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Retirement Plans and Other Employee Benefits | 12 Months Ended
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Dec. 31, 2021
Retirement Benefits [Abstract] |
Retirement Plans and Other Employee Benefits | Retirement Plans and Other Employee Benefits Pension Plan FHN sponsors a noncontributory, qualified defined benefit pension plan to employees hired or re-hired on or before September 1, 2007. Pension benefits are based on years of service, average compensation near retirement or other termination, and estimated social security benefits at age 65. Benefits under the plan are “frozen” so that years of service and compensation changes after 2012 do not affect the benefit owed. Minimum contributions are based upon actuarially determined amounts necessary to fund the total benefit obligation. Decisions to contribute to the plan are based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. FHN made a contribution of $6 million to the qualified pension plan in 2021, and no contributions were made in 2020 and 2019. Management does not currently anticipate that FHN will make a contribution to the qualified pension plan in 2022. FHN also maintains non-qualified plans including a supplemental retirement plan that covers certain employees whose benefits under the qualified pension plan have been limited by tax rules. These other non-qualified plans are unfunded, and contributions to these plans cover all benefits paid under the non-qualified plans. Payments made under the non-qualified plans were $5 million for 2021. FHN anticipates making benefit payments under the non-qualified plans of $5 million in 2022. Savings Plan FHN provides all qualifying full-time employees with the opportunity to participate in FHN's tax qualified 401(k) savings plan. The qualified plan allows employees to defer receipt of earned salary, up to tax law limits, on a tax-advantaged basis. Accounts, which are held in trust, may be invested in a wide range of mutual funds and in FHN common stock. Up to tax law limits, FHN provides a 100% match for the first 6% of salary deferred, with company matching contributions invested according to a participant’s current investment election. Through a non-qualified savings restoration plan, FHN provides a restorative benefit to certain highly-compensated employees who participate in the savings plan and whose contribution elections are capped by tax limitations. FHN also provides “flexible dollars” to assist employees with the cost of annual benefits and/or allow the employee to contribute to his or her qualified savings plan account. These “flexible dollars” are pre-tax contributions and are based upon the employees’ years of service and qualified compensation. Contributions made by FHN through the flexible benefits plan and the company matches were $51 million for 2021, $37 million for 2020, and $28 million for 2019. Other Employee Benefits FHN provides postretirement life insurance benefits to certain employees and also provides postretirement medical insurance benefits to retirement-eligible employees, including certain prescription drug benefits. The postretirement medical plan is contributory with FHN contributing a fixed amount for certain participants. Actuarial Assumptions FHN’s process for developing the long-term expected rate of return of pension plan assets is based on capital market exposure as the source of investment portfolio returns. Capital market exposure refers to the plan’s allocation of its assets to asset classes, which primarily represent fixed income investments. FHN also considers expectations for inflation, real interest rates, and various risk premiums based primarily on the historical risk premium for each asset class. The expected return is based upon a time horizon of 30 years. Given its funded status, the asset allocation strategy for the qualified pension plan utilizes fixed income instruments that closely match the estimated duration of payment obligations. The discount rates for the three years ended 2021 for pension and other benefits were determined by using a hypothetical AA yield curve represented by a series of annualized individual discount rates from one-half to 30 years. The discount rates are selected based upon data specific to FHN’s plans and employee population. The bonds used to create the hypothetical yield curve were subjected to several requirements to ensure that the resulting rates were representative of the bonds that would be selected by management to fulfill the company’s funding obligations. In addition to the AA rating, only non-callable bonds were included. Each bond issue was required to have at least $300 million par outstanding so that each issue was sufficiently marketable. Finally, bonds more than two standard deviations from the average yield were removed. When selecting the discount rate, FHN matches the duration of high quality bonds with the duration of the obligations of the plan as of the measurement date. For all years presented, the measurement date of the benefit obligations and net periodic benefit costs was December 31. The actuarial assumptions used in the defined benefit pension plans and other employee benefit plans were as follows: Table 8.18.1 ACTUARIAL ASSUMPTIONS FOR DEFINED BENEFIT PLANS
|  | Benefit Obligations |  | Net Periodic Benefit Cost
2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Discount rate |  |  |  |  |  |  |  |  |  |  |  |
Qualified pension |  | 2.95% |  | 2.63% |  | 3.31% |  | 2.64% |  | 3.31% |  | 4.43%
Nonqualified pension |  | 2.65% |  | 2.24% |  | 3.08% |  | 2.24% |  | 3.08% |  | 4.26%
Other nonqualified pension |  | 1.99% |  | 1.41% |  | 2.57% |  | 1.41% |  | 2.57% |  | 3.83%
Postretirement benefits |  | 2.43%-3.07% |  | 1.92% - 2.81% |  | 2.85% - 3.44% |  | 1.93%-2.81% |  | 2.87% - 3.44% |  | 4.04% - 4.56%
Expected long-term rate of return |  |  |  |  |  |  |  |  |  |  |  |
Qualified pension/ postretirement benefits |  | N/A |  | N/A |  | N/A |  | 2.30% |  | 3.45% |  | 4.80%
Postretirement benefit (retirees post January 1, 1993) |  | N/A |  | N/A |  | N/A |  | 5.80% |  | 6.40% |  | 6.85%
Postretirement benefit (retirees prior to January 1, 1993) |  | N/A |  | N/A |  | N/A |  | 1.00% |  | 0.90% |  | 0.05%
Since the benefits in the defined benefit pension plan are frozen, the rate of compensation increase has no effect on qualified pension benefits. FHN has one pension plan where participants' benefits are affected by interest crediting rates. The plan's projected benefit obligation as of December 31, 2021, 2020 and 2019 and interest crediting rates for the respective years were as follows: Table 8.18.2 PROJECTED BENEFIT OBLIGATION & CREDITING RATE
(Dollars in millions) |  | 2021 |  | 2020 |  | 2019
Projected benefit obligation |  | $ | 12 |  |  | $ | 15 |  |  | $ | 16 |
Interest crediting rate |  | 9.07 | % |  | 8.20 | % |  | 9.66 | %
The components of net periodic benefit cost for the plan years 2021, 2020 and 2019 were as follows: Table 8.18.3 COMPONENTS OF NET PERIODIC BENEFIT COST
(Dollars in millions) |  | Pension Benefits |  | Other Benefits
2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Components of net periodic benefit cost |  |  |  |  |  |  |  |  |  |  |  |
Interest cost |  | $ | 17 |  |  | $ | 24 |  |  | $ | 30 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 1 |
Expected return on plan assets |  | (20) |  |  | (26) |  |  | (37) |  |  | (1) |  |  | (1) |  |  | (1) |
Amortization of unrecognized: |  |  |  |  |  |  |  |  |  |  |  |
Actuarial (gain) loss |  | 10 |  |  | 13 |  |  | 10 |  |  | — |  |  | — |  |  | — |
Net periodic benefit cost |  | $ | 7 |  |  | $ | 11 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
The long-term expected rate of return is applied to the market-related value of plan assets in determining the expected return on plan assets. FHN determines the market-related value of plan assets using a hybrid methodology which recognizes liability-hedging assets at current fair value while return-seeking assets use a calculated value that recognizes changes in fair value over five years, as permitted by GAAP. FHN utilizes a spot rate approach which applies duration-specific rates from the full yield curve to estimated future benefit payments for the determination of interest cost. The following tables set forth the plans’ benefit obligations and plan assets for 2021 and 2020: Table 8.18.4 BENEFIT OBLIGATIONS & PLAN ASSETS
(Dollars in millions) |  | Pension Benefits |  | Other Benefits
2021 |  | 2020 |  | 2021 |  | 2020
Change in benefit obligation |  |  |  |  |  |  |  |
Benefit obligation, beginning of year |  | $ | 893 |  |  | $ | 836 |  |  | $ | 46 |  |  | $ | 42 |
Interest cost |  | 17 |  |  | 24 |  |  | 1 |  |  | 1 |
Actuarial (gain) loss (a) |  | (26) |  |  | 70 |  |  | (5) |  |  | 4 |
Actual benefits paid |  | (39) |  |  | (37) |  |  | (1) |  |  | (1) |
Benefit obligation, end of year |  | $ | 845 |  |  | $ | 893 |  |  | $ | 41 |  |  | $ | 46 |
Change in plan assets |  |  |  |  |  |  |  |
Fair value of plan assets, beginning of year |  | $ | 896 |  |  | $ | 826 |  |  | $ | 23 |  |  | $ | 20 |
Actual return on plan assets |  | (18) |  |  | 103 |  |  | 3 |  |  | 3 |
Employer contributions |  | 10 |  |  | 4 |  |  | 1 |  |  | 1 |
Actual benefits paid – settlement payments |  | (3) |  |  | (36) |  |  | (1) |  |  | (1) |
Actual benefits paid – other payments |  | (2) |  |  | (1) |  |  | — |  |  | — |
Premium paid for annuity purchase (b) |  | (34) |  |  | — |  |  | — |  |  | — |
Fair value of plan assets, end of year |  | $ | 849 |  |  | $ | 896 |  |  | $ | 26 |  |  | $ | 23 |
Funded (unfunded) status of the plans |  | $ | 4 |  |  | $ | 3 |  |  | $ | (15) |  |  | $ | (23) |
Amounts recognized in the Balance Sheets |  |  |  |  |  |  |  |
Other assets |  | $ | 37 |  |  | $ | 40 |  |  | $ | 23 |  |  | $ | 20 |
Other liabilities |  | (33) |  |  | (37) |  |  | (38) |  |  | (43) |
Net asset (liability) at end of year |  | $ | 4 |  |  | $ | 3 |  |  | $ | (15) |  |  | $ | (23) |
(a)Variances in the actuarial (gain) loss are due to normal activity such as changes in discount rates, updates to participant demographic information and revisions to life expectancy assumptions. (b)2021 amount represents settlements of certain retired participants in the qualified pension plan that occurred during the year. The projected benefit obligation for unfunded plans was as follows: Table 8.18.5 BENEFIT OBLIGATION - UNFUNDED PLANS
|  | Pension Benefits |  | Other Benefits
(Dollars in millions) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Projected benefit obligation |  | $ | 33 |  |  | $ | 37 |  |  | $ | 38 |  |  | $ | 43 |
The qualified pension plan was overfunded by $37 million and $41 million as of December 31, 2021 and 2020, respectively. Because of the pension freeze at the end of 2012, as of both December 31, 2021 and 2020, the pension benefit obligation is equivalent to the accumulated benefit obligation. FHN's funded post retirement plan was also in an overfunded status as of December 31, 2021 and 2020. Unrecognized actuarial gains and losses and unrecognized prior service costs and credits are recognized as a component of accumulated other comprehensive income. Balances reflected in accumulated other comprehensive income on a pre-tax basis for the years ended December 31, 2021 and 2020 consist of: Table 8.18.6 PRE-TAX ACTUARIAL GAINS (LOSSES) REFLECTED IN AOCI
(Dollars in millions) |  | Pension Benefits |  | Other Benefits
2021 |  | 2020 |  | 2021 |  | 2020
Amounts recognized in accumulated other comprehensive income |  |  |  |  |  |  |  |
Net actuarial (gain) loss |  | $ | 342 |  |  | $ | 342 |  |  | $ | (6) |  |  | $ | 1 |
The pre-tax amounts recognized in other comprehensive income during 2021, 2020, and 2019 were as follows: Table 8.18.7 PRE-TAX AMOUNTS RECOGNIZED IN OCI
(Dollars in millions) |  | Pension Benefits |  | Other Benefits
2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Changes in plan assets and benefit obligation recognized in other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |
Net actuarial (gain) loss arising during measurement period |  | $ | 13 |  |  | $ | (8) |  |  | $ | (14) |  |  | $ | (7) |  |  | $ | 3 |  |  | $ | 5 |
Items amortized during the measurement period: |  |  |  |  |  |  |  |  |  |  |  |
Net actuarial gain (loss) |  | (10) |  |  | (13) |  |  | (10) |  |  | — |  |  | — |  |  | — |
Total recognized in other comprehensive income |  | $ | 3 |  |  | $ | (21) |  |  | $ | (24) |  |  | $ | (7) |  |  | $ | 3 |  |  | $ | 5 |
FHN utilizes the minimum amortization method in determining the amount of actuarial gains or losses to include in plan expense. Under this approach, the net deferred actuarial gain or loss that exceeds a threshold is amortized over the average remaining service period of active plan participants. The threshold is measured as the greater of: 10% of a plan’s projected benefit obligation as of the beginning of the year or 10% of the market related value of plan assets as of the beginning of the year. FHN amortizes actuarial gains and losses using the estimated average remaining life expectancy of the remaining participants since all participants are considered inactive due to the freeze. The following table provides detail on expected benefit payments, which reflect expected future service, as appropriate: Table 8.18.8 EXPECTED BENEFIT PAYMENTS
(Dollars in millions) |  | Pension Benefits |  | Other Benefits
2022 |  | $ | 40 |  |  | $ | 2 |
2023 |  | 42 |  |  | 2 |
2024 |  | 43 |  |  | 2 |
2025 |  | 45 |  |  | 2 |
2026 |  | 46 |  |  | 2 |
2027-2031 |  | 232 |  |  | 11 |
Plan Assets FHN’s overall investment goal is to create, over the life of the pension plan and retiree medical plan, an adequate pool of sufficiently liquid assets to support the qualified pension benefit obligations to participants, retirees, and beneficiaries, as well as to partially support the medical obligations to retirees and beneficiaries. Thus, the qualified pension plan and retiree medical plan seek to achieve a level of investment return consistent with changes in projected benefit obligations. Qualified pension plan assets primarily consist of fixed income securities which include U.S. treasuries, corporate bonds of companies from diversified industries, municipal bonds, and foreign bonds. Fixed income investments generally have long durations consistent with the estimated pension liabilities of FHN. This duration-matching strategy is intended to hedge substantially all of the plan’s risk associated with future benefit payments. Retiree medical funds are kept in short-term investments, primarily money market funds and mutual funds. On December 31, 2021 and 2020, FHN did not have any significant concentrations of risk within the plan assets related to the pension plan or the retiree medical plan. The fair value of FHN’s pension plan assets at December 31, 2021 and 2020, by asset category classified using the Fair Value measurement hierarchy, is shown in the tables below. See Note 24 – Fair Value of Assets and Liabilities for more details about fair value measurements. Tables 8.18.9a-b FAIR VALUE OF PENSION ASSETS
(Dollars in millions) |  | December 31, 2021
Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash equivalents and money market funds |  | $ | 45 |  |  | $ | — |  |  | $ | — |  |  | $ | 45 |
Fixed income securities: |  |  |  |  |  |  |  |
U.S. treasuries |  | — |  |  | 15 |  |  | — |  |  | 15 |
Corporate, municipal and foreign bonds |  | — |  |  | 445 |  |  | — |  |  | 445 |
Common and collective funds: |  |  |  |  |  |  |  |
Fixed income |  | — |  |  | 344 |  |  | — |  |  | 344 |
Total |  | $ | 45 |  |  | $ | 804 |  |  | $ | — |  |  | $ | 849 |
(Dollars in millions) |  | December 31, 2020
Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash equivalents and money market funds |  | $ | 23 |  |  | $ | — |  |  | $ | — |  |  | $ | 23 |
Fixed income securities: |  |  |  |  |  |  |  |
U.S. treasuries |  | — |  |  | 6 |  |  | — |  |  | 6 |
Corporate, municipal and foreign bonds |  | — |  |  | 488 |  |  | — |  |  | 488 |
Common and collective funds: |  |  |  |  |  |  |  |
Fixed income |  | — |  |  | 379 |  |  | — |  |  | 379 |
Total |  | $ | 23 |  |  | $ | 873 |  |  | $ | — |  |  | $ | 896 |
The Pension and Savings Investment Committees, comprised of senior managers within the organization, meet regularly to review asset performance and potential portfolio revisions. Adjustments to the qualified pension plan asset allocation primarily reflect changes in anticipated liquidity needs for plan benefits. The fair value of FHN’s retiree medical plan assets at December 31, 2021 and 2020 by asset category are as follows: Tables 8.18.10a-b FAIR VALUE OF RETIREE MEDICAL PLAN ASSETS
(Dollars in millions) |  | December 31, 2021
Level 1 |  | Level 2 |  | Level 3 |  | Total
Mutual funds: |  |  |  |  |  |  |  |
Equity mutual funds |  | $ | 17 |  |  | $ | — |  |  | $ | — |  |  | $ | 17 |
Fixed income mutual funds |  | 9 |  |  | — |  |  | — |  |  | 9 |
Total |  | $ | 26 |  |  | $ | — |  |  | $ | — |  |  | $ | 26 |
(Dollars in millions) |  | December 31, 2020
Level 1 |  | Level 2 |  | Level 3 |  | Total
Mutual funds: |  |  |  |  |  |  |  |
Equity mutual funds |  | $ | 15 |  |  | $ | — |  |  | $ | — |  |  | $ | 15 |
Fixed income mutual funds |  | 8 |  |  | — |  |  | — |  |  | 8 |
Total |  | $ | 23 |  |  | $ | — |  |  | $ | — |  |  | $ | 23 |

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