XML 52 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Retirement Plans
 12 Months Ended
Dec. 31, 2018
Defined Benefit Plan [Abstract]  
Retirement Plans Retirement Plans
The Corporation has a noncontributory defined benefit retirement plan ("Retirement Account Plan") covering substantially all employees who meet participation requirements. The benefits are based primarily on years of service and the employee’s compensation paid. Employees of acquired entities generally participate in the Retirement Account Plan after consummation of the business combinations. Any retirement plans of acquired entities are typically merged into the Retirement Account Plan after completion of the mergers, and credit is usually given to employees for years of service at the acquired institution for vesting and eligibility purposes.
The Corporation also provides legacy healthcare access to a limited group of retired employees from a previous acquisition in the Postretirement Plan. There are no other active retiree healthcare plans.
Bank Mutual was acquired on February 1, 2018. The Bank Mutual Pension Plan was merged into the Retirement Account Plan on December 31, 2018. Bank Mutual's Postretirement Plan was merged into the Corporation's Postretirement Plan during the first quarter of 2018. The reported figures for both the Retirement Account Plan and Postretirement Plan only include 11 months of Bank Mutual expense due to the timing of the Bank Mutual acquisition. See Note 2 Acquisitions for additional information on the Bank Mutual acquisition.
The funded status and amounts recognized in the 2018 and 2017 consolidated balance sheets, as measured on December 31, 2018 and 2017, respectively, for the Retirement Account Plan and Postretirement Plan were as follows:
 
Retirement Account Plan
Bank Mutual Pension
Postretirement
Plan
Retirement Account Plan
Postretirement
Plan
($ in Thousands)
2018
2018
2018
2017
2017
Change in Fair Value of Plan Assets
 
 
 
 
 
Fair value of plan assets at beginning of year
$
331,609

N/A

$
—

$
295,718

$
—

Fair value of Bank Mutual plan assets at February 1, 2018
N/A

59,445

—

N/A

N/A

Actual return on plan assets
(14,609
)
(1,665
)
—

41,490

—

Employer contributions
4,340

37,537

292

6,242

235

Gross benefits paid
(10,582
)
(15,513
)
(292
)
(11,841
)
(235
)
Bank Mutual plan assets transferred at December 31, 2018
79,805

(79,805
)
—

N/A

N/A

Fair value of plan assets at end of year (a)
$
390,564

$
—

$
—

$
331,609

$
—

Change in Benefit Obligation
 
 
 
 
 
Net benefit obligation at beginning of year
$
186,423

N/A

$
2,478

$
176,825

$
2,403

Net Bank Mutual benefit obligation at February 1, 2018
N/A

66,364

576

N/A

N/A

Service cost
7,540

—

—

6,955

—

Interest cost
6,727

2,398

108

7,121

101

Actuarial (gain) loss
(8,000
)
(1,701
)
(347
)
7,363

209

Gross benefits paid
(10,582
)
(2,644
)
(292
)
(11,841
)
(235
)
Lump sums paid
—

(12,868
)
—

—

—

Bank Mutual benefit obligations transferred at December 31, 2018
51,549

(51,549
)
—

N/A

N/A

Net benefit obligation at end of year (a)
$
233,658

$
—

$
2,523

$
186,423

$
2,478

Funded (unfunded) status
$
156,906

$
—

$
(2,523
)
$
145,186

$
(2,478
)
Noncurrent assets
156,906

—

—

145,186

—

Current liabilities
—

—

(219
)
—

(233
)
Noncurrent liabilities
—

—

(2,304
)
—

(2,245
)
Asset (Liability) Recognized in the Consolidated Balance Sheets
$
156,906

$
—

$
(2,523
)
$
145,186

$
(2,478
)
(a)
The fair value of the plan assets represented 167% and 178% of the net benefit obligation of the pension plan at December 31, 2018 and 2017, respectively.

Amounts recognized in accumulated other comprehensive (income) loss, net of tax, as of December 31, 2018 and 2017 follow:
 
Retirement Account Plan
Postretirement
Plan
Retirement Account Plan
Postretirement
Plan
($ in Thousands)
2018
2018
2017
2017
Prior service cost
$
(303
)
$
(588
)
$
(295
)
$
(531
)
Net actuarial loss
50,238

(17
)
24,926

205

Amount not yet recognized in net periodic benefit cost, but recognized in accumulated other comprehensive (income) loss
$
49,935

$
(605
)
$
24,631

$
(326
)

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) (“OCI”), net of tax, in 2018 and 2017 were as follows:
 
Retirement Account Plan
Postretirement
Plan
Retirement Account Plan
Postretirement
Plan
($ in Thousands)
2018
2018
2017
2017
Net actuarial gain (loss)
$
(28,959
)
$
347

$
14,482

$
(209
)
Amortization of prior service cost
(73
)
(75
)
(73
)
(75
)
Amortization of actuarial loss (gain)
2,195

8

2,278

4

Adjustment for adoption of ASU 2018-02
(5,235
)
—

—

—

Income tax (expense) benefit
6,838

(71
)
(6,219
)
107

Total Recognized in OCI
$
(25,234
)
$
209

$
10,468

$
(173
)

The components of net pension cost for the Retirement Account Plan for 2018, 2017, and 2016 were as follows:
 
Retirement Account Plan
Retirement Account Plan
Retirement Account Plan
($ in Thousands)
2018
2017
2016
Service cost
$
7,540

$
6,955

$
6,780

Interest cost
9,125

7,121

7,121

Expected return on plan assets
(23,195
)
(19,646
)
(20,287
)
Amortization of prior service cost
(73
)
(73
)
(73
)
Amortization of actuarial loss (gain)
2,195

2,278

2,115

Recognized settlement loss (gain)
809

—

—

Total net periodic pension cost
$
(3,600
)
$
(3,365
)
$
(4,344
)

The components of net periodic benefit cost for the Postretirement Plan for 2018, 2017, and 2016 were as follows:
 
Postretirement Plan
Postretirement Plan
Postretirement Plan
($ in Thousands)
2018
2017
2016
Interest cost
$
108

$
101

$
142

Amortization of prior service cost
(75
)
(75
)
—

Amortization of actuarial loss (gain)
8

4

—

Total net periodic benefit cost
$
41

$
30

$
142


The components of net periodic pension cost and net periodic benefit cost, other than the service cost component, are included in the line item "other" of noninterest expense in the Consolidated Statements of Income.
As of December 31, 2018, the estimated actuarial losses and prior service cost that will be amortized during 2019 from accumulated other comprehensive income into net periodic pension cost for the Retirement Account Plan includes expense of approximately $260,000 for actuarial losses and income of approximately $75,000 for the prior service cost. For the Postretirement Plan, the estimated actuarial losses and prior service cost that will be amortized during 2019 from accumulated other comprehensive income into net periodic benefit cost includes income of approximately $75,000 for the prior service cost while the actuarial gain income is estimated to be negligible.
 
Retirement Account Plan
Postretirement
 Plan
Retirement Account Plan
Postretirement
Plan
 
2018
2018
2017
2017
Weighted average assumptions used to determine benefit obligations
 
 
 
 
Discount rate
4.30
%
4.30
%
3.70
%
3.70
%
Rate of increase in compensation levels
3.00
%
N/A

3.00
%
N/A

Weighted average assumptions used to determine net periodic benefit costs
 
 
 
 
Discount rate(a)
3.77
%
3.77
%
4.10
%
4.10
%
Rate of increase in compensation levels
3.00
%
N/A

4.00
%
N/A

Expected long-term rate of return on plan assets(b)
5.93
%
N/A

6.50
%
N/A

(a) Weighted average of the 2018 fiscal year discount rate assumption for the Retirement Account Plan was 3.70% and the Bank Mutual Pension Plan was 4.00%
(b) Weighted average of the 2018 fiscal year expected return on asset assumption for the Retirement Account Plan was 6.00% and the Bank Mutual Pension Plan was 5.50%

The expected long-term (more than 20 years) rate of return was estimated using market benchmarks for equities and bonds applied to the Retirement Account Plan’s anticipated asset allocations. The expected return on equities was computed utilizing a valuation framework, which projected future returns based on current equity valuations rather than historical returns. The actual rate of return for the Retirement Account Plan assets was (3.69)% and 14.60% for 2018 and 2017, respectively.
The Retirement Account Plan’s investments are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risks associated with certain investments and the level of uncertainty related to changes in the value of the investments, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported. The investment objective for the Retirement Account Plan is to maximize total return with a tolerance for average risk. The Retirement Account Plan has a diversified portfolio designed to provide liquidity, current income, and growth of income and principal, with anticipated asset allocation ranges of: equity securities 50 to 70%, fixed-income securities 30 to 50%, other cash equivalents 0 to 10%, and alternative securities 0 to 15%. Based on changes in economic and market conditions, the Corporation could be outside of the allocation ranges for brief periods of time. The asset allocation for the Retirement Account Plan as of the December 31, 2018 and 2017 measurement dates, respectively, by asset category were as follows:
Asset Category
2018
2017
Equity securities
49
%
60
%
Fixed-income securities
34
%
37
%
Group annuity contracts
12
%
—
%
Alternative securities
3
%
—
%
Other
2
%
3
%
Total
100
%
100
%

The Retirement Account Plan assets include cash equivalents, such as money market accounts, mutual funds, common / collective trust funds (which include investments in equity and bond securities), and a group annuity contract. Money market accounts are stated at cost plus accrued interest, mutual funds are valued at quoted market prices, investments in common / collective trust funds are valued at the amount at which units in the funds can be withdrawn, and the group annuity contract is valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations and considering the credit worthiness of the issuer. The group annuity contract was obtained as part of the Bank Mutual Pension Plan that was acquired on February 1, 2018 and merged into the Retirement Account Plan on December 31, 2018.
Based on these inputs, the following table summarizes the fair value of the Retirement Account Plan’s investments as of December 31, 2018 and 2017:
 
 
Fair Value Measurements Using
($ in Thousands)
December 31, 2018
Level 1
Level 2
Level 3
Retirement Account Plan Investments
 
 
 
 
Money market account
$
7,159

$
7,159

$
—

$
—

Common /collective trust funds
138,020

138,020

—

—

Mutual funds
198,120

198,120

—

—

Group annuity contracts
47,265

—

—

47,265

Total Retirement Account Plan Investments
$
390,564

$
343,299

$
—

$
47,265

 
 
Fair Value Measurements Using
($ in Thousands)
December 31, 2017
Level 1
Level 2
Level 3
Retirement Account Plan Investments
 
 
 
 
Money market account
$
9,577

$
9,577

$
—

$
—

Common /collective trust funds
133,210

133,210

—

—

Mutual funds
188,823

188,823

—

—

Total Retirement Account Plan Investments
$
331,610

$
331,610

$
—

$
—


The following presents a summary of the changes in the fair value of the Retirement Account Plan's Level 3 asset during the periods indicated. As noted above, the Corporation's Level 3 asset consists entirely of a group annuity contract issued by a life insurance company.
Fair Value Reconciliation of Level 3 Retirement Account Plan Investments
2018
2017
Fair value of group annuity contract at February 1, 2018 (date of Bank Mutual acquisition)
$
49,191

N/A
Actual return on plan assets
565

N/A
Benefits paid
(2,491
)
N/A
Fair value of group annuity contract at December 31, 2018
$
47,265

N/A

The Corporation’s funding policy is to pay at least the minimum amount required by federal law and regulations, with consideration given to the maximum funding amounts allowed. The Corporation regularly reviews the funding of its Retirement Account Plan. The Corporation made contributions of $38 million to the Bank Mutual Pension Plan and $4 million to the Retirement Account Plan during 2018, with the plans merging on December 31, 2018. The Corporation made contributions of $6 million to the Retirement Account Plan in 2017.
The projected benefit payments were calculated using the same assumptions as those used to calculate the benefit obligations listed above. The projected benefit payments for the Retirement Account and Postretirement Plans at December 31, 2018, reflecting expected future services, were as follows:
($ in Thousands)
Retirement Account Plan
Postretirement Plan
Estimated future benefit payments
 
 
2019
$
18,774

$
224

2020
19,265

220

2021
19,161

216

2022
20,210

211

2023
20,086

206

2024-2028
89,992

925


The health care trend rate is an assumption as to how much the Postretirement Plan’s medical costs will change each year in the future. The health care trend rate assumption for pre-65 coverage is an increase of 7% for 2018, with the rate of increase decreasing 0.25% to 0.50% in each succeeding year, to an ultimate rate of 5% for 2024 and future years. The actual change in 2018 health care premium rates for post-65 coverage was a decrease of 5.1%. The health care trend rate assumption for post-65 coverage is
an increase of 6% in 2019 with the rate of increase decreasing 0.25% in each succeeding year, to an ultimate rate of 5% for 2023 and future years.
A one percentage point change in the assumed health care cost trend rate would have the following effect:
 
2018
2017
($ in Thousands)
100 bp Increase
100 bp Decrease
100 bp Increase
100 bp Decrease
Effect on total of service and interest cost
$
7

$
(6
)
$
7

$
(6
)
Effect on postretirement benefit obligation
$
164

$
(143
)
$
162

$
(140
)

The Corporation also has a 401(k) and Employee Stock Ownership Plan (the “401(k) plan”). The Corporation’s contribution is determined by the Compensation and Benefits Committee of the Board of Directors. Total expenses related to contributions to the 401(k) plan were $16 million, $14 million, and $14 million in 2018, 2017, and 2016, respectively.