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Employee Benefit Plans
 12 Months Ended
Dec. 31, 2020
Compensation And Retirement Disclosure [Abstract]  
Employee Benefit Plans

(21.) EMPLOYEE BENEFIT PLANS

Supplemental Executive Retirement Agreements

The Company has non-qualified Supplemental Executive Retirement Agreements (“SERPs”) covering certain former executives. The unfunded liability related to the SERPs was $1.3 million and $1.7 million at December 31, 2020 and 2019, respectively. SERP expense was $51 thousand, $366 thousand and $215 thousand for 2020, 2019 and 2018, respectively.

Defined Contribution Plan

Employees that meet specified eligibility conditions are eligible to participate in the Company sponsored 401(k) plan. Under the plan, participants may make contributions, in the form of salary deferrals, up to the maximum Internal Revenue Code limit. The Company is also permitted to make additional discretionary contributions, although no such additional discretionary contributions were made in 2020, 2019 or 2018.

Defined Benefit Pension Plan

The Company participates in The New York State Bankers Retirement System (the “Plan”), a defined benefit pension plan covering substantially all employees. For employees hired prior to December 31, 2006, who met participation requirements on or before January 1, 2008 (“Tier 1 Participant”), the benefits are generally based on years of service and the employee’s highest average compensation during five consecutive years of employment.

Effective January 1, 2016, the Plan was amended to open the Plan to eligible employees who were hired on and after January 1, 2007 (“Tier 2 Participant”) and provide these eligible participants with a cash balance benefit formula.

The following table provides a reconciliation of the Company’s changes in the Plan’s benefit obligations, fair value of assets and a statement of the funded status as of and for the year ended December 31 (in thousands):

 

 

 

2020

 

 

2019

 

Change in projected benefit obligation:

 

 

 

 

 

 

 

 

Projected benefit obligation at beginning of period

 

$

84,328

 

 

$

69,574

 

Service cost

 

 

3,693

 

 

 

3,207

 

Interest cost

 

 

2,537

 

 

 

2,777

 

Actuarial (gain) loss

 

 

11,154

 

 

 

11,993

 

Benefits paid and plan expenses

 

 

(4,152

)

 

 

(3,223

)

Projected benefit obligation at end of period

 

 

97,560

 

 

 

84,328

 

Change in plan assets:

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of period

 

 

87,827

 

 

 

75,188

 

Actual return on plan assets

 

 

18,501

 

 

 

15,862

 

Employer contributions

 

 

-

 

 

 

-

 

Benefits paid and plan expenses

 

 

(4,152

)

 

 

(3,223

)

Fair value of plan assets at end of period

 

 

102,176

 

 

 

87,827

 

Funded status at end of period

 

$

4,616

 

 

$

3,499

 

 

The accumulated benefit obligation was $88.9 million and $76.8 million at December 31, 2020 and 2019, respectively.

The Company’s funding policy is to contribute, at a minimum, an actuarially determined amount that will satisfy the minimum funding requirements determined under the appropriate sections of Internal Revenue Code. The Company has no minimum required contribution for the 2021 fiscal year.

(21.) EMPLOYEE BENEFIT PLANS (Continued)

Estimated benefit payments under the Plan over the next ten years at December 31, 2020 are as follows (in thousands):

 

2021

 

$

4,581

 

2022

 

 

3,860

 

2023

 

 

4,213

 

2024

 

 

4,259

 

2025

 

 

4,472

 

2026 - 2030

 

 

25,042

 

 

Net periodic pension cost consists of the following components for the years ended December 31 (in thousands):

 

 

 

2020

 

 

2019

 

 

2018

 

Service cost

 

$

3,693

 

 

$

3,207

 

 

$

3,346

 

Interest cost on projected benefit obligation

 

 

2,537

 

 

 

2,777

 

 

 

2,387

 

Expected return on plan assets

 

 

(5,136

)

 

 

(4,736

)

 

 

(5,284

)

Amortization of unrecognized loss

 

 

1,270

 

 

 

1,445

 

 

 

725

 

Amortization of unrecognized prior service (credit) cost

 

 

-

 

 

 

-

 

 

 

(5

)

Net periodic pension cost

 

$

2,364

 

 

$

2,693

 

 

$

1,169

 

 

The actuarial assumptions used to determine the net periodic pension cost were as follows:

 

 

 

2020

 

 

2019

 

 

2018

 

Weighted average discount rate

 

 

3.09

%

 

 

4.13

%

 

 

3.49

%

Rate of compensation increase

 

 

3.00

%

 

 

3.00

%

 

 

3.00

%

Expected long-term rate of return

 

 

6.00

%

 

 

6.50

%

 

 

6.50

%

 

The actuarial assumptions used to determine the projected benefit obligation were as follows:

 

 

 

2020

 

 

2019

 

 

2018

 

Weighted average discount rate

 

 

2.32

%

 

 

3.09

%

 

 

4.13

%

Rate of compensation increase

 

 

3.00

%

 

 

3.00

%

 

 

3.00

%

 

The weighted average discount rate was based upon the projected benefit cash flows and the market yields of high grade corporate bonds that are available to pay such cash flows.

The Plan’s overall investment strategy is to invest in a diversified portfolio while managing the variability between the assets and projected liabilities of underfunded pension plans. The Plan’s Board Members approved a migration (the “Migration”) of substantially all of the Plan’s assets to one fund, Commingled Pensions Trust Fund (LDI Diversified Balanced) of JPMorgan Chase Bank, N.A. (“JPMCB LDI Diversified Balanced Fund” or the “Fund”). The Fund is a collective investment fund managed by the Plan’s trustee (the “Trustee”) under the Declaration of Trust. The Trustee is the Fund’s manager and makes day-to-day investment decisions for the Fund. The Fund is a group trust within the meaning of Internal Revenue Service Revenue Ruling 81-100, as amended. In reliance upon exemptions from the registration requirements of the federal securities laws, neither the Fund nor the Fund’s Units are registered with the SEC or any state securities commission. Because the Fund is not subject to registration under federal or state securities laws, certain protections that might otherwise be provided to investors in registered funds are not available to investors in the Fund. However, as a bank-sponsored collective investment trust holding qualified retirement plan assets, the Fund is required to comply with applicable provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Trustee is subject to supervision and regulation by the Office of the Comptroller of the Currency and the Department of Labor.

(21.) EMPLOYEE BENEFIT PLANS (Continued)

Prior to the Migration, the Plan’s overall investment strategy was to achieve a mix of approximately 97% of investments for long-term growth and 3% for near-term benefit payments with a wide diversification of asset types, fund strategies, and fund managers. The Board made the election in their December 2018 meeting and the Migration had an effective trade date of February 28, 2019. The Fund employs a liability driven investing (“LDI”) strategy for pension plans that are seeking a solution that is balanced between growth and hedging. The Bloomberg Barclays Long A U.S. Corporate Index, the Fund’s primary liability-performance benchmark, is used as a proxy for plan projected liabilities. The growth-oriented portion of the Fund invests in a mix of asset classes that the Fund’s Trustee believes will collectively maximize total risk-adjusted return through a combination of capital appreciation and income. This portion of the Fund will comprise between 35% and 90% of the portfolio and will invest directly or indirectly via underlying funds in a broad mix of global equity, credit, global fixed income, real estate and cash-plus strategies. The remaining portion of the Fund, between 10% and 65% of the portfolio, provides exposure to U.S. long duration fixed income and is used to minimize volatility relative to a plan’s projected liabilities. This portion of the Fund will invest directly or indirectly via underlying funds in investment grade corporate bonds and securities issued by the U.S. Treasury and its agencies or instrumentalities.

 

 

The following table represents the Plan’s target asset allocation and actual asset allocation, respectively, as of December 31, 2020 and 2019:

 

 

 

2020

 

2019

 

 

Target

 

Actual

 

Target

 

Actual

 

 

Allocation

 

Allocation

 

Allocation

 

Allocation

Asset category:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

0.00

%

 

 

0.00

%

 

 

0.00

%

 

 

0.00

%

Equity securities

 

 

28.25

 

 

 

31.56

 

 

 

28.25

 

 

 

31.75

 

Fixed income securities

 

 

59.75

 

 

 

62.60

 

 

 

59.75

 

 

 

57.65

 

Alternative investments

 

 

12.00

 

 

 

5.84

 

 

 

12.00

 

 

 

10.60

 

 

Cash equivalents include repurchase agreements, banker’s acceptances, commercial paper, negotiable certificates of deposit, U.S. government securities with less than one year to maturity and funds (including the Commingled Pension Trust Fund (Liquidity) of JPMorgan Chase Bank, N.A. (“JPMorgan”)) established to invest in these types of highly liquid, high quality instruments. Equity securities primarily include investments in common stocks, depository receipts, preferred stocks, commingled pension trust funds, exchange traded funds and real estate investment trusts. Fixed income securities include corporate bonds, government issues, credit card receivables, mortgage backed securities, municipals, commingled pension trust funds and other asset backed securities. Alternative investments are real estate interests and related investments held within a commingled pension trust fund.

The Fund is valued utilizing the valuation policies set forth by JP Morgan’s asset management committee. Underlying investments for which market quotations are readily available are valued at their market value. Underlying investments for which market quotations are not readily available are fair valued by approved affiliated and/or unaffiliated pricing vendors, third-party broker-dealers or methodologies as approved by the asset management committee. Fixed income instruments are valued based on prices received from approved affiliated and unaffiliated pricing vendors or third-party broker-dealers (collectively referred to as “Pricing Services”). The Pricing Services use multiple valuation techniques to determine the valuation of fixed income instruments. In instances where sufficient market activity exists, the Pricing Services may utilize a market-based approach through which trades or quotes from market makers are used to determine the valuation of these instruments. In instances where sufficient market activity may not exist, the Pricing Services also utilize proprietary valuation models which may consider market transactions in comparable securities and the various relationships between securities in determining fair value and/or market characteristics in order to estimate the relevant cash flows, which are then discounted to calculate the fair values. Equities and other exchange-traded instruments are valued at the last sales price or official market closing price on the primary exchange on which the instrument is traded before the net asset values (“NAV”) of the Funds are calculated on a valuation date. Futures contracts are generally valued on the basis of available market quotations. Forward foreign currency exchange contracts are valued utilizing market quotations from approved Pricing Services. The Fund invests in the Commingled Pension Trust Fund (“Strategic Property Fund”) of JPMorgan (the “SPF”), which holds significant amounts of investments which have been fair valued at December 31, 2020 and 2019.

During the years ended December 31, 2020 and 2019, there were no transfers in or out of Levels 1, 2 or 3. In addition, there were no changes in valuation methodologies during the years ended December 31, 2020 and 2019.

Prior to the Migration, the Plan had a direct investment in the SPF, which was a Level 3 investment.

 

 

(21.) EMPLOYEE BENEFIT PLANS (Continued)

The following is a table of the pricing methodology and unobservable inputs for Level 3 investments held during the year ended December 31, 2019 used by JPMorgan in pricing commingled pension trust funds (“CPTF”):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal Valuation

Technique(s) Used

 

 

 

Unobservable Inputs

CPTF – Other:

 

 

 

 

 

 

 

 

CPTF (Strategic Property) of JPMorgan

 

 

 

Market, Income Approach, Debt Service and Sales Comparison

 

 

 

Credit Spreads, Discount Rate, Loan to Value Ratio, Terminal Capitalization Rate and Value per Square Foot

 

The major categories of Plan assets measured at fair value on a recurring basis as of December 31 are presented in the following tables (in thousands).

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

Inputs

 

 

Inputs

 

 

Inputs

 

 

Fair Value

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash (including foreign currencies)

 

$

6

 

 

$

-

 

 

$

-

 

 

$

6

 

Short term investment funds

 

 

-

 

 

 

1,253

 

 

 

-

 

 

 

1,253

 

Total cash equivalents

 

 

6

 

 

 

1,253

 

 

 

-

 

 

 

1,259

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

31,848

 

 

 

-

 

 

 

31,848

 

Total equity securities

 

 

-

 

 

 

31,848

 

 

 

-

 

 

 

31,848

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

63,171

 

 

 

-

 

 

 

63,171

 

Corporate bonds

 

 

-

 

 

 

5

 

 

 

-

 

 

 

5

 

Total fixed income securities

 

 

-

 

 

 

63,176

 

 

 

-

 

 

 

63,176

 

Other investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds - Realty

 

 

-

 

 

 

5,893

 

 

 

-

 

 

 

5,893

 

Total Plan investments

 

$

6

 

 

$

102,170

 

 

$

-

 

 

$

102,176

 

 

At December 31, 2020, the portfolio was substantially managed by one investment firm, with control of approximately 99% of the Plan’s assets with the remaining 1% under the direct control of the Plan. A portfolio concentration of 99% in the JPMCB LDI Diversified Balanced Fund, a CPTF, existed at December 31, 2020.

 

 

 

(21.) EMPLOYEE BENEFIT PLANS (Continued)

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

Inputs

 

 

Inputs

 

 

Inputs

 

 

Fair Value

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash (including foreign currencies)

 

$

16

 

 

$

-

 

 

$

-

 

 

$

16

 

Short term investment funds

 

 

-

 

 

 

1,829

 

 

 

-

 

 

 

1,829

 

Total cash equivalents

 

 

16

 

 

 

1,829

 

 

 

-

 

 

 

1,845

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

30,685

 

 

 

-

 

 

 

30,685

 

Total equity securities

 

 

-

 

 

 

30,685

 

 

 

-

 

 

 

30,685

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

49,566

 

 

 

-

 

 

 

49,566

 

Corporate bonds

 

 

-

 

 

 

5

 

 

 

-

 

 

 

5

 

Total fixed income securities

 

 

-

 

 

 

49,571

 

 

 

-

 

 

 

49,571

 

Other investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds - Realty

 

 

-

 

 

 

5,726

 

 

 

-

 

 

 

5,726

 

Total Plan investments

 

$

16

 

 

$

87,811

 

 

$

-

 

 

$

87,827

 

 

At December 31, 2019, the portfolio was substantially managed by one investment firm, with control of approximately 98% of the Plan’s assets with the remaining 2% under the direct control of the Plan. A portfolio concentration of 98% in the JPMCB LDI Diversified Balanced Fund, a CPTF, existed at December 31, 2019.    

The following table sets forth a summary of the changes in the Plan’s Level 3 assets for the years ended December 31, 2020 and 2019:

 

Level 3 assets, January 1, 2019

 

$

2,897

 

Realized gain

 

 

881

 

Sales

 

 

(2,873

)

Unrealized gain

 

 

(905

)

Level 3 assets, December 31, 2019

 

 

-

 

No activity during the period

 

 

-

 

Level 3 assets, December 31, 2020

 

$

-

 

 

 

(21.) EMPLOYEE BENEFIT PLANS (Continued)

Postretirement Benefit Plan

An entity acquired by the Company provided health and dental care benefits to retired employees who met specified age and service requirements through a postretirement health and dental care plan in which both the acquired entity and the retirees shared the cost. The plan provided for substantially the same medical insurance coverage as for active employees until their death and was integrated with Medicare for those retirees aged 65 or older. In 2001, the plan’s eligibility requirements were amended to curtail eligible benefit payments to only retired employees and active employees who had already met the then-applicable age and service requirements under the Plan. In 2003, retirees under age 65 began contributing to health coverage at the same cost-sharing level as that of active employees. Retirees ages 65 or older were offered new Medicare supplemental plans as alternatives to the plan historically offered. The cost sharing of medical coverage was standardized throughout the group of retirees aged 65 or older. In addition, to be consistent with the administration of the Company’s dental plan for active employees, all retirees who continued dental coverage began paying the full monthly premium. The accrued liability included in other liabilities in the consolidated statements of financial condition related to this plan amounted to $108 thousand and $110 thousand as of December 31, 2020 and 2019, respectively. The postretirement expense for the plan that was included in salaries and employee benefits in the consolidated statements of income was not significant for the years ended December 31, 2020, 2019 and 2018. The plan is not funded.

The components of accumulated other comprehensive loss related to the defined benefit plan and postretirement benefit plan as of December 31 are summarized below (in thousands):

 

 

 

2020

 

 

2019

 

Defined benefit plan:

 

 

 

 

 

 

 

 

Net actuarial loss

 

$

(16,412

)

 

$

(19,894

)

Prior service credit (cost)

 

 

-

 

 

 

-

 

 

 

 

(16,412

)

 

 

(19,894

)

Postretirement benefit plan:

 

 

 

 

 

 

 

 

Net actuarial loss

 

 

(127

)

 

 

(133

)

Prior service credit

 

 

3

 

 

 

37

 

 

 

 

(124

)

 

 

(96

)

Total

 

 

(16,536

)

 

 

(19,990

)

Deferred tax benefit

 

 

4,237

 

 

 

5,122

 

Amounts included in accumulated other comprehensive loss

 

$

(12,299

)

 

$

(14,868

)

 

Changes in plan assets and benefit obligations recognized in other comprehensive income on a pre-tax basis during the years ended December 31 are as follows (in thousands):

 

 

 

2020

 

 

2019

 

Defined benefit plan:

 

 

 

 

 

 

 

 

Net actuarial gain (loss)

 

$

2,212

 

 

$

(867

)

Amortization of net loss

 

 

1,270

 

 

 

1,445

 

Amortization of prior service credit

 

 

-

 

 

 

-

 

 

 

 

3,482

 

 

 

578

 

Postretirement benefit plan:

 

 

 

 

 

 

 

 

Net actuarial (loss) gain

 

 

(12

)

 

 

(12

)

Amortization of net loss

 

 

18

 

 

 

18

 

Amortization of prior service credit

 

 

(34

)

 

 

(65

)

 

 

 

(28

)

 

 

(59

)

Total recognized in other comprehensive income

 

$

3,454

 

 

$

519