Pensions and Other Postretirement Plans |
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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:
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:
Key assumptions utilized for determining the benefit obligation are as follows:
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:
The total (benefit) cost arising from the Company’s defined benefit pension plans consists of the following components:
The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:
Accumulated other comprehensive income (AOCI) includes the following components of unrecognized net periodic cost for the defined benefit plans:
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:
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:
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:
Other Postretirement Plans. The following table sets forth obligation, asset and funding information for the Company’s other postretirement plans:
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:
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:
The total benefit arising from the Company’s other postretirement plans consists of the following components:
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:
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.
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