EMPLOYEE BENEFIT PLANS

Certain subsidiaries of the Company are sponsors or administrators of both qualified and non-qualified defined benefit pension plans (“Pension Plans”). The largest of these plans is a non-contributory qualified defined benefit pension plan sponsored by RGA Reinsurance that covers U.S. employees. The benefits under the Pension Plans are generally based on years of service and compensation levels.

The Company also provides certain health care and life insurance benefits for retired employees. The health care benefits are provided through a self-insured welfare benefit plan. Employees become eligible for these benefits if they meet minimum age and service requirements. The retiree’s cost for health care benefits varies depending upon the credited years of service. The Company recorded benefits expense of approximately $4.1 million, $3.6 million, and $2.5 million in 2013, 2012 and 2011, respectively that are related to these postretirement plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total cost of postretirement health benefits. Prepaid benefit costs and accrued benefit liabilities are included in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets.

A December 31 measurement date is used for all of the defined benefit and postretirement plans. The status of these plans as of December 31, 2013 and 2012 is summarized below (dollars in thousands):



	December 31,
	Pension Benefits						Other Benefits
	2013			2012			2013			2012
Change in benefit obligation:
Benefit obligation at beginning of year	$	112,759		$	93,101		$	33,953		$	28,854
Service cost	8,023			7,531			1,881			1,641
Interest Cost	4,072			4,072			1,353			1,246
Participant contributions	—			—			128			122
Actuarial (gains) losses	(8,957		)	13,270			(5,949		)	2,341
Benefits paid	(3,347		)	(5,776		)	(607		)	(251		)
Foreign currency rate change effect	(1,355		)	561			—			—
Benefit obligation at end of year	$	111,195		$	112,759		$	30,759		$	33,953



	December 31,
	Pension Benefits						Other Benefits
	2013			2012			2013			2012
Change in plan assets:
Fair value of plan assets at beginning of year	$	49,516		$	41,300		$	—		$	—
Actual return on plan assets	6,027			5,449			—			—
Employer contributions	7,363			8,543			479			129
Participant contributions	—			—			128			122
Benefits paid and expenses	(3,347		)	(5,776		)	(607		)	(251		)
Administrative expense	—			—			—			—
Fair value of plan assets at end of year	$	59,559		$	49,516		$	—		$	—
Funded status at end of year	$	(51,636	)	$	(63,243	)	$	(30,759	)	$	(33,953	)



	December 31,
	Qualified Plans						Non-Qualified Plans⁽¹⁾						Total
	2013			2012			2013			2012			2013			2012
Aggregate fair value of plan assets	$	59,559		$	49,516		$	—		$	—		$	59,559		$	49,516
Aggregate projected benefit obligations	63,502			62,397			47,693			50,362			111,195			112,759
Under funded	$	(3,943	)	$	(12,881	)	$	(47,693	)	$	(50,362	)	$	(51,636	)	$	(63,243	)


(1)	For non-qualified plans, there are no required funding levels.



	December 31,
	Pension Benefits				Other Benefits
	2013		2012		2013		2012
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	22,507	$	37,314	$	8,655	$	15,472
Net prior service cost	1,981		2,506		—		—
Total	$	24,488	$	39,820	$	8,655	$	15,472

The following table presents information for qualified and non-qualified pension plans with a projected benefit obligation in excess of plan assets as of December 31, 2013 and 2012 (dollars in thousands):



	2013		2012
Projected benefit obligation	$	111,195	$	112,759
Fair value of plan assets	59,559		49,516

The accumulated benefit obligations for all defined benefit pension plans were $107.7 million and $106.8 million at December 31, 2013 and 2012, respectively. The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2013 and 2012 (dollars in thousands):



	2013		2012
Accumulated benefit obligation	$	107,722	$	106,845
Fair value of plan assets	59,559		49,516

The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income were as follows (dollars in thousands):



	Pension Benefits									Other Benefits
	2013			2012			2011			2013			2012			2011
Net periodic benefit cost:
Service cost	$	8,023		$	7,531		$	5,985		$	1,881		$	1,641		$	1,116
Interest cost	4,072			4,072			3,916			1,353			1,246			1,035
Expected return on plan assets	(3,734		)	(3,066		)	(2,937		)	—			—			—
Amortization of prior actuarial losses	3,270			3,439			980			868			743			353
Amortization of prior service cost	373			376			399			—			—			—
Settlements	—			841			—			—			—			—
Net periodic benefit cost	12,004			13,193			8,343			4,102			3,630			2,504
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial (gains) losses	(11,250		)	10,888			18,561			(5,949		)	2,341			8,348
Prior service cost	—			—			—			—			—			—
Amortization of actuarial (gains) losses	(3,270		)	(3,439		)	(980		)	(868		)	(743		)	(353		)
Amortization of prior service cost (credit)	(373		)	(376		)	(399		)	—			—			—
Settlements	—			(841		)	—			—			—			—
Foreign exchange translations and other adjustments	(439		)	219			(196		)	—			—			—
Total recognized in other comprehensive income	(15,332		)	6,451			16,986			(6,817		)	1,598			7,995
Total recognized in net periodic benefit cost and other comprehensive income	$	(3,328	)	$	19,644		$	25,329		$	(2,715	)	$	5,228		$	10,499

The Company expects to contribute to the plans $5.7 million in pension benefits and $0.4 million in other benefits during 2014.

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (dollars in thousands):



	Pension Benefits		Other Benefits
2014	$	5,730	$	431
2015	5,860		502
2016	8,500		594
2017	7,148		685
2018	7,936		776
2019-2023	47,544		5,388

The estimated net loss and prior service cost for the defined benefit pension plans and post-retirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $1.7 million and $0.4 million, respectively.

Assumptions

Weighted average assumptions used to determine the accumulated benefit obligation and net benefit cost or income for the year ended December 31:



	Pension Benefits						Other Benefits
	2013		2012		2011		2013		2012		2011
Discount rate used to determine benefit obligation	4.45	%	3.80	%	4.48	%	5.05	%	4.15	%	4.50	%
Discount rate used to determine net benefit cost or income	3.83	%	4.12	%	5.22	%	4.15	%	4.50	%	5.40	%
Expected long-term rate of return on plan assets	7.35	%	7.75	%	7.75	%	—	%	—	%	—	%
Rate of compensation increases	4.21	%	4.20	%	4.20	%	—	%	—	%	—	%

The expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan invests, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of the plan assets by sector, adjusted for the long-term expectations on the performance of the markets. While the precise expected return derived using this approach may fluctuate from year to year, the policy is to hold this long-term assumption constant as long as it remains within reasonable tolerance from the derived rate. This process is consistent for all plan assets as all the assets are invested in mutual funds.

The assumed health care cost trend rates used in measuring the accumulated non-pension post-retirement benefit obligation were as follows:



	December 31,
	2013	2012
Pre-Medicare eligible claims	9% down to 5% in 2017	9% down to 5% in 2016
Medicare eligible claims	9% down to 5% in 2017	9% down to 5% in 2015

Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects (dollars in thousands):



	One Percent Increase		One Percent Decrease
Effect on total of service and interest cost components	$	869	$	(648	)
Effect on accumulated postretirement benefit obligation	$	6,813	$	(5,228	)

Plan Assets

Target allocations of assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification and partial liability immunization. Adjustments are made to target allocations based on the Company’s assessment of the effect of economic factors and market conditions. The target allocations for plan assets are 60% equity securities and 40% debt securities as of December 31, 2013 and 2012. The Company’s plan assets are primarily invested in mutual funds. The mutual funds include holdings of S&P 500 securities, large-cap securities, mid-cap securities, small-cap securities, international securities, corporate debt securities, U.S. and other government securities, mortgage-related securities and cash.

Equity and debt securities are exposed to various risks, such as interest rate risk, credit risk, and overall market volatility. Due to the level of risk associated with certain investment securities, changes in the values of investment securities will occur and any change would affect the amounts reported in the financial statements.

The fair values of the Company’s pension plan assets as of December 31, 2013 and 2012 are summarized below (dollars in thousands):



	December 31, 2013
			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
Mutual Funds⁽¹⁾	$	59,485	$	59,485	$	—	$	—
Cash	74		74		—		—
Total	$	59,559	$	59,559	$	—	$	—


(1)	Mutual funds were invested 33% in U.S. equity funds, 26% in U.S. fixed income funds, 25% in non-U.S. equity funds and 16% in other.



	December 31, 2012
			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
Mutual Funds⁽²⁾	$	49,456	$	49,456	$	—	$	—
Cash	60		60		—		—
Total	$	49,516	$	49,516	$	—	$	—


(2)	Mutual funds were invested 42% in U.S. equity funds, 39% in U.S. fixed income funds, 16% in non-U.S. equity funds and 3% in other.

As of December 31, 2013 and 2012, the Company classified all of its pension plan assets in the Level 1 category as quoted prices in active markets are available for these assets. See Note 6 – “Fair Value of Asset and Liabilities” for additional detail on the fair value hierarchy.

Savings and Investment Plans

Certain subsidiaries of RGA also sponsor saving and investment plans under which a portion of employee contributions are matched. Subsidiary contributions to these plans, which are partially tied to RGA’s financial results, were $7.3 million, $6.4 million and $5.1 million in 2013, 2012 and 2011, respectively.