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Note 18 - Pension and Postretirement Benefits | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Retirement Benefits [Text Block] | 18. Pension and Postretirement Benefits: We have a frozen qualified defined benefit pension plan for certain of our employees through membership in the Pension Plan for Insurance Organizations (the “Pension Plan”), a multiple-employer trust. Prior to the freeze, we applied a cash balance formula to determine future benefits. Under the cash balance formula, each participant has an account, which was credited annually based on salary rates determined by years of service, as well as the interest earned on the previous year-end cash balance. We also have a non-qualified frozen supplemental cash balance plan (“SERP”) for certain employees. Our SERP is funded from our general assets. We contributed $0.7 million to our SERP in 2021 and 2020, respectively, and expect to contribute $1.4 million in 2022. Our Pension Plan’s funding policy is to contribute annually at an amount between the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974 and the maximum amount that can be deducted for federal income tax purposes. No minimum contribution requirement was and is expected for 2021 and 2022, respectively. We also provide certain healthcare and life insurance benefits for both active and retired employees. The Postretirement Health and Life Insurance Plan (the “Postretirement Plan”), which has been frozen, is contributory, requiring participants to pay a stated percentage of the premium for coverage. We do not expect to contribute to our Postretirement Plan in 2022. The following table sets forth the changes in the benefit obligations and the plan assets, the funded status of the Pension Plan, SERP, and Postretirement Plan, and the amounts recognized in our consolidated balance sheets at December 31:
|  | Pension Plan and SERP |  |  | Postretirement Plan |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Change in benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefit obligation at January 1 |  | $ | 459.9 |  |  | $ | 443.6 |  |  | $ | 7.5 |  |  | $ | 8.2 |
Interest cost |  |  | 11.0 |  |  |  | 12.6 |  |  |  | 0.1 |  |  |  | 0.2 |
Actuarial (gain) loss |  |  | (9.0 | ) |  |  | 32.1 |  |  |  | (0.9 | ) |  |  | (0.2 | )
Plan participants’ contributions |  |  | — |  |  |  | — |  |  |  | 1.5 |  |  |  | 1.6 |
Benefits paid |  |  | (30.2 | ) |  |  | (28.4 | ) |  |  | (2.2 | ) |  |  | (2.3 | )
Benefit obligation at December 31 |  | $ | 431.7 |  |  | $ | 459.9 |  |  | $ | 6.0 |  |  | $ | 7.5 |
Accumulated benefit obligation at December 31 |  | $ | 431.7 |  |  | $ | 459.9 |  |  |  |  |  |  |  |  |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at January 1 |  | $ | 520.8 |  |  | $ | 488.9 |  |  | $ | 10.5 |  |  | $ | 10.3 |
Actual return on plan assets, net of expenses |  |  | 54.9 |  |  |  | 59.6 |  |  |  | (0.2 | ) |  |  | 0.3 |
Employer contributions, net |  |  | 0.7 |  |  |  | 0.7 |  |  |  | (0.1 | ) |  |  | 0.6 |
Plan participants’ contributions |  |  | — |  |  |  | — |  |  |  | 1.5 |  |  |  | 1.6 |
Benefits paid |  |  | (30.2 | ) |  |  | (28.4 | ) |  |  | (2.2 | ) |  |  | (2.3 | )
Fair value of plan assets at December 31 |  | $ | 546.2 |  |  | $ | 520.8 |  |  | $ | 9.5 |  |  | $ | 10.5 |
Funded status at December 31 |  | $ | (114.5 | ) |  | $ | (60.9 | ) |  | $ | (3.5 | ) |  | $ | (3.0 | )
Amounts recognized in the consolidated balance sheets consist of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension assets, noncurrent (1) |  | $ | (127.0 | ) |  | $ | (74.3 | ) |  | $ | (3.5 | ) |  | $ | (3.0 | )
Pension, SERP and postretirement benefits, current (2) |  |  | 1.4 |  |  |  | 1.0 |  |  |  | — |  |  |  | — |
Pension, SERP and postretirement benefits, noncurrent (3) |  |  | 11.1 |  |  |  | 12.4 |  |  |  | — |  |  |  | — |
Total Pension, SERP and Postretirement benefits |  | $ | (114.5 | ) |  | $ | (60.9 | ) |  | $ | (3.5 | ) |  | $ | (3.0 | )
_______________ (1) Included in "Other noncurrent assets" in our accompanying consolidated balance sheets (2) Included in "Accounts payable and accrued liabilities" in our accompanying consolidated balance sheets (3) Included in "Other noncurrent liabilities" in our accompanying consolidated balance sheets The pre-tax components included within accumulated other comprehensive losses as of December 31 are summarized below:
|  | Pension Plan and SERP |  |  | Postretirement Plan |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Prior service benefit cost (credit) |  | $ | 2.8 |  |  | $ | 3.0 |  |  | $ | — |  |  | $ | (0.1 | )
Actuarial losses |  |  | 98.3 |  |  |  | 133.2 |  |  |  | 2.4 |  |  |  | 3.1 |
Accumulated other comprehensive losses, pretax |  | $ | 101.1 |  |  | $ | 136.2 |  |  | $ | 2.4 |  |  | $ | 3.0 |
The pre-tax components of net periodic benefit (credit) cost and the amounts recognized in other comprehensive loss are summarized below for the years ended December 31:
|  | Pension Plan and SERP |  |  | Postretirement Plan |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2021 |  |  | 2020 |  |  | 2019 |
Interest cost |  | $ | 11.0 |  |  | $ | 12.6 |  |  | $ | 15.6 |  |  | $ | 0.1 |  |  | $ | 0.2 |  |  | $ | 0.3 |
Expected return on plan assets |  |  | (32.8 | ) |  |  | (29.9 | ) |  |  | (30.3 | ) |  |  | (0.2 | ) |  |  | (0.2 | ) |  |  | (0.2 | )
Amortization of prior service cost (credit) reclassified from accumulated other comprehensive losses |  |  | 0.2 |  |  |  | 0.2 |  |  |  | 0.2 |  |  |  | (0.1 | ) |  |  | (0.1 | ) |  |  | (0.1 | )
Amortization of net actuarial loss reclassified from accumulated other comprehensive losses |  |  | 3.8 |  |  |  | 6.3 |  |  |  | 4.5 |  |  |  | 0.2 |  |  |  | 0.3 |  |  |  | 0.3 |
Net periodic benefit (credit) cost |  |  | (17.8 | ) |  |  | (10.8 | ) |  |  | (10.0 | ) |  |  | — |  |  |  | 0.2 |  |  |  | 0.3 |
Amortization of prior service (cost) credit reclassified from accumulated other comprehensive losses |  |  | (0.2 | ) |  |  | (0.2 | ) |  |  | (0.2 | ) |  |  | 0.1 |  |  |  | 0.1 |  |  |  | 0.1 |
Amortization of actuarial loss reclassified from accumulated other comprehensive losses |  |  | (0.2 | ) |  |  | (0.2 | ) |  |  | (0.1 | ) |  |  | — |  |  |  | — |  |  |  | — |
Net loss recognized reclassified from accumulated other comprehensive losses |  |  | (3.6 | ) |  |  | (6.1 | ) |  |  | (4.4 | ) |  |  | (0.2 | ) |  |  | (0.3 | ) |  |  | (0.3 | )
Actuarial (gain) loss |  |  | (31.1 | ) |  |  | 2.4 |  |  |  | (16.4 | ) |  |  | (0.5 | ) |  |  | (0.3 | ) |  |  | (0.8 | )
Total recognized in other comprehensive income |  |  | (35.1 | ) |  |  | (4.1 | ) |  |  | (21.1 | ) |  |  | (0.6 | ) |  |  | (0.5 | ) |  |  | (1.0 | )
Total recognized in net periodic benefit credit and other comprehensive (income) loss |  | $ | (52.9 | ) |  | $ | (14.9 | ) |  | $ | (31.1 | ) |  | $ | (0.6 | ) |  | $ | (0.3 | ) |  | $ | (0.7 | )
The weighted-average assumptions used to determine benefit obligations as of December 31, 2021 and 2020 and net periodic benefit (credit) cost for the years 2021, 2020 and 2019 are provided below:
|  | Pension Plan and SERP |  |  | Postretirement Plan |
Weighted-average assumptions used to determine benefit obligations: |  | 2021 |  |  | 2020 |  |  |  |  |  |  | 2021 |  |  | 2020 |  |  |  |  |
Discount rate |  |  | 2.75 | % |  |  | 2.49 | % |  |  |  |  |  |  | 2.25 | % |  |  | 1.50 | % |  |  |  |
Expected return on plan assets |  |  | 6.25 | % |  |  | 6.50 | % |  |  |  |  |  |  | 1.75 | % |  |  | 2.00 | % |  |  |  |
Cash balance interest credit rate |  |  | 2.57 | % |  |  | 2.57 | % |  |  |  |  |  |  | N/A |  |  |  |  |
Weighted-average assumptions used to determine net periodic benefit (credit) cost: |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2021 |  |  | 2020 |  |  | 2019 |
Discount rate |  |  | 2.49 | % |  |  | 2.83 | % |  |  | 3.82 | % |  |  | 1.50 | % |  |  | 2.50 | % |  |  | 3.75 | %
Expected return on plan assets |  |  | 6.50 | % |  |  | 6.75 | % |  |  | 7.00 | % |  |  | 2.00 | % |  |  | 2.00 | % |  |  | 2.00 | %
Cash balance interest credit rate |  |  | 2.57 | % |  |  | 2.57 | % |  |  | 2.57 | % |  |  | N/A |
The following table presents the estimated future benefit payments for the respective plans. The future benefit payments for the Postretirement Plan are net of the federal Medicare subsidy.
|  | Pension Plan |  |  | Postretirement |
|  | and SERP |  |  | Plan |
|  | Gross |  |  | Gross |  |  | Medicare |  |  | Net |
|  | Benefit |  |  | Benefit |  |  | Subsidy |  |  | Benefit |
|  | Amount |  |  | Amount |  |  | Payments |  |  | Amount |
2022 |  | $ | 30.5 |  |  | $ | 1.1 |  |  | $ | (0.2 | ) |  | $ | 0.9 |
2023 |  | $ | 30.3 |  |  | $ | 1.0 |  |  | $ | (0.2 | ) |  | $ | 0.8 |
2024 |  | $ | 30.0 |  |  | $ | 0.8 |  |  | $ | (0.1 | ) |  | $ | 0.7 |
2025 |  | $ | 29.0 |  |  | $ | 0.7 |  |  | $ | (0.1 | ) |  | $ | 0.6 |
2026 |  | $ | 28.5 |  |  | $ | 0.6 |  |  | $ | — |  |  | $ | 0.6 |
2027 and thereafter |  | $ | 132.5 |  |  | $ | 2.0 |  |  | $ | — |  |  | $ | 2.0 |
The healthcare cost trend rate for 2021 was 7.75% gradually decreasing to 4.50% in 2035. Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plan. The subsidy benefit from the Medicare Prescription Drug, Improvement and Modernization Act of 2003 reduced our accumulated postretirement benefit assets by approximately $0.8 million as of December 31, 2021 and 2020. The subsidy cost increased the net periodic benefit cost by approximately $75.8 thousand, $58.2 thousand, and $48.5 thousand in fiscal 2021, 2020 and 2019, respectively. The expected return on our Pension Plan assets as of December 31, 2021 and 2020 was 6.25% and 6.50%, respectively, which was determined by taking into consideration our analysis of our actual historical investment returns to a broader long-term forecast after adjusting for the target investment allocation and reflecting the current economic environment. During the first quarter of 2021, we changed the investment guidelines on our Pension Plan assets to target investment allocation of 50% to equity securities and 50% to debt securities from our previous target allocation of 55% to equity securities and 45% to debt securities as of December 31, 2020. Our Pension Plan assets consist primarily of investments in various fixed income and equity funds. Investment guidelines are established with each investment manager. These guidelines provide the parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements and credit quality standards, where applicable. Investment managers are prohibited from entering into any speculative hedging transactions. The investment objective is to achieve a maximum total return with strong emphasis on preservation of capital in real terms. The asset allocation at December 31, 2021 and 2020, and target allocation by asset category are as follows:
|  | Target |  |  | Percentage of Plan Assets |
Asset Category |  | Allocation |  |  | 2021 |  |  | 2020 |
Equity securities |  |  | 50.0 | % |  |  | 45.8 | % |  |  | 52.5 | %
Debt securities |  |  | 50.0 | % |  |  | 47.8 | % |  |  | 40.0 | %
Other |  |  | — | % |  |  | 6.4 | % |  |  | 7.5 | %
Total |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | %
We have used the target investment allocation to derive the expected return as we believe this allocation will be retained on an ongoing basis that will be commensurate with the projected cash flows of the plan. The expected return for each investment category within the target investment allocation is developed using average historical rates of return for each targeted investment category, considering the projected cash flow of our Pension Plan. The difference between this expected return and the actual return on plan assets is generally deferred and recognized over subsequent periods through future net periodic benefit costs. We believe that the use of the average historical rates of returns is consistent with the timing and amounts of expected contributions to the plans and benefit payments to plan participants. These considerations provide the basis for reasonable assumptions with respect to the expected long-term rate of return on plan assets. We also maintain a voluntary employees beneficiary association plan (the “VEBA Plan”) under Section 501(c)(9) of the Internal Revenue Code to fund the Postretirement Plan. The asset allocation for our VEBA Plan at December 31, 2021 and 2020 was 100% in debt securities. There were no transfers among Levels 1, 2, or 3 for the years ended December 31, 2021 and 2020. Refer to Note 7. Fair Value Measurements for further discussion with respect to fair value hierarchy. The following table summarizes the fair value measurements by level of our Pension Plan and Postretirement Plan assets:
|  |  |  |  |  | Quoted Prices |  |  | Significant |
|  |  |  |  |  | in Active |  |  | Other |
|  |  |  |  |  | Markets for |  |  | Observable |
|  |  |  |  |  | Identical Assets |  |  | Inputs |
|  | Total |  |  | (Level 1) |  |  | (Level 2) |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Equity |  |  |  |  |  |  |  |  |  |  |  |
Managed equity accounts (1) |  | $ | 195.0 |  |  | $ | 195.0 |  |  | $ | — |
Equity — pooled separate account (2) |  |  | 54.9 |  |  |  | — |  |  |  | 54.9 |
Debt |  |  |  |  |  |  |  |  |  |  |  |
Fixed income manager — separately managed account (5) |  |  | 163.7 |  |  |  | — |  |  |  | 163.7 |
Fixed income manager — pooled separate account (2) |  |  | 97.9 |  |  |  | — |  |  |  | 97.9 |
Fixed income manager — government securities (3) |  |  | 9.5 |  |  |  | 9.5 |  |  |  | — |
Others |  |  |  |  |  |  |  |  |  |  |  |
Cash — pooled separate account (2) |  |  | (0.1 | ) |  |  | — |  |  |  | (0.1 | )
Global real estate account (4) |  |  | 34.8 |  |  |  | — |  |  |  | 34.8 |
Total |  | $ | 555.7 |  |  | $ | 204.5 |  |  | $ | 351.2 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Equity |  |  |  |  |  |  |  |  |  |  |  |
Managed equity accounts (1) |  | $ | 206.3 |  |  | $ | 206.3 |  |  | $ | — |
Equity — pooled separate account (2) |  |  | 67.2 |  |  |  | — |  |  |  | 67.2 |
Debt |  |  |  |  |  |  |  |  |  |  |  |
Fixed income manager — pooled separate account (2) |  |  | 208.3 |  |  |  | — |  |  |  | 208.3 |
Fixed income manager — government securities (3) |  |  | 10.5 |  |  |  | 10.5 |  |  |  | — |
Others |  |  |  |  |  |  |  |  |  |  |  |
Cash — pooled separate account (2) |  |  | 2.1 |  |  |  | — |  |  |  | 2.1 |
Global real estate account (4) |  |  | 36.9 |  |  |  | — |  |  |  | 36.9 |
Total |  | $ | 531.3 |  |  | $ | 216.8 |  |  | $ | 314.5 |
_______________
(1) | Valued at the closing price of shares for domestic stocks within the managed equity accounts, and valued at the net asset value (“NAV”) of shares for mutual funds at either the closing price reported in the active market or based on yields currently available on comparable securities of issuers with similar credit ratings for corporate bonds held by the Pension Plan in these managed accounts.
(2) | The pooled separate accounts invest in domestic and foreign stocks, bonds and mutual funds. The fair values of these stocks, bonds and mutual funds are publicly quoted and are used in determining the NAV of the pooled separate account, which is not publicly quoted.
(3) | The fund invested in the U.S. government, its agencies or instrumentalities or securities that are rated AAA by S&P, AAA by Fitch, or Aaa by Moody’s, including but not limited to mortgage securities such as agency and non-agency collateralized mortgage obligations, and other obligations that are secured by mortgages or mortgage backed securities, and valued at the closing price reported in the active market.
(4) | The funds invested in common stocks and other equity securities issued by domestic and foreign real estate companies, including real estate investment trusts ("REIT") and similar REIT-like entities. The fair values of these stocks, bonds and mutual funds are publicly quoted and are used in determining the NAV of the funds, which is not publicly quoted.
(5) | The separately managed accounts invest in U.S. Treasury Bonds and U.S. Treasury Separate Trading of Registered Interest and Principal of Securities (“UST STRIPS”). The fair values of these bonds and UST STRIPS are publicly quoted and are used in determining the NAV of the separately managed account, which is not publicly quoted.

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