Pension Benefits and Other Postretirement Benefit Plans

9 Months Ended

Sep. 30, 2019

Defined Benefit Plan [Abstract]

Pension Benefit and Other Postretirement Benefit Plans

Note 12 – Pension Benefits and Other Postretirement Benefit Plans

As of September 30, 2019, we had two qualified noncontributory defined benefit pension plans: 1) the Rogers Corporation Employees’ Pension Plan (the Union Plan) and 2) the Rogers Corporation Defined Benefit Pension Plan for (i) all other U.S. employees hired before December 31, 2007 who are salaried employees or non-union hourly employees and (ii) employees of the acquired Arlon business (the Merged Plan).

The Company also maintains the Rogers Corporation Amended and Restated Pension Restoration Plan effective as of January 1, 2004 and the Rogers Corporation Amended and Restated Pension Restoration Plan effective as of January 1, 2005 (collectively, the Nonqualified Plans). The Nonqualified Plans serve 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 plans for certain retirees. The measurement date for all plans is December 31^st 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 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 loss. 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 loss and amortized into net periodic pension cost in future periods.

Pension Plan Proposed Termination

During the second quarter of 2019, following receipt of a determination letter from the Internal Revenue Service (IRS), the Company amended the Merged Plan to (a) terminate the Merged Plan (subject to discretionary approval by the Company’s Chief Executive Officer) and (b) add a lump sum distribution option in connection with the termination of the Merged Plan, if approved. The Company subsequently provided participants of the Merged Plan an option to elect either a lump sum distribution or an annuity. As of September 30, 2019, the Merged Plan was fully funded on a GAAP basis, the Company intended to terminate the Merged Plan (subject to final approval), and there were no plans to terminate the Union Plan.

On October 17, 2019, the Company’s Chief Executive Officer approved the termination of the Merged Plan. The Company purchased a group annuity contract with an insurance company for all participants who did not elect a lump sum distribution, for approximately $124 million, with a cash settlement date of October 24, 2019. The insurance company will be responsible for administering and paying pension benefit payments effective January 1, 2020. The lump sum distributions, which totaled approximately $39 million, were paid out commencing on October 21, 2019, with the majority of payments completed as of October 30, 2019. The Company estimates it will make an additional $1 million of monthly pension benefit payments subsequent to the annuity purchase date during a transition period ending December 31, 2019. The Merged Plan has sufficient assets to satisfy all transaction obligations. The Company further anticipates that it will have approximately $7 million to $11 million of assets remaining in the Merged Plan after settlement of all of its obligations.

In addition, the Company expects to record a total non-cash pre-tax settlement charge in connection with the termination of the Merged Plan of approximately $52 million to $56 million during the fourth quarter of 2019. This settlement charge includes the immediate recognition into expense of the related unrecognized losses within “Accumulated other comprehensive loss” on the consolidated statements of financial position as of the plan termination date. The settlement charge will be recognized in “Other income (expense), net” on the consolidated statements of operations.

Components of Net Periodic (Benefit) Cost

The components of net periodic (benefit) cost for the periods indicated were:

	Pension Benefits												Retirement Health and Life Insurance Benefits
(Dollars in thousands)	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
Service cost	$	—		$	—		$	—		$	—		$	12		$	17		$	48		$	55
Interest cost	1,790			1,692			5,359			5,064			14			16			44			47
Expected return of plan assets	(2,187		)	(2,164		)	(6,571		)	(6,497		)	—			—			—			—
Amortization of prior service credit	—			—			—			—			(252		)	(400		)	(758		)	(1,201		)
Amortization of net loss	476			457			1,386			1,370			—			—			—			—
Net periodic cost (benefit)	$	79		$	(15	)	$	174		$	(63	)	$	(226	)	$	(367	)	$	(666	)	$	(1,099	)

Employer Contributions

There were no required contributions to our qualified defined benefit pension plans for the three- or nine-month periods ended September 30, 2019 and 2018, and we are not required to make additional contributions to these plans for the remainder of 2019. No voluntary contributions were made to our qualified defined benefit pension plans for each of the three- and nine-month periods ended September 30, 2019 and we made a $25.0 million voluntary contribution to the Merged Plan during the three- and nine-month periods ended September 30, 2018.

As there is no funding requirement for the Nonqualified Plans or the Retiree Health and Life Insurance benefit plans, we fund the amount of benefit payments made during the year, which were immaterial for each of the three- and nine-month periods ended September 30, 2019 and 2018.