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 Company (“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. Effective January 1, 2017, employees hired in the U. S. are not eligible for retiree health care benefits. The effect of the amendment was recorded in 2016 in AOCI and is being amortized through prior service cost. 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, 2018 and 2017 is summarized below (dollars in thousands):



	December 31,
	Pension Benefits						Other Benefits
	2018			2017			2018			2017
Change in benefit obligation:
Benefit obligation at beginning of year	$	172,143		$	161,955		$	70,198		$	60,524
Service cost	12,502			10,686			3,028			2,543
Interest Cost	5,405			5,326			2,319			2,118
Participant contributions	—			—			432			354
Amendments	—			159			—			—
Actuarial (gains) losses	(1,045		)	11,336			(7,172		)	5,510
Settlement (gains) losses	—			(438		)	—			—
Settlements	—			(12,907		)	—			—
Benefits paid	(7,801		)	(5,974		)	(1,409		)	(851		)
Foreign exchange translations and other adjustments	(2,600		)	2,000			—			—
Benefit obligation at end of year	$	178,604		$	172,143		$	67,396		$	70,198



	December 31,
	Pension Benefits						Other Benefits
	2018			2017			2018			2017
Change in plan assets:
Fair value of plan assets at beginning of year	$	103,236		$	84,770		$	—		$	—
Actual return on plan assets	(6,464		)	14,481			—			—
Employer contributions	13,590			22,866			977			497
Participant contributions	—			—			432			354
Disbursement for settlements	—			(12,907		)	—			—
Benefits paid and expenses	(7,801		)	(5,974		)	(1,409		)	(851		)
Fair value of plan assets at end of year	$	102,561		$	103,236		$	—		$	—
Funded status at end of year	$	(76,043	)	$	(68,907	)	$	(67,396	)	$	(70,198	)



	December 31,
	Qualified Plans						Non-Qualified Plans⁽¹⁾						Total
	2018			2017			2018			2017			2018			2017
Aggregate fair value of plan assets	$	102,561		$	103,236		$	—		$	—		$	102,561		$	103,236
Aggregate projected benefit obligations	112,093			107,072			66,511			65,071			178,604			172,143
Under funded	$	(9,532	)	$	(3,836	)	$	(66,511	)	$	(65,071	)	$	(76,043	)	$	(68,907	)


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



	December 31,
	Pension Benefits				Other Benefits
	2018		2017		2018			2017
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	48,744	$	40,058	$	25,923		$	35,672
Net prior service cost (credit)	436		804		(10,491		)	(11,806		)
Total	$	49,180	$	40,862	$	15,432		$	23,866

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, 2018 and 2017 (dollars in thousands):



	2018		2017
Projected benefit obligation	$	178,604	$	172,143
Fair value of plan assets	102,561		103,236

The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2018 and 2017 (dollars in thousands):



	2018		2017
Accumulated benefit obligation	$	174,400	$	169,705
Fair value of plan assets	102,561		103,236

The components of net periodic benefit cost, included in other operating expenses on the consolidated statements of income, and other changes in plan assets and benefit obligations recognized in other comprehensive income were as follows (dollars in thousands):



	Pension Benefits									Other Benefits
	2018			2017			2016			2018			2017			2016
Net periodic benefit cost:
Service cost	$	12,502		$	10,686		$	10,319		$	3,028		$	2,543		$	2,883
Interest cost	5,405			5,326			4,790			2,319			2,118			2,259
Expected return on plan assets	(7,535		)	(6,215		)	(5,138		)	—			—			—
Amortization of net actuarial losses	3,728			4,382			4,323			2,577			1,992			1,827
Amortization of prior service cost (credit)	344			344			294			(1,315		)	(1,315		)	(622		)
Settlements	—			4,785			1,026			—			—			—
Net periodic benefit cost	14,444			19,308			15,614			6,609			5,338			6,347


Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial (gains) losses	12,954			2,633			8,785			(7,172		)	5,507			6,228
Amortization of net actuarial (losses)	(3,728		)	(4,382		)	(4,323		)	(2,577		)	(1,992		)	(1,827		)
Amortization of prior service (cost) credit	(344		)	(344		)	(294		)	1,315			1,315			622
Settlements	—			(4,785		)	(1,026		)	—			—			—
Prior service cost (credit)	—			159			—			—			—			(13,743		)
Foreign exchange translations and other adjustments	(565		)	759			707			—			—			—
Total recognized in other comprehensive income	8,317			(5,960		)	3,849			(8,434		)	4,830			(8,720		)
Total recognized in net periodic benefit cost and other comprehensive income	$	22,761		$	13,348		$	19,463		$	(1,825	)	$	10,168		$	(2,373	)

During 2019, the Company expects to contribute $16.3 million and $1.5 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
2019	$	9,977	$	1,528
2020	12,013		1,835
2021	11,663		2,209
2022	14,229		2,633
2023	14,128		3,009
2024-2028	77,832		20,359

Assumptions

Weighted average assumptions used to determine the accumulated benefit obligation and net benefit cost or income were as follows:



	Pension Benefits						Other Benefits
	2018		2017		2016		2018		2017		2016
Discount rate used to determine benefit obligation	4.02	%	3.40	%	3.80	%	4.17	%	3.56	%	4.10	%
Discount rate used to determine net benefit cost or income	3.41	%	3.81	%	3.95	%	3.56	%	4.10	%	4.43	%
Expected long-term rate of return on plan assets	7.35	%	7.35	%	7.35	%	—	%	—	%	—	%
Rate of compensation increases	4.17	%	4.16	%	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,
	2018	2017
Pre-Medicare eligible claims	8% down to 5% in 2024	9% down to 5% in 2024
Medicare eligible claims	8% down to 5% in 2024	9% down to 5% in 2024

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, 2018 and 2017. 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, 2018 and 2017 are summarized below (dollars in thousands):



	December 31, 2018
			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
Mutual Funds⁽¹⁾	$	102,414	$	102,414	$	—	$	—
Cash	147		147		—		—
Total	$	102,561	$	102,561	$	—	$	—


(1)	Mutual funds were invested 25% in U.S. equity funds, 42% in U.S. fixed income funds, 17% in non-U.S. equity funds and 16% in other.



	December 31, 2017
			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
Mutual Funds⁽²⁾	$	103,106	$	103,106	$	—	$	—
Cash	130		130		—		—
Total	$	103,236	$	103,236	$	—	$	—


(2)	Mutual funds were invested 27% in U.S. equity funds, 36% in U.S. fixed income funds, 22% in non-U.S. equity funds and 15% in other.

As of December 31, 2018 and 2017, 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 savings and investment plans under which a portion of employee contributions are matched. Subsidiary contributions to these plans were $15.3 million, $14.2 million and $9.9 million in 2018, 2017 and 2016, respectively.