Washington Trust maintains a qualified pension plan for the benefit of certain eligible employees who were hired prior to October 1, 2007. Washington Trust also has non-qualified retirement plans to provide supplemental retirement benefits to certain employees, as defined in the plans. The defined benefit pension plans were previously amended to freeze benefit accruals after a 10-year transition period ending in December 2023.

Pension benefit costs and benefit obligations incorporate various actuarial and other assumptions, including discount rates, mortality, rates of return on plan assets and compensation increases. Washington Trust evaluates these assumptions annually.



(Dollars in thousands)	Qualified Pension Plan						Non-Qualified Retirement Plans
At December 31,	2019			2018			2019			2018
Change in Benefit Obligation:
Benefit obligation at beginning of period		$73,380			$80,723			$14,626			$15,203
Service cost	2,037			2,244			126			108
Interest cost	2,967			2,715			563			475
Actuarial loss (gain)	10,453			(7,830		)	2,028			(252		)
Benefits paid	(5,546		)	(4,344		)	(905		)	(908		)
Administrative expenses	(150		)	(128		)	—			—
Benefit obligation at end of period	83,141			73,380			16,438			14,626
Change in Plan Assets:
Fair value of plan assets at beginning of period	86,180			87,364			—			—
Actual return on plan assets	13,265			288			—			—
Employer contributions	—			3,000			905			908
Benefits paid	(5,546		)	(4,344		)	(905		)	(908		)
Administrative expenses	(150		)	(128		)	—			—
Fair value of plan assets at end of period	93,749			86,180			—			—
Funded (unfunded) status at end of period		$10,608			$12,800			($16,438	)		($14,626	)

As of December 31, 2019 and 2018, the funded status of the qualified defined benefit pension plan amounted to $10.6 million and $12.8 million, respectively, and was included in other assets in the Consolidated Balance Sheets. The unfunded status of the non-qualified defined benefit retirement plans was $16.4 million and $14.6 million, respectively, at December 31, 2019 and December 31, 2018 and was included in other liabilities in the Consolidated Balance Sheets.

The non-qualified retirement plans provide for the designation of assets in rabbi trusts. Securities available for sale and other short-term investments designated for this purpose, with the carrying value of $14.3 million and $14.6 million are included in the Consolidated Balance Sheets at December 31, 2019 and 2018, respectively.



(Dollars in thousands)	Qualified Pension Plan					Non-Qualified Retirement Plans
	Qualified Pension Plan					Non-Qualified Retirement Plans
At December 31,	2019		2018			2019		2018
Net actuarial loss		$10,343		$9,453			$7,405		$5,785
Prior service credit	—		(16		)	—		—
Total pre-tax amounts recognized in accumulated other comprehensive income		$10,343		$9,437			$7,405		$5,785

The accumulated benefit obligation for the qualified pension plan was $76.6 million and $67.4 million at December 31, 2019 and 2018, respectively. The accumulated benefit obligation for the non-qualified retirement plans amounted to $14.9 million and $13.2 million at December 31, 2019 and 2018, respectively.



(Dollars in thousands)	Qualified Pension Plan									Non-Qualified Retirement Plans
Years ended December 31,	2019			2018			2017			2019		2018			2017
Net Periodic Benefit Cost:
Service cost (1)		$2,037			$2,244			$2,149			$126		$108			$129
Interest cost (2)	2,967			2,715			2,673			563		475			428
Expected return on plan assets (2)	(4,495		)	(5,272		)	(4,942		)	—		—			—
Amortization of prior service credit (2)	(16		)	(23		)	(23		)	—		(1		)	(1		)
Recognized net actuarial loss (2)	792			1,496			1,114			408		411			347
Net periodic benefit cost	1,285			1,160			971			1,097		993			903
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (on a pre-tax basis):
Net loss (gain)	890			(4,342		)	(1,798		)	1,620		(663		)	1,928
Prior service credit	16			23			23			—		1			1
Recognized in other comprehensive income (loss)	906			(4,319		)	(1,775		)	1,620		(662		)	1,929
Total recognized in net periodic benefit cost and other comprehensive income (loss)		$2,191			($3,159	)		($804	)		$2,717		$331			$2,832

For the qualified pension plan, net losses of $1.6 million will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost during the year 2020. There are no estimated prior service credits to be amortized in 2020 for the qualified pension plan. For the non-qualified retirement plans, net losses of $559 thousand will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost during the year 2020. There are no estimated prior service credits to be amortized in 2020 for the non-qualified retirement plans.



	Qualified Pension Plan				Non-Qualified Retirement Plans
	2019		2018		2019		2018
Measurement date	Dec 31, 2019		Dec 31, 2018		Dec 31, 2019		Dec 31, 2018
Discount rate	3.42	%	4.38	%	3.30	%	4.30	%
Rate of compensation increase	3.75		3.75		3.75		3.75



	Qualified Pension Plan						Non-Qualified Retirement Plans
	2019		2018		2017		2019		2018		2017
Measurement date	Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016
Equivalent single discount rate for benefit obligations	4.38	%	3.69	%	4.18	%	4.28	%	3.58	%	3.96	%
Equivalent single discount rate for service cost	4.44		3.76		4.29		4.48		3.79		4.25
Equivalent single discount rate for interest cost	4.12		3.42		3.73		3.98		3.22		3.36
Expected long-term return on plan assets	5.75		6.75		6.75		N/A		N/A		N/A
Rate of compensation increase	3.75		3.75		3.75		3.75		3.75		3.75

The expected long-term rate of return on plan assets is based on what the Corporation believes is realistically achievable based on the types of assets held by the plan and the plan’s investment practices. The assumption is updated annually, taking into account the asset allocation, historical asset return trends on the types of assets held and the current and expected economic conditions. Future decreases in the long-term rate of return assumption on plan assets would increase pension costs and, in general, may increase the requirement to make funding contributions to the plans. Future increases in the long-term rate of return on plan assets would have the opposite effect.

The "spot rate approach" was utilized in the calculation of interest and service cost. The spot rate approach applies separate discount rates for each projected benefit payment in the calculation of interest and service cost. This approach provides a more precise measurement of service and interest cost by improving the correlation between projected benefit cash flows and their corresponding spot rates.



(Dollars in thousands)
	Fair Value Measurements Using						Assets at Fair Value
December 31, 2019	Level 1		Level 2		Level 3		Assets at Fair Value
Assets:
Cash and cash equivalents		$9,902		$—		$—		$9,902
Obligations of U.S. government-sponsored enterprises	—		28,615		—		28,615
Obligations of states and political subdivisions	—		2,998		—		2,998
Corporate bonds	—		10,033		—		10,033
Common stocks	14,593		—		—		14,593
Mutual funds	27,608		—		—		27,608
Total plan assets		$52,103		$41,646		$—		$93,749



(Dollars in thousands)
	Fair Value Measurements Using						Assets at Fair Value
December 31, 2018	Level 1		Level 2		Level 3		Assets at Fair Value
Assets:
Cash and cash equivalents		$25,986		$—		$—		$25,986
Obligations of U.S. government-sponsored enterprises	—		21,787		—		21,787
Obligations of states and political subdivisions	—		2,597		—		2,597
Corporate bonds	—		10,361		—		10,361
Common stocks	9,957		—		—		9,957
Mutual funds	15,492		—		—		15,492
Total plan assets		$51,435		$34,745		$—		$86,180

When available, the qualified pension plan uses quoted market prices to determine the fair value of securities; such items are classified as Level 1. This category includes cash and cash equivalents, as well as common stocks and mutual funds which are exchange-traded.

Level 2 securities in the qualified pension plan include debt securities with quoted prices, which are traded less frequently than exchange-traded instruments, whose values are determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category includes obligations of U.S. government-sponsored enterprises, obligations of states and political subdivisions and corporate bonds.

In certain cases where there is limited activity or less transparency around inputs to the valuation, securities may be classified as Level 3. As of December 31, 2019 and 2018, the qualified pension plan did not have any securities in the Level 3 category.

The assets of the qualified defined benefit pension plan trust (the “Pension Trust”) are managed to ensure that all present and future benefit obligations are met as they come due. It seeks to achieve this goal while trying to mitigate volatility in plan funded status, contributions and expense by better matching the characteristics of the plan assets to that of the plan liabilities. As benefit accruals under the qualified plan will be frozen on December 31, 2023, asset allocations have been and will continue to be refined.

Cash inflow is typically comprised of investment income from portfolio holdings and Bank contributions, while cash outflow is for the purpose of paying plan benefits and certain plan expenses. As early as possible each year, the trustee is advised of the projected schedule of employer contributions and estimations of benefit payments.

The investment philosophy used for the Pension Trust emphasizes consistency of results over an extended market cycle, while reducing the impact of the volatility of the security markets upon investment results. The assets of the Pension Trust should be protected by substantial diversification of investments, providing exposure to a wide range of quality investment opportunities in various asset classes, with a high degree of liquidity.

Fixed income bond investments will typically be limited to investment grade securities in the top four categories used by the major credit rating agencies. High yield bond funds may be used to provide exposure to this asset class as a diversification tool. In order to reduce the volatility of the annual rate of return of the bond portfolio, attention will be given to the maturity structure of the portfolio in the light of money market conditions and interest rate forecasts. The assets of the Pension Trust will typically have a laddered maturity structure, avoiding large concentrations in any single year. Equity holdings provide opportunities for dividend and capital appreciation returns. Holdings will be appropriately diversified by maintaining broad exposure to large-, mid- and small-cap stocks as well as international equities. Investment selection and mix of equity holdings should be influenced by forecasts of economic activity, corporate profits and allocation among different segments of the economy while ensuring efficient diversification. The fair value of equity securities of any one issuer will not be permitted to exceed 10% of the total fair value of equity holdings of the Pension Trust.

The Internal Revenue Code permits flexibility in plan contributions so that normally a range of contributions is possible. The Corporation does not expect to make a contribution to the qualified pension plan in 2020. In addition, the Corporation expects to contribute $898 thousand in benefit payments to the non-qualified retirement plans in 2020.

The Corporation’s 401(k) Plan provides a match up to a maximum of 3% of employee contributions for substantially all employees. In addition, substantially all employees hired after September 30, 2007, who are ineligible for participation in the qualified defined benefit pension plan, receive a non-elective employer contribution of 4% of compensation. Total employer matching contributions under this plan amounted to $2.7 million, $2.5 million and $2.3 million in 2019, 2018 and 2017, respectively.

The Corporation maintains several non-qualified incentive compensation plans. Substantially all employees participate in one of the incentive compensation plans. Incentive plans provide for annual or more frequent payments based on individual, business line and/or corporate performance targets. Total incentive based compensation in 2019, 2018 and 2017 amounted to $16.7 million, $16.1 million and $16.9 million, respectively. In general, the terms of incentive plans are subject to annual renewal and may be terminated at any time by the Compensation Committee of the Board of Directors.

The Amended and Restated Nonqualified Deferred Compensation Plan provides supplemental retirement and tax benefits to directors and certain officers. The plan is funded primarily through pre-tax contributions made by the participants. The assets and liabilities of the Deferred Compensation Plan are recorded at fair value in the Corporation’s Consolidated Balance Sheets. The participants in the plan bear the risk of market fluctuations of the underlying assets. The accrued liability related to this plan amounted to $17.9 million and $15.7 million, respectively, at December 31, 2019 and 2018, and is included in other liabilities on the accompanying Consolidated Balance Sheets. The corresponding invested assets are reported in other assets in the Consolidated Balance Sheets.