Employee Benefit Plans

12 Months Ended

Dec. 31, 2020

401(k) Savings Plans

The Firm maintains various qualified defined contribution 401(k) retirement savings plans for eligible employees. Assets of these plans are held in trust for the sole benefit of employees and/or their beneficiaries. Employer matching contributions are discretionary and are funded annually as approved by the Board. Kforce accrued matching 401(k) contributions for continuing operations of $1.7 million and $1.4 million as of December 31, 2020 and 2019, respectively.

Employee Stock Purchase Plan

Kforce’s employee stock purchase plan allows all eligible employees to enroll each quarter to purchase Kforce’s common stock at a 5% discount from its market price on the last day of the quarter. Kforce issued 19 thousand, 17 thousand, and 19 thousand shares of common stock at an average purchase price of $29.43, $32.79 and $28.93 per share during the years ended December 31, 2020, 2019 and 2018, respectively. All shares purchased under the employee stock purchase plan were settled using Kforce’s treasury stock.

Deferred Compensation Plans

The Firm maintains various non-qualified deferred compensation plans, pursuant to which eligible management and highly compensated key employees, as defined by IRS regulations, may elect to defer all or part of their compensation to later years. These amounts are classified in Accounts payable and other accrued liabilities if payable within the next year or in Other long-term liabilities if payable after the next year, upon retirement or termination of employment in the accompanying Consolidated Balance Sheets. At December 31, 2020 and 2019, amounts related to the deferred compensation plans included in Accounts payable and other accrued liabilities were $4.2 million and $3.6 million, respectively, and $34.5 million and $30.4 million was included in Other long-term liabilities at December 31, 2020 and 2019, respectively, in the Consolidated Balance Sheets. For the years ended December 31, 2020, 2019 and 2018, we recognized compensation expense for the plans of $1.0 million, $0.4 million and $0.8 million, respectively.

Kforce maintains a Rabbi Trust and holds life insurance policies on certain individuals to assist in the funding of the deferred compensation liability. If necessary, employee distributions are funded through proceeds from the sale of assets held within the Rabbi Trust. During the year ended December 31, 2020, the Company received proceeds of $3.5 million from the sale of Company-owned life insurance policies. The balance of the assets held within the Rabbi Trust, including the cash surrender value of the Company-owned life insurance policies, was $36.2 million and $35.4 million as of December 31, 2020 and 2019, respectively, and is recorded in Other assets, net in the accompanying Consolidated Balance Sheets. As of December 31, 2020, the life insurance policies had a net death benefit of $169.6 million.

Supplemental Executive Retirement Plan

Kforce maintains a SERP for the benefit of two executive officers. Normal retirement age under the SERP is defined as age 65; however, certain conditions allow for early retirement as early as age 55 or upon a change in control. Both participants are fully vested in accordance with the plan’s provisions. The SERP will be funded entirely by Kforce, and benefits are taxable to the covered executive officer upon receipt and will be deductible (though may not be fully deductible) by Kforce when paid. Benefits payable under the SERP upon the occurrence of a qualifying distribution event, as defined, are targeted at 45% of the covered executive officers’ average salary and bonus, as defined, from the three years in which the covered executive officer earned the highest salary and bonus during the last 10 years of employment. The benefits under the SERP are reduced for a participant that has not reached age 62 with 10 years of service or age 55 with 25 years of service with a percentage reduction up to the normal retirement age.

Benefits under the SERP are based on the lump sum present value but may be paid over the life of the covered executive officer or 10-year annuity, as elected by the covered executive officer upon commencement of participation in the SERP. None of the benefits earned pursuant to the SERP are attributable to services provided prior to the effective date of the plan. For purposes of the measurement of the benefit obligation as of December 31, 2020, Kforce has assumed that both participants will elect to take the lump sum present value option based on historical trends.

Actuarial Assumptions

Due to the SERP being unfunded as of December 31, 2020 and 2019, it is not necessary for Kforce to determine the expected long-term rate of return on plan assets. The following table presents the weighted-average actuarial assumptions used to determine the actuarial present value of projected benefit obligations at:


	DECEMBER 31,
	2020		2019
Discount rate	2.00	%	2.75	%
Rate of future compensation increase	2.90	%	2.90	%

The following table presents the weighted-average actuarial assumptions used to determine net periodic benefit cost for the years ended:


	DECEMBER 31,
	2020		2019		2018
Discount rate	2.75	%	4.00	%	3.25	%
Rate of future compensation increase	2.90	%	2.90	%	2.90	%

The discount rate was determined using the Moody’s Aa long-term corporate bond yield as of the measurement date with a maturity commensurate with the expected payout of the SERP obligation. This rate is also compared against the Citigroup Pension Discount Curve and Liability Index to ensure the rate used is reasonable and may be adjusted accordingly. This index is widely used by companies throughout the U.S. and is considered to be one of the preferred standards for establishing a discount rate.

The assumed rate of future compensation increases is based on a combination of factors, including the historical compensation increases and future target compensation levels for its covered executive officers, taking into account the covered executive officers’ assumed retirement date.

The periodic benefit cost is based on actuarial assumptions that are reviewed on an annual basis; however, management monitors these assumptions on a periodic basis to ensure that they accurately reflect current expectations of the cost of providing retirement benefits.

Net Periodic Benefit Cost

The following table presents the components of net periodic benefit cost for the years ended (in thousands):


	DECEMBER 31,
	2020		2019		2018
Service cost	$	345	$	261	$	1,353
Interest cost	497		601		468
Net periodic benefit cost	$	842	$	862	$	1,821

The service cost is recorded in SG&A and the interest cost is recorded in Other expense, net in the accompanying Consolidated Statements of Operations and Comprehensive Income.

Changes in Benefit Obligation

The following table presents the changes in the projected benefit obligation for the years ended (in thousands):


	DECEMBER 31,
	2020		2019
Projected benefit obligation, beginning	$	18,080	$	15,035
Service cost	345		261
Interest cost	497		601
Actuarial experience and changes in actuarial assumptions	1,706		2,183
Projected benefit obligation, ending	$	20,628	$	18,080

There were no payments made under the SERP during the years ended December 31, 2020 and 2019, respectively. The projected benefit obligation is recorded in Other long-term liabilities in the accompanying Consolidated Balance Sheets. The accumulated benefit obligation is the actuarial present value of all benefits attributed to past service, excluding future salary increases. The accumulated benefit obligation as of December 31, 2020 and 2019 was $20.6 million and $18.1 million, respectively.

Contributions

There is no requirement for Kforce to fund the SERP and, as a result, no contributions have been made to the SERP through the year ended December 31, 2020. Kforce does not currently anticipate funding the SERP during the year ending December 31, 2021.

Estimated Future Benefit Payments

Undiscounted projected benefit payments attributed to the SERP, which reflect the anticipated future service of participants, are expected to be paid as follows during the years ended December 31 (in thousands):


	Projected Annual Benefit Payments
2021	$	—
2022	15,231
2023	—
2024	—
2025	—
2025-2030	9,736

The estimated future benefit amounts and timing of these payments were determined using assumed retirement dates for the participants, among other assumptions, as of December 31, 2020; however, no specific plans or timelines have been established for or by these participants and the assumptions are subject to change, which could impact the future amounts and timing of payments.