Annual report pursuant to Section 13 and 15(d)

Postretirement Benefits

v3.22.0.1
Postretirement Benefits
 12 Months Ended
Dec. 31, 2021
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]  
Postretirement Benefits Postretirement Benefits
Overview. The Company has defined contribution plans and makes contributions including matching and annual discretionary contributions which are based on various percentages of compensation, and in some instances are based on the amount of the employees' contributions to the plans. The expense related to the defined contribution plans was $47.1 million in 2021, $49.4 million in 2020 and $44.1 million in 2019.

The Company's domestic pension and retiree health care and life insurance benefit plans, which are discussed below, provide benefits based on years of service and, for some plans, the employee's average compensation prior to retirement. Such benefit accruals are frozen for all plan participants. The Company uses a December 31 measurement date for these plans. The Company's foreign postretirement benefit plans are not significant individually or in the aggregate.

Plan Developments. The Company historically maintained four qualified defined benefit plans: the Brunswick Pension Plan for Salaried Employees (Salaried Plan), the Brunswick Pension Plan for Hourly Bargaining Unit Employees (Bargaining Plan), the Brunswick Pension Plan For Hourly Employees (Hourly Plan) and the Brunswick Pension Plan For Hourly Wage Employees (Muskegon Plan). During the third quarter of 2018, the Company initiated actions to terminate its two remaining plans, the Salaried Plan and the Bargaining Plan, effective October 31, 2018. All benefits were settled during 2019 either through a lump-sum payment to participants or the purchase of an annuity offering on behalf of the participants. As a result of the planned terminations, the remaining over-funded position for each plan is currently recorded within Accounts and notes receivable in the Consolidated Balance Sheets. The Company had previously completed actions to terminate the Hourly Plan and the Muskegon Plan, effective as of December 31, 2016, and all benefits were paid during 2017.

During 2019, total settlement payments of $673.9 million were made from the Salaried Plan and the Bargaining Plan, consisting of lump-sum pension distributions of $77.1 million and the purchase of group annuity contracts totaling $596.8 million to cover future benefit payments. The annuity contracts unconditionally and irrevocably guarantee the full payment of all future annuity payments to the affected participants. The insurance company assumed all risk associated with the assets and obligations that were transferred. The Company recognized a pretax settlement loss of $292.8 million during the year related to these actions.

Costs. Pension and other postretirement benefit costs included the following components for 2021, 2020 and 2019:
  Pension Benefits Other Postretirement Benefits
(in millions) 2021 2020 2019 2021 2020 2019
Interest cost $ 0.4  $ 0.7  $ 6.0  $ —  $ 0.8  $ 1.3 
Expected return on plan assets —  —  (7.4) —  —  — 
Amortization of prior service credits —  —  —  —  (0.7) (0.7)
Amortization of net actuarial losses 0.8  0.6  5.8  —  —  — 
Settlement charges —  (1.1) 292.8  —  —  — 
Net pension and other benefit costs $ 1.2  $ 0.2  $ 297.2  $ —  $ 0.1  $ 0.6 

Net pension and other benefit costs are recorded in Pension settlement benefit (charge) and Other expense, net in the Consolidated Statements of Operations.
Benefit Obligations and Funded Status. A reconciliation of the changes in the benefit obligations and fair value of assets over the two-year period ending December 31, 2021, and a statement of the funded status as of December 31 for these years for the Company's pension and other postretirement benefit plans follow:
Pension Benefits Other Postretirement Benefits
(in millions) 2021 2020 2021 2020
Reconciliation of benefit obligation:
Benefit obligation as of previous December 31 $ 27.5  $ 28.1  $ 33.2  $ 33.0 
Interest cost 0.4  0.7  —  0.8 
Actuarial losses —  2.1  (1.8) 1.8 
Benefit payments (3.2) (3.4) (2.0) (2.4)
Benefit obligation as of December 31 24.7  27.5  29.4  33.2 
Reconciliation of fair value of plan assets:
Fair value of plan assets as of previous December 31 —  10.6  —  — 
Employer contributions 3.2  3.4  2.0  2.4 
Benefit payments (3.2) (3.4) (2.0) (2.4)
Adjustments (A)
—  (10.6) —  — 
Fair value of plan assets as of December 31 —  —  —  — 
Funded status as of December 31 $ (24.7) $ (27.5) $ (29.4) $ (33.2)
Funded percentage NA NA NA NA

(A) 2020 adjustment represents the over funded position of the Company's salaried bargaining plans refunded during the year.

The funded status of these pension plans includes the projected and accumulated benefit obligations for the Company's nonqualified pension plan of $24.7 million and $27.5 million as of December 31, 2021 and 2020, respectively. The Company's nonqualified pension plan and other postretirement benefit plans are not funded. The projected benefit obligation, net of plan assets for the Company's foreign pension plans, was $16.2 million and $17.1 million as of December 31, 2021 and 2020, respectively.

The amounts included in the Company's Consolidated Balance Sheets as of December 31, 2021 and 2020, were as follows:
Pension Benefits Other Postretirement Benefits
(in millions) 2021 2020 2021 2020
Accrued expenses $ 3.0  $ 3.0  $ 3.1  $ 3.1 
Postretirement benefit liabilities 21.7  24.5  26.3  30.1 
Liabilities recognized $ 24.7  $ 27.5  $ 29.4  $ 33.2 
Accumulated Other Comprehensive Loss. The following pretax activity related to pensions and other postretirement benefits was recorded in Accumulated other comprehensive loss as of December 31:
Pension Benefits Other Postretirement Benefits
(in millions) 2021 2020 2021 2020
Prior service credits
Beginning balance $ —  $ —  $ (7.4) $ (8.1)
Amount recognized as component of net benefit costs —  —  —  0.7 
Ending balance —  —  (7.4) (7.4)
Net actuarial losses
Beginning balance 13.5  12.0  0.4  (1.4)
Actuarial losses arising during the period —  2.1  (2.3) 1.8 
Amount recognized as component of net benefit costs (0.8) (0.6) —  — 
Ending balance 12.7  13.5  (1.9) 0.4 
Total $ 12.7  $ 13.5  $ (9.3) $ (7.0)
Prior service credits associated with other postretirement benefits are being amortized on a straight-line basis over the average future working lifetime to full eligibility for active hourly plan participants and over the average remaining life expectancy for those plans' participants who are fully eligible for benefits. Actuarial gains and losses in excess of 10 percent of the greater of the benefit obligation or the market value of assets are amortized over the remaining service period of active plan participants and over the average remaining life expectancy of inactive plan participants.

Other Postretirement Benefits. Once participants eligible for other postretirement benefits turn 65 years old, the health care benefits become a flat dollar amount based on age and years of service. The assumed health care cost trend rate for other postretirement benefits for pre-age 65 benefits as of December 31 was as follows:
Pre-age 65 Benefits
2021 2020
Health care cost trend rate for next year 5.6  % 5.3  %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.0  % 4.5  %
Year rate reaches the ultimate trend rate 2045 2037

A one percent change in the assumed health care trend rate as of December 31, 2021 would not have a material impact on the accumulated postretirement benefit obligation.

The Company monitors the cost of health care and life insurance benefit plans and reserves the right to make additional changes or terminate these benefits in the future.

Assumptions. Weighted average assumptions used to determine pension and other postretirement benefit obligations as of December 31 were as follows:
Pension Benefits Other Postretirement Benefits
2021 2020 2021 2020
Discount rate 2.50  % 2.00  % 2.61  % 2.13  %
Weighted average assumptions used to determine net pension and other postretirement benefit costs for the years ended December 31 were as follows:
2021 2020 2019
Discount rate for pension benefits (A) (B)
1.37% 2.55% 4.13%
Discount rate for other postretirement benefits (A) (B)
1.50% 2.65% 3.85%
Long-term rate of return on plan assets (C)
NA NA NA

(A) The Company utilizes a yield curve analysis to calculate the discount rates used to determine pension and other postretirement benefit obligations. The yield curve analysis matches the cash flows of the Company's benefit obligations. The yield curve consisted of spot interest rates at half year increments for each of the next 30 years and was developed based on pricing and yield information for high quality corporate bonds rated Aa by either Moody's or Standard & Poor's, private placement bonds that are traded in reliance with Rule 144A and are at least two years from date of issuance, bonds with make-whole provisions and bonds issued by foreign corporations that are denominated in U.S. dollars, excluding callable bonds and bonds less than a minimum size and other filtering criteria. Additionally, the Company's yield curve methodology includes bonds having a yield that is greater than the regression mean yield curve as the Company believes this methodology represents an appropriate estimate of the rates at which the Company could effectively settle its pension obligations.
(B) The Company uses a "spot rate approach" in the calculation of pension and postretirement interest costs to provide a more accurate measurement of interest costs. The spot rate approach applies separate discount rates for each projected benefit payment in the calculation of pension and postretirement interest costs.
(C) The Company evaluates its assumption regarding the estimated long-term rate of return on plan assets based on historical experience, future expectations of investment returns, asset allocations, investment strategies and views of investment professionals.

Master Trust Investments. Assets of the Company's Master Pension Trust (Trust) are invested solely in the interest of the plan participants for the purpose of providing benefits to participants and their beneficiaries. During 2019, all assets of the Trust were distributed to participants in connection with the plan terminations.

Expected Cash Flows. The expected cash flows for the Company's pension and other postretirement benefit plan are presented as follows:
(in millions) Pension Benefits Other Postretirement Benefits
Company contributions expected to be made in 2022 $ 2.8  $ 2.9 
Expected benefit payments:
2022 2.8  2.9 
2023 2.8  2.8 
2024 2.4  2.6 
2025 2.3  2.5 
2026 2.1  2.3 
2026-2030 8.4  9.6