| Retirement Plans |
Retirement Plans The Retirement Income Plan for Selective Insurance Company of America and the Supplemental Excess Retirement Plan (jointly referred to as the "Retirement Income Plan") were amended in the first quarter of 2013 to curtail the accrual of additional benefits for all employees eligible to participate in the plans after March 31, 2016. The curtailment of the plans resulted in a net actuarial gain recognized in OCI of $44.0 million on a pre-tax basis.
As a result of the curtailment, the Retirement Income Plan was re-measured as of March 31, 2013. When determining the most appropriate discount rate to be used in the valuation, we consider, among other factors, our expected payout patterns of the Retirement Income Plan's obligations, as well as our investment strategy. We ultimately select the rate that we believe best represents our estimate of the inherent interest rate at which the Retirement Income Plan's liabilities can be effectively settled. The expected rate of return on plan assets at March 31, 2013 remained at 7.40%, consistent with our December 31, 2012 assumption. For re-measurement, we determined that the most appropriate discount rate was 4.66%, up slightly from 4.42% determined as of December 31, 2012.
Eligible employees impacted by the curtailment of the Retirement Income Plan began receiving, on April 5, 2013, an enhanced company contribution to the Selective Insurance Retirement Savings Plan of 4% of base salary, which is the enhanced company contribution currently provided to all employees not eligible to participate in the Retirement Income Plan.
The funded status of the Retirement Income Plan recognized in the Consolidated Balance Sheets as of June 30, 2013, the valuation of which was updated as of March 31, 2013 as a result of the first quarter curtailment discussed above, and December 31, 2012, was as follows: | | | | | | | | |
| | Retirement Income Plan | ($ in thousands) | | June 30, 2013 | | December 31, 2012 | Change in Benefit Obligation: | | | | | Benefit obligation, beginning of year | | $ | 302,647 |
| | 254,009 |
| Service cost | | 2,449 |
| | 8,091 |
| Interest cost | | 3,303 |
| | 12,981 |
| Actuarial (gain) losses | | (11,485 | ) | | 33,596 |
| Benefits paid | | (1,598 | ) | | (6,030 | ) | Impact of curtailment | | (29,603 | ) | | — |
| Benefit obligation, end of period | | $ | 265,713 |
| | 302,647 |
| | | | | | Change in Fair Value of Assets: | | | | | Fair value of assets, beginning of year | | $ | 207,150 |
| | 182,614 |
| Actual return on plan assets, net of expenses | | 6,760 |
| | 21,896 |
| Contribution by employer to funded plans | | 2,650 |
| | 8,550 |
| Contribution by employer to unfunded plans | | 30 |
| | 120 |
| Benefits paid | | (1,598 | ) | | (6,030 | ) | Fair value of assets, end of period | | $ | 214,992 |
| | 207,150 |
| | | | | | Funded status | | $ | (50,721 | ) | | (95,497 | ) |
| | | | | | | | | Amount Recognized in Consolidated Balance Sheet: | | | | | Liabilities | | $ | (50,721 | ) | | (95,497 | ) | Net pension liability, end of period | | $ | (50,721 | ) | | (95,497 | ) |
| | | | | | | | | Amount Recognized in AOCI: | | | | | Prior service cost | | $ | — |
| | 26 |
| Net actuarial loss | | 57,543 |
| | 103,365 |
| Total | | $ | 57,543 |
| | 103,391 |
|
| | | | | | | | | Other Information: | | | | | Accumulated benefit obligation | | $ | 257,412 |
| | 265,899 |
|
| | | | | | | Weighted-Average Liability Assumptions: | | | | | Discount Rate | | 4.66 | % | | 4.42 | Rate of compensation increase | | 4.00 | % | | 4.00 |
The following table shows the cost of the Retirement Income Plan and the life insurance benefit ("Retirement Life Plan") for the quarterly and six month periods ended June 30, 2013 and June 30, 2012:
| | | | | | | | | | | | | | | | | Retirement Income Plan
Quarter ended June 30, | | Retirement Life Plan
Quarter ended June 30, | ($ in thousands) | | 2013 | | 2012 | | 2013 | | 2012 | Components of Net Periodic Benefit Cost and Other Amounts Recognized in OCI: | | |
| | |
| | |
| | |
| | | | | | | | | | Net Periodic Benefit Cost: | | | | | | | | | Service cost | | $ | 1,857 |
| | 2,154 |
| | — |
| | — |
| Interest cost | | 3,051 |
| | 3,230 |
| | 69 |
| | 74 |
| Expected return on plan assets | | (3,985 | ) | | (3,547 | ) | | — |
| | — |
| Amortization of unrecognized prior service cost | | — |
| | 37 |
| | — |
| | — |
| Amortization of unrecognized net actuarial loss | | 772 |
| | 1,383 |
| | 17 |
| | 8 |
| Total net periodic cost | | $ | 1,695 |
| | 3,257 |
| | 86 |
| | 82 |
| | | | | | | | | | Other Changes in Plan Assets and Benefit Obligations Recognized in OCI: | | | | | | | | | Reversal of amortization of net actuarial loss | | $ | (772 | ) | | (1,383 | ) | | (17 | ) | | (8 | ) | Reversal of amortization of prior service cost | | — |
| | (37 | ) | | — |
| | — |
| Total recognized in OCI | | $ | (772 | ) | | (1,420 | ) | | (17 | ) | | (8 | ) | | | | | | | | | | Total recognized in net periodic benefit cost and OCI | | $ | 923 |
| | 1,837 |
| | 69 |
| | 74 |
|
| | | | | | | | | | | | | | | | | Retirement Income Plan
Six Months ended June 30, | | Retirement Life Plan
Six Months ended June 30, | ($ in thousands) | | 2013 | | 2012 | | 2013 | | 2012 | Components of Net Periodic Benefit Cost and Other Amounts Recognized in OCI: | | |
| | |
| | |
| | |
| | | | | | | | | | Net Periodic Benefit Cost: | | | | | | | | | Service cost | | $ | 4,306 |
| | 4,308 |
| | — |
| | — |
| Interest cost | | 6,354 |
| | 6,460 |
| | 139 |
| | 148 |
| Expected return on plan assets | | (7,833 | ) | | (7,094 | ) | | — |
| | — |
| Amortization of unrecognized prior service cost | | 10 |
| | 75 |
| | — |
| | — |
| Amortization of unrecognized net actuarial loss | | 2,594 |
| | 2,766 |
| | 35 |
| | 15 |
| Curtailment expense | | 16 |
| | — |
| | — |
| | — |
| Total net periodic cost | | $ | 5,447 |
| | 6,515 |
| | 174 |
| | 163 |
| | | | | | | | | | Other Changes in Plan Assets and Benefit Obligations Recognized in OCI: | | | | | | | | | Net actuarial gain due to curtailment | | $ | (44,000 | ) | | — |
| | — |
| | — |
| Reversal of amortization of net actuarial loss | | (2,594 | ) | | (2,766 | ) | | (35 | ) | | (15 | ) | Reversal of amortization of prior service cost | | (10 | ) | | (75 | ) | | — |
| | — |
| Curtailment expense | | (16 | ) | | — |
| | — |
| | — |
| Total recognized in OCI | | $ | (46,620 | ) | | (2,841 | ) | | (35 | ) | | (15 | ) | | | | | | | | | | Total recognized in net periodic benefit cost and OCI | | $ | (41,173 | ) | | 3,674 |
| | 139 |
| | 148 |
|
The amortization of prior service cost related to the Retirement Income Plan is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the Retirement Income Plan.
The estimated net actuarial loss for the Retirement Income Plan that will be amortized from AOCI into net periodic benefit cost during the 2013 fiscal year is $4.1 million. | | | | | | | | | | | | | Retirement Income Plan
Six Months ended June 30, | | Retirement Life Plan
Six Months ended June 30, | | | 2013 | | 2012 | | 2013 | | 2012 | Weighted-Average Expense Assumptions: | | | | | | | | | Discount rate | | 4.66 | % | | 5.16 | | 4.66 | | 5.16 | Expected return on plan assets | | 7.40 | % | | 7.75 | | — | | — | Rate of compensation increase | | 4.00 | % | | 4.00 | | — | | — |
The following table presents future benefit payments expected under the Retirement Income Plan: | | | | | | ($ in thousands) | | Retirement Income Plan | Benefits Expected to be Paid in Future Years | | |
| Fiscal Years: | | |
| 2013 | | $ | 7,586 |
| 2014 | | 8,384 |
| 2015 | | 9,148 |
| 2016 | | 9,942 |
| 2017 | | 10,810 |
| 2018-2022 | | 67,447 |
|
For additional information regarding our retirement plans, refer to Note 15. "Retirement Plans" included in Item 8. "Financial Statements and Supplementary Data." of our 2012 Annual Report. |