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Qualified Employee Benefit Plans
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
Qualified Employee Benefit Plans Qualified Employee Benefit Plans
We maintain a qualified profit sharing plan covering U.S. employees and certain foreign employees. Employer contributions are discretionary and generally limited to the maximum amount deductible for federal income tax purposes. Aggregate contributions were $17.5 million, $16.5 million and $15.6 million for 2022, 2021 and 2020, respectively.
We maintain several defined contribution plans for foreign employees working for our subsidiaries in the United Kingdom, Australia, Japan and other locations outside the United States. Employer contributions generally are consistent with regulatory requirements and tax limits. Defined contribution expense for foreign entities was $10.2 million, $9.8 million and $8.4 million in 2022, 2021 and 2020, respectively.
We maintain a qualified, noncontributory, defined benefit retirement plan (“Retirement Plan”) covering current and former employees who were employed by AB in the United States prior to October 2, 2000. Benefits are based on years of credited service, average final base salary (as defined in the Retirement Plan) and primary Social Security benefits. Service and compensation after December 31, 2008 are not taken into account in determining participants’ retirement benefits.
Our policy is to satisfy our funding obligation for each year in an amount not less than the minimum required by ERISA and not greater than the maximum amount we can deduct for federal income tax purposes. We did not make a contribution to the Retirement Plan during 2022. We do not currently anticipate that we will contribute to the Retirement Plan during 2023. Contribution estimates, which are subject to change, are based on regulatory requirements, future market conditions and assumptions used for actuarial computations of the Retirement Plan’s obligations and assets. Management, at the present time, has not determined the amount, if any, of additional future contributions that may be required.
The Retirement Plan’s projected benefit obligation, fair value of plan assets and funded status (amounts recognized in the consolidated statements of financial condition) were as follows:
Years Ended December 31
20222021
(in thousands)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year$141,862 $151,124 
Interest cost3,958 3,794 
Plan settlements(4,524)(5,803)
Actuarial (gain)(37,839)(4,447)
Benefits paid(2,977)(2,806)
Projected benefit obligation at end of year100,480 141,862 
Change in plan assets:
Plan assets at fair value at beginning of year130,939 125,022 
Actual return on plan assets(27,448)14,526 
Employer contribution— — 
Plan settlements(4,524)(5,803)
Benefits paid(2,977)(2,806)
Plan assets at fair value at end of year95,990 130,939 
Funded status$(4,490)$(10,923)
Effective December 31, 2015, the Retirement Plan was amended to change the actuarial basis used for converting a life annuity benefit to optional forms of payment and converting benefits payable at age 65 to earlier commencement dates. This prior service cost will be amortized over future years.
The amounts recognized in other comprehensive income (loss) for the Retirement Plan for 2022, 2021 and 2020 were as follows:
202220212020
(in thousands)
Unrecognized net gain (loss) from experience different from that assumed and effects of changes and assumptions$6,519 $15,858 $(4,089)
Prior service cost24 24 24 
6,543 15,882 (4,065)
Income tax (expense) (33)(87)(216)
Other comprehensive income (loss)$6,510 $15,795 $(4,281)
The gain of $6.5 million recognized in 2022 was primarily due to changes in the discount rate and lump sum interest rates of ($38.7 million), settlement loss recognized of ($1.7 million) and the recognized actuarial loss of ($1.0 million), offset by actual earnings less than expected earnings on plan assets ($34.0 million), changes in the census data ($0.5 million) and changes in adjustments for participants who received their pension as a lump sum ($0.4 million).
The gain of $15.8 million recognized in 2021 was primarily due to actual earnings exceeding expected earnings on plan assets ($8.2 million), changes in the discount rate and lump sum interest rates of ($5.6 million), settlement loss recognized of ($2.0 million) and the recognized actuarial loss of ($1.5 million), offset by changes in the census data ($1.0 million) and changes in the mortality assumption ($0.2 million).
The loss of $4.3 million recognized in 2020 primarily was due to changes in the discount rate and lump sum interest rates ($16.7 million), offset by actual earnings exceeding expected earnings on plan assets ($10.4 million), changes in the mortality assumption ($1.0 million), the recognized actuarial loss ($1.4 million) and changes in census data ($0.4 million).
Foreign retirement plans and an individual's retirement plan maintained by AB are not material to AB's consolidated financial statements. As such, disclosure for these plans is not necessary. The reconciliation of the 2022 amounts recognized in other comprehensive income for the Retirement Plan as compared to the consolidated statement of comprehensive income ("OCI Statement") is as follows:
Retirement
Plan		Retired Individual PlanForeign Retirement PlansOCI
Statement
(in thousands)
Recognized actuarial gain$6,519 $107 $296 $6,922 
Amortization of prior service cost24 — — 24 
Changes in employee benefit related items6,543 107 296 6,946 
Income tax (expense) (33)— (62)(95)
Employee benefit related items, net of tax$6,510 $107 $234 $6,851 
The amounts included in accumulated other comprehensive loss for the Retirement Plan as of December 31, 2022 and 2021 were as follows:
20222021
(in thousands)
Unrecognized net loss from experience different from that assumed and effects of changes and assumptions$(37,249)$(43,768)
Prior service cost (659)(683)
(37,908)(44,451)
Income tax benefit177 210 
Accumulated other comprehensive loss$(37,731)$(44,241)
The amortization period over which we are amortizing the loss for the Retirement Plan from accumulated other comprehensive income is 27.9 years. The estimated prior service cost and amortization of loss for the Retirement Plan that will be amortized from accumulated other comprehensive income over the next year are $24,000 and $1.0 million, respectively.
The accumulated benefit obligation for the plan was $100.5 million and $141.9 million as of December 31, 2022 and 2021, respectively.
The discount rates used to determine benefit obligations as of December 31, 2022 and 2021 (measurement dates) were 5.50% and 2.90%, respectively.
Benefit payments are expected to be paid as follows (in thousands):
2023$10,121 
20246,767 
20258,058 
20267,865 
20278,743 
2028 - 2032
38,404 
Net expense under the Retirement Plan consisted of:
Years Ended December 31
202220212020
(in thousands)
Interest cost on projected benefit obligations$3,958 $3,794 $4,443 
Expected return on plan assets(6,591)(6,351)(6,084)
Amortization of prior service cost24 24 24 
Settlement loss recognized1,678 2,024 — 
Recognized actuarial loss1,042 1,447 1,386 
Net pension expense$111 $938 $(231)
Actuarial computations used to determine net periodic costs were made utilizing the following weighted-average assumptions:
Years Ended December 31
202220212020
Discount rate on benefit obligations2.90 %2.55 %3.35 %
Expected long-term rate of return on plan assets5.25 %5.25 %5.50 %
In developing the expected long-term rate of return on plan assets of 5.25%, management considered the historical returns and future expectations for returns for each asset category, as well as the target asset allocation of the portfolio. The expected long-term rate of return on assets is based on weighted average expected returns for each asset class.
As of December 31, 2022, the mortality projection assumption used the generational MP-2021 improvement scale, which is consistent with the improvement scale used in 2021. Prior to 2021, mortality was projected generationally using the MP-2020 improvements scale. The base mortality assumption used is the Society of Actuaries Pri-2012 base mortality table for private sector plans, with a white-collar adjustment, using the contingent annuitant table for beneficiaries of deceased participants.
The Internal Revenue Service (“IRS”) recently updated the mortality tables used to determine lump sums. For fiscal year-end 2022, we reflected the most recently published IRS table for lump sums assumed to be paid in 2023. We projected future mortality for lump sums assumed to be paid after 2023 using the current base mortality tables (RP-2014 backed off to 2006) and projection scale of MP-2021.
The Retirement Plan’s asset allocation percentages consisted of:
Years Ended December 31
20222021
Equity46 %52 %
Debt securities42 38 
Other12 10 
Total100 %100 %
The guidelines regarding allocation of assets are formalized in the Investment Policy Statement adopted by the Investment Committee for the Retirement Plan. The objective of the investment program is to enhance the portfolio of the Retirement Plan through total return (capital appreciation and income), thereby promoting the ongoing ability of the Retirement plan to meet future liabilities and obligations, while minimizing the need for additional contributions. The guidelines specify an allocation
weighting of 10% to 35% for liability hedging investments (target of 24%), 15% to 40% for return seeking investments (target of 27%), 5% to 35% for risk mitigating investments (target of 10%), 10% to 35% for diversifying investments (target of 21%) and 5% to 35% for dynamic asset allocation (target of 18%). Investments in mutual funds, hedge funds (and other alternative investments), and other commingled investment vehicles are permitted Investment Policy Statement. Investments are permitted in overlay portfolios (regulated mutual funds), which are designed to manage short-term portfolio risk and mitigate the effect of extreme outcomes by varying the asset allocation of a portfolio.
See Note 9, Fair Value for a description of how we measure the fair value of our plan assets.
The valuation of our Retirement Plan assets by pricing observability levels as of December 31, 2022 and 2021 was as follows (in thousands):
Level 1Level 2Level 3Total
December 31, 2022
Cash$1,441 $— $— $1,441 
U.S. Treasury Strips— 15,634 — 15,634 
Fixed income mutual funds2,149 — — 2,149 
Fixed income securities— 22,478 — 22,478 
Equity mutual funds26,074 — — 26,074 
Equity securities10,928 219 — 11,147 
Total assets in the fair value hierarchy40,592 38,331 — 78,923 
Investments measured at net assets value— — — 17,067 
Investments at fair value$40,592 $38,331 $— $95,990 
Level 1Level 2Level 3Total
December 31, 2021
Cash$47 $— $— $47 
U.S. Treasury Strips— 32,355 — 32,355 
Fixed income mutual funds17,477 — — 17,477 
Equity mutual funds43,786 — — 43,786 
Equity securities14,801 — — 14,801 
Total assets in the fair value hierarchy76,111 32,355 — 108,466 
Investments measured at net assets value— — — 22,473 
Investments at fair value$76,111 $32,355 $— $130,939 
During 2022 and 2021, the Retirement Plan's investments include the following:
•U.S. Treasury strips, (zero-coupon bonds);
•one fixed income mutual fund in 2022, as compared to two fixed income mutual funds in 2021. The fund included in both 2022 and 2021 pursues an aggressive investment strategy involving a variety of asset classes. This fund seeks inflation protection from investments around the globe, both in developed and emerging market countries. The additional fund included in 2021 sought to generate income consistent with preservation of capital;
•six equity mutual funds in both 2022 and 2021, which focus on both U.S.-based and non-U.S.-based equity securities of various capitalization sizes ranging from small to large capitalization and diversified portfolios within those capitalization ranges;
•one asset allocation mutual fund, which seeks to moderate overall volatility and limit extreme outcomes in times of market stress, without sacrificing long-term growth potential. This fund continuously adjusts the mix of global equities, bonds and related “opportunistic” assets based on our view of prospective market conditions;
•one separately managed account, managed against the Bloomberg Long U.S. Corporate index. This portfolio invests in U.S. dollar denominated investment grade fixed income securities with at least 10 years to maturity;
•one alternative investment, securitized assets hedge fund with a focus on mortgage credit, principally through investment in Credit Risk Transfer Securities, residential mortgage-backed securities, commercial mortgage-backed securities and other asset-backed securities; and
•investments measured at net asset value, including two hedge funds in both 2022 and 2021;