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POSTRETIREMENT BENEFITS | 12 Months Ended
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Dec. 31, 2021
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] |
POSTRETIREMENT BENEFITS | We have historically provided certain health care benefits for a large number of retired U.S. employees. Employees hired prior to January 1, 2002 become eligible for benefits if they attain the appropriate years of service and age prior to retirement. Employees hired on January 1, 2002 or later are not eligible to participate in the plan. In addition to our retiree health care plan, we also have a U.S. supplemental executive retirement plan (SERP). The SERP is no longer an active plan. It is not adding new participants and all of the current participants are retired. The SERP has no plan assets, but our obligation is fully funded by investments in company-owned life insurance policies. Obligations and funded status – Changes in our benefit obligation, plan assets and funded status for the years ended December 31 were as follows:
(in thousands) |  | Postretirement benefit plan |  | Pension plan(1)
Change in benefit obligation: |  |  |  |
Benefit obligation, December 31, 2019 |  | $ | 73,175 |  |  | $ | 3,251 |
Interest cost |  | 1,835 |  |  | 76 |
Net actuarial loss |  | 218 |  |  | 340 |
Benefits paid from plan assets and company funds |  | (7,064) |  |  | (324) |
Benefit obligation, December 31, 2020 |  | 68,164 |  |  | 3,343 |
Interest cost |  | 929 |  |  | 39 |
Net actuarial (gain) loss |  | (5,721) |  |  | 2 |
Benefits paid from plan assets and company funds |  | (5,591) |  |  | (324) |
Benefit obligation, December 31, 2021 |  | $ | 57,781 |  |  | $ | 3,060 |
Change in plan assets: |  |  |  |
Fair value of plan assets, December 31, 2019 |  | $ | 129,918 |  |  | $ | — |
Return on plan assets |  | 15,741 |  |  | — |
Benefits paid |  | (6,287) |  |  | — |
Fair value of plan assets, December 31, 2020 |  | 139,372 |  |  | — |
Return on plan assets |  | 10,159 |  |  | — |
Benefits paid |  | (4,731) |  |  | — |
Fair value of plan assets, December 31, 2021 |  | $ | 144,800 |  |  | $ | — |
Funded status, December 31, 2020 |  | $ | 71,208 |  |  | $ | (3,343) |
Funded status, December 31, 2021 |  | $ | 87,019 |  |  | $ | (3,060) |
(1) The accumulated benefit obligation equals the projected benefit obligation. The funded status of our plans was recognized on the consolidated balance sheets as of December 31 as follows:
|  | Postretirement benefit plan |  | Pension plan
(in thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Other non-current assets |  | $ | 87,019 |  |  | $ | 71,208 |  |  | $ | — |  |  | $ | — |
Accrued liabilities |  | — |  |  | — |  |  | 324 |  |  | 324 |
Other non-current liabilities |  | — |  |  | — |  |  | 2,736 |  |  | 3,019 |
Amounts included in accumulated other comprehensive loss as of December 31 that have not been recognized as components of postretirement benefit income were as follows:
(in thousands) |  | 2021 |  | 2020
Unrecognized prior service credit |  | $ | 9,914 |  |  | $ | 11,335 |
Unrecognized net actuarial loss |  | (25,445) |  |  | (35,454) |
Tax effect |  | 100 |  |  | 2,163 |
Amount recognized in accumulated other comprehensive loss, net of tax |  | $ | (15,431) |  |  | $ | (21,956) |
The unrecognized prior service credit relates to our postretirement benefit plan and is a result of previous plan amendments that reduced the accumulated postretirement benefit obligation. A reduction is first used to reduce any existing unrecognized prior service cost, then to reduce any remaining unrecognized transition obligation. The excess is the unrecognized prior service credit. The prior service credit is amortized on the straight-line basis over the remaining life expectancy of plan participants at the time of each plan amendment. Unrecognized net actuarial gains and losses result from experience different from that assumed and from changes in assumptions. The net actuarial gain recognized during 2021 was primarily due to the increase in the discount rate used to discount the benefit obligation, as well as favorable claims experience. The net actuarial loss generated during 2020 was primarily due to the decrease in the discount rate used to discount the benefit obligation, partially offset by our claims and other experience. Unrecognized actuarial gains and losses for our postretirement benefit plan are amortized over the average remaining life expectancy of inactive plan participants, as a large percentage of the plan participants are classified as inactive. This amortization period is currently 12.5 years. Postretirement benefit income – Postretirement benefit income for the years ended December 31 consisted of the following components:
(in thousands) |  | 2021 |  | 2020 |  | 2019
Interest cost |  | $ | 968 |  |  | $ | 1,911 |  |  | $ | 2,727 |
Expected return on plan assets |  | (7,498) |  |  | (7,619) |  |  | (6,957) |
Amortization of prior service credit |  | (1,421) |  |  | (1,421) |  |  | (1,421) |
Amortization of net actuarial losses |  | 1,629 |  |  | 2,301 |  |  | 3,223 |
Net periodic benefit income |  | $ | (6,322) |  |  | $ | (4,828) |  |  | $ | (2,428) |
Actuarial assumptions – In measuring the benefit obligations as of December 31, the following discount rate assumptions were used:
|  | Postretirement benefit plan |  | Pension plan
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Discount rate |  | 2.61 | % |  | 2.16 | % |  | 2.26 | % |  | 1.74 | %
In measuring net periodic benefit income for the years ended December 31, the following assumptions were used:
|  | Postretirement benefit plan |  | Pension plan
|  | 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Discount rate |  | 2.16 | % |  | 3.03 | % |  | 4.13 | % |  | 1.74 | % |  | 2.76 | % |  | 4.01 | %
Expected return on plan assets |  | 5.50 | % |  | 6.00 | % |  | 6.25 | % |  | — |  |  | — |  |  | — |
The discount rate assumption is based on the rates of return on high-quality, fixed-income instruments currently available whose cash flows approximate the timing and amount of expected benefit payments. In determining the expected long-term rate of return on plan assets, we utilize our historical returns and then adjust these returns for estimated inflation and projected market returns. Our inflation assumption is primarily based on analysis of historical inflation data. In measuring the benefit obligation as of December 31 for our postretirement benefit plan, the following assumptions for health care cost trend rates were used. These rates are utilized to determine our periodic benefit income for the following year.
|  | 2021 |  | 2020 |  | 2019
|  | Participants under age 65 |  | Participants age 65 and older |  | Participants under age 65 |  | Participants age 65 and older |  | Participants under age 65 |  | Participants age 65 and older
Health care cost trend rate assumed for next year |  | 6.9 | % |  | 7.6 | % |  | 7.2 | % |  | 8.0 | % |  | 7.4 | % |  | 8.4 | %
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) |  | 4.5 | % |  | 4.5 | % |  | 4.5 | % |  | 4.5 | % |  | 4.5 | % |  | 4.5 | %
Year that the rate reaches the ultimate trend rate |  | 2030 |  | 2030 |  | 2030 |  | 2030 |  | 2029 |  | 2029
Plan assets – The allocation of plan assets by asset category as of December 31 was as follows:
|  | Postretirement benefit plan
|  | 2021 |  | 2020
Mortgage-backed securities |  | 41 | % |  | 24 | %
International equity securities |  | 20 | % |  | 20 | %
U.S. corporate debt securities |  | 19 | % |  | 21 | %
U.S. large capitalization equity securities |  | 17 | % |  | 17 | %
Government debt securities |  | — |  |  | 15 | %
U.S. small and mid-capitalization equity securities |  | 3 | % |  | 3 | %
Total |  | 100 | % |  | 100 | %
Our postretirement benefit plan has assets that are intended to meet long-term obligations. In order to meet these obligations, we employ a total return investment approach that considers cash flow needs and balances long-term projected returns against expected asset risk, as measured using projected standard deviations. Risk tolerance is established through consideration of projected plan liabilities, the plan's funded status, projected liquidity needs and our financial condition. The target asset allocation percentages for our postretirement benefit plan are based on our liability and asset projections. The targeted allocation of plan assets is 60% fixed income securities, 20% international equity securities, 17% large capitalization equity securities and 3% small and mid-capitalization equity securities. During 2021, we modified certain of the funds in which our plan assets are invested and we began utilizing collective investment trusts (CITs). Information regarding fair value measurements of plan assets was as follows as of December 31, 2021:
|  | Fair value measurements using |  |  |  |
|  | Quoted prices in active markets for identical assets |  | Significant other observable inputs |  | Significant unobservable inputs |  | Investments measured at net asset value |  | Fair value as of December 31, 2021
(in thousands) |  | (Level 1) |  | (Level 2) |  | (Level 3) |  |
Mortgage-backed securities |  | $ | (94) |  |  | $ | 58,893 |  |  | $ | — |  |  | $ | — |  |  | $ | 58,799 |
International equity securities |  | 285 |  |  | 28,708 |  |  | — |  |  | — |  |  | 28,993 |
U.S. corporate debt securities |  | 22 |  |  | 27,836 |  |  | — |  |  | — |  |  | 27,858 |
U.S. large capitalization equity securities |  | (15) |  |  | 25,410 |  |  | — |  |  | — |  |  | 25,395 |
U.S. small and mid-capitalization equity securities |  | 26 |  |  | 3,729 |  |  | — |  |  | — |  |  | 3,755 |
Plan assets |  | $ | 224 |  |  | $ | 144,576 |  |  | $ | — |  |  | $ | — |  |  | $ | 144,800 |
Information regarding fair value measurements of plan assets was as follows as of December 31, 2020:
|  | Fair value measurements using |  |  |  |
|  | Quoted prices in active markets for identical assets |  | Significant other observable inputs |  | Significant unobservable inputs |  | Investments measured at net asset value |  | Fair value as of December 31, 2020
(in thousands) |  | (Level 1) |  | (Level 2) |  | (Level 3) |  |
Mortgage-backed securities |  | $ | — |  |  | $ | 10,546 |  |  | $ | — |  |  | $ | 22,507 |  |  | $ | 33,053 |
U.S. corporate debt securities |  | — |  |  | 27,439 |  |  | — |  |  | 1,474 |  |  | 28,913 |
International equity securities |  | 24,512 |  |  | 3,632 |  |  | — |  |  | — |  |  | 28,144 |
U.S. large capitalization equity securities |  | — |  |  | 24,536 |  |  | — |  |  | — |  |  | 24,536 |
Government debt securities |  | — |  |  | 20,357 |  |  | — |  |  | — |  |  | 20,357 |
U.S. small and mid-capitalization equity securities |  | 3,406 |  |  | 356 |  |  | — |  |  | — |  |  | 3,762 |
Other debt securities |  | 387 |  |  | 220 |  |  | — |  |  | — |  |  | 607 |
Plan assets |  | $ | 28,305 |  |  | $ | 87,086 |  |  | $ | — |  |  | $ | 23,981 |  |  | $ | 139,372 |
The fair value of Level 2 mortgage-backed securities is estimated using pricing models with inputs derived principally from observable market data. The fair value of our other Level 2 debt securities is typically estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flow calculations that maximize observable inputs, such as current yields for similar instruments adjusted for trades and other pertinent market information. Our policy is to recognize transfers between fair value levels as of the end of the reporting period in which the transfer occurred. Cash flows – We made no contributions to plan assets during the past 3 years. We have fully funded the SERP obligation with investments in company-owned life insurance policies. The cash surrender value of these policies is included in long-term investments on the consolidated balance sheets and totaled $7,370 as of December 31, 2021 and $7,095 as of December 31, 2020. The following benefit payments are expected to be paid during the years indicated:
(in thousands) |  | Postretirement benefit plan | Pension plan
2022 |  | $ | 6,190 |  |  | $ | 320 |
2023 |  | 5,846 |  |  | 320 |
2024 |  | 5,314 |  |  | 310 |
2025 |  | 4,810 |  |  | 300 |
2026 |  | 4,338 |  |  | 290 |
2027 - 2031 |  | 17,328 |  |  | 1,190 |

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