Retirement Plans

12 Months Ended

Dec. 31, 2019

First Commonwealth has a savings plan pursuant to the provisions of section 401(k) of the Internal Revenue code. Effective January 1, 2013, a participating employee can receive a maximum matching contribution of 6% of their compensation. In

addition, each participating employee may contribute up to 80% of their eligible compensation to the plan. The 401(k) plan expense was $3.6 million in 2019, $3.2 million in 2018, and $2.8 million in 2017.

First Commonwealth maintains a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to provide deferred compensation for those employees who are in the top 7% of full-time employees, as determined on the basis of base compensation. The NQDC Plan provides participants whose maximum retirement contribution is limited by IRS rules to defer additional compensation.

Participants in the NQDC Plan are eligible to defer (on a pre-tax basis) from 1% to 25% of their eligible Plan compensation. Participants are also eligible to defer all or a portion of the Annual Incentive Plan (on a pre-tax basis) from 10% to 100% of their annual cash incentive earned. There was no NQDC Plan expense in 2019, 2018 and 2017.

Select employees from former acquisitions were covered by postretirement benefit plans which provide medical and life insurance coverage. The measurement date for these plans was December 31.

Postretirement Benefits Other than Pensions from Prior Acquisitions

Net periodic benefit cost of these plans for the years ended December 31, was as follows:



	2019			2018			2017
	(dollars in thousands)
Service cost	$	—		$	—		$	—
Interest cost on projected benefit obligation	34			38			49
Amortization of transition obligation	—			—			—
Gain amortization	(60		)	(35		)	(21		)
Net periodic benefit cost	$	(26	)	$	3		$	28

The following table sets forth the change in the benefit obligation and plan assets as of December 31:



	2019			2018
	(dollars in thousands)
Change in Benefit Obligation
Benefit obligation at beginning of year	$	883		$	1,188
Service cost	—			—
Interest cost	34			38
Amendments	—			—
Actuarial gain	61			(174		)
Net benefits paid	(144		)	(169		)
Benefit obligation at end of year	834			883
Change in Plan Assets
Fair value of plan assets at beginning of year	—			—
Actual return on plan assets	—			—
Employer contributions	144			169
Net benefits paid	(144		)	(169		)
Fair value of plan assets at end of year	—			—
Funded Status at End of Year	834			883
Unrecognized transition obligation	—			—
Unrecognized net gain	463			584
Amounts recognized in retained earnings	$	1,297		$	1,467

As of December 31, the funded status of the plan is:



	2019		2018
	(dollars in thousands)
Amounts Recognized in the Statement of Financial Condition as Other liabilities	$	834	$	883

The following table sets forth the amounts recognized in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit costs as of December 31:



	2019			2018			2017
	(dollars in thousands)
Amounts recognized in accumulated other comprehensive income, net of tax:
Net (gain) loss	$	(366	)	$	(461	)	$	(347	)
Transition obligation	—			—			—
Total	$	(366	)	$	(461	)	$	(347	)

Weighted-average assumptions used to determine the benefit obligation as of December 31 are as follows:



	2019		2018		2017
Weighted-Average Assumptions
Discount rate	2.88	%	4.11	%	3.37	%
Health care cost trend: Initial	5.55	%	6.00	%	6.00	%
Health care cost trend: Ultimate	4.75	%	4.75	%	4.75	%
Year ultimate reached	2025		2024		2023

Weighted-average assumptions used to determine the net benefit costs as of December 31 are as follows:



	2019		2018		2017
Weighted-Average Assumptions for Net Periodic Cost
Discount rate	4.11	%	3.37	%	3.74	%
Health care cost trend: Initial	6.00	%	6.00	%	6.00	%
Health care cost trend: Ultimate	4.75	%	4.75	%	4.75	%
Year ultimate reached	2024		2023		2022
Corridor	10.00	%	10.00	%	10.00	%
Recognition period for gains and losses	12.1		12.1		11.0

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) introduced a prescription drug benefit under Medicare Part D and a federal subsidy to sponsors of retiree health care benefit plans that provide a prescription drug benefit that is at least actuarially equivalent to Medicare Part D. The postretirement plans of First Commonwealth are provided through insurance coverage; therefore, First Commonwealth will not receive a direct federal subsidy. The preceding measures of the accumulated postretirement benefit cost assume that First Commonwealth will not receive the subsidy due to the relatively small number of retirees.

The health care cost trend rate assumption can have a significant impact on the amounts reported for this plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:



	One-Percentage- Point Increase		One-Percentage- Point Decrease
	(dollars in thousands)
Effect on postretirement benefit obligation	$	14	$	(13	)
Effect on total of service and interest cost components	1		(1		)

As of December 31, 2019, the projected benefit payments for the next ten years are as follows:



	Projected Benefit Payments
	(dollars in thousands)
2020	$	102
2021	96
2022	89
2023	82
2024	75
2025 - 2029	286

The projected payments were calculated using the same assumptions as those used to calculate the benefit obligations included in this note.

The estimated costs that will be amortized from accumulated other comprehensive income into net periodic cost for 2020 are as follows (dollars in thousands):



	Postretirement Benefits
	(dollars in thousands)
Net gain	$	(52	)
Transition obligation	—
Total	$	(52	)