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 $5.4 million, $4.1 million, and $3.6 million in 2014, 2013 and 2012, 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, 2014 and 2013 is summarized below (dollars in thousands):



	December 31,
	Pension Benefits						Other Benefits
	2014			2013			2014			2013
Change in benefit obligation:
Benefit obligation at beginning of year	$	111,195		$	112,759		$	30,759		$	33,953
Service cost	8,121			8,023			2,354			1,881
Interest Cost	4,972			4,072			1,962			1,353
Participant contributions	—			—			174			128
Actuarial (gains) losses	18,930			(8,957		)	25,354			(5,949		)
Benefits paid	(3,044		)	(3,347		)	(821		)	(607		)
Foreign currency rate change effect	(1,978		)	(1,355		)	—			—
Benefit obligation at end of year	$	138,196		$	111,195		$	59,782		$	30,759



	December 31,
	Pension Benefits						Other Benefits
	2014			2013			2014			2013
Change in plan assets:
Fair value of plan assets at beginning of year	$	59,559		$	49,516		$	—		$	—
Actual return on plan assets	2,489			6,027			—			—
Employer contributions	7,753			7,363			647			479
Participant contributions	—			—			174			128
Benefits paid and expenses	(3,044		)	(3,347		)	(821		)	(607		)
Fair value of plan assets at end of year	$	66,757		$	59,559		$	—		$	—
Funded status at end of year	$	(71,439	)	$	(51,636	)	$	(59,782	)	$	(30,759	)



	December 31,
	Qualified Plans						Non-Qualified Plans⁽¹⁾						Total
	2014			2013			2014			2013			2014			2013
Aggregate fair value of plan assets	$	66,757		$	59,559		$	—		$	—		$	66,757		$	59,559
Aggregate projected benefit obligations	80,104			63,502			58,092			47,693			138,196			111,195
Under funded	$	(13,347	)	$	(3,943	)	$	(58,092	)	$	(47,693	)	$	(71,439	)	$	(51,636	)


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



	December 31,
	Pension Benefits				Other Benefits
	2014		2013		2014		2013
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	41,238	$	22,507	$	32,949	$	8,655
Net prior service cost	1,496		1,981		—		—
Total	$	42,734	$	24,488	$	32,949	$	8,655

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, 2014 and 2013 (dollars in thousands):



	2014		2013
Projected benefit obligation	$	138,196	$	111,195
Fair value of plan assets	66,757		59,559

The accumulated benefit obligations for all defined benefit pension plans were $135.9 million and $107.7 million at December 31, 2014 and 2013, respectively. The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2014 and 2013 (dollars in thousands):



	2014		2013
Accumulated benefit obligation	$	135,850	$	107,722
Fair value of plan assets	66,757		59,559

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
	2014			2013			2012			2014			2013			2012
Net periodic benefit cost:
Service cost	$	8,121		$	8,023		$	7,531		$	2,354		$	1,881		$	1,641
Interest cost	4,972			4,072			4,072			1,962			1,353			1,246
Expected return on plan assets	(4,471		)	(3,734		)	(3,066		)	—			—			—
Amortization of prior actuarial losses	1,755			3,270			3,439			1,060			868			743
Amortization of prior service cost	333			373			376			—			—			—
Settlements	—			—			841			—			—			—
Net periodic benefit cost	10,710			12,004			13,193			5,376			4,102			3,630
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial (gains) losses	20,912			(11,250		)	10,888			25,354			(5,949		)	2,341
Prior service cost	—			—			—			—			—			—
Amortization of actuarial (gains) losses	(1,755		)	(3,270		)	(3,439		)	(1,060		)	(868		)	(743		)
Amortization of prior service cost (credit)	(333		)	(373		)	(376		)	—			—			—
Settlements	—			—			(841		)	—			—			—
Foreign exchange translations and other adjustments	(578		)	(439		)	219			—			—			—
Total recognized in other comprehensive income	18,246			(15,332		)	6,451			24,294			(6,817		)	1,598
Total recognized in net periodic benefit cost and other comprehensive income	$	28,956		$	(3,328	)	$	19,644		$	29,670		$	(2,715	)	$	5,228

The Company expects to contribute to the plans $13.1 million in pension benefits and $4.3 million in other benefits during 2015.

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



	Pension Benefits		Other Benefits
2015	$	6,423	$	567
2016	9,897		703
2017	7,828		814
2018	7,979		970
2019	9,509		1,104
2020-2024	50,896		7,720

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 $3.8 million and $2.2 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
	2014		2013		2012		2014		2013		2012
Discount rate used to determine benefit obligation	3.90	%	4.45	%	3.80	%	4.05	%	5.05	%	4.15	%
Discount rate used to determine net benefit cost or income	4.30	%	3.83	%	4.12	%	5.05	%	4.15	%	4.50	%
Expected long-term rate of return on plan assets	7.35	%	7.35	%	7.75	%	—	%	—	%	—	%
Rate of compensation increases	4.08	%	4.21	%	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,
	2014	2013
Pre-Medicare eligible claims	8% down to 5% in 2018	9% down to 5% in 2017
Medicare eligible claims	8% down to 5% in 2018	9% down to 5% in 2017

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	$	1,232	$	(881	)
Effect on accumulated postretirement benefit obligation	$	14,912	$	(11,081	)

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, 2014 and 2013. 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, 2014 and 2013 are summarized below (dollars in thousands):



	December 31, 2014
			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
Mutual Funds⁽¹⁾	$	66,675	$	66,675	$	—	$	—
Cash	82		82		—		—
Total	$	66,757	$	66,757	$	—	$	—


(1)	Mutual funds were invested 32% in U.S. equity funds, 30% in U.S. fixed income funds, 22% in non-U.S. equity funds and 16% in other.



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


(2)	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.

As of December 31, 2014 and 2013, 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, were $7.8 million, $7.3 million and $6.4 million in 2014, 2013 and 2012, respectively.