Retirement Plans

12 Months Ended

Dec. 31, 2019

RETIREMENT PLANS

We sponsor the Retirement Income Plan (RIP), a qualified noncontributory defined benefit pension plan that has been frozen. The RIP covered employees who satisfied minimum age and length of service requirements. Although not required, during 2019, we made a $5.0 million contribution to the RIP.

We also sponsor two supplemental non-qualified retirement plans that have been frozen. The ERISA Excess Retirement Plan provides retirement benefits equal to the difference, if any, between the maximum benefit allowable under the Internal Revenue Code and the amount that would be provided under the RIP, if no limits were applied. The Basic Retirement Plan (BRP) is applicable to certain officers whom the Board of Directors designates. Officers participating in the BRP receive a benefit based on a target benefit percentage based on years of service at retirement and a designated tier as determined by the Board of Directors. When a participant retires, the benefit under the BRP is a monthly benefit equal to the participant's aggregate target benefit percentage multiplied by the participant’s highest average monthly cash compensation, including bonuses, during five consecutive calendar years within the last ten calendar years of employment before 2009. This monthly benefit is reduced by the monthly benefit the participant receives from the Social Security Administration, the RIP, the ERISA Excess Retirement Plan and the annuity equivalent of the automatic contributions paid to participants under the qualified 401(k) defined contribution plan and the ERISA Excess Lost Match Plan.

The following tables provide information relating to the accumulated benefit obligation, change in benefit obligation, change in plan assets, the plans’ funded status and the amount included in the Consolidated Balance Sheets for the qualified and non-qualified plans described above (collectively, the Plans):

TABLE 17.1



December 31	2019									2018
	Qualified			Non-Qualified			Total			Qualified			Non-Qualified			Total
(in millions)
Accumulated benefit obligation	$	156		$	19		$	175		$	145		$	18		$	163
Projected benefit obligation at beginning of year	$	145		$	18		$	163		$	162		$	20		$	182
Interest cost	6			1			7			6			—			6
Actuarial loss (gain)	15			2			17			(12		)	(1		)	(13		)
Benefits paid	(10		)	(2		)	(12		)	(11		)	(1		)	(12		)
Projected benefit obligation at end of year	$	156		$	19		$	175		$	145		$	18		$	163
Fair value of plan assets at beginning of year	$	150		$	—		$	150		$	164		$	—		$	164
Actual return on plan assets	28			—			28			(7		)	—			(7		)
Corporation contribution	5			2			7			4			1			5
Benefits paid	(10		)	(2		)	(12		)	(11		)	(1		)	(12		)
Fair value of plan assets at end of year	$	173		$	—		$	173		$	150		$	—		$	150
Funded status of plans	$	17		$	(19	)	$	(2	)	$	5		$	(18	)	$	(13	)

The unrecognized actuarial loss, prior service cost and net transition obligation are required to be recognized into earnings over the average remaining participant life due to the freezing of the RIP, which may, on a net basis reduce future earnings.

Actuarial assumptions used in the determination of the projected benefit obligation in the Plans are as follows:

TABLE 17.2



Assumptions at December 31	2019		2018
Weighted average discount rate	3.17	%	4.18	%
Rates of average increase in compensation levels	3.50		3.50

The discount rate assumption at December 31, 2019 and 2018 was determined using a yield-curve based approach. A yield curve was produced for a universe containing the majority of U.S.-issued Aa-graded corporate bonds, all of which were non-callable (or callable with make-whole provisions), and after excluding the 10% of the bonds with the highest and lowest yields. The discount rate was developed as the level equivalent rate that would produce the same present value as that using spot rates aligned with the projected benefit payments.

The net periodic pension cost and other comprehensive income for the Plans included the following components:

TABLE 17.3



Year Ended December 31	2019			2018			2017
(in millions)
Interest cost	$	7		$	6		$	7
Expected return on plan assets	(11		)	(11		)	(11		)
Actuarial loss amortization	2			2			2
Total pension income	(2		)	(3		)	(2		)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Current year actuarial loss	1			6			3
Amortization of actuarial loss	(2		)	(2		)	(2		)
Total amount recognized in other comprehensive income	(1		)	4			1
Total amount recognized in net periodic benefit cost and other comprehensive income	$	(3	)	$	1		$	(1	)

The plans have an actuarial measurement date of December 31. Actuarial assumptions used in the determination of the net periodic pension cost in the Plans are as follows:

TABLE 17.4



Assumptions for the Year Ended December 31	2019		2018		2017
Weighted average discount rate	4.16	%	4.19	%	3.96	%
Rates of increase in compensation levels	3.50		3.50		3.50
Expected long-term rate of return on assets	7.25		7.25		7.25

The expected long-term rate of return on plan assets has been established by considering historical and anticipated expected returns on the asset classes invested in by the pension trust and the allocation strategy currently in place among those classes.

The change in plan assets reflects benefits paid from the qualified pension plans of $10.0 million and $10.1 million for 2019 and 2018, respectively. As stated above, we made a $5.0 million contribution to the RIP during 2019. We made a $4.0 million contribution to the RIP during 2018. For the non-qualified pension plans, the change in plan assets reflects benefits paid from and contributions made to the plans in the same amount. This amount represents the actual benefit payments paid from general assets of $1.5 million for 2019 and $1.4 million for 2018.

The following table provides information regarding estimated future cash flows relating to the Plans at December 31, 2019:

TABLE 17.5



(in millions)
Expected employer contributions:	2020	$	2
Expected benefit payments:	2020	10
	2021	10
	2022	10
	2023	10
	2024	11
	2025 – 2029	53

The qualified pension plan contributions are deposited into a trust and the qualified benefit payments are made from trust assets. For the non-qualified plans, the contributions and the benefit payments are the same and reflect expected benefit amounts, which we pay from general assets.

Our subsidiaries participate in a qualified 401(k) defined contribution plan under which employees may contribute a percentage of their salary. Employees are eligible to participate upon their first day of employment. Under this plan, we match 100% of the first 6% that the employee defers. During the second quarter of 2018, we made a one-time discretionary contribution of $0.9 million to the vast majority of our employees following the tax reform that was enacted in December 2017. Additionally, we may provide a performance-based company contribution of up to 3% if we exceed annual financial goals. Our contribution expense is presented in the following table:

TABLE 17.6



Year Ended December 31	2019		2018		2017
(in millions)
401(k) contribution expense	$	15	$	15	$	12

We also sponsor an ERISA Excess Lost Match Plan for certain officers. This plan provides retirement benefits equal to the difference, if any, between the maximum benefit allowable under the Internal Revenue Code and the amount that would have been provided under the qualified 401(k) defined contribution plan, if no limits were applied.

Pension Plan Investment Policy and Strategy

Our investment strategy for the RIP is to diversify plan assets between a wide mix of securities within the equity and debt markets to allow the account the opportunity to meet the expected long-term rate of return requirements while minimizing short-term volatility. In this regard, the plan has targeted allocations within the equity securities category for domestic large cap, domestic mid cap, domestic small cap, real estate investment trusts, emerging market and international securities. Within the debt securities category, the plan has targeted allocation levels for U.S. Treasury, U.S. agency, domestic investment-grade bonds, high-yield bonds, inflation-protected securities and international bonds.

The following table presents asset allocations for our pension plans as of December 31, 2019 and 2018, and the target allocation for 2020, by asset category:

TABLE 17.7



	Target Allocation	Percentage of Plan Assets
December 31	2020	2019		2018
Asset Category
Equity securities	45 - 65	60	%	55	%
Debt securities	30 - 50	37		41
Cash equivalents	0 - 10	3		4

At December 31, 2019 and 2018, equity securities included 469,000 and 585,000 shares, respectively, of our common stock, representing 3.5% and 4.0% of total plan assets at December 31, 2019 and 2018, respectively. Dividends received on our common stock held by the Plan were $0.2 million and $0.3 million for 2019 and 2018, respectively.

The fair values of our pension plan assets by asset category are as follows:

TABLE 17.8



(in millions)	Level 1		Level 2		Level 3		Total
December 31, 2019
Asset Class
Cash	$	5	$	—	$	—	$	5
Equity securities:
F.N.B. Corporation	6		—		—		6
Other large-cap U.S. financial services companies	4		—		—		4
Other large-cap U.S. companies	54		—		—		54
Other equity	1		—		—		1
Mutual fund equity investments:
U.S. equity index funds:
U.S. large-cap equity index funds	1		—		—		1
U.S. small-cap equity index funds	3		—		—		3
U.S. mid-cap equity index funds	5		—		—		5
Non-U.S. equities growth fund	9		—		—		9
U.S. equity funds:
U.S. mid-cap	12		—		—		12
U.S. small-cap	4		—		—		4
Other	5		—		—		5
Fixed income securities:
U.S. government agencies	—		51		—		51
Corporate bonds	—		1		—		1
Fixed income mutual funds:
U.S. investment-grade fixed income securities	12		—		—		12
Total	$	121	$	52	$	—	$	173



(in millions)	Level 1		Level 2		Level 3		Total
December 31, 2018
Asset Class
Cash	$	6	$	—	$	—	$	6
Equity securities:
F.N.B. Corporation	6		—		—		6
Other large-cap U.S. financial services companies	3		—		—		3
Other large-cap U.S. companies	43		—		—		43
International companies	1		—		—		1
Mutual fund equity investments:
U.S. equity index funds:
U.S. small-cap equity index funds	3		—		—		3
U.S. mid-cap equity index funds	4		—		—		4
Non-U.S. equities growth fund	6		—		—		6
U.S. equity funds:
U.S. mid-cap	9		—		—		9
U.S. small-cap	3		—		—		3
Other	4		—		—		4
Fixed income securities:
U.S. government agencies	—		49		—		49
Corporate bonds	—		2		—		2
Fixed income mutual funds:
U.S. investment-grade fixed income securities	11		—		—		11
Total	$	99	$	51	$	—	$	150

The classifications for Level 1, Level 2 and Level 3 are discussed in Note 24, “Fair Value Measurements.”