Employee Benefits

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Employee Benefits

Employee Benefits

Defined Benefit Pension Plans

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. These defined benefit pension plans were previously amended to freeze benefit accruals after a 10-year transition period, which ended in December 2023.

In the fourth quarter of 2023, the Corporation’s Board of Directors approved a resolution to terminate the qualified pension plan and participants were notified of the termination. Work on the qualified pension plan termination process has commenced and the qualified pension plan’s assets are expected to be distributed in 2025, pending completion of applicable regulatory approvals, including receipt of a determination letter from the Internal Revenue Service. The qualified pension plan liability is expected to be settled in 2025 through a combination of lump sum payments to participants and purchase of a group annuity contract from a highly-rated insurance company. Upon settlement in 2025, the Corporation expects to recognize a pre-tax pension settlement charge that will include a non-cash charge for the recognition of all pre-tax actuarial losses accumulated in AOCL at that time. The actual amount of the settlement charge will depend on various factors, including interest rates, plan asset returns, the lump sum election rate and annuity pricing.

The qualified pension plan is funded on a current basis, in compliance with the requirements of ERISA.

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. The actuarial assumptions as of December 31, 2023 included considerations for the termination of the qualified pension plan.

The following table presents the plans’ projected benefit obligations, fair value of plan assets and funded (unfunded) status:

(Dollars in thousands)	Qualified Pension Plan		Non-Qualified Retirement Plans
At December 31,	2023	2022	2023	2022
Change in Benefit Obligation:
Benefit obligation at beginning of period	$66,656	$89,408	$13,562	$17,717
Service cost	1,403	2,062	156	218
Interest cost	3,540	2,368	706	423
Actuarial (gain) loss	8,522	(23,658)	(279)	(3,880)
Benefits paid	(4,570)	(3,422)	(950)	(916)
Administrative expenses	(267)	(102)	—	—
Benefit obligation at end of period	75,284	66,656	13,195	13,562
Change in Plan Assets:
Fair value of plan assets at beginning of period	81,553	103,047	—	—
Actual return on plan assets	6,121	(17,970)	—	—
Employer contributions	—	—	950	916
Benefits paid	(4,570)	(3,422)	(950)	(916)
Administrative expenses	(267)	(102)	—	—
Fair value of plan assets at end of period	82,837	81,553	—	—
Funded (unfunded) status at end of period (1)	$7,553	$14,897	($13,195)	($13,562)

(1)Funded status of the qualified pension plan is included in other assets in the Consolidated Balance Sheets. Unfunded status of the non-qualified retirement plans is 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 $13.6 million and $14.0 million are included in the Consolidated Balance Sheets at December 31, 2023 and 2022, respectively.

The following table presents the amounts included in AOCL related to the qualified pension plan and non-qualified retirement plans:

(Dollars in thousands)	Qualified Pension Plan		Non-Qualified Retirement Plans
At December 31,	2023	2022	2023	2022
Net actuarial loss included in AOCL, pre-tax	$8,837	$1,846	$2,939	$3,455

The accumulated benefit obligation for the qualified pension plan was $75.3 million and $64.8 million, respectively, at December 31, 2023 and 2022.  The accumulated benefit obligation for the non-qualified retirement plans amounted to $13.2 million and $13.1 million, respectively, at December 31, 2023 and 2022.

The following table presents components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss), on a pre-tax basis:

(Dollars in thousands)	Qualified Pension Plan			Non-Qualified Retirement Plans
Years ended December 31,	2023	2022	2021	2023	2022	2021
Net Periodic Benefit Cost:
Service cost (1)	$1,403	$2,062	$2,369	$156	$218	$208
Interest cost (2)	3,540	2,368	2,004	706	423	337
Expected return on plan assets (2)	(4,590)	(4,634)	(4,815)	—	—	—
Recognized net actuarial loss (2)	—	1,020	2,121	237	692	723
Net periodic benefit cost	353	816	1,679	1,099	1,333	1,268
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (on a pre-tax basis):
Net loss (gain)	6,991	(2,074)	(8,132)	(516)	(4,572)	(621)
Recognized in other comprehensive income (loss)	6,991	(2,074)	(8,132)	(516)	(4,572)	(621)
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$7,344	($1,258)	($6,453)	$583	($3,239)	$647

(1)Included in salaries and employee benefits expense in the Consolidated Statements of Income.

(2)Included in other expenses in the Consolidated Statements of Income.

Assumptions

The following table presents the measurement date and weighted-average assumptions used to determine benefit obligations at December 31, 2023 and 2022:

	Qualified Pension Plan				Non-Qualified Retirement Plans
	2023		2022		2023		2022
Measurement date	Dec 31, 2023		Dec 31, 2022		Dec 31, 2023		Dec 31, 2022
Discount rate	4.51	%	5.54	%	5.10	%	5.50	%
Rate of compensation increase	0.50		5.00		N/A		5.00

The following table presents the measurement date and weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2023, 2022 and 2021:

	Qualified Pension Plan						Non-Qualified Retirement Plans
	2023		2022		2021		2023		2022		2021
Measurement date	Dec 31, 2022		Dec 31, 2021		Dec 31, 2020		Dec 31, 2022		Dec 31, 2021		Dec 31, 2020
Equivalent single discount rate for benefit obligations	5.54	%	3.00	%	2.71	%	5.50	%	2.89	%	2.51	%
Equivalent single discount rate for service cost	5.60		3.11		2.86		5.61		3.16		2.94
Equivalent single discount rate for interest cost	5.43		2.67		2.16		5.40		2.48		1.97
Expected long-term return on plan assets	5.25		5.25		5.75		N/A		N/A		N/A
Rate of compensation increase	5.00		3.75		3.75		5.00		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. Decreases in the long-term rate of return assumption on plan assets increase pension costs and, in general, may increase the requirement to make funding contributions to the plans. Increases in the long-term rate of return on plan assets have the opposite effect.

The discount rate assumption for defined benefit pension plans is reset on the measurement date.  Discount rates are selected for each plan by matching expected future benefit payments stream to a yield curve based on a selection of high-quality fixed-income debt securities. Decreases in discount rates increase the present value of pension obligations and increase our pension costs, while increases in discount rates 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.

Plan Assets

The following tables present the fair values of the qualified pension plan’s assets:

(Dollars in thousands)	Fair Value Measurements Using			Fair Value
December 31, 2023	Level 1	Level 2	Level 3
Assets:
Cash and cash equivalents	$16,820	$—	$—	$16,820
Obligations of U.S. government-sponsored enterprises	—	58,147	—	58,147
Obligations of states and political subdivisions	—	1,459	—	1,459
Corporate bonds	—	1,974	—	1,974
Mutual funds	4,437	—	—	4,437
Total plan assets	$21,257	$61,580	$—	$82,837

(Dollars in thousands)	Fair Value Measurements Using			Fair Value
December 31, 2022	Level 1	Level 2	Level 3
Assets:
Cash and cash equivalents	$8,438	$—	$—	$8,438
Obligations of U.S. government-sponsored enterprises	—	42,601	—	42,601
Obligations of states and political subdivisions	—	1,728	—	1,728
Corporate bonds	—	4,854	—	4,854
Mutual funds	23,932	—	—	23,932
Total plan assets	$32,370	$49,183	$—	$81,553

The qualified pension plan uses fair value measurements to record fair value adjustments to the securities held in its investment portfolio.

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 exchange-traded mutual funds.

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, 2023 and 2022, the qualified pension plan did not have any securities in the Level 3 category.

The following table presents the asset allocations of the qualified pension plan, by asset category:

December 31,	2023		2022
Asset Category:
Cash and cash equivalents	20.3	%	10.3	%
Fixed income securities (1)	74.3		60.3
Mutual funds	5.4		29.4
Total	100.0	%	100.0	%

(1)Includes obligations of U.S. government agencies and U.S. government-sponsored enterprises, obligations of states and political subdivisions and corporate bonds.

The assets of the qualified defined benefit pension plan 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 aligning the characteristics of the plan assets to that of the plan liabilities. The qualified pension plan is considered well-funded and benefit accruals have been frozen at December 31, 2023. In addition, as noted above, the qualified pension plan’s termination has commenced in 2023. Our investment approach takes these factors into consideration, and as such we have increased our allocation to lower-risk fixed income securities, while simultaneously reducing our allocation to higher-risk equity securities.

Cash inflow is typically composed of investment income from portfolio holdings and employer 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.

Cash Flows

Contributions

The Code permits flexibility in plan contributions so that normally a range of contributions is possible.  The Corporation does not expect to make contributions to the qualified pension plan in the future due to the plan’s termination that is expected to be completed in 2025 and the plan’s funded status.  In addition, the Corporation expects to contribute $859 thousand in benefit payments to the non-qualified retirement plans in 2024.

Estimated Future Benefit Payments

The following table presents the benefit payments, which reflect expected future service, as appropriate, expected to be paid:

(Dollars in thousands)			Qualified Pension Plan	Non-Qualified Retirement Plans
Years ending December 31,	2024		$2,830	$859
	2025	(1)	76,626	873
	2026		—	918
	2027		—	942
	2028		—	934
	2029 and thereafter		—	4,749

(1)The expected benefit payments for the qualified pension plan in 2025 reflects the termination of the plan that is expected to be completed in 2025.

401(k) Plan

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 $3.5 million, $3.2 million and $3.0 million in 2023, 2022 and 2021, respectively.

Deferred Compensation Plan

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 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 $20.6 million and $18.7 million, respectively, at December 31, 2023 and 2022, 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.