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Note 10 - Pensions and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Retirement Benefits [Text Block]

Note 10 – Pensions and Other Postretirement Benefits

 

The Company sponsors a defined benefit pension plan (“GR Plan”) covering certain domestic employees. Benefits are based on each covered employee’s years of service and compensation. The GR Plan is funded in conformity with the funding requirements of applicable U.S. regulations. The GR Plan was closed to new participants effective January 1, 2008. Employees hired after this date, in eligible locations, participate in an enhanced 401(k) plan instead of the defined benefit pension plan. Employees hired prior to this date continue to accrue benefits.

 

Additionally, the Company sponsors defined contribution pension plans made available to all domestic and Canadian employees. Total contributions to the plans were $3.0 million for 2022 and $2.3 million for each of 2021 and 2020.

 

As part of the agreement to purchase the assets of Fill-Rite, the Company was required to establish a defined benefit pension plan for certain Fill-Rite employees (“Fill-Rite Plan”) as of June 1, 2022. No pension or other postretirement benefit plan liabilities existing as of the acquisition date were assumed as part of the transaction. Total contributions to the Fill-Rite Plan were $0.3 million in 2022. The benefit obligation as of December 31, 2022 was $0.2 million. No payments were made under the plan during 2022. The 2022 activity is included in the tables within this footnote.

 

The Company also sponsors a non-contributory defined benefit postretirement health care plan that provides health benefits to certain domestic and Canadian retirees and eligible spouses and dependent children. The Company funds the cost of these benefits as incurred. For measurement purposes, and based on maximum benefits as defined by the plan, a 5% annual rate of increase in the per capita cost of covered health care benefits for all retirees was assumed in estimating the projected postretirement benefit obligation at December 31, 2022, which is expected to remain constant going forward. A 5% percent annual rate of increase was assumed in estimating the projected benefit obligation at December 31, 2021 and in calculating 2022 periodic benefit cost.

 

 

The Company recognizes the obligations associated with its defined benefit pension plans and defined benefit postretirement health care plan in its Consolidated Financial Statements. The following table presents the plans’ funded status as of the measurement date, December 31, reconciled with amounts recognized in the Company’s Consolidated Balance Sheets:

 

   

Pension Plans

    

Postretirement Plan

  
   

2022

    

2021

    

2022

    

2021

  

Accumulated benefit obligation at end of year

   $ 45,756     $ 67,400     $ 23,954     $ 28,934  
Change in projected benefit obligation:                  

Benefit obligation at beginning of year

   $ 82,000     $ 86,299     $ 28,934     $ 29,848  

Service cost

     2,400       2,662       1,146       1,462  

Interest cost

     2,326       1,729       760       654  

Settlement

     1,656       651       -       -  

Benefits paid

     (17,826 )     (7,719 )     (1,781 )     (1,618 )

Effect of foreign exchange

     -       -       (28 )     1  

Actual expenses

     (150 )     (150 )     -       -  

Actuarial (gain)/ loss

     (14,454 )     (1,472 )     (5,077 )     (1,413 )

Benefit obligation at end of year

   $ 55,952     $ 82,000     $ 23,954     $ 28,934  
                                 
Change in plan assets:                                

Plan assets at beginning of year

   $ 72,658     $ 77,067     $ -     $ -  

Actual return on plan assets

     (10,332 )     1,460       -       -  

Employer contributions

     2,250       2,000       1,781       1,618  

Benefits paid

     (17,826 )     (7,719 )     (1,781 )     (1,618 )

Actual expenses

     (150 )     (150 )     -       -  

Plan assets at end of year

   $ 46,600     $ 72,658     $ -     $ -  

Funded status at end of year

   $ (9,352 )   $ (9,342 )   $ (23,954 )   $ (28,934 )

 

 

   

Pension Plans

    

Postretirement Plan

  
   

2022

    

2021

    

2022

    

2021

  
Amounts recognized in the Consolidated Balance Sheets consist of:                          

Current liabilities

   $ -     $ -     $ (1,541 )   $ (1,575 )

Noncurrent liabilities

     (9,352 )     (9,342

)

     (22,413 )     (27,359 )

Total assets (liabilities)

   $ (9,352 )   $ (9,342

)

   $ (23,954 )   $ (28,934 )
                                 
Amounts recognized in Accumulated other                  

Net actuarial loss

   $ 18,290     $ 26,016     $ 308     $ 5,841  

Prior Service Cost

     -       -       (995 )     (2,125 )

Deferred tax (benefit) expense

     (4,607 )     (6,446 )     242       (807 )

After tax actuarial loss

   $ 13,683     $ 19,570     $ (445 )   $ 2,909  

 

 

Components of net periodic benefit cost:

                        
   

2022

    

2021

    

2020

  
Pension Plans                        

Service cost

   $ 2,400     $ 2,662     $ 2,709  

Interest cost

     2,326       1,729       1,937  

Expected return on plan assets

     (2,892 )     (3,610 )     (3,900 )

Recognized actuarial loss

     1,724       1,904       2,160  

Settlement loss

     6,427       2,304       4,583  

Net periodic benefit cost

   $ 9,985     $ 4,989     $ 7,489  
                         
Other changes in pension plan assets and benefit obligations recognized in other comprehensive loss:                        

Net (gain) loss

     (7,726 )     (2,879 )     2,704  

Total expense recognized in net periodic benefit cost and other comprehensive income

   $ 2,259     $ 2,110     $ 10,193  
                         
Postretirement Plan                        

Service cost

   $ 1,146     $ 1,462     $ 1,372  

Interest cost

     760       654       778  

Prior service cost recognition

     (1,128 )     (1,130 )     (1,129 )

Recognized actuarial loss (gain)

     368       580       306  

Net periodic benefit cost (credit)

   $ 1,146     $ 1,566     $ 1,327  
                         
Other changes in postretirement plan assets and benefit obligations recognized in other comprehensive loss:                        

Net loss (gain)

   $ (4,317 )   $ (863 )   $ 3,762  

Total expense (benefit) recognized in net periodic benefit cost and other comprehensive income

   $ (3,171 )   $ 703     $ 5,089  

 

The components of net periodic benefit cost other than the service cost component are included in Other income (expense), net in the Consolidated Statements of Income.

 

During 2022, 2021, and 2020, the Company recorded a settlement loss relating to retirees that received lump-sum distributions from the GR Plan totaling $6.4 million, $2.3 million and $4.6 million respectively. These charges were the result of lump-sum payments to retirees which exceeded the GR Plan’s actuarial service and interest cost thresholds.

 

The prior service cost is amortized on a straight-line basis over the average estimated remaining service period of active participants. The unrecognized actuarial gain or loss in excess of the greater of 10% of the benefit obligation or the market value of plan assets is also amortized on a straight-line basis over the average estimated remaining service period of active participants.

 

   

Pension Plans

    

Postretirement Plan

  
   

2022

    

2021

    

2022

    

2021

  
Weighted-average assumptions used to determine benefit obligations at December 31:                                

Discount rate

     4.89 %     2.44 %     5.16 %     2.70 %

Rate of compensation increase

     3.50 %     3.50 %     -       -  
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:                                

Discount rate

     4.43 %     2.07 %     2.70 %     2.25 %

Expected long-term rate of return on plan assets

     5.00 %     5.10 %     -       –  

Rate of compensation increase

     3.50 %     3.50 %     -       –  

 

To enhance the Company’s efforts to mitigate the impact of the defined benefit pension plan on its financial statements, in 2014 the Company moved towards a liability driven investing model to more closely align assets with liabilities based on when the liabilities are expected to come due. Currently, based on 2022 funding levels, equities may comprise between 22% and 42% of the Plan’s market value. Fixed income investments may comprise between 50% and 70% of the GR Plan’s market value. Alternative investments may comprise between 3% and 13% of the Plan’s market value. Cash and cash equivalents (including all senior debt securities with less than one year to maturity) may comprise between 0% and 10% of the GR Plan’s market value.

 

Financial instruments included in pension plan assets are categorized into a fair value hierarchy of three levels, based on the degree of subjectivity inherent in the valuation methodology. Level 1 assets are based on unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets. Level 2 assets are valued at inputs other than quoted prices in active markets for identical assets that are observable either directly or indirectly for substantially the full term of the assets. Level 3 assets are valued based on unobservable inputs for the asset (i.e., supported by little or no market activity). These inputs include management’s own assessments about the assumptions that market participants would use in pricing assets (including assumptions about risk). The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

 

The following tables set forth by asset class the fair value of plan assets for the years ended December 31, 2022 and 2021:

 

   

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

    

Significant

Observable

Inputs

(Level 2)

    

Significant

Unobservable

Inputs

(Level 3)

    

Plan Assets

at December

31, 2022

  

Equity

   $ 7,157     $ -     $ -     $ 7,157  

Fixed income

     5,052       27,045       -       32,097  

Mutual funds

     2,406       -       -       2,406  

Money funds and cash

     1,527       3,413       -       4,940  

Total fair value of Plan assets

   $ 16,142     $ 30,458     $ -     $ 46,600  

 

 

   

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

    

Significant

Observable

Inputs

(Level 2)

    

Significant

Unobservable

Inputs

(Level 3)

    

Plan Assets

at December

31, 2021

  

Equity

   $ 10,979     $ -     $ -     $ 10,979  

Fixed income

     8,788       42,154       139       51,081  

Mutual funds

     3,045       -       -       3,045  

Money funds and cash

     2,220       5,333       -       7,553  

Total fair value of Plan assets

   $ 25,032     $ 47,487     $ 139     $ 72,658  

 

Contributions

 

The Company expects to contribute up to $2.3 million to its defined benefit pension plans in 2023.

 

Expected future benefit payments

 

The following benefit payments are expected to be paid as follows based on actuarial calculations:

 

   

2023

    

2024

    

2025

    

2026

    

2027

    

Thereafter

  

Pension

   $ 7,435     $ 2,930     $ 3,272     $ 2,871     $ 3,838     $ 25,710  

Postretirement

     1,580       1,591       1,632       1,673       1,750       10,356  

 

For measurement purposes, and based on maximum benefits as defined by the plan, a 5% annual rate of increase in the per capita cost of covered health care benefits for all retirees was assumed as of December 31, 2022 and 2021 and is expected to remain constant going forward.

 

 

A one percentage point change in the assumed rate of return on the defined benefit pension plans assets is estimated to have an approximate $0.6 million effect on net periodic benefit cost. Additionally, a one percentage point increase in the discount rate is estimated to have a $1.7 million decrease in net periodic benefit cost, while a one percentage point decrease in the discount rate is estimated to have a $2.0million increase in net periodic benefit cost.