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Note 9 - Pensions and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Retirement Benefits [Text Block]

Note 9 – 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 $4.3 million for 2023, $3.0 million for 2022, and $2.3 million for 2021.

 

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 2023. The benefit obligation as of December 31, 2023 was $0.4 million. Total contributions to the Fill-Rite Plan were $0.3 million in 2022. The 2023 activity is included in the tables within this footnote. Effective January 31, 2024 the Fill-Rite Plan was frozen and will terminate on April 30, 2024. The Fill-Rite Plan was replaced with the Company’s enhanced 401(k) plan. Liabilities included in the table within this footnote include the estimated termination liability of the Fill-Rite Plan.

 

The Company also sponsors a non-contributory defined benefit postretirement health care plan that provides medical 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, 2023, which is expected to remain constant going forward. A 5.0% percent annual rate of increase was assumed in estimating the projected benefit obligation at December 31, 2022 and in calculating 2023 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

  
   

2023

    

2022

    

2023

    

2022

  

Accumulated benefit obligation at end of year

   $ 50,114     $ 45,756     $ 24,276     $ 23,954  

Change in projected benefit obligation:

                                

Benefit obligation at beginning of year

   $ 55,930     $ 82,000     $ 23,954     $ 28,934  

Service cost

     2,180       2,378       835       1,146  

Interest cost

     2,652       2,326       1,196       760  

Settlement

     -       1,656       -       -  

Benefits paid

     (1,646 )     (17,826 )     (1,796 )     (1,781 )

Effect of foreign exchange

     -       -       6       (28 )

Actual expenses

     (161 )     (150 )     -       -  

Actuarial (gain)/loss

     3,194       (14,454 )     81       (5,077 )

Benefit obligation at end of year

   $ 62,149     $ 55,930     $ 24,276     $ 23,954  
                                 

Change in plan assets:

                                

Plan assets at beginning of year

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

Actual return on plan assets

     3,606       (10,332 )     -       -  

Employer contributions

     2,250       2,250       1,796       1,781  

Benefits paid

     (1,646 )     (17,826 )     (1,796 )     (1,781 )

Actual expenses

     (161 )     (150 )     -       -  

Plan assets at end of year

   $ 50,649     $ 46,600     $ -     $ -  

Funded status at end of year

   $ (11,500 )   $ (9,330 )   $ (24,276 )   $ (23,954 )

 

   

Pension Plans

    

Postretirement Plan

  
   

2023

    

2022

    

2023

    

2022

  

Amounts recognized in the Consolidated Balance Sheets consist of:

                                

Current liabilities

   $ -     $ -     $ (1,490 )   $ (1,541 )

Noncurrent liabilities

     (11,500 )     (9,330

)

     (22,786 )     (22,413 )

Total assets (liabilities)

   $ (11,500 )   $ (9,330

)

   $ (24,276 )   $ (23,954 )
                                 

Amounts recognized in Accumulated other comprehensive loss consist of:

                                

Net actuarial loss

   $ 19,084     $ 18,290     $ (236 )   $ 308  

Prior Service Cost

     -       -       -       (995 )

Deferred tax (benefit) expense

     (4,803 )     (4,607 )     135       242  

After tax actuarial loss

   $ 14,281     $ 13,683     $ (101 )   $ (445 )

 

 

Components of net periodic benefit cost:

 

   

2023

    

2022

    

2021

  

Pension Plans

                        

Service cost

   $ 2,180     $ 2,400     $ 2,662  

Interest cost

     2,652       2,326       1,729  
Expected return on plan assets     (2,695 )     (2,892 )     (3,610 )

Recognized actuarial loss

     1,461       1,724       1,904  

Settlement loss

     -       6,427       2,304  

Net periodic benefit cost

   $ 3,598     $ 9,985     $ 4,989  
                         

Other changes in pension plan assets and benefit obligations recognized in other comprehensive loss:

                        

Net (gain) loss

     822       (7,726 )     (2,879 )

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

   $ 4,420     $ 2,259     $ 2,110  
                         

Postretirement Plan

                        

Service cost

   $ 835     $ 1,146     $ 1,462  

Interest costs

     1,196       760       654  

Prior service cost recognition

     (995 )     (1,128 )     (1,130 )

Recognized actuarial loss (gain)

     (38 )     368       580  

Net periodic benefit cost (credit)

   $ 998     $ 1,146     $ 1,566  
                         

Other changes in postretirement plan assets and benefit obligations recognized in other comprehensive loss:

                        

Net loss (gain)

   $ 1,114     $ (4,317 )   $ (863 )

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

   $ 2,112     $ (3,171 )   $ 703  

 

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.

 

There was no pension settlement charge recorded in 2023. In 2022 and 2021, the Company recorded pre-tax non-cash pension settlement charges of $6.4 million and $2.3 million, respectively, driven by lump-sum distributions discussed above. 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

  
   

2023

    

2022

    

2023

    

2022

  

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

              

Discount rate

     4.69 %     4.89 %     4.86 %     5.16 %

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

     4.89 %     4.43 %     5.16 %     2.70 %

Expected long-term rate of return on plan assets

     6.20 %     5.00 %     -       -  

Rate of compensation increase

     3.50 %     3.50 %     -       -  

 

To enhance the Company’s efforts to mitigate the impact of the GR 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 2023 funding levels, equities may comprise between 5% and 35% of the GR Plan’s market value. Fixed income investments may comprise between 49% and 70% of the GR Plan’s market value. Alternative investments may comprise between 3% and 13% of the GR 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 20% 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, 2023 and 2022:

 

   

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,

2023

  

Equity

   $ 13,660     $ -     $ -     $ 13,660  

Fixed income

     8,913       18,579       -       27,492  

Mutual funds

     3,684       -       -       3,684  

Money funds and cash

     2,047       3,766       -       5,813  

Total fair value of Plan assets

   $ 28,304     $ 22,345     $ -     $ 50,649  

 

 

   

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  

 

Contributions

 

The Company expects to contribute up to $3.0 million to its defined benefit pension plans in 2024.

 

Expected future benefit payments

 

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

 

   

2024

    

2025

    

2026

    

2027

    

2028

    

Thereafter

  

Pension

   $ 9,100     $ 3,676     $ 3,024     $ 3,995     $ 4,771     $ 28,598  

Postretirement

     1,530       1,627       1,658       1,728       1,783       10,695  

 

For measurement purposes and based on maximum benefits as defined by the plan, a 5.0% annual rate of increase in the per capita cost of covered health care benefits for all retirees was assumed as of December 31, 2023 and 2022 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 $0.4 million effect on net periodic benefit cost. Additionally, a one percentage point increase in the discount rate is estimated to have a $1.1 million decrease in net periodic benefit cost, while a one percentage point decrease in the discount rate is estimated to have a $1.3 million increase in net periodic benefit cost.