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Employee Benefit Plans
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [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 $697 thousand and $1.0 million at December 31, 2022 and 2021, respectively. SERP expense was $28 thousand, $39 thousand and $51 thousand for 2022, 2021 and 2020, 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 2022, 2021 or 2020.

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.

As part of the reorganization the Company implemented in December 2022, the Plan was amended such that effective January 31, 2023, benefits under Tier 1 will be frozen to future accruals and going forward all participants will be earning benefits under Tier 2.

(21.) EMPLOYEE BENEFIT PLANS (Continued)

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):

 

 

 

2022

 

 

2021

 

Change in projected benefit obligation:

 

 

 

 

 

 

Projected benefit obligation at beginning of period

 

$

97,682

 

 

$

97,560

 

Service cost

 

 

3,485

 

 

 

4,196

 

Interest cost

 

 

2,588

 

 

 

2,202

 

Actuarial gain

 

 

(25,055

)

 

 

(1,945

)

Benefits paid and plan expenses

 

 

(4,528

)

 

 

(4,331

)

Projected benefit obligation at end of period

 

 

74,172

 

 

 

97,682

 

Change in plan assets:

 

 

 

 

 

 

Fair value of plan assets at beginning of period

 

 

104,227

 

 

 

102,176

 

Actual return on plan assets

 

 

(26,422

)

 

 

6,382

 

Employer contributions

 

 

-

 

 

 

-

 

Benefits paid and plan expenses

 

 

(4,529

)

 

 

(4,331

)

Fair value of plan assets at end of period

 

 

73,276

 

 

 

104,227

 

Funded status at end of period

 

$

(896

)

 

$

6,545

 

The accumulated benefit obligation was $70.2 million and $90.1 million at December 31, 2022 and 2021, 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 2023 fiscal year.

Estimated benefit payments under the Plan over the next ten years at December 31, 2022 are as follows (in thousands):

 

2023

 

$

4,062

 

2024

 

 

4,271

 

2025

 

 

4,434

 

2026

 

 

4,796

 

2027

 

 

4,978

 

2028 - 2031

 

 

26,970

 

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

 

 

 

2022

 

 

2021

 

 

2020

 

Service cost

 

$

3,485

 

 

$

4,196

 

 

$

3,693

 

Interest cost on projected benefit obligation

 

 

2,588

 

 

 

2,202

 

 

 

2,537

 

Expected return on plan assets

 

 

(4,565

)

 

 

(5,225

)

 

 

(5,136

)

Amortization of unrecognized loss

 

 

250

 

 

 

724

 

 

 

1,270

 

Net periodic pension cost

 

$

1,758

 

 

$

1,897

 

 

$

2,364

 

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

 

 

 

2022

 

 

2021

 

 

2020

 

Weighted average discount rate

 

 

2.70

%

 

 

2.32

%

 

 

3.09

%

Rate of compensation increase

 

 

3.00

%

 

 

3.00

%

 

 

3.00

%

Expected long-term rate of return

 

 

5.25

%

 

 

5.25

%

 

 

6.00

%

 

(21.) EMPLOYEE BENEFIT PLANS (Continued)

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

 

 

 

2022

 

 

2021

 

 

2020

 

Weighted average discount rate

 

 

4.98

%

 

 

2.70

%

 

 

2.32

%

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.

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, 2022 and 2021:

 

 

 

2022

 

2021

 

 

Target

 

Actual

 

Target

 

Actual

 

 

Allocation

 

Allocation

 

Allocation

 

Allocation

Asset category:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

0.00

%

 

 

16.59

%

 

 

0.00

%

 

 

0.00

%

Equity securities

 

 

30.00

 

 

 

25.05

 

 

 

30.00

 

 

 

35.65

 

Fixed income securities

 

 

15.00

 

 

 

21.70

 

 

 

15.00

 

 

 

34.98

 

Alternative investments

 

 

55.00

 

 

 

36.66

 

 

 

55.00

 

 

 

29.37

 

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.

(21.) EMPLOYEE BENEFIT PLANS (Continued)

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, 2022 and 2021.

During the years ended December 31, 2022 and 2021, 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, 2022 and 2021.

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

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash (including foreign currencies)

 

$

7

 

 

$

-

 

 

$

-

 

 

$

7

 

Short term investment funds

 

 

-

 

 

 

12,149

 

 

 

-

 

 

 

12,149

 

Total cash equivalents

 

 

7

 

 

 

12,149

 

 

 

-

 

 

 

12,156

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

18,356

 

 

 

-

 

 

 

18,356

 

Total equity securities

 

 

-

 

 

 

18,356

 

 

 

-

 

 

 

18,356

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

15,898

 

 

 

-

 

 

 

15,898

 

Corporate bonds

 

 

-

 

 

 

3

 

 

 

-

 

 

 

3

 

Total fixed income securities

 

 

-

 

 

 

15,901

 

 

 

-

 

 

 

15,901

 

Other investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

26,863

 

 

 

-

 

 

 

26,863

 

Total Plan investments

 

$

7

 

 

$

73,269

 

 

$

-

 

 

$

73,276

 

 

(21.) EMPLOYEE BENEFIT PLANS (Continued)

At December 31, 2022, the portfolio was substantially managed by one investment firm, with control of approximately 96% of the Plan’s assets. A portfolio concentration of 96% in the JPMCB LDI Diversified Balanced Fund, a CPTF, existed at December 31, 2022.

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

Inputs

 

 

Inputs

 

 

Inputs

 

 

Fair Value

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash (including foreign currencies)

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

Short term investment funds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total cash equivalents

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

37,157

 

 

 

-

 

 

 

37,157

 

Total equity securities

 

 

-

 

 

 

37,157

 

 

 

-

 

 

 

37,157

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

36,459

 

 

 

-

 

 

 

36,459

 

Corporate bonds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total fixed income securities

 

 

-

 

 

 

36,459

 

 

 

-

 

 

 

36,459

 

Other investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commingled pension trust funds

 

 

-

 

 

 

30,611

 

 

 

-

 

 

 

30,611

 

Total Plan investments

 

$

-

 

 

$

104,227

 

 

$

-

 

 

$

104,227

 

At December 31, 2021, the portfolio was substantially managed by one investment firm, with control of approximately 100% of the Plan’s assets with the remaining 1% under the direct control of the Plan. A portfolio concentration of 100% in the JPMCB LDI Diversified Balanced Fund, a CPTF, existed at December 31, 2021.

 

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. As of December 31, 2022, there was no accrued liability related to this plan. The accrued liability included in other liabilities in the consolidated statements of financial condition related to this plan amounted to $33 thousand as of December 31, 2021. 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, 2022, 2021 and 2020. This plan is unfunded.