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EMPLOYEE RETIREMENT PLANS
 12 Months Ended
Dec. 31, 2021
Defined Benefit Pension Plans And Defined Benefit Postretirement Plans [Abstract]  
EMPLOYEE RETIREMENT PLANS
17.
EMPLOYEE RETIREMENT PLANS:

Defined Contribution Plan

The Company maintains the Universal Display Corporation 401(k) Plan (the Plan) in accordance with the provisions of Section 401(k) of the Internal Revenue Code (the Code). The Plan covers substantially all full-time employees of the Company. Participants may contribute up to 90% of their total compensation to the Plan, not to exceed the limit as defined in the Code. Once an employee is eligible to participate in the Plan, the Company will make a non-elective contribution equal to 3% of the employee’s total compensation. For the years ended December 31, 2021, 2020 and 2019, the Company contributed $1.3 million, $1.1 million and $880,000, respectively, to the Plan.

Defined Benefit Plan

On March 18, 2010, the Human Capital Committee and the Board of Directors of the Company approved and adopted the Universal Display Corporation Supplemental Executive Retirement Plan (SERP), effective as of April 1, 2010. On March 3, 2015, the Human Capital Committee and the Board of Directors amended the SERP to include salary and bonus as part of the plan. Prior to this amendment, the SERP benefit did not take into account any bonuses. The purpose of the SERP, which is unfunded, is to provide certain of the Company’s key employees with supplemental pension benefits following a cessation of their employment and to encourage their continued employment with the Company. As of December 31, 2021 there were eight participants in the SERP.

The SERP benefit is based on a percentage of the participant’s annual base salary and in certain cases, the participant's average annual bonus for the most recent three fiscal years ending prior to the participant's date of termination of employment with the Company for the life of the participant. For this purpose, annual base salary means 12 times the average monthly base salary paid or payable to the participant during the 24-month period immediately preceding the participant’s date of termination of employment, or, if required, the date of a change in control of the Company.

Under the SERP, if a participant resigns or is terminated without cause at or after age 65 and with at least 20 years of service, he or she will be eligible to receive a SERP benefit. The benefit is based on a percentage of the participant’s annual base salary and bonus for the life of the participant. This percentage is 50%, 25% or 15%, depending on the participant’s benefit class.

If a participant resigns at or after age 65 and with at least 15 years of service, he or she will be eligible to receive a prorated SERP benefit. If a participant is terminated without cause or on account of a disability after at least 15 years of service, he or she will be eligible to receive a prorated SERP benefit regardless of age. The prorated benefit in either case would be based on the participant’s number of years of service (up to 20), divided by 20. In the event a participant is terminated for cause, his or her SERP benefit and any future benefit payments are subject to immediate forfeiture.

The SERP benefit is payable in installments over 10 years, beginning at the later of age 65 or the date of the participant’s separation from service. Payments are based on a present value calculation of the benefit amount for the actuarial remaining life expectancy of the participant. This calculation is made as of the date benefit payments are to begin (later of age 65 or separation from service). If the participant dies after reaching age 65, any future or remaining benefit payments are made to the participant’s beneficiary or estate. If the participant dies before reaching age 65, the benefit is forfeited.

In the event of a change in control of the Company, each participant will become immediately vested in his or her SERP benefit. Unless the participant’s benefit has already fully vested, if the participant has less than 20 years of service at the time of the change in control, he or she will receive a prorated benefit based on his or her number of years of service (up to 20), divided by 20. If the change in control qualifies as a “change in control event” for purposes of Section 409A of the Internal Revenue Code, then each participant (including former employees who are entitled to SERP benefits) will receive a lump sum cash payment equal to the present value of the benefit immediately upon the change in control.

Certain of the Company’s executive officers are designated as special participants under the SERP. If these participants resign or are terminated without cause after 20 years of service, or at or after age 65 and with at least 15 years of service, they will be eligible to receive a SERP benefit. If they are terminated without cause or on account of a disability, they will be eligible to receive a prorated SERP benefit regardless of age. The prorated benefit would be based on the participant’s number of years of service (up to 20), divided by 20.

The SERP benefit for special participants is based on 50% of their annual base salary and bonus for their life and the life of their surviving spouse, if any. Payments are based on a present value calculation of the benefit amount for the actuarial remaining life expectancies of the participant and their surviving spouse, if any. If they die before reaching age 65, the benefit is not forfeited if the surviving spouse, if any, lives until the participant would have reached age 65. If their spouse also dies before the participant would have reached age 65, the benefit is forfeited.

The Company records amounts relating to the SERP based on calculations that incorporate various actuarial and other assumptions, including discount rates, rate of compensation increases, retirement dates, and life expectancies. The net periodic costs are recognized as employees render the services necessary to earn the SERP benefits.

In connection with the initiation and subsequent amendments of the SERP, the Company recorded cost related to prior service of $22.8 million as accumulated other comprehensive loss as of December 31, 2021. The prior service cost is being amortized as a component of net periodic pension cost over the average of the remaining service period of the employees expected to receive benefits under the plan. The prior service cost expected to be amortized for the year ending December 31, 2022 is $2.6 million.

Information relating to the Company’s plan is as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

Change in benefit obligation:

 

 

 

 

 

 

Benefit obligation, beginning of year

 

$

78,527

 

 

$

51,117

 

Service cost

 

 

1,675

 

 

 

1,092

 

Interest cost

 

 

1,165

 

 

 

1,285

 

Actuarial (gain) loss

 

 

(14,956

)

 

 

25,033

 

Plan amendment

 

 

362

 

 

 

—

 

Benefit obligation, end of year

 

 

66,773

 

 

 

78,527

 

Fair value of plan assets

 

 

—

 

 

 

—

 

Unfunded status of the plan, end of year

 

$

66,773

 

 

$

78,527

 

Current liability

 

 

—

 

 

 

—

 

Non-current liability

 

$

66,773

 

 

$

78,527

 

 

The accumulated benefit obligation for the plan was $63.3 million and $74.2 million as of December 31, 2021 and 2020, respectively. The actuarial gain of $15.0 million for the year ended December 31, 2021 was due to a reduction in the three-year average

cash bonus paid to participants. The actuarial loss of $25.0 million for the year ended December 31, 2020 was due to an increase in the three year-average cash bonus paid to participants.

The components of net periodic pension cost were as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Service cost

 

$

1,675

 

 

$

1,092

 

 

$

969

 

Interest cost

 

 

1,165

 

 

 

1,285

 

 

 

1,613

 

Amortization of prior service cost

 

 

1,099

 

 

 

1,098

 

 

 

1,595

 

Amortization of loss

 

 

4,936

 

 

 

2,181

 

 

 

1,641

 

Total net periodic benefit cost

 

$

8,875

 

 

$

5,656

 

 

$

5,818

 

 

The measurement date is the Company’s fiscal year end. The net periodic pension cost is based on assumptions determined at the prior year end measurement date.

Assumptions used to determine the year end benefit obligation were as follows:

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

Discount rate

 

 

2.16

%

 

 

1.54

%

Rate of compensation increases

 

 

3.50

%

 

 

3.50

%

 

Assumptions used to determine the net periodic pension cost were as follows:

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Discount rate

 

 

1.54

%

 

 

2.64

%

 

 

3.82

%

Rate of compensation increases

 

 

3.50

%

 

 

3.50

%

 

 

3.50

%

 

Actuarial gains and losses are amortized from accumulated other comprehensive loss into net periodic pension cost over future years based upon the average remaining service period of active plan participants, when the accumulation of such gains or losses exceeds 10% of the year end benefit obligation. The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost or credit) is included in the Company’s results of income on a straight-line basis over the average remaining service period of active plan participants.

The estimated amounts to be amortized from accumulated other comprehensive loss into the net periodic pension cost in 2022 are as follows (in thousands):

 

Amortization of prior service cost

 

$

1,119

 

Amortization of loss

 

 

1,487

 

Total

 

$

2,606

 

 

Benefit payments, which reflect estimated future service, are currently expected to be paid as follows (in thousands):

 

Year

 

Projected
Benefits

 

2022

 

$

—

 

2023

 

 

5,462

 

2024

 

 

5,462

 

2025

 

 

5,462

 

2026

 

 

6,709

 

2027-2031

 

 

37,528

 

Thereafter

 

 

22,217