Post-retirement Plans

In connection with our PCLI acquisition, we agreed to establish employee benefit plans including union and non-union pension plans and a post-retirement healthcare plan for PCLI employees that were previously covered under legacy Suncor plans.

Our agreement with Suncor also provides that pension assets related to the union and non-union pension plans will be transferred from the Suncor plans to a pension trust established by us and will be computed in accordance with the share purchase agreement, subject to regulatory approval. Our purchase price allocation as of February 1, 2017 included estimates of the amount of pension benefit obligation and the pension assets to be transferred using actuarial estimates. The actual asset transfer to our PCLI pension plan trust will be a cash transfer that is expected to occur in 2018. As of December 31, 2017, the plan asset balance represents a receivable for the pending transfer from the Suncor plans.

The following table sets forth the changes in the benefit obligation and plan assets of our PCLI pension plans for the eleven months ended December 31, 2017:



	February 1, 2017 to December 31, 2017
	(In thousands)
Change in plans' benefit obligations
Pension plans' benefit obligation at acquisition	$	52,155
Service cost	3,598
Interest cost	1,979
Actuarial loss	4,503
Benefits paid	(966		)
Foreign currency exchange rate changes	2,313
Pension plans' benefit obligation - end of year	$	63,582

Change in pension plans assets
Fair value of plans assets at acquisition	$	51,870
Actual return on plans assets	6,182
Benefits paid	(966		)
Foreign currency exchange rate changes	2,175
Fair value of plans assets - end of year	$	59,261

Funded status
Under-funded balance	$	(4,321	)

Amounts recognized in consolidated balance sheets
Accrued pension liability	$	(4,321	)

Amounts recognized in accumulated other comprehensive income
Cumulative actuarial loss	$	1,162

The accumulated benefit obligation was $52.8 million at December 31, 2017. The measurement date used for our pension plans was December 31, 2017.

The weighted average assumptions used to determine end of period benefit obligations:



	December 31, 2017

Discount rate	3.40	%
Rate of future compensation increases	3.00	%

Net periodic pension expense consisted of the following components:



	February 1, 2017 to December 31, 2017
	(In thousands)
Service cost - benefit earned during the period	$	3,598
Interest cost on projected benefit obligations	1,979
Expected return on plans assets	(2,841		)
Net periodic pension expense	$	2,736

The weighted average assumptions used to determine net periodic pension expense:



	February 1, 2017 to December 31, 2017

Discount rate	3.80	%
Rate of future compensation increases	3.00	%
Expected long-term rate of return on assets	5.75	%

Benefit payments, which reflect expected future service, are expected to be paid as follows: $0.8 million in 2018, $1.2 million in 2019, $1.5 million in 2020, $1.8 million in 2021, $2.1 million in 2022 and $14.9 million in 2023 to 2027.

Post-retirement Healthcare Plans

We have a post-retirement healthcare and other benefits plan that is available to certain of our employees who satisfy certain age and service requirements. This plan is unfunded and provides differing levels of healthcare benefits dependent upon hire date and work location. Not all of our employees are covered by this plan at December 31, 2017. In addition, we established a post-retirement healthcare and other benefits plan for our PCLI employees.

The following table sets forth the changes in the benefit obligation and plan assets of our post-retirement healthcare plans for the years ended December 31, 2017 and 2016:



	Years Ended December 31,
	2017			2016
	(In thousands)
Change in plan’s benefit obligation
Post-retirement plan's benefit obligation - beginning of year	$	18,992		$	21,201
PCLI acquisition	8,212			—
Service cost	1,511			1,294
Interest cost	987			787
Participant contributions	181			244
Amendments	—			21
Benefits paid	(1,800		)	(2,171		)
Actuarial loss (gain)	1,058			(2,384		)
Foreign currency exchange rate changes	358			—
Post-retirement plans' benefit obligation - end of year	$	29,499		$	18,992

Change in plan assets
Fair value of plan assets - beginning of year	$	—		$	—
Employer contributions	1,542			1,927
Participant contributions	258			244
Benefits paid	(1,800		)	(2,171		)
Fair value of plan assets - end of year	$	—		$	—

Funded status
Under-funded balance	$	(29,499	)	$	(18,992	)

Amounts recognized in consolidated balance sheets
Accrued post-retirement liability	$	(29,499	)	$	(18,992	)

Amounts recognized in accumulated other comprehensive income
Cumulative actuarial (loss) gain	$	(287	)	$	771
Prior service credit	28,953			32,434
Total	$	28,666		$	33,205

Benefit payments, which reflect expected future service, are expected to be paid as follows: $1.9 million in 2018; $1.6 million in 2019; $1.6 million in 2020; $1.7 million in 2021; $1.7 million in 2022; and $8.2 million in 2023 through 2027.

The weighted average assumptions used to determine end of period benefit obligations:



	December 31, 2017				December 31, 2016
	HFC		PCLI		HFC

Discount rate	3.35	%	3.40	%	3.75	%
Current health care trend rate	7.00	%	6.50	%	7.00	%
Ultimate health care trend rate	5.00	%	5.00	%	5.00	%
Year rate reaches ultimate trend rate	2028		2022		2030

Net periodic post-retirement credit consisted of the following components:



	Years Ended December 31,
	2017			2016			2015
	(In thousands)
Service cost – benefit earned during the year	$	1,511		$	1,294		$	1,694
Interest cost on projected benefit obligations	987			787			819
Amortization of prior service credit	(3,481		)	(3,482		)	(3,482		)
Amortization of net loss	—			—			183
Net periodic post-retirement credit	$	(983	)	$	(1,401	)	$	(786	)

Prior service credits are amortized over the average remaining effective period to obtain full benefit eligibility for participants.

Assumed health care cost trend rates have an effect on the amounts reported for the post-retirement health care benefit plan. The weighted average assumptions used to determine net periodic benefit expense follow:



	Years Ended December 31,
	2017				2016		2015
	HFC		PCLI		HFC

Discount rate	3.75	%	3.80	%	3.90	%	3.60	%
Current health care trend rate	7.00	%	6.50	%	8.00	%	8.00	%
Ultimate health care trend rate	5.00	%	5.00	%	5.00	%	5.00	%
Year rate reaches ultimate trend rate	2030		2022		2041		2042

The effect of a 1% change in health care cost trend rates is as follows:



	1% Point Increase		1% Point Decrease
	(In thousands)
Service cost	$	175	$	(146	)
Interest cost	$	48	$	(42	)
Year-end accumulated post-retirement benefit obligation	$	1,393	$	(1,204	)

Retirement Restoration Plan

We have an unfunded retirement restoration plan that provides for additional payments from us so that total retirement plan benefits for certain executives will be maintained at the levels provided in the retirement plan before the application of Internal Revenue Code limitations. We expensed $0.1 million, $0.1 million and $0.1 million for the years ended December 31, 2017, 2016 and 2015, respectively, in connection with this plan. The accrued liability reflected in the consolidated balance sheets was $2.7 million and $2.7 million at December 31, 2017 and 2016, respectively. As of December 31, 2017, the projected benefit obligation under this plan was $2.7 million. Annual benefit payments of $0.2 million are expected to be paid through 2027, which reflect expected future service.

Defined Contribution Plan

We have a defined contribution “401(k)” plan that covers substantially all U.S. employees. Our contributions are based on an employee's eligible compensation and years of service. We also partially match our employees’ contributions. We expensed $17.6 million, $17.5 million and $17.2 million for the years ended December 31, 2017, 2016 and 2015, respectively, in connection with this plan.