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Employee Benefits | 12 Months Ended
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Dec. 31, 2023
Retirement Benefits [Abstract] |
Employee Benefits | 18. Employee Benefits Pension Plans Key maintains a cash balance pension plan and other defined benefit plans. These plans are frozen and closed to new employees. We continue to credit participants’ existing account balances for interest until they receive their plan benefits. Plans provide benefits based upon length of service and compensation levels. Key utilizes its fiscal year-end as the measurement date for its pension and other postretirement employee benefit plans. Actuarial gains and losses are deferred and amortized over the future service periods of active employees. We determine the expected return on plan assets using a calculated market-related value of plan assets. Gain or loss amounts in AOCI are only amortized to the extent that they exceed 10% of the greater of the market-related value or the projected benefit obligation. Pre-tax AOCI not yet recognized as net pension cost w a s $384 million a t December 31, 2023, and $385 million at December 31, 2022, consisting entirely of net unrecognized losses. During 2023, 2022, and 2021, we recognized a settlement loss for lump sum payments made under certain pension plans. In accordance with the applicable accounting guidance for defined benefit plans, we performed a remeasurement of the affected plans in conjunction with the settlement and recognized the settlement loss reflected in the following table. Net pension cost is recorded within “other expense.” The components of net pension cost and the amount recognized in OCI for all funded and unfunded plans are as follows:
Year ended December 31, Dollars in millions | 2023 | 2022 | 2021
Interest cost on PBO | $ | 45 |  | $ | 27 |  | $ | 25 |
Expected return on plan assets | (42) |  | (27) |  | (28) |
Amortization of losses | 9 |  | 15 |  | 18 |
Settlement loss | 18 |  | 12 |  | 9 |
Net pension cost | $ | 30 |  | $ | 27 |  | $ | 24 |
Other changes in plan assets and benefit obligations recognized in OCI: |  |  |
Net (gain) loss | $ | 26 |  | $ | 31 |  | $ | (19) |
Amortization of gains | (27) |  | (27) |  | (27) |
Total recognized in comprehensive income | $ | (1) |  | $ | 4 |  | $ | (46) |
Total recognized in net pension cost and comprehensive income | $ | 29 |  | $ | 31 |  | $ | (22) |
The information related to our pension plans presented in the following tables is based on current actuarial reports using measurement dates of December 31, 2023, and December 31, 2022. The following table summarizes changes in the PBO related to our pension plans. Actuarial losses in 2023 were primarily driven by a decrease in discount rates.
Year ended December 31, Dollars in millions | 2023 | 2022
PBO at beginning of year | $ | 965 |  | $ | 1,156 |
Interest cost | 45 |  | 27 |
Actuarial losses (gains) | 10 |  | (133) |
Benefit payments | (97) |  | (85) |
PBO at end of year | $ | 923 |  | $ | 965 |
The following table summarizes changes in the FVA.
Year ended December 31, Dollars in millions | 2023 | 2022
FVA at beginning of year | $ | 886 |  | $ | 1,096 |
Actual return on plan assets | 25 |  | (138) |
Employer contributions | 13 |  | 13 |
Benefit payments | (97) |  | (85) |
FVA at end of year | $ | 827 |  | $ | 886 |
The following table summarizes the funded status of the pension plans, which equals the amounts recognized in the balance sheets at December 31, 2023, and December 31, 2022.
December 31, Dollars in millions | 2023 | 2022
Funded status (a) | $ | (95) |  | $ | (78) |
Net prepaid pension cost recognized consists of: |  |
Noncurrent assets | $ | 34 |  | $ | 58 |
Current liabilities | (14) |  | (13) |
Noncurrent liabilities | (115) |  | (123) |
Net prepaid pension cost recognized (b) | $ | (95) |  | $ | (78) |
(a)The shortage of the FVA under the PBO. (b)Represents the accrued benefit liability of the pension plans. At December 31, 2023, our primary qualified cash balance pension plan was sufficiently funded under the requirements of ERISA. Consequently, we are not required to make a minimum contribution to that plan in 2024. We also do not expect to make any significant discretionary contributions during 2024. At December 31, 2023, we expect to pay the benefits from all funded and unfunded pension plans as follows: 2024 — $89 million; 2025 — $87 million; 2026 — $84 million; 2027 — $81 million; 2028 — $79 million and $347 million in the aggregate from 2029 through 2033. The ABO for all of our pension plans was $922 million a t December 31, 2023, and $965 million at December 31, 2022. As indicated in the table below, collectively our plans had an ABO in excess of plan assets as follows:
December 31, | 2023 | 2022
Dollars in millions | Cash Balance Pension Plan | Other Defined Benefit Plans | Cash Balance Pension Plan | Other Defined Benefit Plans
PBO | $ | 793 |  | $ | 128 |  | $ | 828 |  | $ | 137 |
ABO | 793 |  | 128 |  | 828 |  | 137 |
Fair value of plan assets | 827 |  | — |  | 886 |  | — |
To determine the actuarial present value of benefit obligations, we assumed the following weighted-average rates.
December 31, | 2023 | 2022
Discount rate | 4.68 | % | 4.85 | %
Weighted-average interest crediting rate | 4.09 | % | 3.97 | %
To determine net pension cost, we assumed the following weighted-average rates.
Year ended December 31, | 2023 | 2022 | 2021
Discount rate | 4.85 | % | 2.43 | % | 2.05 | %
Expected return on plan assets | 4.50 | % | 2.75 | % | 2.75 | %
We estimate that we will recogniz e $11 million in net pension cost for 2024. We estimate that a 25 basis point increase or decrease in the expected return on plan assets would change our net pension cost for 2024 by approximately $2 million. Pension cost also is affected by an assumed discount rate. We estimate that a 25 basis point change in the assumed discount rate would change net pension cost for 2024 by approximately $2 million. The expected return on plan assets is determined by considering a number of factors, the most significant of which are: •Our expectations for returns on plan assets over the long term, weighted for the investment mix of the assets. These expectations consider, among other factors, historical capital market returns of equity, fixed income, convertible, and other securities, and forecasted returns that are modeled under various economic scenarios. •Historical returns on our plan assets. Based on an annual reassessment of current and expected future capital market returns, our expected return on plan assets was 4.5% for 2023, 4.5% for 2022 and 2.75% for 2021. We deemed a rate of 4.50% to be appropriate in estimating 2023 pension cost. The investment objectives of the pension fund are developed to reflect the characteristics of the plan, such as pension formulas, cash lump sum distribution features, and the liability profiles of the plan’s participants. An executive oversight committee reviews the plan’s investment performance at least quarterly, and compares performance against appropriate market indices. The pension fund’s investment objectives are to balance total return objectives with a continued management of plan liabilities, and to minimize the mismatch between assets and liabilities. The following table shows the asset target allocations prescribed by the pension fund’s investment policies based on the plan’s funded status at December 31, 2023.
| Target Allocation
Asset Class | 2023
Global equity | 16 | %
Fixed income | 84 |
Total | 100 | %
Investments consist of mutual funds, collective investment funds and insurance investments that invest in underlying assets in accordance with the target asset allocations shown above. Although the pension funds’ investment policies conditionally permit the use of derivative contracts, we have not entered into any such contracts, and we do not expect to employ such contracts in the future. The valuation methodologies used to measure the fair value of pension plan assets vary depending on the type of asset, as described below. For an explanation of the fair value hierarchy, see Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements.” Mutual funds. Exchange-traded mutual funds listed or traded on securities exchanges are valued at the closing price on the exchange or system where the security is principally traded. These securities are classified as Level 1 because quoted prices for identical securities in active markets are available. Non exchange-traded mutual funds are classified as Level 2. Collective investment funds. Investments in collective investment funds are valued using the net asset value practical expedient and are not classified within the fair value hierarchy. Fair value is determined based on Key’s proportionate share of total net assets in the fund. Insurance investment contracts and pooled separate accounts. Deposits under insurance investment contracts and pooled separate accounts with insurance companies do not have readily determinable fair values and are valued using a methodology that is consistent with accounting guidance that allows the plan to estimate fair value based upon net asset value per share (or its equivalent, such as member units or an ownership in partners’ capital to which a proportionate share of net assets is attributed); thus, these investments are not classified within the fair value hierarchy. The following tables show the fair values of our pension plan assets by asset class at December 31, 2023, and December 31, 2022.
December 31, 2023 |  |  |  |
Dollars in millions | Level 1 | Level 2 | Level 3 | Total
ASSET CLASS |  |  |  |
Mutual funds: |  |  |  |
Fixed income — U.S. | $ | — |  | $ | 342 |  | $ | — |  | $ | 342 |
Collective investment funds (measured at NAV) (a) | — |  | — |  | — |  | 465 |
Insurance investment contracts and pooled separate accounts (measured at NAV) (a) | — |  | — |  | — |  | 20 |
Total net assets at fair value | $ | — |  | $ | 342 |  | $ | — |  | $ | 827 |
(a)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote.
December 31, 2022 |  |  |  |
Dollars in millions | Level 1 | Level 2 | Level 3 | Total
ASSET CLASS |  |  |  |
Mutual funds: |  |  |  |
Fixed income — U.S. | $ | — |  | $ | 359 |  | $ | — |  | $ | 359 |
Collective investment funds (measured at NAV) (a) | — |  | — |  | — |  | 507 |
Insurance investment contracts and pooled separate accounts (measured at NAV) (a) | — |  | — |  | — |  | 20 |
Total net assets at fair value | $ | — |  | $ | 359 |  | $ | — |  | $ | 886 |
(a)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote. Other Postretirement Benefit Plans We sponsor a retiree healthcare plan in which all employees age 55 with five years of service (or employees age 50 with 15 years of service who are terminated under conditions that entitle them to a severance benefit) are eligible to participate. Participant contributions are adjusted annually. Key may provide a subsidy toward the cost of coverage for certain employees hired before 2001 with a minimum of 15 years of service at the time of termination. We use a separate VEBA trust to fund the retiree healthcare plan. The components of pre-tax AOCI not yet recognized as net postretirement benefit cost are shown below.
December 31, |  |
Dollars in millions | 2023 | 2022
Net unrecognized losses (gains) | $ | (9) |  | $ | (9) |
Net unrecognized prior service credit | (11) |  | (12) |
Total unrecognized AOCI | $ | (20) |  | $ | (21) |
The components of net postretirement benefit cost and the amount recognized in OCI for all funded and unfunded plans are as follows:
December 31, |  |  |
Dollars in millions | 2023 | 2022 | 2021
Interest cost on APBO | $ | 2 |  | $ | 2 |  | $ | 2 |
Expected return on plan assets | (2) |  | (2) |  | (2) |
Amortization of prior service credit | (1) |  | (1) |  | (1) |
Amortization of gains | (1) |  | (1) |  | (1) |
Net postretirement benefit cost | $ | (2) |  | $ | (2) |  | $ | (2) |
Other changes in plan assets and benefit obligations recognized in OCI: |  |  |
Net (gain) loss | $ | 1 |  | $ | 1 |  | $ | 1 |
Amortization of prior service credit | 1 |  | 1 |  | 1 |
Total recognized in comprehensive income | $ | 2 |  | $ | 2 |  | $ | 2 |
Total recognized in net postretirement benefit cost and comprehensive income | $ | — |  | $ | — |  | $ | — |
The information related to our postretirement benefit plans presented in the following tables is based on current actuarial reports using measurement dates of December 31, 2023, and December 31, 2022. The following table summarizes changes in the APBO. Actuarial losses are a result of asset performance.
Year ended December 31, |  |
Dollars in millions | 2023 | 2022
APBO at beginning of year | $ | 40 |  | $ | 57 |
Service cost | — |  | — |
Interest cost | 2 |  | 2 |
Plan participants’ contributions | 1 |  | 1 |
Actuarial losses (gains) | 6 |  | (5) |
Benefit payments | (9) |  | (15) |
Plan amendments | — |  | — |
APBO at end of year | $ | 40 |  | $ | 40 |
The following table summarizes changes in FVA.
Year ended December 31, |  |
Dollars in millions | 2023 | 2022
FVA at beginning of year | $ | 40 |  | $ | 57 |
Employer contributions | — |  | — |
Plan participants’ contributions | 1 |  | 1 |
Benefit payments | (9) |  | (15) |
Actual return on plan assets | 8 |  | (3) |
FVA at end of year | $ | 40 |  | $ | 40 |
The postretirement plans were fully funded at December 31, 2023, and December 31, 2022. Ther efore, no liabilities were recognized on our Consolidated Balance Sheets. There are no regulations that require contributions to the VEBA trust that funds our retiree healthcare plan, so there is no minimum funding requirement. We are permitted to make discretionary contributions to the VEBA trust, subject to certain IRS restrictions and limitations. We anticipate that our discretionary contributions in 2024, if any, will be minimal. At December 31, 2023, we expect to pay the benefits from other postretirement plans as follows: 2024 — $5 million; 2025 — $5 million; 2026 — $5 million; 2027 — $4 million; 2028 — $4 million; and $19 million in the aggregate from 2029 through 2033. To determine the APBO, we assumed discount rates of 4.5% at December 31, 2023, and 4.5% at December 31, 2022. To determine net postretirement benefit cost, we assumed the following weighted-average rates.
Year ended December 31, | 2023 | 2022 | 2021
Discount rate | 4.50 | % | 4.50 | % | 4.50 | %
Expected return on plan assets | 4.50 |  | 4.50 |  | 4.50 |
The realized net investment income for the postretirement healthcare plan VEBA trust is subject to federal income taxes, which are reflected in the weighted-average expected return on plan assets shown above. Assumed healthcare cost trend rates do not have a material impact on net postretirement benefit cost or obligations since the postretirement plan has cost-sharing provisions and benefit limitations. We expect to recognize a $2 million credit in net postretirement benefit cost for 2024. We estimate the expected returns o n plan assets for the VEBA trust much the same way we estimate returns on our pension funds. The primary investment objectives of the VEBA trust are to obtain a market rate of return, take into consideration the safety and/or risk of the investment, and to diversify the portfolio in order to satisfy the trust’s anticipated liquidity requirements. The following table shows the asset target allocations prescribed by the trust’s investment policy.
| Target Allocation
Asset Class | 2023
U.S. equity securities | 64 | %
International equity securities | 16 |
Fixed income securities | 20 |
Total | 100 | %
Investments consist of mutual funds and other assets that invest in underlying assets in accordance with the target asset allocations shown above. Exchange-traded mutual funds are valued using quoted prices and, therefore, are classified as Level 1. Investments in other assets are valued using the Net Asset Value practical expedient and are not classified within the fair value hierarchy. These investments do not have readily determinable fair values and are valued using a methodology consistent with accounting guidance that allows the plan to estimate fair value based upon net asset value per share (or its equivalent, such as member units or an ownership in partners’ capital to which a proportionate share of net assets is attributed). The following tables show the fair values of our postretirement plan assets by asset class at December 31, 2023, and December 31, 2022.
December 31, 2023 |  |  |  |
Dollars in millions | Level 1 | Level 2 | Level 3 | Total
ASSET CLASS |  |  |  |
Mutual funds: |  |  |  |
Equity — U.S. | $ | 24 |  | $ | — |  | $ | — |  | $ | 24 |
Equity — International | 7 |  | — |  | — |  | 7 |
Fixed income — U.S. | 8 |  | — |  | — |  | 8 |
Other assets (measured at NAV)(a) | — |  | — |  | — |  | 1 |
Total net assets at fair value | $ | 39 |  | $ | — |  | $ | — |  | $ | 40 |
(a)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote.
December 31, 2022 |  |  |  |
Dollars in millions | Level 1 | Level 2 | Level 3 | Total
ASSET CLASS |  |  |  |
Mutual funds: |  |  |  |
Equity — U.S. | $ | 24 |  | $ | — |  | $ | — |  | $ | 24 |
Equity — International | 7 |  | — |  | — |  | 7 |
Fixed income — U.S. | 8 |  | — |  | — |  | 8 |
Other assets (measured at NAV) | — |  | — |  | — |  | 1 |
Total net assets at fair value | $ | 39 |  | $ | — |  | $ | — |  | $ | 40 |
(a)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the fair value of plan assets presented elsewhere within this footnote. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 introduced a prescription drug benefit under Medicare and prescribes a federal subsidy to sponsors of retiree healthcare benefit plans that offer prescription drug coverage that is “actuarially equivalent” to the benefits under Medicare Part D. Based on our application of the relevant regulatory formula, we determined that the prescription drug coverage related to our retiree healthcare benefit plan is not actuarially equivalent to the Medicare benefit for the vast majority of retirees. For the years ended December 31, 2023, and December 31, 2022, we did not receive federal subsidies. Employee 401(k) Savings Plan A substantial number of our employees are covere d under a savings plan that is qualified under Section 401(k) of the Internal Revenue Code. The plan permits employees to contribute from 1% to 100% of eligible compensation, with up to 7% being eligible for matching contributions in 2023. The plan also permits us to provide a discretionary annual profit sharing contribution to eligible employees who have at least one year of service. We did not accrue a profit sharing contributions for 2023 or 2022. We made a contribution of 1% for 2021, on eligible compensation for employees eligible on the last business day of the plan year. We also maintain a deferred savings plan that provides certain employees with benefits they otherwise would not have been eligible to receive under the qualified plan once their compensation for the plan year reached the IRS contribution limits. Total expense associated with the above plans was $99 million in 2023, $82 million in 2022, and $119 million in 2021.

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