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Retirement Plans

12 Months Ended

Dec. 31, 2019

(11) Retirement Plans

The Company sponsors a defined benefit plan for its inland vessel personnel and shore based tankermen. The plan benefits are based on an employee’s years of service and compensation. The plan assets consist primarily of equity and fixed income securities.

On April 12, 2017, the Company amended its pension plan to cease all benefit accruals for periods after May 31, 2017 for certain participants. Participants grandfathered and not impacted were those, as of the close of business on May 31, 2017, who either (a) had completed 15 years of pension service or (b) had attained age 50 and completed 10 years of pension service. Participants non-grandfathered are eligible to receive discretionary 401(k) plan contributions. The Company did not incur any one-time charges related to this amendment but the pension plan’s projected benefit obligation decreased by $33,433,000.

On February 14, 2018, with the acquisition of Higman, the Company assumed Higman’s pension plan for its inland vessel personnel and office staff. On March 27, 2018, the Company amended the Higman pension plan to close it to all new entrants and cease all benefit accruals for periods after May 15, 2018 for all participants. The Company did not incur any one-time charges related to this amendment but the Higman pension plan’s projected benefit obligation decreased by $3,081,000. The Company made contributions to the Higman pension plan of $1,615,000 in 2019 for the 2018 plan year, $1,449,000 in 2019 for the 2019 plan year, $6,717,000 in 2018 for the 2016 and 2017 plan years and $1,385,000 in 2018 for the 2018 year.

The fair value of plan assets of the Company’s pension plans was $358,197,000 and $303,151,000 at December 31, 2019 and 2018 respectively. As of December 31, 2019 and 2018, these assets were allocated among asset categories as follows:

Asset Category	2019			2018			Current Minimum, Target and Maximum Allocation Policy
U.S. equity securities		53	%		52	%		30% — 50%— 70	%
International equity securities		19			17			0% — 20%— 30	%
Debt securities		26			28			15% — 30%— 55	%
Cash and cash equivalents		2			3			0% — 0%— 5	%
		100	%		100	%

At December 31, 2019 and 2018, $25,871,000 and $22,497,000 respectively, was held in cash and equity securities classified within Level 1 of the valuation hierarchy and $125,000 and $804,000, respectively, was held in real estate investments classified within Level 3 of the valuation hierarchy. All other plan assets are invested in common collective trusts and valued using the net asset value per share practical expedient and therefore not valued within the valuation hierarchy.

The Company’s investment strategy focuses on total return on invested assets (capital appreciation plus dividend and interest income). The primary objective in the investment management of assets is to achieve long-term growth of principal while avoiding excessive risk. Risk is managed through diversification of investments within and among asset classes, as well as by choosing securities that have an established trading and underlying operating history.

The Company makes various assumptions when determining defined benefit plan costs including, but not limited to, the current discount rate and the expected long-term return on plan assets. Discount rates are determined annually and are based on a yield curve that consists of a hypothetical portfolio of high quality corporate bonds with maturities matching the projected benefit cash flows. The Company assumed that plan assets would generate a long-term rate of return of 7.0% in 2019 and 2018. The Company developed its expected long-term rate of return assumption by evaluating input from investment consultants comparing historical returns for various asset classes with its actual and targeted plan investments. The Company believes that its long-term asset allocation, on average, will approximate the targeted allocation.

The Company’s pension plan funding strategy is to make annual contributions in amounts equal to or greater than amounts necessary to meet minimum government funding requirements. The plan’s benefit obligations are based on a variety of demographic and economic assumptions, and the pension plan assets’ returns are subject to various risks, including market and interest rate risk, making an accurate prediction of the pension plan contribution difficult. The Company’s pension plan funding was 86% of the pension plans’ accumulated benefit obligation at December 31, 2019, including the Higman pension plan.

The Company sponsors an unfunded defined benefit health care plan that provides limited postretirement medical benefits to employees who met minimum age and service requirements, and to eligible dependents. The plan limits cost increases in the Company’s contribution to 4% per year. The plan is contributory, with retiree contributions adjusted annually. The plan eliminated coverage for future retirees as of December 31, 2011. The Company also has an unfunded defined benefit supplemental executive retirement plan (“SERP”) that was assumed in an acquisition in 1999. That plan ceased to accrue additional benefits effective January 1, 2000.

The following table presents the change in benefit obligation and plan assets for the Company’s defined benefit plans and postretirement benefit plan (in thousands):

													Other Postretirement Benefits
	Pension Benefits												Postretirement Welfare Plan
	Pension Plan						SERP						Postretirement Welfare Plan
	2019			2018			2019			2018			2019			2018
Change in benefit obligation
Benefit obligation at beginning of year	$	381,483		$	354,994		$	1,246		$	1,412		$	743		$	679
Service cost		7,364			7,622			—			—			—			—
Interest cost		16,493			15,499			52			49			31			24
Actuarial loss (gain)		49,478			(44,935	)		72			(70	)		(22	)		143
Gross benefits paid		(11,957	)		(11,749	)		(145	)		(145	)		(90	)		(103	)
Curtailments		—			(3,081	)		—			—			—			—
Acquisition		—			63,133			—			—			—			—
Benefit obligation at end of year	$	442,861		$	381,483		$	1,225		$	1,246		$	662		$	743

Accumulated benefit obligation at end of year	$	417,981		$	356,797		$	1,225		$	1,246		$	662		$	743

Weighted-average assumption used to determine benefit obligation at end of year
Discount rate (a)		3.5	%		4.4	%	3.5	%	4.4	%	3.5	%	4.4	%
Rate of compensation increase	Service-based table			Service-based table			—		—		—		—
Health care cost trend rate
Initial rate		—			—		—		—		6.75	%	7.0	%
Ultimate rate		—			—		—		—		5.0	%	5.0	%
Years to ultimate		—			—		—		—		2025		2025

Effect of one-percentage-point change in assumed health care cost trend rate on postretirement obligation
Increase	$	—	$	—	$	—	$	—	$	68		$	75
Decrease		—		—		—		—		(59	)		(65	)

Change in plan assets
Fair value of plan assets at beginning of year	$	303,151		$	294,995		$	—		$	—		$	—		$	—
Actual return on plan assets		63,939			(18,214	)		—			—			—			—
Employer contribution		3,064			8,102			145			145			90			103
Gross benefits paid		(11,957	)		(11,749	)		(145	)		(145	)		(90	)		(103	)
Acquisition		—			30,017			—			—			—			—
Fair value of plan assets at end of year	$	358,197		$	303,151		$	—		$	—		$	—		$	—

(a) The discount rate for the Higman pension plan in 2018 was changed from 4.13% as of February 14, 2018 and 4.02% as of March 31, 2018 to 4.40% as of December 31, 2018.

The following table presents the funded status and amounts recognized in the Company’s consolidated balance sheet for the Company’s defined benefit plans and postretirement benefit plan at December 31, 2019 and 2018 (in thousands):

													Other Postretirement Benefits
	Pension Benefits												Postretirement Welfare Plan
	Pension Plan						SERP						Postretirement Welfare Plan
	2019			2018			2019			2018			2019			2018
Funded status at end of year
Fair value of plan assets	$	358,197		$	303,151		$	—		$	—		$	—		$	—
Benefit obligations		(442,861	)		(381,483	)		(1,225	)		(1,246	)		(662	)		(743	)
Funded status and amount recognized at end of year	$	(84,664	)	$	(78,332	)	$	(1,225	)	$	(1,246	)	$	(662	)	$	(743	)

Amounts recognized in the consolidated balance sheets
Noncurrent asset	$	—		$	—		$	—		$	—		$	—		$	—
Current liability		—			—			(159	)		(158	)		(60	)		(65	)
Long-term liability		(84,664	)		(78,332	)		(1,066	)		(1,087	)		(602	)		(678	)

Amounts recognized in accumulated other comprehensive income
Net actuarial loss (gain)	$	52,160	$	47,101	$	460	$	415	$	(3,795	)	$	(4,313	)
Prior service cost (credit)		—		—		—		—		—			—
Accumulated other compensation income	$	52,160	$	47,101	$	460	$	415	$	(3,795	)	$	(4,313	)

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets at December 31, 2019 and 2018 were as follows (in thousands):

	Pension Benefits
	Pension Plan				SERP
	2019		2018		2019		2018
Projected benefit obligation in excess of plan assets
Projected benefit obligation at end of year	$	442,861	$	381,483	$	1,225	$	1,246
Fair value of plan assets at end of year		358,197		303,151		—		—

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2019 and 2018 were as follows (in thousands):

	Pension Benefits
	Pension Plan				SERP
	2019		2018		2019		2018
Accumulated benefit obligation in excess of plan assets
Projected benefit obligation at end of year	$	442,861	$	381,483	$	1,225	$	1,246
Accumulated benefit obligation at end of year		417,981		356,797		1,225		1,246
Fair value of plan assets at end of year		358,197		303,151		—		—

The following tables present the expected cash flows for the Company’s defined benefit plans and postretirement benefit plan at December 31, 2019 and 2018 (in thousands):

									Other Postretirement Benefits
	Pension Benefits								Postretirement Welfare Plan
	Pension Plan				SERP				Postretirement Welfare Plan
	2019		2018		2019		2018		2019		2018
Expected employer contributions
First year	$	2,407	$	2,395	$	—	$	—	$	—	$	—

									Other Postretirement Benefits
	Pension Benefits								Postretirement Welfare Plan
	Pension Plan				SERP				Postretirement Welfare Plan
	2019		2018		2019		2018		2019		2018
Expected benefit payments (gross)
Year one	$	12,063	$	12,209	$	162	$	162	$	61	$	66
Year two		13,123		13,108		158		159		62		68
Year three		14,300		13,959		133		155		51		69
Year four		15,572		14,959		107		130		51		57
Year five		16,857		16,052		103		104		49		56
Next five years		100,587		96,547		426		447		220		261

The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s defined benefit plans for the years ended December 31, 2019, 2018 and 2017 were as follows (in thousands):


	Pension Benefits
	Pension Plan									SERP
	2019			2018			2017			2019			2018			2017
Components of net periodic benefit cost
Service cost	$	7,364		$	7,622		$	10,677		$	—		$	—		$	—
Interest cost		16,493			15,499			13,729			52			49			58
Expected return on plan assets		(20,956	)		(22,406	)		(18,195	)		—			—			—
Amortization:
Actuarial loss		1,438			2,890			4,400			28			23			28
Prior service credit		—			—			—			—			—			—
Net periodic benefit cost		4,339			3,605			10,611			80			72			86

Other changes in plan assets and benefit obligations recognized in other comprehensive income
Current year actuarial loss (gain)		6,497			(7,396	)		7,562			73			(70	)		42
Recognition of actuarial loss		(1,438	)		(2,890	)		(37,833	)		(28	)		(23	)		(28	)
Recognition of prior service credit		—			—			—			—			—			—
Total recognized in other comprehensive income		5,059			(10,286	)		(30,271	)		45			(93	)		14

Total recognized in net periodic benefit cost and other comprehensive income	$	9,398		$	(6,681	)	$	(19,660	)	$	125		$	(21	)	$	100
Weighted average assumptions used to determine net periodic benefit cost
Discount rate (a)		4.4	%		3.7	%		4.2/4.0	%		4.4	%		3.7	%		4.2	%
Expected long-term rate of return on plan assets		7.0	%		7.0	%		7.0	%		—			—			—
Rate of compensation increase	Service- based table			Service- based table			Service- based table				—			—			—

(a)

The 2018 discount rate for benefit cost for the Higman pension plan was changed from 4.13% as of February 14, 2018 and 4.02% as of March 31, 2018 to 4.40% as of December 31, 2018. In 2017, benefit cost for the pension plan was determined using a discount rate of 4.2% for the period beginning January 1, 2017 and ending April 11, 2017 and 4.0% for the period beginning April 12, 2017 and ending December 31, 2017.

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2020 are as follows (in thousands):

	Pension Benefits
	Pension Plan		SERP
Actuarial loss	$	929	$	35
Prior service credit		—		—
	$	929	$	35

The components of net periodic benefit cost and other changes in benefit obligations recognized in other comprehensive income for the Company’s postretirement benefit plan for the years ended December 31, 2019, 2018 and 2017 were as follows (in thousands):

	Other Postretirement Benefits
	Postretirement Welfare Plan
	2019			2018			2017
Components of net periodic benefit cost
Service cost	$	—		$	—		$	—
Interest cost		31			24			27
Amortization:
Actuarial gain		(540	)		(596	)		(668	)
Prior service cost		—			—			—
Net periodic benefit cost		(509	)		(572	)		(641	)

Other changes in benefit obligations recognized in other comprehensive income
Current year actuarial loss (gain)		(22	)		144			52
Recognition of actuarial gain		540			596			668
Recognition of prior service cost		—			—			—
Total recognized in other comprehensive income		518			740			720

Total recognized in net periodic benefit cost and other comprehensive income	$	9		$	168		$	79

Weighted average assumptions used to determine net periodic benefit cost
Discount rate		4.4	%		3.7	%		4.2	%
Health care cost trend rate:
Initial rate		7.0	%		7.0	%		7.0	%
Ultimate rate		5.0	%		5.0	%		5.0	%
Years to ultimate		2025			2022			2021

Effect of one-percentage-point change in assumed health care cost trend rate on aggregate service and interest cost
Increase	$	3		$	3		$	3
Decrease		(3	)		(2	)		(3	)

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2020 are as follows (in thousands):

	Other Postretirement Benefits
	Postretirement Welfare Plan
Actuarial gain	$	(522	)
Prior service cost		—
	$	(522	)

The Company also contributes to a multiemployer pension plan pursuant to a collective bargaining agreement which covers certain vessel crew members of its coastal operations and expires on April 30, 2022. The Company began participation in the Seafarers Pension Trust (“SPT”) with the Penn Maritime, Inc. acquisition on December 14, 2012.

Contributions to the SPT are made currently based on a per day worked basis and charged to expense as incurred and included in costs of sales and operating expenses in the consolidated statement of earnings. During 2019 and 2018, the Company made contributions of $665,000 and $671,000, respectively, to the SPT. The Company’s contributions to the SPT exceeded 5% of total contributions to the SPT in 2018. Total contributions for 2019 are not yet available. The Company did not pay any material surcharges in 2019 or 2018.

The federal identification number of the SPT is 13-6100329 and the Certified Zone Status is Green at December 31, 2018. The Company’s future minimum contribution requirements under the SPT are unavailable because actuarial reports for the 2019 plan year are not yet complete and such contributions are subject to negotiations between the employers and the unions. The SPT was not in endangered or critical status for the 2018 plan year, the latest period for which a report is available, as the funded status was in excess of 100%. Based on an actuarial valuation performed as of December 31, 2018, there would be no withdrawal liability if the Company chose to withdraw from the SPT although the Company currently has no intention of terminating its participation in the SPT.

The Company also contributes to a multiemployer pension plan pursuant to a collective bargaining agreement which covers certain employees of its distribution and services segment in New Jersey and expires on October 8, 2023. The Company began participation in the Central Pension Fund of the International Union of Operating Engineers and Participating Employers (“CPF”) with the S&S acquisition on September 13, 2017.

Contributions to the CPF are made currently based on a fixed hourly rate for each hour worked or paid basis (in some cases contributions are made as a percentage of gross pay) and charged to expense as incurred and included in costs of sales and operating expenses in the consolidated statement of earnings. During 2019 and 2018, the Company made contributions of $693,000 and $736,000, respectively, to the CPF. Total contributions for the 2019 plan year are not yet available. The Company did not pay any material surcharges in 2019 or 2018.

The federal identification number of the CPF is 36-6052390 and the Certified Zone Status is Green at January 31, 2019. The Company’s future minimum contribution requirements under the CPF are unavailable because actuarial reports for the 2019 plan year, which ended January 31, 2020, are not yet complete and such contributions are subject to negotiations between the employers and the unions. The CPF was not in endangered or critical status for the 2018 plan year, the latest period for which a report is available, as the funded status was 95%. Based on an actuarial valuation performed as of January 31, 2019, there would be no withdrawal liability if the Company chose to withdraw from the CPF although the Company currently has no intention of terminating its participation in the CPF.

In addition to the defined benefit plans, the Company sponsors various defined contribution plans for substantially all employees. The aggregate contributions to the plans were $25,409,000, $22,392,000 and $17,247,000 in 2019, 2018 and 2017, respectively.