NOTE 12: EMPLOYEE BENEFITS

Retirement Plan

On April 1, 2002, three separate pension plans for employees of the former Queens County Savings Bank, the former CFS Bank, and the former Richmond County Savings Bank were merged and renamed the “New York Community Bancorp Retirement Plan” (the “Retirement Plan”). The pension plan for employees of the former Roslyn Savings Bank was merged into the Retirement Plan on September 30, 2004. The pension plan for employees of the former Atlantic Bank of New York was merged into the Retirement Plan on March 31, 2008.

The Retirement Plan covers substantially all employees who had attained minimum age, service, and employment status requirements prior to the date when the individual plans were frozen by the banks of origin. Once frozen, the individual plans ceased to accrue additional benefits, service, and compensation factors, and became closed to employees who would otherwise have met eligibility requirements after the “freeze” date.

The following table sets forth certain information regarding the Retirement Plan as of the dates indicated:


	December 31,
(in thousands)	2016			2015
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	146,618		$	157,061
Interest cost		5,881			6,063
Actuarial loss (gain)		611			(7,891	)
Annuity payments		(6,473	)		(6,339	)
Settlements		(208	)		(2,276	)

Benefit obligation at end of year	$	146,429		$	146,618

Change in Plan Assets:
Fair value of assets at beginning of year	$	211,888		$	222,990
Actual return (loss) on plan assets		15,533			(2,487	)
Contributions		—			—
Annuity payments		(6,473	)		(6,339	)
Settlements		(208	)		(2,276	)

Fair value of assets at end of year	$	220,740		$	211,888

Funded status (included in “Other assets”)	$	74,311		$	65,270

Changes recognized in other comprehensive income (loss) for the year ended December 31:
Amortization of prior service cost	$	—		$	—
Amortization of actuarial loss		(9,050)			(8,208	)
Net actuarial loss arising during the year		706			12,155

Total recognized in other comprehensive loss for the year (pre-tax)		$(8,344)		$	3,947

Accumulated other comprehensive loss (pre-tax) not yet recognized in net periodic benefit cost at December 31:
Prior service cost	$	—		$	—
Actuarial loss, net		79,541			87,885

Total accumulated other comprehensive loss (pre-tax)	$	79,541		$	87,885

In 2017, an estimated $8.2 million of unrecognized net actuarial loss for the Retirement Plan will be amortized from AOCL into net periodic benefit cost. The comparable amount recognized as net periodic benefit cost in 2016 was $9.0 million. No prior service cost will be amortized in 2017 and none was amortized in 2016. The discount rates used to determine the benefit obligation at December 31, 2016 and 2015 were 3.9% and 4.1%, respectively.

The discount rate reflects rates at which the benefit obligation could be effectively settled. To determine this rate, the Company considers rates of return on high-quality fixed-income investments that are currently available and are expected to be available during the period until the pension benefits are paid. The expected future payments are discounted based on a portfolio of high-quality rated bonds (above-median AA curve) for which the Company relies on the Citigroup Pension Liability Index that is published as of the measurement date.

The components of net periodic pension credit were as follows for the years indicated:


	Years Ended December 31,
(in thousands)	2016			2015			2014
Components of net periodic pension credit:
Interest cost	$	5,881		$	6,063		$	5,895
Expected return on plan assets		(15,627	)		(17,559	)		(19,435	)
Amortization of net actuarial loss		9,050			8,208			3,289

Net periodic pension credit	$	(696	)	$	(3,288	)	$	(10,251	)

The following table indicates the weighted average assumptions used in determining the net periodic benefit cost for the years indicated:


	Years Ended December 31,
	2016			2015			2014
Discount rate		4.1	%		4.0	%		4.8	%
Expected rate of return on plan assets		7.5			8.0			9.0

As of December 31, 2016, Retirement Plan assets were invested in two diversified investment portfolios of the Pentegra Retirement Trust (the “Trust”) (formerly known as “RSI Retirement Trust”), a private placement investment fund.

The Company (in this context, the “Plan Sponsor”) chooses the specific asset allocation for the Retirement Plan within the parameters set forth in the Trust’s Investment Policy Statement. The long-term investment objectives are to maintain the Retirement Plan’s assets at a level that will sufficiently cover the Plan Sponsor’s long-term obligations, and to generate a return on those assets that will meet or exceed the rate at which the Plan Sponsor’s long-term obligations will grow.

The Retirement Plan allocates its assets in accordance with the following targets:

•

To hold 55% of its assets in equity securities via investment in the Trust’s Long-Term Growth—Equity (“LTGE”) Portfolio, a diversified portfolio that invests in a number of actively and passively managed equity mutual funds and collective trusts in order to diversify within U.S. and non-U.S. equity markets;

•

To hold 44% of its assets in intermediate-term investment-grade bonds via investment in the Trust’s Long-Term Growth—Fixed Income (“LTGFI”) Portfolio, a diversified portfolio that invests in a number of fixed-income mutual funds and collective investment trusts, primarily including intermediate-term bond funds with a focus on U.S. investment grade securities and opportunistic allocations to below-investment grade and non-U.S. investments; and

•

To hold 1% of its assets in a cash-equivalent portfolio for liquidity purposes.

In addition, the Retirement Plan holds Company shares, the value of which is approximately equal to 11% of the assets that are held by the Trust.

The LTGE and LTGFI portfolios are designed to provide long-term growth of equity and fixed-income assets with the objective of achieving an investment return in excess of the cost of funding the active life, deferred vesting, and all 30-year term and longer obligations of retired lives in the Trust. Risk and volatility are further managed in accordance with the distinct investment objectives of the Trust’s respective portfolios.

The following table presents information about the fair value measurements of the investments held by the Retirement Plan as of December 31, 2016:


(in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity:
Large-cap value ⁽¹⁾	$	19,735	$	—	$	19,735	$	—
Large-cap growth ⁽²⁾		17,726		—		17,726		—
Large-cap core ⁽³⁾		12,549		—		12,549		—
Mid-cap value ⁽⁴⁾		4,203		—		4,203		—
Mid-cap growth ⁽⁵⁾		3,825		—		3,825		—
Mid-cap core ⁽⁶⁾		4,303		—		4,303		—
Small-cap value ⁽⁷⁾		3,441		—		3,441		—
Small-cap growth ⁽⁸⁾		2,887		—		2,887		—
Small-cap core ⁽⁹⁾		6,432		—		6,432		—
International equity ⁽¹⁰⁾		23,302		—		23,302		—
Fixed Income Funds:
Fixed Income – U.S. Core ⁽¹¹⁾		70,912		—		70,912		—
Intermediate duration ⁽¹²⁾		24,312		—		24,312		—
Equity Securities:
Company common stock		24,403		24,403		—		—
Cash Equivalents:								—
Money market ^*		2,710		1,092		1,618		—

	$	220,740	$	25,495	$	195,245	$	—

*	Includes cash equivalent investments in equity and fixed income strategies.

(1)

This category contains large-cap stocks with above-average yields. The portfolio typically holds between 60 and 70 stocks.

(2)

This category seeks long-term capital appreciation by investing primarily in large growth companies based in the U.S.

(3)

This fund tracks the performance of the S&P 500 Index by purchasing the securities represented in the Index in approximately the same weightings as the Index.

(4)

This category employs an indexing investment approach designed to track the performance of the Center for Research in Security Prices (“CRSP”) U.S. Mid-Cap Value Index.

(5)

This category employs an indexing investment approach designed to track the performance of the CRSP U.S. Mid-Cap Growth Index.

(6)

This category seeks to track the performance of the S&P Midcap 400 Index.

(7)

This category consists of a selection of investments based on the Russell 2000 Value Index.

(8)

This category consists of a selection of investments based on the Russell 2000 Growth Index.

(9)

This category consists of an index fund designed to track the Russell 2000, along with a fund investing in readily marketable securities of U.S. companies with market capitalizations within the smallest 10% of the market universe, or smaller than the 1000th largest U.S. company.

(10)

This category has investments in medium to large non-U.S. companies, including high quality, durable growth companies and companies based in countries with stable economic and political systems. A portion of this category consists of an index fund designed to track the Morgan Stanley and Capital International Group All Country World Index (“MSCI ACWI”) ex-U.S. Net Dividend Return Index.

(11)

This category currently includes equal investments in three mutual funds, two of which usually hold at least 80% of fund assets in investment-grade fixed income securities, seeking to outperform the Barclays U.S. Aggregate Bond Index while maintaining a similar duration to that index. The third fund targets investments of 50% or more in mortgage-backed securities guaranteed by the U.S. government and its agencies.

(12)

This category consists of a mutual fund that invests in a diversified portfolio of high-quality bonds and other fixed income securities, including U.S. Government obligations, mortgage-related and asset-backed securities, corporate and municipal bonds, CMOs, and other securities that are mostly rated “A” or better.

Current Asset Allocation

The asset allocations for the Retirement Plan as of December 31, 2016 and 2015 were as follows:


	At December 31,
	2016			2015
Equity securities		56	%		55	%
Debt securities		43			44
Cash equivalents		1			1

Total		100	%		100	%

Determination of Long-Term Rate of Return

The long-term rate of return on Retirement Plan assets assumption was based on historical returns earned by equities and fixed income securities, and adjusted to reflect expectations of future returns as applied to the Retirement Plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn long-term rates of return in the ranges of 6% to 8% and 3% to 5%, respectively, with an assumed long-term inflation rate of 2.5% reflected within these ranges. When these overall return expectations are applied to the Retirement Plan’s target allocations, the result is an expected rate of return of 5% to 8%.

Expected Contributions

The Company does not expect to contribute to the Retirement Plan in 2017.

Expected Future Annuity Payments

The following annuity payments, which reflect expected future service, as appropriate, are expected to be paid by the Retirement Plan during the years indicated:


(in thousands)
2017	$	7,077
2018		7,158
2019		7,310
2020		7,385
2021		7,532
2022 and thereafter		39,526

Total	$	75,988

Qualified Savings Plan

The Company maintains a defined contribution qualified savings plan in which all full-time employees are able to participate after three months of service and having attained age 21. No matching contributions are made by the Company to this plan.

Post-Retirement Health and Welfare Benefits

The Company offers certain post-retirement benefits, including medical, dental, and life insurance (the “Health & Welfare Plan”) to retired employees, depending on age and years of service at the time of retirement. The costs of such benefits are accrued during the years that an employee renders the necessary service.

The Health & Welfare Plan is an unfunded plan and is not expected to hold assets for investment at any time. Any contributions made to the Health & Welfare Plan are used to immediately pay plan premiums and claims as they come due.

The following table sets forth certain information regarding the Health & Welfare Plan as of the dates indicated:


	December 31,
(in thousands)	2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	17,280		$	18,375
Service cost		5			4
Interest cost		639			700
Actuarial gain		(673	)		(880	)
Premiums and claims paid		(957	)		(919	)

Benefit obligation at end of year	$	16,294		$	17,280

Change in plan assets:
Fair value of assets at beginning of year	$	—		$	—
Employer contribution		957			919
Premiums and claims paid		(957	)		(919	)

Fair value of assets at end of year	$	—		$	—

Funded status (included in “Other liabilities”)	$	(16,294	)	$	(17,280	)

Changes recognized in other comprehensive (loss) income for the year ended December 31:
Amortization of prior service cost	$	249		$	249
Amortization of actuarial gain		(326	)		(383	)
Net actuarial (gain) loss arising during the year		(673	)		(880	)

Total recognized in other comprehensive loss for the year (pre-tax)	$	(750	)	$	(1,014	)

Accumulated other comprehensive loss (pre-tax) not yet recognized in net periodic benefit cost at December 31:
Prior service cost	$	(1,283	)	$	(1,533	)
Actuarial loss, net		5,137			6,137

Total accumulated other comprehensive loss (pre-tax)	$	3,854		$	4,604

The discount rates used in the preceding table were 3.7% and 3.8%, respectively, at December 31, 2016 and 2015.

The estimated net actuarial loss and the prior service liability that will be amortized from AOCL into net periodic benefit cost in 2017 are $275,000 and $249,000, respectively.

The following table presents the components of net periodic benefit cost for the years indicated:


	Years Ended December 31,
(in thousands)	2016			2015			2014
Components of Net Periodic Benefit Cost:
Service cost	$	5		$	4		$	4
Interest cost		639			700			759
Amortization of past-service liability		(249	)		(249	)		(249	)
Amortization of net actuarial loss		326			383			474

Net periodic benefit cost	$	721		$	838		$	988

The following table presents the weighted average assumptions used in determining the net periodic benefit cost for the years indicated:


	Years Ended December 31,
	2016			2015			2014
Discount rate		3.8	%		4.0	%		4.3	%
Current medical trend rate		6.5			6.5			7.0
Ultimate trend rate		5.0			5.0			5.0
Year when ultimate trend rate will be reached		2022			2018			2018

Had the assumed medical trend rate at December 31, 2016 increased by 1% for each future year, the accumulated post-retirement benefit obligation at that date would have increased by $768,000, and the aggregate of the benefits earned and the interest components of 2016 net post-retirement benefit cost would each have increased by $32,000. Had the assumed medical trend rate decreased by 1% for each future year, the accumulated post-retirement benefit obligation at December 31, 2016 would have declined by $645,000, and the aggregate of the benefits earned and the interest components of 2016 net post-retirement benefit cost would each have declined by $27,000.

Expected Contributions

The Company expects to contribute $1.3 million to the Health & Welfare Plan to pay premiums and claims in the fiscal year ending December 31, 2017.

Expected Future Payments for Premiums and Claims

The following amounts are currently expected to be paid for premiums and claims during the years indicated under the Health & Welfare Plan:


(in thousands)
2017	$	1,307
2018		1,277
2019		1,238
2020		1,202
2021		1,165
2022 and thereafter		5,220

Total	$	11,409