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Pension Plans
12 Months Ended
Dec. 31, 2017
Retirement Benefits [Abstract]  
Pension Plans

8. Pension Plans

Prior to January 1, 2001, the Company maintained a noncontributory defined benefit pension plan in which substantially all of its employees were eligible to participate upon meeting the pension plan’s participation requirements. The benefits were based on years of service and compensation levels. On December 31, 2000, benefits credited under the plan’s previous formula were frozen. On January 1, 2001, the Company amended its defined benefit pension plan to determine future benefits using a cash balance formula. Under the cash formula, each participant had an account which was credited monthly with 3% of qualified earnings and the interest earned on their previous month-end cash balance. In addition, the Company included a “grandfather” clause which assures that those participating at January 1, 2001 will receive the greater of the benefit calculated under the cash balance plan and the benefit that would have been payable if the defined benefit plan had remained in existence. The benefit payable to a terminated vested participant upon retirement at age 65, or as early as age 55 if the participant had 15 years of service at the time the plan was frozen, is equal to the participant’s account balance, which increases with interest credits over time. At retirement, the employee generally receives the balance in the account as a lump sum. The funding policy of the Company is to contribute annually an amount which equals or exceeds the minimum required by applicable law. On December 31, 2001, the plan was frozen such that no new participants were allowed to enter the plan and existing participants were no longer eligible to earn service credits.

As a result of increased lump-sum distributions from the retirement plan during 2017, 2016 and 2015, net settlement losses of $1.7 million, $1.7 million and $2.4 million were recognized in 2017, 2016 and 2015, respectively. These settlement losses have been classified as corporate operating expenses in the accompanying consolidated statements of operations.

 

The following table sets forth the funded status at December 31 (amounts in thousands):

 

     2017      2016  

CHANGE IN BENEFIT OBLIGATION:

     

Benefit obligation at beginning of year

   $ 85,360      $ 87,236  

Interest cost

     3,019        3,173  

Actuarial loss

     3,624        304  

Benefits paid

     (6,308      (5,353
  

 

 

    

 

 

 

Benefit obligation at end of year

     85,695        85,360  
  

 

 

    

 

 

 

CHANGE IN PLAN ASSETS:

     

Fair value of plan assets at beginning of year

     65,446        65,439  

Actual return on plan assets

     10,107        5,360  

Benefits paid

     (6,308      (5,353
  

 

 

    

 

 

 

Fair value of plan assets at end of year

     69,245        65,446  
  

 

 

    

 

 

 

Funded status and accrued pension cost

   $ (16,450    $ (19,914
  

 

 

    

 

 

 

Net periodic pension expense reflected in the accompanying consolidated statements of operations included the following components for the years ended December 31 (amounts in thousands):

 

     2017      2016      2015  

Interest cost

   $ 3,019      $ 3,173      $ 3,423  

Expected return on plan assets

     (4,202      (4,131      (4,627

Recognized net actuarial loss

     919        1,047        917  

Net settlement loss

     1,734        1,715        2,356  
  

 

 

    

 

 

    

 

 

 

Total net periodic pension expense

   $ 1,470      $ 1,804      $ 2,069  
  

 

 

    

 

 

    

 

 

 

Assumptions

The weighted-average assumptions used to determine the benefit obligation at December 31 are as follows:

 

     2017     2016     2015  

Discount rate

     3.30     3.72     3.90

Rate of compensation increase

     N/A       N/A       N/A  

The weighted-average assumptions used to determine the net periodic pension expense for years ended December 31 are as follows:

 

     2017     2016     2015  

Discount rate

     3.59     3.70     3.77

Rate of compensation increase

     N/A       N/A       N/A  

Expected long-term rate of return on plan assets

     6.50     6.50     6.50

The rate of increase in future compensation levels was not applicable for any reported years due to the Company amending the plan to freeze the cash balance benefit as described above.

The Company determines the overall expected long-term rate of return on plan assets based on its estimate of the return that plan assets will provide over the period that benefits are expected to be paid out. In preparing this estimate, the Company assesses the rates of return on each current allocation of plan assets, and advice from its third-party actuary and investment consultants. The expected return on plan assets is a long-term assumption and generally does not significantly change annually. While historical returns are considered, the rate of return assumption is primarily based on projections of expected returns based on fair value, using economic data and financial models to estimate the probability of returns. The probability distribution of annualized returns for the portfolio using current asset allocations is used to determine the expected range of returns for a ten-to-twenty-year horizon. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and expense.

 

Plan Assets

The plan’s overall strategy is to achieve a rate of return necessary to fund benefit payments by utilizing a variety of asset types, investment strategies and investment managers. The plan seeks to achieve a real long-term rate of return over inflation resulting from income, capital gains, or both, which assists the plan in meeting its long-term objectives.

The long-term target allocations for the plan’s assets are managed dynamically according to a sliding scale correlating with the funded status of the plan. As the plan’s funded status increases, allocations are moved away from equity securities toward fixed income securities. Equity securities primarily include large cap and mid cap companies. Fixed income securities primarily include corporate bonds of companies in diversified industries, mortgage-backed securities and U.S. Treasuries. Investments in hedge funds and private equity funds are not held by the plan.

The allocation of the defined benefit pension plan’s assets at December 31 are as follows (amounts in thousands):

 

Asset Class

   2017      2016  

Cash

   $ 642      $ 728  

Mutual funds

     68,603        64,718  
  

 

 

    

 

 

 

Total

   $ 69,245      $ 65,446  
  

 

 

    

 

 

 

All of the assets held by the plan consist of money market and mutual funds traded in an active market. The Company determined the fair value of these assets based on the net asset value per unit of the funds or the portfolio, which is based upon quoted market prices in an active market. Therefore, the Company has categorized these investments as Level 1.

Periodically, and based on market conditions, the entire account is rebalanced to maintain the desired allocation and the investment policy is reviewed. Within each asset class, plan assets are allocated to various investment styles. Professional managers manage all assets of the plan and professional advisors assist the plan in the attainment of its objectives.

Expected Contributions and Benefit Payments

The Company expects to contribute approximately $1.6 million to its defined benefit pension plan in 2018. Based on the Company’s assumptions discussed above, the Company expects to make the following estimated future benefit payments under the plan during the years ending December 31 (amounts in thousands):

 

2018

   $ 4,358  

2019

     5,102  

2020

     4,764  

2021

     5,029  

2022

     5,990  

2023 - 2027

     29,384  

Other Information

The Company also maintains non-qualified pension plans (the “Non-Qualified Plans”) to provide benefits to certain key employees. The Non-Qualified Plans are not funded and the beneficiaries’ rights to receive distributions under these plans constitute unsecured claims to be paid from the Company’s general assets. At December 31, 2017, the Non-Qualified Plans’ projected benefit obligations and accumulated benefit obligations were $15.1 million.

The Company’s accrued cost related to its qualified and non-qualified pension plans of $31.6 million and $34.8 million at December 31, 2017 and 2016, respectively, is included in other liabilities in the accompanying consolidated balance sheets. The decrease in the deferred net loss related to the Company’s retirement plans during 2017, 2016 and 2015 resulted in an increase in equity of $4.5 million, $3.8 million and $0.1 million, respectively, net of taxes of $1.5 million, $0, and $(0.1) million, respectively. Each of these adjustments to equity due to the change in the minimum liability are included in other comprehensive loss in the accompanying consolidated statements of stockholders’ equity.

 

The net gain recognized in other comprehensive income for the years ended December 31, 2017 and 2016 was $4.5 million and $3.8 million, respectively. Included in accumulated other comprehensive loss at December 31, 2017 and 2016 are unrecognized actuarial losses of $35.9 million and $40.4 million ($25.0 million and $27.9 million net of tax), respectively, that have not yet been recognized in net periodic pension expense. Net losses are amortized into net periodic pension expense based on the life expectancy of plan participants expected to receive benefits, using a corridor approach based on the greater of projected benefit obligation or fair value of plan assets. The estimated actuarial loss for the retirement plans included in accumulated other comprehensive loss that will be amortized from accumulated other comprehensive loss into net periodic pension expense over the next fiscal year is $1.0 million.