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Retirement Benefit Plans | 9 Months Ended
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Sep. 30, 2024
Retirement Benefits [Abstract] |
Retirement Benefit Plans | RETIREMENT BENEFIT PLANS (Dollars in Thousands) Arrow sponsors qualified and non-qualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees. Effective December 1, 2002, all active participants in the qualified defined benefit pension plan were given a one-time irrevocable election to continue participating in the traditional plan design, for which benefits were based on years of service and the participant’s final compensation (as defined), or to begin participating in the new cash balance plan design. All employees who first participate in the plan after December 1, 2002 automatically participate in the cash balance plan design. The interest credits under the cash balance plan are based on the 30-year U.S. Treasury rate in effect for November of the prior year with a minimum interest credit of 3%. The service credits under the cash balance plan are equal to 6.0% of eligible salaries for employees who become participants on or after January 1, 2003. For employees in the plan prior to January 1, 2003, the service credits are scaled based on the age of the participant, and range from 6.0% to 12.0%. The funding policy is to contribute up to the maximum amount that can be deducted for federal income tax purposes and to make all payments required under The Employee Retirement Income Security Act (ERISA). Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law. Arrow has multiple non-pension postretirement benefit plans. The health care, dental and life insurance plans are contributory, with participants’ contributions adjusted annually. Arrow’s policy is to fund the cost of postretirement benefits based on the current cost of the underlying policies. However, the health care plan provision allows for grandfathered participants to receive automatic increases of Company contributions each year based on the increase in inflation, limited to a maximum of 5%. As of December 31, 2023, Arrow used the sex-distinct Amount-Weighted Pri-2012 Mortality Tables for employees, healthy retirees and contingent survivors, with mortality improvements projected using Scale MP-2021 on a generational basis for the Pension Plan and the sex-distinct Amount-Weighted White Collar Pri-2012 Mortality Tables for employees, healthy retirees and contingent survivors, with mortality improvements projected using Scale MP-2021 on a generational basis for the Select Executive Retirement Plan (the "SERP"). Segment interest rates of 5.50%, 5.76%, 5.83% were used in determining the present value of a lump sum payment/annuitizing cash balance accounts as of December 31, 2023. Effective January 1, 2021, GFNB amended the Arrow Financial Corporation Employees' Pension Plan (the "Plan"). The Plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The Plan amendment was as follows: Effective January 1, 2021, the benefit payable to or on behalf of each participant: • whose employment with the Employer (or any predecessor Employer, except as noted below) terminated on or before January 1, 2016; • who satisfied the requirements for early, normal, or late retirement as of such termination; • who never participated in the United Vermont Bancorporation Plan; and • who is, or whose beneficiary is, receiving monthly benefit payments from the Plan as of January 1, 2021 (including a participant or beneficiary who shall commence receiving benefits from the Plan as of January 1, 2021), shall be increased by 3%. The foregoing increase was applied to the monthly benefit actually payable to the participant, or to the participant's beneficiary, as of January 1, 2021, determined after all applicable adjustments, regardless of whether such benefit had been determined under the Company's plan or the plan of a predecessor employer that had been merged into the Plan. The plan amendment caused a $351,638 increase in the projected benefit obligation, creating a positive service cost which will be amortized over 9.70 years (the average expected future service of active plan participants.) Effective January 1, 2021, GFNB amended the Arrow Financial Corporation Employees' SERP. The plan change was adopted January 1, 2021 and the amendment was valued as of December 31, 2020. The plan amendment provides a special adjustment to the monthly benefit payment for certain retirees. The plan amendment caused a $122,797 increase in the projected benefit obligation, creating a positive prior service cost which will be amortized over 12.5 years. Settlement accounting is required when lump sum payments during a fiscal year exceed that fiscal year's Service Cost plus Interest Cost components of the Net Periodic Pension Cost. For 2022, the sum of the Service Cost and Interest Cost was $3.3 million and the 2022 total lump sum payments exceeded that amount. The Plan therefore recognized in the 2022 Net Periodic Pension Cost a portion of the Unamortized Net (Gain)/Loss equal to the ratio of the projected benefit obligation for the participants that received a lump sum to the total projected benefit obligation. As of December 31, 2022, the Unamortized Net Loss prior to reflecting settlement accounting was $7.2 million. The ratio of the projected benefit obligation for participants that received a lump sum to the total projected benefit obligation was 8.06%. The effect of the settlement that was recognized in the 2022 Net Periodic Pension Cost was $577 thousand, which was fully reflected in the 2022 Net Periodic Pension Cost. Settlement accounting was not required for the the year ended December 31, 2023 or for the three- or nine-month periods ended September 30, 2024. The following tables provide the components of net periodic benefit costs for the three-month and nine-month periods ended September 30, 2024 and 2023:
|  | Employees' |  | Select Executive |  | Postretirement
|  | Pension |  | Retirement |  | Benefit
|  | Plan |  | Plan |  | Plans
Net Periodic Benefit Cost |  |  |  |  |  |
For the Three Months Ended September 30, 2024: |  |  |  |  |  |
Service Cost 1 |  | $ | 423 |  |  | $ | 20 |  |  | $ | 11 |
Interest Cost (Benefit) 2 |  | 562 |  |  | (157) |  |  | 79 |
Expected Return on Plan Assets 2 |  | (928) |  |  | 237 |  |  | — |
Amortization of Prior Service Cost 2 |  | 32 |  |  | 9 |  |  | 26 |
Amortization of Net Gain 2 |  | — |  |  | 6 |  |  | (84) |
Net Periodic Cost |  | $ | 89 |  |  | $ | 115 |  |  | $ | 32 |
Plan Contributions During the Period |  | $ | — |  |  | $ | 127 |  |  | $ | 31 |
For the Three Months Ended September 30, 2023: |  |  |  |  |  |
Service Cost 1 |  | $ | 398 |  |  | $ | 143 |  |  | $ | 14 |
Interest Cost 2 |  | 524 |  |  | 85 |  |  | 82 |
Expected Return on Plan Assets 2 |  | (854) |  |  | — |  |  | — |
Amortization of Prior Service Cost 2 |  | 16 |  |  | 9 |  |  | 26 |
Amortization of Net Loss (Gain) 2 |  | 30 |  |  | 18 |  |  | (88) |
Net Periodic Cost |  | $ | 114 |  |  | $ | 255 |  |  | $ | 34 |
Plan Contributions During the Period |  | $ | — |  |  | $ | 99 |  |  | $ | 28 |
Net Periodic Benefit Cost |  |  |  |  |  |
For the Nine Months Ended September 30, 2024: |  |  |  |  |  |
Service Cost 1 |  | $ | 1,269 |  |  | $ | 59 |  |  | $ | 34 |
Interest Cost 2 |  | 1,682 |  |  | 3 |  |  | 239 |
Expected Return on Plan Assets 2 |  | (2,783) |  |  | 237 |  |  | — |
Amortization of Prior Service Cost 2 |  | 98 |  |  | 29 |  |  | 77 |
Amortization of Net Loss (Gain) 2 |  | — |  |  | 18 |  |  | (253) |
Net Periodic Cost |  | $ | 266 |  |  | $ | 346 |  |  | $ | 97 |
Plan Contributions During the Period |  | $ | — |  |  | $ | 382 |  |  | $ | 112 |
Estimated Future Contributions in the Current Fiscal Year |  | $ | — |  |  | $ | 127 |  |  | $ | 37 |
For the Nine Months Ended September 30, 2023: |  |  |  |  |  |
Service Cost 1 |  | $ | 1,195 |  |  | $ | 428 |  |  | $ | 42 |
Interest Cost 2 |  | 1,573 |  |  | 244 |  |  | 249 |
Expected Return on Plan Assets 2 |  | (2,562) |  |  | — |  |  | — |
Amortization of Prior Service Cost 2 |  | 47 |  |  | 29 |  |  | 78 |
Amortization of Net Loss (Gain) 2 |  | 89 |  |  | 55 |  |  | (265) |
Net Periodic Cost |  | $ | 342 |  |  | $ | 756 |  |  | $ | 104 |
Plan Contributions During the Period |  | $ | — |  |  | $ | 325 |  |  | $ | 75 |
Footnotes: 1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income 2. Included in Other Operating Expense on the Consolidated Statements of Income A contribution to the qualified pension plan was not required during the period ended September 30, 2024 and currently, additional contributions in 2024 are not expected. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.

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