PENSION BENEFITS AND RETIREMENT HEALTH AND LIFE INSURANCE BENEFITS

We have three qualified noncontributory defined benefit pension plans for unionized hourly employees, all other U.S. employees hired before December 31, 2007 and employees of the acquired Arlon business. We also have established a nonqualified unfunded noncontributory defined benefit pension plan to restore certain retirement benefits that might otherwise be lost due to limitations imposed by federal law on qualified pension plans, as well as to provide supplemental retirement benefits, for certain senior executives of the Company.

In addition, we sponsor multiple fully insured or self-funded medical plans and life insurance plan for certain retirees. The measurement date for all plans is December 31 for each respective plan year.

We are required, as an employer, to: (a) recognize in our consolidated statements of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and our obligations that determine our funded status as of the end of the fiscal year; and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur and report these changes in accumulated other comprehensive income. In addition, actuarial gains and losses that are not immediately recognized as net periodic pension cost are recognized as a component of accumulated other comprehensive income (loss) and amortized into net periodic pension cost in future periods.

Defined Benefit Pension Plan Amendments and Retiree Medical Plan Amendments

During the fourth quarter of 2015, we changed the benefits related to the salaried and non-union hourly participants of the retirement health insurance benefits program. This program had been frozen to new participants in 2007. The 2015 amendment to the plan was approved on October 2, 2015 and resulted in a negative prior service cost, which is being amortized over the average expected remaining years of future benefit payments for this group. This change resulted in a remeasurement event requiring us to remeasure the plan liabilities, as well as the expense related to the plan, as of October 31, 2015.

All qualified noncontributory defined benefit pension plans have ceased accruing benefits. The Arlon pension plan (the “Bear Plan”) was frozen previous to our acquisition of Arlon. Effective June 30, 2013, for salaried and non-union hourly employees in the U.S., and effective December 31, 2013 for union employees in the U.S., benefits under the Rogers defined benefit pension plans no longer accrue.



(Dollars in thousands)	Pension Benefits						Retirement Health and Life Insurance Benefits
Change in benefit obligation:	2016			2015			2016			2015
Benefit obligation at beginning of year	$	182,359		$	187,882		$	2,722		$	9,839
Addition of Bear Plan	—			4,169			—			—
Service cost	—			—			133			411
Interest cost	7,530			7,523			75			216
Actuarial (gain) loss	(3,621		)	(8,674		)	72			(1,362		)
Benefit payments	(8,572		)	(8,541		)	(860		)	(766		)
Plan Amendment	—			—			—			(5,616		)
Benefit obligation at end of year	$	177,696		$	182,359		$	2,142		$	2,722



Change in plan assets:	2016			2015			2016			2015
Fair value of plan assets at the beginning of the year	$	171,007		$	170,600		$	—		$	—
Addition of Bear Plan	—			2,171			—			—
Actual return on plan assets	8,999			(194		)	—			—
Employer contributions	344			6,971			860			766
Benefit payments	(8,572		)	(8,541		)	(860		)	(766		)
Fair value of plan assets at the end of the year	171,778			171,007			—			—
Unfunded status	$	(5,918	)	$	(11,352	)	$	(2,142	)	$	(2,722	)

Amounts included in the consolidated statements of financial position consist of:



(Dollars in thousands)	Pension Benefits						Retirement Health and Life Insurance Benefits
	2016			2015			2016			2015
Noncurrent assets	$	2,583		$	1,273		$	—		$	—
Current liabilities	—			(1		)	(150		)	(537		)
Noncurrent liabilities	(8,501		)	(12,624		)	(1,992		)	(2,185		)
Net amount recognized at end of year	$	(5,918	)	$	(11,352	)	$	(2,142	)	$	(2,722	)



(Dollars in thousands)	Pension Benefits						Retirement Health and Life Insurance Benefits
	2016			2015			2016		2015
Net actuarial (loss) gain	$	(59,377	)	(62,972		)	$	523	643
Prior service benefit	—			—			3,878		5,368
Net amount recognized at end of year	$	(59,377	)	$	(62,972	)	$	4,401	$	6,011

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with an accumulated benefit obligation in excess of plan assets were $148.6 million, $148.6 million and $140.1 million, respectively, as of December 31, 2016 and $151.9 million, $151.9 million and $139.3 million, respectively, as of December 31, 2015.

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with plan assets in excess of an accumulated benefit obligation were $29.1 million, $29.1 million and $31.7 million, respectively, as of December 31, 2016. For 2015, the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with plan assets in excess of an accumulated benefit obligation were $30.5 million, $30.5 million, and $31.7 million, respectively.

Components of Net Periodic (Benefit) Cost



(Dollars in thousands)	Pension Benefits									Postretirement Health and Life Insurance Benefits
	2016			2015			2014			2016			2015			2014
Service cost	$	—		$	—		$	—		$	133		$	411		$	556
Interest cost	7,530			7,523			8,015			75			216			305
Expected return of plan assets	(10,808		)	(11,148		)	(12,909		)	—			—			—
Amortization of prior service cost (credit)	—			—			—			(1,489		)	(248		)	—
Amortization of net loss	1,784			1,690			686			(47		)	(12		)	—
Settlement charge	—			57			5,321			—			—			—
Net periodic benefit cost (benefit)	$	(1,494	)	$	(1,878	)	$	1,113		$	(1,328	)	$	367		$	861

In the fourth quarter of 2014, certain eligible participants in the defined benefit pension plans were given a lump sum payout offer. The payout of this program resulted in a settlement charge of $5.2 million.

The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $1.7 million. The estimated net benefit for the defined benefit postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $1.5 million.

Weighted-average assumptions used to determine benefit obligations at December 31:



	Pension Benefits				Retirement Health and Life Insurance Benefits
	2016		2015		2016		2015
Discount rate	4.25	%	4.25	%	3.25	%	3.00	%

Weighted-average assumptions used to determine net benefit cost for the years ended December 31:



	Pension Benefits				Retirement Health and Life Insurance Benefits
	2016		2015		2016		2015
Discount rate	4.25	%	4.00	%	3.00	%	3.00	%
Expected long-term rate of return on plan assets	5.51	%	6.50	%	—		—

Rate of compensation increase - An expected rate of compensation increase was not included in the weighted average assumptions as there would be no impact to the net benefit cost, as the plans have been previously frozen.

Discount rate - To determine the discount rate, we review current market indices of high quality corporate bonds, particularly the PruCurve index, to ensure that the rate used in our calculations is consistent and within an acceptable range based on these indices, which reflect current market conditions. The market-based rates are modified to be Rogers-specific, and this is done by applying our pension benefit cash flow projections to the generic index rate.

Long-term rate of return on assets - To determine the expected long-term rate of return on plan assets, we review historical and projected portfolio performance, the historical long-term rate of return, and how any change in the allocation of the assets could affect the anticipated returns. Adjustments are made to the projected rate of return if it is deemed necessary based on those factors and other current market trends.

Health care cost trend rates - For measurement purposes as of December 31, 2016 we assumed annual health care cost trend rates of 7.50% and 7.50% for covered health care benefits for retirees pre-age 65 and post-age 65, respectively. The rates were assumed to decrease gradually by 0.25% annually until reaching 4.50% and 4.50%, respectively, and remain at those levels thereafter. For measurement purposes as of December 31, 2015, we assumed annual health care cost trend rates of 7.00% and 7.50% for covered health care benefits for retirees pre-age 65 and post-age 65, respectively. Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would be expected to have the following effects:



(Dollars in thousands)	Increase		Decrease
Effect on total service and interest cost	$	12	$	(11	)
Effect on other postretirement benefit obligations	78		(74		)

Plan Assets

Our defined benefit pension assets are invested with the objective of achieving a total rate of return over the long-term that is sufficient to fund future pension obligations. In managing these assets and our investment strategy, we take into consideration future cash contributions to the plans, as well as the potential of the portfolio underperforming the market, which is partially mitigated by maintaining a diversified portfolio of assets.

In order to meet our investment objectives, we set asset allocation target ranges based on current funding status and future projections in order to mitigate the risk in the plan while maintaining its funded status. In November of 2014 we implemented a pension risk reduction strategy related to our investments, which included a change in our asset mix to hold a larger amount of fixed income securities. At December 31, 2016 and 2015, we held approximately 27% equity securities and 73% fixed income and short term cash securities in our portfolio.

In determining our investment strategy and calculating the net benefit cost, we utilized an expected long-term rate of return on plan assets. This rate is developed based on several factors, including the plans’ asset allocation targets, the historical and projected performance on those asset classes, and on the plans’ current asset composition. To justify our assumptions, we analyze certain data points related to portfolio performance. For example, we analyze the actual historical performance of our total plan assets, which has generated a return of approximately 8.3% over the past 20 year period. Based on the historical returns and the projected future returns we determined that a target return of 5.5% is appropriate for the current portfolio. Investments were stated at fair value as of the dates reported.

The following table presents the fair value of the pension plan net assets by asset category as of December 31, 2016 and 2015:



(Dollars in thousands)	2016		2015
Pooled separate accounts	$	7,587	$	6,782
Fixed income bonds	111,070		110,427
Mutual funds	44,054		43,454
Guaranteed deposit account	9,067		10,344
Total investments at fair value	$	171,778	$	171,007

Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the plan year. The fair value of the guaranteed deposit account was determined through discounting expected future investment cash flow from both investment income and repayment of principal for each investment purchased.

The estimated fair values of the participation units owned by the plan in pooled separate accounts were based on quoted redemption values and adjusted for management fees and asset charges, as determined by the record keeper, on the last business day of the Plan year. Pooled separate accounts are accounts established solely for the purpose of investing the assets of one or more plans. Funds in a separate account are not commingled with other assets of the Company for investment purposes.

The following tables set forth by level, within the fair value hierarchy, the assetscarried at fair value as of December 31, 2016 and 2015.



	Assets at Fair Value as of December 31, 2016
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Pooled separate accounts	$	—	$	7,587	$	—	$	7,587
Fixed income bonds	—		111,070		—		111,070
Mutual funds	44,054		—		—		44,054
Guaranteed deposit account	—		—		9,067		9,067
Total assets at fair value	$	44,054	$	118,657	$	9,067	$	171,778

	Assets at Fair Value as of December 31, 2015
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Pooled separate accounts	$	—	$	6,782	$	—	$	6,782
Fixed income bonds	—		110,427		—		110,427
Mutual funds	43,454		—		—		43,454
Guaranteed deposit account	—		—		10,344		10,344
Total assets at fair value	$	43,454	$	117,209	$	10,344	$	171,007

The table below sets forth a summary of changes in the fair value of the guaranteed deposit account’s Level 3 assetsfor the year ended December 31, 2016:



(Dollars in thousands)	Guaranteed Deposit Account
Balance at beginning of year	$	10,344
Unrealized gains relating to instruments still held at the reporting date	329
Purchases, sales, issuances and settlements (net)	(1,606		)
Balance at end of year	$	9,067

Cash Flows

Contributions

At December 31, 2016, we had met the minimum funding requirements for all of our qualified defined benefit pension plans due to a required contribution to the Bear Plan of $0.3 million for 2016 and we estimate that we will be required to make a contribution of $0.3 million for 2017. In 2015, we made mandatory contributions of $0.3 million and voluntary contributions of $6.5 million. As there is no funding requirement for the nonqualified defined benefit pension plans nor the Retiree Health and Life Insurance benefit plans, we fund the amount of benefit payments made during the year.

Estimated Future Payments

The following pension benefit payments are expected to be paid through the utilization of plan assets for the funded plans and from the Company’s operating cash flows for the unfunded plans. The Retiree Health and Life Insurance benefits, for which no funding has been made, are expected to be paid from the Company’s operating cash flows. The benefit payments are based on the same assumptions used to measure our benefit obligation at the end of fiscal 2016.



(Dollars in thousands)	Pension Benefits		Retiree Health and Life Insurance Benefits
2017	$	8,916	$	513
2018	$	9,043	$	345
2019	$	9,201	$	285
2020	$	9,404	$	280
2021	$	9,694	$	193
2022-2026	$	52,583	$	1,391