9. Employee Benefit Plans

Defined Benefit Pension Plan

The Company has a defined benefit pension plan that covers certain of its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The plan is noncontributory and benefits are based on an employee’s years of service and “final average earnings,” as defined by the plan. The plan provides reduced benefits for early retirement and takes into account offsets for social security benefits. The Company also has an unfunded supplemental retirement plan (“Benefit Equalization Plan”) for certain employees whose benefits under the defined benefit pension plan were reduced because of compensation limitations under federal tax laws. Effective June 1, 2004, all benefit accruals under the Company’s pension plan and Benefit Equalization Plan were frozen; however, the current vested benefit was preserved. Pension disclosure as presented below includes aggregated amounts for both of the Company’s plans, except where otherwise indicated.

The Company historically has used the date of its year-end as its measurement date to determine the funded status of the plan.

The long-term investment goals of our plan are to manage the assets in accordance with the legal requirements of all applicable laws; produce investment returns which maximize return within reasonable and prudent levels of risks; and achieve a fully funded status with regard to current pension liabilities. Some risk must be assumed in order to achieve the investment goals. Investments with the ability to withstand short and intermediate term variability are considered and some interim fluctuations in market value and rates of return are tolerated in order to achieve the plan’s longer-term objectives.

The pension plan’s assets are managed by a third-party investment manager. The Company monitors investment performance and risk on an ongoing basis.

A summary of net periodic benefit cost is as follows:



	Year Ended December 31,
(in thousands)	2016			2015			2014
Interest cost	$	4,153		$	4,055		$	4,144
Service cost		600			—			—
Expected return on plan assets		(4,803)			(5,021)			(4,797)
Recognized net actuarial losses		1,745			1,869			4,385
Net periodic benefit cost	$	1,695		$	903		$	3,732
Actuarial assumptions used to determine net cost:
Discount rate		4.10	%		3.75	%		4.47	%
Expected return on assets		6.00	%		6.50	%		6.75	%
Rate of increase in compensation		N/A			N/A			N/A

The target asset allocation for the Company’s pension plan by asset category for 2017 and the actual asset allocation as of December 31, 2016 and 2015 by asset category are as follows:



	Percentage of Plan Assets as of December 31,
	Target
	Allocation		Actual Allocation
Asset Category	2017		2016		2015
Cash	5	%	4	%	4	%
Equity securities:
Domestic	50		47		61
International	25		28		30
Fixed income securities	20		21		5
Total	100	%	100	%	100	%

As of December 31, 2016 and 2015, plan assets included approximately $39.1 million and $52.1 million, respectively, of investments in hedge funds and equity partnerships which do not have readily determinable fair values. The underlying holdings of the funds were comprised of a combination of assets for which the estimate of fair value is determined using information provided by fund managers.

The Company expects to contribute approximately $2.6 million to its defined benefit pension plan in 2017.

Future benefit payments under the plans are estimated as follows:



Year ended December 31,
(in thousands)
2017	$	6,488
2018		6,632
2019		6,691
2020		6,717
2021		6,732
Thereafter		32,722
Total	$	65,982

The following tables provide a reconciliation of the changes in the fair value of plan assets and plan benefit obligations during 2016 and 2015, and a summary of the funded status as of December 31, 2016 and 2015



	Year Ended December 31,
(in thousands)	2016		2015
Change in Fair Value of Plan Assets
Balance at beginning of year	$	72,296	$	75,956
Actual return on plan assets		(1,909)		(984)
Company contribution		2,025		2,900
Benefit payments		(6,355)		(5,576)
Balance at end of year	$	66,057	$	72,296



	Year Ended December 31,
(in thousands)	2016		2015
Change in Benefit Obligations
Balance at beginning of year	$	105,942	$	110,923
Interest cost		4,153		4,055
Service cost		600		—
Assumption change (gain) loss		308		(3,838)
Actuarial (gain) loss		(967)		378
Benefit payments		(6,355)		(5,576)
Balance at end of year	$	103,681	$	105,942



	As of December 31,
(in thousands)	2016		2015
Funded status	$	(37,624)	$	(33,646)
Amounts recognized in Consolidated Balance Sheets consist of:
Current liabilities	$	(271)	$	(218)
Long-term liabilities		(37,353)		(33,428)
Net amount recognized in Consolidated Balance Sheets	$	(37,624)	$	(33,646)



	Year Ended December 31,
(in thousands)	2016		2015
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive loss
Net actuarial loss	$	(61,132)	$	(56,824)
Cumulative Company contributions in excess of net periodic benefit cost		23,508		23,178
Net amount recognized in Consolidated Balance Sheets	$	(37,624)	$	(33,646)

The change in actuarial loss during the period resulting from changed assumptions was $4.3 million in 2016, $0.7 million in 2015 and $13.9 million in 2014.

The estimated amount of the net accumulated loss that will be amortized from accumulated other comprehensive loss into net period benefit cost in 2017 is $1.8 million.

The discount rate used in determining the accumulated post-retirement benefit obligation was 3.9% as of December 31, 2016 and 4.1% as of December 31, 2015. The discount rate used for the accumulated post-retirement obligation was derived using a blend of U.S. Treasury and high-quality corporate bond discount rates.

The expected long-term rate of return on assets assumption was 6.0% for 2016 and 6.5% for 2015. The expected long-term rate of return on assets assumption was developed considering forward looking capital market assumptions and historical return expectations for each asset class assuming the plans’ target asset allocation and full availability of invested assets.

Fund strategies seek to capitalize on inefficiencies identified across different asset classes or markets. Hedge fund strategy types include long-short, event-driven, multi-strategy, equity partnerships and distressed credit.

Plan assets were measured at fair value. The following provides a description of the valuation techniques employed for each major asset class: Corporate equities were valued at the closing price reported on the active market on which the individual securities were purchased.

Registered investment companies are public investment vehicles valued using the Net Asset Value (NAV) of shares held by the plan at year-end. Closely held funds held by the plan, which are only available through private offerings, do not have readily determinable fair values. Estimates of fair value of these funds were determined using the information provided by the fund managers and it is generally based on the net asset value per share or its equivalent. Corporate bonds were valued based on market values quoted by dealers who are market makers in these securities, and by independent pricing services which use multiple valuation techniques that incorporate available market information and proprietary valuation models using market characteristics, such as benchmark yield curve, coupon rates, credit spreads, estimated default rates and other features.

The following table sets forth the plan assets at fair value in accordance with the fair value hierarchy described in Note 3:



	As of December 31, 2016								As of December 31, 2015
	Fair Value Hierarchy								Fair Value Hierarchy
(in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	2,437	$	2,437	$	—	$	—	$	2,654	$	2,654	$	—	$	—
Fixed Income		14,023		14,023		—		—		4,029		4,029		—		—
Equities		—		—		—		—		6,566		6,566		—		—
Mutual Funds		10,489		10,489		—		—		6,994		6,994		—		—
	$	26,949	$	26,949	$	—	$	—	$	20,243	$	20,243	$	—	$	—
Closely held funds(a)
Equity Partnerships		6,931								7,920
Hedge Fund Investments		32,177								44,133
Total closely held funds(a)		39,108								52,053
Total	$	66,057	$	26,949	$	—	$	—	$	72,296	$	20,243	$	—	$	—

(a)

Closely held funds in private investment were measured at fair value using NAV and were not categorized in the fair value hierarchy. Although the investments were not categorized within the fair value hierarchy, the holdings of these private investment funds were comprised of a combination of Level 1, 2 and 3 investments, but were not categorized in the fair value hierarchy because they were measured at NAV using the practical expedient. This is a change from prior years’ presentation as there is no longer a requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient.

The plans have benefit obligations in excess of the fair value of each plan’s assets detailed as follows:



	As of December 31, 2016						As of December 31, 2015
			Benefit						Benefit
	Pension		Equalization				Pension		Equalization
(in thousands)	Plan		Plan		Total		Plan		Plan		Total
Projected benefit obligation	$	100,336	$	3,345	$	103,681	$	102,495	$	3,447	$	105,942
Accumulated benefit obligation		100,336		3,345		103,681		102,495		3,447		105,942
Fair value of plans' assets		66,057		—		66,057		72,296		—		72,296
Projected benefit obligation greater than fair value of plans' assets	$	34,279	$	3,345	$	37,624	$	30,199	$	3,447	$	33,646
Accumulated benefit obligation greater than fair value of plans' assets	$	34,279	$	3,345	$	37,624	$	30,199	$	3,447	$	33,646

Section 401(k) Plans

The Company has several contributory Section 401(k) plans which cover its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The 401(k) expense provision was $4.0 million in both 2016 and 2015 and $3.6 million in 2014. The Company’s contribution is based on a non-discretionary match of employees’ contributions, as defined by each plan.

Cash-Based Compensation Plans

The Company has multiple cash-based compensation plans and a share-based incentive compensation plan for key employees, which are generally based on the Company’s achievement of a certain level of profit. For information on the Company’s share-based incentive compensation plan, see Note 8.

Multiemployer Plans

In addition to the Company’s defined benefit pension and contribution plans discussed above, the Company participates in multiemployer pension plans for its union construction employees. Contributions are based on the hours worked by employees covered under various collective bargaining agreements. Under the Employee Retirement Income Security Act, a contributor to a multiemployer plan is only liable for its proportionate share of a plan’s unfunded vested liability upon termination, or withdrawal from, a plan. The Company currently has no intention of withdrawing from any of the multiemployer pension plans in which it participates and, therefore, has not recognized a liability for its proportionate share of any unfunded vested liabilities associated with these plans.

The following tables summarize key information for the plans that the Company had significant involvement with during the years ended December 31, 2016, 2015 and 2014.

Expiration

FIP/RP

Date of

Pension Protections Act

Status

Company Contributions

Collective

EIN/Pension

Zone Status

Pending Or

(amounts in millions)

Surcharge

Bargaining

Pension Fund

Plan Number

2016

2015

Implemented

2016 (b)

2015

2014

Imposed

Agreement

The Pension, Hospitalization and Benefit Plan of the Electrical Industry - Pension Trust Fund

13-6123601/001

Green

N/A

$ 15.8

$ 13.6

(a)

$ 11.8

(a)

5/31/2019

Laborers Pension Trust Fund for Northern California

94-6277608

Yellow

Implemented

5.6

2.8

1.9

6/30/2019

Carpenters Pension Trust Fund for Northern California

94-6050970

Red

Implemented

4.4

2.7

1.9

6/30/2019

Excavators Union Local 731 Pension Fund

13-1809825/002

Green

N/A

4.2

7.1

5.3

4/30/2022

Steamfitters Industry Pension Fund

13-6149680/001

Green

N/A

3.9

6.2

(a)

5.1

(a)

6/30/2017

Iron Workers Locals 40,361 & 417 Pension Fund

51-6102576/001

Green

Yellow

Implemented

3.8

5.2

(a)

0.7

6/30/2020

Local 147 Construction Workers Retirement Fund

13-6528181

Green

N/A

3.7

5.6

(a)

1.3

6/30/2018

Southern California Gunite Workers Pension Fund

95-4354179

Green

N/A

3.5

0.7

6/30/2019

(a)

These amounts exceeded 5% of the respective total plan contributions.

(b)

The Company's contributions as a percentage of total plan contributions were not available for any of our plans.

In addition to the individually significant plans described above, the Company also contributed approximately $38.8 million in 2016, $37.5 million in 2015 and $30.8 million in 2014 to other multiemployer pension plans.