EMPLOYEE BENEFIT PLANS

The Company has one qualified non-contributory defined benefit pension plan covering a portion of its employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plans. The Company closed enrollment in its pension plans to salaried employees hired after December 31, 2005. Effective December 31, 2016, the Company froze benefits for all employees participating in the pension plan. In lieu of the pension plan, the Company will provide those employees with an enhanced 401(k) plan match similar to what is currently provided to employees hired after December 31, 2005. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.

The following tables set forth the change in the projected benefit obligation and plan assets and reconcile the funded status and the amounts recognized in the Consolidated Balance Sheets for the pension and postretirement benefit plans for the two years ended December 31:



	Pension						Postretirement
	2016			2015			2016			2015
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year		$84,005			$87,355			$1,159			$1,226
Service cost	1,307			1,484			4			11
Interest cost	3,474			3,319			42			52
Curtailment gain	(5,447		)	—			—			—
Actuarial (gain) loss	1,296			(5,332		)	99			(123		)
Benefits paid	(2,883		)	(2,821		)	(19		)	(7		)
Projected benefit obligation at end of year		$81,752			$84,005			$1,285			$1,159



Change in Plan Assets
Fair value of plan assets at beginning of year		$50,970			$55,546		—		—
Actual return on plan assets	3,557			(1,241		)	—		—
Employer contributions	29			29			19		7
Benefits paid	(2,883		)	(2,821		)	(19	)	(7	)
Other expense	(559		)	(543		)	—		—
Fair value of plan assets at end of year		$51,114			$50,970		—		—



Funded Status at End of Year:
Net accrued benefit cost	($30,638	)	($33,035	)	($1,285	)	($1,159	)



Amounts Recognized in the Consolidated
Balance Sheets Consist of:
Current liabilities		($36	)		($32	)		($30	)		($24	)
Noncurrent liabilities	(30,602		)	(33,003		)	(1,255		)	(1,135		)
Net amount recognized		($30,638	)		($33,035	)		($1,285	)		($1,159	)

Net gains or losses recognized in other comprehensive income for the three years ended December 31 are as follows:



	Pension								Postretirement
	2016		2015			2014			2016			2015		2014
Net gains (losses)		$3,119		($477	)		($37,559	)		($99	)		$123		($2,250	)

Net gains or losses and prior service costs or credits reclassified from other comprehensive income and recognized as a component of pension and postretirement expense for the three years ended December 31 are as follows:



	Pension						Postretirement
	2016		2015		2014		2016			2015		2014
Amortization of losses (gains)		$2,526		$3,733		$6,542		($13	)		$12		$288
Amortization of prior service cost	—		13		576		—			—		8
Amortization of negative plan amendment	—		—		—		—			—		(137		)

Net losses that have not yet been included in pension and postretirement expense for the two years ended December 31, which have been recognized as a component of AOCI are as follows:



	Pension						Postretirement
	2016			2015			2016			2015
Net (losses) gains	(22,065		)	(27,710		)	(67		)	45
Deferred income tax benefit	1,927			1,927			6			6
AOCI		($20,138	)		($25,783	)		($61	)		$51

For pension and postretirement plans with accumulated benefit obligations in excess of plan assets, the following table sets forth the projected and accumulated benefit obligations and the fair value of plan assets for the two years ended December 31:



	2016		2015
Projected benefit obligation		$81,752		$84,005
Accumulated benefit obligation	81,752		78,779
Fair value of plan assets	51,114		50,970

The following tables set forth the components of net pension and postretirement benefit cost that have been recognized during the three years ended December 31:



	Pension									Postretirement
	2016			2015			2014			2016			2015		2014
Components of Net Periodic Benefit Cost
Service cost		$1,307			$1,484			$3,923			$4			$11		$402
Interest cost	3,474			3,319			10,707			42			52		537
Expected return on plan assets	(4,030		)	(4,027		)	(15,258		)	—			—		—
Amortization of prior service cost	—			13			576			—			—		8
Amortization of losses (gains)	2,526			3,733			6,542			(13		)	12		288
Amortization of negative plan amendment	—			—			—			—			—		(137		)
Net periodic benefit cost (a)		$3,277			$4,522			$6,490			$33			$75		$1,098


(a)	Net periodic benefit cost for the year ended December 31, 2014 included $4.0 million recorded in “Income from discontinued operations, net” on the Consolidated Statements of Income and Comprehensive Income.

The estimated pre-tax amounts that will be amortized from AOCI into net periodic benefit cost in 2017 are as follows:



	Pension		Postretirement
Amortization of loss (gain)		$416		($1	)

The following table sets forth the principal assumptions inherent in the determination of benefit obligations and net periodic benefit cost of the pension and postretirement benefit plans as of December 31:



	Pension						Postretirement
	2016		2015		2014		2016		2015		2014
Assumptions used to determine benefit obligations at December 31:
Discount rate	4.01	%	4.20	%	3.80	%	4.12	%	4.34	%	3.96	%
Rate of compensation increase	4.16	%	4.50	%	4.50	%	4.50	%	4.50	%	4.50	%
Assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate (pre spin-off)	—		—		4.60	%	—		—		4.60	%
Discount rate (post spin-off)	4.20	%	3.80	%	4.04	%	4.34	%	3.96	%	4.00	%
Expected long-term return on plan assets	7.70	%	7.70	%	8.50	%	—		—		—
Rate of compensation increase	4.16	%	4.50	%	4.50	%	4.50	%	4.50	%	4.50	%

At December 31, 2016, the pension plan’s discount rate was 4.0%, which closely approximates interest rates on high quality, long-term obligations. In 2016, the expected return on plan assets remained at 7.7%, which is based on historical and expected long-term rates of return on broad equity and bond indices and consideration of the actual annualized rate of return. The Company, with the assistance of external consultants, utilizes this information in developing assumptions for returns, and risks and correlation of asset classes, which are then used to establish the asset allocation ranges.

Investment of Plan Assets

The Company’s pension plans’ asset allocation (excluding short-term investments) at December 31, 2016 and 2015, and target allocation ranges by asset category are as follows:



	Percentage of Plan Assets				Target Allocation Range
Asset Category	2016		2015		Target Allocation Range
Domestic equity securities	41	%	40	%	35-45%
International equity securities	25	%	25	%	20-30%
Domestic fixed income securities	26	%	27	%	25-29%
International fixed income securities	5	%	5	%	3-7%
Real estate fund	3	%	3	%	2-4%
Total	100	%	100	%

The Company’s Pension and Savings Plan Committee and the Audit Committee of the Board of Directors oversee the pension plans’ investment program which is designed to maximize returns and provide sufficient liquidity to meet plan obligations while maintaining acceptable risk levels. The investment approach emphasizes diversification by allocating the plans’ assets among asset categories and selecting investment managers whose various investment methodologies will be minimally correlative with each other. Investments within the equity categories may include large capitalization, small capitalization and emerging market securities, while the international fixed income portfolio may include emerging markets debt. Pension assets did not include a direct investment in Rayonier common stock at December 31, 2016 or 2015.

Fair Value Measurements

The following table sets forth by level, within the fair value hierarchy (see Note 2 — Summary of Significant Accounting Policies for definition), the assets of the plans as of December 31, 2016 and 2015.



	Fair Value at December 31, 2016						Fair Value at December 31, 2015
Asset Category	Level 1		Level 2	Level 3	Total		Level 1		Level 2	Level 3	Total
Investments at Fair Value:
Mutual Funds		$13,962	—	—		$13,962		$13,774	—	—		$13,774
Investments at Net Asset Value:
Common Collective Trusts					37,152						37,196
Total Investments at Fair Value						$51,114						$50,970

The valuation methodology used for measuring the fair value of these asset categories was as follows:

Mutual funds are valued at the daily closing price as reported by the fund. Mutual funds held by the plan are open-end mutual funds that are registered with the U.S. Securities and Exchange Commission. These funds are required to publish their daily net asset value and to transact at that price. The mutual funds held by the plan are deemed to be actively traded and to be Level 1 investments.

Collective trust funds are measured using the unit value calculated based on the Net Asset Value (“NAV”) of the underlying assets. The NAV is based on the fair value of the underlying investments held by each fund less liabilities divided by the units outstanding as of the valuation date. These funds are not publicly traded; however, the unit price calculation is based on observable market inputs of the funds’ underlying assets.

The Company did not have Level 2 or Level 3 assets at December 31, 2016 and 2015.

Cash Flows

Expected benefit payments for the next 10 years are as follows:



	Pension Benefits		Postretirement Benefits
2017		$3,196		$30
2018	3,329		33
2019	3,497		35
2020	3,716		38
2021	3,819		41
2022 - 2026	21,254		249

The Company has approximately $0.3 million of pension contribution requirements in 2017.

Defined Contribution Plans

The Company provides defined contribution plans to all of its hourly and salaried employees. Company contributions charged to expense for these plans were $0.7 million, $0.7 million and $1.6 million for the years ended December 31, 2016, 2015 and 2014, respectively. Rayonier Hourly and Salaried Defined Contribution Plans include Rayonier common stock with a fair market value of $12.8 million and $11.1 million at December 31, 2016 and 2015, respectively. As of June 1, 2016, the Rayonier Inc. Common Stock Fund was closed to new contributions. Transfers out of the fund will continue to be permitted, but no new investments or transfers into the fund are allowed.

As discussed above, the defined benefit pension plan is currently closed to new employees. Employees not eligible for the pension plan are immediately eligible to participate in the Company’s 401(k) plan and receive an enhanced contribution. Company contributions related to this plan for the years ended December 31, 2016, 2015 and 2014 were $0.5 million, $0.4 million and $0.5 million, respectively.