29.6
)
 
35.1

 
(8.2
)
Participant contributions
—

 
—

 
0.5

 
0.5

Employer contributions
16.4

 
27.6

 
2.5

 
3.0

Benefits paid
(62.2
)
 
(60.7
)
 
(18.6
)
 
(17.6
)
Other
9.4

 
0.1

 
—

 
—

Fair value of plan assets — end of year
$
748.9

 
$
687.2

 
$
259.7

 
$
240.2

Funded status
$
(272.2
)
 
$
(218.5
)
 
$
5.2

 
$
(1.7
)
 
 
 
 
 
 
 
 
Amounts recognized in Statements of Financial Position:
 
 
 
 
 
 
 
Non-current assets
$
—

 
$
—

 
$
48.5

 
$
32.1

Current liabilities
(0.5
)
 
(0.1
)
 
(3.5
)
 
(3.5
)
Non-current liabilities
(271.7
)
 
(218.4
)
 
(39.8
)
 
(30.3
)
Total amount recognized
$
(272.2
)
 
$
(218.5
)
 
$
5.2

 
$
(1.7
)
 
 
 
 
 
 
 
 
Amounts recognized in accumulated other comprehensive loss:
 
 
 
 
 
 
 
Net actuarial loss
$
382.1

 
$
330.1

 
$
72.6

 
$
82.1

Prior service cost (credit)
7.3

 
8.5

 
(7.9
)
 
(9.9
)
Net amount recognized
$
389.4

 
$
338.6

 
$
64.7

 
$
72.2


 
(In Millions)
 
2019
 
Pension Plans
 
Other Benefits
 
Salaried
 
Hourly
 
SERP
 
Total
 
Salaried
 
Hourly
 
Total
Fair value of plan assets
$
293.7

 
$
455.2

 
$
—

 
$
748.9

 
$
—

 
$
259.7

 
$
259.7

Benefit obligation
(407.2
)
 
(607.3
)
 
(6.6
)
 
(1,021.1
)
 
(37.7
)
 
(216.8
)
 
(254.5
)
Funded status
$
(113.5
)
 
$
(152.1
)
 
$
(6.6
)
 
$
(272.2
)
 
$
(37.7
)
 
$
42.9

 
$
5.2


 
(In Millions)
 
2018
 
Pension Plans
 
Other Benefits
 
Salaried
 
Hourly
 
Mining
 
SERP
 
Total
 
Salaried
 
Hourly
 
Total
Fair value of plan assets
$
249.8

 
$
429.4

 
$
8.0

 
$
—

 
$
687.2

 
$
—

 
$
240.2

 
$
240.2

Benefit obligation
(340.8
)
 
(548.9
)
 
(10.7
)
 
(5.3
)
 
(905.7
)
 
(32.9
)
 
(209.0
)
 
(241.9
)
Funded status
$
(91.0
)
 
$
(119.5
)
 
$
(2.7
)
 
$
(5.3
)
 
$
(218.5
)
 
$
(32.9
)
 
$
31.2

 
$
(1.7
)

The accumulated benefit obligation for all defined benefit pension plans was $1,010.0 million and $896.8 million at December 31, 2019 and 2018, respectively.
Components of Net Periodic Benefit Cost
 
(In Millions)
 
Pension Benefits
 
Other Benefits
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Service cost
$
17.3

 
$
18.7

 
$
17.1

 
$
1.7

 
$
2.2

 
$
1.8

Interest cost
34.9

 
30.3

 
30.5

 
9.5

 
8.3

 
8.3

Expected return on plan assets
(54.6
)
 
(60.0
)
 
(54.5
)
 
(16.8
)
 
(18.4
)
 
(17.7
)
Amortization:
 
 
 
 
 
 
 
 
 
 
 
Prior service costs (credits)
1.2

 
2.2

 
2.6

 
(2.0
)
 
(3.0
)
 
(3.0
)
Net actuarial loss
23.5

 
21.2

 
22.3

 
5.1

 
5.0

 
4.5

Curtailments
0.1

 
0.3

 
—

 
—

 
—

 
—

Net periodic benefit cost (credit)
$
22.4

 
$
12.7

 
$
18.0

 
$
(2.5
)
 
$
(5.9
)
 
$
(6.1
)

Components of Accumulated Other Comprehensive Loss (Income)
The following includes details on the significant actuarial losses (gains) impacting the benefit obligation:
 
(In Millions)
 
Pension Benefits
 
Other Benefits
 
2019
 
2018
 
2019
 
2018
Discount rates
$
105.8

 
$
(75.7
)
 
$
25.5

 
$
(19.0
)
Demographic losses
12.3

 
21.7

 
3.6

 
2.3

Mortality
(6.3
)
 
(3.0
)
 
(3.9
)
 
(0.8
)
Per capita claims
—

 
—

 
(9.4
)
 
(11.9
)
Other
—

 
—

 
3.1

 
—

Actuarial (gain) loss on benefit obligation
111.8

 
(57.0
)
 
18.9

 
(29.4
)
Actual returns on assets (over) under estimate
(43.5
)
 
89.6

 
(18.3
)
 
26.6

Amortization of net actuarial loss
(23.5
)
 
(21.2
)
 
(5.1
)
 
(5.0
)
Amortization of prior service credits (costs)
(1.2
)
 
(2.2
)
 
2.0

 
3.0

Current year prior service costs
—

 
2.2

 
—

 
12.8

Other
7.2

 
(0.3
)
 
(5.0
)
 
1.5

Total recognized in accumulated other comprehensive loss (income)
$
50.8

 
$
11.1

 
$
(7.5
)
 
$
9.5


Assumptions
The discount rate for determining PBO is determined individually for each plan as noted in the assumption chart below. The discount rates are determined by matching the projected cash flows used to determine the PBO and APBO to a projected yield curve of 936 Aa graded bonds in the 40th to 90th percentiles. These bonds are either noncallable or callable with make-whole provisions.
On December 31, 2019, the assumed mortality improvement projection was changed from generational scale MP-2018 to generational scale MP-2019. The healthy mortality assumption was updated to the Pri-2012 mortality tables with blue collar adjustments for the Iron Hourly Pension and Hourly OPEB plans, with white collar adjustments for the Salaried OPEB Plan, and without adjustments for the Salaried Pension Plan.
On December 31, 2018, the assumed mortality improvement projection was changed from generational scale MP-2017 to generational scale MP-2018. The healthy mortality assumption was the RP-2014 mortality tables with blue collar adjustments for the Iron Hourly Pension and Hourly OPEB plans, with white collar adjustments for the Salaried OPEB Plan, and without adjustments for the Salaried Pension Plan.
The following represents weighted-average assumptions used to determine benefit obligations:
 
Pension Benefits
 
Other Benefits
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
Discount rate:
 
 
 
 
 
 
 
 
 
 
 
Iron Hourly Pension Plan
3.34
%
 
4.31
%
 
N/A
%
 
N/A
%
Salaried Pension Plan
3.18
 
 
4.21
 
 
N/A
 
 
N/A
 
Ore Mining Pension Plan
N/A
 
 
4.33
 
 
N/A
 
 
N/A
 
Supplemental Executive Retirement Plan
3.05
 
 
4.22
 
 
N/A
 
 
N/A
 
Hourly OPEB Plan
N/A
 
 
N/A
 
 
3.28
 
 
4.29
 
Salaried OPEB Plan
N/A
 
 
N/A
 
 
3.29
 
 
4.27
 
Interest crediting rate
6.00
 
 
6.00
 
 
N/A
 
 
N/A
 
Salaried rate of compensation increase
3.00
 
 
3.00
 
 
3.00
 
 
3.00
 
Hourly rate of compensation increase
2.00
 
 
2.00
 
 
N/A
 
 
N/A
 

The following represents weighted-average assumptions used to determine net benefit cost:
 
Pension Benefits
 
Other Benefits
 
December 31,
 
December 31,
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Obligation Discount Rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Iron Hourly Pension Plan
4.31
%
 
3.61
%
 
4.02
%
 
N/A
%
 
N/A
%
 
N/A
%
Salaried Pension Plan
4.22
 
 
3.52
 
 
3.91
 
 
N/A
 
 
N/A
 
 
N/A
 
Ore Mining Pension Plan
N/A
 
 
3.61
 
 
4.04
 
 
N/A
 
 
N/A
 
 
N/A
 
Supplemental Executive Retirement Plan
4.21
 
 
3.54
 
 
3.90
 
 
N/A
 
 
N/A
 
 
N/A
 
Hourly OPEB Plan
N/A
 
 
N/A
 
 
N/A
 
 
4.29
 
 
3.60
 
 
4.03
 
Salaried OPEB Plan
N/A
 
 
N/A
 
 
N/A
 
 
4.28
 
 
3.57
 
 
3.98
 
Service Cost Discount Rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Iron Hourly Pension Plan
4.49
 
 
3.76
 
 
4.30
 
 
N/A
 
 
N/A
 
 
N/A
 
Salaried Pension Plan
4.23
 
 
3.53
 
 
3.93
 
 
N/A
 
 
N/A
 
 
N/A
 
Ore Mining Pension Plan
N/A
 
 
3.75
 
 
4.27
 
 
N/A
 
 
N/A
 
 
N/A
 
Supplemental Executive Retirement Plan
4.11
 
 
3.43
 
 
3.69
 
 
N/A
 
 
N/A
 
 
N/A
 
Hourly OPEB Plan
N/A
 
 
N/A
 
 
N/A
 
 
4.48
 
 
3.73
 
 
4.23
 
Salaried OPEB Plan
N/A
 
 
N/A
 
 
N/A
 
 
4.54
 
 
3.76
 
 
4.30
 
Interest Cost Discount Rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Iron Hourly Pension Plan
3.96
 
 
3.21
 
 
3.38
 
 
N/A
 
 
N/A
 
 
N/A
 
Salaried Pension Plan
3.85
 
 
3.08
 
 
3.21
 
 
N/A
 
 
N/A
 
 
N/A
 
Ore Mining Pension Plan
N/A
 
 
3.22
 
 
3.41
 
 
N/A
 
 
N/A
 
 
N/A
 
Supplemental Executive Retirement Plan
3.89
 
 
3.16
 
 
3.36
 
 
N/A
 
 
N/A
 
 
N/A
 
Hourly OPEB Plan
N/A
 
 
N/A
 
 
N/A
 
 
3.95
 
 
3.10
 
 
3.24
 
Salaried OPEB Plan
N/A
 
 
N/A
 
 
N/A
 
 
3.91
 
 
3.15
 
 
3.28
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest crediting rate
6.00
 
 
6.00
 
 
6.00
 
 
N/A
 
 
N/A
 
 
N/A
 
Expected return on plan assets
8.25
 
 
8.25
 
 
8.25
 
 
7.00
 
 
7.00
 
 
7.00
 
Salaried rate of compensation increase
3.00
 
 
3.00
 
 
3.00
 
 
3.00
 
 
3.00
 
 
3.00
 
Hourly rate of compensation increase
2.00
 
 
2.00
 
 
2.00
 
 
N/A
 
 
N/A
 
 
N/A
 

The following represents assumed health care cost trend rates:
 
December 31,
 
2019
 
2018
Health care cost trend rate assumed for next year
6.50
%
 
6.75
%
Ultimate health care cost trend rate
5.00
 
 
5.00
 
Year that the ultimate rate is reached
2026
 
 
2026
 

Plan Assets
Our financial objectives with respect to our pension and VEBA plan assets are to fully fund the actuarial accrued liability for each of the plans, to maximize investment returns within reasonable and prudent levels of risk, and to maintain sufficient liquidity to meet benefit obligations on a timely basis.
Our investment objective is to outperform the expected return on assets assumption used in the plans’ actuarial reports over the life of the plans. The expected return on assets takes into account historical returns and estimated future long-term returns based on capital market assumptions applied to the asset allocation strategy. The expected return is net of investment expenses paid by the plans. In addition, investment performance is monitored on a quarterly basis by benchmarking to various indices and metrics for the one-, three- and five-year periods.
The asset allocation strategy is determined through a detailed analysis of assets and liabilities by plan, which defines the overall risk that is acceptable with regard to the expected level and variability of portfolio returns, surplus (assets compared to liabilities), contributions and pension expense.
The asset allocation review process involves simulating capital market behaviors including global asset class performance, inflation and interest rates in order to evaluate various asset allocation scenarios and determine the asset mix with the highest likelihood of meeting financial objectives. The process includes factoring in the current funded status and likely future funded status levels of the plans by taking into account expected growth or decline in the contributions over time.
The asset allocation strategy varies by plan. The following table reflects the actual asset allocations for pension and VEBA plan assets as of December 31, 2019 and 2018, as well as the 2020 weighted average target asset allocations. Equity investments include securities in large-cap, mid-cap and small-cap companies located in the U.S. and worldwide. Fixed income investments primarily include corporate bonds and government debt securities.
 
 
Pension Assets
 
VEBA Assets
Asset Category
 
2020
Target
Allocation
 
Percentage of
Plan Assets at
December 31,
 
2020
Target
Allocation
 
Percentage of
Plan Assets at
December 31,
2019
 
2018
 
2019
 
2018
Equity securities
 
45.0
%
 
44.0
%
 
38.9
%
 
8.0
%
 
7.2
%
 
8.1
%
Fixed income
 
28.0
%
 
26.1
%
 
26.0
%
 
80.0
%
 
79.8
%
 
77.0
%
Hedge funds
 
5.0
%
 
5.4
%
 
5.4
%
 
4.0
%
 
4.8
%
 
4.7
%
Private equity
 
7.0
%
 
6.6
%
 
6.2
%
 
3.0
%
 
0.7
%
 
1.2
%
Structured credit
 
7.5
%
 
7.0
%
 
11.4
%
 
2.0
%
 
2.1
%
 
3.5
%
Real estate
 
7.5
%
 
9.4
%
 
10.3
%
 
3.0
%
 
5.4
%
 
5.4
%
Cash
 
—
%
 
1.5
%
 
1.8
%
 
—
%
 
—
%
 
0.1
%
Total
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%

Following is a description of the inputs and valuation methodologies used to measure the fair value of our plan assets.
Equity Securities
Equity securities classified as Level 1 investments include U.S. large-, small- and mid-cap investments and international equities. These investments are comprised of securities listed on an exchange, market or automated quotation system for which quotations are readily available. The valuation of these securities is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets.
Fixed Income
Fixed income securities classified as Level 1 investments include bonds and government debt securities. These investments are comprised of securities listed on an exchange, market or automated quotation system for which quotations are readily available. The valuation of these securities is determined using a market approach and is based upon unadjusted quoted prices for identical assets in active markets. Also included in fixed income is a portfolio of U.S. Treasury STRIPS, which are zero-coupon bearing fixed income securities backed by the full faith and credit of the U.S. government. The securities sell at a discount to par because there are no incremental coupon payments. STRIPS are not issued directly by the Treasury but rather are created by a financial institution, government securities broker or government securities dealer. Liquidity on the issue varies depending on various market conditions; however, in general the STRIPS market is slightly less liquid than that of the U.S. Treasury Bond market. The STRIPS are priced daily through a bond pricing vendor and are classified as Level 2.
Hedge Funds
Hedge funds are alternative investments comprised of direct or indirect investment in offshore hedge funds with an investment objective to achieve equity-like returns with one half the volatility of equities and moderate correlation. The valuation techniques used to measure fair value attempt to maximize the use of observable inputs and minimize the use of unobservable inputs. Considerable judgment is required to interpret the factors used to develop estimates of fair value. Valuations of the underlying investment funds are obtained and reviewed. The securities that are valued by the funds are interests in the investment funds and not the underlying holdings of such investment funds. Thus, the inputs
used to value the investments in each of the underlying funds may differ from the inputs used to value the underlying holdings of such funds. Hedge funds are valued monthly and recorded on a one-month lag.
Private Equity Funds
Private equity funds are alternative investments that represent direct or indirect investments in partnerships, venture funds or a diversified pool of private investment vehicles (fund of funds).
Investment commitments are made in private equity funds based on an asset allocation strategy, and capital calls are made over the life of the funds to fund the commitments. As of December 31, 2019, remaining commitments total $37.1 million for our pension and OPEB plans. Committed amounts are funded from plan assets when capital calls are made. Investment commitments are not pre-funded in reserve accounts.
Private equity investments are valued quarterly and recorded on a one-quarter lag. For alternative investment values reported on a lag, current market information is reviewed for any material changes in values at the reporting date. Capital distributions for the funds do not occur on a regular frequency. Liquidation of these investments would require sale of the partnership interest.
Structured Credit
Structured credit investments are alternative investments comprised of collateralized debt obligations and other structured credit investments that are priced based on valuations provided by independent, third-party pricing agents, if available. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value structured credit investments at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations or other methodologies designed to identify the market value of such securities.
Structured credit investments are valued monthly and recorded on a one-month lag. For alternative investment values reported on a lag, current market information is reviewed for any material changes in values at the reporting date. Historically, redemption requests have been considered quarterly, subject to notice of 90 days, although the advisor is currently only requiring notice of 65 days.
Real Estate
The real estate portfolio for the pension plans is an alternative investment comprised of one fund with strategic categories of real estate investments. All real estate holdings are appraised externally at least annually, and appraisals are conducted by reputable, independent appraisal firms that are members of the Appraisal Institute. All external appraisals are performed in accordance with the Uniform Standards of Professional Appraisal Practices. The property valuations and assumptions about each property are reviewed quarterly by the investment advisor and values are adjusted if there has been a significant change in circumstances relating to the property since the last external appraisal. The fair value of the fund is updated monthly so there is no lag in reported value. Redemption requests are considered on a quarterly basis, subject to notice of 45 days.
The real estate fund of funds investment for the Empire-Tilden, Hibbing and United Taconite VEBA plans invests in pooled investment vehicles that in turn invest in commercial real estate properties. Valuations are performed quarterly and financial statements are prepared on a semi-annual basis, with annual audited statements. Asset values for this fund are reported with a one-quarter lag, and current market information is reviewed for any material changes in values at the reporting date. Withdrawals are permitted on the last business day of each quarter subject to a 95-day prior written notice.
Pension
The fair value of our pension plan assets by asset category is as follows:
 
 
(In Millions)
 
 
December 31, 2019
Asset Category
 
Quoted Prices in Active
Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Equity securities:
 
 
 
 
 
 
 
 
U.S. large-cap
 
$
139.1

 
$
—

 
$
—

 
$
139.1

U.S. small/mid-cap
 
29.3

 
—

 
—

 
29.3

International
 
161.4

 
—

 
—

 
161.4

Fixed income
 
173.0

 
22.3

 
—

 
195.3

Hedge funds
 
—

 
—

 
40.2

 
40.2

Private equity
 
—

 
—

 
49.5

 
49.5

Structured credit
 
—

 
—

 
52.3

 
52.3

Real estate
 
—

 
—

 
70.4

 
70.4

Cash
 
11.4

 
—

 
—

 
11.4

Total
 
$
514.2

 
$
22.3

 
$
212.4

 
$
748.9

 
 
(In Millions)
 
 
December 31, 2018
Asset Category
 
Quoted Prices in Active
Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Equity securities:
 
 
 
 
 
 
 
 
U.S. large-cap
 
$
112.6

 
$
—

 
$
—

 
$
112.6

U.S. small/mid-cap
 
22.5

 
—

 
—

 
22.5

International
 
132.0

 
—

 
—

 
132.0

Fixed income
 
151.1

 
27.4

 
—

 
178.5

Hedge funds
 
—

 
—

 
37.2

 
37.2

Private equity
 
—

 
—

 
42.6

 
42.6

Structured credit
 
—

 
—

 
78.8

 
78.8

Real estate
 
—

 
—

 
70.5

 
70.5

Cash
 
12.5

 
—

 
—

 
12.5

Total
 
$
430.7

 
$
27.4

 
$
229.1

 
$
687.2


The following represents the fair value measurements of changes in plan assets using significant unobservable inputs (Level 3):
 
(In Millions)
 
Year Ended December 31, 2019
 
Hedge 
Funds
 
Private Equity
Funds
 
Structured
Credit Fund
 
Real
Estate
 
Total
Beginning balance — January 1, 2019
$
37.2

 
$
42.6

 
$
78.8

 
$
70.5

 
$
229.1

Actual return on plan assets:

 

 

 

 
 
Relating to assets still held at
    the reporting date
3.4

 
(1.0
)
 
0.5

 
(4.2
)
 
(1.3
)
Relating to assets sold during
    the period
—

 
1.2

 
0.8

 
28.6

 
30.6

Purchases
—

 
16.5

 
—

 
—

 
16.5

Sales
—

 
(9.3
)
 
(26.8
)
 
(23.8
)
 
(59.9
)
Other
(0.4
)
 
(0.5
)
 
(1.0
)
 
(0.7
)
 
(2.6
)
Ending balance — December 31, 2019
$
40.2

 
$
49.5

 
$
52.3

 
$
70.4

 
$
212.4

 
(In Millions)
 
Year Ended December 31, 2018
 
Hedge 
Funds
 
Private Equity
Funds
 
Structured
Credit Fund
 
Real
Estate
 
Total
Beginning balance — January 1, 2018
$
37.4

 
$
39.8

 
$
72.9

 
$
65.5

 
$
215.6

Actual return on plan assets:

 

 

 

 
 
Relating to assets still held at
    the reporting date
(0.2
)
 
1.4

 
5.9

 
5.4

 
12.5

Relating to assets sold during
the period
—

 
4.0

 
—

 
—

 
4.0

Purchases
—

 
5.2

 
—

 
—

 
5.2

Sales
—

 
(7.8
)
 
—

 
(0.4
)
 
(8.2
)
Ending balance — December 31, 2018
$
37.2

 
$
42.6

 
$
78.8

 
$
70.5

 
$
229.1


VEBA
Assets for OPEB plans include VEBA trusts pursuant to bargaining agreements that are available to fund retired employees’ life insurance obligations and medical benefits. The fair value of our other benefit plan assets by asset category is as follows:
 
 
(In Millions)
 
 
December 31, 2019
Asset Category
 
Quoted Prices in Active
Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Equity securities:
 
 
 
 
 
 
 
 
U.S. large-cap
 
$
9.3

 
$
—

 
$
—

 
$
9.3

U.S. small/mid-cap
 
2.3

 
—

 
—

 
2.3

International
 
7.0

 
—

 
—

 
7.0

Fixed income
 
166.4

 
40.9

 
—

 
207.3

Hedge funds
 
—

 
—

 
12.4

 
12.4

Private equity
 
—

 
—

 
1.7

 
1.7

Structured credit
 
—

 
—

 
5.5

 
5.5

Real estate
 
—

 
—

 
14.0

 
14.0

Cash
 
0.2

 
—

 
—

 
0.2

Total
 
$
185.2

 
$
40.9

 
$
33.6

 
$
259.7

 
 
(In Millions)
 
 
December 31, 2018
Asset Category
 
Quoted Prices in Active
Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Equity securities:
 

 

 

 

U.S. large-cap
 
$
9.7

 
$
—

 
$
—

 
$
9.7

U.S. small/mid-cap
 
2.4

 
—

 
—

 
2.4

International
 
7.3

 
—

 
—

 
7.3

Fixed income
 
146.8

 
37.8

 
—

 
184.6

Hedge funds
 
—

 
—

 
11.4

 
11.4

Private equity
 
—

 
—

 
3.0

 
3.0

Structured credit
 
—

 
—

 
8.5

 
8.5

Real estate
 
—

 
—

 
13.1

 
13.1

Cash
 
0.2

 
—

 
—

 
0.2

Total
 
$
166.4

 
$
37.8

 
$
36.0

 
$
240.2


The following represents the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets:
 
(In Millions)
 
Year Ended December 31, 2019
 
Hedge 
Funds
 
Private Equity
Funds
 
Structured
Credit Fund
 
Real
Estate
 
Total
Beginning balance — January 1, 2019
$
11.4

 
$
3.0

 
$
8.5

 
$
13.1

 
$
36.0

Actual return on plan assets:

 

 

 

 
 
Relating to assets still held at the reporting date
1.0

 
(0.6
)
 
0.1

 
0.9

 
1.4

Relating to assets sold during the period
—

 
—

 
0.1

 
—

 
0.1

Purchases
—

 
—

 
—

 
—

 
—

Sales
—

 
(0.7
)
 
(3.2
)
 
—

 
(3.9
)
Ending balance — December 31, 2019
$
12.4

 
$
1.7

 
$
5.5

 
$
14.0

 
$
33.6

 
(In Millions)
 
Year Ended December 31, 2018
 
Hedge 
Funds
 
Private Equity
Funds
 
Structured
Credit Fund
 
Real
Estate
 
Total
Beginning balance — January 1, 2018
$
11.4

 
$
3.9

 
$
7.9

 
$
12.0

 
$
35.2

Actual return on plan assets:

 

 

 

 
 
Relating to assets still held at the reporting date
—

 
(0.1
)
 
0.6

 
1.1

 
1.6

Relating to assets sold during the period
—

 
0.3

 
—

 
—

 
0.3

Purchases
—

 
—

 
—

 
—

 
—

Sales
—

 
(1.1
)
 
—

 
—

 
(1.1
)
Ending balance — December 31, 2018
$
11.4

 
$
3.0

 
$
8.5

 
$
13.1

 
$
36.0


Contributions
Annual contributions to the pension plans are made within income tax deductibility restrictions in accordance with statutory regulations. In the event of plan termination, the plan sponsors could be required to fund additional shut down and early retirement obligations that are not included in the pension obligations. Costs for early termination for pensions and OPEB are estimated to be $14.9 million and $3.0 million, respectively. We currently have no intention to shut down, terminate or withdraw from any of our employee benefit plans.
 
 
(In Millions)
 
 
Pension
Benefits
 
Other Benefits
Company Contributions
 
VEBA
 
Direct
Payments
 
Total
2018
 
$
27.6

 
$
—

 
$
3.8

 
$
3.8

2019
 
16.4

 
—

 
3.7

 
3.7

2020 (Expected)1
 
20.2

 
—

 
3.5

 
3.5

 
 
 
 
 
 
 
 
 
1 Pursuant to the bargaining agreement, benefits can be paid from VEBA trusts that are at least 70% funded (all VEBA trusts are over 70% funded at December 31, 2019). Funding obligations have been suspended as UTAC's, Tilden's and Empire's share of the value of their respective trust assets have reached 90% of their obligation.

VEBA plans are not subject to minimum regulatory funding requirements. Amounts contributed are pursuant to bargaining agreements.
Contributions by participants to the OPEB plans were $5.8 million for the year ended December 31, 2019 and $5.6 million for the year ended December 31, 2018.
Estimated Cost for 2020
For 2020, we estimate net periodic benefit cost (credit) as follows:
 
(In Millions)
Defined benefit pension plans
$
16.7

OPEB plans
(8.7
)
Total
$
8.0


Estimated Future Benefit Payments
 
(In Millions)
 
Pension
Benefits
 
Other Benefits
Gross
Company
Benefits
 
Less
Medicare
Subsidy
 
Net
Benefit
Payments
2020
$
73.6

 
$
17.2

 
$
(0.7
)
 
$
16.5

2021
71.1

 
16.6

 
(0.8
)
 
15.8

2022
70.4

 
16.3

 
(0.8
)
 
15.5

2023
71.2

 
16.3

 
(0.8
)
 
15.5

2024
66.9

 
16.1

 
(0.9
)
 
15.2

2025-2029
318.2

 
77.3

 
(4.6
)
 
72.7