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Employee Benefit Plans
 12 Months Ended
Dec. 31, 2020
Employee Benefit Plans [Abstract]  
Employee Benefit Plans Note 14 – Employee Benefit Plans

The Company has a qualified, defined benefit pension plan that was established to provide benefits to certain employees. The plan is frozen and participants are no longer accruing benefits. Generally, contributions to the plan are not less than the minimum amounts required under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and not more than the maximum amount that can be deducted for federal income tax purposes. The plan’s assets are held by independent trustees and consist primarily of equity and fixed income securities.

The Company also provided certain postretirement health care benefits for certain of its salaried retired employees. Generally, employees became eligible for health care benefits if they retired after attaining specified age and service requirements. These benefits were subject to deductibles, co-payment provisions and other limitations. On October 15, 2019 the Company notified retirees and affected active employees that it would terminate medical benefits offered to retirees of the Company and their dependents effective January 1, 2020. The retiree benefits that were terminated include medical insurance and vison insurance that were offered under the FreightCar America, Inc. Health and Welfare Plan. The benefit termination resulted in a gain of $6,637.

The Company has elected to utilize a full yield curve approach in estimating the service and interest components of net periodic benefit cost for postretirement benefits and the interest component for pension benefits by applying the specific spot rates along the yield curve used in determining the benefit obligation to the relevant projected cash flows.

The changes in benefit obligation, change in plan assets and funded status as of December 31, 2020 and 2019, are as follows:

Pension Benefits

Postretirement Benefits

2020

2019

2020

2019

Change in benefit obligation

Benefit obligation – Beginning of year

$

53,294 

$

48,590 

$

-

$

5,370 

Service cost

-

-

-

18 

Interest cost

1,430 

1,863 

-

183 

Actuarial loss

3,870 

6,157 

-

-

Benefits paid

(3,235)

(3,316)

-

(601)

Liability gain due to termination

-

-

-

(4,369)

Benefit obligation – End of year

55,359 

53,294 

-

601 

Change in plan assets

Plan assets – Beginning of year

46,784 

42,749 

-

-

Return on plan assets

4,765 

7,351 

-

-

Employer contributions

-

-

-

601 

Benefits paid

(3,235)

(3,316)

-

(601)

Plan assets at fair value – End of year

48,314 

46,784 

-

-

Funded status of plans – End of year

$

(7,045)

$

(6,510)

$

-

$

(601)

Pension Benefits

Postretirement Benefits

2020

2019

2020

2019

Amounts recognized in the Consolidated Balance Sheets

Current liabilities

$

-

$

-

$

-

$

(181)

Noncurrent liabilities

(7,045)

(6,510)

-

(420)

Net amount recognized at December 31

$

(7,045)

$

(6,510)

$

-

$

(601)


‎

Amounts recognized in accumulated other comprehensive loss but not yet recognized in earnings at December 31, 2020 and 2019, are as follows:

Pension Benefits

2020

2019

Net actuarial loss

$

18,045 

$

17,062 

$

18,045 

$

17,062 

Components of net periodic benefit cost for the years ended December 31, 2020 and 2019, are as follows:

Pension Benefits

Postretirement Benefits

2020

2019

2020

2019

Components of net periodic benefit cost

Service cost

$

-

$

-

$

-

$

18 

Interest cost

1,430 

1,863 

-

183 

Expected return on plan assets

(2,438)

(2,218)

-

-

Amortization of unrecognized prior service cost

-

-

-

14 

Amortization of unrecognized net loss (gain)

562 

549 

-

(389)

Termination gain

-

-

-

(6,637)

Total net periodic (income) benefit cost

$

(446)

$

194 

$

-

$

(6,811)

The increase (decrease) in accumulated other comprehensive loss (pre-tax) for the years ended December 31, 2020 and 2019, are as follows:

2020

2019

Pension Benefits

Postretirement Benefits

Pension Benefits

Postretirement Benefits

Net actuarial loss

$

1,544 

$

-

$

1,025 

$

-

Liability gain due to termination

-

-

-

(4,369)

Termination gain

-

-

-

6,637 

Amortization of net actuarial (gain) loss

(561)

-

(549)

389 

Amortization of prior service cost

-

-

-

(14)

Total recognized in accumulated other comprehensive loss

$

983 

$

-

$

476 

$

2,643 

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of December 31, 2020:

Pension Benefits

2021

$

3,385

2022

3,282

2023

3,264

2024

3,231

2025

3,206

2026 through 2030

15,321

The Company is not required to make any contributions to its pension plan in 2021 to meet its minimum funding requirements.


‎

The assumptions used to determine end of year benefit obligations are shown in the following table:

Pension Benefits

Postretirement Benefits

2020

2019

2020

2019

Discount rates

2.48%

3.22%

N/A

N/A

The discount rate is determined using a yield curve model that uses yields on high quality corporate bonds (AA rated or better) to produce a single equivalent rate. The yield curve model excludes callable bonds except those with make-whole provisions, private placements and bonds with variable rates.

In October 2020, the Society of Actuaries issued base mortality table Pri-2012 which is split by retiree and contingent survivor tables and includes mortality improvement assumptions for U.S. plans, scale (MP-2020), which reflects additional data that the Social Security Administration has released since prior assumptions (MP-2019) were developed. The Company has historically utilized the Society of Actuaries’ published mortality data in its plan assumptions. Accordingly, the Company adopted Pri-2012 with MP-2020 for purposes of measuring its pension obligations at December 31, 2020.

The 2020 actuarial loss of $3,870 was largely the result of the change in the yield curve. The 2020 actuarial loss related to the change in the yield curve was partially offset by the impact of the mortality improvement scale MP-2020.

The assumptions used in the measurement of net periodic cost are shown in the following table:

Pension Benefits

Postretirement Benefits

2020

2019

2020

2019

Discount rate for benefit obligations

3.22%

4.36%

N/A

4.34%

Expected return on plan assets

5.40%

5.40%

N/A

N/A

Rate for interest on benefit obligations

2.78%

3.96%

N/A

3.94%

Discount rate for service cost

N/A

N/A

N/A

4.60%

The Company’s pension plan’s weighted average asset allocations at December 31, 2020 and 2019, and target allocations for 2021, by asset category, are as follows:

Plan Assets at December 31,

Target Allocation

2020

2019

2021

Asset Category

Cash and cash equivalents

0%

1%

0% - 5%

Equity securities

56%

54%

45% - 65%

Fixed income securities

35%

40%

30% - 50%

Real estate

9%

5%

4%-6%

100%

100%

100%

The basic goal underlying the pension plan investment policy is to ensure that the assets of the plans, along with expected plan sponsor contributions, will be invested in a prudent manner to meet the obligations of the plans as those obligations come due under a broad range of potential economic and financial scenarios, maximize the long-term investment return with an acceptable level of risk based on such obligations, and broadly diversify investments across and within the capital markets to protect asset values against adverse movements in any one market. The Company’s investment strategy balances the requirement to maximize returns using potentially higher return

generating assets, such as equity securities, with the need to manage the risk of such investments with less volatile assets, such as fixed-income securities. Investment practices must comply with the requirements of ERISA and any other applicable laws and regulations. The Company, in consultation with its investment advisors, has determined a targeted allocation of invested assets by category and it works with its advisors to reasonably maintain the actual allocation of assets near the target. The long term return on assets was estimated based upon historical market performance, expectations of future market performance for debt and equity securities and the related risks of various allocations between debt and equity securities. Numerous asset classes with differing expected rates of return, return volatility and correlations are utilized to reduce risk through diversification.

The Company’s pension plan assets are invested in one mutual fund for each fund classification. The following table presents the fair value of pension plan assets classified under the appropriate level of the ASC 820 fair value hierarchy (see Note 2, Summary of Significant Accounting Policies for a description of the fair value hierarchy) as of December 31, 2020 and 2019:

Pension Plan Assets

As of December 31, 2020

Level 1

Level 2

Level 3

Total

Mutual funds:

Fixed income funds

$

16,670 

$

-

$

-

$

16,670 

Large cap funds

16,033 

-

-

16,033 

Small cap funds

4,558 

-

-

4,558 

International funds

6,338 

-

-

6,338 

Real estate funds

4,576 

-

-

4,576 

Cash and equivalents

139 

-

-

139 

Total

$

48,314 

$

-

$

-

$

48,314 

Pension Plan Assets

As of December 31, 2019

Level 1

Level 2

Level 3

Total

Mutual funds:

Fixed income funds

$

18,720 

$

-

$

-

$

18,720 

Large cap funds

15,546 

-

-

15,546 

Small cap funds

3,567 

-

-

3,567 

International funds

6,369 

-

-

6,369 

Real estate funds

2,339 

-

-

2,339 

Cash and equivalents

243 

-

-

243 

Total

$

46,784 

$

-

$

-

$

46,784 

The Company also maintains qualified defined contribution plans, which provide benefits to their employees based on employee contributions and employee earnings, with discretionary contributions allowed. Expenses related to these plans were $1,372 for the year ended December 31, 2019. Effective January 1, 2020, the Company suspended the employer contribution to its defined contribution plans.