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Savings Plans, Pension Plans and Other Postretirement Employee Benefits | 12 Months Ended
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Dec. 31, 2022
Retirement Benefits, Description [Abstract] |
Savings Plans, Pension Plans and Other Postretirement Employee Benefits | NOTE 15. SAVINGS PLANS, PEN SION PLANS AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS SAVINGS PLANS Substantially all of our employees are eligible to participate in 401(k) savings plans. In 2022, 2021 and 2020, we made matching 401(k) contributions on behalf of our employees of $4.2 million, $4.0 million and $3.6 million, respectively. Certain eligible employees who earn awards under our annual incentive plan are permitted to defer receipt of those awards. These employees may defer receipt of a minimum of 50% and a maximum of 100% of the award pursuant to rules established under our Management Deferred Compensation Plan. Eligible employees may also defer up to 50% of their base salary under the Management Deferred Compensation Plan. At the employee's election, deferrals may be deemed invested in a company stock unit account, a directed investment account with certain deemed investments available under the 401(k) Plan or a combination of these investment vehicles. If company stock units are elected, dividend equivalents are credited to the units. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS On January 1, 2011, we closed the legacy Potlatch pension plans to any new salaried and hourly non-represented employees hired after that date. Upon merger with Deltic in 2018, we assumed one qualified pension plan, one nonqualified pension plan and one other postretirement benefit (OPEB) plan. The acquired plans have been frozen to new participants since 2014. Effective December 31, 2021, the Potlatch Salaried Retirement Plan (Salaried Plan) was amended and restated merging the company's three other qualified pension plans into the Salaried Plan, creating one qualified pension plan renamed the PotlatchDeltic Retirement Plan. There were no impacts to vesting provisions or benefits to the participants of the former qualified defined benefit pension plans as a result of the merger into the Salaried Plan. In March 2022, we transferred $75.6 million of our qualified pension plan (the Plan) assets to an insurance company for the purchase of a group annuity contract. As a result of the transaction, the insurance company assumed responsibility for annuity administration and benefit payments to select retirees and terminated vested participants, with no change to participants' pension benefits. We recorded a non-cash pretax settlement charge of $14.2 million as a result of accelerating the recognition of actuarial losses included in Accumulated Other Comprehensive Income (Loss) that would have been recognized in future periods. The settlement triggered a remeasurement of the Plan's assets and liabilities. We updated the discount rate used to measure our projected benefit obligation for the Plan as of March 31, 2022, and to calculate the related net periodic benefit cost for the remainder of 2022 to 3.95% from 3.00%. All other pension assumptions remain unchanged. In February 2020, we purchased a group annuity contract from an insurance company to transfer $101.1 million of our outstanding pension benefit obligation related to our qualified pension plans to the insurance company. This transaction was funded with plan assets. As a result of the transaction, the insurance company assumed responsibility for annuity administration and benefit payments to select retirees, with no change to their monthly retirement benefit payment amounts. In connection with this transaction, we recorded a non-cash pretax settlement charge of $43.0 million as a result of accelerating the recognition of actuarial losses included in Accumulated Other Comprehensive Income (Loss) that would have been recognized in future periods. The settlement also triggered a remeasurement of plan assets and liabilities. We updated the discount rate used to measure our projected benefit obligation for the qualified pension plans as of February 29, 2020, and to calculate the related net periodic benefit cost for the remainder of 2020 to 2.95% from 3.40%. All other pension assumptions were unchanged. Legacy Potlatch and Deltic retirees under age 65 are offered a PPO medical plan with prescription drug coverage. Legacy Deltic retirees over age 65 are offered a PPO medical plan with no prescription drug coverage. This plan is considered a secondary plan to Medicare. For legacy Potlatch retirees age 65 or over, the medical plan is divided into two components, with the company continuing to self-insure prescription drugs and providing a fully-insured medical supplemental plan through AARP/United Healthcare. The health care plans require the retiree to contribute amounts in excess of the company subsidy in order to continue coverage. We use a December 31 measurement date for our benefit plans and obligations. We recognize the underfunded status of our defined benefit pension plans and OPEB plan obligations on our Consolidated Balance Sheets. We recognize changes in the funded status in the year in which changes occur in Accumulated Other Comprehensive Income (Loss) and amortize actuarial gains and losses in the Consolidated Statements of Operations as net periodic cost (benefit). Changes in benefit obligation, plan assets and funded status for our pension and OPEB plans were as follows for the year ended December 31:
|  | Pension Plans |  |  | OPEB |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Benefit obligation at beginning of year |  | $ | (386,205 | ) |  | $ | (408,429 | ) |  | $ | (32,258 | ) |  | $ | (50,835 | )
Service cost |  |  | (6,805 | ) |  |  | (8,182 | ) |  |  | (316 | ) |  |  | (670 | )
Interest cost |  |  | (10,646 | ) |  |  | (10,533 | ) |  |  | (914 | ) |  |  | (1,267 | )
Actuarial gain |  |  | 74,445 |  |  |  | 17,204 |  |  |  | 8,334 |  |  |  | 16,614 |
Benefits paid |  |  | 17,708 |  |  |  | 23,735 |  |  |  | 2,784 |  |  |  | 3,900 |
Plan settlements |  |  | 79,305 |  |  |  | — |  |  |  | — |  |  |  | — |
Benefit obligation at end of year |  | $ | (232,198 | ) |  | $ | (386,205 | ) |  | $ | (22,370 | ) |  | $ | (32,258 | )
Fair value of plan assets at beginning of year |  | $ | 329,796 |  |  | $ | 325,790 |  |  | $ | — |  |  | $ | — |
Actual return on plan assets |  |  | (62,807 | ) |  |  | 22,597 |  |  |  | — |  |  |  | — |
Employer contributions and benefit payments |  |  | 2,278 |  |  |  | 5,144 |  |  |  | 2,784 |  |  |  | 3,900 |
Benefits paid |  |  | (17,708 | ) |  |  | (23,735 | ) |  |  | (2,784 | ) |  |  | (3,900 | )
Plan settlements |  |  | (79,313 | ) |  |  | — |  |  |  | — |  |  |  | — |
Fair value of plan assets at end of year |  | $ | 172,246 |  |  | $ | 329,796 |  |  | $ | — |  |  | $ | — |
Amounts recognized in the consolidated balance sheets: |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  | $ | (2,517 | ) |  | $ | (2,462 | ) |  | $ | (2,409 | ) |  | $ | (2,531 | )
Noncurrent liabilities |  |  | (57,435 | ) |  |  | (53,947 | ) |  |  | (19,961 | ) |  |  | (29,727 | )
Funded status |  | $ | (59,952 | ) |  | $ | (56,409 | ) |  | $ | (22,370 | ) |  | $ | (32,258 | )
The accumulated benefit obligation for all defined benefit pension plans is determined using the actuarial present value of the vested benefits to which the employee is currently entitled and the employee’s expected date of separation for retirement. At December 31, 2022 and 2021, the accumulated benefit obligation for all defined benefit pension plans w as $223.7 million and $374.7 million, respectively. Actuarial gain (loss) in our pension plans is primarily due to year over yea r changes in the discount rate. Actuarial gain (loss) for our OPEB plans is primarily due to year over year changes in the discount rate and assumptions associated with medical trends, claims and participant contributions. During 2022 and 2021, funding of pension and other postretirement employee benefit plans was $5.1 million and $9.0 million, respectively. Pension plans with projected benefit obligations greater than plan assets were as follows at December 31:
|  |  | 2022 |  |  |  | 2021 |
Projected benefit obligations |  | $ | 232,198 |  |  | $ | 386,205 |
Fair value of plan assets |  | $ | 172,246 |  |  | $ | 329,796 |
Pension plans with accumulated benefit obligations greater than plan assets at December 31 are as follows:
|  |  | 2022 |  |  |  | 2021 |
Accumulated benefit obligations |  | $ | 223,686 |  |  | $ | 374,719 |
Fair value of plan assets |  | $ | 172,246 |  |  | $ | 329,796 |
PENSION ASSETS We utilize formal investment policy guidelines for our company-sponsored pension plan assets. Management is responsible for ensuring the investment policy and guidelines are adhered to and the investment objectives are met. The general policy states that plan assets will be invested to seek the greatest return consistent with the fiduciary character of the pension funds and to allow the plans to meet the need for timely pension benefit payments. The specific investment guidelines stipulate that management will maintain adequate liquidity for meeting expected benefit payments by reviewing, on a timely basis, contribution and benefit payment levels and appropriately revise long-term and short-term asset allocations. Management takes reasonable and prudent steps to preserve the value of pension fund assets and to avoid the risk of large losses. Major steps taken to provide this protection include the following: • Assets are diversified among various asset classes, such as global equities, fixed income, alternatives and liquid reserves. • Periodic reviews of allocations within these ranges are reviewed to determine what adjustments should be made based on changing economic and market conditions and specific liquidity requirements. • Assets are managed by professional investment managers and may be invested in separately managed accounts or commingled funds. • Assets are not invested in PotlatchDeltic stock. The investment guidelines also provide that the individual investment managers are expected to achieve a reasonable rate of return over a market cycle. Emphasis will be placed on long-term performance versus short-term market aberrations. Factors to be considered in determining reasonable rates of return include performance achieved by a diverse cross section of other investment managers, performance of commonly used benchmarks (e.g., MSCI All-Country World Index, Barclays Long Credit Index), actuarial assumptions for return on plan investments and specific performance guidelines given to individual investment managers. The long-term targeted asset allocation ranges for the pension benefit plans’ asset categories are as follows:
Asset Category |  | Allocation Range
Global equities |  | 5% - 35%
Fixed income securities |  | 50% - 100%
Alternatives, which may include equities and fixed income securities |  | 0% - 15%
Cash and cash equivalents |  | 0% - 5%
T he asset allocations of the pension benefit plans’ assets by asset category were as follows at December 31:
|  | Pension Plans |
Asset Category |  |  | 2022 |  |  |  | 2021 |
Global equities |  |  | 20 | % |  |  | 20 | %
Fixed income securities |  |  | 73 |  |  | 73 |
Other (includes cash and cash equivalents and alternatives) |  |  | 7 |  |  | 7 |
Total |  |  | 100 | % |  |  | 100 | %
The pension assets are stated at fair value. Refer to Note 1: Summary of Significant Accounting Policies for a discussion of the framework used to measure fair value. Assets within our defined benefit pension plans were invested as follows:
(in thousands) |  | December 31, 2022 |
Asset Category |  | Level 1 |  |  | Level 2 |  |  | Total |
Cash and cash equivalents |  | $ | 3,690 |  |  | $ | — |  |  | $ | 3,690 |
Global equity securities 1 |  |  | 33,974 |  |  |  | — |  |  |  | 33,974 |
Fixed income securities 2 |  |  | 107,557 |  |  |  | 18,801 |  |  |  | 126,358 |
Alternatives 3 |  |  | 8,224 |  |  |  | — |  |  |  | 8,224 |
Total |  | $ | 153,445 |  |  | $ | 18,801 |  |  | $ | 172,246 |
(in thousands) |  | December 31, 2021 |
Asset Category |  | Level 1 |  |  | Level 2 |  |  | Total |
Cash and cash equivalents |  | $ | 4,269 |  |  | $ | — |  |  | $ | 4,269 |
Global equity securities 1 |  |  | 66,517 |  |  |  | — |  |  |  | 66,517 |
Fixed income securities 2 |  |  | 182,506 |  |  |  | 59,405 |  |  |  | 241,911 |
Alternatives 3 |  |  | 17,099 |  |  |  | — |  |  |  | 17,099 |
Total |  | $ | 270,391 |  |  | $ | 59,405 |  |  | $ | 329,796 |
1 | Level 1 assets are international and domestic managed investments with quoted prices on major security markets and also include investments in registered investment company funds for which market quotations are generally readily available on the primary market or exchange on which they are traded. The global equity securities track the MSCI All-Country World Index.
2 | Level 1 assets are investments in a diversified portfolio of fixed income instruments of varying maturities representing corporate securities, U.S. treasuries, municipals and futures. Level 2 assets are thinly traded investments in a diversified portfolio of fixed income instruments of varying maturities representing mostly corporate securities. Both Level 1 & Level 2 investments track the Bloomberg Barclay’s Long-term Credit Index.
3 | Level 1 assets are long-term investment funds which are invested in tangible assets and real asset companies such as infrastructure, natural resources and timber.
There were no Level 3 investments held by the defined benefit pension plans at December 31, 2022 or 2021. PLAN ACTIVITY Pre-tax components of net periodic cost (benefit) recognized in our Consolidated Statements of Operations were as follows for the year ended December 31:
|  | Pension Plans |  |  | OPEB |
(in thousands) |  |  | 2022 |  |  |  | 2021 |  |  |  | 2020 |  |  |  | 2022 |  |  |  | 2021 |  |  |  | 2020 |
Service cost |  | $ | 6,805 |  |  | $ | 8,182 |  |  | $ | 8,932 |  |  | $ | 316 |  |  | $ | 670 |  |  | $ | 508 |
Interest cost |  |  | 10,646 |  |  |  | 10,533 |  |  |  | 12,263 |  |  |  | 914 |  |  |  | 1,267 |  |  |  | 1,502 |
Expected return on plan assets |  |  | (9,920 | ) |  |  | (14,100 | ) |  |  | (15,474 | ) |  |  | — |  |  |  | — |  |  |  | — |
Amortization of prior service cost (credit) |  |  | 73 |  |  |  | 86 |  |  |  | 111 |  |  |  | (381 | ) |  |  | (1,192 | ) |  |  | (1,274 | )
Amortization of actuarial loss |  |  | 5,400 |  |  |  | 14,455 |  |  |  | 15,426 |  |  |  | 623 |  |  |  | 2,178 |  |  |  | 1,672 |
Net periodic cost before pension settlement charges |  |  | 13,004 |  |  |  | 19,156 |  |  |  | 21,258 |  |  |  | 1,472 |  |  |  | 2,923 |  |  |  | 2,408 |
Pension settlement charge |  |  | 14,165 |  |  |  | — |  |  |  | 42,988 |  |  |  | — |  |  |  | — |  |  |  | — |
Other settlements |  |  | 783 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Net periodic cost |  | $ | 27,952 |  |  | $ | 19,156 |  |  | $ | 64,246 |  |  | $ | 1,472 |  |  | $ | 2,923 |  |  | $ | 2,408 |
The amounts recorded in Accumulated Other Comprehensive Income (Loss) on our Consolidated Balance Sheets, which have not yet been recognized as components of net periodic benefit costs at December 31, net of tax, consist of:
|  | Pension Plans |  |  | OPEB |
(in thousands) |  | 2022 |  |  | 2021 |  |  |  | 2022 |  |  |  | 2021 |
Net (loss) income |  | $ | (33,043 | ) |  | $ | (49,476 | ) |  | $ | 4,598 |  |  | $ | (2,075 | )
Prior service (cost) credit |  |  | (49 | ) |  |  | (103 | ) |  |  | — |  |  |  | 285 |
Total amount unrecognized |  | $ | (33,092 | ) |  | $ | (49,579 | ) |  | $ | 4,598 |  |  | $ | (1,790 | )
EXPECTED FUNDING AND BENEFIT PAYMENTS We are no t required to contribute to our qualified pension plan in 2023. Our non-qualified pension plan and other postretirement employee benefit plans are unfunded and benefit payments are paid from our general assets. We estimate that we will make non-qualified pension plan payments of $2.5 million and other postretirement employee benefit payments of $2.4 million in 2023, which are included below. Estimated future benefit payments, which reflect expected future service are as follows for the years indicated:
(in thousands) |  | Pension Plans |  |  | OPEB |
2023 |  | $ | 16,141 |  |  | $ | 2,409 |
2024 |  | $ | 16,514 |  |  | $ | 2,171 |
2025 |  | $ | 16,680 |  |  | $ | 1,984 |
2026 |  | $ | 16,835 |  |  | $ | 1,898 |
2027 |  | $ | 17,040 |  |  | $ | 1,783 |
2028–2032 |  | $ | 85,999 |  |  | $ | 8,019 |
ACTUARIAL ASSUMPTIONS The weighted-average assumptions used to determine the benefit obligation for our pension and OPEB plans were as follows at December 31:
|  | Pension Plans |  |  | OPEB |
|  |  | 2022 |  |  |  | 2021 |  |  |  | 2022 |  |  |  | 2021 |
Discount rate |  |  | 5.60 | % |  |  | 3.00 | % |  |  | 5.55 | % |  |  | 2.95 | %
Rate of compensation increase |  | 3.00 - 5.00% |  |  | 3.00 - 4.00% |  |  |  | — |  |  |  | — |
The weighted-average assumptions used for all pension and OPEB plans to determine the net periodic benefit cost were as follows for the year ended December 31:
|  | Pension Plans |  |  | OPEB |
|  |  | 2022 |  |  |  | 2021 |  |  |  | 2020 |  |  |  | 2022 |  |  |  | 2021 |  |  |  | 2020 |
Discount rate |  |  | 3.00 | % |  |  | 2.65 | % |  | 3.40% |  |  |  | 2.95 | % |  |  | 2.60 | % |  |  | 3.40 | %
Expected return on plan assets |  |  | 4.50 | % |  |  | 5.25 | % |  | 5.75% |  |  |  | — |  |  |  | — |  |  |  | — |
Rate of compensation increase |  | 3.00 - 5.00% |  |  | 3.00 - 4.00% |  |  | 3.00 - 4.00% |  |  |  | — |  |  |  | — |  |  |  | — |
The discount rate used in the determination of pension and other postretirement employee benefit obligations was calculated using hypothetical bond portfolios to match the expected benefit payments under each of our pension plans and other postretirement employee benefit obligations based on bonds available at each year end with a rating of "AA" or better. The portfolios were well-diversified over corporate industrial, corporate financial, municipal, federal and foreign government issuers. Determining our expected return on plan assets requires a high degree of judgment. The expected return on plan assets assumption is based upon an analysis of historical long-term returns for various investment categories, as measured by appropriate indices. These indices are weighted based upon the extent to which plan assets are invested in the particular categories in arriving at our determination of a composite expected return. At December 31, 2022, the assumed health care cost trend rate used to calculate other postretirement employee benefit obligations was between 9.81% and 11.77% depending on the individual plan participant makeup and graded ratably to an assum ption of 4.00% in 2047. The a ctual rates of health care cost increases may vary significantly from the assumption used because of unanticipated changes in health care costs.

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