PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

9 Months Ended

Sep. 30, 2020

EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

NOTE G – PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Nonunion Defined Benefit Pension, Supplemental Benefit, and Postretirement Health Benefit Plans

The following is a summary of the components of net periodic benefit cost:

	Three Months Ended September 30
	Nonunion Defined				Supplemental				Postretirement
	Benefit Pension Plan				Benefit Plan				Health Benefit Plan
	2020(1)		2019		2020		2019		2020(2)		2019
	(in thousands)
Service cost	$	—	$	—	$	—	$	—	$	46	$	80
Interest cost		—		138		2		9		144		303
Expected return on plan assets		—		29		—		—		—		—
Amortization of prior service credit		—		—		—		—		—		(8)
Pension settlement expense(3)		—		2,530		—		—		—		—
Amortization of net actuarial (gain) loss(4)		—		50		2		24		(150)		225
Net periodic benefit cost	$	—	$	2,747	$	4	$	33	$	40	$	600

	Nine Months Ended September 30
	Nonunion Defined				Supplemental				Postretirement
	Benefit Pension Plan				Benefit Plan				Health Benefit Plan
	2020(1)		2019		2020		2019		2020(2)		2019
	(in thousands)
Service cost	$	—	$	—	$	—	$	—	$	140	$	240
Interest cost		—		624		7		29		432		909
Expected return on plan assets		—		(60)		—		—		—		—
Amortization of prior service credit		—		—		—		—		—		(25)
Pension settlement expense(3)		—		4,164		89		—		—		—
Amortization of net actuarial (gain) loss(4)		—		260		7		71		(448)		674
Net periodic benefit cost	$	—	$	4,988	$	103	$	100	$	124	$	1,798

(1) Termination of the nonunion defined benefit pension plan was completed in 2019 and the plan was liquidated as of December 31, 2019.

(2) Expense for the postretirement health benefit plan is lower for the three and nine months ended September 30, 2020, compared to the same periods of 2019, due to the impact of a lower cost prescription drug plan effective January 1, 2020.

(3) For the nine months ended September 30, 2020, pension settlement expense for the supplemental benefit plan of $0.1 million (pre-tax), or $0.1 million (after-tax), was due to a $0.7 million benefit related to an officer retirement. For the three and nine months ended September 30, 2019, pension settlement expense for the nonunion defined benefit pension plan of $2.5 million (pre-tax), or $1.9 million (after-tax), and $4.2 million (pre-tax), or $3.1 million (after-tax), respectively, was related to lump-sum distributions from the plan of $16.0 million and $33.9 million, respectively, which included third quarter 2019 payments to purchase a nonparticipating annuity contract and transfer the remaining benefit obligation to the Pension Benefit Guaranty Corporation (the “PBGC”). During the three and nine months ended September 30, 2019, an additional $4.0 million pension termination expense (with no tax benefit) was recorded with pension settlement expense in the “Other, net” line of other income (costs) in the consolidated statements of operations. This noncash charge was related to an amount which was stranded in accumulated other comprehensive loss until the nonunion defined benefit pension obligation was settled upon plan termination.

(4) The Company amortizes actuarial gains and losses over the average remaining active service period of the plan participants and does not use a corridor approach.

Multiemployer Plans

ABF Freight System, Inc. and certain other subsidiaries reported in the Company’s Asset-Based operating segment (“ABF Freight”) contribute to multiemployer pension and health and welfare plans, which have been established pursuant to the Taft-Hartley Act, to provide benefits for its contractual employees. ABF Freight’s contributions generally are based on the time worked by its contractual employees, in accordance with the 2018 ABF NMFA and other related supplemental agreements. ABF Freight recognizes as expense the contractually required contributions for each period and recognizes as a liability any contributions due and unpaid.

The 25 multiemployer pension plans to which ABF Freight contributes vary greatly in size and in funded status. Contribution obligations to these plans are generally specified in the 2018 ABF NMFA, which will remain in effect through June 30, 2023. The funding obligations to the pension plans are intended to satisfy the requirements imposed by the Pension Protection Act of 2006, which was permanently extended by the Multiemployer Pension Reform Act (the “Reform Act”) included in the Consolidated and Further Continuing Appropriations Act of 2015. Provisions of the Reform Act include, among others, providing qualifying plans the ability to self-correct funding issues, subject to various requirements and restrictions, including applying to the U.S. Department of the Treasury for the reduction of certain accrued benefits. Through the term of its current collective bargaining agreement, ABF Freight’s contribution obligations generally will be satisfied by making the specified contributions when due. However, the Company cannot determine with any certainty the contributions that will be required under future collective bargaining agreements for ABF Freight’s contractual employees. If ABF Freight was to completely withdraw from certain multiemployer pension plans, under current law, ABF Freight would have material liabilities for its share of the unfunded vested liabilities of each such plan.

Approximately one half of ABF Freight’s total contributions to multiemployer pension plans are made to the Central States, Southeast and Southwest Areas Pension Plan (the “Central States Pension Plan”). As set forth in the 2019 Annual Funding Notice for the Central States Pension Plan, the funded percentage of the plan was 24.8% as of January 1, 2019. In the Notice of Critical and Declining Status for the Central States Pension Plan dated March 30, 2020, the plan’s actuary certified that, as of January 1, 2020, the plan is in critical and declining status, as defined by the Reform Act. Critical and declining status is applicable to critical status plans that are projected to become insolvent anytime within the next 14 plan years, or if the plan is projected to become insolvent within the next 19 plan years and either the plan’s ratio of inactive participants to active participants exceeds two to one or the plan’s funded percentage is less than 80%.

The Company received a notice of insolvency dated September 30, 2020 for the Trucking Employees of North Jersey Welfare Fund, Inc. – Pension Fund (the “560 Pension Fund”) which is expected to become insolvent in April 2021. Approximately 2% of ABF Freight’s total multiemployer pension contributions for the year ended December 31, 2019, were made to the 560 Pension Fund. While the board of trustees of the 560 Pension Fund will continue to administer the fund, the PBGC will provide financial assistance to the fund by paying retiree benefits not to exceed the PBGC guarantee limits for insolvent multiemployer plans.

The multiemployer plan administrators have provided to the Company no other significant changes in information related to multiemployer plans from the information disclosed in the Company’s 2019 Annual Report on Form 10-K.