Annual report pursuant to Section 13 and 15(d)

Employee Benefit Plans

v3.19.3.a.u2
Employee Benefit Plans
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Employee Benefit Plans Employee Benefit Plans
 
The Trust has a defined contribution plan available to all regular employees having one or more years of continuous service. Contributions are at the discretion of the Trustees of the Trust. The Trust contributed approximately $0.3 million for the year ended December 31, 2019 and $0.1 million for the years ended December 31, 2018 and 2017, respectively.
 
The Trust has a noncontributory pension plan (the “Plan”) available to all regular employees having one or more years of continuous service. The Plan provides for normal retirement at age 65. Contributions to the Plan reflect benefits attributed to employees’ services to date, as well as services expected in the future.
 
The following table sets forth the Plan’s changes in benefit obligation, changes in fair value of plan assets, and funded status as of December 31, 2019 and 2018 using a measurement date of December 31 (in thousands): 

  December 31, 2019 December 31, 2018
Change in projected benefits obligation:
Projected benefit obligation at beginning of year
 $ 4,745    $ 5,032   
Service cost
 666    157   
Interest cost
 197    183   
Actuarial (gain) loss
 1,208    (369)  
Benefits paid
 (239)   (258)  
 Projected benefit obligation at end of year
 $ 6,577    $ 4,745   
Change in plan assets:
Fair value of plan assets at beginning of year
 $ 5,313    $ 5,356   
Actual return on plan assets
 1,041    (185)  
Contributions by employer
 500    400   
Benefits paid
 (239)   (258)  
Fair value of plan assets at end of year
 6,615    5,313   
Funded (unfunded) status at end of year $ 38    $ 568   
 
Amounts recognized in the balance sheets as of December 31, 2019 and 2018 consist of (in thousands): 

  December 31, 2019 December 31, 2018
Assets $ 38    $ 568   
Liabilities —    —   
  $ 38    $ 568   

Amounts recognized in accumulated other comprehensive income (loss) consist of the following as of December 31, 2019 and 2018 (in thousands):

  December 31, 2019 December 31, 2018
Net actuarial loss $ (1,849)   $ (1,365)  
Amounts recognized in accumulated other comprehensive income (loss), before taxes (1,849)   (1,365)  
Income tax benefit 388    287   
Amounts recognized in accumulated other comprehensive income (loss), after taxes $ (1,461)   $ (1,078)  
 
Net periodic benefit cost for the years ended December 31, 2019, 2018 and 2017 include the following components (in thousands):

Years Ended December 31,
  2019 2018 2017
Components of net periodic benefit cost:
Service cost $ 666    $ 157    $ 147   
Interest cost 197    183    201   
Expected return on plan assets (364)   (367)   (339)  
Amortization of net loss 46    64    108   
Net periodic benefit cost $ 545    $ 37    $ 117   
 
Service cost, a component of net periodic benefit cost, is reflected in our consolidated statements of income within salaries and related employee expenses. The other components of net periodic benefit cost are included in other income (expense) on the consolidated statements of income.

Other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31, 2019, 2018 and 2017 (in thousands): 

Years Ended December 31,
  2019 2018 2017
Net actuarial (gain) loss $ 530    $ 183    $ (132)  
Recognized actuarial loss (46)   (64)   (108)  
Total recognized in other comprehensive income, before taxes $ 484    $ 119    $ (240)  
Total recognized in net benefit cost and other comprehensive income, before taxes $ 1,029    $ 156    $ (123)  
 
The Trust reclassified less than $0.1 million (net of income tax expense of less than $0.1 million) out of accumulated other comprehensive income (loss) for net periodic benefit cost to other income (expense) for each of the years ended December 31, 2019, 2018 and 2017, respectively. The estimated net actuarial loss for the Plan that will be amortized from accumulated other comprehensive income (loss) to other income (expense) over the next fiscal year is less than $0.1 million.

The following table summarizes the Plan assets in excess of projected benefit obligation and accumulated benefit obligation at December 31, 2019 and 2018 (in thousands): 

  December 31, 2019 December 31, 2018
Plan assets in excess of projected benefit obligation:
Projected benefit obligation
 $ 6,577    $ 4,745   
Fair value of plan assets
 $ 6,615    $ 5,313   
Plan assets in excess of accumulated benefit obligation:
Accumulated benefit obligation
 $ 5,056    $ 4,173   
Fair value of plan assets
 $ 6,615    $ 5,313   
 
The following are weighted-average assumptions used to determine benefit obligations and costs at December 31, 2019, 2018 and 2017: 

Years Ended December 31,
  2019 2018 2017
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate
 3.25  % 4.25  % 3.75  %
Rate of compensation increase
 7.29  % 7.29  % 7.29  %
Weighted average assumptions used to determine benefit costs for the years ended December 31:
Discount rate
 4.25  % 3.75  % 4.25  %
Expected return on plan assets
 7.00  % 7.00  % 7.00  %
Rate of compensation increase
 7.29  % 7.29  % 7.29  %
 
The expected return on Plan assets assumption of 7.0% was selected by the Trust based on historical real rates of return for the current asset mix and an assumption with respect to future inflation. The rate was determined based on a long-term allocation of about two-thirds fixed income and one-third equity securities; historical real rates of return of about 2.5% and 8.5% for fixed income and equity securities, respectively; and assuming a long-term inflation rate of 2.5%.
 
The Plan has a formal investment policy statement. The Plan’s investment objective is balanced income, with a moderate risk tolerance. This objective emphasizes current income through a 30% to 80% allocation to fixed income securities, complemented by a secondary consideration for capital appreciation through an equity allocation in the range of 20% to 60%. Diversification is achieved through investment in mutual funds and bonds. The asset allocation is reviewed annually with respect to the target allocations and rebalancing adjustments and/or target allocation changes are made as appropriate. The Trust’s current funding policy is to maintain the Plan’s fully funded status on an ERISA minimum funding basis.
 
Fair Value Measurements
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date.
 
The fair value accounting standards establish a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect our assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs used in measuring fair value, as follows:

Level 1 – Inputs are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Since inputs are based on quoted prices that are readily and regularly available in an active market, Level 1 inputs require the least judgment.
 
Level 2 – Inputs are based on quoted prices for similar instruments in active markets, or are observable either directly or indirectly. Inputs are obtained from various sources including financial institutions and brokers.
 
Level 3 – Inputs that are unobservable and significant to the overall fair value measurement. The degree of judgment exercised by us in determining fair value is greatest for fair value measurements categorized in Level 3.
 
The fair values of plan assets by major asset category at December 31, 2019 and 2018, respectively, are 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)
As of December 31, 2019:
Cash and cash equivalents — money markets $ 528    $ 528    $ —    $ —   
Equities 1,133    1,133    —    —   
Equity funds 1,939    1,939    —    —   
Fixed income funds 465    465    —    —   
Taxable bonds 2,550    2,550    —    —   
Total $ 6,615    $ 6,615    $ —    $ —   
As of December 31, 2018:
Cash and cash equivalents — money markets $ 407    $ 407    $ —    $ —   
Equities 813    813    —    —   
Equity funds 2,448    2,448    —    —   
Fixed income funds 1,645    1,645    —    —   
Total $ 5,313    $ 5,313    $ —    $ —   

Management intends to at least fund the minimum ERISA amount for 2020. The Trust may make some discretionary contributions to the Plan, the amounts of which have not yet been determined.
 
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the following ten-year period (in thousands):
 
Year ending December 31, Amount
2020 $ 258   
2021 254   
2022 250   
2023 246   
2024 240   
2025 to 2029 1,252