Benefit Plan

12 Months Ended

Dec. 31, 2019

The Corporation has a noncontributory Defined Benefit Pension Plan (the “Pension Plan”) covering substantially all of the employees of the Corporation and its subsidiaries. The Pension Plan provides benefits based on an employee’s years of service and compensation.

There was no pension contribution in 2019 or 2018 and there is no contribution expected to be made in 2020.

Using accrual measurement dates of December 31, 2019 and 2018, plan assets and benefit obligation activity for the Pension Plan are listed below:


(In thousands)	2019		2018
Change in fair value of plan assets
Fair value at beginning of measurement period	$	177,077	$	195,735
Actual return on plan assets	42,402		(8,118)
Employer contributions	—		—
Benefits paid	(8,856)		(10,540)
Fair value at end of measurement period	$	210,623	$	177,077
Change in benefit obligation
Projected benefit obligation at beginning of measurement period	$	123,528	$	138,698
Service cost	5,873		6,547
Interest cost	5,491		5,236
Plan amendments	(168)		—
Actuarial loss (gain)	28,551		(16,413)
Benefits paid	(8,856)		(10,540)
Projected benefit obligation at the end of measurement period	$	154,419	$	123,528
Funded status at end of year (fair value of plan assets less benefit obligation)	$	56,204	$	53,549

The change in the actuarial loss (gain) from an actuarial gain of $16.4 million as of December 31, 2018 to an actuarial loss of $28.6 million as of December 31, 2019, was largely the result of a decrease in the discount rate from 4.60% to 3.53%. Additionally, the generational mortality improvement projection scale was updated from scale MP-2018 to scale MP-2019 and the mortality tables were updated from the RP-2004 employee and healthy annuitant mortality tables to the Pri-2012 employee and retiree mortality tables.

The asset allocation for the Pension Plan as of each measurement date, by asset category, was as follows:


		Percentage of Plan Assets
Asset category	Target Allocation	2019		2018
Equity securities	50% - 100%	81	%	82	%
Fixed income and cash equivalents	remaining balance	19	%	18	%
Total		100	%	100	%

The investment policy, as established by the Retirement Plan Committee, is to invest assets according to the target allocation stated above. Assets will be reallocated periodically based on the investment strategy of the Retirement Plan Committee. The investment policy is reviewed periodically.

The expected long-term rate of return on plan assets used to measure the benefit obligation was 7.00% at both December 31, 2019 and December 31, 2018. This return was based on the expected long-term return of each of the asset categories, weighted based on the median of the target allocation for each class.

The accumulated benefit obligation for the Pension Plan was $129.3 million and $104.9 million at December 31, 2019 and 2018, respectively.

On November 17, 2009, the Park Pension Plan completed the purchase of 115,800 common shares of Park for $7.0 million or $60.45 per share. At December 31, 2019 and 2018, the fair value of the 115,800 common shares held by the Pension Plan was $11.9 million, or $102.38 per share and $9.8 million, or $84.95 per share, respectively.

The weighted average assumptions used to determine benefit obligations at December 31, 2019, 2018 and 2017 were as follows:


	2019		2018		2017
Discount rate	3.53	%	4.60	%	3.89	%
Rate of compensation increase
Under age 30	10.00	%	10.00	%	10.00	%
Ages 30-39	6.00	%	6.00	%	6.00	%
Ages 40-49	4.00	%	4.00	%	4.00	%
Ages 50 and over	3.00	%	3.00	%	3.00	%

The estimated future pension benefit payments reflecting expected future service for the next ten years are shown below (in thousands):


2020	$	9,676
2021	10,377
2022	11,038
2023	10,553
2024	11,627
2025-2029	58,398
Total	$	111,669

The following table shows ending balances of accumulated other comprehensive loss at December 31, 2019 and 2018.


(In thousands)	2019		2018
Prior service credit	$	168	$	—
Net actuarial loss	(33,933)		(37,560)
Total	(33,765)		(37,560)
Deferred taxes	7,091		7,888
Accumulated other comprehensive loss	$	(26,674)	$	(29,672)

Using actuarial measurement dates of December 31 for 2019, 2018 and 2017, components of net periodic benefit income and other amounts recognized in other comprehensive income were as follows:


(In thousands)	2019		2018		2017		Affected Line Item in the Consolidated Statements of Income
Components of net periodic benefit income and other amounts recognized in other comprehensive income (loss)
Service cost	$	(5,873)	$	(6,547)	$	(5,270)	Employee benefits
Interest cost	(5,491)		(5,236)		(5,085)		Other components of net periodic benefit income
Expected return on plan assets	12,105		13,417		11,455		Other components of net periodic benefit income
Recognized net actuarial loss	(1,882)		(1,361)		(576)		Other components of net periodic benefit income
Net periodic benefit (loss) income	$	(1,141)	$	273	$	524
Net actuarial gain (loss) and prior service cost	$	1,913	$	(5,122)	$	(11,698)
Amortization of net loss	1,882		1,361		576
Total recognized in other comprehensive income (loss)	3,795		(3,761)		(11,122)
Total recognized in net benefit income (loss) and other comprehensive income (loss)	$	2,654	$	(3,488)	$	(10,598)

There are $16,000 in estimated prior service costs for the Pension Plan to be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next year. The estimated net actuarial loss expected to be recognized in the next year is $1.2 million.

The weighted average assumptions used to determine net periodic benefit income for the years ended December 31, 2019, 2018 and 2017 are listed below:


	2019		2018		2017
Discount rate	4.60	%	3.89	%	4.58	%
Rate of compensation increase
Under age 30	10.00	%	10.00	%	10.00	%
Ages 30-39	6.00	%	6.00	%	6.00	%
Ages 40-49	4.00	%	4.00	%	4.00	%
Ages 50 and over	3.00	%	3.00	%	3.00	%
Expected long-term return on plan assets	7.00	%	7.00	%	7.00	%

The Pension Plan maintains cash in a PNB savings account. The Pension Plan cash balance was $8.9 million at December 31, 2019.

GAAP defines fair value as the price that would be received by Park for an asset or paid by Park to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date, using the most advantageous market for the asset or liability. The fair values of equity securities, consisting of mutual fund investments and common stock (U.S. large cap) held by the Pension Plan and the fixed income and cash equivalents, are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs). The fair value of Pension Plan assets at December 31, 2019 was $210.6 million. At December 31, 2019, $180.0 million of equity investments and cash in the Pension Plan were categorized as Level 1 inputs; $30.6 million of Pension Plan investments in corporate (U.S. large cap), U.S. Government sponsored entity bonds and marketable CDs were categorized as Level 2 inputs, as fair value was based on quoted market prices of comparable instruments; and no investments were categorized as Level 3 inputs. The fair value of Pension Plan assets was $177.1 million at December 31, 2018. At December 31, 2018, $147.1 million of investments in the Pension Plan were categorized as Level 1 inputs; $30.0 million were categorized as Level 2; and no investments were categorized as Level 3.

Salary Deferral Plan

The Corporation has a voluntary salary deferral plan (the Corporation's Employees Stock Ownership Plan) covering substantially all of the employees of the Corporation and its subsidiaries. Eligible employees may contribute a portion of their compensation subject to a maximum statutory limitation. The Corporation provides a matching contribution established annually by the Corporation. Contribution expense for the Corporation was $3.9 million, $3.0 million, and $1.3 million for 2019, 2018 and 2017, respectively.

Supplemental Executive Retirement Plan

The Corporation has entered into Supplemental Executive Retirement Plan Agreements (the "SERP Agreements") with certain key officers of the Corporation and its subsidiaries which provide defined pension benefits in excess of limits imposed by federal income tax law. The accrued benefit cost for the SERP Agreements totaled $11.0 million and $10.3 million for 2019 and 2018, respectively. The expense for the Corporation was $1.3 million for 2019, $1.0 million for 2018 and $1.7 million for 2017.