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Retirement Plans, Postretirement and Postemployment Benefits
 12 Months Ended
Dec. 31, 2018
Compensation And Retirement Disclosure [Abstract]  
Retirement Plans, Postretirement and Postemployment Benefits

Note K: Retirement Plans, Postretirement and Postemployment Benefits

The Company sponsors defined benefit retirement plans that cover substantially all employees. Additionally, the Company provides other postretirement benefits for certain employees, including medical benefits for retirees and their spouses and retiree life insurance. Employees starting on or after January 1, 2002 are not eligible for postretirement welfare plans. The Company also provides certain benefits, such as disability benefits, to former or inactive employees after employment but before retirement.  

The measurement date for the Company’s defined benefit plans, postretirement benefit plans and postemployment benefit plans is December 31.

Defined Benefit Retirement Plans. Retirement plan assets are invested in listed stocks, bonds, hedge funds, real estate and cash equivalents. Defined retirement benefits for salaried employees are based on each employee’s years of service and average compensation for a specified period of time before retirement. Defined retirement benefits for hourly employees are generally stated amounts for specified periods of service.

The Company sponsors a Supplemental Excess Retirement Plan (SERP) that generally provides for the payment of retirement benefits in excess of allowable Internal Revenue Code limits. The SERP generally provides for a lump-sum payment of vested benefits. When these benefit payments exceed the sum of the service and interest costs for the SERP during a year, the Company recognizes a pro-rata portion of the SERP’s unrecognized actuarial loss as settlement expense.  

The net periodic retirement benefit cost of defined benefit plans includes the following components:

years ended December 31

(add 000)

 

2018

 

 

2017

 

 

2016

 

Service cost

 

$

31,624

 

 

$

26,805

 

 

$

22,167

 

Interest cost

 

 

33,209

 

 

 

36,101

 

 

 

35,879

 

Expected return on assets

 

 

(46,011

)

 

 

(39,759

)

 

 

(37,699

)

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

  Prior service cost

 

 

104

 

 

 

311

 

 

 

350

 

  Actuarial loss

 

 

12,830

 

 

 

14,138

 

 

 

12,074

 

  Transition asset

 

 

(1

)

 

 

(1

)

 

 

(1

)

Settlement charge

 

 

2,936

 

 

 

21

 

 

 

124

 

Termination benefit charge

 

 

—

 

 

 

—

 

 

 

764

 

Net periodic benefit cost

 

$

34,691

 

 

$

37,616

 

 

$

33,658

 

 

The components of net periodic benefit cost other than service cost are included in the line item Other nonoperating (income) and expenses, net, in the consolidated statements of earnings.

The expected return on assets is calculated by applying an annually selected expected rate of return assumption to the estimated fair value of the plan assets, giving consideration to contributions and benefits paid.  The termination benefit charge represents the increased benefits payable to former Texas Industries, Inc. (TXI) executives as part of their change-in-control agreements.

The Company recognized the following amounts in consolidated comprehensive earnings:

 years ended December 31

(add 000)

 

2018

 

 

2017

 

 

2016

 

Actuarial loss

 

$

32,214

 

 

$

13,343

 

 

$

52,028

 

Net prior service cost

 

 

3

 

 

 

—

 

 

 

—

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost

 

 

(104

)

 

 

(311

)

 

 

(350

)

Actuarial loss

 

 

(12,830

)

 

 

(14,138

)

 

 

(12,074

)

Transition asset

 

 

1

 

 

 

1

 

 

 

1

 

Special plan termination benefits

 

 

—

 

 

 

—

 

 

 

(764

)

Settlement charge

 

 

(2,936

)

 

 

(21

)

 

 

(124

)

Total

 

$

16,348

 

 

$

(1,126

)

 

$

38,717

 

 

Accumulated other comprehensive loss includes the following amounts that have not yet been recognized in net periodic benefit cost:

 

December 31

 

2018

 

 

2017

 

(add 000)

 

Gross

 

 

Net of tax

 

 

Gross

 

 

Net of tax

 

Prior service cost

 

$

14

 

 

$

9

 

 

$

115

 

 

$

71

 

Actuarial loss

 

 

233,688

 

 

 

146,588

 

 

 

217,240

 

 

 

134,066

 

Transition asset

 

 

(5

)

 

 

(3

)

 

 

(6

)

 

 

(4

)

Total

 

$

233,697

 

 

$

146,594

 

 

$

217,349

 

 

$

134,133

 

 

The prior service cost, actuarial loss and transition asset expected to be recognized in net periodic benefit cost during 2019 are $8,000 (net of deferred taxes of $2,000), $15,727,000 (net of deferred taxes of $3,893,000) and $1,000, respectively. These amounts are included in accumulated other comprehensive loss at December 31, 2018.

The defined benefit plans’ change in projected benefit obligation is as follows:

 

years ended December 31

(add 000)

 

2018

 

 

2017

 

Net projected benefit obligation at beginning of year

 

$

879,335

 

 

$

831,849

 

Service cost

 

 

31,624

 

 

 

26,805

 

Interest cost

 

 

33,209

 

 

 

36,101

 

Actuarial (gain) loss

 

 

(54,621

)

 

 

56,675

 

Plan amendment

 

 

3

 

 

 

-

 

Gross benefits paid

 

 

(41,654

)

 

 

(72,095

)

Net projected benefit obligation at end of year

 

$

847,896

 

 

$

879,335

 

 

The Company’s change in plan assets, funded status and amounts recognized on the Company’s consolidated balance sheets are as follows:

 

years ended December 31

(add 000)

 

2018

 

 

2017

 

Change in plan assets:

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

$

638,106

 

 

$

596,207

 

Actual return on plan assets, net

 

 

(40,823

)

 

 

83,091

 

Employer contributions

 

 

162,281

 

 

 

30,903

 

Gross benefits paid

 

 

(41,654

)

 

 

(72,095

)

Fair value of plan assets at end of year

 

$

717,910

 

 

$

638,106

 

 

December 31

(add 000)

 

2018

 

 

2017

 

Funded status of the plan at end of year

 

$

(129,986

)

 

$

(241,229

)

Accrued benefit cost

 

$

(129,986

)

 

$

(241,229

)

 

December 31

(add 000)

 

2018

 

 

2017

 

Amounts recognized on consolidated balance sheets consist of:

 

 

 

 

 

 

 

 

Current liability

 

$

(8,992

)

 

$

(11,092

)

Noncurrent liability

 

 

(120,994

)

 

 

(230,137

)

Net amount recognized at end of year

 

$

(129,986

)

 

$

(241,229

)

 

The accumulated benefit obligation for all defined benefit pension plans was $771,921,000 and $792,912,000 at December 31, 2018 and 2017, respectively.

Benefit obligations and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets are as follows:

 

December 31

(add 000)

 

2018

 

 

2017

 

Projected benefit obligation

 

$

98,729

 

 

$

879,335

 

Accumulated benefit obligation

 

$

85,548

 

 

$

792,912

 

Fair value of plan assets

 

$

560

 

 

$

638,106

 

 

Weighted-average assumptions used to determine benefit obligations as of December 31 are:

 

 

 

2018

 

 

2017

 

Discount rate

 

4.38%

 

 

3.76%

 

Rate of increase in future compensation levels

 

4.50%

 

 

4.50%

 

 

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31 are:

 

 

2018

 

 

2017

 

 

2016

 

Discount rate

 

3.76%

 

 

4.29%

 

 

4.67%

 

Rate of increase in future compensation levels

 

4.50%

 

 

4.50%

 

 

4.50%

 

Expected long-term rate of return on assets

 

6.75%

 

 

6.75%

 

 

7.00%

 

 

The expected long-term rate of return on assets is based on a building-block approach, whereby the components are weighted based on the allocation of pension plan assets.

For 2018 and 2017, the Company estimated the remaining lives of participants in the pension plans using the RP-2014 Base Table.  The no-collar table was used for salaried participants and the blue-collar table, reflecting the experience of the Company’s participants, was used for hourly participants.  The Company used mortality improvement scales MP-2018 and MP-2017 for the years 2018 and 2017, respectively. The change in mortality improvement scale in 2018 did not have a material impact on the projected benefit obligation.

The target allocation for 2018 and the actual pension plan asset allocation by asset class are as follows:

 

 

Percentage of Plan Assets

 

 

 

2018

 

 

December 31

 

Asset Class

 

Target

Allocation

 

 

2018

 

 

2017

 

Equity securities

 

56%

 

 

57%

 

 

57%

 

Debt securities

 

30%

 

 

32%

 

 

29%

 

Hedge funds

 

4%

 

 

6%

 

 

7%

 

Real estate

 

10%

 

 

5%

 

 

7%

 

Total

 

100%

 

 

100%

 

 

100%

 

 

The Company’s investment strategy is for approximately 45% of equity securities, excluding hedge funds and real estate, to be invested in mid-sized to large capitalization U.S. funds, with the remaining invested in small capitalization, emerging markets and international funds. Debt securities, or fixed income investments, are invested in funds benchmarked to the Barclays U.S. Aggregate Bond Index.

The fair values of pension plan assets by asset class and fair value hierarchy level are as follows:

 

 

 

Fair Value Measurements

 

 

 

 

 

 

 

 

 

December 31

 

Quoted Prices

in Active

Markets

for Identical

Assets

(Level 1)

 

 

Significant

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

 

Net Asset Value

 

 

Total Fair

Value

 

(add 000)

 

2018

 

Equity securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-sized to large cap

 

$

—

 

 

$

—

 

 

$

—

 

 

$

196,475

 

 

$

196,475

 

Small cap, international and emerging growth funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

210,371

 

 

 

210,371

 

Debt securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core fixed income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

228,194

 

 

 

228,194

 

Real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

35,553

 

 

 

35,553

 

Hedge funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

44,453

 

 

 

44,453

 

Cash equivalents

 

 

2,864

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,864

 

Total

 

$

2,864

 

 

$

—

 

 

$

—

 

 

$

715,046

 

 

$

717,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

Equity securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mid-sized to large cap

 

$

—

 

 

$

—

 

 

$

—

 

 

$

177,497

 

 

$

177,497

 

Small cap, international and emerging growth funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

186,272

 

 

 

186,272

 

Debt securities1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core fixed income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

182,225

 

 

 

182,225

 

Real estate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

46,467

 

 

 

46,467

 

Hedge funds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

45,604

 

 

 

45,604

 

Cash equivalents

 

 

41

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

41

 

Total

 

$

41

 

 

$

—

 

 

$

—

 

 

$

638,065

 

 

$

638,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 These investments are common collective investment trusts valued using the net asset value (NAV) unit price provided by the fund administrator. The NAV is based on the value of the underlying assets owned by the fund.

 

 

Real estate investments are stated at estimated fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of real estate investments generally do not reflect transaction costs which may be incurred upon disposition of the real estate investments and do not necessarily represent the prices at which the real estate investments would be sold or repaid, since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller. An independent valuation consultant is employed to determine the fair value of the real estate investments. The value of hedge funds is based on the values of the sub-fund investments. In determining the fair value of each sub-fund’s investment, the hedge funds’ Board of Trustees uses the values provided by the sub-funds and any other considerations that may, in its judgment, increase or decrease such estimated value.

 

In 2018 and 2017, the Company made combined pension plan and SERP contributions of $162,281,000 and $30,903,000, respectively. The Company currently estimates that it will contribute $32,022,000 to its pension plans in 2019.

The expected benefit payments to be paid from plan assets for each of the next five years and the five-year period thereafter are as follows:

 

(add 000)

 

 

 

 

2019

 

$

40,835

 

2020

 

$

42,908

 

2021

 

$

44,237

 

2022

 

$

45,848

 

2023

 

$

47,170

 

Years 2024 - 2028

 

$

260,117

 

 

Postretirement Benefits. The net periodic postretirement benefit credit for postretirement plans includes the following components:

 

years ended December 31

(add 000)

 

2018

 

 

2017

 

 

2016

 

Service cost

 

$

77

 

 

$

80

 

 

$

85

 

Interest cost

 

 

519

 

 

 

727

 

 

 

863

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

     Prior service credit

 

 

(2,074

)

 

 

(1,741

)

 

 

(1,959

)

     Actuarial gain

 

 

(211

)

 

 

(364

)

 

 

(499

)

Settlement credit

 

 

—

 

 

 

—

 

 

 

(9

)

Total net periodic benefit credit

 

$

(1,689

)

 

$

(1,298

)

 

$

(1,519

)

The components of net periodic benefit credit other than service cost are included in the line item Other nonoperating (income) and expenses, net, in the consolidated statements of earnings.

The Company recognized the following amounts in consolidated comprehensive earnings:

 

years ended December 31

(add 000)

 

2018

 

 

2017

 

 

2016

 

Actuarial (gain) loss

 

$

(1,700

)

 

$

1,236

 

 

$

686

 

Net prior service credit

 

 

—

 

 

 

(3,902

)

 

 

(1,326

)

Settlement credit

 

 

—

 

 

 

—

 

 

 

9

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

Prior service credit

 

 

2,074

 

 

 

1,741

 

 

 

1,959

 

Actuarial gain

 

 

211

 

 

 

364

 

 

 

499

 

Total

 

$

585

 

 

$

(561

)

 

$

1,827

 

 

Accumulated other comprehensive loss includes the following amounts that have not yet been recognized in net periodic benefit credit or cost:

 

December 31

 

2018

 

 

2017

 

(add 000)

 

Gross

 

 

Net of tax

 

 

Gross

 

 

Net of tax

 

Prior service credit

 

$

(3,747

)

 

$

(2,388

)

 

$

(6,314

)

 

$

(3,899

)

Actuarial gain

 

 

(4,238

)

 

 

(2,701

)

 

 

(2,256

)

 

 

(1,393

)

Total

 

$

(7,985

)

 

$

(5,089

)

 

$

(8,570

)

 

$

(5,292

)

 

The prior service credit and actuarial gain expected to be recognized in net periodic benefit cost during 2019 is $762,000 (net of deferred taxes of $189,000) and $473,000 (net of deferred taxes of $117,000), respectively, and are included in accumulated other comprehensive loss at December 31, 2018.

The postretirement health care plans’ change in benefit obligation is as follows:

 

years ended December 31

(add 000)

 

2018

 

 

2017

 

Change in benefit obligation:

 

 

 

 

 

 

 

 

Net benefit obligation at beginning of year

 

$

15,347

 

 

$

20,591

 

Service cost

 

 

77

 

 

 

80

 

Interest cost

 

 

519

 

 

 

727

 

Participants’ contributions

 

 

312

 

 

 

3,421

 

Actuarial (gain) loss

 

 

(1,700

)

 

 

1,236

 

Gross benefits paid

 

 

(1,262

)

 

 

(6,806

)

Plan amendments

 

 

-

 

 

 

(3,902

)

Net benefit obligation at end of year

 

$

13,293

 

 

$

15,347

 

 

The postretirement health care plans’ change in plan assets, funded status and amounts recognized on the Company’s consolidated balance sheets are as follows:

 

years ended December 31

(add 000)

 

2018

 

 

2017

 

Fair value of plan assets at beginning of year:

 

$

—

 

 

$

—

 

Employer contributions

 

 

950

 

 

 

3,385

 

Participants’ contributions

 

 

312

 

 

 

3,421

 

Gross benefits paid

 

 

(1,262

)

 

 

(6,806

)

Fair value of plan assets at end of year

 

$

—

 

 

$

—

 

 

December 31

(add 000)

 

2018

 

 

2017

 

Funded status of the plan at end of year

 

$

(13,293

)

 

$

(15,347

)

Accrued benefit cost

 

$

(13,293

)

 

$

(15,347

)

 

December 31

(add 000)

 

2018

 

 

2017

 

Amounts recognized on consolidated balance sheets consist of:

 

 

 

 

 

 

 

 

Current liability

 

$

(950

)

 

$

(2,560

)

Noncurrent liability

 

 

(12,343

)

 

 

(12,787

)

Net amount recognized at end of year

 

$

(13,293

)

 

$

(15,347

)

 

Weighted-average assumptions used to determine the postretirement benefit obligation as of December 31 are:

 

 

 

2018

 

 

2017

 

Discount rate

 

 

4.15

%

 

 

3.47

%

 

Weighted-average assumptions used to determine net postretirement benefit credit for the years ended December 31 are:

 

 

2018

 

 

2017

 

 

2016

 

Discount rate

 

 

3.47

%

 

 

3.78

%

 

 

4.25

%

 

For 2018 and 2017, the Company estimated the remaining lives of participants in the postretirement benefit plans using the RP-2014 Base Table.  The no-collar table was used for salaried participants and the blue-collar table, reflecting the experience of the Company’s participants, was used for hourly participants.  The Company used mortality improvement scales MP-2018 and MP-2017 for the years 2018 and 2017, respectively. The change in mortality improvement scale in 2018 did not have a material impact on the projected benefit obligation.

Assumed health care cost trend rates at December 31 are:

 

 

2018

 

 

2017

 

Health care cost trend rate assumed for next year

 

7.0%

 

 

7.0%

 

Rate to which the cost trend rate gradually declines

 

5.0%

 

 

5.0%

 

Year the rate reaches the ultimate rate

 

2023

 

 

2022

 

 

Assumed health care cost trend rates have a significant effect on the amounts reported for the Company’s health care plans. A one percentage-point change in assumed health care cost trend rates would have the following effects:  

 

 

 

One Percentage Point

 

(add 000)

 

Increase

 

 

(Decrease)

 

Total service and interest cost components

 

$

25

 

 

$

(22

)

Postretirement benefit obligation

 

$

640

 

 

$

(575

)

 

The Company estimates that it will contribute $950,000 to its postretirement health care plans in 2019.

The total expected benefit payments to be paid by the Company, net of participant contributions, for each of the next five years and the five-year period thereafter are as follows:

 

(add 000)

 

 

 

 

2019

 

$

950

 

2020

 

$

1,492

 

2021

 

$

1,419

 

2022

 

$

1,344

 

2023

 

$

1,254

 

Years 2024 – 2028

 

$

5,809

 

 

Defined Contribution Plan. The Company maintains a defined contribution plan that covers substantially all employees. This plan, qualified under Section 401(a) of the Internal Revenue Code, is a retirement savings and investment plan for the Company’s salaried and hourly employees. Under certain provisions of the plan, the Company, at established rates, matches employees’ eligible contributions. The Company’s matching obligations were $16,545,000 in 2018, $14,893,000 in 2017 and $13,235,000 in 2016.