Pension Plan and Postretirement Benefits Other Than Pension

12 Months Ended

Dec. 31, 2020

Pension Plan and Postretirement Benefits Other Than Pension

Pension Plan and Postretirement Benefits Other Than Pension

10.            Pension Plan and Postretirement Benefits Other Than Pension

Benefits payable under our noncontributory retirement plan that covers substantially all employees and certain vested employees of our former parent company (the “Pension Plan”) were based on employees’ years of service and compensation during the final 10 years of employment. The Compensation Committee of the Company’s Board of Directors (“Compensation Committee”) approved an amendment to freeze the Pension Plan, effective September 30, 2017.  After September 30, 2017, participants in the Pension Plan ceased accruing additional benefits for future service or compensation. Participants retained benefits accumulated as of September 30, 2017 in accordance with the terms of the Pension Plan. The Compensation Committee approved the termination of the Pension Plan, effective June 1, 2019.  The Company is currently performing the administrative actions required to terminate the Pension Plan in a standard termination, as defined by the Pension Benefit Guaranty Corporation.

In connection with the termination of the Pension Plan, in July 2020, the Company contributed $3.7 million to the Pension Plan. Payments were made in July 2020 from the Pension Plan to participants, beneficiaries and alternate payees that elected to receive a lump sum distribution and to the selected annuity provider that has assumed the liabilities of the Pension Plan.  As part of the assumption of Pension Plan liabilities by the annuity provider, the Company removed the pension liability on its consolidated balance sheet and recorded a settlement loss in the amount of $1.3 million during 2020.

We also sponsor an unfunded defined benefit postretirement medical plan that previously covered substantially all employees, as well as Advisors. The medical plan is contributory with participant contributions adjusted annually. The medical plan does not provide for benefits after age 65 with the exception of a small group of employees that were grandfathered when such plan was established. During 2016, the Company amended this plan to discontinue the availability of coverage for any individuals who retire after December 31, 2016.

A reconciliation of the funded status of these plans and the assumptions related to the obligations at December 31, 2020, 2019 and 2018 are as follows:

					Other
	Pension Benefits				Postretirement Benefits
	2020		2019	2018	2020	2019	2018
	(in thousands)
Change in projected benefit obligation:
Net benefit obligation at beginning of year	$	186,480	154,528	184,245	726	1,048	2,195
Interest cost		3,070	6,146	5,986	15	33	54
Benefits paid		(1,154)	(13,221)	(13,690)	(827)	(677)	(602)
Actuarial loss (gain)		9,294	39,027	(22,013)	409	47	(965)
Plan Termination		(197,690)	—	—	—	—	—
Retiree contributions		—	—	—	220	275	366
Net benefit obligation at end of year	$	—	186,480	154,528	543	726	1,048

					Other
	Pension Benefits				Postretirement Benefits
	2020		2019	2018	2020	2019	2018
	(in thousands)
Change in plan assets:
Fair value of plan assets at beginning of year	$	183,903	162,999	170,881	—	—	—
Actual return on plan assets		11,378	34,125	1,808	—	—	—
Employer contributions		3,661	—	4,000	607	402	236
Retiree contributions		—	—	—	220	275	366
Benefits paid		(1,154)	(13,221)	(13,690)	(827)	(677)	(602)
Plan Termination		(197,788)	—	—	—	—	—
Fair value of plan assets at end of year	$	—	183,903	162,999	—	—	—
Funded status at end of year	$	—	(2,577)	8,471	(543)	(726)	(1,048)

							Other
	Pension Benefits						Postretirement Benefits
	2020		2019		2018		2020		2019		2018
	(in thousands, except percentage data)
Amounts recognized in the statement of financial position:
Noncurrent assets	$	—	—		8,471		—		—		—
Current liabilities		—	—		—		(97)		(158)		(250)
Noncurrent liabilities		—	(2,577)		—		(446)		(568)		(798)
Net amount recognized at end of year	$	—	(2,577)		8,471		(543)		(726)		(1,048)
Weighted average assumptions used to determine benefit obligation at December 31:
Discount rate		N/A	3.32	%	4.45	%	2.03	%	2.87	%	4.08	%

The discount rate assumption used to determine the pension and other postretirement benefits obligations was based on the Aon Hewitt AA Only Above Median Yield Curve. This discount rate was determined separately for each plan by plotting the expected benefit payments from each plan against a yield curve of high quality, zero coupon bonds and calculating the single rate that would produce the same present value of liabilities as the yield curve.

In 2018, the Company implemented a new pension de-risking strategy designed to more closely match assets to the pension obligations by shifting exposure from return-seeking assets to liability-hedging assets.  In 2019 and 2020, the Company further shifted plan assets towards cash.  Plan assets were distributed in 2020 as part of the termination and therefore, there are no Pension Plan assets at December 31, 2020.

We determine the fair value of our Pension Plan assets using broad levels of inputs as defined by related accounting standards and categorized as Level 1, Level 2 or Level 3, as described in Note 4. The following table summarizes our Pension Plan assets as of December 31, 2019.

2019	Level 1		Level 2	Level 3	Total
	(in thousands)
Cash equivalents	$	—	91,989	—		91,989
Fixed income securities:
U.S. Treasuries		—	19,311	—		19,311
Corporate bonds		—	62,313	—		62,313
Foreign bonds		—	8,913	—		8,913
Total investment securities		—	182,526	—		182,526
Cash						1,377
Total					$	183,903

In 2018, we adjusted the expected long-term rate of return to 5.00% to reflect a further decrease to the Plan’s equity securities’ holdings based on expected investment mix at the beginning of the year.  During 2018, we accelerated the de-risking strategy and as such, further reduced the long-term rate of return in 2019 to 4.00%.  In 2020, the long-term rate of return was reduced to 2.5% as we continued to de-risk Pension Plan assets in preparation for termination.

Net periodic pension costs are recorded in investment and other income on the Company’s consolidated statements of income.  The components of net periodic pension and other postretirement costs consisted of the following for the years ended December 31, 2020, 2019 and 2018:  

					Other
	Pension Benefits				Postretirement Benefits
	2020		2019	2018	2020	2019	2018
	(in thousands)
Components of net periodic benefit cost:
Interest cost	$	3,070	6,146	5,986	15	33	54
Expected return on plan assets		(2,617)	(6,315)	(8,320)	—	—	—
Actuarial loss (gain)		—	11,217	(15,501)	—	—	—
Actuarial gain amortization		—	—	—	(269)	(495)	(120)
Prior service cost amortization		—	—	—	—	—	(2)
Settlement loss		1,302	—	—	—	—	—
Total	$	1,755	11,048	(17,835)	(254)	(462)	(68)

The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, 2020, 2019 and 2018 are as follows:

							Other
	Pension Benefits						Postretirement Benefits
	2020		2019		2018		2020		2019		2018
Discount rate	3.07	%	4.45	%	3.76	%	2.87	%	4.08	%	3.28	%
Expected return on plan assets	2.50	%	4.00	%	5.00	%	Not applicable
Rate of compensation increase	Not applicable						Not applicable

________________________

Under current plan provisions, we expect the following benefit payments to be paid.

		Other
		Postretirement
		Benefits
	(in thousands)
2021	$	97
2022		81
2023		58
2024		58
2025		37
2026 through 2030		110
	$	441

Our policy with respect to funding the Pension Plan was to fund at least the minimum required by the Employee Retirement Income Security Act of 1974, as amended, and not more than the maximum amount deductible for tax purposes. In 2020, the Company contribution to the Pension Plan was related to the termination. No contributions were made to the Pension Plan for 2019 and all contributions for 2018 were voluntary.

All Company contributions to other postretirement medical benefits are voluntary, as the postretirement medical plan is not funded and is not subject to any minimum regulatory funding requirements. The contributions for each year represent claims paid for medical expenses, and we anticipate making the 2021 expected contribution with cash generated from operations. Participants also made contributions to the postretirement plan for the years ended December 31, 2020, 2019 and 2018.

For measurement purposes, the initial health care cost trend rate was 6.44% (prior to age 65) and 7.42% (subsequent to age 65) for 2020, 7.60% (prior to age 65) and 8.70% (subsequent to age 65) for 2019 and 8.05% (prior to age 65) and 9.30% (subsequent to age 65) for 2018.  The health care cost trend rate reflects anticipated increases in health

care costs. The initial growth rates for 2020 are assumed to gradually decline over the next 8 years to a rate of 4.5%.

At December 31, 2020, the accrued pension and postretirement liability recorded in the consolidated balance sheet was comprised of a liability for postretirement benefits in the amount of $0.4 million. The current portion of postretirement liability of $0.1 million is included in other current liabilities on the consolidated balance sheet.  At December 31, 2019, the accrued pension and postretirement liability recorded in the consolidated balance sheet was comprised of a pension liability of $2.6 million and a liability for postretirement benefits in the amount of $0.6 million. The current portion of postretirement liability of $0.1 million is included in other current liabilities on the consolidated balance sheet.