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Employee Benefits | 12 Months Ended
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Dec. 31, 2019
Retirement Benefits [Abstract] |
EMPLOYEE BENEFITS | EMPLOYEE BENEFITS We maintain a qualified defined benefit pension plan, or Plan, covering substantially all employees hired prior to January 1, 2008. The benefits are based on years of service and the employee’s compensation for the highest five consecutive years in the last ten years through March 31, 2016 when the Plan was frozen. Contributions are intended to provide for benefits attributed to employee service to date and for those benefits expected to be earned in the future. Our qualified and nonqualified defined benefit plans were amended to freeze benefit accruals for all persons entitled to benefits under the plan in 2016. We will continue recording pension expense related to these plans, primarily representing interest costs on the accumulated benefit obligation and amortization of actuarial losses accumulated in the plan, as well as income from expected investment returns on pension assets. Since the plans have been frozen, no service costs are included in net periodic pension expense. The expected long-term rate of return on plan assets is 4.80 percent. We made a $20.4 million contribution to our qualified defined benefit plan on September 7, 2018. The fair value of the plan was not re-measured for the impact of the contribution. The pension contribution was deducted on our 2017 Consolidated Federal Income Tax Return and we recognized a return to provision discrete tax benefit of $2.9 million due to the decrease in the federal statutory rate of 35 percent to 21 percent resulting from tax legislation enacted in December 2017. The following table summarizes the activity in the benefit obligation and Plan assets deriving the funded status, which is recorded in other liabilities in the Consolidated Balance Sheets:
(dollars in thousands) | 2019 |  |  | 2018 |
Change in Projected Benefit Obligation |  |  |
Projected benefit obligation at beginning of year | $ | 95,200 |  |  | $ | 106,664 |
Interest cost | 3,987 |  |  | 3,882 |
Actuarial gain/(loss) | 13,996 |  |  | (7,371 | )
Acquisitions - DNB merger | 6,778 |  |  | — |
Benefits paid | (6,282 | ) |  | (7,975 | )
Projected Benefit Obligation at End of Year | $ | 113,679 |  |  | $ | 95,200 |
Change in Plan Assets |  |  |
Fair value of plan assets at beginning of year | $ | 101,765 |  |  | $ | 87,154 |
Actual return on plan assets | 16,358 |  |  | 2,166 |
Employer contributions | — |  |  | 20,420 |
Acquisitions - DNB merger | 4,811 |  |  | — |
Benefits paid | (6,282 | ) |  | (7,975 | )
Fair Value of Plan Assets at End of Year | $ | 116,652 |  |  | $ | 101,765 |
Funded Status | $ | 2,973 |  |  | $ | 6,565 |
The following table sets forth the amounts recognized in accumulated other comprehensive (loss) income at December 31:
(dollars in thousands) | 2019 |  |  | 2018 |
Net actuarial loss | (23,106 | ) |  | (22,340 | )
Total (Before Tax Effects) | $ | (23,106 | ) |  | $ | (22,340 | )
Below are the actuarial weighted average assumptions used in determining the benefit obligation:
| 2019 |  |  | 2018 |
Discount rate | 3.25 | % |  | 4.31 | %
Rate of compensation increase(1) | — | % |  | — | %
(1)Rate of compensation increase is not applicable for 2019 and 2018 due to the amendment to freeze benefit accruals under the qualified and nonqualified defined benefit pension plans effective March 31, 2016. The following table summarizes the components of net periodic pension cost and other changes in Plan assets and benefit obligations recognized in other comprehensive loss for the years ended December 31:
(dollars in thousands) | 2019 |  |  | 2018 |  |  | 2017 |
Components of Net Periodic Pension Cost |  |  |  |  |
Interest cost on projected benefit obligation | 3,987 |  |  | 3,882 |  |  | 4,100 |
Expected return on plan assets | (4,731 | ) |  | (6,266 | ) |  | (6,313 | )
Amortization of prior service credit - DNB merger | 7 |  |  | — |  |  | — |
Recognized net actuarial loss | 1,604 |  |  | 2,134 |  |  | 1,866 |
Net Periodic Pension Expense | $ | 867 |  |  | $ | (250 | ) |  | $ | (347 | )
Other Changes in Plan Assets and Benefit Obligation Recognized in Other Comprehensive Income (Loss) |  |  |  |  |
Net actuarial loss/(gain) | $ | 2,370 |  |  | $ | (3,271 | ) |  | $ | 3,678 |
Recognized net actuarial loss | (1,604 | ) |  | (2,134 | ) |  | (1,866 | )
Recognized prior service credit | — |  |  | — |  |  | — |
Total (Before Tax Effects) | $ | 766 |  |  | $ | (5,405 | ) |  | $ | 1,812 |
Total Recognized in Net Benefit Cost and Other Comprehensive Income/(Loss) (Before Tax Effects) | $ | 1,633 |  |  | $ | (5,655 | ) |  | $ | 1,465 |
The following table summarizes the actuarial weighted average assumptions used in determining net periodic pension cost:
| 2019 |  |  | 2018 |  |  | 2017 |
Discount rate | 4.31 | % |  | 3.75 | % |  | 4.00 | %
Rate of compensation increase(1) | — | % |  | — | % |  | — | %
Expected return on assets | 4.80 | % |  | 7.50 | % |  | 7.50 | %
(1)Rate of compensation increase is not applicable for 2019, 2018 and 2017 due to the amendment to freeze benefit accruals under the qualified and nonqualified defined benefit pension plans effective March 31, 2016. The net actuarial loss included in accumulated other comprehensive loss expected to be recognized in net periodic pension cost in the following year ending December 31, 2020 is $1.5 million. There will be no prior service credit recognized due to the amendment to freeze benefit accruals under the qualified and nonqualified defined benefit pension plans. The accumulated benefit obligation for the Plan was $113.7 million at December 31, 2019 and $95.2 million at December 31, 2018. We consider many factors when setting the assumed rate of return on Plan assets. As a general guideline the assumed rate of return is equal to the weighted average of the expected returns for each asset category and is estimated based on historical returns as well as expected future returns. The weighted average discount rate is derived from corporate yield curves. S&T Bank’s Retirement Plan Committee determines the investment policy for the Plan. In general, the targeted asset allocation is 5 percent to 15 percent equities and alternatives and 85 percent to 95 percent fixed income. Prior to 2018, the asset allocation was 50 percent to 70 percent equities and 30 percent to 50 percent fixed income. A strategic allocation within each asset class is based on the Plan’s duration, time horizon, risk tolerances, performance expectations, and asset class preferences. Investment managers have discretion to invest in any equity or fixed-income asset class, subject to the securities guidelines of the Plan’s Investment Policy Statement. On December 19, 2017, S&T Bank, as Plan Sponsor, entered into an agreement with an insurance company to purchase a single premium annuity contract for 124 retired Plan participants and their beneficiaries. Of these participants, 30 are receiving a $2,000 death benefit only. The total premium of $1.5 million was paid out of the Plan's assets, and the effective date of the annuity payments was January 1, 2018. The annuity purchase resulted in a reduction in the associated pension liability. At this time, S&T Bank is expected to make a $0.1 million required cash contribution to the Plan in 2020. The following table provides information regarding estimated future benefit payments to be paid in each of the next five years and in the aggregate for the five years thereafter:
(dollars in thousands) | Amount |
2020 | $ | 8,211 |
2021 | 8,151 |
2022 | 7,695 |
2023 | 7,343 |
2024 | 7,164 |
2025 - 2029 | 33,640 |
We also have nonqualified supplemental executive pension plans, or SERPs, for certain key employees. The SERPs are unfunded. The projected benefit obligations related to the SERPs were $5.3 million and $4.4 million at December 31, 2019 and 2018. These amounts also represent the net amount recognized in the statement of financial position for the SERPs. Net periodic benefit costs for the SERPs were $0.4 million for the year ended December 31, 2019 and $0.5 million for each of the years ended December 31, 2018 and 2017. Additionally, $2.4 million, $1.9 million and $2.7 million before tax was reflected in accumulated other comprehensive income (loss) at December 31, 2019, 2018 and 2017, in relation to the SERPs. The actuarial assumptions used for the SERPs are the same as those used for the Plan. We maintain a Thrift Plan, a qualified defined contribution plan, in which substantially all employees are eligible to participate. We make matching contributions to the Thrift Plan up to 3.5 percent of participants’ eligible compensation and may make additional profit-sharing contributions as provided by the Thrift Plan. Expense related to these contributions amounted to $2.0 million in 2019, $1.7 million in 2018 and $1.8 million in 2017. Fair Value Measurements The following tables present our Plan assets measured at fair value on a recurring basis by fair value hierarchy level at December 31, 2019 and 2018. During the year ended December 31, 2019, there were no transfers between Level 1 and Level 2 for items of a recurring basis. During the year ended December 31, 2018, cash and cash equivalents of $2.2 million were transferred to Level 1 from Level 2 relating to changes in our plan asset allocation as set forth in the plan's investment policy. There were no purchases or transfers of Level 3 plan assets in 2019 or 2018.
| December 31, 2019
| Fair Value Asset Classes(1)
(dollars in thousands) | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Cash and cash equivalents(2) | $ | 1,831 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,831 |
Fixed income(3) | 101,320 |  |  | — |  |  | — |  |  | 101,320 |
Equities: |  |  |  |  |  |  |
Equity index mutual funds—international(4) | 3,066 |  |  | — |  |  | — |  |  | 3,066 |
Domestic individual equities(5) | 10,435 |  |  | — |  |  | — |  |  | 10,435 |
Total Assets at Fair Value | $ | 116,652 |  |  | $ | — |  |  | $ | — |  |  | $ | 116,652 |
(1)Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy. (2)This asset class includes FDIC insured money market instruments. (3)This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the U.S. dollar. (4)The sole investment within this asset class is the Vanguard Total International Stock Index Fund Admiral Shares. (5)This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.
| December 31, 2018
| Fair Value Asset Classes(1)
(dollars in thousands) | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Cash and cash equivalents(2) | $ | 2,164 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,164 |
Fixed income(3) | 91,830 |  |  | — |  |  | — |  |  | 91,830 |
Equities: |  |  |  |  |  |  |
Equity index mutual funds—international(4) | 2,604 |  |  | — |  |  | — |  |  | 2,604 |
Domestic individual equities(5) | 4,884 |  |  | — |  |  | — |  |  | 4,884 |
Total Assets at Fair Value | $ | 101,482 |  |  | $ | — |  |  | $ | — |  |  | $ | 101,482 |
(1)Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy. (2)This asset class includes FDIC insured money market instruments. (3)This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the U.S. dollar. (4)The sole investment within this asset class is Harbor International Institutional Fund. (5)This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.

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