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PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS | 9 Months Ended
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Sep. 30, 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 September 30 |
|  | 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 |  |  | 1,356 |  |  | 1,401 |  |  | 31 |  |  | 49 |  |  | 228 |  |  | 197 |
Expected return on plan assets |  |  | (2,297) |  |  | (2,544) |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of prior service credit |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (47) |  |  | (47) |
Pension settlement expense |  |  | 762 |  |  | 805 |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of net actuarial loss |  |  | 640 |  |  | 595 |  |  | 40 |  |  | 57 |  |  | 213 |  |  | 23 |
Net periodic benefit cost |  | $ | 461 |  | $ | 257 |  | $ | 71 |  | $ | 106 |  | $ | 495 |  | $ | 243 |
|  | Nine Months Ended September 30 |
|  | Nonunion Defined |  | Supplemental |  | Postretirement |
|  | Benefit Pension Plan |  | Benefit Plan |  | Health Benefit Plan |
|  | 2015 |  | 2014 |  | 2015 |  | 2014 |  | 2015 |  | 2014 |
|  | (in thousands) |
Service cost |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 304 |  | $ | 210 |
Interest cost |  |  | 3,899 |  |  | 4,643 |  |  | 92 |  |  | 147 |  |  | 685 |  |  | 591 |
Expected return on plan assets |  |  | (7,058) |  |  | (7,980) |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of prior service credit |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (142) |  |  | (142) |
Pension settlement expense |  |  | 2,478 |  |  | 5,405 |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of net actuarial loss |  |  | 2,276 |  |  | 1,729 |  |  | 120 |  |  | 170 |  |  | 639 |  |  | 69 |
Net periodic benefit cost |  | $ | 1,595 |  | $ | 3,797 |  | $ | 212 |  | $ | 317 |  | $ | 1,486 |  | $ | 728 |
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 were 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 Company recognized pension settlement expense as a component of net periodic benefit cost for the three and nine months ended September 30, 2014 of $0.8 million (pre-tax), or $0.5 million (after-tax), and $5.4 million (pre-tax), or $3.3 million (after-tax), respectively, related to the $25.4 million nonparticipating annuity contract purchased in first quarter 2014 and to lump-sum distributions which amounted to $6.3 million and $28.8 million for the three and nine months ended September 30, 2014, respectively. The Company recognized total settlement expense as a component of net periodic benefit cost for the three and nine months ended September 30, 2015 of $0.8 million (pre-tax), or $0.5 million (after-tax), and $2.5 million (pre-tax), or $1.5 million (after-tax), respectively, related to lump-sum distributions which amounted to $4.1 million and $16.6 million for the three and nine months ended September 30, 2015, respectively. Upon recognition of pension settlement expense, a corresponding reduction in the unrecognized net actuarial loss of the 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 projected benefit obligation (the “PBO”) and plan assets of the nonunion defined benefit pension plan for the nine months ended September 30, 2015:
|  | Nonunion Defined
|  | Benefit Pension Plan
|  | (in thousands)
Change in benefit obligations |  |  |  |
Projected benefit obligation at December 31, 2014 |  | $ | 174,410 |
Interest cost |  |  | 3,899 |
Actuarial gain(1) |  |  | (475) |
Benefits paid |  |  | (16,756) |
Projected benefit obligation at September 30, 2015 |  |  | 161,078 |
Change in plan assets |  |  |  |
Fair value of plan assets at December 31, 2014 |  |  | 158,265 |
Actual loss on plan assets |  |  | (3,616) |
Employer contributions |  |  | 50 |
Benefits paid |  |  | (16,756) |
Fair value of plan assets at September 30, 2015 |  |  | 137,943 |
Funded status at September 30, 2015(2) |  | $ | (23,135) |
Accumulated benefit obligation |  | $ | 161,078 |
| (1) |  | Actuarial gain from remeasurement upon settlements was primarily impacted by changes in the discount rate since the previous remeasurement date. The discount rates used to remeasure the PBO upon settlement were 3.4%, 3.5%, 3.0%, and 3.2% at the September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014 measurement dates, respectively.
| (2) |  | Noncurrent liability recognized within pension and postretirement liabilities in the accompanying consolidated balance sheet at September 30, 2015.
Based upon currently available actuarial information, the Company does not have a required minimum contribution to its nonunion defined benefit pension plan for 2015. The plan’s actuary certified the adjusted funding target attainment percentage (“AFTAP”) to be 107.3% 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 U.S. Department of the Treasury (the “Treasury”) 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. 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. 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”). As set forth in information provided by the Central States Pension Plan, the funded percentage of the plan was 47.9% as of January 1, 2015 and the plan was classified 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 if the plan is projected to become insolvent within 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%. In September 2015, the Central States Pension Plan filed an application with the Treasury seeking approval under the Reform Act for a pension rescue plan, which includes benefit reductions for participants of the Central States Pension Plan. The proposed benefit reductions in the pension rescue plan, which are subject to various requirements and restrictions, vary depending on participants’ age, retirement status, years of credited service, and whether the participants’ current or former employer who withdrew from the multiemployer pension plan either failed to pay their full employer withdrawal obligations or paid their full employer withdrawal liability and guaranteed protection of the participants’ benefits. If the Treasury approves the proposed pension rescue plan, participants of the Central States Pension Plan will have an opportunity to vote on whether the plan should be implemented; however, by law, the Treasury can override a negative participant vote and order that the pension rescue plan be implemented or modified. If approved, the pension rescue plan would be implemented in July 2016 based on the application filing date. As previously disclosed, the implementation of the rescue plan sought by the Central States Pension Plan would not reduce the benefit rates ABF Freight is obligated to pay under the ABF NMFA which will remain in effect through March 31, 2018. 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 received a Notice of Insolvency from the Road Carriers Local 707 Pension Fund (the “707 Pension Fund”) for the plan year beginning February 1, 2016. Approximately 1% of ABF Freight’s total multiemployer pension contributions for the year ended December 31, 2014 were made to the 707 Pension Fund. Based on currently available information, the Company does not believe the insolvency of the 707 Pension Fund will increase ABF Freight’s contributions to the fund during the current ABF NMFA contract period, which extends to March 31, 2018; however, there can be no assurances in this regard. ABF Freight has not received any other notification of plan reorganization or plan insolvency.

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