Pension and Other Post-Retirement Benefit Plans

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Pension and Other Post-Retirement Benefit Plans

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

Defined Benefit and Post-retirement Healthcare Plans

ABX sponsors a qualified defined benefit pension plan for ABX crewmembers and a qualified defined benefit pension plan for a major portion of its other ABX employees that meet minimum eligibility requirements. ABX also sponsors non-qualified defined benefit pension plans for certain employees. These non-qualified plans are unfunded. Employees are no longer accruing benefits under any of the defined benefit pension plans. ABX also sponsors a post-retirement healthcare plan for its ABX crewmembers, which is unfunded. Benefits for covered individuals terminate upon reaching age 65 under the post-retirement healthcare plans.

The accounting and valuation for these post-retirement obligations are determined by prescribed accounting and actuarial methods that consider a number of assumptions and estimates. The selection of appropriate assumptions and estimates is significant due to the long time period over which benefits will be accrued and paid. The long term nature of these benefit payouts increases the sensitivity of certain estimates of our post-retirement obligations. The assumptions considered most sensitive in actuarially valuing ABX’s pension obligations and determining related expense amounts are discount rates and expected long term investment returns on plan assets. Additionally, other assumptions concerning retirement ages, mortality and employee turnover also affect the valuations. Actual results and future changes in these assumptions could result in future costs significantly higher than those recorded in our results of operations.

ABX measures plan assets and benefit obligations as of December 31 of each year. Information regarding ABX’s sponsored defined benefit pension plans and post-retirement healthcare plans follow below. The accumulated benefit obligation reflects pension benefit obligations based on the actual earnings and service to-date of current employees.

Funded Status  (in thousands):

	Pension Plans				Post-retirement Healthcare Plans
	2020		2019		2020		2019
Accumulated benefit obligation	$	873,826	$	779,031	$	3,484	$	3,707
Change in benefit obligation
Obligation as of January 1	$	779,031	$	690,729	$	3,707	$	3,824
Service cost	—		—		139		107
Interest cost	27,880		31,299		91		148
Plan transfers	2,895		3,313		—		—
Benefits paid	(34,218)		(31,718)		(362)		(365)
Curtailments and settlement	(2,435)		—		(17)		—
Actuarial (gain) loss	100,673		85,408		(74)		(7)
Obligation as of December 31	$	873,826	$	779,031	$	3,484	$	3,707
Change in plan assets
Fair value as of January 1	$	746,763	$	625,646	$	—	$	—
Actual gain (loss) on plan assets	120,057		144,108		—		—
Plan transfers	2,895		3,313		—		—
Employer contributions	10,833		5,414		362		365
Benefits paid	(34,218)		(31,718)		(362)		(365)
Settlement payments	$	(2,435)	$	—	$	—	$	—
Fair value as of December 31	$	843,895	$	746,763	$	—	$	—
Funded status
Overfunded plans, net asset	$	3,447	$	4,996	$	—	$	—
Underfunded plans
Current liabilities	$	(1,348)	$	(3,796)	$	(415)	$	(431)
Non-current liabilities	$	(32,030)	$	(33,468)	$	(3,069)	$	(3,276)

Components of Net Periodic Benefit Cost

ABX’s net periodic benefit costs for its defined benefit pension plans and post-retirement healthcare plans for the years ended December 31, 2020, 2019 and 2018, are as follows (in thousands):

	Pension Plans						Post-Retirement Healthcare Plan
	2020		2019		2018		2020		2019		2018
Service cost	$	—	$	—	$	—	$	139	$	107	123
Interest cost	27,880		31,299		29,135		91		148		127
Expected return on plan assets	(44,673)		(37,907)		(42,093)		—		—		—
Curtailments and settlements	(424)		—		—		(17)		—		—
Amortization of prior service cost	—		—		—		—		—		—
Amortization of net (gain) loss	3,763		15,528		3,547		124		172		219
Net periodic benefit cost (income)	$	(13,454)	$	8,920	$	(9,411)	$	337	$	427	$	469

Unrecognized Net Periodic Benefit Expense

The pre-tax amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit expense at December 31 are as follows (in thousands):

	Pension Plans				Post-Retirement Healthcare Plans
	2020		2019		2020		2019
Unrecognized prior service cost	$	—	$	—	$	—	$	—
Unrecognized net actuarial loss	111,820		89,871		833		1,031
Accumulated other comprehensive loss	$	111,820	$	89,871	$	833	$	1,031

The amounts of unrecognized net actuarial loss recorded in accumulated other comprehensive loss that is expected to be recognized as components of net periodic benefit expense during 2021 is $7.1 million and $0.2 million for the pension plans and the post-retirement healthcare plans, respectively.

Assumptions

Assumptions used in determining the funded status of ABX’s pension plans at December 31 were as follows:

 

	Pension Plans
	2020	2019	2018
Discount rate - crewmembers	2.55%	3.65%	4.65%
Discount rate - non-crewmembers	2.75%	3.70%	4.65%
Expected return on plan assets	5.75%	6.10%	6.20%

Net periodic benefit cost was based on the discount rate assumptions at the end of the previous year.

The discount rate used to determine post-retirement healthcare obligations was 1.30%, 2.60% and 4.10% for pilots at December 31, 2020, 2019 and 2018, respectively. Post-retirement healthcare plan obligations have not been funded. The Company's retiree healthcare contributions have been fixed for each participant, accordingly, healthcare cost trend rates do not affect the post-retirement healthcare obligations.

Plan Assets

The weighted-average asset allocations by asset category are as shown below:

 

	Composition of Plan Assets as of December 31
Asset category	2020		2019
Cash	1	%	—	%
Equity securities	30	%	26	%
Fixed income securities	69	%	74	%
	100	%	100	%

ABX uses an investment management firm to advise it in developing and executing an investment policy. The portfolio is managed with consideration for diversification, quality and marketability. The investment policy permits the following ranges of asset allocation: equities – 15% to 35%; fixed income securities – 60% to 80%; cash – 0% to 10%. Except for U.S. Treasuries, no more than 10% of the fixed income portfolio and no more than 5% of the equity portfolio can be invested in securities of any single issuer.

The overall expected long term rate of return was developed using various market assumptions in conjunction with the plans’ targeted asset allocation. The assumptions were based on historical market returns.

Cash Flows

In 2020 and 2019, the Company made contributions to its defined benefit plans of $10.8 million and $5.4 million, respectively. The Company estimates that its contributions in 2021 will be approximately $1.7 million for its defined benefit pension plans and $0.4 million for its post-retirement healthcare plans.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid out of the respective plans as follows (in thousands):

	Pension Benefits		Post-retirement Healthcare Benefits
2021	$	38,035	$	415
2022	41,229		462
2023	43,907		512
2024	45,804		499
2025	47,565		467
Years 2026 to 2030	242,354		1,390

Fair Value Measurements

The pension plan assets are stated at fair value. The following is a description of the valuation methodologies used for the investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

Common Trust Funds—Common trust funds are composed of shares or units in non-publicly traded funds whereby the underlying assets in these funds (cash, cash equivalents, fixed income securities and equity securities) are publicly traded on exchanges and price quotes for the assets held by these funds are readily available. Holdings of common trust funds are classified as Level 2 investments.

Corporate Stock—This investment category consists of common and preferred stock issued by domestic and international corporations that are regularly traded on exchanges and price quotes for these shares are readily available. These investments are classified as Level 1 investments.

Mutual Funds—Investments in this category include shares in registered mutual funds, unit trust and commingled funds. These funds consist of domestic equity, international equity and fixed income strategies. Investments in this category that are publicly traded on an exchange and have a share price published at the close of each business day are classified as Level 1 investments and holdings in the other mutual funds are classified as Level 2 investments.

Fixed Income Investments—Securities in this category consist of U.S. Government or Agency securities, state and local government securities, corporate fixed income securities or pooled fixed income securities. Securities in this category that are valued utilizing published prices at the close of each business day are classified as Level 1 investments. Those investments valued by bid data prices provided by independent pricing sources are classified as Level 2 investments.

The pension plan assets measured at fair value on a recurring basis were as follows (in thousands):

As of December 31, 2020	Fair Value Measurement Using				Total
	Level 1		Level 2
Plan assets
Common trust funds	$	—	$	5,055	$	5,055
Corporate stock	19,852		501		20,353
Mutual funds	—		237,063		237,063
Fixed income investments	545		580,476		581,021
Benefit Plan Assets	$	20,397	$	823,095	$	843,492
Investments measured at net asset value ("NAV")					403
Total benefit plan assets					$	843,895

As of December 31, 2019	Fair Value Measurement Using				Total
	Level 1		Level 2
Plan assets
Common trust funds	$	—	$	3,467	$	3,467
Corporate stock	14,553		442		14,995
Mutual funds	59,710		117,067		176,777
Fixed income investments	—		549,441		549,441
Benefit Plan Assets	$	74,263	$	670,417	$	744,680
Investments measured at net asset value ("NAV")					2,083
Total benefit plan assets					$	746,763

Investments that were measured at NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. These investments include hedge funds, private equity and real estate funds. Management’s estimates are based on information provided by the fund managers or general partners of those funds.

Hedge Funds and Private Equity—These investments are not readily tradable and have valuations that are not based on readily observable data inputs. The fair value of these assets is estimated based on information provided by the fund managers or the general partners. These assets have been valued using NAV as a practical expedient.

The following table presents investments measured at fair value based on NAV per share as a practical expedient:

	Fair Value		Redemption Frequency	Redemption Notice Period	Unfunded Commitments
As of December 31, 2020
Hedge Funds & Private Equity	$	403	(1) (2)	90 days	$	—
Real Estate	—		(3)	90 days	—
Total investments measured at NAV	$	403			$	—
As of December 31, 2019
Hedge Funds & Private Equity	$	2,083	(1) (2)	90 days	$	—
Real Estate	—		(3)	90 days	—
Total investments measured at NAV	$	2,083			$	—

(1) Quarterly - hedge funds

(2) None - private equity

(3) Monthly

Defined Contribution Plans

The Company sponsors defined contribution capital accumulation plans (401k) that are funded by both voluntary employee salary deferrals and by employer contributions. Expenses for defined contribution retirement plans were $15.4 million, $12.6 million and $9.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.