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POSTRETIREMENT BENEFITS
12 Months Ended
Dec. 31, 2020
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]  
POSTRETIREMENT BENEFITS We have historically provided certain health care benefits for a large number of retired U.S. employees. Employees hired prior to January 1, 2002 become eligible for benefits if they attain the appropriate years of service and age prior to retirement. Employees hired on January 1, 2002 or later are not eligible to participate in the plan. In addition to our retiree health care plan, we also have a U.S. supplemental executive retirement plan (SERP). The SERP is no longer an active plan. It is not adding new participants and all of the current participants are retired. The SERP has no plan assets, but our obligation is fully funded by investments in company-owned life insurance policies.
Obligations and funded status – The following tables summarize the change in benefit obligation, plan assets and funded status during 2020 and 2019:
(in thousands)Postretirement benefit plan
Pension plan(1)
Change in benefit obligation:
Benefit obligation, December 31, 2018$73,717 $3,148 
Interest cost2,617 111 
Net actuarial loss5,012 316 
Benefits paid from plan assets and company funds(8,171)(324)
Benefit obligation, December 31, 201973,175 3,251 
Interest cost1,835 76 
Net actuarial loss218 340 
Benefits paid from plan assets and company funds(7,064)(324)
Benefit obligation, December 31, 2020$68,164 $3,343 
Change in plan assets:
Fair value of plan assets, December 31, 2018$114,976 $— 
Return on plan assets21,179 — 
Benefits paid(6,237)— 
Fair value of plan assets, December 31, 2019129,918 — 
Return on plan assets15,741 — 
Benefits paid(6,287)— 
Fair value of plan assets, December 31, 2020$139,372 $— 
Funded status, December 31, 2019$56,743 $(3,251)
Funded status, December 31, 2020$71,208 $(3,343)

(1) The accumulated benefit obligation equals the projected benefit obligation.

The funded status of our plans was recognized in the consolidated balance sheets as of December 31 as follows:
Postretirement benefit planPension plan
(in thousands)2020201920202019
Other non-current assets$71,208 $56,743 $— $— 
Accrued liabilities— — 324 324 
Other non-current liabilities— — 3,019 2,927 

Amounts included in accumulated other comprehensive loss as of December 31 that have not been recognized as components of postretirement benefit income were as follows:
(in thousands)20202019
Unrecognized prior service credit$11,335 $12,756 
Unrecognized net actuarial loss(35,454)(45,319)
Tax effect2,163 4,157 
Amount recognized in accumulated other comprehensive loss, net of tax
$(21,956)$(28,406)

The unrecognized prior service credit relates to our postretirement benefit plan and is a result of previous plan amendments that reduced the accumulated postretirement benefit obligation. A reduction is first used to reduce any existing unrecognized prior service cost, then to reduce any remaining unrecognized transition obligation. The excess is the unrecognized prior service credit. The prior service credit is amortized on the straight-line basis over the remaining life expectancy of plan participants at the time of each plan amendment.
Unrecognized net actuarial gains and losses result from experience different from that assumed and from changes in assumptions. The net actuarial loss generated during 2020 was primarily due to the decrease in the discount rate used to discount the benefit obligation, partially offset by our claims and other experience. The net actuarial loss generated during 2019 was primarily due to the decrease in the discount rate used to discount the benefit obligation. Unrecognized actuarial gains and losses for our postretirement benefit plan are amortized over the average remaining life expectancy of inactive plan participants, as a large percentage of the plan participants are classified as inactive. This amortization period is currently 8.7 years.

Postretirement benefit income – Postretirement benefit income for the years ended December 31 consisted of the following components:
(in thousands)202020192018
Interest cost$1,911 $2,727 $2,626 
Expected return on plan assets(7,619)(6,957)(7,737)
Amortization of prior service credit(1,421)(1,421)(1,421)
Amortization of net actuarial losses2,301 3,223 2,884 
Net periodic benefit income$(4,828)$(2,428)$(3,648)

Actuarial assumptions – In measuring the benefit obligations as of December 31, the following discount rate assumptions were used:
Postretirement benefit planPension plan
2020201920202019
Discount rate2.16 %3.03 %1.74 %2.76 %

In measuring net periodic benefit income for the years ended December 31, the following assumptions were used:

Postretirement benefit planPension plan
202020192018202020192018
Discount rate3.03 %4.13 %3.46 %2.76 %4.01 %3.35 %
Expected return on plan assets6.00 %6.25 %6.25 %— — — 

The discount rate assumption is based on the rates of return on high-quality, fixed-income instruments currently available whose cash flows approximate the timing and amount of expected benefit payments. In determining the expected long-term rate of return on plan assets, we utilize our historical returns and then adjust these returns for estimated inflation and projected market returns. Our inflation assumption is primarily based on analysis of historical inflation data.

In measuring the benefit obligation as of December 31 for our postretirement benefit plan, the following assumptions for health care cost trend rates were used:
202020192018
Participants under age 65Participants age 65 and olderParticipants under age 65Participants age 65 and olderParticipants under age 65Participants age 65 and older
Health care cost trend rate assumed for next year
7.2 %8.0 %7.4 %8.4 %7.7 %8.7 %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
4.5 %4.5 %4.5 %4.5 %4.5 %4.5 %
Year that the rate reaches the ultimate trend rate
203020302029202920292029
Plan assets – The allocation of plan assets by asset category as of December 31 was as follows:
Postretirement benefit plan
20202019
Mortgage-backed securities24 %24 %
U.S. corporate debt securities21 %15 %
International equity securities20 %19 %
U.S. large capitalization equity securities17 %24 %
Government debt securities15 %14 %
U.S. small and mid-capitalization equity securities%%
Total100 %100 %

Our postretirement benefit plan has assets that are intended to meet long-term obligations. In order to meet these obligations, we employ a total return investment approach that considers cash flow needs and balances long-term projected returns against expected asset risk, as measured using projected standard deviations. Risk tolerance is established through consideration of projected plan liabilities, the plan's funded status, projected liquidity needs and our financial condition.

The target asset allocation percentages for our postretirement benefit plan are based on our liability and asset projections. The targeted allocation of plan assets is 60% fixed income securities, 17% large capitalization equity securities, 20% international equity securities and 3% small and mid-capitalization equity securities.

Information regarding fair value measurements of plan assets was as follows as of December 31, 2020:
Fair value measurements using
Quoted prices in active markets for identical assetsSignificant other observable inputsSignificant unobservable inputsInvestments measured at net asset valueFair value as of
December 31,
2020
(in thousands)(Level 1) (Level 2)(Level 3)
Mortgage-backed securities$— $10,546 $— $22,507 $33,053 
U.S. corporate debt securities— 27,439 — 1,474 28,913 
International equity securities24,512 3,632 — — 28,144 
U.S. large capitalization equity securities
— 24,536 — — 24,536 
Government debt securities— 20,357 — — 20,357 
U.S. small and mid-capitalization equity securities
3,406 356 — — 3,762 
Other debt securities387 220 — — 607 
Plan assets$28,305 $87,086 $— $23,981 $139,372 
Information regarding fair value measurements of plan assets was as follows as of December 31, 2019:
Fair value measurements using
Quoted prices in active markets for identical assetsSignificant other observable inputsSignificant unobservable inputsInvestments measured at net asset valueFair value as of
December 31,
2019
(in thousands)(Level 1) (Level 2)(Level 3)
U.S. large capitalization equity securities
$— $30,990 $— $— $30,990 
Mortgage-backed securities— 13,060 — 17,768 30,828 
International equity securities20,859 3,173 — — 24,032 
U.S. corporate debt securities— 14,771 — 5,184 19,955 
Government debt securities— 18,776 — — 18,776 
U.S. small and mid-capitalization equity securities
4,228 363 — — 4,591 
Other debt securities529 217 — — 746 
Plan assets$25,616 $81,350 $— $22,952 $129,918 

The fair value of Level 2 mortgage-backed securities is estimated using pricing models with inputs derived principally from observable market data. The fair value of our other Level 2 debt securities is typically estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flow calculations that maximize observable inputs, such as current yields for similar instruments adjusted for trades and other pertinent market information. Our policy is to recognize transfers between fair value levels as of the end of the reporting period in which the transfer occurred.

Cash flows – We made no contributions to plan assets during the past 3 years.

We have fully funded the SERP obligation with investments in company-owned life insurance policies. The cash surrender value of these policies is included in long-term investments on the consolidated balance sheets and totaled $7,095 as of December 31, 2020 and $7,136 as of December 31, 2019.

The following benefit payments are expected to be paid during the years indicated:
(in thousands)Postretirement benefit planPension plan
2021$6,283 $320 
20226,129 310 
20235,905 300 
20245,568 290 
20255,137 280 
2026 - 203020,189 1,170