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 the Company’s 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)	2017			2016			2015
Interest cost	$	3,919		$	4,153		$	4,055
Service cost		850			600			—
Expected return on plan assets		(4,358)			(4,803)			(5,021)
Recognized net actuarial losses		1,897			1,745			1,869
Net periodic benefit cost	$	2,308		$	1,695		$	903
Actuarial assumptions used to determine net cost:
Discount rate		3.90	%		4.10	%		3.75	%
Expected return on assets		6.00	%		6.00	%		6.50	%
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 2018 and the actual asset allocation as of December 31, 2017 and 2016 by asset category are as follows:



	Percentage of Plan Assets as of December 31,
	Target
	Allocation		Actual Allocation
Asset Category	2018		2017		2016
Cash	5	%	3	%	4	%
Equity funds:
Domestic	37		41		47
International	28		31		28
Fixed income funds	30		25		21
Total	100	%	100	%	100	%

As of December 31, 2017 and 2016, plan assets included approximately $30.7 million and $39.1 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 $2.8 million to its defined benefit pension plan in 2018.

Future benefit payments under the plans are estimated as follows:



(in thousands)
Year ended December 31,
2018	$	6,748
2019		6,798
2020		6,781
2021		6,785
2022		6,721
2023-2027		32,410
Total	$	66,243

The following tables provide a reconciliation of the changes in the fair value of plan assets and plan benefit obligations during 2017 and 2016, and a summary of the funded status as of December 31, 2017 and 2016:



	Year Ended December 31,
(in thousands)	2017		2016
Change in Fair Value of Plan Assets
Balance at beginning of year	$	66,057	$	72,296
Actual return on plan assets		9,224		(1,909)
Company contribution		2,838		2,025
Benefit payments		(6,578)		(6,355)
Balance at end of year	$	71,541	$	66,057



	Year Ended December 31,
(in thousands)	2017		2016
Change in Benefit Obligations
Balance at beginning of year	$	103,681	$	105,942
Interest cost		3,919		4,153
Service cost		850		600
Assumption change (gain) loss		3,854		308
Actuarial (gain) loss		492		(967)
Benefit payments		(6,578)		(6,355)
Balance at end of year	$	106,218	$	103,681



	As of December 31,
(in thousands)	2017		2016
Funded status	$	(34,677)	$	(37,624)
Net unfunded amounts recognized in Consolidated Balance Sheets consist of:
Current liabilities	$	(279)	$	(271)
Long-term liabilities		(34,398)		(37,353)
Total net unfunded amount recognized in Consolidated Balance Sheets	$	(34,677)	$	(37,624)

Amounts not yet recognized in net periodic benefit cost and included in accumulated other comprehensive loss consist of net actuarial losses before income taxes of $58.7 million and $61.1 million, for the years ended December 31, 2017 and 2016, respectively.

In 2017, net other comprehensive income of $2.4 million consisted of reclassification adjustments for the amortization of previously existing actuarial losses and net actuarial gains arising during the period. In 2016 and 2015, net actuarial losses arising during the years were partially offset by reclassification adjustments for the amortization of previously existing actuarial losses and resulted in net other comprehensive losses of $4.3 and $0.7 million, respectively.

The estimated amount of the net accumulated loss (consisting of net actuarial losses) that will be amortized from accumulated other comprehensive loss into net period benefit cost in 2018 is $2.1 million.

The discount rate used in determining the accumulated post-retirement benefit obligation was 3.5% as of December 31, 2017 and 3.9% as of December 31, 2016. 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 2017 and 2016. 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. Registered investment companies are public investment vehicles valued using the Net Asset Value (NAV) of shares held by the plan at year-end. Equity and fixed income funds are valued based on quoted market prices in active markets. 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.

The following table sets forth the plan assets at fair value in accordance with the fair value hierarchy described in Note 10:



	As of December 31, 2017								As of December 31, 2016
	Fair Value Hierarchy								Fair Value Hierarchy
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3			Total
Cash and cash equivalents	$	2,390	$	—	$	—	$	2,390	$	2,437	$	—	$	—	$	2,437
Fixed income funds		18,031		—		—		18,031		14,023		—		—		14,023
Equity funds		20,372		—		—		20,372		10,489		—		—		10,489
	$	40,793	$	—	$	—	$	40,793	$	26,949	$	—	$	—	$	26,949
Closely held funds(a)
Equity partnerships								8,711								6,931
Hedge fund investments								22,037								32,177
Total closely held funds(a)								30,748								39,108
Total	$	40,793	$	—	$	—	$	71,541	$	26,949	$	—	$	—	$	66,057

(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 under ASC 820, Fair Value Measurement (“ASC 820”).

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



	As of December 31, 2017						As of December 31, 2016
			Benefit						Benefit
	Pension		Equalization				Pension		Equalization
(in thousands)	Plan		Plan		Total		Plan		Plan		Total
Projected benefit obligation	$	102,806	$	3,412	$	106,218	$	100,336	$	3,345	$	103,681
Accumulated benefit obligation	$	102,806	$	3,412	$	106,218	$	100,336	$	3,345	$	103,681
Fair value of plans' assets		71,541		—		71,541		66,057		—		66,057
Projected benefit obligation greater than fair value of plans' assets	$	31,265	$	3,412	$	34,677	$	34,279	$	3,345	$	37,624
Accumulated benefit obligation greater than fair value of plans' assets	$	31,265	$	3,412	$	34,677	$	34,279	$	3,345	$	37,624

Section 401(k) Plan

The Company has a contributory Section 401(k) plan which covers its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The cost recognized by the Company for its 401(k) plan was $4.2 million in 2017 and $4.0 million in both 2016 and 2015. The Company’s contribution is based on a non-discretionary match of employees’ contributions, as defined by the plan.

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 table summarize key information for the plans that the Company had significant involvement with during the years ended December 31, 2017, 2016 and 2015:

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

2017

2016

Implemented

2017 (b)

2016

2015

Imposed

Agreement

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

13-6123601/001

Green

N/A

$ 16.0

$ 15.8

(a)

$ 13.6

(a)

4/30/2019

Carpenters Pension Trust Fund for Northern California

94-6050970

Red

Implemented

8.2

4.4

2.7

6/30/2019

Laborers Pension Trust Fund for Northern California

94-6277608

Yellow

Implemented

6.6

5.6

2.8

6/30/2019

Northern California Electrical Workers Pension Plan

94-6062674

Green

N/A

5.2

1.5

0.3

5/31/2018

Steamfitters Industry Pension Fund

13-6149680/001

Green

N/A

3.9

(a)

6.2

(a)

6/30/2020

(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 its plans.

In addition to the individually significant plans described above, the Company also contributed approximately $32.1 million in 2017, $52.5 million in 2016 and $55.8 million in 2015 to other multiemployer pension plans.