XML 46 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Retirement, Postretirement And Other Benefit Plans
 12 Months Ended
Dec. 31, 2017
Retirement Benefits, Description [Abstract]  
Retirement, Postretirement And Other Benefit Plans
RETIREMENT, POSTRETIREMENT AND OTHER BENEFIT PLANS

CIT provides various benefit programs, including defined benefit retirement and postretirement plans, and defined contribution savings incentive plans. A summary of major plans is provided below.

Retirement and Postretirement Benefit Plans

Retirement Benefits

CIT maintains a frozen U.S. non-contributory pension plan (the "Plan") qualified under the Internal Revenue Code (IRC). Benefits under the Plan are based on an employee's age, years of service and qualifying compensation.

The Company also maintains a frozen U.S. non-contributory supplemental retirement plan (the "Supplemental Plan), and an Executive Retirement Plan, which has been closed to new members since 2006, and whose participants are all inactive as of December 31, 2017. In addition, CIT has a frozen non-contributory, non-US retirement plan which covers a small number of retired participants.

Accumulated balances under the Plan and the Supplemental Plan continue to receive periodic interest, subject to certain government limits. The interest credit was 2.84%, 2.61%, and 2.55% for the years ended December 31, 2017, 2016, and 2015, respectively.

Postretirement Benefits

CIT provides healthcare and life insurance benefits to eligible retired employees. For most eligible retirees, healthcare is contributory and life insurance is non-contributory. All postretirement benefit plans are funded on a pay-as-you-go basis.

The Company amended CIT's postretirement benefit plans to discontinue benefits effective December 31, 2012. CIT no longer offers retiree medical, dental and life insurance benefits to those who did not meet the eligibility criteria for these benefits by December 31, 2013. Employees who met the eligibility requirements for retiree health insurance by December 31, 2013 will be offered retiree medical and dental coverage upon retirement. To receive retiree life insurance, employees must have met the eligibility criteria for retiree life insurance by, and must have retired from CIT on or before, December 31, 2013.

Obligations and Funded Status

The following tables set forth changes in benefit obligation, plan assets, funded status and net periodic benefit cost of the retirement plans and postretirement plans:

Obligations and Funded Status (dollars in millions)
 
Retirement Benefits
 
Post-Retirement Benefits
 
2017
 
2016
 
2017
 
2016
Change in benefit obligation
 

 
 

 
 

 
 

Benefit obligation at beginning of year
$
443.6

 
$
445.5

 
$
35.2

 
$
35.1

Service cost
—

 
0.1

 
—

 
—

Interest cost
16.0

 
17.1

 
1.2

 
1.4

Plan amendments, curtailments, and settlements
3.2

 
(1.8
)
 
—

 
—

Actuarial loss
9.5

 
4.7

 
0.5

 
0.2

Benefits paid
(27.1
)
 
(21.8
)
 
(4.1
)
 
(3.6
)
Other(1)
(5.4
)
 
(0.2
)
 
1.7

 
2.1

Benefit obligation at end of year
439.8

 
443.6

 
34.5

 
35.2

Change in plan assets
 

 
   
 
   
 
   
Fair value of plan assets at beginning of period
355.5

 
337.9

 
—

 
—

Actual return on plan assets
46.0

 
28.2

 
—

 
—

Employer contributions
7.9

 
13.2

 
2.5

 
1.5

Plan settlements
(0.6
)
 
(1.8
)
 
—

 
—

Benefits paid
(27.1
)
 
(21.8
)
 
(4.1
)
 
(3.6
)
Other(1)
(7.4
)
 
(0.2
)
 
1.6

 
2.1

Fair value of plan assets at end of period
374.3

 
355.5

 
—

 
—

Funded status at end of year(2)(3)
$
(65.5
)
 
$
(88.1
)
 
$
(34.5
)
 
$
(35.2
)
Information on accumulated benefit obligation in excess of plan assets
 
 
 
 
 
 
Projected benefit obligation(6) / Accumulated benefit obligation (4)(6)
$
84.7

 
$
437.4

 
(5) 
 
(5) 
Fair value of plan assets
$
—

 
$
349.3

 
 
 
 

(1) 
Consists of the following: special termination benefits, plan participants' contributions and currency translation adjustments, primarily related to CIT's Germany pension plan.
(2) 
These amounts were recognized as liabilities in the Consolidated Balance Sheet at December 31, 2017 and 2016.
(3) 
Company assets of $82.9 million and $86.1 million as of December 31, 2017 and 2016, respectively, related to the non-qualified U.S. executive retirement plan obligation are not included in plan assets but related liabilities are in the benefit obligation.
(4) 
Since the Plans' benefits are frozen, the rate of compensation increase is no longer an assumption used to calculate the accumulated benefit obligation. Therefore, the accumulated benefit obligation was the same as the projected benefit obligation at December 31, 2017 and 2016.
(5) 
Not applicable
(6) 
As of December 31, 2017, the assets for CIT's qualified pension plan exceeded the projected benefit obligations of the Plan.

The net periodic benefit cost and other amounts recognized in AOCI consisted of the following:

Net Periodic Benefit Costs and Other Amounts (dollars in millions)
 
Retirement Benefits
 
Post-Retirement Benefits
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Service cost
$
—

 
$
0.1

 
$
0.2

 
$
—

 
$
—

 
$
—

Interest cost
16.0

 
17.1

 
16.9

 
1.2

 
1.4

 
1.4

Expected return on plan assets
(19.3
)
 
(18.5
)
 
(20.1
)
 
—

 
—

 
—

Amortization of prior service cost
—

 
—

 
—

 
(0.5
)
 
(0.5
)
 
(0.5
)
Amortization of net loss/(gain)
1.6

 
2.9

 
2.6

 
(1.0
)
 
(0.7
)
 
(0.3
)
Net settlement and curtailment (gain)/loss and special termination benefit(1)
4.5

 
—

 
—

 
—

 
—

 
—

Net periodic benefit cost (credit)
2.8

 
1.6

 
(0.4
)
 
(0.3
)
 
0.2

 
0.6

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
   
 
   
 
   
 
   
 
   
 
   
Net loss/(gain)
(17.1
)
 
(5.0
)
 
20.9

 
0.5

 
0.9

 
(1.5
)
Amortization, settlement or curtailment recognition of net (loss)/gain
(1.5
)
 
(2.9
)
 
(2.6
)
 
1.1

 
0.7

 
0.3

Amortization, settlement or curtailment recognition of prior service credit
—

 
—

 
—

 
0.5

 
0.5

 
0.5

Total recognized in OCI
(18.6
)
 
(7.9
)
 
18.3

 
2.1

 
2.1

 
(0.7
)
Total recognized in net periodic benefit cost and OCI
$
(15.8
)
 
$
(6.3
)
 
$
17.9

 
$
1.8

 
$
2.3

 
$
(0.1
)


(1)
$4.7 million curtailment and special termination benefit costs were recorded in discontinued operations in the accompanying financial statements

The estimated net loss for CIT’s retirement benefits that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is $1.2 million. The estimated prior service credit and net gain for CIT’s post-retirement benefits that will be amortized from AOCI into net periodic benefit cost over the next fiscal year is $0.5 million and $0.4 million, respectively.

Assumptions

Discount rate assumptions used for pension and post-retirement benefit plan accounting reflect prevailing rates available on high-quality, fixed-income debt instruments with maturities that match the benefit obligation.

Expected long-term rate of return assumptions on assets are based on projected asset allocation and historical and expected future returns for each asset class. Independent analysis of historical and projected asset returns, inflation, and interest rates are provided by the Company's investment consultants and actuaries as part of the Company's assumptions process.

The weighted average assumptions used in the measurement of benefit obligations are as follows:

Weighted Average Assumptions
 
Retirement Benefits
 
Post-Retirement Benefits
 
2017
 
2016
 
2017
 
2016
Discount rate
3.45
%
 
3.73
%
 
3.50
%
 
3.75
%
Rate of compensation increases
—

 
—

 
(1 
) 
 
(1 
) 
Health care cost trend rate
 

 
 

 
 

 
 

Pre-65
(1 
) 
 
(1 
) 
 
6.30
%
 
6.50
%
Post-65
(1 
) 
 
(1 
) 
 
7.40
%
 
7.80
%
Ultimate health care cost trend rate
(1 
) 
 
(1 
) 
 
4.50
%
 
4.50
%
Year ultimate reached
(1 
) 
 
(1 
) 
 
2037

 
2037



The weighted average assumptions used to determine net periodic benefit costs are as follows:

Weighted Average Assumptions
 
Retirement Benefits
 
Post-Retirement Benefits
 
2017
 
2016
 
2017
 
2016
Discount rate
3.73
%
 
3.97
%
 
3.75
%
 
3.99
%
Expected long-term return on plan assets
5.69
%
 
5.68
%
 
(1 
) 
 
(1 
) 
(1) Not applicable

Healthcare rate trends have a significant effect on healthcare plan costs. The Company uses both external and historical data to determine healthcare rate trends. An increase (decrease) of one-percentage point in assumed healthcare rate trends would increase (decrease) the postretirement benefit obligation by $0.7 million and ($0.6 million), respectively. The service and interest cost are not material.

Plan Assets

CIT maintains a "Statement of Investment Policies and Objectives" which specifies guidelines for the investment, supervision and monitoring of pension assets in order to manage the Company's objective of ensuring sufficient funds to finance future retirement benefits. The asset allocation policy allows assets to be invested between 15% to 35% in Equities, 35% to 65% in Fixed-Income, 15% to 25% in Global Asset Allocation, and 5% to 10% in Alternative Investments. The asset allocation follows a Liability Driven Investing ("LDI") strategy. The policy provides specific guidance on asset class objectives, fund manager guidelines and identification of prohibited and restricted transactions. It is reviewed periodically by the Company's Investment Committee and external investment consultants.

There were no direct investments in equity securities of CIT or its subsidiaries included in pension plan assets in any of the years presented.

Plan investments are stated at fair value. Common stock traded on security exchanges as well as mutual funds, exchange traded funds and short term investment funds are valued at closing market prices. Such investments are considered Level 1 per fair value hierarchy. Investments in Common Collective Trusts and Alternative Investment Funds are carried at fair value based upon reported net asset values ("NAV"). ASU 2015-7 removes the requirements to categorize investments for which fair value is measured using the NAV per share as practical expedient from the fair value hierarchy.

There were no transfers of assets between Levels during 2017 and 2016. The tables below set forth asset fair value measurements.

Fair Value Measurements (dollars in millions)
December 31, 2017
Level 1
 
Level 2
 
Level 3
 
Not Classified1
 
Total Fair Value
Cash
$
8.3

 
$
—

 
$
—

 
$
—

 
$
8.3

Mutual Fund
82.5

 
—

 
—

 
—

 
82.5

Exchange Traded Funds
18.6

 
—

 
—

 
—

 
18.6

Common Stock
21.5

 
—

 
—

 
—

 
21.5

Short Term Investment Fund, measured at NAV
1.2

 
—

 
—

 
—

 
1.2

Common Collective Trust, measured at NAV
—

 
—

 
—

 
206.8

 
206.8

Partnership, measured at NAV
—

 
—

 
—

 
9.9

 
9.9

Hedge Fund, measured at NAV
—

 
—

 
—

 
25.5

 
25.5

 
$
132.1

 
$
—

 
$
—

 
$
242.2

 
$
374.3

December 31, 2016
 
 
 
 
 
 
 
 
 
Cash
$
5.8

 
$
—

 
$
—

 
$
—

 
$
5.8

Mutual Fund
69.9

 
—

 
—

 
—

 
69.9

Exchange Traded Funds
26.1

 
—

 
—

 
—

 
26.1

Common Stock
16.0

 
—

 
—

 
—

 
16.0

Short Term Investment Fund, measured at NAV
1.4

 
—

 
—

 
—

 
1.4

Insurance Contracts, measured at NAV
—

 
—

 
6.1

 
—

 
6.1

Common Collective Trust, measured at NAV
—

 
—

 
—

 
195.2

 
195.2

Partnership, measured at NAV
—

 
—

 
—

 
8.6

 
8.6

Hedge Fund, measured at NAV
—

 
—

 
—

 
26.4

 
26.4

 
$
119.2

 
$
—

 
$
6.1

 
$
230.2

 
$
355.5


(1)  
These investments have been measured using the net asset value per share practical expedient and are not required to be classified in the table above, in accordance with ASU 2015-7.

The table below sets forth changes in the fair value of the Plan's Level 3 assets for the year ended December 31, 2017:

Fair Value of Level 3 Assets (dollars in millions)
 
Insurance Contracts
December 31, 2016
$
6.1

Realized and Unrealized losses
(0.3
)
Purchases, sales, and settlements, net
(5.8
)
December 31, 2017
$
—



Contributions

The Company's policy is to make contributions so that they exceed the minimum required by laws and regulations, are consistent with the Company's objective of ensuring sufficient funds to finance future retirement benefits and are tax deductible. CIT currently does not expect to have a required minimum contribution to the U.S. Retirement Plan during 2018. For all other plans, CIT currently expects to contribute $10 million during 2018.

Estimated Future Benefit Payments

The following table depicts benefits projected to be paid from plan assets or from the Company's general assets calculated using current actuarial assumptions. Actual benefit payments may differ from projected benefit payments.

Projected Benefits (dollars in millions)
For the years ended December 31,
Retirement Benefits
 
Gross Postretirement Benefits
 
Medicare Subsidy Receipts
2018
$
28.0

 
$
2.9

 
$
0.2

2019
27.2

 
2.9

 
0.3

2020
29.0

 
2.8

 
0.3

2021
29.1

 
2.7

 
0.3

2022
28.0

 
2.6

 
0.3

2023 – 2027
138.0

 
11.4

 
0.5



Savings Incentive Plan

CIT has a number of defined contribution retirement plans covering certain of its U.S. employees which qualify under section 401(k) of the Internal Revenue Code. Generally, employees may contribute a portion of their eligible compensation, as defined, subject to regulatory limits and plan provisions, and the Company matches these contributions up to a threshold. Participants are also eligible for an additional discretionary company contribution. The cost of these plans totaled $18.7 million, $15.8 million and $19.0 million for the years ended December 31, 2017, 2016, and 2015, respectively.

Stock-Based Compensation

In February 2016, the Company adopted the CIT Group Inc. 2016 Omnibus Incentive Plan (the "2016 Plan"), which provides for grants of stock-based awards to employees, executive officers and directors, and replaced the Amended and Restated CIT Group Inc. Long-Term Incentive Plan (the "Prior Plan"). The number of shares of common stock that may be issued for all purposes under the 2016 Plan is (1) 5 million shares plus (2) the number of authorized Shares remaining available under the Prior Plan plus (3) the number of Shares relating to awards granted under the Prior Plan that subsequently are forfeited, expire, terminate or otherwise lapse or are settled for cash, in whole or in part, as provided by the 2016 Plan — 5,405,837 at December 31, 2017 (excludes 2,775,499 shares underlying outstanding awards granted to employees and/or directors that are unvested and/or unsettled.) Currently under the 2016 Plan, the issued and unvested awards consist mainly of Restricted Stock Units ("RSUs") and Performance Stock Units ("PSUs").

Compensation expense related to equity-based awards are measured and recorded in accordance with ASC 718, Stock Compensation. The fair value of RSUs and PSUs are based on the fair market value of CIT's common stock on the date of grant. Compensation expense is recognized over the vesting period (requisite service period), which is generally three years for restricted stock/units, under the graded vesting method, whereby each vesting tranche of the award is amortized separately as if each were a separate award. Compensation expenses for PSUs that cliff vest are recognized over the vesting period, which is generally three years, and on a straight-line basis.

Operating expenses includes $41.9 million of compensation expense related to equity-based awards granted to employees or members of the Board of Directors for the year ended December 31, 2017, including $41.3 million related to restricted and retention stock and unit awards and the remaining related to stock purchases. Compensation expense related to equity-based awards included $36.6 million in 2016 and $63.4 million in 2015. Total unrecognized compensation cost related to nonvested awards was $21.9 million at December 31, 2017. That cost is expected to be recognized over a weighted average period of 1.88 years.

Employee Stock Purchase Plan

In December 2010, the Company adopted the CIT Group Inc. 2011 Employee Stock Purchase Plan (the "ESPP"), which was approved by shareholders in May 2011. Eligibility for participation in the ESPP includes employees of CIT and its participating subsidiaries, except that any employees designated as highly compensated are not eligible to participate in the ESPP. The ESPP is available to employees in the United States and to certain international employees. Under the ESPP, CIT is authorized to issue up to 2,000,000 shares of common stock to eligible employees. Eligible employees can choose to have between 1% and 10% of their base salary withheld to purchase shares quarterly, at a purchase price equal to 85% of the fair market value of CIT common stock on the last business day of the quarterly offering period. The amount of common stock that may be purchased by a participant through the ESPP is generally limited to $25,000 per year. A total of 54,684, 72,325, and 46,770 shares were purchased under the plan in 2017, 2016 and 2015, respectively.

Restricted Stock Units and Performance Stock Units

Under the 2016 Plan, RSUs and PSUs are awarded at no cost to the recipient upon grant. RSUs are generally granted annually at the discretion of the Company, but may also be granted during the year to new hires or for retention or other purposes. RSUs granted to employees and members of the Board during 2017 and 2016 generally were scheduled to vest either one third per year for three years or 100% after three years. Beginning in 2014, RSUs granted to employees were also subject to performance-based vesting based on the Company's pre-tax income results or beginning in 2016, for certain employees, a minimum Tier 1 Capital ratio. A limited number of vested stock awards are scheduled to remain subject to transfer restrictions through the first anniversary of the grant date for members of the Board who elected to receive stock in lieu of cash compensation for their retainer. Certain RSUs granted to directors, and in limited instances to employees, are designed to settle in cash and are accounted for as "liability" awards as prescribed by ASC 718. The values of these cash-settled RSUs are re-measured at the end of each reporting period until the award is settled.

Certain senior executives receive long-term incentive (LTI) awards, which are generally granted at the discretion of the Company annually. During 2017 and 2016, LTI has been awarded 50% in the form of Performance Share Units (PSUs) based on after-tax Return on Tangible Common Stockholder's Equity (ROTCE), and 50% in the form of performance based RSUs (described above). A total shareholder return (TSR) adjustment factor, described more fully below, was introduced to the 2016 PSUs. During 2015, LTI was awarded by the Company as two forms of PSUs.

The 2017 PSUs may be earned at the end of a three-year performance period (2017 - 2019) based on after-tax ROTCE, which may be increased or decreased by up to 20% depending on the Company’s 3-year cumulative TSR results relative to the component companies of the KBW Nasdaq Bank Index for the performance period. No increase is permitted if the Company’s TSR for the performance period is negative, and the overall payout for the 2017 PSUs, including the TSR adjustment factor, may range from 0% to a maximum of 150% of target. The 2016 PSUs may be earned at the end of a three-year performance period (2016 — 2018) from 0% to 150% of target based on after-tax ROTCE. The first form of 2015 PSUs, "2015 PSUs-Return on Average Earnings Assets (ROA) / Earnings Per Share (EPS)," may also be earned at the end of a three-year performance period (2015 — 2017) from 0% to 150% of target based on performance against two pre-established performance measures: fully diluted EPS (weighted 75%) and pre-tax ROA (weighted 25%). The second form of 2015 PSUs, "2015 PSUs-PreTax ROTCE," are earned in each year during a three-year performance period (2015 — 2017) from 0% to a maximum of 150% of target based on pre-tax ROTCE as follows: (1) one-third based on the pre-tax ROTCE for the first year of the performance period; (2) one-third based on the average pre-tax ROTCE for the first two years of the performance period; and (3) one-third based on the three-year average ROTCE during the performance period. Performance measures for all PSU awards have a minimum threshold level of performance that must be achieved to trigger any payout; if the threshold level of performance is not achieved, then no portion of the PSU target will be payable.

The fair value of RSUs and PSUs that vested and settled in stock during 2017, 2016 and 2015 was $59.0 million, $52.4 million and $56.2 million, respectively. The fair value of RSUs that vested and settled in cash during 2017, 2016 and 2015 was $0.3 million, $0.2 million and $0.2 million, respectively.

The following tables summarize restricted stock and RSU activity for 2017 and 2016:

Stock and Cash — Settled Awards Outstanding
 
Stock-Settled Awards
 
Cash-Settled Awards
December 31, 2017
Number of Shares
 
Weighted Average Grant Date Value
 
Number of Shares
 
Weighted Average Grant Date Value
Unvested at beginning of period
3,043,451

 
$
37.70

 
12,072

 
$
37.81

Vested / unsettled awards at beginning of period
243,335

 
46.10

 
—

 
—

PSUs - granted to employee
194,979

 
41.67

 
—

 
—

PSUs - adjustments for performance versus targets
(30,758
)
 
47.76

 
—

 
—

RSUs - granted to employees
826,634

 
41.30

 
—

 
—

RSUs - granted to directors
32,623

 
46.03

 
8,506

 
46.66

Forfeited / cancelled
(144,615
)
 
36.41

 
—

 
—

Vested / settled awards
(1,390,151
)
 
40.92

 
(5,507
)
 
39.42

Vested / unsettled awards
(246,057
)
 
45.09

 
—

 
—

Unvested at end of period
2,529,441

 
$
37.55

 
15,071

 
$
42.22

December 31, 2016
 
 
 
 
 
 
 
Unvested at beginning of period
3,384,297

 
$
45.55

 
9,623

 
$
44.97

Vested / unsettled awards at beginning of period
39,626

 
40.46

 
—

 
—

PSUs - granted to employee
284,640

 
32.80

 
—

 
—

PSUs - incremental for performance above 2012-14 targets
19,938

 
42.21

 
—

 
—

RSUs - granted to employees
1,429,554

 
30.32

 
—

 
—

RSUs - granted to directors
38,957

 
33.37

 
7,496

 
33.35

Forfeited / cancelled
(276,627
)
 
38.61

 
—

 
—

Vested / settled awards
(1,633,599
)
 
45.28

 
(5,047
)
 
44.83

Vested / unsettled awards
(243,335
)
 
46.10

 
—

 
—

Unvested at end of period
3,043,451

 
$
37.70

 
12,072

 
$
37.81