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Pensions and Other Postretirement Plans
 12 Months Ended
Dec. 31, 2022
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.
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 2022, a new pension credit retention program was implemented by the Company for certain Graham Healthcare Group employees; the program offers a pension credit up to $50,000 per employee, cliff vested after three years of continuous employment for existing employees and new employees hired from January 1, 2022 through December 31, 2024. The Company recorded $10.5 million in pension service cost expense in 2022 related to this program.
In the fourth quarter of 2022, the Company recorded $3.6 million in expenses related to a Separation Incentive Program (SIP) for certain Kaplan employees, which was funded from the assets of the Company’s pension plans.
In the second quarter of 2021, the Company recorded $1.1 million in expenses related to a SIP for certain Dekko employees, which was funded from the assets of the Company’s pension plans.
In the second quarter of 2020, the Company recorded $6.0 million in expenses related to a SIP for certain Kaplan, Code3 and Decile employees, which was funded from the assets of the Company’s pension plans. 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 plans.
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)20222021
Change in Benefit Obligation
Benefit obligation at beginning of year$1,088,309 $1,095,117 
Service cost32,567 22,991 
Interest cost30,504 26,917 
Amendments— 2 
Actuarial (gain) loss(219,466)5,660 
Benefits paid(65,240)(63,510)
Special termination benefits3,624 1,132 
Benefit Obligation at End of Year$870,298 $1,088,309 
Change in Plan Assets  
Fair value of assets at beginning of year$3,394,823 $2,803,422 
Actual return on plan assets(801,239)654,911 
Benefits paid(65,240)(63,510)
Fair Value of Assets at End of Year$2,528,344 $3,394,823 
Funded Status$1,658,046 $2,306,514 
SERP
As of December 31
(in thousands)20222021
Change in Benefit Obligation  
Benefit obligation at beginning of year$112,706 $122,299 
Service cost911 1,022 
Interest cost3,289 2,943 
Actuarial gain(20,956)(7,640)
Benefits paid(5,932)(5,918)
Benefit Obligation at End of Year$90,018 $112,706 
Funded Status$(90,018)$(112,706)
The changes in the Company’s benefit obligations for the pension plans and SERP were primarily due to the recognition of an actuarial gain resulting from an increase to the discount rate used to measure the benefit obligation and benefits paid during the year.
The accumulated benefit obligation for the Company’s pension plans at December 31, 2022 and 2021, was $843.6 million and $1,052.7 million, respectively. The accumulated benefit obligation for the Company’s SERP at December 31, 2022 and 2021, was $88.0 million and $112.2 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)2022202120222021
Noncurrent asset$1,658,046 $2,306,514 $— $— 
Current liability— — (6,570)(6,334)
Noncurrent liability— — (83,448)(106,372)
Recognized Asset (Liability)$1,658,046 $2,306,514 $(90,018)$(112,706)
Key assumptions utilized for determining the benefit obligation are as follows:
Pension PlansSERP
As of December 31As of December 31
 2022202120222021
Discount rate5.5%2.9%5.5%2.9%
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
4.28% with phase in to 5.50% in 2025
1.41% with phase in to 2.90% in 2024
——
The Company made no contributions to its pension plans in 2022 and 2021, and the Company does not expect to make any contributions in 2023. The SERP is unfunded, therefore, the Company made actual benefit payments of $5.9 million to beneficiaries in each of the years ended December 31, 2022 and 2021.
At December 31, 2022, future estimated benefit payments, excluding charges for early retirement programs, are as follows:
(in thousands)Pension PlansSERP
2023$60,164 $6,748 
202461,225 6,999 
202567,838 7,244 
202666,898 7,413 
202768,227 7,452 
2028–2032334,626 36,725 
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)202220212020
Service cost$32,567 $22,991 $22,656 
Interest cost30,504 26,917 32,587 
Expected return on assets(167,485)(137,878)(113,427)
Amortization of prior service cost2,835 2,846 2,830 
Recognized actuarial gain(68,656)(7,906)— 
Net Periodic Benefit for the Year(170,235)(93,030)(55,354)
Special separation benefit expense3,624 1,132 13,781 
Total Benefit for the Year$(166,611)$(91,898)$(41,573)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
   
Current year actuarial loss (gain)$749,258 $(511,373)$(371,621)
Current year prior service cost— 2 69 
Amortization of prior service cost(2,835)(2,846)(2,830)
Recognized net actuarial gain68,656 7,906 — 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$815,079 $(506,311)$(374,382)
Total Recognized in Total Benefit and Other Comprehensive Income (Before Tax Effects)
$648,468 $(598,209)$(415,955)
SERP
Year Ended December 31
(in thousands)202220212020
Service cost$911 $1,022 $954 
Interest cost3,289 2,943 3,678 
Amortization of prior service cost36 331 331 
Recognized actuarial loss666 5,930 5,267 
Total Cost for the Year$4,902 $10,226 $10,230 
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial (gain) loss$(20,956)$(7,640)$7,448 
Amortization of prior service cost(36)(331)(331)
Recognized net actuarial loss(666)(5,930)(5,267)
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(21,658)$(13,901)$1,850 
Total Recognized in Total Cost and Other Comprehensive Income (Before Tax Effects)
$(16,756)$(3,675)$12,080 
The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:
Pension PlansSERP
Year Ended December 31Year Ended December 31
202220212020202220212020
Discount rate
2.9%2.5%3.3%2.9%2.5%3.3%
Expected return on plan assets6.25%6.25%6.25%———
Rate of compensation increase – age graded
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
5.0%–1.0%
Cash balance interest crediting rate
1.41% with phase in to 2.90% in 2024
1.41% with phase in to 2.50% in 2023
2.77% with phase in to 3.30% in 2022
———
Accumulated other comprehensive income (AOCI) includes the following components of unrecognized net periodic cost for the defined benefit plans:
Pension PlansSERP
As of December 31As of December 31
(in thousands)2022202120222021
Unrecognized actuarial (gain) loss$(524,709)$(1,342,623)$(2,511)$19,111 
Unrecognized prior service cost1,676 4,511 — 36 
Gross Amount(523,033)(1,338,112)(2,511)19,147 
Deferred tax liability (asset)145,430 355,078 230 (5,340)
Net Amount$(377,603)$(983,034)$(2,281)$13,807 
Defined Benefit Plan Assets.  The Company’s defined benefit pension obligations are funded by a portfolio made up of private investment funds, 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
20222021
U.S. equities59 %61 %
Private investment funds16 %17 %
International equities11 %9 %
U.S. stock index fund7 %9 %
U.S. fixed income7 %4 %
 100 %100 %
The Company manages approximately 41% of the pension assets internally, of which the majority is invested in private investment funds with the remaining investments in Berkshire Hathaway stock, a U.S. stock index fund, and short-term fixed-income securities. The remaining 59% 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, 2022. 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, 2022, the pension plan held investments in one common stock and one private investment fund that exceeded 10% of total plan assets, valued at $842.6 million, or approximately 33% of total plan assets. At December 31, 2021, the pension plan held investments in one common stock and one private investment fund that exceeded 10% of total plan assets, valued at $998.8 million, or approximately 29% 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, 2022
(in thousands)Level 1Level 2Level 3Total
Cash equivalents$1,980 $— $— $1,980 
Equity securities
U.S. equities (1)
1,507,609 — — 1,507,609 
International equities (2)
270,872 — — 270,872 
Total Investments$1,780,461 $— $— $1,780,461 
Short-term investment funds measured at NAV (3)
170,062 
Private investment funds measured at NAV (4)
406,600 
U.S. stock index fund measured at NAV (5)
168,532 
Receivables, net 2,689 
Total $2,528,344 
As of December 31, 2021
(in thousands)Level 1Level 2Level 3Total
Cash equivalents$2,159 $— $— $2,159 
Equity securities
U.S. equities (1)
2,067,152 — — 2,067,152 
International equities (2)
301,640 — — 301,640 
Total Investments$2,370,951 $— $— $2,370,951 
Short-term investment funds measured at NAV (3)
145,683 
Private investment funds measured at NAV (4)
573,970 
U.S. stock index fund measured at NAV (5)
302,478 
Receivables, net 1,741 
Total $3,394,823 
____________
(1)
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.
(2)
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.
(3)
Short-term investment funds.  These investments include commingled funds that are primarily held in U.S. Treasury securities. The funds are valued using the net asset value (NAV) provided by the administrator of the funds and reviewed by the Company.
(4)
Private investment funds. This category includes a commingled fund and a private investment fund. The commingled fund invests in a diversified mix of publicly traded securities (U.S. and international stocks) and private companies. The private investment fund invests in non-public companies. The funds are valued using the NAV provided by the administrator of the funds 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.
(5)
U.S. stock index fund. This fund consists of investments held in common stock, plus an uninvested cash portion comprising less than 1% of fund value, 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 following table sets forth a summary of the Plan’s investments with a reported NAV:
(in thousands)
Fair Value
Unfunded Commitment
Redemption FrequencyOther Redemption RestrictionRedemption
Notice
Period
Short-term investment funds
2022$170,062 $— 
Immediate
None
None
2021$145,683 $— 
Immediate
None
None
Private investment funds
2022$406,600 $20,673 (1)(1)90 days
2021$573,970 $26,088 (1)(1)90 days
U.S. stock index fund
2022$168,532 $— 
Immediate
None
1 day
2021$302,478 $— 
Immediate
None
1 day
____________
(1)
Five percent of the NAV of the investment in the commingled fund may be redeemed annually starting at the 12-month anniversary of the investment, subject to certain limitations. Additionally, the investment in the commingled 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. The investment in the private investment fund is generally not redeemable until the dissolution of the fund.
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)20222021
Change in Benefit Obligation  
Benefit obligation at beginning of year$4,722 $5,587 
Interest cost98 92 
Actuarial gain(1,205)(582)
Benefits paid, net of Medicare subsidy(215)(375)
Benefit Obligation at End of Year$3,400 $4,722 
Funded Status$(3,400)$(4,722)
The change in the benefit obligation for the Company’s other postretirement plans was due to updated claims experience based on actual premium rates, the recognition of an actuarial gain resulting from an increase to the discount rate used to measure the benefit obligation, and benefits paid during the year.
The amounts recognized in the Company’s Consolidated Balance Sheets for its other postretirement plans are as follows:
Postretirement Plans
As of December 31
(in thousands)20222021
Current liability$(541)$(671)
Noncurrent liability(2,859)(4,051)
Recognized Liability$(3,400)$(4,722)
The discount rates utilized for determining the benefit obligation at December 31, 2022 and 2021, for the postretirement plans were 4.76% and 2.23%, respectively. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2022, was 6.75% for pre-age 65, decreasing to 4.5% in the year 2032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2022, was 6.92% for post-age 65, decreasing to 4.5% in the year 2032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2022, was 8.00% for Medicare Advantage, decreasing to 4.5% in the year 2032 and thereafter.
The Company’s postretirement benefit plans are unfunded, therefore, the Company made actual benefit payments of $0.2 million and $0.4 million to beneficiaries for the years ended December 31, 2022 and 2021, respectively.
At December 31, 2022, future estimated benefit payments are as follows:
(in thousands)Postretirement
Plans
2023$541 
2024$468 
2025$382 
2026$341 
2027$322 
2028–2032$2,054 
The total benefit arising from the Company’s other postretirement plans consists of the following components:
Postretirement Plans
Year Ended December 31
(in thousands)202220212020
Interest cost$98 $92 $167 
Amortization of prior service credit(7)(7)(481)
Recognized actuarial gain(2,843)(3,510)(4,048)
Net Periodic Benefit for the Year(2,752)(3,425)(4,362)
Settlement— (120)— 
Total Benefit for the Year$(2,752)$(3,545)$(4,362)
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial gain$(1,205)$(582)$(991)
Amortization of prior service credit7 7 481 
Recognized actuarial gain2,843 3,510 4,048 
Settlement— 120 — 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$1,645 $3,055 $3,538 
Total Recognized in Benefit and Other Comprehensive Income (Before Tax Effects)
$(1,107)$(490)$(824)
The costs for the Company’s postretirement plans are actuarially determined. The discount rate utilized to determine periodic cost for the years ended December 31, 2022, 2021 and 2020 were 2.23%, 1.78% and 2.68%. AOCI included the following components of unrecognized net periodic benefit for the postretirement plans:
As of December 31
(in thousands)20222021
Unrecognized actuarial gain$(12,004)$(13,642)
Unrecognized prior service credit(5)(12)
Gross Amount(12,009)(13,654)
Deferred tax liability3,302 3,724 
Net Amount$(8,707)$(9,930)
Multiemployer Pension Plans.  In 2022, 2021 and 2020, 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 2022, 2021 and 2020.
Savings Plans.  The Company recorded expense associated with retirement benefits provided under incentive savings plans (primarily 401(k) plans) of approximately $11.6 million in 2022, $10.9 million in 2021 and $8.8 million in 2020.