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RETIREMENT PLANS

12 Months Ended

Dec. 31, 2019

14. RETIREMENT PLANS

The Company has noncontributory defined benefit pension plans as well as a noncontributory defined medical, dental, vision, and life benefit plan for certain employees of its International Telecom segment. The Company reviews the funded status of its pension plans and makes contributions based on that analysis. The benefits are based on the participants’ compensation during their employment and the credited service years earned by participants. The Company funds the other postretirement benefit plans as benefits are paid.

The weighted-average rates assumed in the actuarial calculations for the pension and other postretirement benefit plans are as follows as of December 31, 2019, 2018 and 2017:


	2019		2018		2017
Discount Rate – Pension Benefit Obligation	4.2	%	4.7	%	4.2	%
Discount Rate – Pension Benefit Cost	4.5	%	4.3	%	4.6	%
Discount Rate – Postretirement Benefit Obligation	3.5	%	4.5	%	3.9	%
Discount Rate – Postretirement Benefit Cost	4.5	%	3.9	%	4.3	%
Annual salary increase	6.5	%	6.5	%	6.5	%
Expected long-term return on plan assets	6.1	%	6.1	%	6.1	%

The expected long-term rate of return on plan assets was determined based on several factors including input from pension investment consultants, projected long-term returns of equity and bond indices, and historical returns over the life of the related obligations of the fund. The Company, in conjunction with its pension investment consultants, reviews its asset allocation periodically and rebalances its investments when appropriate in an effort to earn the expected long-term returns. The Company will continue to evaluate its long-term rate of return assumptions at least annually and will adjust them as necessary.

The annual salary increase assumption reflects the Company’s estimated long term average rate of salary increases.

The discount rate was determined based on a review of market data including yields on high quality corporate bonds with maturities approximating the remaining life of the project benefit obligations.

The other postretirement benefit plans healthcare cost trend assumptions is based on health care trend rates. The 2019 assumed medical health care cost trend rate is 6% trending to an ultimate rate of 4% in 2073. The 2019 and ultimate assumed dental care cost trend rate is 4%. The effect of a one-percentage-point increase in the assumed health care cost trend rates for each future year on the accumulated postretirement benefit obligation for health care benefits and the aggregate of the service and interest cost components of net periodic postretirement health care benefit cost is shown below:


	2019						2018
	Accumulated postretirement benefit obligation			Service cost plus interest cost			Accumulated postretirement benefit obligation			Service cost plus interest cost

At trend		4,900			308			4,013			308
At trend + 1%		5,242			337			4,305			338
Dollar Impact		342			29			292			30
Percentage Impact		7.0	%		9.4	%		7.3	%		9.7	%
At trend – 1%		4,597			284			3,755			282
Dollar Impact		(303)			(24)			(258)			(26)
Percentage Impact		(6.2)	%		(7.8)	%		(6.4)	%		(8.4)	%

Changes during the year in the projected benefit obligations and in the fair value of plan assets are as follows for 2019 and 2018 (in thousands):


	2019				2018

	Pension Benefits		Postretirement Benefits		Pension Benefits		Postretirement Benefits
Projected benefit obligations:
Balance at beginning of year:	$	76,900	$	4,012	$	80,355	$	5,307
Service cost		1,709		126		1,794		147
Interest cost		3,472		182		3,279		161
Benefits and settlements paid		(5,738)		(354)		(4,524)		(360)
Actuarial (gain) loss		5,739		933		(4,004)		(1,243)
Settlement		(105)		—		—		—
Balance at end of year	$	81,977	$	4,899	$	76,900	$	4,012
Plan net assets:
Balance at beginning of year:	$	77,530	$	—	$	80,892	$	—
Actual return on plan assets		10,678		—		(730)		—
Company contributions		838		354		1,830		360
Benefits and settlements paid		(5,696)		(354)		(4,462)		(360)
Balance at end of year	$	83,350	$	—	$	77,530	$	—
Over/ (Under) funded status of plan	$	1,373	$	(4,899)	$	630	$	(4,012)

The Company reports an asset or liability on its balance equal to the funded status of its pension and other postretirement benefit plans. Plans in an overfunded status are aggregated and recorded as a net benefit asset in other assets. Plans in an underfunded status are aggregated and recorded as a net benefit liability in other liabilities. The funded status of the Company’s pension and other retirement benefit plans is below (in thousands):


	2019						2018

	GTT Pension Benefit		Viya Pension Benefit		Postretirement Benefits		GTT Pension Benefit		Viya Pension Benefit		Postretirement Benefits

Projected benefit obligation	$	15,594	$	66,383	$	4,899	$	14,712	$	62,188	$	4,012
Plan Net Assets		15,054		68,296		—		14,105		63,425		—
Over/ (Under) funded status of plan	$	(540)	$	1,913	$	(4,899)	$	(607)	$	1,237	$	(4,012)

The Company’s investment policy for its pension assets is to have a reasonably balanced investment approach, with a long-term bias toward debt investments. The Company’s strategy allocates plan assets among equity, debt and other assets to achieve long-term returns without significant risk to principal. The pension fund has limitations from investing in the equity, debt or other securities of the employer, its subsidiaries or associates of the employer or any company of which the employer is a subsidiary or an associate.

The fair values for the pension plan’s net assets, by asset category, at December 31, 2019 are as follows (in thousands):


Asset Category	Total		Level 1		Level 2		Level 3
Cash, cash equivalents, money markets and other	$	4,982	$	4,982	$	—	$	—
Common stock		26,702		22,451		4,251		—
Mutual funds - fixed income		12,970		12,970		—		—
Mutual funds - equities		10,921		10,921		—		—
Fixed income securities		26,307		1,178		25,129		—
Other		1,468		1,031		—		437
Total	$	83,350	$	53,533	$	29,380	$	437

The fair values for the pension plan’s net assets, by asset category, at December 31, 2018 are as follows (in thousands):


Asset Category	Total		Level 1		Level 2		Level 3
Cash, cash equivalents, money markets and other	$	5,173	$	5,173	$	—	$	—
Common stock		23,052		18,760		4,292		—
Mutual funds - fixed income		16,444		—		16,444		—
Mutual funds - equities		13,099		4,748		8,351		—
Fixed income securities		18,095		—		18,095		—
Other		1,667		1,177		—		490
Total	$	77,530	$	29,858	$	47,182	$	490

The plan’s weighted-average asset allocations at December 31, 2019 and 2018, by asset category are as follows:


	2019		2018
Cash, cash equivalents, money markets and other	6	%	7	%
Common stock	32		30
Mutual funds - fixed income	16		21
Mutual funds - equities	13		17
Fixed income securities	32		23
Other	1		2
Total	100	%	100	%

Amounts recognized on the Company’s consolidated balance sheets consist of (in thousands):


	As of December 31,
	2019				2018
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits

Accrued and current liabilities	$	—	$	340	$	—	$	271
Other Liabilities		540		4,559		744		3,742
Other Assets		1,913		—		1,375		—
Accumulated other comprehensive income, net of tax		1,484		359		938		1,350

Amounts recognized in accumulated other comprehensive loss consist of (in thousands):


	As of December 31,
	2019				2018
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits

Net actuarial gain	$	540	$	359	$	30	$	1,350
Accumulated other comprehensive income, pre-tax		540		359		30		1,350
Accumulated other comprehensive income, net of tax		1,484		359		938		1,350

Components of the plan’s net periodic pension cost are as follows for the years ended December 31, 2019, 2018 and 2017 (in thousands):


	2019				2018				2017
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits

Service cost	$	1,709	$	126	$	1,794	$	147	$	1,676	$	183
Interest cost		3,472		182		3,279		161		3,388		206
Expected return on plan assets		(4,571)		—		(4,835)		—		(4,470)		—
Amortization of actuarial (gain) loss		29		(58)		121		(67)		716		—
Settlement		(35)		—		—		—		—		—
Net periodic pension cost	$	604	$	250	$	359	$	241	$	1,310	$	389

The Company is currently evaluating whether it will make any contributions to its pension and postretirement benefit plans during the year ending December 31, 2020.

The following estimated benefits, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as indicated below (in thousands):


	Pension		Postretirement
Fiscal Year	Benefits		Benefits
2020	$	4,719	$	347
2021		4,476		320
2022		4,813		317
2023		4,339		263
2024		4,594		310
2025-2029		23,474		1,695
Total	$	46,415	$	3,252