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Retirement and Benefit Plans | 12 Months Ended
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Dec. 31, 2018
Retirement Benefits [Abstract] |
Retirement and Benefit Plans | Retirement and Benefit Plans Our retirement plans consist of noncontributory defined benefit pension plans, contributory defined contribution savings plans, a deferred compensation plan, and a multiemployer health and welfare plan. Defined Benefit Plans Some of our employees are covered by noncontributory defined benefit pension plans. We have one qualified defined benefit pension plan (Pension Plan). Benefits under the Pension Plan are frozen for salaried employees and substantially all eligible hourly employees. The following summarizes recent activity of each individual plan:
• | During third quarter 2016, we offered a program whereby certain terminated vested participants and active employees of the Boise Cascade Company Pension Plan could elect to take a one-time voluntary lump-sum payment equal to the present value of future benefits. Active employees were required to retire on or before November 1, 2016 to receive their lump-sum benefits. This program closed on September 30, 2016 with participants electing lump-sum payments totaling approximately $21 million. Plan participants who elected to participate in the program received their lump-sum benefits on November 1, 2016. We remeasured the Pension Plan on November 1, 2016 and recorded settlement expense of $3.9 million in fourth quarter 2016. See "Assumptions" below for the impact on our discount rate and expected return on plan asset assumptions.
• | On April 25, 2018, and August 10, 2018, we transferred $151.8 million and $124.8 million, respectively, of our qualified defined benefit pension plan assets to The Prudential Insurance Company of America (Prudential) for the purchase of group annuity contracts. Under the arrangements, Prudential assumed ongoing responsibility for administration and benefit payments for all plan participants in payout status as of July 1, 2018, which comprised over 60% of our U.S. qualified pension plan projected benefit obligations. As a result of the transfers of pension plan assets, we remeasured the Pension Plan on April 25, 2018, and August 10, 2018, and recorded settlement expense in second and third quarters 2018 of $12.0 million and $11.3 million, respectively. See "Assumptions" below for the impact on our discount rate and expected return on plan asset assumptions.
We also have nonqualified salaried pension plans, which were frozen so that no future benefits have accrued since December 31, 2009. Defined Contribution Plans We sponsor contributory defined contribution savings plans for most of our salaried and hourly employees, and we generally provide company contributions to the savings plans. Since March 1, 2010, we have contributed 4% of each salaried participant's eligible compensation to the plan as a nondiscretionary company contribution. In addition, beginning in 2012, for the years that a performance target is met, we contribute an additional amount of the employee's eligible compensation, depending on company performance and the employee's years of service. During the year ended December 31, 2018, company performance resulted in additional contributions in the range of 2% to 4% of eligible compensation. During the year ended December 31, 2017, company performance resulted in additional contributions in the range of 1% to 2% of eligible compensation. During the year ended December 31, 2016, company performance resulted in no additional contributions. The company contributions for union and nonunion hourly employees vary by location. Company contributions paid, or to be paid, to our defined contribution savings plans for the years ended December 31, 2018, 2017, and 2016, were $22.2 million, $15.9 million, and $11.4 million, respectively. Defined Contributory Trust We have participated in a multiemployer defined contributory trust plan for certain union hourly employees since 2013. As of December 31, 2018, 2017, and 2016 approximately 1,221, 1,365, and 1,369, respectively, of our employees participated in this plan. For certain of these employees, per the terms of the representative collective bargaining agreements, we were required to contribute $0.85, $0.80, and $0.80, respectively, per hour per active employee during 2018, 2017, and 2016. For certain other of these employees, we were required to contribute 4.5% of the employee's earnings during 2018 and 2017, and approximately 4% of the employee's earnings during 2016. Company contributions to the multiemployer defined contributory trust plan for each of the years ended December 31, 2018, 2017, and 2016 were $2.8 million. After required contributions, we have no further obligation to the plan. The plan and its assets are managed by a joint board of trustees. Deferred Compensation Plan We sponsor a deferred compensation plan. Under the plan, participating employees irrevocably elect each year to defer receipt of a portion of their base salary and incentive compensation. A participant's account is credited with imputed interest at a rate equal to 130% of Moody's Composite Average of Yields on Corporate Bonds. Participants may receive payment of their deferred compensation plan balance in a lump sum or in monthly installments over a specified period of years following the termination of their employment with the company. In addition, subject to plan revisions that became effective January 1, 2019, participants may also receive distributions of their deferred compensation accounts while still employed by the company. The deferred compensation plan is unfunded; therefore, benefits are paid from our general assets. For the years ended December 31, 2018, 2017, and 2016, we recognized $1.0 million, $0.8 million, and $0.7 million, respectively, of interest expense related to the plan. At December 31, 2018 and 2017, we had liabilities related to the plan of $1.1 million and $1.6 million, respectively, recorded in "Accrued liabilities, Compensation and benefits" and $18.8 million and $14.8 million, respectively, recorded in "Other, Compensation and benefits" on our Consolidated Balance Sheets. Multiemployer Health and Welfare Plan We participate in a multiemployer health and welfare plan that covers medical, dental, and life insurance benefits for certain active employees as well as benefits for retired employees. As of December 31, 2018, 2017, and 2016, approximately 604, 649, and 658, respectively, of our employees participated in this plan. Per the terms of the representative collective bargaining agreements, we were required to contribute $5.50 per hour per active employee from June 1, 2015, to December 31, 2016. From January 1, 2017, to May 31, 2017, we were required to contribute $5.80 per hour per active employee. From June 1, 2017, to May 31, 2018, we were required to contribute $6.10 per hour per active employee. Since June 1, 2018, we are required to contribute $6.40 per hour per active employee. During the years ended December 31, 2018, 2017, and 2016 company contributions to the multiemployer health and welfare plan were $7.7 million, $8.1 million, and $7.6 million, respectively. After required contributions, we have no further obligation to the plan. The trustees of the plan determine the allocation of benefits between active and retired employees. Defined Benefit Obligations and Funded Status The following table, which includes only company-sponsored defined benefit plans, reconciles the beginning and ending balances of our projected benefit obligation and fair value of plan assets. We recognize the underfunded status of our defined benefit pension plans on our Consolidated Balance Sheets. We recognize changes in funded status in the year changes occur through other comprehensive income.
|  | December 31
|  | 2018 |  | 2017
|  | (thousands)
Change in benefit obligation |  |  |  |
Benefit obligation at beginning of year |  | $ | 483,525 |  |  | $ | 460,192 |
Service cost |  | 794 |  |  | 1,204 |
Interest cost |  | 11,344 |  |  | 17,542 |
Actuarial (gain) loss |  | (39,651 | ) |  | 26,112 |
Group annuity transactions (a) |  | (265,137 | ) |  | — |
Benefits paid |  | (14,023 | ) |  | (21,525 | )
Benefit obligation at end of year |  | 176,852 |  |  | 483,525 |
Change in plan assets |  |  |  |
Fair value of plan assets at beginning of year |  | 422,255 |  |  | 389,440 |
Actual return on plan assets |  | (3,968 | ) |  | 52,147 |
Employer contributions |  | 26,081 |  |  | 2,193 |
Group annuity transactions (a) |  | (275,544 | ) |  | — |
Benefits paid |  | (14,023 | ) |  | (21,525 | )
Fair value of plan assets at end of year |  | 154,801 |  |  | 422,255 |
Underfunded status |  | $ | (22,051 | ) |  | $ | (61,270 | )
Amounts recognized on our Consolidated Balance Sheets |  |  |  |
Current liabilities |  | $ | (671 | ) |  | $ | (715 | )
Noncurrent liabilities |  | (21,380 | ) |  | (60,555 | )
Net liability |  | $ | (22,051 | ) |  | $ | (61,270 | )
Amounts recognized in accumulated other comprehensive loss |  |  |  |
Net actuarial loss |  | $ | 11,856 |  |  | $ | 50,787 |
Prior service cost |  | — |  |  | — |
Net loss recognized |  | $ | 11,856 |  |  | $ | 50,787 |
______________________________________
(a) | See Defined Benefits Plans above for description of group annuity transactions.
The accumulated benefit obligation for all defined benefit pension plans was $176.9 million and $483.5 million at December 31, 2018 and 2017, respectively. All of our defined benefit pension plans have accumulated benefit obligations that exceed the fair value of plan assets. Net Periodic Benefit Cost and Other Comprehensive Income The components of net periodic benefit cost and other amounts recognized in other comprehensive income are as follows:
| Year Ended December 31
| 2018 |  | 2017 |  | 2016
| (thousands)
Net periodic benefit cost |  |  |  |  |
Service cost | $ | 794 |  |  | $ | 1,204 |  |  | $ | 1,127 |
Interest cost | 11,344 |  |  | 17,542 |  |  | 18,798 |
Expected return on plan assets | (11,097 | ) |  | (18,968 | ) |  | (20,324 | )
Amortization of actuarial loss | 1,497 |  |  | 1,686 |  |  | 2,484 |
Plan settlement expense (a) | 23,255 |  |  | — |  |  | 4,155 |
Net periodic benefit cost | 25,793 |  |  | 1,464 |  |  | 6,240 |
Changes in plan assets and benefit obligations recognized in other comprehensive income |  |  |  |  |
Net actuarial gain | (14,178 | ) |  | (7,067 | ) |  | (9,622 | )
Amortization of actuarial loss | (1,497 | ) |  | (1,686 | ) |  | (2,484 | )
Effect of settlements | (23,255 | ) |  | — |  |  | (4,155 | )
Total recognized in other comprehensive income | (38,930 | ) |  | (8,753 | ) |  | (16,261 | )
Total recognized in net periodic cost and other comprehensive income | $ | (13,137 | ) |  | $ | (7,289 | ) |  | $ | (10,021 | )
______________________________________
(a) | Plan settlement expense during the year ended December 31, 2018 includes $23.3 million of settlement charges related to the transfers of pension plan assets to Prudential for the purchase of group annuity contracts. Plan settlement expense during the year ended December 31, 2016 includes a $3.9 million settlement charge related to lump-sum cash payments to certain terminated vested participants in settlement of pension obligations.
In 2019, we estimate net periodic pension expense will be approximately $1.8 million, including $0.2 million of net actuarial gain that will be amortized from accumulated other comprehensive loss. Assumptions The assumptions used in accounting for our plans are estimates of factors that will determine, among other things, the amount and timing of future contributions. The following table presents the assumptions used in the measurement of our benefit obligations:
| December 31
| 2018 |  | 2017
Weighted average assumptions |  |  |
Discount rate | 4.15 | % |  | 3.40 | %
Rate of compensation increases (c) | — | % |  | — | %
The following table presents the assumptions used in the measurement of net periodic benefit cost:
|  | December 31
|  | 2018 |  | 2017 |  | 2016
Weighted average assumptions |  |  |  |  |  |  |  |  |  |  |  |
Discount rate (a)(b) |  | 3.95 | % | / | 4.05 | % | / | 3.40 | % |  | 3.90 | % |  | 3.45 | % | / | 4.05 | %
Expected long-term rate of return on plan assets (a)(b) |  | 3.85 | % | / | 4.50 | % | / | 4.75 | % |  | 5.00 | % |  | 5.10 | % | / | 5.10 | %
Rate of compensation increases (c) |  | — | % |  | — | % |  | — | %
_______________________________________
(a) | Prior to the remeasurements of our qualified defined benefit pension plan on April 25, 2018, and August 10, 2018, the discount rates were 3.40% and 4.05%, respectively, and the expected rates of return on plan assets were 4.75% and 4.50%, respectively. The discount rate and expected rate of return on plan assets after the August 10, 2018 remeasurement were 3.95% and 3.85%, respectively.
(b) | Prior to the remeasurement of our qualified defined benefit pension plan on November 1, 2016, the discount rate and expected rate of return on plan assets were 4.05% and 5.10%. The discount rate and expected rate of return on plan assets after the November 1, 2016 remeasurement were 3.45% and 5.10%, respectively.
(c) | Pension benefits for all salaried employees are frozen, resulting in an assumption for the rate of compensation increase of zero. In addition to the salaried benefits being frozen, there are currently no scheduled increases in pension benefit rates applicable to past service covering the minimal number of hourly employees who continue to accrue benefits.
Discount Rate Assumption. The discount rate reflects the current rate at which the pension obligations could be settled at each measurement date of the plan. In all years presented, the discount rates were determined by matching the expected plan benefit payments against a spot rate yield curve constructed to replicate the yields of Aa-graded corporate bonds. Asset Return Assumption. We base our expected long-term rate of return on plan assets on a weighted average of our expected returns for the major asset classes in which we invest. The weights we assign each asset class are based on our investment strategy. Expected returns for the asset classes are based on long-term historical returns, inflation expectations, forecasted gross domestic product, earnings growth, and other economic factors. We developed our return assumption based on a review of the fund manager's estimates of future market expectations by broad asset class and expected long-term rates of return from external investment managers. The weighted average expected return on plan assets we will use in our calculation of 2019 net periodic benefit cost is 3.85%. Retirement and Mortality Rates. These rates are developed to reflect actual and projected plan experience. In 2018, we used the RP-2014 mortality tables adjusted to reflect mortality improvement scale MP-2015 and projected forward using MP-2018 on a generational basis. In 2017, we used the RP-2014 mortality tables adjusted to reflect mortality improvement scale MP-2015 and projected forward using MP-2017 on a generational basis. Investment Policies and Strategies Our Retirement Funds Investment Committee (RFIC) is responsible for establishing and overseeing the implementation of our investment policy. Russell Investments (Russell) oversees the active management of our pension investments through its manager of managers program in order to achieve broad diversification in a cost-effective manner. At December 31, 2018, as dictated by investment allocation guidelines established by our RFIC, approximately 90% of our pension plan assets were invested in fixed-income securities, and approximately 10% were invested in a multi-asset class fund, both of which are described in more detail below. With the previously described group annuity transactions that were completed in 2018, our pension liability was significantly reduced and the duration of our remaining liability was extended. In addition, an increase in discount rates and approximately $26 million of plan contributions during 2018 resulted in a meaningful year-over-year improvement in the funded status of the plan. Given the significant change in the duration of the liability and improved funded status, our investment objective is to hedge the plan’s future exposure to interest rate risk by shifting the substantial majority of plan assets into fixed income securities that have a duration profile closely aligned with the duration profile of the remaining plan liability. This shift is consistent with a de-risking glide path established by our RFIC. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risk, all of which are subject to change. In addition, our overall investment strategy and related allocations between equity and fixed-income securities may change from time to time based on market conditions, external economic factors, and the funded status of our plans. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term, and such changes could materially affect the reported amounts. Fair Value Measurements of Plan Assets The following table sets forth by level, within the fair value hierarchy, the pension plan assets, by major asset category, at fair value at December 31, 2018 and 2017:
|  | December 31, 2018
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) (a) |  | Significant Unobservable Inputs (Level 3) |  | Total
|  | (thousands)
Fixed-income securities (b) |  | $ | — |  |  | $ | 141,930 |  |  | $ | — |  |  | $ | 141,930 |
Multi-asset class fund (c) |  | — |  |  | 12,431 |  |  | — |  |  | 12,431 |
Total investments at fair value |  | $ | — |  |  | $ | 154,361 |  |  | $ | — |  |  | 154,361 |
Receivables and accrued expenses, net |  |  |  |  |  |  |  | 440 |
Fair value of plan assets |  |  |  |  |  |  |  | $ | 154,801 |
|  | December 31, 2017
|  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) (a) |  | Significant Unobservable Inputs (Level 3) |  | Total
|  | (thousands)
Fixed-income securities (b) |  | $ | — |  |  | $ | 197,866 |  |  | $ | — |  |  | $ | 197,866 |
Equity securities |  |  |  |  |  |  |  |
Large-cap U.S. equity securities (d) |  | — |  |  | 93,021 |  |  | — |  |  | 93,021 |
Small- and mid-cap U.S. equity securities (e) |  | — |  |  | 17,187 |  |  | — |  |  | 17,187 |
International equity securities (f) |  | — |  |  | 59,937 |  |  | — |  |  | 59,937 |
Total investments at fair value |  | $ | — |  |  | $ | 368,011 |  |  | $ | — |  |  | 368,011 |
Hedge fund measured at NAV (g) |  |  |  |  |  |  |  | 27,021 |
Real estate fund measured at NAV (h) |  |  |  |  |  |  |  | 25,894 |
Receivables and accrued expenses, net |  |  |  |  |  |  |  | 1,329 |
Fair value of plan assets |  |  |  |  |  |  |  | $ | 422,255 |
_______________________________________
(a) | Securities represent common collective trusts managed and valued by Russell Trust Company, the administrator of the funds. While the underlying assets are actively traded on an exchange, the funds are not. The investments in equity and fixed-income securities are considered to have a readily determinable fair value because the fair value per share (unit) is determined and published and is the basis for current transactions. We have the ability to redeem these securities with a one-day notice.
(b) | Invested in the Russell Long Duration Fixed Income Fund at December 31, 2018 and 2017, which is designed to provide current income and capital appreciation through diversified strategies including sector rotation, modest interest rate timing, security selection, and tactical use of high-yield, emerging market bonds and other non-index securities. In addition, at December 31, 2018, our investments in this category included the Russell 14-Year LDI Fixed Income Fund. The fund invests primarily in investment grade bonds that closely match those found in discount rate curves used to value U.S. pension liabilities and seeks to provide additional incremental return through modest interest rate timing, security selection, and tactical use of non-credit sectors. In addition, at December 31, 2018, our investments in this category included Russell STRIPS Fixed Income Funds with duration profiles of 10, 15, and 28 years. These funds invest in a subset of the STRIPS universe with a similar duration profile as their respective Bloomberg Barclays U.S. STRIPS Index. Lastly, at December 31, 2017, our investments in this category also included the Russell Multi-Manager Bond Fund. The fund seeks to outperform the Barclays Capital U.S. Aggregate Bond Index over a full market cycle. The fund is designed to provide current income and, as a secondary objective, capital appreciation through a variety of diversified strategies, including sector rotation, modest interest rate timing, security selection, and tactical use of high-yield and emerging market bonds.
(c) | Invested in the Russell Multi-Asset Core Plus Fund, which is designed to provide long-term growth by providing a diversified portfolio of investments that has an overall strategic allocation of 75% global equity, 15% marketable real assets, and 10% global fixed income.
(d) | Invested in the Russell Large Cap U.S. Equity Fund. The fund seeks returns that exceed the Russell 1000 Index by investing in large-capitalization stocks of the U.S. stock market. In addition, our investments in this category included the Russell 1000 Index Fund, which seeks to track the investment results of an index composed of large- and mid-capitalization stocks of the U.S. stock market.
(e) | Invested in the Russell Equity II Fund. The fund seeks returns that exceed the Russell 2500 Index by investing in the small- and mid-capitalization stocks of the U.S. stock market.
(f) | Invested in the Russell International Fund with Active Currency, which benchmarks against the Russell Developed ex-U.S. Large Cap Index Net and seeks favorable total returns and additional diversification through investment in non-U.S. equity securities and active currency management. The fund participates primarily in the stock markets of Europe and the Pacific Rim and seeks to opportunistically add value through active investment in foreign currencies. In addition, our investments in this category included the Russell Emerging Market Fund, which benchmarks against the Russell Emerging Markets Index and is designed to maintain a broadly diversified exposure to emerging market countries.
(g) | Invested in the AQR Delta Offshore Fund. The fund seeks to produce high risk-adjusted returns while targeting a low long-term average correlation to traditional markets. The fund invests internationally in a broad range of instruments, including, but not limited to, equities, currencies, convertible securities, futures, forwards, options, swaps, and other derivative products. The fair value of the hedge fund is estimated using the net asset value (NAV) of the investment as a practical expedient for fair value. We have the ability to redeem these investments at NAV within the near term. The fund is classified outside the fair value hierarchy tables because fair value is measured using the NAV per share practical expedient.
(h) | Invested in the Russell Real Estate Equity Fund. The fund seeks to obtain favorable total return through income and growth, and to outperform the NCREIF Open-End Diversified Core Equity Fund Index - Equal Weight. Real estate investments include those in limited partnerships, limited liability companies, and real estate investment trusts consisting of private real estate investments including office, apartment, retail, industrial, and other commercial properties. The fair value of the real estate fund is estimated using NAV of the investment as a practical expedient for fair value. Amounts realized on the sale of these investments may differ from the calculated values. We have the ability to redeem the real estate investments with a 110-calendar-day written notice prior to a quarterly trade date. The fund is classified outside the fair value hierarchy tables because fair value is measured using the NAV per share practical expedient.
Cash Flows Since 2012, we have contributed a total of four company-owned real property locations from our Building Materials Distribution segment to our qualified defined benefit pension plan. These contributions constitute related party transactions. We are leasing back the contributed properties for initial terms of ten years ending between 2022 and 2025 with two five-year extension options and continue to use the properties in our distribution operations. Rent payments are made quarterly and include 2% annual escalation rates. Each lease provides us a right of first refusal on any subsequent sale by the pension plan, as well as repurchase options at the end of the initial term and extension periods. The plan engaged an independent fiduciary who negotiated the lease terms and also manages the properties on behalf of the plan. We determined that the contribution of the properties does not meet the accounting definition of a plan asset within the scope of Accounting Standards Codification 715, Compensation — Retirement Benefits. Accordingly, the contributed properties are not considered a contribution for accounting purposes and, as a result, are not included in plan assets and have no impact on the net pension liability recorded on our Consolidated Balance Sheets. We continue to depreciate the carrying value of the properties in our financial statements, and no gain or loss was recognized at the contribution date for accounting purposes. Lease payments are recorded as pension contributions. During fourth quarter 2018, we repurchased one of the real property locations we previously had contributed to our qualified defined benefit pension plan for approximately $4.0 million (the Repurchase), which was recorded as a pension contribution. Therefore, as of December 31, 2018, we have a total of three company-owned real property locations that we are leasing from our qualified defined benefit pension plan. Our practice is to fund the pension plans in amounts sufficient to meet the minimum requirements of U.S. federal laws and regulations. Additional discretionary funding may be provided as deemed appropriate. For the years ended December 31, 2018, 2017, and 2016, we made cash contributions to our pension plans totaling $26.1 million, $2.2 million, and $3.8 million, respectively. During 2018, cash contributions include a $20.0 million discretionary contribution, the $4.0 million Repurchase, and $1.5 million of lease payments. Cash contributions during both 2017 and 2016 include $1.4 million of lease payments. While we have no federally required contributions for 2019, we expect to make cash contributions of approximately $2 million to our pension plans. These contributions reflect benefit payments to plan participants of our nonqualified salaried pension plans and lease payments for properties we have contributed to our qualified defined benefit pension plan. Qualified pension benefit payments are paid from plan assets, while nonqualified pension benefit payments are paid by the company. The following benefit payments are expected to be paid to plan participants (in thousands):
2019 |  | $ | 3,129 |
2020 |  | 4,191 |
2021 |  | 5,368 |
2022 |  | 6,393 |
2023 |  | 7,271 |
Years 2024-2028 |  | 46,610 |

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