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Pensions and Other Postretirement Plans
 12 Months Ended
Dec. 31, 2021
Retirement Benefits, Description [Abstract]  
Pensions and Other Postretirement Plans PENSIONS AND OTHER POSTRETIREMENT PLANS
The Company maintains various pension and incentive savings plans and contributed to multiemployer plans on behalf of certain union-represented employee groups. Most of the Company’s employees are covered by these plans. The Company also provides healthcare and life insurance benefits to certain retired employees. These employees become eligible for benefits after meeting age and service requirements.
The Company uses a measurement date of December 31 for its pension and other postretirement benefit plans.
In December 2019, the Company purchased an irrevocable group annuity contract from an insurance company for $216.8 million to settle $212.1 million of the outstanding defined benefit pension obligation related to certain retirees and beneficiaries. The purchase of the group annuity contract was funded from the assets of the Company’s pension plans As a result of this transaction, the Company was relieved of all responsibility for these pension obligations and the insurance company is now required to pay and administer the retirement benefits owed to approximately 3,800 retirees and beneficiaries, with no change to the amount, timing or form of monthly retirement benefit payments. As a result, the Company recorded a one-time settlement gain of $91.7 million.
Defined Benefit Plans.  The Company’s defined benefit pension plans consist of various pension plans and a Supplemental Executive Retirement Plan (SERP) offered to certain executives of the Company.
In the second quarter of 2021, the Company recorded $1.1 million in expenses related to a Separation Incentive Program (SIP) for certain Dekko employees, which will be funded from the assets of the Company’s pension plans.
In the second quarter of 2020, the Company recorded $6.0 million in expenses related to a SIP for certain Kaplan, Code3 and Decile employees, which was funded from the assets of the Company’s pension plans. In the third quarter of 2020, the Company recorded $7.8 million in expenses related to a SIP for certain Kaplan employees, which was funded from the assets of the Company’s pension plans.
In the second quarter of 2019, the Company offered a SIP for certain Kaplan employees, which was funded from the assets of the Company’s pension plans. The Company recorded $6.4 million in expense related to the SIP for 2019.
The following table sets forth obligation, asset and funding information for the Company’s defined benefit pension plans:
Pension Plans
As of December 31
(in thousands)20212020
Change in Benefit Obligation
Benefit obligation at beginning of year$1,095,117 $1,020,356 
Service cost22,991 22,656 
Interest cost26,917 32,587 
Amendments2 69 
Actuarial loss5,660 78,900 
Benefits paid(63,510)(73,232)
Special termination benefits1,132 13,781 
Benefit Obligation at End of Year$1,088,309 $1,095,117 
Change in Plan Assets  
Fair value of assets at beginning of year$2,803,422 $2,312,706 
Actual return on plan assets654,911 563,948 
Benefits paid(63,510)(73,232)
Fair Value of Assets at End of Year$3,394,823 $2,803,422 
Funded Status$2,306,514 $1,708,305 
SERP
As of December 31
(in thousands)20212020
Change in Benefit Obligation  
Benefit obligation at beginning of year$122,299 $116,193 
Service cost1,022 954 
Interest cost2,943 3,678 
Actuarial (gain) loss(7,640)7,448 
Benefits paid(5,918)(5,974)
Benefit Obligation at End of Year$112,706 $122,299 
Change in Plan Assets 
Fair value of assets at beginning of year$— $— 
Employer contributions5,918 5,974 
Benefits paid(5,918)(5,974)
Fair Value of Assets at End of Year$— $— 
Funded Status$(112,706)$(122,299)
The change in the Company’s benefit obligations for the pension plans was primarily due to benefits paid during the year. The change in the benefit obligations for the Company’s SERP was due to the recognition of an actuarial gain resulting from an increase to the discount rate used to measure the benefit obligation and benefits paid during the year.
The accumulated benefit obligation for the Company’s pension plans at December 31, 2021 and 2020, was $1,052.7 million and $1,064.3 million, respectively. The accumulated benefit obligation for the Company’s SERP at
December 31, 2021 and 2020, was $112.2 million and $121.7 million, respectively. The amounts recognized in the Company’s Consolidated Balance Sheets for its defined benefit pension plans are as follows:
Pension PlansSERP
As of December 31As of December 31
(in thousands)2021202020212020
Noncurrent asset$2,306,514 $1,708,305 $— $— 
Current liability— — (6,334)(6,495)
Noncurrent liability— — (106,372)(115,804)
Recognized Asset (Liability)$2,306,514 $1,708,305 $(112,706)$(122,299)
Key assumptions utilized for determining the benefit obligation are as follows:
Pension PlansSERP
As of December 31As of December 31
 2021202020212020
Discount rate2.9%2.5%2.9%2.5%
Rate of compensation increase – age graded
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
Cash balance interest crediting rate
1.41% with phase in to 2.90% in 2024
1.41% with phase in to 2.50% in 2023
——
The Company made no contributions to its pension plans in 2021 and 2020, and the Company does not expect to make any contributions in 2022. The Company made contributions to its SERP of $5.9 million and $6.0 million for the years ended December 31, 2021 and 2020, respectively. As the plan is unfunded, the Company makes contributions to the SERP based on actual benefit payments.
At December 31, 2021, future estimated benefit payments, excluding charges for early retirement programs, are as follows:
(in thousands)Pension PlansSERP
2022$61,330 $6,425 
202361,487 6,706 
202462,710 6,897 
202563,299 7,029 
202663,102 7,118 
2027–2031316,913 35,476 
The total (benefit) cost arising from the Company’s defined benefit pension plans consists of the following components:
Pension Plans
Year Ended December 31
(in thousands)202120202019
Service cost$22,991 $22,656 $20,422 
Interest cost26,917 32,587 46,821 
Expected return on assets(137,878)(113,427)(122,790)
Amortization of prior service cost2,846 2,830 2,882 
Recognized actuarial gain(7,906)— — 
Net Periodic Benefit for the Year(93,030)(55,354)(52,665)
Settlement— — (91,676)
Special separation benefit expense1,132 13,781 6,432 
Total Benefit for the Year$(91,898)$(41,573)$(137,909)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
   
Current year actuarial gain$(511,373)$(371,621)$(245,402)
Current year prior service cost2 69 5,725 
Amortization of prior service cost(2,846)(2,830)(2,882)
Recognized net actuarial gain7,906 — — 
Curtailment and settlement— — 91,676 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(506,311)$(374,382)$(150,883)
Total Recognized in Total Benefit and Other Comprehensive Income (Before Tax Effects)
$(598,209)$(415,955)$(288,792)
SERP
Year Ended December 31
(in thousands)202120202019
Service cost$1,022 $954 $858 
Interest cost2,943 3,678 4,314 
Amortization of prior service cost331 331 339 
Recognized actuarial loss5,930 5,267 2,314 
Total Cost for the Year$10,226 $10,230 $7,825 
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial (gain) loss$(7,640)$7,448 $15,544 
Amortization of prior service cost(331)(331)(339)
Recognized net actuarial loss(5,930)(5,267)(2,314)
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(13,901)$1,850 $12,891 
Total Recognized in Total Cost and Other Comprehensive Income (Before Tax Effects)
$(3,675)$12,080 $20,716 
The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:
Pension PlansSERP
Year Ended December 31Year Ended December 31
202120202019202120202019
Discount rate
2.5%3.3%4.3%2.5%3.3%4.3%
Expected return on plan assets6.25%6.25%6.25%———
Rate of compensation increase – age graded
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
Cash balance interest crediting rate
1.41% with phase in to 2.50% in 2023
2.77% with phase in to 3.30% in 2022
3.45% with phase in to 4.30% in 2021
———
Accumulated other comprehensive income (AOCI) includes the following components of unrecognized net periodic cost for the defined benefit plans:
Pension PlansSERP
As of December 31As of December 31
(in thousands)2021202020212020
Unrecognized actuarial (gain) loss$(1,342,623)$(839,156)$19,111 $32,681 
Unrecognized prior service cost4,511 7,355 36 367 
Gross Amount(1,338,112)(831,801)19,147 33,048 
Deferred tax liability (asset)355,078 224,586 (5,340)(8,923)
Net Amount$(983,034)$(607,215)$13,807 $24,125 
Defined Benefit Plan Assets.  The Company’s defined benefit pension obligations are funded by a portfolio made up of private investment funds, a U.S. stock index fund, and a relatively small number of stocks and high-quality fixed-income securities that are held by a third-party trustee. The assets of the Company’s pension plans were allocated as follows:
As of December 31
20212020
U.S. equities61 %58 %
Private investment funds17 %18 %
U.S. stock index fund9 %9 %
International equities9 %8 %
U.S. fixed income4 %7 %
 100 %100 %
The Company manages approximately 39% of the pension assets internally, of which the majority is invested in private investment funds with the remaining investments in Berkshire Hathaway stock, a U.S. stock index fund, and short-term fixed-income securities. The remaining 61% of plan assets are managed by two investment companies. The goal of the investment managers is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both investment managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. One investment manager cannot invest more than 15% of the assets at the time of
purchase in the stock of Alphabet and Berkshire Hathaway, and no more than 30% of the assets it manages in specified international exchanges at the time the investment is made. The other investment manager cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway, and no more than 15% of the assets it manages in specified international exchanges at the time the investment is made, and no less than 10% of the assets could be invested in fixed-income securities. Excluding the exceptions noted above, the investment managers cannot invest more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval from the Plan administrator.
In determining the expected rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the Company may consult with and consider the input of financial and other professionals in developing appropriate return benchmarks.
The Company evaluated its defined benefit pension plan asset portfolio for the existence of significant concentrations (defined as greater than 10% of plan assets) of credit risk as of December 31, 2021. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country and individual fund. At December 31, 2021, the pension plan held investments in one common stock and one private investment fund that exceeded 10% of total plan assets, valued at $998.8 million, or approximately 29% of total plan assets. At December 31, 2020, the pension plan held investments in one common stock and one private investment fund that exceeded 10% of total plan assets, valued at $850.6 million, or approximately 30% of total plan assets.
The Company’s pension plan assets measured at fair value on a recurring basis were as follows:
As of December 31, 2021
(in thousands)Level 1Level 2Level 3Total
Cash equivalents and other short-term investments$2,159 $145,683 $— $147,842 
Equity securities
U.S. equities2,067,152 — — 2,067,152 
International equities301,640 — — 301,640 
Private investment funds— — 573,970 573,970 
U.S. stock index fund— — 302,478 302,478 
Total Investments$2,370,951 $145,683 $876,448 $3,393,082 
Receivables, net 1,741 
Total $3,394,823 
As of December 31, 2020
(in thousands)Level 1Level 2Level 3Total
Cash equivalents and other short-term investments$2,218 $197,655 $— $199,873 
Equity securities
U.S. equities1,614,879 — — 1,614,879 
International equities233,818 — — 233,818 
Private investment fund— — 496,458 496,458 
U.S. stock index fund— — 256,291 256,291 
Total Investments$1,850,915 $197,655 $752,749 $2,801,319 
Receivables, net 2,103 
Total $2,803,422 
Cash equivalents and other short-term investments.  These investments are primarily held in U.S. Treasury securities and registered money market funds. These investments are valued using a market approach based on the quoted market prices of the security or inputs that include quoted market prices for similar instruments and are classified as either Level 1 or Level 2 in the valuation hierarchy.
U.S. equities.  These investments are held in common and preferred stock of U.S. corporations and American Depositary Receipts (ADRs) traded on U.S. exchanges. Common and preferred shares and ADRs are traded actively on exchanges, and price quotes for these shares are readily available. These investments are classified as Level 1 in the valuation hierarchy.
International equities.  These investments are held in common and preferred stock issued by non-U.S. corporations. Common and preferred shares are traded actively on exchanges, and price quotes for these shares are readily available. These investments are classified as Level 1 in the valuation hierarchy.
Private investment funds. This category includes a commingled fund and a private investment fund. The commingled fund invests in a diversified mix of publicly-traded securities (U.S. and international stocks) and private companies. The private investment fund invests in non-public companies. These investment funds have restrictions that limit the Company’s ability to liquidate its investments. The investment in the commingled fund may be redeemed in part, or in full, at the 60-month anniversary of the investment, or at any subsequent 36-month anniversary date following the initial 60-month anniversary. The investment in the private investment fund is generally not redeemable until the dissolution of the fund. The funds are valued using the net asset value (NAV) provided by the administrator of the funds and reviewed by the Company. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of units outstanding. These investments are classified as Level 3 in the valuation hierarchy.
U.S. stock index fund. This fund consists of investments held in a diversified mix of securities (U.S. and international stocks, and fixed-income securities) and a combination of other collective funds that together are designed to track the performance of the S&P 500 Index. The fund is valued using the NAV provided by the administrator of the fund and reviewed by the Company. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of units outstanding. The investment in this fund may be redeemed daily, subject to the restrictions of the fund. This investment is classified as Level 3 in the valuation hierarchy.
The following table provides a reconciliation of changes in pension assets measured at fair value on a recurring basis, using Level 3 inputs:
(in thousands)Private
Investment Funds		U.S. Stock
Index Fund
As of December 31, 2019$151,854 $322,229 
Purchases, sales, and settlements, net130,000 (100,000)
Actual return on plan assets:
Losses relating to assets sold— (5,763)
Gains relating to assets still held at year-end214,604 39,825 
As of December 31, 2020496,458 256,291 
Purchases, sales, and settlements, net3,912 (25,000)
Actual return on plan assets:
Gains relating to assets sold— 3,715 
Gains relating to assets still held at year-end73,600 67,472 
As of December 31, 2021$573,970 $302,478 
Other Postretirement Plans.  The following table sets forth obligation, asset and funding information for the Company’s other postretirement plans:
Postretirement Plans
As of December 31
(in thousands)20212020
Change in Benefit Obligation  
Benefit obligation at beginning of year$5,587 $6,816 
Interest cost92 167 
Actuarial gain(582)(991)
Benefits paid, net of Medicare subsidy(375)(405)
Benefit Obligation at End of Year$4,722 $5,587 
Change in Plan Assets  
Fair value of assets at beginning of year$— $— 
Employer contributions375 405 
Benefits paid, net of Medicare subsidy(375)(405)
Fair Value of Assets at End of Year$— $— 
Funded Status$(4,722)$(5,587)
The change in the benefit obligation for the Company’s other postretirement plans was due to updated claims experience based on actual premium rates, the recognition of an actuarial gain resulting from an increase to the discount rate used to measure the benefit obligation, and benefits paid during the year.
The amounts recognized in the Company’s Consolidated Balance Sheets for its other postretirement plans are as follows:
Postretirement Plans
As of December 31
(in thousands)20212020
Current liability$(671)$(797)
Noncurrent liability(4,051)(4,790)
Recognized Liability$(4,722)$(5,587)
The discount rates utilized for determining the benefit obligation at December 31, 2021 and 2020, for the postretirement plans were 2.23% and 1.78%, respectively. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2021, was 6.17% for pre-age 65, decreasing to 4.5% in the year 2032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2021, was 6.52% for post-age 65, decreasing to 4.5% in the year 2032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2021, was 8.00% for Medicare Advantage, decreasing to 4.5% in the year 2032 and thereafter.
The Company made contributions to its postretirement benefit plans of $0.4 million for each of the years ended December 31, 2021 and 2020. As the plans are unfunded, the Company makes contributions to its postretirement plans based on actual benefit payments.
At December 31, 2021, future estimated benefit payments are as follows:
(in thousands)Postretirement
Plans
2022$671 
2023$590 
2024$485 
2025$393 
2026$335 
2027–2031$2,474 
The total benefit arising from the Company’s other postretirement plans consists of the following components:
Postretirement Plans
Year Ended December 31
(in thousands)202120202019
Interest cost$92 $167 $289 
Amortization of prior service credit(7)(481)(7,363)
Recognized actuarial gain(3,510)(4,048)(4,360)
Net Periodic Benefit for the Year(3,425)(4,362)(11,434)
Settlement(120)— — 
Total Benefit for the Year$(3,545)$(4,362)$(11,434)
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial gain$(582)$(991)$(1,246)
Amortization of prior service credit7 481 7,363 
Recognized actuarial gain3,510 4,048 4,360 
Settlement120 — — 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$3,055 $3,538 $10,477 
Total Recognized in Benefit and Other Comprehensive Income (Before Tax Effects)
$(490)$(824)$(957)
The costs for the Company’s postretirement plans are actuarially determined. The discount rate utilized to determine periodic cost for the years ended December 31, 2021, 2020 and 2019 were 1.78%, 2.68% and 3.69%. AOCI included the following components of unrecognized net periodic benefit for the postretirement plans:
As of December 31
(in thousands)20212020
Unrecognized actuarial gain$(13,642)$(16,690)
Unrecognized prior service credit(12)(19)
Gross Amount(13,654)(16,709)
Deferred tax liability3,724 4,512 
Net Amount$(9,930)$(12,197)
Multiemployer Pension Plans.  In 2021, 2020 and 2019, the Company contributed to one multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covered certain union-represented employees. The Company’s total contributions to the multiemployer pension plan amounted to $0.1 million in each year for 2021, 2020 and 2019.
Savings Plans.  The Company recorded expense associated with retirement benefits provided under incentive savings plans (primarily 401(k) plans) of approximately $10.9 million in 2021, $8.8 million in 2020 and $9.8 million in 2019.