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Pensions and Other Postretirement Plans
 12 Months Ended
Dec. 31, 2020
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 2020, the Company recorded $6.0 million in expenses related to a Separation Incentive Program (SIP) for certain Kaplan, Code3 and Decile employees, which was funded from the assets of the Company’s pension plan. In the third quarter of 2020, the Company recorded $7.8 million in expenses related to a SIP for certain Kaplan employees, which was funded from the assets of the Company’s pension plan.
In the second quarter of 2019, the Company offered a 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.
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)20202019
Change in Benefit Obligation
Benefit obligation at beginning of year$1,020,356 $1,116,569 
Service cost22,656 20,422 
Interest cost32,587 46,821 
Amendments69 5,725 
Actuarial loss78,900 124,285 
Benefits paid(73,232)(64,354)
Special termination benefits13,781 6,432 
Settlement— (235,544)
Benefit Obligation at End of Year$1,095,117 $1,020,356 
Change in Plan Assets  
Fair value of assets at beginning of year$2,312,706 $2,120,127 
Actual return on plan assets563,948 492,477 
Benefits paid(73,232)(64,354)
Settlement— (235,544)
Fair Value of Assets at End of Year$2,803,422 $2,312,706 
Funded Status$1,708,305 $1,292,350 
SERP
As of December 31
(in thousands)20202019
Change in Benefit Obligation  
Benefit obligation at beginning of year$116,193 $102,548 
Service cost954 858 
Interest cost3,678 4,314 
Actuarial loss7,448 15,544 
Benefits paid(5,974)(7,071)
Benefit Obligation at End of Year$122,299 $116,193 
Change in Plan Assets 
Fair value of assets at beginning of year$— $— 
Employer contributions5,974 7,071 
Benefits paid(5,974)(7,071)
Fair Value of Assets at End of Year$— $— 
Funded Status$(122,299)$(116,193)
The change in the Company’s benefit obligations for the pension plan and SERP were primarily 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, 2020 and 2019, was $1,064.3 million and $991.1 million, respectively. The accumulated benefit obligation for the Company’s SERP at December 31, 2020 and 2019, was $121.7 million and $114.8 million, respectively. The amounts recognized in the Company’s Consolidated Balance Sheets for its defined benefit pension plans are as follows:
Pension PlansSERP
As of December 31As of December 31
(in thousands)2020201920202019
Noncurrent asset$1,708,305 $1,292,350 $— $— 
Current liability— — (6,495)(6,447)
Noncurrent liability— — (115,804)(109,746)
Recognized Asset (Liability)$1,708,305 $1,292,350 $(122,299)$(116,193)
Key assumptions utilized for determining the benefit obligation are as follows:
Pension PlansSERP
As of December 31As of December 31
 2020201920202019
Discount rate2.5%3.3%2.5%3.3%
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
1.41% with phase in to 2.50% in 2023
2.77% with phase in to 3.30% in 2022
——
The Company made no contributions to its pension plans in 2020 and 2019, and the Company does not expect to make any contributions in 2021. The Company made contributions to its SERP of $6.0 million and $7.1 million for the years ended December 31, 2020 and 2019, respectively. As the plan is unfunded, the Company makes contributions to the SERP based on actual benefit payments.
At December 31, 2020, future estimated benefit payments, excluding charges for early retirement programs, are as follows:
(in thousands)Pension PlansSERP
2021$61,312 $6,576 
202261,461 6,818 
202361,888 7,014 
202462,496 7,150 
202563,056 7,229 
2026–2030303,420 36,132 
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)202020192018
Service cost$22,656 $20,422 $18,221 
Interest cost32,587 46,821 46,787 
Expected return on assets(113,427)(122,790)(129,220)
Amortization of prior service cost2,830 2,882 150 
Recognized actuarial gain— — (9,969)
Net Periodic Benefit for the Year(55,354)(52,665)(74,031)
Curtailment— — (806)
Settlement— (91,676)(26,917)
Special separation benefit expense13,781 6,432 — 
Total Benefit for the Year$(41,573)$(137,909)$(101,754)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
   
Current year actuarial (gain) loss$(371,621)$(245,402)$111,084 
Current year prior service cost69 5,725 7,183 
Amortization of prior service cost(2,830)(2,882)(150)
Recognized net actuarial gain— — 9,969 
Curtailment and settlement— 91,676 26,887 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(374,382)$(150,883)$154,973 
Total Recognized in Total Benefit and Other Comprehensive Income (Before Tax Effects)
$(415,955)$(288,792)$53,219 
SERP
Year Ended December 31
(in thousands)202020192018
Service cost$954 $858 $819 
Interest cost3,678 4,314 3,865 
Amortization of prior service cost331 339 311 
Recognized actuarial loss5,267 2,314 2,403 
Total Cost for the Year$10,230 $7,825 $7,398 
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial loss (gain)$7,448 $15,544 $(7,552)
Current year prior service cost— — 1,028 
Amortization of prior service cost(331)(339)(311)
Recognized net actuarial loss(5,267)(2,314)(2,403)
Total Recognized in Other Comprehensive Income (Before Tax Effects)$1,850 $12,891 $(9,238)
Total Recognized in Total Cost and Other Comprehensive Income (Before Tax Effects)
$12,080 $20,716 $(1,840)
The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:
Pension PlansSERP
Year Ended December 31Year Ended December 31
202020192018202020192018
Discount rate (1)
3.3%

4.3%

4.0%/3.6%

3.3%

4.3%

3.6%
Expected return on plan assets6.25%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
2.77% with phase in to 3.30% in 2022
3.45% with phase in to 4.30% in 2021
2.23% 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 PlansSERP
As of December 31As of December 31
(in thousands)2020201920202019
Unrecognized actuarial (gain) loss$(839,156)$(467,535)$32,681 $30,500 
Unrecognized prior service cost7,355 10,116 367 698 
Gross Amount(831,801)(457,419)33,048 31,198 
Deferred tax liability (asset)224,586 123,503 (8,923)(8,423)
Net Amount$(607,215)$(333,916)$24,125 $22,775 
Defined Benefit Plan Assets.  The Company’s defined benefit pension obligations are funded by a portfolio made up of a private investment fund, a U.S. stock index 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
20202019
U.S. equities58 %62 %
Private investment fund18 %7 %
U.S. stock index fund9 %14 %
International equities8 %7 %
U.S. fixed income7 %10 %
 100 %100 %
The Company manages approximately 40% of the pension assets internally, of which the majority is invested in a private investment fund with the remaining investments in Berkshire Hathaway stock, a U.S. stock index fund and
short-term fixed-income securities. The remaining 60% 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, and no more than 30% of the assets it manages in specified international exchanges at the time the investment is made. The other investment manager cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway, and 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 invest 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, 2020. 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, 2020, the pension plan held investments in one common stock and one private investment fund that exceeded 10% of total plan assets, valued at $850.6 million, or approximately 30% of total plan assets. At December 31, 2019, the pension plan held investments in one common stock and one U.S. stock index fund that exceeded 10% of total plan assets, valued at $704.8 million, or approximately 30% 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, 2020
(in thousands)Level 1Level 2Level 3Total
Cash equivalents and other short-term investments$2,218 $197,655 $— $199,873 
Equity securities
U.S. equities1,614,879 — — 1,614,879 
International equities233,818 — — 233,818 
Private investment fund— — 496,458 496,458 
U.S. stock index fund— — 256,291 256,291 
Total Investments$1,850,915 $197,655 $752,749 $2,801,319 
Receivables, net 2,103 
Total $2,803,422 
As of December 31, 2019
(in thousands)Level 1Level 2Level 3Total
Cash equivalents and other short-term investments$2,133 $234,999 $— $237,132 
Equity securities
U.S. equities1,439,098 — — 1,439,098 
International equities161,377 — — 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 
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.
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 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. 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.
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 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.
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, 2018$— $601,395 
Purchases, sales, and settlements, net150,000 (425,000)
Actual return on plan assets:
Gains relating to assets sold— 68,658 
Gains relating to assets still held at year-end1,854 77,176 
As of December 31, 2019151,854 322,229 
Purchases, sales, and settlements, net130,000 (100,000)
Actual return on plan assets:
Losses relating to assets sold— (5,763)
Gains relating to assets still held at year-end214,604 39,825 
As of December 31, 2020$496,458 $256,291 
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)20202019
Change in Benefit Obligation  
Benefit obligation at beginning of year$6,816 $8,523 
Interest cost167 289 
Actuarial gain(991)(1,246)
Benefits paid, net of Medicare subsidy(405)(750)
Benefit Obligation at End of Year$5,587 $6,816 
Change in Plan Assets  
Fair value of assets at beginning of year$— $— 
Employer contributions405 750 
Benefits paid, net of Medicare subsidy(405)(750)
Fair Value of Assets at End of Year$— $— 
Funded Status$(5,587)$(6,816)
The change in the benefit obligation for the Company’s other postretirement plans was primarily due to updated claims experience based on actual premium rates offset by the recognition of an actuarial loss resulting from a decrease to the discount rate used to measure the benefit obligation.
The amounts recognized in the Company’s Consolidated Balance Sheets for its other postretirement plans are as follows:
Postretirement Plans
As of December 31
(in thousands)20202019
Current liability$(797)$(1,153)
Noncurrent liability(4,790)(5,663)
Recognized Liability$(5,587)$(6,816)
The discount rates utilized for determining the benefit obligation at December 31, 2020 and 2019, for the postretirement plans were 1.78% and 2.68%, respectively. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2020, was 6.59% for pre-age 65, decreasing to 4.5% in the year 2029 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2020, was 7.01% for post-age 65, decreasing to 4.5% in the year 2029 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2020, was 8.25% for Medicare Advantage, decreasing to 4.5% in the year 2029 and thereafter.
The Company made contributions to its postretirement benefit plans of $0.4 million and $0.8 million for the years ended December 31, 2020 and 2019, respectively. As the plans are unfunded, the Company makes contributions to its postretirement plans based on actual benefit payments.
At December 31, 2020, future estimated benefit payments are as follows:
(in thousands)Postretirement
Plans
2021$797 
2022$725 
2023$624 
2024$500 
2025$398 
2026–2030$1,394 
The total benefit arising from the Company’s other postretirement plans consists of the following components:
Postretirement Plans
Year Ended December 31
(in thousands)202020192018
Service cost$— $— $892 
Interest cost167 289 620 
Amortization of prior service credit(481)(7,363)(1,408)
Recognized actuarial gain(4,048)(4,360)(3,783)
Net Periodic Benefit for the Year(4,362)(11,434)(3,679)
Curtailment— — (3,380)
Total Benefit for the Year$(4,362)$(11,434)$(7,059)
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial gain$(991)$(1,246)$(2,519)
Current year prior service credit— — (12,473)
Amortization of prior service credit481 7,363 1,408 
Recognized actuarial gain4,048 4,360 3,783 
Curtailment and settlement— — 3,380 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$3,538 $10,477 $(6,421)
Total Recognized in Benefit and Other Comprehensive Income (Before Tax Effects)
$(824)$(957)$(13,480)
The costs for the Company’s postretirement plans are actuarially determined. The discount rate utilized to determine periodic cost for the years ended December 31, 2020 and 2019 were 2.68% and 3.69%. As a result of the changes to the postretirement plans, the Company remeasured the accumulated and projected benefit obligation of the postretirement plan as of October 31, 2018. The remeasurement changed the discount rate from 3.11% for the
period January 1 through October 31, 2018 to 4.04% for the period November 1 to December 31, 2018. AOCI included the following components of unrecognized net periodic benefit for the postretirement plans:
As of December 31
(in thousands)20202019
Unrecognized actuarial gain$(16,690)$(19,747)
Unrecognized prior service credit(19)(500)
Gross Amount(16,709)(20,247)
Deferred tax liability4,512 5,467 
Net Amount$(12,197)$(14,780)
Multiemployer Pension Plans.  In 2020, 2019 and 2018, 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 2020, 2019 and 2018.
Savings Plans.  The Company recorded expense associated with retirement benefits provided under incentive savings plans (primarily 401(k) plans) of approximately $8.8 million in 2020, $9.8 million in 2019 and $8.6 million in 2018.