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 provides 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
	2017			2016			2017			2016
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year		$81,752			$84,005			$1,285			$1,159
Service cost	—			1,307			6			4
Interest cost	3,259			3,474			53			42
Curtailment gain	—			(5,447		)	—			—
Actuarial loss	6,123			1,296			89			99
Benefits paid	(3,148		)	(2,883		)	(13		)	(19		)
Projected benefit obligation at end of year		$87,986			$81,752			$1,420			$1,285



Change in Plan Assets
Fair value of plan assets at beginning of year		$51,114			$50,970		—		—
Actual return on plan assets	9,909			3,557			—		—
Employer contributions	90			29			13		19
Benefits paid	(3,148		)	(2,883		)	(13	)	(19	)
Other expense	(588		)	(559		)	—		—
Fair value of plan assets at end of year		$57,377			$51,114		—		—



Funded Status at End of Year:
Net accrued benefit cost	($30,609	)	($30,638	)	($1,420	)	($1,285	)



Amounts Recognized in the Consolidated
Balance Sheets Consist of:
Current liabilities		($92	)		($36	)		($32	)		($30	)
Noncurrent liabilities	(30,517		)	(30,602		)	(1,388		)	(1,255		)
Net amount recognized		($30,609	)		($30,638	)		($1,420	)		($1,285	)

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



	Pension								Postretirement
	2017			2016		2015			2017			2016			2015
Net (losses) gains		($583	)		$3,119		($477	)		($89	)		($99	)		$123

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
	2017		2016		2015		2017			2016			2015
Amortization of losses (gains)		$466		$2,526		$3,733		($1	)		($13	)		$12
Amortization of prior service cost	—		—		13		—			—			—

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
	2017			2016			2017			2016
Net (losses) gains		($22,183	)		($22,065	)		($157	)		($67	)
Deferred income tax benefit	1,927			1,927			6			6
AOCI		($20,256	)		($20,138	)		($151	)		($61	)

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:



	2017		2016
Projected benefit obligation		$87,986		$81,752
Accumulated benefit obligation	87,986		81,752
Fair value of plan assets	57,377		51,114

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



	Pension									Postretirement
	2017			2016			2015			2017			2016			2015
Components of Net Periodic Benefit (Credit) Cost
Service cost	—				$1,307			$1,484			$6			$4			$11
Interest cost	3,259			3,474			3,319			53			42			52
Expected return on plan assets	(3,781		)	(4,030		)	(4,027		)	—			—			—
Amortization of prior service cost	—			—			13			—			—			—
Amortization of losses (gains)	466			2,526			3,733			(1		)	(13		)	12
Net periodic benefit (credit) cost (a)		($56	)		$3,277			$4,522			$58			$33			$75

The estimated pre-tax amounts that will be amortized from AOCI into net periodic benefit cost in 2018 are as follows:



	Pension		Postretirement
Amortization of loss		$635		$2

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
	2017		2016		2015		2017		2016		2015
Assumptions used to determine benefit obligations at December 31:
Discount rate	3.48	%	4.01	%	4.20	%	3.56	%	4.12	%	4.34	%
Rate of compensation increase	—		4.16	%	4.50	%	4.50	%	4.50	%	4.50	%
Assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate	4.01	%	4.20	%	3.80	%	4.12	%	4.34	%	3.96	%
Expected long-term return on plan assets	7.17	%	7.70	%	7.70	%	—		—		—
Rate of compensation increase	—		4.16	%	4.50	%	4.50	%	4.50	%	4.50	%

At December 31, 2017, the pension plan’s discount rate was 3.5%, which closely approximates interest rates on high quality, long-term obligations. In 2017, the expected return on plan assets was reduced to 7.2% 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 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, 2017 and 2016, and target allocation ranges by asset category are as follows:



	Percentage of Plan Assets				Target Allocation Range
Asset Category	2017		2016		Target Allocation Range
Domestic equity securities	41	%	41	%	35-45%
International equity securities	26	%	25	%	20-30%
Domestic fixed income securities	26	%	26	%	25-29%
International fixed income securities	4	%	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, 2017 or 2016.

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, 2017 and 2016.



	Fair Value at December 31, 2017						Fair Value at December 31, 2016
Asset Category	Level 1		Level 2	Level 3	Total		Level 1		Level 2	Level 3	Total
Investments at Fair Value:
Mutual Funds		$8,986	—	—		$8,986		$13,962	—	—		$13,962
Investments at Net Asset Value:
Common Collective Trusts					48,391						37,152
Total Investments at Fair Value						$57,377						$51,114

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, 2017 and 2016.

CASH FLOWS

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



	Pension Benefits		Postretirement Benefits
2018		$3,315		$32
2019	3,478		35
2020	3,670		37
2021	3,770		40
2022	4,028		43
2023 - 2027	21,803		260

The Company has approximately $2.9 million of pension contribution requirements in 2018.

DEFINED CONTRIBUTION PLANS

The Company provides defined contribution plans to all of its hourly and salaried employees. Company match contributions charged to expense for these plans were $0.8 million, $0.7 million and $0.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. Rayonier Hourly and Salaried Defined Contribution Plans include Rayonier common stock with a fair market value of $12.3 million and $12.8 million at December 31, 2017 and 2016, 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 frozen. In lieu of the pension plan, employees are eligible to receive an enhanced match contribution. Company enhanced match contributions charged to expense for the years ended December 31, 2017, 2016 and 2015 were $0.8 million, $0.5 million and $0.4 million, respectively.