Retirement Plans And Other Postretirement Benefits

12 Months Ended

Dec. 31, 2020

Retirement Plans And Other Postretirement Benefits

RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

Tredegar sponsors a noncontributory defined benefit (pension) plan covering certain current and former U.S. employees. The plan for salaried and hourly employees currently in effect is based on a formula using the participant’s years of service and compensation or using the participant’s years of service and a dollar amount. The plan is closed to new participants and pay for active plan participants for benefit calculations was frozen as of December 31, 2007. As of January 31, 2018, the plan no longer accrued benefits associated with crediting employees for service, thereby freezing all future benefits under the plan.

In addition to providing pension benefits, the Company provides postretirement life insurance and health care benefits for certain groups of employees. Tredegar and retirees share in the cost of postretirement health care benefits, with employees hired on or before January 1, 1993, receiving a fixed subsidy to cover a portion of their health care premiums. The Company eliminated prescription drug coverage for Medicare-eligible retirees as of January 1, 2006. Consequently, Tredegar is not eligible for any federal subsidies.

The following tables reconcile the changes in benefit obligations and plan assets in 2020 and 2019, and reconcile the funded status to prepaid or accrued cost at December 31, 2020 and 2019:


	Pension Benefits				Other Post- Retirement Benefits
(In thousands)	2020		2019		2020		2019
Change in benefit obligation:
Benefit obligation, beginning of year	$	318,763	$	287,240	$	7,650	$	6,889
Service cost	—		—		29		26
Interest cost	10,156		12,222		243		290
Effect of actuarial (gains) losses related to the following:
Discount rate change	26,887		38,919		644		894
Retirement rate assumptions and mortality table adjustments	(3,446)		(2,589)		13		21
Other	69		(1,047)		55		(176)
Plan participant contributions	—		—		606		649
Benefits paid	(16,270)		(15,982)		(1,076)		(943)
Benefit obligation, end of year	$	336,159	$	318,763	$	8,164	$	7,650
Change in plan assets:
Plan assets at fair value, beginning of year	$	218,329	$	205,367	$	—	$	—
Actual return on plan assets	18,800		20,624		—		—
Employer contributions	12,216		8,320		470		294
Plan participant contributions	—		—		606		649
Benefits paid	(16,270)		(15,982)		(1,076)		(943)
Plan assets at fair value, end of year	$	233,075	$	218,329	$	—	$	—
Funded status of the plans	$	(103,084)	$	(100,434)	$	(8,164)	$	(7,650)
Amounts recognized in the consolidated balance sheets:
Accrued expenses (current)	$	181	$	168	$	481	$	470
Pension and other postretirement benefit obligations, net	102,903		100,266		7,683		7,180
Net amount recognized	$	103,084	$	100,434	$	8,164	$	7,650

The following table sets forth the assumptions used in accounting for the pension and other post-retirement benefits, and the components of net periodic benefit cost:


	Pension Benefits									Other Post- Retirement Benefits
(In thousands, except percentages)	2020			2019			2018			2020			2019			2018
Weighted-average assumptions used to determine benefit obligations:
Discount rate	2.57		%	3.27		%	4.40		%	2.54		%	3.25		%	4.37		%
Expected long-term return on plan assets	5.00		%	5.00		%	6.00		%	n/a			n/a			n/a
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate	3.27		%	4.40		%	3.72		%	3.25		%	4.37		%	3.69		%
Expected long-term return on plan assets	5.00		%	6.00		%	6.50		%	n/a			n/a			n/a
Components of net periodic benefit cost:
Service cost	$	—		$	—		$	17		$	29		$	26		$	36
Interest cost	10,156			12,222			11,442			243			290			271
Expected return on plan assets	(11,004)			(13,528)			(15,011)			—			—			—
Amortization of prior service costs and gains or losses	15,494			10,891			13,894			(198)			(258)			(243)
Net periodic benefit cost	$	14,646		$	9,585		$	10,342		$	74		$	58		$	64

Net periodic benefit cost is determined using assumptions at the beginning of each year. Funded status is determined using assumptions at the end of each year. The amount of the accumulated benefit obligation is the same as the projected benefit obligation. At December 31, 2020, the effect of a 1% change in the health care cost trend rate assumptions would not impact the post-retirement obligation.

Expected benefit payments over the next five years and in the aggregate for 2026-2030 are as follows:


(In thousands)	Pension Benefits		Other Post- Retirement Benefits
2021	$	17,593	$	481
2022	18,001		482
2023	18,205		478
2024	18,445		473
2025	18,511		468
2026—2030	90,778		2,196

The pre-tax amounts recorded in 2020, 2019 and 2018 in accumulated other comprehensive income consist of:


	Pension						Other Post-Retirement
(In thousands)	2020		2019		2018		2020		2019		2018
Net actuarial (gain) loss	$	150,267	$	150,047	$	132,751	$	86	$	(824)	$	(1,821)

Pension expense is expected to be $14.0 million in 2021. The amounts in accumulated other comprehensive income, before related deferred income taxes, that are expected to be recognized as components of net periodic cost during 2021 are $17.1 million of cost for the pension plan and $0.1 million of benefit for other post-retirement plans.

The percentage composition of assets held by pension plans at December 31, 2020, 2019 and 2018 are as follows:


	% Composition of Plan Assets at December 31,
	2020		2019		2018
Pension plans:
Fixed income securities	7.7	%	8.7	%	8.6	%
Large/mid-capitalization equity securities	27.1		21.3		18.2
Small-capitalization equity securities	8.6		7.8		6.8
International and emerging market equity securities	20.6		19.7		16.0
Total equity securities	56.3		48.8		41.0
Private equity and hedge funds	12.1		35.0		42.3
Cash and cash equivalents	17.5		1.4		1.4
Other assets	6.4		6.1		6.7
Total	100.0	%	100.0	%	100.0	%

Tredegar’s targeted allocation percentage for pension plan assets and the expected long-term rate of return on assets used to determine its benefit obligation at December 31, 2020, are as follows:


	Target % Composition of Plan Assets1		Expected Long-term Return %
Pension plans:
Fixed income securities	12.0	%	1.3	%
Large/mid-capitalization equity securities	27.0		6.3
Small-capitalization equity securities	8.0		6.8
International and emerging market equity securities	20.0		5.6
Total equity securities	55.0		6.1
Private equity and hedge funds	33.0		4.4
Total	100.0	%	5.0	%
1.Target percentages for the composition of plan assets represents a neutral position within the approved range of allocations for such assets.

Expected long-term returns are estimated by asset class and generally are based on inflation-adjusted historical returns, volatilities, risk premiums and managed asset premiums. The portfolio of fixed income securities is structured with maturities that generally match estimated benefit payments over the next 1-2 years. The other assets category is primarily comprised of cash and contracts with insurance companies. The Company’s primary investment objective is to maximize total return with a strong emphasis on the preservation of capital, and it believes that over the long-term a diversified portfolio of fixed income securities, equity securities, hedge funds and private equity funds has a better risk-return profile than fixed income securities alone. The average remaining duration of benefit payments for the pension plans is about 11.5 years. The Company expects its required contributions to be approximately $11.7 million in 2021.

Estimates of the fair value of assets held by the Company’s pension plan are provided by unaffiliated third parties. Investments in private equity and hedge funds and certain fixed income securities by the Company’s pension plan are measured at net asset value, which is a practical expedient for measuring fair value. These assets are therefore excluded from the fair value hierarchy for each of the years presented.

At December 31, 2020 and 2019, the pension plan assets are categorized by level within the fair value measurement hierarchy as follows:


(In thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Balances at December 31, 2020
Cash and cash equivalents	$	40,890	$	40,890	$	—	$	—
Large/mid-capitalization equity securities	63,146		63,146		—		—
Small-capitalization equity securities	19,932		19,932		—		—
International and emerging market equity securities	24,325		24,325		—		—
Fixed income securities	18,008		6,690		11,318		—
Contracts with insurance companies	9,118		—		—		9,118
Other assets	5,629		5,629		—		—
Total plan assets at fair value	$	181,048	$	160,612	$	11,318	$	9,118
Investments measured at net asset value1	52,027
Total plan assets, December 31, 2020	$	233,075
Balances at December 31, 2019
Cash and cash equivalents	$	3,076	$	3,076	$	—	$	—
Large/mid-capitalization equity securities	46,440		46,440		—		—
Small-capitalization equity securities	17,135		17,135		—		—
International and emerging market equity securities	43,079		19,117		23,962		—
Fixed income securities	18,911		6,209		12,702		—
Contracts with insurance companies	8,840		—		—		8,840
Other assets	4,509		4,509		—		—
Total plan assets at fair value	$	141,990	$	96,486	$	36,664	$	8,840
Investments measured at net asset value1	76,339
Total plan assets, December 31, 2019	$	218,329
1.Includes private equity, hedge funds and certain international equity securities measured at net asset value.

Tredegar also has a non-qualified supplemental pension plan covering certain employees. Effective December 31, 2005, further participation in this plan was terminated and benefit accruals for existing participants were frozen. The plan was designed to restore all or a part of the pension benefits that would have been payable to designated participants from the principal pension plans if it were not for limitations imposed by income tax regulations. The projected benefit obligation relating to this unfunded plan was $2.2 million at December 31, 2020 and December 31, 2019. Pension expense recognized for this plan was $0.1 million in 2020, 2019, and 2018. This information has been included in the preceding pension benefit tables.

Pension and other postretirement benefit liabilities related to Personal Care Films have been retained by the Company. Pension expense recognized for participation by these former employees in the Company’s plans is not material for the years ended December 31, 2020, 2019, and 2018.