Pension Plans

12 Months Ended

Dec. 31, 2022

Payment for Pension and Other Postretirement Benefits [Abstract]

Pension Plans

PENSION PLANS

The Company has a non-contributory qualified defined benefit pension plan (the “Qualified Pension Plan”). On February 23, 2010, the Company’s Board of Directors approved an amendment to the Qualified Pension Plan that, among other things, closed the Qualified Pension Plan to all new hires on or after March 1, 2010, and stipulated that years of service would continue to be added for purposes of the benefit calculations only through December 31, 2015, with no further accrual of benefits for service thereafter. As a result, effective December 31, 2015, the qualified pension plan was frozen with respect to future benefit accruals.

The Company also has a Supplemental Employees’ Retirement Plan (“SERP”), which is considered a non-qualified pension plan. The SERP provides certain key executives, whose compensation is in excess of the limitations imposed by federal law on the qualified defined benefit pension plan, with supplemental benefits based upon eligible earnings, years of service and age at retirement. During 2010, the Company's Board of Directors also approved an amendment to the SERP that made changes consistent with the pension plan amendment. The Board's Compensation Committee and the Board have not approved any new participants to the SERP since February 28, 2010, and do not intend to do so at any time in the future. The measurement date for both these plans is December 31.

17. PENSION PLANS (CONTINUED)

Obligations and Funded Status

The changes in the actuarial present value of the projected benefit obligation and fair value of plan assets are as follows:

	For the year ended December 31,
	Qualified Pension Plan				SERP
	2022		2021		2022		2021
In thousands
Projected benefit obligation at beginning of year	$	785,795	$	836,531	$	5,017	$	7,669
Service cost	3,363		1,301		—		—
Interest cost	17,198		14,165		86		63
Actuarial liability (gain) loss (1)	(169,342)		(29,590)		(737)		(63)
Benefit payments	(40,063)		(36,612)		(534)		(2,652)
Projected benefit obligation at end of year	$	596,951	$	785,795	$	3,832	$	5,017
Fair value of plan assets at beginning of year	$	764,009	$	766,921	$	—	$	—
Actual return on plan assets	(179,304)		23,700		—		—
Employer contributions	—		10,000		534		2,652
Benefit payments	(40,063)		(36,612)		(534)		(2,652)
Fair value of plan assets at end of year	$	544,642	$	764,009	$	—	$	—
Funded status at end of year	$	(52,309)	$	(21,786)	$	(3,832)	$	(5,017)
Accumulated benefit obligation	$	596,951	$	785,795	$	3,832	$	5,017

(1) The actuarial liability (gain) loss amount for the qualified pension plan for 2022 and 2021 was principally due to the effect of changes in the discount rate.

The Company has recorded liabilities related to our qualified pension plan and SERP as follows:

	At December 31,
	Qualified Pension Plan				SERP
	2022		2021		2022		2021
In thousands
Current liabilities (1)	$	—	$	—	$	(520)	$	(526)
Noncurrent liabilities	(52,309)		(21,786)		(3,312)		(4,491)
Total	$	(52,309)	$	(21,786)	$	(3,832)	$	(5,017)

(1) The current liabilities are included in other current liabilities on the Consolidated Balance Sheets.

The following table presents amounts included in accumulated other comprehensive income on the Consolidated Balance Sheets that will be recognized as components of pension cost in future periods.

	At December 31,
	Qualified Pension Plan				SERP
	2022		2021		2022		2021
In thousands
Unrecognized loss (gain)	$	206,896	$	159,015	$	(68)	$	730
Amount included in accumulated other comprehensive income	$	206,896	$	159,015	$	(68)	$	730

17. PENSION PLANS (CONTINUED)

Obligations and Funded Status - continued

The pension plan net periodic benefit costs on the Consolidated Statements of Operations and other amounts recognized in other comprehensive income (loss) on the Consolidated Statements of Comprehensive Income and Consolidated Statements of Shareholders’ Equity were computed using the projected unit credit actuarial cost method and included the following components:

	For the year ended December 31,
	Qualified Pension Plan						SERP
	2022		2021		2020		2022		2021		2020
In thousands
Service cost for benefits earned during the year	$	3,363	$	1,301	$	5,234	$	—	$	—	$	—
Interest cost on projected benefit obligation	17,198		14,165		21,020		86		63		165
Expected return on plan assets	(42,177)		(45,177)		(43,183)		—		—		—
Recognized net loss	4,258		4,444		4,804		61		65		944
Additional amount recognized due to curtailment/settlement	—		—		—		—		211		—
Net pension benefit (income) cost	$	(17,358)	$	(25,267)	$	(12,125)	$	147	$	339	$	1,109
Change in net (loss) or gain	52,139		(8,113)		(708)		(737)		(274)		703
Amortization of net loss	(4,258)		(4,444)		(4,804)		(61)		(65)		(944)
Total recognized in other comprehensive (loss) income	$	47,881	$	(12,557)	$	(5,512)	$	(798)	$	(339)	$	(241)
Total recognized in net periodic benefit cost and other comprehensive (income) loss	$	30,523	$	(37,824)	$	(17,637)	$	(651)	$	—	$	868

The following tables show the amount of the contributions made to the Qualified Pension Plan and SERP during each period and the amount of contributions the Company expects to make during 2023:

	Qualified Pension Plan				SERP
	2022		2021		2022		2021
In thousands
Contributions	$	—	$	10,000	$	534	$	2,652

	Qualified Pension Plan		SERP
In thousands
Expected contributions during 2023	$	—	$	520

17. PENSION PLANS (CONTINUED)

Obligations and Funded Status - continued

Expected future benefit payments are as follows:

	Qualified Pension Plan		SERP
In thousands
2023	$	43,242	$	520
2024	$	44,380	$	487
2025	$	45,138	$	454
2026	$	45,709	$	421
2027	$	45,928	$	388
2028-2032	$	223,607	$	1,486

Mortality is a key assumption in developing actuarial estimates, and therefore could significantly impact the valuation of the Company's obligations under the qualified pension plan and SERP. The Company reviewed the mortality data and based on the size and demographics of the plan's participant population, the Company determined the Pri-2012 Blue Collar with Scale MP-2021 mortality table was the most appropriate assumption.

The Company uses the Financial Times Stock Exchange ("FTSE") Pension Discount Curve, as it is deemed to be the most appropriate basis for generating the Company's discount rate assumption, as the future cash flows of the plan are most closely aligned to the Above Median Double-A Curve. The discount rates used in determining benefit obligations of the pension plans are as follows:

	At December 31,
	Qualified Pension Plan				SERP
	2022		2021		2022		2021
Discount rate	5.19	%	2.71	%	5.04	%	2.33	%

The actuarial assumptions used in determining the net periodic benefit cost of the pension plans are as follows:

	For the year ended December 31,
	Qualified Pension Plan				SERP
	2022		2021		2022		2021
Discount rate(1)	2.71	%	2.34	%	2.33	%	1.78	%	/	2.29	%
Expected return on plan assets	5.70	%	6.00	%	N/A		N/A
Average rate of increase in compensation levels	N/A		N/A		N/A		N/A

(1) In November 2021, the Company's SERP had a settlement and re-measurement. This resulted in the Company using a discount rate of 1.78% for the first ten months of the year ended December 31, 2021 and a discount rate of 2.29% for the remaining two months following the re-measurement.

Other

The Company utilizes a "spot rate approach" in the calculation of pension interest and service cost. The spot rate approach applies separate discount rates for each projected benefit payment in the calculation of pension interest and service cost.

Qualified Pension Plan Assets

The expected return on plan assets rate was determined based upon historical returns adjusted for estimated future market fluctuations. For 2022 and 2021, the expected rate of return on plan assets was 5.7% and 6.0%, respectively. During 2022, the actual return on pension plan assets, net of direct expenses, was (23.8)%.

17. PENSION PLANS (CONTINUED)

Qualified Pension Plan Assets - continued

Plan assets are invested in a diversified portfolio consisting of equity and fixed income securities. The investment goals for pension plan assets are to improve and/or maintain the Plan’s funded status by generating long-term asset returns that exceed the rate of growth of the Plan’s liabilities. The Plan invests assets in a manner that seeks to (a) maximize return within reasonable and prudent levels of risk of loss of funded status; and (b) maintain sufficient liquidity to meet benefit payment obligations and other periodic cash flow requirements on a timely basis. The return generation/liability matching asset allocation ratio was 38.7%/61.3% at December 31, 2022. As the plan’s funded status changes, the Pension Administrative Committee (the management committee that is responsible for plan administration) will act through an immediate or gradual process, as appropriate, to reallocate assets.

Under the current investment policy, no Investment Manager may invest in investments deemed illiquid by the Investment Manager at the time of purchase, development programs, real estate, mortgages or private equities or securities of Kaman Corporation without prior written authorization from the Pension Administrative Committee. In addition, with the exception of USG securities, managers’ holdings in the securities of any one issuer, at the time of purchase, may not exceed 7.5% of the total market value of that manager’s account.

The pension plan assets are valued at fair value. The following is a description of the valuation methodologies used for the investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

Short-term Investments – This investment category consists of cash and cash equivalents and futures and options contracts. Cash and cash equivalents are comprised of investments with maturities of three months or less when purchased, including certain short-term fixed-income securities, and are classified as Level 1 investments. Futures contracts and options contracts requiring the investment managers to receive from or pay to the broker an amount of cash equal to daily fluctuations are included in short-term investments and are classified as Level 2 investments.

Corporate Stock – This investment category consists primarily of domestic common stock issued by U.S. corporations. Common shares are traded actively on exchanges and price quotes for these shares are readily available. Holdings of corporate stock are classified as Level 1 investments.

Mutual Funds – Mutual funds are traded actively on public exchanges. The share prices for these mutual funds are published at the close of each business day. Holdings of mutual funds are classified as Level 1 investments.

Common Trust Funds – Common trust funds are comprised of shares or units in commingled funds that are not publicly traded. The values of the commingled funds are not publicly quoted and must trade through a broker. For equity and fixed-income commingled funds traded through a broker, the fund administrator values the fund using the net asset value (“NAV”) per fund share, derived from the value of the underlying assets. The underlying assets in these funds (equity securities, fixed income securities and commodity-related securities) are publicly traded on exchanges and price quotes for the assets held by these funds are readily available. Holdings of common trust funds are not subject to leveling.

Fixed Income Securities - For fixed income securities, multiple prices and price types are obtained from pricing vendors whenever possible, which enables cross-provider validations. A primary price source is identified based on asset type, class or issue for each security. The fair values of fixed income securities are based on evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences, and are categorized as Level 2. These securities are primarily investment grade securities.

17. PENSION PLANS (CONTINUED)

Qualified Pension Plan Assets - continued

The fair values of the Company’s qualified pension plan assets at December 31, 2022 and 2021, are as follows:

	Total Carrying Value at December 31, 2022		Quoted prices  in active markets (Level 1)		Significant  other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Not subject to leveling
In thousands
Short-term investments:
Cash and cash equivalents	$	14,168	$	14,168	$	—	$	—	$	—
Futures contracts - assets	145		—		145		—		—
Futures contracts - liabilities	(1,283)		—		(1,283)		—		—
Fixed income securities	251,317		—		251,317		—		—
Mutual funds	73,042		73,042		—		—		—
Common trust funds(1)	177,894		—		—		—		177,894
Corporate stock	26,450		26,450		—		—		—
Subtotal	$	541,733	$	113,660	$	250,179	$	—	$	177,894
Accrued income/expense	2,909		107		2,802		—		—
Total	$	544,642	$	113,767	$	252,981	$	—	$	177,894

	Total Carrying Value at December 31, 2021		Quoted prices  in active markets (Level 1)		Significant  other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Not subject to leveling
In thousands
Short term investments:
Cash and cash equivalents	$	19,033	$	19,033	$	—	$	—	$	—
Futures contracts - assets	2,014		—		2,014		—		—
Futures contracts - liabilities	(372)		—		(372)		—		—
Fixed income securities	231,433		—		231,433		—		—
Mutual funds	72,834		72,834		—		—		—
Common trust funds(1)	417,022		—		—		—		417,022
Corporate stock	20,222		20,222		—		—		—
Subtotal	$	762,186	$	112,089	$	233,075	$	—	$	417,022
Accrued income/expense	1,823		(33)		1,856		—		—
Total	$	764,009	$	112,056	$	234,931	$	—	$	417,022

(1) In accordance with ASU 2015-07, Fair Value Measurement (Topic 820), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension plan assets.

Derivatives are primarily used to manage risk and gain asset class exposure while still maintaining liquidity. Derivative instruments mainly consist of equity futures and interest rate futures.

17. PENSION PLANS (CONTINUED)

Other Plans

The Company also maintains a Defined Contribution Plan that has been adopted by most of its U.S. subsidiaries. Employees of the adopting employers who meet the eligibility requirements of the plan may participate. Employer matching contributions are made to the plan based on a percentage of each participant’s pre-tax contribution. For each dollar that a participant contributes, up to 5% of compensation, participating subsidiaries make employer contributions of one dollar. Employer contributions to the plan totaled $6.4 million, $6.1 million and $6.7 million in 2022, 2021 and 2020, respectively.

One of the Company's foreign subsidiaries maintains a defined benefit plan of its own for its local employees. The net pension liability associated with this plan was not material as of December 31, 2022 and 2021.