Compensation and Employee Benefit Plans | Employee Benefit Plans Our pension and postretirement benefit liabilities represent the funded status of the present value of benefit obligations of our employee benefit plans. We develop pension, postretirement medical and life benefit costs from third-party actuarial valuations. We establish actuarial assumptions to anticipate future events and use those assumptions when calculating the expense and liabilities related to these plans. These factors include assumptions management makes concerning expected investment return on plan assets, discount rates, health care costs trend rates, turnover rates and rates of future compensation increases, among others. In addition, we use subjective factors such as withdrawal and mortality rates to develop actuarial valuations. Management reviews and updates these assumptions on an annual basis. The actuarial assumptions that we use may differ from actual results due to changing market rates or other factors. These differences could affect the amount of pension and postretirement medical and life benefit expense we will recognize in future periods. Defined Contribution Plan. We sponsor a defined contribution plan in which we match our employees’ qualifying contributions, resulting in additional expense to us. Expenses related to the defined contribution plan were $11.0 million, $11.4 million and $12.2 million in 2018, 2019 and 2020, respectively. Defined Benefit Plans. We sponsor two pension plans, including one for all non-union employees and one that covers union employees, and a postretirement benefit plan for certain employees. The annual measurement date of these plans is December 31. The following table presents the changes in benefit obligations and plan assets for pension benefits and other postretirement benefits, as well as the end-of-period accumulated benefit obligation for the years ended December 31, 2019 and 2020 (in thousands): Pension Benefits Other Postretirement Benefits 2019 2020 2019 2020 Change in benefit obligations: Benefit obligations at beginning of year $ 308,949 $ 381,240 $ 12,080 $ 15,207 Service cost 25,406 27,736 193 258 Interest cost 12,163 10,989 507 479 Plan participants’ contributions — — 564 567 Actuarial loss 54,171 53,165 3,300 2,540 Benefits paid (11,409) (23,097) (1,437) (1,758) Curtailment gain — (1,703) — — Settlement payments (8,040) (4,685) — — Benefit obligations at end of year 381,240 443,645 15,207 17,293 Change in plan assets: Fair value of plan assets at beginning of year 197,590 249,293 — — Employer contributions 31,630 29,338 873 1,191 Plan participants’ contributions — — 564 567 Actual return on plan assets 39,522 43,560 — — Benefits paid (11,409) (23,097) (1,437) (1,758) Settlement payments (8,040) (3,343) — — Fair value of plan assets at end of year 249,293 295,751 — — Funded status at end of year $ (131,947) $ (147,894) $ (15,207) $ (17,293) Accumulated benefit obligations $ 274,353 $ 324,770 At December 31, 2019 and 2020, the accumulated benefit obligations of each of our plans exceeded the fair value of the related plans’ assets. The pension plans actuarial loss in 2020 of $53.2 million is primarily due to the impact of decreases in the discount rates used to calculate the benefit obligations, partially offset by demographic changes. The pension benefit obligations experienced an actuarial loss of $54.2 million in 2019 primarily due to the impact of decreases in the discount rates used to calculate the benefit obligations, partially offset by changes in salary assumptions and higher asset returns. The following table summarizes information for pension plans with obligations in excess of plan assets (in thousands): December 31, 2019 2020 Plans with a projected benefit obligation in excess of plan assets: Projected benefit obligation $ 381,240 $ 443,645 Fair value of plan assets $ 249,293 $ 295,751 Plans with an accumulated benefit obligation in excess of plan assets: Accumulated benefit obligation $ 274,353 $ 324,770 Fair value of plan assets $ 249,293 $ 295,751 Amounts recognized in the consolidated balance sheets included in these financial statements were as follows (in thousands): Pension Benefits Other Postretirement Benefits 2019 2020 2019 2020 Amounts recognized in consolidated balance sheets: Current accrued benefit cost $ — $ — $ 1,162 $ 1,411 Long-term pension and benefits 131,947 147,894 14,045 15,882 131,947 147,894 15,207 17,293 Accumulated other comprehensive loss: Net actuarial loss (107,625) (120,487) (8,378) (10,409) Prior service credit 2,886 2,705 — — (104,739) (117,782) (8,378) (10,409) Net amount of liabilities and accumulated other comprehensive loss recognized in consolidated balance sheets $ 27,208 $ 30,112 $ 6,829 $ 6,884 Net periodic benefit expense for the years ended December 31, 2018, 2019 and 2020 was as follows (in thousands): Pension Benefits Other Postretirement Benefits 2018 2019 2020 2018 2019 2020 Components of net periodic pension and postretirement benefit expense: Service cost $ 38,167 $ 25,406 $ 27,736 $ 243 $ 193 $ 258 Interest cost 14,907 12,163 10,989 416 507 479 Expected return on plan assets (12,090) (9,401) (11,354) — — — Amortization of prior service credit (181) (181) (181) — — — Amortization of actuarial loss 9,763 5,489 5,425 589 331 509 Settlement cost 1,964 2,606 969 — — — Settlement gain on disposition of assets — — (1,342) — — — Net periodic expense $ 52,530 $ 36,082 $ 32,242 $ 1,248 $ 1,031 $ 1,246 The service component of our net periodic benefit expense (credit) is presented in operating expense and G&A expense, and the non-service components are presented in other (income) expense in our consolidated statements of income. Net periodic benefit expense for the year ended December 31, 2018 includes corrections of $19.4 million resulting from an error in our third-party actuary’s valuation of our pension liabilities and net periodic pension expense. In addition, long-term pension and benefits increased $22.2 million and accumulated other comprehensive loss increased $2.8 million in our 2018 consolidated balance sheets as a result of this valuation error. Changes in plan assets and benefit obligations recognized in other comprehensive income (loss) during 2018, 2019 and 2020 were as follows (in thousands): Pension Benefits Other Postretirement Benefits 2018 2019 2020 2018 2019 2020 Beginning balance $ (97,226) $ (88,602) $ (104,739) $ (6,597) $ (5,409) $ (8,378) Net actuarial gain (loss) (2,922) (24,051) (20,959) 599 (3,300) (2,540) Amortization of prior service credit (181) (181) (181) — — — Amortization of actuarial loss 9,763 5,489 5,425 589 331 509 Curtailment gain — — 1,703 — — — Settlement cost 1,964 2,606 969 — — — Amount recognized in other comprehensive loss 8,624 (16,137) (13,043) 1,188 (2,969) (2,031) Ending balance $ (88,602) $ (104,739) $ (117,782) $ (5,409) $ (8,378) $ (10,409) Actuarial gains and losses are amortized over the average future service period of the current active plan participants expected to receive benefits. The corridor approach is used to determine when actuarial gains and losses are to be amortized and is equal to 10% of the greater of the projected benefit obligation or the market related value of plan assets. The amount of gain or loss in excess of the calculated corridor is subject to amortization. The estimated net actuarial loss and prior service credit for the defined benefit pension plans that will be amortized from AOCL into net periodic benefit cost in 2021 are $6.2 million and $0.2 million, respectively. The estimated net actuarial loss for the other defined benefit postretirement plan that will be amortized from AOCL into net periodic benefit cost in 2021 is $0.6 million. The weighted-average rate assumptions used to determine projected benefit obligations were as follows: Pension Benefits Other Postretirement Benefits 2019 2020 2019 2020 Discount rate 3.01% 2.23% 3.06% 2.30% Rate of compensation increase 4.58% 4.53% n/a n/a Cash balance interest crediting rate 2.16% 1.70% n/a n/a The weighted-average rate assumptions used to determine net pension and other postretirement benefit plans expense were as follows: Pension Benefits Other Postretirement Benefits For the Year Ended December 31, For the Year Ended December 31, 2018 2019 2020 2018 2019 2020 Discount rate 3.63% 3.98% 3.01% 3.43% 4.08% 3.06% Rate of compensation increase 6.38% 6.48% 4.58% n/a n/a n/a Expected rate of return on plan assets 6.00% 6.00% 4.50% n/a n/a n/a Cash balance interest crediting rate 3.15% 2.78% 2.16% n/a n/a n/a The non-pension postretirement benefit plans provide for retiree contributions and contain other cost-sharing features such as deductibles and coinsurance. The accounting for these plans anticipates future cost sharing that is consistent with management’s expressed intent to increase the retiree contribution rate generally in line with health care cost increases. The annual assumed rate of increase in the health care cost trend rate for 2021 is 6.0% decreasing systematically to 5.08% by 2028 for pre-65 year old participants. The fair values of the pension plan assets at December 31, 2019 were as follows (in thousands): Asset Category Total Quoted Prices in Active Markets for Significant Significant Domestic Equity Securities: (1) Small-cap fund $ 5,087 $ 5,087 $ — $ — Mid-cap fund 5,095 5,095 — — Large-cap fund 40,884 40,884 — — International equity fund 25,580 25,580 — — Fixed Income Securities: (1) Short-term bond fund 3,590 3,590 — — Intermediate-term bond fund 29,485 29,485 — — Long-term investment grade bond funds 132,096 132,096 — — Other: Short-term investment fund 7,300 7,300 — — Group annuity contract 176 — — 176 Fair value of plan assets $ 249,293 $ 249,117 $ — $ 176 (1) We hold equity and fixed income securities through investments in mutual funds, which are dedicated to each category as indicated. The fair values of the pension plan assets at December 31, 2020 were as follows (in thousands): Asset Category Total Quoted Prices in Active Markets for Significant Significant Domestic Equity Securities (1) : Small-cap fund $ 5,798 $ 5,798 $ — $ — Mid-cap fund 5,853 5,853 — — Large-cap fund 47,598 47,598 — — International equity fund 29,876 29,876 — — Fixed Income Securities (1) : Short-term bond fund 4,209 4,209 — — Intermediate-term bond fund 34,894 34,894 — — Long-term investment grade bond funds 161,007 161,007 — — Other: Short-term investment fund 6,354 6,354 — — Group annuity contract 162 — — 162 Fair value of plan assets $ 295,751 $ 295,589 $ — $ 162 (1) We hold equity and fixed income securities through investments in mutual funds, which are dedicated to each category as indicated. As reflected in the tables above, Level 3 activity was not material. The investment strategies for the various funds held as pension plan assets by asset category are as follows: Asset Category Fund’s Investment Strategy Domestic Equity Securities: Small-cap fund Seeks to track performance of the Center for Research in Security Prices (“CRSP”) US Small Cap Index Mid-cap fund Seeks to track performance of the CRSP US Mid Cap Index Large-cap fund Seeks to track performance of the Standard & Poor’s 500 Index International equity fund Seeks long-term growth of capital by investing 65% or more of assets in international equities Fixed Income Securities: Short-term bond fund Seeks current income with limited price volatility through investment in primarily high quality bonds Intermediate-term bond fund Seeks moderate and sustainable level of current income by investing primarily in high quality fixed income securities with maturities from five to ten years Long-term investment grade bond funds Seek high and sustainable current income through investment primarily in long-term high grade bonds Other: Short-term investment fund Invests in high quality short-term money market instruments issued by the U.S. Treasury Group annuity contract Earns interest quarterly equal to the effective yield of the 91-day U.S. Treasury bill The expected long-term rate of return on plan assets was determined by combining a review of projected returns, historical returns of portfolios with assets similar to the current portfolios of the union and non-union pension plans and target weightings of each asset classification. Our investment objective for the assets within the pension plans is to earn a return that meets or exceeds the growth of obligations that result from interest and changes in the discount rate, while avoiding excessive risk. Defined diversification goals are set in order to reduce the risk of wide swings in the market value from year to year, or of incurring large losses that may result from concentrated positions. As a result, our plan assets have no significant concentrations of credit risk. Additionally, liquidity risks are minimized because all of the funds that the plans have invested in are publicly traded. We evaluate risks based on the potential impact to the predictability of contribution requirements, probability of under-funding, expected risk-adjusted returns and investment return volatility. Funds are invested with multiple investment managers. Our liabilities are calculated using rates defined by the Pension Protection Act of 2006. Approximately 70% of the plans’ investments are allocated to fixed-income securities and invested to match the durations of the plans’ short, intermediate and long-term pension liabilities, with the amount invested in each duration reflecting that duration’s proportion of the plans’ liabilities. The remaining approximately 30% of the plans’ investments are allocated to equity securities. The target allocation and actual weighted-average asset allocation percentages at December 31, 2019 and 2020 were as follows: 2019 2020 Actual Target Actual Target Equity securities 30% 30% 30% 30% Fixed income securities 67% 67% 68% 67% Other 3% 3% 2% 3% As of December 31, 2020, the benefit amounts expected to be paid from plan assets through December 31, 2030 were as follows (in thousands): Pension Other 2021 $ 21,404 $ 1,410 2022 $ 17,855 $ 1,275 2023 $ 21,413 $ 1,168 2024 $ 22,878 $ 1,016 2025 $ 23,629 $ 975 2026 through 2030 $ 145,885 $ 3,929 Contributions estimated to be paid by us into the plans in 2021 are $29.7 million and $1.4 million for the pension and other postretirement benefit plans, respectively. |