Retirement and Benefit Plans

Our plans consist of noncontributory defined benefit pension plans, contributory defined contribution savings plans, a deferred compensation plan, and a multiemployer health and welfare plan. On April 25, 2018, Boise Cascade transferred $151.8 million of its qualified defined benefit pension plan (Pension Plan) assets to The Prudential Insurance Company of America (Prudential) for the purchase of a group annuity contract. Under the arrangement, Prudential assumed ongoing responsibility for administration and benefit payments for approximately one-third of Boise Cascade’s U.S. qualified pension plan projected benefit obligations.

As a result of the transfer of pension plan assets, we remeasured the Pension Plan on April 25, 2018, and recorded settlement expense of $12.0 million in second quarter 2018, as well as an actuarial gain of $13.3 million. The actuarial gain was the result of an increase in discount rate from 3.40% at December 31, 2017, to 4.05% at April 25, 2018, offset partially by lower than expected returns on plan assets through April 25, 2018, and a loss from the annuitization. As a result of the transfer of pension plan assets, we have rebalanced our plan assets to modestly increase our equity securities and decrease our fixed income securities given a longer liability duration profile of the Pension Plan subsequent to the transfer. At the same time, we also updated our long-term asset return expectations for each asset class held by the pension plan. As a result of the asset allocation shift and updated view of asset return expectations, the weighted average expected return on plan assets we will use for the remainder of 2018 in our calculation of net periodic benefit cost is 4.50%, down from 4.75% used for 2018 prior to the April 25, 2018, remeasurement.

The following table presents the pension benefit costs:



	Three Months Ended June 30						Six Months Ended June 30
	2018			2017			2018			2017
	(thousands)
Service cost	$	198		$	301		$	403		$	602
Interest cost	3,312			4,382			7,323			8,758
Expected return on plan assets	(3,292		)	(4,742		)	(7,880		)	(9,482		)
Amortization of actuarial loss	356			410			1,177			805
Plan settlement loss	12,003			—			12,003			—
Net periodic benefit expense	$	12,577		$	351		$	13,026		$	683

Service cost is recorded in the same income statement line items as other employee compensation costs arising from services rendered, and the other components of net periodic benefit expense are recorded in "Pension expense (excluding service costs) in our Consolidated Statements of Operations.

On August 3, 2018, we entered into a commitment letter with Prudential to purchase another group annuity contract, in which Prudential will assume ongoing responsibility for administration and benefit payments for approximately 40 percent, or $122 million, of Boise Cascade’s then remaining U.S. qualified pension plan projected benefit obligations. As a result, we expect to recognize a non-cash pension settlement charge of approximately $10 million before tax in the third quarter of 2018. In conjunction with the transaction, we also plan to make a discretionary pension contribution of $20.0 million in third quarter 2018, for which we will receive a tax deduction at the 2017 federal income tax rate.

During the six months ended June 30, 2018, we contributed $1.0 million in cash to the pension plans. For the remainder of 2018, we expect to make approximately $21.0 million in cash contributions to the pension plans, of which $20.0 million is discretionary, as noted above.