Note 13 – Employee Retirement Plans

Defined Contribution Retirement Plan

The Company provides retirement benefits to eligible employees primarily through the Worthington Steel, Inc. 401(k) Retirement Savings Plan (the “401(k) Plan”), a defined contribution retirement plan. Prior to the Separation, eligible employees of Worthington Steel had historically received benefits through the Former Parent’s defined contribution retirement plans. As a result of the Separation, the 401(k) Plan was established, and new accounts within the 401(k) Plan were created for each of the qualifying plan participants of the Former Parent’s defined contribution retirement plan. As of the Separation date, all future qualifying plan participants’ contributions were attributed to the 401(k) Plan.

The 401(k) Plan is a defined contribution plan covering all non-union U.S. employees of Worthington Steel (and its subsidiaries who are participating employers under the 401(k) Plan) on U.S. payroll who meet the tenure, hour and age requirements specified in the 401(k) Plan. The 401(k) Plan is subject to the provisions of the ERISA. The trustee for the 401(k) Plan is Fidelity Management Trust Company. Worthington Steel is the sponsor of the 401(k) Plan.

Eligible participants make contributions based on elected percentages of eligible compensation, subject to annual addition and other limitations imposed by the Internal Revenue Code and the various plans’ provisions. Company contributions consist of employer matching contributions, annual or monthly employer contributions and discretionary contributions, based on individual plan provisions. The Company matches 50 cents per dollar on contributions of the first 4% of the 401(k) Plan participants’ compensation. The Company also makes an employer contribution of 3% of compensation on behalf of eligible participants irrespective of the amounts deferred by such participants. As a safe harbor plan, the Company guarantees a minimum contribution of at least 3% of participants’ eligible compensation.

Defined Benefit Pension Plans

Defined benefit pension and OPEB plan obligations are remeasured at least annually as of reporting period end based on the present value of projected future benefit payments for all participants for services rendered to date. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions.

Net periodic benefit costs, including service cost, interest cost, and expected return on assets, are determined using assumptions regarding the benefit obligation and the fair value of plan assets as of the beginning of each fiscal year. The funded status of the benefit plans, which represents the difference between the benefit obligation and the fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are determined using assumptions as of the reporting period end. Net periodic benefit cost is included in other income (expense) in the Company’s consolidated and combined statements of earnings, except for the service cost component, which is recorded in cost of goods sold and SG&A.

Through prior acquisitions, the Company sponsors various defined benefit pension and similar plans. Tempel’s obligations include a defined benefit domestic funded pension plan, an unfunded supplemental executive retirement (SERP) plan, and a domestic unfunded postretirement plan. Effective December 31, 2010, Tempel froze its defined benefit domestic funded pension plan. No further benefits will be earned by participants of this plan after December 31, 2010.

As part of the Company’s acquisition of the Sitem Group on June 3, 2025, it assumed approximately $14.3 million of net pension benefit obligations. The Stanzwerk AG pension plan was assumed in connection with the acquisition of the Sitem Group. The acquired Stanzwerk AG pension plan is a funded defined benefit pension plan in Switzerland covering eligible employees, the plan’s assets are managed by a collective trust. During fiscal 2026, the Company recognized curtailment and settlement gains related to the acquired Stanzwerk AG pension plan. The curtailment resulted from a restructuring initiative that significantly reduced expected future service for certain plan participants. In addition, a settlement was triggered because lump-sum benefit payments exceeded the applicable threshold. A portion of the curtailment gain will be recognized in future periods as affected employees terminate employment. See “Note 2 – Acquisitions” for additional information related to the acquisition of the Sitem Group.

In fiscal 2025, primarily in the second quarter, the Company, through Tempel, recorded a non-cash pension settlement gain of $2.7 million reflected in miscellaneous income (expense), net, as a result of transferring $18.7 million, or approximately 26%, of the total projected benefit obligation and related plan assets of the Tempel Employees Pension Plan as of the purchase date, to an insurance company. The purchase of the annuity contract as well as the lump sums paid prior to the pension risk transfer required remeasurement of the plan prior to the calculation of the settlement charge. Additional lump sums paid out after the pension risk transfer but prior to the end of the fiscal year, resulted in a second settlement gain. The net impact of the pension risk transfer and lump sum settlements, and the second quarter fiscal 2025 remeasurement was a decrease of approximately $2.0 million in the non-current liability for pensions (and corresponding decrease in accumulated other comprehensive loss, before income taxes), and is included within the actuarial (gain)/loss with the reconciliation of the changes in the projected benefit obligation and plan assets disclosure below. In the reconciliation of the changes in the projected benefit obligation and plan assets, the cash paid for the purchase of the annuity contracts as well as the lump sum payments that resulted in settlements is recorded within settlements. As a result of this transaction: 1) the Company was relieved of all responsibility for these pension obligations, subject to customary administrative adjustments, and 2) the insurance company is now required to pay and administer the retirement benefits owed to 472 beneficiaries. Assumptions used for this remeasurement included discount rates determined using September 2024 market conditions and calculated using the same methodology as discussed above. Due to the settlement, the Company determined that a discount rate of 5.55% was used from June 1, 2024 up until September 2024. A discount rate of 4.79% was used from September 2024 up until May 31, 2025. A discount rate of 5.40% was used as of May 31, 2025. All other assumptions were consistent with the fiscal 2025 disclosures.

As a result of the Company’s acquisition of Voestalpine Nagold in fiscal 2024, it assumed approximately $0.9 million of net pension benefit obligations under a pre-existing pension obligation of the former company that resulted from a previous contractual arrangement with a prior owner before the Company’s acquisition. No further pension benefit will be earned by participants of this plan, and participants will begin to receive benefits upon reaching age 65. See “Note 2 – Acquisitions” for additional information related to the acquisition of Voestalpine Nagold.

Prior-year non-U.S. pension information has been reclassified to conform to the current-year presentation following the acquisition of a material non-U.S. defined benefit plan. The reclassification had no impact on previously reported results.

Net Periodic Pension Costs (Income) and Weighted Average Rates

During fiscal 2026, fiscal 2025, and fiscal 2024, the Company also incurred less than $0.1 million, $0.1 million, and $0.1 million, respectively, in net periodic benefit cost related to the Tempel Steel Company Postretirement Benefit Plan.

The discount rates used to measure plan liabilities as of the measurement date are determined individually for each plan using actuarially developed yield curves. The discount rates are determined by matching the projected cash flows used to determine the plan liabilities to a projected yield curve of high-quality corporate bonds available at the measurement date. The expected return on plan assets assumption is determined by reviewing the investment returns, as well as longer-term historical returns of an asset mix approximating the Company’s asset allocation targets, and periodically comparing these returns to the expectations of investment advisors and actuaries to determine whether long-term future returns are expected to differ significantly from the past.

Funded Status

Pension plan assets are required to be disclosed at fair value in the Company’s consolidated and combined financial statements. Fair value is defined in “Note 17 – Fair Value Measurements”. The pension plan assets’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Fair Value Hierarchy Categories

There are three measurement input levels for determining fair value. The three levels of inputs used to measure fair value are as follows:

Cash is valued at cost, which approximates fair value. There were no Level 3 plan assets at May 31, 2026, or May 31, 2025, as shown in the table below. The table below presents plan assets by fair value hierarchy level. See “Note 17 – Fair Value Measurements”.

Fair Value of Plan Assets

Equity securities include no employer stock. The investment policy and strategy for the defined benefit plans is: (i) long-term in nature with liquidity requirements that are anticipated to be minimal due to the projected normal retirement date of the average employee and the current average age of participants; (ii) to earn nominal returns, net of investment fees, equal to or in excess of the defined benefit plans’ respective liability growth rate; and (iii) to include a diversified asset allocation of domestic and international equities and fixed income investments. The Company expects to contribute approximately $2.8 million to the defined benefit and OPEB plans during fiscal 2027. However, the Company reserves the right to make additional contributions.

Estimated Future Benefits Payments