Pensions and Other Postretirement Plans

12 Months Ended

Dec. 31, 2019

Retirement Benefits, Description [Abstract]

Pensions and Other Postretirement Plans

PENSIONS AND OTHER POSTRETIREMENT PLANS

The Company maintains various pension and incentive savings plans and contributed to multiemployer plans on behalf of certain union-represented employee groups. Most of the Company’s employees are covered by these plans. The Company also provides healthcare and life insurance benefits to certain retired employees. These employees become eligible for benefits after meeting age and service requirements.

The Company uses a measurement date of December 31 for its pension and other postretirement benefit plans.

In December 2019, the Company purchased an irrevocable group annuity contract from an insurance company for $216.8 million to settle $212.1 million of the outstanding defined benefit pension obligation related to certain retirees and beneficiaries. The purchase of the group annuity contract was funded from the assets of the Company’s pension plan. As a result of this transaction, the Company was relieved of all responsibility for these pension obligations and the insurance company is now required to pay and administer the retirement benefits owed to approximately 3,800 retirees and beneficiaries, with no change to the amount, timing or form of monthly retirement benefit payments. As a result, the Company recorded a one-time settlement gain of $91.7 million.

On March 22, 2018, the Company eliminated the accrual of pension benefits for certain Kaplan University employees related to their future service. As a result, the Company remeasured the accumulated and projected benefit obligation of the pension plan as of March 22, 2018, and the Company recorded a curtailment gain in the first quarter of 2018. The new measurement basis was used for the recognition of the Company’s pension benefit following the remeasurement. The curtailment gain on the Kaplan University transaction is included in the gain on the Kaplan University transaction and reported in Other income, net on the Consolidated Statements of Operations.

On October 31, 2018, the Company made certain changes to the other postretirement plans, including changes in eligibility, cost sharing and surviving spouse coverage. As a result, the Company remeasured the accumulated and projected benefit obligation of the other postretirement plans as of October 31, 2018, and the Company recorded a curtailment gain in the fourth quarter of 2018. The new measurement basis was used for the recognition of the Company’s other postretirement plans cost following the remeasurement.

Defined Benefit Plans.  The Company’s defined benefit pension plans consist of various pension plans and a Supplemental Executive Retirement Plan (SERP) offered to certain executives of the Company.

In the second quarter of 2019, the Company offered a Separation Incentive Program (SIP) for certain Kaplan employees, which was funded from the assets of the Company’s pension plan. The Company recorded $6.4 million in expense related to the SIP for 2019.

In the fourth quarter of 2018, the Company offered certain terminated participants with a vested pension benefit an opportunity to take their benefits in the form of a lump sum or an annuity. Most of the participants that elected a lump sum benefit under the program were paid in December 2018. Additional lump sum payments were paid in early 2019. The Company recorded a $26.9 million settlement gain related to the bulk lump sum pension program offering.

In the fourth quarter of 2017, the Company recorded $0.9 million related to a SIP for certain Kaplan employees, which was funded from the assets of the Company’s pension plan. In the third quarter of 2017, the Company recorded $0.9 million related to a SIP for certain Forney employees, which was funded from the assets of the Company’s pension plan.

The following table sets forth obligation, asset and funding information for the Company’s defined benefit pension plans:

	Pension Plans
	As of December 31
(in thousands)	2019			2018
Change in Benefit Obligation
Benefit obligation at beginning of year	$	1,116,569		$	1,286,694
Service cost	20,422			18,221
Interest cost	46,821			46,787
Amendments	5,725			7,183
Actuarial loss (gain)	124,285			(81,851		)
Benefits paid	(64,354		)	(63,852		)
Special termination benefits	6,432			—
Curtailment	—			(836		)
Settlement	(235,544		)	(95,777		)
Benefit Obligation at End of Year	$	1,020,356		$	1,116,569
Change in Plan Assets
Fair value of assets at beginning of year	$	2,120,127		$	2,343,471
Actual return on plan assets	492,477			(63,715		)
Benefits paid	(64,354		)	(63,852		)
Settlement	(235,544		)	(95,777		)
Fair Value of Assets at End of Year	$	2,312,706		$	2,120,127
Funded Status	$	1,292,350		$	1,003,558

	SERP
	As of December 31
(in thousands)	2019			2018
Change in Benefit Obligation
Benefit obligation at beginning of year	$	102,548		$	110,082
Service cost	858			819
Interest cost	4,314			3,865
Amendments	—			1,028
Actuarial loss (gain)	15,544			(7,552		)
Benefits paid	(7,071		)	(5,694		)
Benefit Obligation at End of Year	$	116,193		$	102,548
Change in Plan Assets
Fair value of assets at beginning of year	$	—		$	—
Employer contributions	7,071			5,694
Benefits paid	(7,071		)	(5,694		)
Fair Value of Assets at End of Year	$	—		$	—
Funded Status	$	(116,193	)	$	(102,548	)

The change in the Company’s benefit obligation for the pension plan was primarily due to the settlement gain recognized related to the annuity purchase, offset by an actuarial loss recognized as a result of a decrease to the discount rate used to measure the benefit obligation. The change in the benefit obligation for the Company’s SERP was due to the recognition of an actuarial loss resulting from a decrease to the discount rate used to measure the benefit obligation.

The accumulated benefit obligation for the Company’s pension plans at December 31, 2019 and 2018, was $991.1 million and $1,097.3 million, respectively. The accumulated benefit obligation for the Company’s SERP at December 31, 2019 and 2018, was $114.8 million and $102.2 million, respectively. The amounts recognized in the Company’s Consolidated Balance Sheets for its defined benefit pension plans are as follows:

	Pension Plans				SERP
	As of December 31				As of December 31
(in thousands)	2019		2018		2019			2018
Noncurrent asset	$	1,292,350	$	1,003,558	$	—		$	—
Current liability	—		—		(6,447		)	(6,321		)
Noncurrent liability	—		—		(109,746		)	(96,227		)
Recognized Asset (Liability)	$	1,292,350	$	1,003,558	$	(116,193	)	$	(102,548	)

Key assumptions utilized for determining the benefit obligation are as follows:

	Pension Plans		SERP
	As of December 31		As of December 31
	2019	2018	2019	2018
Discount rate	3.3%	4.3%	3.3%	4.3%
Rate of compensation increase – age graded	5.0%–1.0%	5.0%–1.0%	5.0%–1.0%	5.0%–1.0%
Cash balance interest crediting rate	2.77% with phase in to 3.30% in 2022	3.50% with phase in to 4.30% in 2021	—	—

The Company made no contributions to its pension plans in 2019 and 2018, and the Company does not expect to make any contributions in 2020. The Company made contributions to its SERP of $7.1 million and $5.7 million for the years ended December 31, 2019 and 2018, respectively. As the plan is unfunded, the Company makes contributions to the SERP based on actual benefit payments.

At December 31, 2019, future estimated benefit payments, excluding charges for early retirement programs, are as follows:

(in thousands)	Pension Plans		SERP
2020	$	60,666	$	6,552
2021	$	60,964	$	6,845
2022	$	61,256	$	7,056
2023	$	61,497	$	7,195
2024	$	61,469	$	7,293
2025–2029	$	305,371	$	36,760

The total (benefit) cost arising from the Company’s defined benefit pension plans consists of the following components:

	Pension Plans
	Year Ended December 31
(in thousands)	2019			2018			2017
Service cost	$	20,422		$	18,221		$	18,687
Interest cost	46,821			46,787			47,925
Expected return on assets	(122,790		)	(129,220		)	(121,411		)
Amortization of prior service cost	2,882			150			170
Recognized actuarial gain	—			(9,969		)	(4,410		)
Net Periodic Benefit for the Year	(52,665		)	(74,031		)	(59,039		)
Curtailment	—			(806		)	—
Settlement	(91,676		)	(26,917		)	—
Early retirement programs and special separation benefit expense	6,432			—			1,825
Total Benefit for the Year	$	(137,909	)	$	(101,754	)	$	(57,214	)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial (gain) loss	$	(245,402	)	$	111,084		$	(180,885	)
Current year prior service cost	5,725			7,183			75
Amortization of prior service cost	(2,882		)	(150		)	(170		)
Recognized net actuarial gain	—			9,969			4,410
Curtailment and settlement	91,676			26,887			—
Total Recognized in Other Comprehensive Income (Before Tax Effects)	$	(150,883	)	$	154,973		$	(176,570	)
Total Recognized in Total Benefit and Other Comprehensive Income (Before Tax Effects)	$	(288,792	)	$	53,219		$	(233,784	)

	SERP
	Year Ended December 31
(in thousands)	2019			2018			2017
Service cost	$	858		$	819		$	858
Interest cost	4,314			3,865			4,233
Amortization of prior service cost	339			311			455
Recognized actuarial loss	2,314			2,403			1,774
Total Cost for the Year	$	7,825		$	7,398		$	7,320
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial loss (gain)	$	15,544		$	(7,552	)	$	4,041
Current year prior service cost	—			1,028			—
Amortization of prior service cost	(339		)	(311		)	(455		)
Recognized net actuarial loss	(2,314		)	(2,403		)	(1,774		)
Total Recognized in Other Comprehensive Income (Before Tax Effects)	$	12,891		$	(9,238	)	$	1,812
Total Recognized in Total Cost and Other Comprehensive Income (Before Tax Effects)	$	20,716		$	(1,840	)	$	9,132

The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:

	Pension Plans			SERP
	Year Ended December 31			Year Ended December 31
	2019	2018	2017	2019	2018	2017
Discount rate (1)	4.3%	4.0%/3.6%	4.1%	4.3%	3.6%	4.1%
Expected return on plan assets	6.25%	6.25%	6.25%	—	—	—
Rate of compensation increase – age graded	5.0%–1.0%	5.0%–1.0%	5.0%–1.0%	5.0%–1.0%	5.0%–1.0%	5.0%–1.0%
Cash balance interest crediting rate	3.45% with phase in to 4.30% in 2021	2.23% with phase in to 3.00% in 2020	1.57% with phase in to 3.00% in 2020	—	—	—

____________

(1) As a result of the Kaplan University transaction, the Company remeasured the accumulated and projected benefit obligation of the pension plan as of March 22, 2018. The remeasurement changed the discount rate from 3.6% for the period January 1 to March 23, 2018 to 4.0% for the period after March 23, 2018.

Accumulated other comprehensive income (AOCI) includes the following components of unrecognized net periodic cost for the defined benefit plans:

	Pension Plans						SERP
	As of December 31						As of December 31
(in thousands)	2019			2018			2019			2018
Unrecognized actuarial (gain) loss	$	(467,535	)	$	(313,809	)	$	30,500		$	17,270
Unrecognized prior service cost	10,116			7,273			698			1,037
Gross Amount	(457,419		)	(306,536		)	31,198			18,307
Deferred tax liability (asset)	123,503			82,765			(8,423		)	(4,943		)
Net Amount	$	(333,916	)	$	(223,771	)	$	22,775		$	13,364

Defined Benefit Plan Assets.  The Company’s defined benefit pension obligations are funded by a portfolio made up of a U.S. stock index fund, a private investment fund, and a relatively small number of stocks and high-quality fixed-income securities that are held by a third-party trustee. The assets of the Company’s pension plans were allocated as follows:

	As of December 31
	2019		2018
U.S. equities	62	%	53	%
U.S. stock index fund	14	%	28	%
U.S. fixed income	10	%	13	%
Private investment fund	7	%	—	%
International equities	7	%	6	%
	100	%	100	%

The Company manages approximately 39% of the pension assets internally, of which the majority is invested in a U.S. stock index fund with the remaining investments in Berkshire Hathaway stock, a private investment fund and short-term fixed-income securities. The remaining 61% of plan assets are managed by two investment companies. The goal of the investment managers is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both investment managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. One investment manager cannot invest more than 15% of the assets at the time of purchase in the stock of Alphabet and Berkshire Hathaway, no more than 30% of the assets it manages in specified international exchanges at the time the investment is made, and no less than 5% of the assets could be invested in fixed-income securities. The other investment manager cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway, no more than 15% of the assets it manages in specified international exchanges at the time the investment is made, and no less than 10% of the assets could be invested in fixed-income securities. Excluding the exceptions noted above, the investment managers cannot investment more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval from the Plan administrator.

In determining the expected rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the Company may consult with and consider the input of financial and other professionals in developing appropriate return benchmarks.

The Company evaluated its defined benefit pension plan asset portfolio for the existence of significant concentrations (defined as greater than 10% of plan assets) of credit risk as of December 31, 2019. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country and individual fund. At December 31, 2019 and 2018, the pension plan held investments in one common stock and one U.S. stock index fund that exceeded 10% of total plan assets. These investments were valued at $704.8 million and $945.6 million at December 31, 2019 and 2018, respectively, or approximately 30% and 45%, respectively, of total plan assets.

The Company’s pension plan assets measured at fair value on a recurring basis were as follows:

	As of December 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents and other short-term investments	$	2,133	$	234,999	$	—	$	237,132
Equity securities
U.S. equities	1,439,098		—		—		1,439,098
International equities	161,377		—		—		161,377
U.S. stock index fund	—		—		322,229		322,229
Private investment fund	—		—		151,854		151,854
Total Investments	$	1,602,608	$	234,999	$	474,083	$	2,311,690
Receivables, net							1,016
Total							$	2,312,706

	As of December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents and other short-term investments	$	2,068	$	269,544	$	—	$	271,612
Equity securities
U.S. equities	1,115,323		—		—		1,115,323
International equities	131,912		—		—		131,912
U.S. stock index fund	—		—		601,395		601,395
Total Investments	$	1,249,303	$	269,544	$	601,395	$	2,120,242
Payable for settlement of investments purchased, net							(115		)
Total							$	2,120,127

Cash equivalents and other short-term investments.  These investments are primarily held in U.S. Treasury securities and registered money market funds. These investments are valued using a market approach based on the quoted market prices of the security or inputs that include quoted market prices for similar instruments and are classified as either Level 1 or Level 2 in the valuation hierarchy.

U.S. equities.  These investments are held in common and preferred stock of U.S. corporations and American Depositary Receipts (ADRs) traded on U.S. exchanges. Common and preferred shares and ADRs are traded actively on exchanges, and price quotes for these shares are readily available. These investments are classified as Level 1 in the valuation hierarchy.

International equities.  These investments are held in common and preferred stock issued by non-U.S. corporations. Common and preferred shares are traded actively on exchanges, and price quotes for these shares are readily available. These investments are classified as Level 1 in the valuation hierarchy.

U.S. stock index fund. This fund consists of investments held in a diversified mix of securities (U.S. and international stocks, and fixed-income securities) and a combination of other collective funds that together are designed to track the performance of the S&P 500 Index. The fund is valued using the net asset value (NAV) provided by the administrator of the fund and reviewed by the Company. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of units outstanding. The investment in this fund may be redeemed daily, subject to the restrictions of the fund. This investment is classified as Level 3 in the valuation hierarchy.

Private investment fund. This fund consists of investments held in a diversified mix of publicly-traded securities (U.S and international stocks) and private companies. The fund is valued using the NAV provided by the administrator of the fund and reviewed by the Company. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of units outstanding. Five percent of the NAV of the investment may be redeemed annually starting at the 12-month anniversary of the investment, subject to certain limitations. Additionally, the investment in this fund may be redeemed in part, or in full, at the 60-month anniversary of the investment, or at any subsequent 36-month anniversary date following the initial 60-month anniversary. This investment is classified as Level 3 in the valuation hierarchy.

The following table provides a reconciliation of changes in pension assets measured at fair value on a recurring basis, using Level 3 inputs:

(in thousands)	Private Investment Fund		U.S. Stock Index Fund
As of December 31, 2017	$	—	$	706,202
Purchases, sales, and settlements, net	—		(80,000		)
Actual return on plan assets:
Gains relating to assets sold	—		2,819
Losses relating to assets still held at year-end	—		(27,626		)
As of December 31, 2018	—		601,395
Purchases, sales, and settlements, net	150,000		(425,000		)
Actual return on plan assets:
Gains relating to assets sold	—		68,658
Gains relating to assets still held at year-end	1,854		77,176
As of December 31, 2019	$	151,854	$	322,229

Other Postretirement Plans.  The following table sets forth obligation, asset and funding information for the Company’s other postretirement plans:

	Postretirement Plans
	As of December 31
(in thousands)	2019			2018
Change in Benefit Obligation
Benefit obligation at beginning of year	$	8,523		$	22,785
Service cost	—			892
Interest cost	289			620
Amendments	—			(12,473		)
Actuarial gain	(1,246		)	(2,519		)
Benefits paid, net of Medicare subsidy	(750		)	(782		)
Benefit Obligation at End of Year	$	6,816		$	8,523
Change in Plan Assets
Fair value of assets at beginning of year	$	—		$	—
Employer contributions	750			782
Benefits paid, net of Medicare subsidy	(750		)	(782		)
Fair Value of Assets at End of Year	$	—		$	—
Funded Status	$	(6,816	)	$	(8,523	)

The change in the benefit obligation for the Company’s other postretirement plans was primarily due to the recognition of an actuarial gain resulting from repeal of the Health Insurer Fee (HIF) included in the Further Consolidation Appropriations Act, 2020.

The amounts recognized in the Company’s Consolidated Balance Sheets for its other postretirement plans are as follows:

	Postretirement Plans
	As of December 31
(in thousands)	2019			2018
Current liability	$	(1,153	)	$	(1,399	)
Noncurrent liability	(5,663		)	(7,124		)
Recognized Liability	$	(6,816	)	$	(8,523	)

The discount rates utilized for determining the benefit obligation at December 31, 2019 and 2018, for the postretirement plans were 2.68% and 3.69%, respectively. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2019, was 7.00% for pre-age 65, decreasing to 4.5% in the year 2026 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2019, was 7.49% for post-age 65, decreasing to 4.5% in the year 2026 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation for Medicare Advantage at December 31, 2019, was (6.89)%, due to the repeal of the HIF, and 8.15% for 2021, decreasing to 4.5% in the year 2029 and thereafter.

The Company made contributions to its postretirement benefit plans of $0.8 million for both years ended December 31, 2019 and 2018. As the plans are unfunded, the Company makes contributions to its postretirement plans based on actual benefit payments.

At December 31, 2019, future estimated benefit payments are as follows:

(in thousands)	Postretirement Plans
2020	$	1,153
2021	$	955
2022	$	856
2023	$	724
2024	$	569
2025–2029	$	1,699

The total benefit arising from the Company’s other postretirement plans consists of the following components:

	Postretirement Plans
	Year Ended December 31
(in thousands)	2019			2018			2017
Service cost	$	—		$	892		$	1,028
Interest cost	289			620			779
Amortization of prior service credit	(7,363		)	(1,408		)	(148		)
Recognized actuarial gain	(4,360		)	(3,783		)	(3,891		)
Net Periodic Benefit for the Year	(11,434		)	(3,679		)	(2,232		)
Curtailment	—			(3,380		)	—
Total Benefit for the Year	$	(11,434	)	$	(7,059	)	$	(2,232	)
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial gain	$	(1,246	)	$	(2,519	)	$	(2,830	)
Current year prior service credit	—			(12,473		)	—
Amortization of prior service credit	7,363			1,408			148
Recognized actuarial gain	4,360			3,783			3,891
Curtailment and settlement	—			3,380			—
Total Recognized in Other Comprehensive Income (Before Tax Effects)	$	10,477		$	(6,421	)	$	1,209
Total Recognized in Benefit and Other Comprehensive Income (Before Tax Effects)	$	(957	)	$	(13,480	)	$	(1,023	)

The costs for the Company’s postretirement plans are actuarially determined. The discount rate utilized to determine periodic cost for the year ended December 31, 2019 was 3.69%. As a result of the changes to the postretirement plans, the Company remeasured the accumulated and projected benefit obligation of the postretirement plan as of October 31, 2018. The remeasurement changed the discount rate from 3.11% for the period January 1 through October 31, 2018 to 4.04% for the period November 1 to December 31, 2018. The discount rate utilized to determine periodic cost for the year ended December 31, 2017 was 3.31%. AOCI included the following components of unrecognized net periodic benefit for the postretirement plans:

	As of December 31
(in thousands)	2019			2018
Unrecognized actuarial gain	$	(19,747	)	$	(22,861	)
Unrecognized prior service credit	(500		)	(7,863		)
Gross Amount	(20,247		)	(30,724		)
Deferred tax liability	5,467			8,295
Net Amount	$	(14,780	)	$	(22,429	)

Multiemployer Pension Plans.  In 2019, 2018 and 2017, the Company contributed to one multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covered certain union-represented employees. The Company’s total contributions to the multiemployer pension plan amounted to $0.1 million in each year for 2019, 2018 and 2017.

Savings Plans.  The Company recorded expense associated with retirement benefits provided under incentive savings plans (primarily 401(k) plans) of approximately $9.8 million in 2019, $8.6 million in 2018 and $7.5 million in 2017.