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PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS | 3 Months Ended
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Mar. 31, 2015
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS |
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS | NOTE F — PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS Nonunion Defined Benefit Pension, Supplemental Benefit, and Postretirement Health Benefit Plans The following is a summary of the components of net periodic benefit cost:
|  | Three Months Ended March 31 |
|  | Nonunion Defined |  | Supplemental |  | Postretirement |
|  | Benefit Pension Plan |  | Benefit Plan |  | Health Benefit Plan |
|  | 2015 |  | 2014 |  | 2015 |  | 2014 |  | 2015 |  | 2014 |
|  | (in thousands) |
Service cost |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 101 |  | $ | 70 |
Interest cost |  | 1,320 |  | 1,720 |  | 31 |  | 49 |  | 228 |  | 197 |
Expected return on plan assets |  | (2,402 | ) | (2,831 | ) | — |  | — |  | — |  | — |
Amortization of prior service credit |  | — |  | — |  | — |  | — |  | (47 | ) | (47 | )
Pension settlement expense |  | 1,119 |  | 3,691 |  | — |  | — |  | — |  | — |
Amortization of net actuarial loss |  | 821 |  | 498 |  | 40 |  | 56 |  | 213 |  | 23 |
Net periodic benefit cost |  | $ | 858 |  | $ | 3,078 |  | $ | 71 |  | $ | 105 |  | $ | 495 |  | $ | 243 |
Nonunion Defined Benefit Pension Plan The Company’s nonunion defined benefit pension plan covers substantially all noncontractual employees hired before January 1, 2006. In June 2013, the Company amended the nonunion defined benefit pension plan to freeze the participants’ final average compensation and years of credited service as of July 1, 2013. The plan amendment did not impact the vested benefits of retirees or former employees whose benefits have not yet been paid from the plan. Effective July 1, 2013, participants of the nonunion defined benefit pension plan who are active employees of the Company became eligible for the discretionary defined contribution feature of the Company’s nonunion defined contribution plan in which all eligible noncontractual employees hired subsequent to December 31, 2005 also participate. In consideration of the freeze of the accrual of benefits, the investment strategy has become more focused on reducing investment, interest rate, and longevity risks in the plan. As part of this strategy, in January 2014, the plan purchased a nonparticipating annuity contract from an insurance company to settle the pension obligation related to the vested benefits of 375 plan participants and beneficiaries receiving monthly benefit payments at the time of the contract purchase. The nonparticipating annuity contract purchase amount of $25.4 million plus first quarter 2014 lump-sum benefit distributions of $14.1 million exceeded the projected annual interest costs of the plan for 2014; therefore, the Company recognized pension settlement expense as a component of net periodic benefit cost of $3.7 million (pre-tax), or $2.3 million (after-tax), during the three months ended March 31, 2014. For the three months ended March 31, 2015, the Company recognized pension settlement expense as a component of net periodic benefit cost of $1.1 million (pre-tax), or $0.7 million (after-tax), related to first quarter 2015 lump-sum distributions of $7.6 million, because total annual lump-sum benefit distributions from the plan are projected to exceed the total annual interest cost of the plan. When pension settlement expense is recognized, a corresponding reduction in the unrecognized net actuarial loss of the nonunion defined benefit pension plan is recorded. The remaining pre-tax unrecognized net actuarial loss will continue to be amortized over the average remaining future years of service of the plan participants, which is approximately eight years. The Company will incur additional quarterly settlement expense related to lump-sum distributions from the nonunion defined benefit pension plan during the remainder of 2015. The following table discloses the changes in the PBO and plan assets of the nonunion defined benefit pension plan for the three months ended March 31, 2015:
|  | Nonunion Defined |
|  | Benefit Pension Plan |
|  | (in thousands) |
Change in projected benefit obligation |  |  |
Projected benefit obligation at December 31, 2014 |  | $ | 174,410 |
Interest cost |  | 1,320 |
Actuarial loss(1) |  | 4,171 |
Benefits paid |  | (7,665 | )
Projected benefit obligation at March 31, 2015 |  | 172,236 |
Change in plan assets |  |  |
Fair value of plan assets at December 31, 2014 |  | 158,265 |
Actual return on plan assets |  | 3,577 |
Employer contributions |  | 50 |
Benefits paid |  | (7,665 | )
Fair value of plan assets at March 31, 2015 |  | 154,227 |
Funded status at March 31, 2015(2) |  | $ | (18,009 | )
Accumulated benefit obligation |  | $ | 172,236 |
| (1) |  | Net actuarial loss from remeasurement upon settlement was primarily impacted by changes in the discount rate since the previous remeasurement date. The discount rate used to remeasure the PBO upon settlement at March 31, 2015 was 3.0% compared to a rate of 3.2% as of the December 31, 2014 measurement date.
| (2) |  | Noncurrent liability recognized within pension and postretirement liabilities in the accompanying consolidated balance sheet at March 31, 2015.
Based upon currently available actuarial information, the Company does not expect to have cash outlays for required minimum contributions to its nonunion defined benefit pension plan in 2015. The plan had an adjusted funding target attainment percentage (“AFTAP”) of 108.1% as of the January 1, 2015 valuation date. The AFTAP is determined by measurements prescribed by the Internal Revenue Code, which differ from the funding measurements for financial statement reporting purposes. Multiemployer Plans ABF Freight contributes to multiemployer pension and health and welfare plans, which have been established pursuant to the Taft-Hartley Act, to provide benefits for its contractual employees. ABF Freight’s contributions generally are based on the time worked by its contractual employees, in accordance with the ABF NMFA and other related supplemental agreements. ABF Freight recognizes as expense the contractually required contributions for each period and recognizes as a liability any contributions due and unpaid. The 25 multiemployer pension plans to which ABF Freight contributes vary greatly in size and in funded status. ABF Freight’s contribution obligations to these plans are specified in the ABF NMFA, which was implemented on November 3, 2013 and will remain in effect through March 31, 2018. The funding obligations to the pension plans are intended to satisfy the requirements imposed by the Pension Protection Act of 2006 (the “PPA”), which was permanently extended by the Multiemployer Pension Reform Act of 2014 (the “Reform Act”) included in the Consolidated and Further Continuing Appropriations Act of 2015. Provisions of the Reform Act include, among others, providing qualifying plans the ability to self-correct funding issues, subject to various requirements and restrictions, including applying to the Pension Benefit Guaranty Corporation for the suspension of certain benefits. Any actions taken by trustees of multiemployer pension plans under the Reform Act to improve funding will not reduce benefit rates ABF Freight is obligated to pay under the ABF NMFA. Through the term of its current collective bargaining agreement, ABF Freight’s contribution obligations generally will be satisfied by making the specified contributions when due. However, the Company cannot determine with any certainty the contributions that will be required under future collective bargaining agreements for its contractual employees. Approximately one half of ABF Freight’s total contributions to multiemployer pension plans are made to the Central States, Southeast and Southwest Areas Pension Plan (the “Central States Pension Plan”). The funded percentage of the Central States Pension Plan, as set forth in information provided by the Central States Plan, was 48.4% as of January 1, 2014. ABF Freight received an Actuarial Status Certification for the Central States Pension Plan dated March 31, 2015, in which the plan’s actuary certified that, as of January 1, 2015, the plan was in critical and declining status, as defined by the Reform Act. Critical and declining status is applicable to critical status plans that are projected to become insolvent anytime in the current plan year or during the next 14 plan years, or during the next 19 plan years and either the plan’s ratio of inactive participants to active participants exceeds two to one or the plan’s funded percentage is less than 80%. The multiemployer plan administrators have provided to the Company no other significant changes in information related to multiemployer plans from the information disclosed in the Company’s 2014 Annual Report on Form 10-K. ABF Freight has not received notification of any plan reorganization or plan insolvency. If ABF Freight was to completely withdraw from certain multiemployer pension plans, under current law, the Company would have material liabilities for its share of the unfunded vested liabilities of each such plan. However, ABF Freight currently has no intention to withdraw from any such plan, which withdrawal generally would have to be effected through collective bargaining.

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