Pension and Other Postretirement Benefit Plans

The Corporation's retirement plans include a qualified pension plan, a nonqualified pension plan, a nonqualified postretirement benefit plan, a 401(k) savings plan, and a multi-employer defined benefit plan.

Qualified and Nonqualified Pension Plans and Nonqualified Postretirement Benefit Plans

The Chemical Financial Corporation Employees’ Pension Plan (the "Retirement Plan") of the Corporation is a qualified defined-benefit, noncontributory plan, which provides for postretirement pension benefits for all salaried employees of the Corporation and its subsidiary, Chemical Bank, employed on or before January 1, 2006. On May 15, 2006, the Board of Directors of the Corporation approved a partial freezing of the Plan effective June 30, 2006. Effective September 30, 2017, the Pension and Compensation Committee approved an amendment to the Retirement Plan to cease accruing additional benefits under the existing pension benefit formula after the effective date and all accrued benefits were frozen. The benefits of all the participants in the qualified pension plan were determined based on the accrued benefit in effect under the qualified pension plan as of September 30, 2017. The freeze of the plan, effective September 30, 2017, required a remeasurement of the plan's projected benefit obligation. The combined impact of the remeasurement, an increase in fair value of underlying assets, the impact of the freeze and changes to participant's status as a result of the Corporation's restructuring efforts in the third quarter of 2017, resulted in an increase of the funded status of the plan by $10.6 million. A discount rate of 3.81% was utilized to remeasure the projected benefit obligation as of September 30, 2017. There was less than $0.1 million of curtailment cost to the Corporation as a result of the amendment. The Corporation did not make a contribution to the Retirement Plan during the three and nine months ended September 30, 2017 or 2016. The Retirement Plan is fully funded as of September 30, 2017 and anticipated future employer benefit payments total $5.8 million.

The Pension and Compensation Committee approved a curtailment to the Corporation's Supplemental Executive Retirement Plan ("SERP"), or nonqualified pension plan, due to the retirement of the participant in the SERP. The curtailment resulted in a reduction in obligation of $362 thousand. As of September 30, 2017, a $2.3 million liability included in other liabilities was recorded in the Corporation's Consolidated Balance Sheet related to the SERP. A discount rate of 3.63% was utilized to measure the projected benefit obligation prior to September 30, 2017; after that date, the discount rate used to determine the SERP liability as of September 30, 2017, was 0.00% as the remaining liability is to be paid out within the following six months.

The components of net periodic benefit cost for the Corporation’s qualified and nonqualified pension plans and nonqualified postretirement benefit plan are as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2017			2016			2017			2016
Defined Benefit Pension Plans
Service cost	$	233		$	279		$	700		$	834
Interest cost	1,302			1,357			3,906			4,072
Contractual termination cost	—			32			—			32
Expected return on plan assets	(2,216		)	(2,141		)	(6,650		)	(6,422		)
Amortization of unrecognized net loss	578			585			1,734			1,729
Settlement⁽¹⁾	322			—			322			—
Net periodic benefit cost (income)	$	219		$	112		$	12		$	245
Postretirement Benefit Plan
Service cost	$	1		$	2		$	4		$	7
Interest cost	24			33			70			99
Amortization of prior service cost	—			29			—			88
Amortization of unrecognized net gain	(41		)	(24		)	(121		)	(75		)
Net periodic benefit cost (income)	$	(16	)	$	40		$	(47	)	$	119


⁽¹⁾	The settlement charge relates to the settlement of liabilities under the SERP for the retirement of the plan participant during the third quarter of 2017.

401(k) Savings Plan

401(k) Savings Plan expense for the Corporation’s match of participants’ base compensation contributions and a 4.0% of eligible pay contribution to employees who are not grandfathered under the pension plan was $2.5 million and $1.7 million for the three months ended September 30, 2017 and 2016, respectively, and $7.5 million and $4.4 million for the nine months ended September 30, 2017 and 2016, respectively. The Corporation's base compensation match equals 50.0% of the participants' elective deferrals on the first 4.0% of the participants' base compensation up to the maximum amount allowed under the Internal Revenue Code.

Multi-Employer Defined Benefit Plan

In conjunction with the April 1, 2015 acquisition of Monarch, the Corporation acquired a participation in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra DB Plan), a qualified defined benefit pension plan. Employee benefits for Monarch employees under the Plan were frozen effective April 1, 2004. The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code (IRC). The Pentegra DB Plan is a single plan under IRC Section 413(c) and, as a result, all of the plan's assets stand behind all of the plan's liabilities. Accordingly, contributions made by a participating employer may be used to provide benefits to participants of other participating employers. No contributions were made by the Corporation to the Pentegra DB Plan for the three and nine months ended September 30, 2017 and 2016.