Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

12. 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 pension plan is noncontributory and benefits are based on an employee’s years of service and “final average earnings,” as defined by the pension plan. The pension 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 pension plan.

The long-term investment goals of the Company’s pension 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 pension 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.

The following table sets forth a summary of net periodic benefit cost for the years ended December 31, 2019, 2018 and 2017:



	Year Ended December 31,
(in thousands)	2019			2018			2017
Interest cost	$	3,801		$	3,496		$	3,919
Service cost		900			875			850
Expected return on plan assets		(4,170)			(4,302)			(4,358)
Recognized net actuarial losses		1,933			2,067			1,897
Net periodic benefit cost	$	2,464		$	2,136		$	2,308
Actuarial assumptions used to determine net cost:
Discount rate		4.12	%		3.45	%		3.90	%
Expected return on assets		5.75	%		6.00	%		6.00	%
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 2020 and the actual asset allocation as of December 31, 2019 and 2018 by asset category are as follows:



	Percentage of Plan Assets as of December 31,
	Target
	Allocation		Actual Allocation
Asset Category	2020		2019		2018
Cash	5	%	4	%	3	%
Equity funds:
Domestic	45		47		50
International	18		18		27
Fixed income funds	32		31		20
Total	100	%	100	%	100	%

The Company expects to contribute approximately $4.1 million to its defined benefit pension plan in 2020.

Future benefit payments under the plans are estimated as follows:



(in thousands)
Year ended December 31,
2020	$	6,822
2021		6,789
2022		6,724
2023		6,637
2024		6,611
2025-2029		31,183
Total	$	64,766

The following tables provide a reconciliation of the changes in the fair value of plan assets and plan benefit obligations during 2019 and 2018, and a summary of the funded status as of December 31, 2019 and 2018:



	Year Ended December 31,
(in thousands)	2019		2018
Change in Fair Value of Plan Assets
Balance at beginning of year	$	63,109	$	71,541
Actual return on plan assets		12,123		(4,758)
Company contribution		4,793		2,975
Benefit payments		(6,668)		(6,649)
Balance at end of year	$	73,357	$	63,109



	Year Ended December 31,
(in thousands)	2019		2018
Change in Benefit Obligations
Balance at beginning of year	$	95,869	$	106,218
Interest cost		3,801		3,496
Service cost		900		875
Assumption change loss (gain)		8,373		(7,056)
Actuarial loss (gain)		332		(1,014)
Benefit payments		(6,668)		(6,650)
Balance at end of year	$	102,607	$	95,869



	As of December 31,
(in thousands)	2019		2018
Funded status	$	(29,250)	$	(32,760)
Net unfunded amounts recognized in Consolidated Balance Sheets consist of:
Current liabilities	$	(279)	$	(262)
Long-term liabilities		(28,971)		(32,498)
Total net unfunded amount recognized in Consolidated Balance Sheets	$	(29,250)	$	(32,760)

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 $56.5 million and $57.6 million as of December 31, 2019 and 2018, respectively.

In 2019, net other comprehensive income of $1.2 million consisted of reclassification adjustments for the amortization of previously existing actuarial losses and net actuarial losses arising during the period. In 2018, net other comprehensive income of $1.1 million consisted of reclassification adjustments for the amortization of previously existing actuarial losses and net actuarial gains arising during the period. 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.

The estimated amount of the net accumulated loss (consisting of net actuarial losses) that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2020 is $2.4 million.

The discount rate used in determining the accumulated post-retirement benefit obligation was 3.1% as of December 31, 2019 and 4.1% as of December 31, 2018. 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 5.8% for 2019 and 6.0% for 2018. 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.

Closely held fund strategies seek to capitalize on inefficiencies identified across different asset classes or markets and include long-short equity and long equity, event-driven, multi-strategy 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 pension 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 pension 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 are generally based on the NAV per share or its equivalent.

The following table sets forth the pension plan assets at fair value in accordance with the fair value hierarchy described in Note 13:



	As of December 31, 2019								As of December 31, 2018
	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	$	2,867	$	—	$	—	$	2,867	$	7,587	$	—	$	—	$	7,587
Fixed income funds		—		2,861		—		2,861		—		2,585		—		2,585
Mutual funds		54,085		—		—		54,085		36,436		—		—		36,436
	$	56,952	$	2,861	$	—	$	59,813	$	44,023	$	2,585	$	—	$	46,608
Closely held funds^(a)
Equity partnerships								3,660								5,580
Hedge fund investments								9,884								10,921
Total closely held funds^(a)								13,544								16,501
Total	$	56,952	$	2,861	$	—	$	73,357	$	44,023	$	2,585	$	—	$	63,109

_____________________________________________________________________________________________________________

(a)Closely held funds in private investment 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”).

As of December 31, 2019 and 2018, pension plan assets included approximately $13.5 million and $16.5 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 plans have benefit obligations in excess of the fair value of each plan’s assets as follows:



	As of December 31, 2019						As of December 31, 2018
			Benefit						Benefit
	Pension		Equalization				Pension		Equalization
(in thousands)	Plan		Plan		Total		Plan		Plan		Total
Projected benefit obligation	$	99,515	$	3,092	$	102,607	$	92,816	$	3,053	$	95,869
Accumulated benefit obligation	$	99,515	$	3,092	$	102,607	$	92,816	$	3,053	$	95,869
Fair value of plans' assets		73,357		—		73,357		63,109		—		63,109
Projected benefit obligation greater than fair value of plans' assets	$	26,158	$	3,092	$	29,250	$	29,707	$	3,053	$	32,760
Accumulated benefit obligation greater than fair value of plans' assets	$	26,158	$	3,092	$	29,250	$	29,707	$	3,053	$	32,760

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 $4.1 million in 2019

and $4.2 million in both 2018 and 2017. 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 summarizes key information for the plans that the Company made significant contributions to during the three years ended December 31, 2019:

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

2019

2018

Implemented

2019^(b)

2018^(b)

2017

Imposed

Agreement

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

13-6123601/001

Green

N/A

9.3

12.2

16.0

^(a)

4/13/2022

Carpenters Pension Trust Fund for Northern California

94-6050970

Red

Implemented

4.0

4.9

8.2

6/30/2023

Excavators Union Local 731 Pension Fund

13-1809825/002

Green

N/A

5.1

4.1

4.3

4/30/2022

Northern California Electrical Workers Pension Plan

94-6062674

Green

N/A

3.0

4.1

5.2

5/31/2022

Laborers Pension Trust Fund for Northern California

94-6277608

Green

N/A

3.4

3.8

6.6

6/30/2023

Steamfitters Industry Pension Fund

13-6149680/001

Green

N/A

1.7

3.5

3.9

^(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 the 2019 and 2018 plan years for any of the above pension funds, excluding Excavators Union Local 731 Pension Fund, Northern California Electrical Workers Pension Plan and Steamfitters Industry Pension Fund for the 2018 plan year.

In addition to the individually significant plans described above, the Company also contributed approximately $31.4 million in 2019, $29.3 million in 2018 and $27.8 million in 2017 to other multiemployer pension plans. Funding for these payments is principally provided for in the contracts with our customers.