16. Retirement Plans

The Corporation sponsors the Retirement Income Plan (RIP), a qualified noncontributory defined benefit pension plan that covered substantially all salaried employees hired prior to January 1, 2008. The RIP covers employees who satisfied minimum age and length of service requirements. The Corporation’s funding guideline has been to make annual contributions to the RIP each year, if necessary, such that minimum funding requirements have been met. The RIP was frozen as of December 31, 2010.

The Corporation also sponsors two supplemental non-qualified retirement plans. 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 basic benefit under the BRP is a monthly benefit equal to the target benefit percentage times the participant’s highest average monthly cash compensation during five consecutive calendar years within the last ten calendar years of employment. This monthly benefit was reduced by the monthly benefit the participant receives from Social Security, the RIP, the ERISA Excess Retirement Plan and the annuity equivalent of the three percent automatic contributions to the qualified 401(k) defined contribution plan and the ERISA Excess Lost Match Plan. The BRP was frozen as of December 31, 2008. The ERISA Excess Retirement Plan was frozen as of December 31, 2010.

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 sheet for the qualified and non-qualified plans described above (collectively, the Plans):


December 31	2014			2013
Accumulated benefit obligation	$	156,589		$	139,483

Projected benefit obligation at beginning of year	$	139,731		$	153,958
Service cost		62			65
Interest cost		6,411			5,728
Actuarial loss (gain)		21,253			(13,486	)
Benefits paid		(10,533	)		(6,534	)

Projected benefit obligation at end of year	$	156,924		$	139,731

Fair value of plan assets at beginning of year	$	139,737		$	113,416
Actual return on plan assets		9,613			16,534
Corporation contribution		1,323			16,321
Benefits paid		(10,533	)		(6,534	)

Fair value of plan assets at end of year	$	140,140		$	139,737

Funded status of plans	$	(16,784	)	$	6

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:


Assumptions at December 31	2014			2013
Weighted average discount rate		3.85	%		4.68	%
Rates of average increase in compensation levels		4.00	%		4.00	%

The discount rate assumption at December 31, 2014 and 2013 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:


Year Ended December 31	2014			2013			2012
Service cost	$	62		$	65		$	59
Interest cost		6,411			5,728			6,173
Expected return on plan assets		(9,946	)		(9,081	)		(7,935	)
Transition amount amortization		(21	)		(93	)		(93	)
Prior service credit amortization		7			7			7
Actuarial loss amortization		1,367			2,263			1,861

Net periodic pension cost (gain)		(2,120	)		(1,111	)		72
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Current year actuarial loss (gain)		21,586			(20,938	)		10,594
Amortization of actuarial loss		(1,367	)		(2,263	)		(1,861	)
Amortization of prior service credit		(7	)		(7	)		(7	)
Amortization of transition asset		21			93			93

Total recognized in other comprehensive income		20,233			(23,115	)		8,819

Total recognized in net periodic pension cost (gain) and other comprehensive income	$	18,113		$	(24,226	)	$	8,891

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:


Assumptions for the Year Ended December 31	2014			2013			2012
Weighted average discount rate		4.67	%		3.78	%		4.39	%
Rates of increase in compensation levels		4.00	%		4.00	%		4.00	%
Expected long-term rate of return on assets		7.25	%		7.25	%		7.50	%

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 $9,211 and $5,212 for 2014 and 2013, respectively, and employer contributions to the qualified pension plans of $0 and $15,000 for 2014 and 2013, respectively. For the non-qualified pension plans, the change in plan assets reflects benefits paid and contributions to the plans in the same amount. This amount represents the actual benefit payments paid from general plan assets of $1,322 for both 2014 and 2013.

As of December 31, 2014 and 2013, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the qualified and non-qualified pension plans were as follows:


	Qualified Pension Plans				Non-Qualified Pension Plans
December 31	2014		2013		2014		2013
Projected benefit obligation	$	135,998	$	120,512	$	20,926	$	19,219
Accumulated benefit obligation		135,998		120,512		20,591		18,971
Fair value of plan assets		140,140		139,737		—		—

The impact of changes in the discount rate and expected long-term rate of return on plan assets would have had the following effects on 2014 pension expense:


	Estimated Increase in Pension Expense
0.5% decrease in the discount rate	$	21
0.5% decrease in the expected long-term rate of return on plan assets		686

The following table provides information regarding estimated future cash flows relating to the Plans at December 31, 2014:


Expected employer contributions:	2015	$	1,347

Expected benefit payments:	2015		6,839
	2016		7,225
	2017		9,191
	2018		8,065
	2019		8,370
	2020 – 2024		45,802

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 are paid from general assets.

The Corporation’s 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, the Corporation matches 100% of the first four percent that the employee deferred in 2012 through 2014. Additionally, substantially all employees receive an automatic contribution of three percent of compensation at the end of the year and the Corporation may make an additional contribution of up to two percent depending on the Corporation achieving its performance goals for the plan year. The Corporation’s contribution expense was $10,188 for 2014, $9,300 for 2013 and $8,860 for 2012.

The Corporation also sponsors 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

The Corporation’s investment strategy for the RIP is to diversify plan assets between a wide mix of securities within the equity and debt markets in an effort to allow the plan the opportunity to meet the plan’s 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 the Corporation’s pension plans as of December 31, 2014 and 2013, and the target allocation for 2015, by asset category:


	Target Allocation			Percentage of Plan Assets
December 31	2015			2014			2013
Asset Category
Equity securities		45 - 65	%		57	%		57	%
Debt securities		30 - 50			40			40
Cash equivalents		0 - 10			3			3

At December 31, 2014 and 2013, equity securities included 575,128 and 550,128 shares of the Corporation’s common stock, respectively, totaling $7,661 (5.5% of total plan assets) at December 31, 2014 and $6,943 (5.0% of total plan assets) at December 31, 2013. The plan acquired 25,000 additional shares during 2014. Dividends received on the Corporation’s common stock held by the Plan were $272 and $264 for 2014 and 2013, respectively.

The fair values of the Corporation’s pension plan assets by asset category are as follows:


	Level 1		Level 2		Level 3		Total
December 31, 2014
Asset Class
Cash	$	3,970		—		—	$	3,970
Equity securities:
F.N.B. Corporation		7,661		—		—		7,661
Other large-cap U.S. financial services companies		2,653		—		—		2,653
Other large-cap U.S. companies		34,286		—		—		34,286
International companies		730		—		—		730
Other equity		583		—		—		583
Mutual fund equity investments:
U.S. equity index funds:
U.S. large-cap equity index funds		1,504		—		—		1,504
U.S. small-cap equity index funds		2,946		—		—		2,946
U.S. mid-cap equity index funds		3,803		—		—		3,803
Non-U.S. equities growth fund		9,986		—		—		9,986
U.S. equity funds:
U.S. mid-cap		7,501		—		—		7,501
U.S. small-cap		3,019		—		—		3,019
Other		5,643		—		—		5,643
Fixed income securities:
U.S. government agencies		—		44,417		—		44,417
Fixed income mutual funds:
U.S. investment-grade fixed income securities		10,993		—		—		10,993
Non-U.S. fixed income securities		445		—		—		445

	$	95,723	$	44,417		—	$	140,140


	Level 1		Level 2		Level 3		Total
December 31, 2013
Asset Class
Cash	$	4,090		—		—	$	4,090
Equity securities:
F.N.B. Corporation		6,943		—		—		6,943
Other large-cap U.S. financial services companies		2,202		—		—		2,202
Other large-cap U.S. companies		33,686		—		—		33,686
International companies		811		—		—		811
Other equity		555		—		—		555
Mutual fund equity investments:
U.S. equity index funds:
U.S. large-cap equity index funds		2,543		—		—		2,543
U.S. small-cap equity index funds		2,850		—		—		2,850
U.S. mid-cap equity index funds		3,911		—		—		3,911
Non-U.S. equities growth fund		10,783		—		—		10,783
U.S. equity funds:
U.S. mid-cap		7,919		—		—		7,919
U.S. small-cap		3,653		—		—		3,653
Other		4,469		—		—		4,469
Fixed income securities:
U.S. government agencies		—		44,653		—		44,653
Fixed income mutual funds:
U.S. investment-grade fixed income securities		10,196		—		—		10,196
Non-U.S. fixed income securities		473		—		—		473

	$	95,084	$	44,653		—	$	139,737

The classifications for Level 1, Level 2 and Level 3 are discussed in the Fair Value Measurements footnote.