Employee Benefit Plans

12 Months Ended

Dec. 31, 2020

Employee Benefit Plans

The company maintains an unfunded Arrow supplemental executive retirement plan (“SERP”) under which the company will pay supplemental pension benefits to certain employees upon retirement. As of December 31, 2020, there were 10 current and 23 former corporate officers participating in this plan. The Board determines those employees who are eligible to participate in the Arrow SERP.

The Arrow SERP, as amended, provides for the pension benefits to be based on a percentage of average final compensation, based on years of participation in the Arrow SERP. The Arrow SERP permits early retirement, with payments at a reduced rate, based on age and years of service subject to a minimum retirement age of 55. Participants whose accrued rights under the Arrow SERP, prior to the 2002 amendment, which were adversely affected by the amendment, will continue to be entitled to such greater rights.

As part of the company's acquisition of Wyle in 2000, Wyle provided retirement benefits for certain employees under a defined benefit plan. Benefits under this plan were frozen as of December 31, 2000 and on December 31, 2018 the plan was terminated. Prior to terminating the plan, the company adopted an amendment to the plan that provided eligible plan participants with the option to receive an early distribution of their pension benefits. In 2019 the company entered into a settlement for the remaining portion of its Wyle defined benefit plan under which participants received benefits through lump sum payments and an insurance annuity contract. During 2019, the settlement of $59,311 was completed and the company recorded settlement expense of $20,111, which is recorded in the “Employee benefit plan expense, net” line item in the company's consolidated statements of operations. The company decided to terminate the plan to reduce administrative burdens.

The company uses a December 31 measurement date for the Arrow SERP and the Wyle defined benefit plan. Pension information for the years ended December 31 is as follows:


	Arrow SERP						Wyle Defined Benefit Plan
	2020			2019			2020		2019
Accumulated benefit obligation	$	100,825		$	93,385		$	—	$	—
Changes in projected benefit obligation:
Projected benefit obligation at beginning of year	101,817			90,578			—		59,399
Service cost	3,514			2,874			—		—
Interest cost	3,087			3,710			—		1,130
Actuarial loss (gain)	5,699			9,210			—		1,500
Benefits paid	(4,561)			(4,555)			—		(2,718)
Settlement	—			—			—		(59,311)
Projected benefit obligation at end of year	109,556			101,817			—		—
Changes in plan assets:
Fair value of plan assets at beginning of year	—			—			502		54,925
Actual return on plan assets	—			—			—		7,606
Company contributions	—			—			(502)		—
Benefits paid	—			—			—		(2,718)
Settlement	—			—			—		(59,311)
Fair value of plan assets at end of year	—			—			—		502
Funded status	$	(109,556)		$	(101,817)		$	—	$	502
Amounts recognized in the company's consolidated balance sheets:
Current assets	$	—		$	—		$	—	$	502
Current liabilities	(4,532)			(4,535)			—		—
Noncurrent liabilities	(105,024)			(97,282)			—		—
Net asset (liability) at end of year	(109,556)			(101,817)			—		502
Components of net periodic pension cost:
Service cost	3,514			2,874			—		—
Interest cost	3,087			3,710			—		1,130
Expected return on plan assets	—			—			—		(954)
Amortization of net loss	1,606			100			—		820

Settlement charge	—			—			—		20,111
Net periodic pension cost	$	8,207		$	6,684		$	—	$	21,107
Weighted-average assumptions used to determine benefit obligation:
Discount rate	2.40		%	3.10		%	N/A		N/A
Rate of compensation increase	5.00		%	5.00		%	N/A		N/A
Expected return on plan assets	N/A			N/A			N/A		N/A
Weighted-average assumptions used to determine net periodic pension cost:
Discount rate	3.10		%	4.20		%	N/A		2.60		%
Rate of compensation increase	5.00		%	5.00		%	N/A		N/A
Expected return on plan assets	N/A			N/A			N/A		N/A

The amounts reported for net periodic pension cost and the respective benefit obligation amounts are dependent upon the actuarial assumptions used. The company reviews historical trends, future expectations, current market conditions, and external data to determine the assumptions. The discount rate represents the market rate for a high-quality corporate bond. The rate of compensation increase is determined by the company, based upon its long-term plans for such increases. The actuarial

assumptions used to determine the net periodic pension cost are based upon the prior year's assumptions used to determine the benefit obligation.

Benefit payments are expected to be paid as follows:


	Arrow SERP
2021	$	4,532
2022	6,071
2023	6,380
2024	6,551
2025	6,461
2026-2030	34,019

The company has funded $101,495 of the Arrow SERP obligation for the former corporate officers in a rabbi trust comprised primarily of life insurance policies and mutual fund assets. Contributions to the rabbi trust are irrevocable by the company. In the event of bankruptcy by the company, the assets held by the rabbi trust are subject to claims made by the company's creditors.

Comprehensive Income Items

In 2020, 2019, and 2018, actuarial (gains) losses of $4,341, $2,922, and $(6,339), respectively, were recognized in comprehensive income, net of related taxes, related to the company's defined benefit plans. In 2020, 2019, and 2018, a reclassification adjustment of comprehensive income was recognized, net of related taxes, as a result of being recognized in net periodic pension cost for an actuarial loss of $1,220, $15,797, and $1,758, respectively.

Accumulated other comprehensive income (loss) at December 31, 2020 and 2019 includes unrecognized actuarial losses, net of related taxes, of $17,375 and $14,253, respectively, that have not yet been recognized in net periodic pension cost.

The actuarial loss included in accumulated other comprehensive income (loss), net of related taxes, which is expected to be recognized in net periodic pension cost during the year ended December 31, 2021 is $1,860.

Defined Contribution Plan

The company has defined contribution plans for eligible employees, which qualify under Section 401(k) of the Internal Revenue Code. The company's contribution to the plans, which are based on a specified percentage of employee contributions, amounted to $17,989, $19,655, and $20,523 in 2020, 2019, and 2018, respectively. The company made discretionary contributions in the amount of $7,503 to the company's defined contribution 401(k) plan during 2018. Certain international subsidiaries maintain separate defined contribution plans for their employees and made contributions thereunder, which amounted to $21,819, $21,025, and $18,996 in 2020, 2019, and 2018, respectively.