EMPLOYEE BENEFIT PLANS

Beginning with the December 31, 2015 measurement, PLC changed its method used to estimate the service and interest cost components of net periodic benefit cost for pension and other postretirement benefits by applying a spot rate approach. Historically, PLC utilized a single weighted average discount rate derived from a selected yield curve used to measure the benefit obligation as of the measurement date. Under the new spot rate approach, the actual calculation of service and interest cost will reflect an array of spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. PLC made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot rates from the selected yield curve. This new approach does not affect the measurement of the total benefit obligation.

Qualified Pension Plan and Nonqualified Excess Pension Plan

PLC sponsors the Qualified Pension Plan covering substantially all of its employees, including those of the Company. Benefits are based on years of service and the employee’s compensation.

Effective January 1, 2008, PLC made the following changes to its Qualified Pension Plan. These changes have been reflected in the computations within this note.


•	Employees hired after December 31, 2007 and any former employee hired after that date, will receive a cash balance benefit.


•	Employees active on December 31, 2007, with age plus years of vesting service less than 55 years, will receive a final pay-based pension benefit for service through December 31, 2007, plus a cash balance benefit for service after December 31, 2007.


•	Employees active on December 31, 2007, with age plus years of vesting service equaling or exceeding 55 years, will receive a final pay-based pension benefit for service both before and after December 31, 2007, with a modest reduction in the formula for benefits earned after December 31, 2007.


•	All participants terminating employment on or after December of 2007 may elect to receive a lump sum benefit.

In 2016, the Company amended its Qualified Pension Plan to offer a limited-time opportunity of benefit payouts to eligible, terminated-vested participants (“lump sum window”). The lump sum window provided eligible, terminated-vested participants with an option to elect to receive a lump sum settlement of his or her pension benefit in December 2016 or to elect receipt of monthly pension benefits commencing in December 2016. This event triggered settlement accounting for the Company and resulted in the recognition of $0.9 million of settlement income for the twelve months ended December 31, 2016 (Successor Company).

The Company also sponsors the Nonqualified Excess Pension Plan, which is an unfunded nonqualified plan that provides defined pension benefits in excess of limits imposed on the Qualified Pension Plan by federal tax law.

In 2016, the Board of Directors of Protective Life Corporation approved the conversion of the accrued benefit payable under the Nonqualified Excess Pension Plan as of March 31, 2016 to John D. Johns, the Company's Chairman and Chief Executive Officer at the time, into a lump sum amount. The lump sum amount is allocated to a book entry that will be treated as though it were a pay deferral account under the Company’s deferred compensation plan for officers. Mr. Johns will continue to accrue benefits as though he were accruing benefits under the Nonqualified Excess Pension Plan with respect to this continued service as an employee of the Company after March 31, 2016. The conversion event required the Company to re-measure the Nonqualified Excess Pension Plan as of May 31, 2016 and resulted in the recognition of $2.1 million in settlement expense during the twelve months ended December 31, 2016 (Successor Company).

The following table presents the benefit obligation, fair value of plan assets, funded status, and amounts not yet recognized as components of net periodic pension costs for the Company's defined benefit pension plan and unfunded excess benefit plan as of December 31, 2017 and 2016 (Successor Company):



	Successor Company
	December 31, 2017						December 31, 2016
	Qualified Pension Plan			Nonqualified Excess Pension Plan			Qualified Pension Plan			Nonqualified Excess Pension PLan
	(Dollars In Thousands)
Accumulated benefit obligation, end of year	$	278,084		$	50,149		$	247,595		$	45,594
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	265,848		$	47,802		$	268,221		$	56,985
Service cost	12,011			1,350			12,791			1,413
Interest cost	9,846			1,480			9,751			1,353
Amendments	—			—			—			—
Actuarial loss/(gain)	26,539			7,861			5,988			4,124
Benefits paid	(13,821		)	(3,903		)	(30,903		)	(16,073		)
Projected benefit obligation at end of year	300,423			54,590			265,848			47,802
Change in plan assets:
Fair value of plan assets at beginning of year	201,843			—			196,042			—
Actual return on plan assets	29,404			—			15,815			—
Employer contributions⁽¹⁾	43,500			3,903			20,889			16,073
Benefits paid⁽²⁾	(13,821		)	(3,903		)	(30,903		)	(16,073		)
Fair value of plan assets at end of year	260,926			—			201,843			—
After reflecting FASB guidance:
Funded status	(39,497		)	(54,590		)	(64,005		)	(47,802		)
Amounts recognized in the balance sheet:
Other liabilities	(39,497		)	(54,590		)	(64,005		)	(47,802		)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss/(gain)	2,850			13,521			(7,855		)	6,294
Prior service cost/(credit)	—			—			—			—
Total amounts recognized in AOCI	$	2,850		$	13,521		$	(7,855	)	$	6,294


(1)	Employer contributions disclosed are based on the Company's fiscal filing year


(2)	Includes amount related to Mr. Johns' conversion of his benefit under the Nonqualified Excess Pension Plan to a Retirement Pay Deferral Account as discussed above in Nonqualified Excess Pension Plan.

Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:



	Successor Company
	Qualified Pension Plan				Nonqualified Excess Pension Plan
	2017		2016		2017		2016
Discount rate	3.55	%	4.04	%	3.26	%	3.60	%
Rate of compensation increase	4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above

Weighted-average assumptions used to determine the net periodic benefit cost for the year ended December 31, 2017 (Successor Company), for the year ended December 31, 2016 (Successor Company), and for the period of February 1, 2015 to December 31, 2015 (Successor Company), are as follows:



	Successor Company
	For The Year Ended December 31,
	2017		2016		2015		2017		2016		2015
	Qualified Pension Plan						Nonqualified Excess Pension Plan
Discount rate	4.04	%	4.29	%	3.95	%	3.60	%	3.63	%	3.63	%
Rate of compensation increase	4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above		4.75% prior to age 40/ 3.75% for age 40 and above
Expected long-term return on plan assets	7.00	%	7.25	%	7.50	%	N/A		N/A		N/A

The assumed discount rates used to determine the benefit obligations were based on an analysis of future benefits expected to be paid under the plans. The assumed discount rate reflects the interest rate at which an amount that is invested in a portfolio of high-quality debt instruments on the measurement date would provide the future cash flows necessary to pay benefits when they come due.

To determine an appropriate long-term rate of return assumption, PLC obtained a 25 year annualized return for each of the represented asset classes. In addition, PLC received evaluations of market performance based on PLC’s asset allocation as provided by external consultants. A combination of these statistical analytics provided results that PLC utilized to determine an appropriate long-term rate of return assumption.

Components of the net periodic benefit cost for the year ended December 31, 2017 (Successor Company), for the year ended December 31, 2016 (Successor Company), for the period of February 1, 2015 to December 31, 2015 (Successor Company), and for the period of January 1, 2015 to January 31, 2015 (Predecessor Company) are as follows:



	Successor Company															Predecessor Company
	For The Year Ended December 31, 2017					For The Year Ended December 31, 2016					February 1, 2015 to December 31, 2015					January 1, 2015 to January 31, 2015
	For The Year Ended December 31, 2017					For The Year Ended December 31, 2016					February 1, 2015 to December 31, 2015					January 1, 2015 to January 31, 2015
	Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan
	(Dollars In Thousands)															(Dollars In Thousands)
Service cost — benefits earned during the period	$	12,011		$	1,350	$	12,791		$	1,413	$	11,220		$	1,229	$	974		$	95
Interest cost on projected benefit obligation	9,846			1,480		9,751			1,353		9,072			1,499		1,002			140
Expected return on plan assets	(13,570		)	—		(13,780		)	—		(13,214		)	—		(1,293		)	—
Amortization of prior service cost/(credit)	—			—		—			—		—			—		(33		)	1
Amortization of actuarial loss/(gain)⁽¹⁾	—			634		—			178		—			—		668			138
Preliminary net periodic benefit cost	8,287			3,464		8,762			2,944		7,078			2,728		1,318			374
Settlement/curtailment expense⁽²⁾	—			—		(964		)	2,135		—			—		—			—
Total net periodic benefit cost	$	8,287		$	3,464	$	7,798		$	5,079	$	7,078		$	2,728	$	1,318		$	374


(1)	2017 average remaining service period used is 9.24 years and 8.23 years for the Qualified Pension Plan and Nonqualified Excess Pension Plan, respectively.


(2)	The Nonqualified Excess Pension Plan triggered settlement accounting for the year ended December 31, 2016 since the total lump sum payments exceeded the settlement threshold of service cost plus interest cost.

For the Qualified Pension Plan, the Company does not expect to amortize any net actuarial loss/(gain) from other comprehensive income into net periodic benefit cost during 2018 since the net actuarial loss/(gain) subject to amortization is less than 10% of the greater of the smooth value of assets or the projected benefit obligation. For the unfunded excess benefit plan, the Company expects to amortize approximately $1.0 million of net actuarial loss from other comprehensive income into net periodic benefit cost during 2018.

Estimated future benefit payments under the Qualified Pension Plan and Nonqualified Excess Pension Plan are as follows:



Years	Qualified Pension Plan		Nonqualified Excess Pension Plan
	(Dollars In Thousands)
2018	$	19,479	$	3,542
2019	20,719		7,242
2020	21,062		6,087
2021	21,351		5,709
2022	23,537		6,267
2023 - 2027	116,400		23,324

Qualified Pension Plan Assets

Allocation of plan assets of the Qualified Pension Plan by category as of December 31 are as follows:



	Successor Company
Asset Category	Target Allocation for 2018		2017⁽¹⁾		2016
Cash and cash equivalents	2	%	15	%	2	%
Equity securities	60		55		61
Fixed income	38		30		37
Total	100	%	100	%	100	%

(1) During 2017, the Company made a $43.5 million contribution to the defined benefit pension plan and allocated the contribution to cash and cash equivalents pending further analysis of its investment strategy. The plan's investment policy was amended to allow for an actual asset allocation outside of the current target allocation until the investment strategy analysis is complete. The Company anticipates completing this analysis during the first quarter of 2018.

PLC’s target asset allocation is designed to provide an acceptable level of risk and balance between equity assets and fixed income assets. The weighting towards equity securities is designed to help provide for an increased level of asset growth potential and liquidity.

Prior to the amendment for the $43.5 million contribution made in 2017, the defined benefit pension plan had a target asset allocation of 60% domestic equities, 38% fixed income, and 2% cash. PLC's investment policy includes various guidelines and procedures designed to ensure assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans' actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies. PLC is currently performing an asset and liability study of its defined benefit pension plan and the associated investment portfolio to ensure that the current investment policy is appropriate for the plan. We anticipate this analysis being complete in the first quarter of 2018.

The Qualified Pension Plan's equity assets are in a Russell 3000 index fund that invests in a domestic equity index collective trust managed by Northern Trust Corporation and in a Spartan 500 index fund managed by Fidelity. The Plan's cash is invested in a collective trust managed by Northern Trust Corporation. The plan's fixed income assets are invested in a group deposit administration annuity contract with PLICO.

Plan assets of the Qualified Pension Plan by category as of December 31, 2017 and 2016 (Successor Company) are as follows:



	Successor Company
	As of December 31,
Asset Category	2017		2016
	(Dollars In Thousands)
Cash and cash equivalents	$	39,897	$	4,175
Equity securities:
Collective Russell 3000 equity index fund	74,511		67,627
Fidelity Spartan 500 index fund	71,632		58,815
Fixed income	74,886		71,226
Total investments	260,926		201,843
Employer contribution receivable	—		—
Total	$	260,926	$	201,843

The valuation methodologies used to determine the fair values reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. The Qualified Pension Plan's group deposit administration annuity contract with the Company is recorded at contract value, which PLC believes approximates fair value. Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to purchase annuities (the plan has not purchased annuities on behalf of participants under this contract during the periods presented). Units in collective short-term and collective investment funds are valued at the unit value, which approximates fair value, as reported by the trustee of the collective short-term and collective investment funds on each valuation date. These methods of valuation may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Qualified Pension Plan’s assets at fair value as of December 31, 2017 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Collective short-term investment fund	$	39,897	$	—	$	—	$	39,897
Collective investment funds:
Equity index funds	71,632		74,511		—		146,143
Group deposit administration annuity contract	—		—		74,886		74,886
Total investments	$	111,529	$	74,511	$	74,886	$	260,926

The following table sets forth by level, within the fair value hierarchy, the Qualified Pension Plan’s assets at fair value as of December 31, 2016 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Collective short-term investment fund	$	4,175	$	—	$	—	$	4,175
Collective investment funds:
Equity index funds	58,815		67,627		—		126,442
Group deposit administration annuity contract	—		—		71,226		71,226
Total investments	$	62,990	$	67,627	$	71,226	$	201,843

For the year ended December 31, 2017 (Successor Company) and December 31, 2016 (Successor Company), there were no transfers between levels.

The following table summarizes the Qualified Pension Plan investments measured at fair value based on NAV per share as of December 31, 2017 (Successor Company) and December 31, 2016 (Successor Company), respectively:



Name	Fair Value		Unfunded Commitments	Redemption Frequency	Redemption Notice Period
	(Dollars In Thousands)
Successor Company
As of December 31, 2017
Collective short-term investment fund	$	39,897	Not Applicable	Daily	1 day
Collective Russell 3000 index fund⁽¹⁾	74,511		Not Applicable	Daily	1 day
Fidelity Spartan 500 index fund	71,632		Not Applicable	Daily	1 day
As of December 31, 2016
Collective short-term investment fund	$	4,175	Not Applicable	Daily	1 day
Collective Russell 3000 index fund⁽¹⁾	67,627		Not Applicable	Daily	1 day
Fidelity Spartan 500 index fund	58,815		Not Applicable	Daily	1 day


(1)	Non-lending collective trust that does not publish a daily NAV but tracks the Russell 3000 index and provides a daily NAV to the Plan.

The following table presents a reconciliation of the beginning and ending balances for the fair value measurements for the year ended December 31, 2017 (Successor Company) and for the year ended December 31, 2016 (Successor Company) for which PLC has used significant unobservable inputs (Level 3):



	Successor Company
	December 31, 2017		December 31, 2016
	(Dollars In Thousands)
Balance, beginning of year	$	71,226	$	67,707
Interest income	3,660		3,519
Transfers from collective short-term investments fund	—		—
Transfers to collective short-term investments fund	—		—
Balance, end of year	$	74,886	$	71,226

The following table represents the Plan’s Level 3 financial instrument, the valuation technique used, and the significant unobservable input and the ranges of values for that input as of December 31, 2017 (Successor Company):



Instrument	Fair Value		Principal Valuation Technique	Significant Unobservable Inputs	Range of Significant Input Values
	(Dollars In Thousands)
Group deposit administration annuity contract	$	74,886	Contract Value	Contract Rate	5.10% - 5.19%

Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported.

Qualified Pension Plan Funding Policy

PLC's funding policy is to contribute amounts to the Qualified Pension Plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act ("ERISA") plus such additional amounts as PLC may determine to be appropriate from time to time. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.

Under the Pension Protection Act of 2006 ("PPA"), a plan could be subject to certain benefit restrictions if the plan's adjusted funding target attainment percentage ("AFTAP") drops below 80%. Therefore, PLC may make additional contributions in future periods to maintain an AFTAP of at least 80%. In general, the AFTAP is a measure of how well a plan is funded and is obtained by dividing a plan's assets by its funding liabilities. AFTAP is based on participant data, plan provisions, plan methods and assumptions, funding credit balances, and plan assets as of the plan valuation date. Some of the assumptions and methods used to determine a plan's AFTAP may be different from the assumptions and methods used to measure a plan's funded status on a GAAP basis.

In July of 2012, the Moving Ahead for Progress in the 21st Century Act ("MAP-21"), which includes pension funding stabilization provisions, was signed into law. These provisions establish an interest rate corridor which is designed to stabilize the segment rates used to determine funding requirements from the effects of interest rate volatility. In August of 2014, the Highway and Transportation Funding Act of 2014 ("HATFA") was signed into law. HAFTA extends the funding relief provided by MAP-21 by delaying the interest rate corridor expansion. The funding stabilization provisions of MAP-21 and HATFA reduced the Company's minimum required Qualified Pension Plan contributions for the 2013 and 2014 plan years. Since the funding stabilization provisions of MAP-21 and HATFA do not apply for Pension Benefit Guaranty Corporation ("PBGC") reporting purposes, PLC may also make additional contributions in future periods to avoid certain PBGC reporting triggers.

During the twelve months ended December 31, 2017, PLC contributed $43.5 million to the Qualified Pension Plan for the 2016 plan year. PLC has not yet determined what amount it will fund during 2018, but may contribute an amount that would eliminate the PGBC variable-rate premiums payable in 2018. PLC currently estimates that amount will be between $10 million and $20 million.

Other Postretirement Benefits

In addition to pension benefits, PLC provides limited healthcare benefits to eligible retired employees until age 65. This postretirement benefit is provided by an unfunded plan. As of December 31, 2017 and 2016 (Successor Company), the accumulated postretirement benefit obligation and projected benefit obligation were immaterial.

For a closed group of retirees over age 65, the Company provides a prescription drug benefit. As of December 31, 2017 (Successor Company) and December 31, 2016 (Successor Company), PLC's liability related to this benefit was immaterial.

PLC also offers life insurance benefits for retirees from $10,000 up to a maximum of $75,000 which are provided through the payment of premiums under a group life insurance policy. This plan is partially funded at a maximum of $50,000 face amount of insurance. The benefit obligation associated with these benefits is as follows:



	Successor Company
Postretirement Life Insurance Plan	As of December 31, 2017			As of December 31, 2016
	(Dollars In Thousands)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	9,634		$	9,063
Service cost	122			102
Interest cost	354			338
Actuarial (gain)/loss	1,347			604
Benefits paid	(479		)	(473		)
Benefit obligation, end of year	$	10,978		$	9,634

For the postretirement life insurance plan, PLC’s discount rate assumption used to determine the benefit obligation and the net periodic benefit cost as of December 31, 2017 (Successor Company) is 3.74% and 4.35%, respectively.

PLC’s expected long-term rate of return assumption used to determine the net periodic benefit cost as of December 31, 2017 (Successor Company) is 2.75%. To determine an appropriate long-term rate of return assumption, PLC utilized 25 year average and annualized return results on the Barclay’s short treasury index.

Investments of PLC’s group life insurance plan are held by Wells Fargo Bank, N.A. Plan assets held by the Custodian are invested in a money market fund.

The fair value of each major category of plan assets for PLC’s postretirement life insurance plan is as follows



	Successor Company
	As of December 31,
	2017		2016
	(Dollars In Thousands)
Category of Investment
Money market fund	$	5,104	$	5,362

Investments are stated at fair value and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The money market funds are valued based on historical cost, which represents fair value, at year end. This method of valuation may produce a fair value calculation that may not be reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the life insurance plan's assets at fair value as of December 31, 2017 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Money market fund	$	5,104	$	—	$	—	$	5,104

The following table sets forth by level, within the fair value hierarchy, the life insurance plan's assets at fair value as of December 31, 2016 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Money market fund	$	5,362	$	—	$	—	$	5,362

For the year ended December 31, 2017 and 2016 (Successor Company), there were no transfers between levels.

Investments are exposed to various risks, such as interest rate and credit risks. Due to the level of risk associated with investments and the level of uncertainty related to credit risks, it is at least reasonably possible that changes in risk in the near term could materially affect the amounts reported.

401(k) Plan

PLC sponsors a tax qualified 401(k) Plan ("401(k) Plan") which covers substantially all employees. Employee contributions are made on a before-tax basis as provided by Section 401(k) of the Internal Revenue Code or as after-tax “Roth” contributions. Employees may contribute up to 25% of their eligible annual compensation to the 401(k) Plan, limited to a maximum annual contribution amount as set periodically by the Internal Revenue Service ($18,000 for 2017). The Plan also provides a “catch-up” contribution provision which permits eligible participants (age 50 or over at the end of the calendar year), to make additional contributions that exceed the regular annual contribution limits up to a limit periodically set by the Internal Revenue Service ($6,000 for 2017). PLC matches the sum of all employee contributions dollar for dollar up to a maximum of 4% of an employee’s pay per year per person. All matching contributions vest immediately. For the year ended December 31, 2017 (Successor Company) and December 31, 2016 (Successor Company), the Company recorded an expense of$8.2 million and $7.5 million associated with 401(k) Plan matching contributions, respectively.

PLC also has a supplemental matching contribution program, which is a nonqualified plan that provides supplemental matching contributions in excess of the limits imposed on qualified defined contribution plans by federal tax law. The expense recorded by PLC for this employee benefit was $1.1 million, $0.6 million, and $0.5 million, respectively, in 2017, 2016, and 2015.

Deferred Compensation Plan

On February 1, 2015, PLC became a wholly owned subsidiary of Dai-ichi Life and PLC stock ceased to be publicly traded. Thus, any common stock equivalents within the plans converted into rights to receive the merger consideration of $70.00 per common stock equivalent.

As of February 1, 2015, PLC has continued the deferred compensation plans for officers and others. Compensation deferred was credited to the participants in cash, mutual funds, or a combination thereof. As of December 31, 2017 (Successor Company), PLC's obligations related to its deferred compensation plans are reported in other liabilities.