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Employee Benefit Plans
12 Months Ended
Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]  
Employee Benefit Plans
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 select health care and life insurance benefits for certain 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 $6.3 million, $9.1 million, and $5.4 million in 2016, 2015 and 2014, respectively, that are related to these postretirement plans. Effective January 1, 2017, employees hired in the U. S. are not eligible for retiree health care benefits. 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, 2016 and 2015 is summarized below (dollars in thousands):
 
 
December 31,
 
 
Pension Benefits
 
Other Benefits
 
 
2016
 
2015
 
2016
 
2015
Change in benefit obligation:
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
 
$
142,239

 
$
138,196

 
$
63,307

 
$
59,782

Service cost
 
10,319

 
9,222

 
2,883

 
4,062

Interest Cost
 
4,790

 
5,035

 
2,259

 
2,572

Participant contributions
 

 

 
305

 
229

Amendments(1)
 

 

 
(13,743
)
 

Actuarial (gains) losses
 
9,973

 
(1,919
)
 
6,228

 
(2,729
)
Settlement (gains) losses
 
258

 

 

 

Settlements
 
(3,152
)
 

 

 

Benefits paid
 
(3,047
)
 
(4,480
)
 
(715
)
 
(609
)
Foreign exchange translations and other adjustments
 
575

 
(3,815
)
 

 

Benefit obligation at end of year
 
$
161,955

 
$
142,239

 
$
60,524

 
$
63,307


(1)
Reflects effect of the amendment to RGA’s U.S. retiree health care benefit plan announced in 2016, effective January 1, 2017. The amount was recorded in AOCI and will be amortized through prior service cost.
 
 
December 31,
 
 
Pension Benefits
 
Other Benefits
 
 
2016
 
2015
 
2016
 
2015
Change in plan assets:
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
 
$
68,435

 
$
66,757

 
$

 
$

Actual return on plan assets
 
6,584

 
(2,795
)
 

 

Employer contributions
 
15,950

 
8,953

 
410

 
380

Participant contributions
 

 

 
305

 
229

Disbursement for settlements
 
(3,152
)
 

 

 

Benefits paid and expenses
 
(3,047
)
 
(4,480
)
 
(715
)
 
(609
)
Fair value of plan assets at end of year
 
$
84,770

 
$
68,435

 
$

 
$

Funded status at end of year
 
$
(77,185
)
 
$
(73,804
)
 
$
(60,524
)
 
$
(63,307
)

 
 
December 31,
 
 
Qualified Plans
 
Non-Qualified Plans(1)
 
Total
 
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Aggregate fair value of plan assets
 
$
84,770

 
$
68,435

 
$

 
$

 
$
84,770

 
$
68,435

Aggregate projected benefit obligations
 
96,418

 
83,870

 
65,537

 
58,369

 
161,955

 
142,239

Under funded
 
$
(11,648
)
 
$
(15,435
)
 
$
(65,537
)
 
$
(58,369
)
 
$
(77,185
)
 
$
(73,804
)
(1)
For non-qualified plans, there are no required funding levels.
 
December 31,
 
Pension Benefits
 
Other Benefits
 
2016
 
2015
 
2016
 
2015
Amounts recognized in accumulated other comprehensive income:
 
 
 
 
 
 
 
Net actuarial loss
$
46,119

 
$
41,814

 
$
32,156

 
$
27,755

Net prior service cost (credit)
703

 
1,159

 
(13,121
)
 

Total
$
46,822

 
$
42,973


$
19,035

 
$
27,755



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, 2016 and 2015 (dollars in thousands):
 
 
2016
 
2015
Projected benefit obligation
 
$
161,955

 
$
142,239

Fair value of plan assets
 
84,770

 
68,435



The accumulated benefit obligations for all defined benefit pension plans were $158.6 million and $140.4 million at December 31, 2016 and 2015, respectively. The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2016 and 2015 (dollars in thousands):
 
 
2016
 
2015
Accumulated benefit obligation
 
$
158,580

 
$
140,442

Fair value of plan assets
 
84,770

 
68,435


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
 
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Net periodic benefit cost:
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
 
$
10,319

 
$
9,222

 
$
8,121

 
$
2,883

 
$
4,062

 
$
2,354

Interest cost
 
4,790

 
5,035

 
4,972

 
2,259

 
2,572

 
1,962

Expected return on plan assets
 
(5,138
)
 
(4,897
)
 
(4,471
)
 

 

 

Amortization of prior actuarial losses
 
4,323

 
3,429

 
1,755

 
1,827

 
2,465

 
1,060

Amortization of prior service cost (credit)
 
294

 
309

 
333

 
(622
)
 

 

Settlements
 
1,026

 

 

 

 

 

Net periodic benefit cost
 
15,614

 
13,098

 
10,710

 
6,347

 
9,099

 
5,376

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
Net actuarial (gains) losses
 
8,785

 
5,774

 
20,912

 
6,228

 
(2,729
)
 
25,354

Amortization of actuarial (gains) losses
 
(4,323
)
 
(3,429
)
 
(1,755
)
 
(1,827
)
 
(2,465
)
 
(1,060
)
Amortization of prior service cost (credit)
 
(294
)
 
(309
)
 
(333
)
 
622

 

 

Settlements
 
(1,026
)
 

 

 

 

 

Prior service cost (credit) (1)
 

 

 

 
(13,743
)
 

 

Foreign exchange translations and other adjustments
 
707

 
(1,797
)
 
(578
)
 

 

 

Total recognized in other comprehensive income
 
3,849

 
239

 
18,246

 
(8,720
)
 
(5,194
)
 
24,294

Total recognized in net periodic benefit cost and other comprehensive income
 
$
19,463


$
13,337

 
$
28,956

 
$
(2,373
)
 
$
3,905

 
$
29,670


(1)
Reflects effect of the amendment to RGA’s U.S. retiree health care benefit plan announced in 2016, effective January 1, 2017. The amount was recorded in AOCI and will be amortized through prior service cost.
During 2017, the Company expects to contribute $15.1 million and $5.1 million to the pension plans and other benefit plans, respectively.
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (dollars in thousands):
 
 
Pension Benefits    
 
Other Benefits    
2017
 
$
8,944

 
$
1,132

2018
 
8,709

 
1,387

2019
 
11,467

 
1,650

2020
 
10,250

 
1,977

2021
 
10,474

 
2,327

2022-2026
 
63,526

 
16,374


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 $4.1 million and $0.8 million, respectively.
Assumptions
Weighted average assumptions used to determine the accumulated benefit obligation and net benefit cost or income were as follows:
 
 
Pension Benefits
 
Other Benefits
 
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Discount rate used to determine benefit obligation
 
3.80
%
 
3.99
%
 
3.90
%
 
4.10
%
 
4.43
%
 
4.05
%
Discount rate used to determine net benefit cost or income
 
3.95
%
 
3.77
%
 
4.30
%
 
4.43
%
 
4.05
%
 
5.05
%
Expected long-term rate of return on plan assets
 
7.35
%
 
7.35
%
 
7.35
%
 
%
 
%
 
%
Rate of compensation increases
 
4.08
%
 
4.08
%
 
4.08
%
 
%
 
%
 
%

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,
 
 
2016
 
2015
Pre-Medicare eligible claims
 
10% down to 5% in 2024
 
8% down to 5% in 2020
Medicare eligible claims
 
10% down to 5% in 2024
 
8% down to 5% in 2020

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
 
$
7,394

 
$
(6,606
)
Effect on accumulated postretirement benefit obligation
 
$
940

 
$
(710
)

Plan Assets
Target allocations of U.S. qualified pension plan 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, 2016 and 2015. 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 qualified pension plan assets as of December 31, 2016 and 2015 are summarized below (dollars in thousands):
  
 
December 31, 2016
 
 
 
 
Fair Value Measurement Using:
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Mutual Funds(1)
 
$
84,671

 
$
84,671

 
$

 
$

Cash
 
99

 
99

 

 

Total
 
$
84,770

 
$
84,770

 
$

 
$

(1)
Mutual funds were invested 28% in U.S. equity funds, 37% in U.S. fixed income funds, 20% in non-U.S. equity funds and 15% in other.
  
 
December 31, 2015
 
 
 
 
Fair Value Measurement Using:
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Mutual Funds(2)
 
$
68,349

 
$
68,349

 
$

 
$

Cash
 
86

 
86

 

 

Total
 
$
68,435

 
$
68,435

 
$

 
$

(2)
Mutual funds were invested 32% in U.S. equity funds, 38% in U.S. fixed income funds, 15% in non-U.S. equity funds and 15% in other.
As of December 31, 2016 and 2015, the Company classified all of its qualified 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 $9.9 million, $9.0 million and $7.8 million in 2016, 2015 and 2014, respectively.