

NOTE 13 – EMPLOYEE BENEFIT PLANS

The following summarizes the Corporation’s expense under its retirement plans for the years ended December 31:



	2018		2017		2016
	(in thousands)
401(k) Retirement Plan	$	8,482	$	8,121	$	7,418
Pension Plan	3,435		4,168		4,310
	$	11,917	$	12,289	$	11,728

The 401(k) Retirement Plan is a defined contribution plan under which eligible employees may defer a portion of their pre-tax covered compensation on an annual basis, with employer matches of up to 5% of employee compensation. Employee and employer contributions under these features are 100% vested.

Contributions to the Defined Benefit Pension Plan ("Pension Plan") are actuarially determined and funded annually, if necessary. The Corporation recognizes the funded status of its Pension Plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income. The Pension Plan has been curtailed, with no additional benefits accruing to participants.

Pension Plan

The net periodic pension cost for the Pension Plan, as determined by consulting actuaries, consisted of the following components for the years ended December 31:



	2018			2017			2016
	(in thousands)
Service cost ⁽¹⁾	$	—		$	—		$	688
Interest cost	3,053			3,320			3,520
Expected return on assets	(2,047		)	(1,804		)	(2,318		)
Net amortization and deferral	2,429			2,652			2,420
Net periodic pension cost	$	3,435		$	4,168		$	4,310


(1)	The Pension Plan was curtailed effective January 1, 2008. Pension plan service cost for all years presented was related to administrative costs associated with the plan and not due to the accrual of additional participant benefits. Beginning January 1, 2017 the administrative costs were netted with the expected return on assets.

The following table summarizes the changes in the projected benefit obligation and fair value of plan assets for the plan years ended December 31:



	2018			2017
	(in thousands)
Projected benefit obligation at beginning of year	$	89,482		$	85,363
Interest cost	3,053			3,320
Benefit payments	(5,796		)	(3,751		)
Change in assumptions	(8,051		)	5,008
Experience gain	738			(458		)
Projected benefit obligation at end of year	$	79,426		$	89,482

Fair value of plan assets at beginning of year	$	54,061		$	48,684
Employer contributions⁽¹⁾	13,042			3,816
Actual return on plan assets	(3,482		)	5,312
Benefit payments	(5,796		)	(3,751		)
Fair value of plan assets at end of year	$	57,825		$	54,061


(1)	The Corporation funds at least the minimum amount required by federal law and regulations. The Corporation contributed $13.0 million and $3.8 million to the Pension Plan during 2018 and 2017, respectively.

The following table presents the funded status of the Pension Plan, included in other liabilities on the consolidated balance sheets, as of December 31:



	2018			2017
	(in thousands)
Projected benefit obligation	$	(79,426	)	$	(89,482	)
Fair value of plan assets	57,825			54,061
Funded status	$	(21,601	)	$	(35,421	)

The following table summarizes the changes in the unrecognized net loss included as a component of accumulated other comprehensive loss:



	Unrecognized Net Loss
	Before tax			Net of tax
	(in thousands)
Balance as of December 31, 2016	$	30,169		$	19,610
Recognized as a component of 2017 periodic pension cost	(2,652		)	(1,724		)
Unrecognized gains arising in 2017	1,042			678
Balance as of December 31, 2017	28,559			18,564
Recognized as a component of 2018 periodic pension cost	(2,429		)	(1,892		)
Unrecognized losses arising in 2018	(1,783		)	(1,389		)
Re-measurement adjustments for tax rate changes	—			3,678
Balance as of December 31, 2018	$	24,347		$	18,961

The total amount of unrecognized net loss that will be amortized as a component of net periodic pension cost in 2019 is expected to be $2.3 million.

The following rates were used to calculate net periodic pension cost and the present value of benefit obligations as of December 31:



	2018		2017		2016
Discount rate-projected benefit obligation	4.25	%	3.50	%	4.00	%
Expected long-term rate of return on plan assets	5.00	%	5.00	%	5.00	%

The discount rates used were determined using the Citigroup Average Life discount rate table, as adjusted based on the Pension Plan's expected benefit payments and rounded to the nearest 0.25%.

The 5.00% long-term rate of return on plan assets used to calculate the net periodic pension cost was based on historical returns, adjusted for expectations of long-term asset returns based on the December 31, 2018 weighted average asset allocations. The expected long-term return is considered to be appropriate based on the asset mix and the historical returns realized.

The following table presents a summary of the fair values of the Pension Plan’s assets as of December 31:



	2018				2017
	Estimated Fair Value		% of Total Assets		Estimated Fair Value		% of Total Assets
	(dollars in thousands)
Equity mutual funds	$	18,532			$	19,219
Equity common trust funds	9,062				9,612
Equity securities	27,594		47.7	%	28,831		53.3	%
Cash and money market funds	10,754				5,675
Fixed income mutual funds	11,523				11,136
Corporate debt securities	2,985				2,999
U.S. Government agency securities	—				249
Fixed income securities and cash	25,262		43.7	%	20,059		37.1	%
Other alternative investment funds	4,969		8.6	%	5,171		9.6	%
	$	57,825	100.0	%	$	54,061	100.0	%

Investment allocation decisions are made by a retirement plan committee. The goal of the investment allocation strategy is to match certain benefit obligations with maturities of fixed income securities. Pension Plan assets are invested with a balanced objective, with target asset allocations of approximately 50% in equities, 40% in fixed income securities and cash and 10% in alternative investments. Alternative investments may include managed futures, commodities, real estate investment trusts, master limited partnerships, and long-short strategies with traditional stocks and bonds. All alternative investments are in the form of mutual funds, not individual contracts, to enable daily liquidity.

The fair values for all assets held by the Pension Plan, excluding equity common trust funds, are based on quoted prices for identical instruments and would be categorized as Level 1 assets under FASB ASC Topic 810. Equity common trust funds would be categorized as Level 2 assets under FASB ASC Topic 810.

Estimated future benefit payments are as follows (in thousands):



Year
2019	$	3,899
2020	4,203
2021	4,390
2022	4,500
2023	4,628
2024 – 2028	24,718
	$	46,338

Postretirement Benefits

The Corporation provides medical benefits and life insurance benefits under a postretirement benefits plan ("Postretirement Plan") to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998. Prior to February 1, 2014, certain full-time employees became eligible for these discretionary benefits if they reached retirement age while working for the Corporation. The Corporation recognizes the funded status of the postretirement plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income.

The components of the net (benefit) expense for postretirement benefits other than pensions are as follows:



	2018			2017			2016
	(in thousands)
Interest cost	$	57		$	68		$	85
Net amortization and deferral	(559		)	(565		)	(551		)
Net postretirement benefit	$	(502	)	$	(497	)	$	(466	)

The following table summarizes the changes in the accumulated postretirement benefit obligation and fair value of plan assets for the years ended December 31:



	2018			2017
	(in thousands)
Accumulated postretirement benefit obligation at beginning of year	$	1,700		$	1,926
Interest cost	57			68
Benefit payments	(205		)	(216		)
Experience gain	35			(104		)
Change in assumptions	(67		)	26
Accumulated postretirement benefit obligation at end of year	$	1,520		$	1,700

Fair value of plan assets at beginning of year	$	—		$	3
Employer contributions	205			213
Benefit payments	(205		)	(216		)
Fair value of plan assets at end of year	$	—		$	—

The funded status of the Postretirement Plan, included in other liabilities on the consolidated balance sheets as of December 31, 2018 and 2017 was $1.5 million and $1.7 million, respectively.

The following table summarizes the changes in items recognized as a component of accumulated other comprehensive loss:



	Before tax
	Unrecognized Prior Service Cost			Unrecognized Net Loss (Gain)			Total			Net of tax
	(in thousands)
Balance as of December 31, 2016	$	(4,869	)	$	(1,183	)	$	(6,052	)	$	(3,935	)
Recognized as a component of 2017 postretirement benefit cost	465			101			566			368
Unrecognized gains arising in 2017	—			(77		)	(77		)	(50		)
Balance as of December 31, 2017	(4,404		)	(1,159		)	(5,563		)	(3,617		)
Recognized as a component of 2018 postretirement benefit cost	464			95			559			435
Unrecognized gains arising in 2018	—			(32		)	(32		)	(25		)
Re-measurement adjustments for tax rate changes	—			—			—			(721		)
Balance as of December 31, 2018	$	(3,940	)	$	(1,096	)	$	(5,036	)	$	(3,928	)

The following rates were used to calculate net periodic postretirement benefit cost and the present value of benefit obligations as of December 31:



	2018		2017		2016
Discount rate-projected benefit obligation	4.25	%	3.50	%	4.25	%
Expected long-term rate of return on plan assets	3.00	%	3.00	%	3.00	%

The discount rates used to calculate the accumulated postretirement benefit obligation were determined using the Citigroup Average Life discount rate table, as adjusted based on the Postretirement Plan's expected benefit payments and rounded to the nearest 0.25%.

Estimated future benefit payments under the Postretirement Plan are as follows (in thousands):



Year
2019	$	189
2020	176
2021	164
2022	151
2023	140
2024 – 2028	534
	$	1,354