Employee Retirement Plans

12 Months Ended

Dec. 31, 2019

Employee Retirement Plans

Qualified Defined Benefit Multiemployer Plan. We participate in the Pentegra Defined Benefit Plan for Financial Institutions (the Pentegra Defined Benefit Plan), a funded, tax-qualified, noncontributory defined-benefit pension plan. The Pentegra Defined Benefit Plan is treated as a multiemployer plan for accounting purposes, but operates as a multiple-employer plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the Internal Revenue Code. Accordingly, certain multiemployer plan disclosures are not applicable to the Pentegra Defined Benefit Plan. Under the Pentegra Defined Benefit Plan, contributions made by a participating employer may be used to provide benefits to employees of other participating employers since assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. Also, in the event a participating employer is unable to meet its contribution requirements, the required contributions for the other participating employers could increase proportionately. The plan covers substantially all of our employees. For the years ended December 31, 2019, 2018 and 2017, in addition to our required contribution, we made voluntary contributions of $6.0 million, $6.0 million and $6.2 million, respectively, to the Pentegra Defined Benefit Plan. We were not required to nor did we pay a funding improvement surcharge to the plan for the years ended December 31, 2019, 2018, and 2017.

The Pentegra Defined Benefit Plan operates on a fiscal year from July 1 through June 30. The Pentegra Defined Benefit Plan files one Form 5500 on behalf of all employers who participate in the plan. The Employer Identification Number is 13-5645888 and the three-digit plan number is 333. We do not have any collective bargaining agreements in place.

The Pentegra Defined Benefit Plan's annual valuation process includes calculating the plan's funded status and separately calculating the funded status of each participating employer. The funded status is defined as the market value of assets divided by the funding target (100 percent of the present value of all benefit liabilities accrued at that date). As permitted by ERISA, the Pentegra Defined Benefit Plan accepts contributions for the prior plan year up to eight and a half months after the asset valuation date. Accordingly, the market value of assets at the valuation date (July 1) will increase by any subsequent contributions designated for the immediately preceding plan year ended June 30.

The most recent Form 5500 available for the Pentegra Defined Benefit Plan is for the plan year ended June 30, 2018. For the Pentegra Defined Benefit Plan plan years ended June 30, 2017 and 2016, our contributions did not represent more than five percent of the total contributions to the Pentegra Defined Benefit Plan.

Table 18.1 - Pentegra Defined Benefit Plan Net Pension Cost and Funded Status (dollars in thousands)

	For the Year Ended December 31,
	2019				2018				2017
Net pension cost	$	6,559			$	6,472			$	6,727
Pentegra Defined Benefit Plan funded status as of July 1⁽¹⁾	108.6		%	⁽²⁾	111.0		%	⁽³⁾	111.8		%
Our funded status as of July 1⁽¹⁾	113.9		%		123.1		%		122.9		%

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(1)

The funded status is calculated in accordance with a provision contained in the Highway and Transportation Funding Act of 2014 (HATFA), which was signed into law on August 8, 2014, and which modifies the interest rates that had been set by the Moving Ahead for Progress in the 21st Century Act (MAP-21). MAP-21, signed into law in 2012, changed the calculation of the discount rate used in measuring the pension plan liability. MAP-21 allows plan sponsors to measure the pension plan liability using a 25-year average of interest rates plus or minus a corridor. Prior to MAP-21, the discount rate used in measuring the pension plan liability was based on the 24-month average of interest rates. HATFA amended MAP-21 by extending the time period and reducing the rate at which the 25-year corridors widen. Over time, the pension funding stabilization effect of MAP-21 will decline because the 24-month smoothed segment rates and the amended 25-year corridors are likely to converge.

(2)

The funded status as of July 1, 2019, is preliminary and may increase because the plan's participants were permitted to make contributions for the plan year ended June 30, 2019, through March 15, 2020. Contributions made on or before March 15, 2020, and designated for the plan year ended June 30, 2019, will be included in the final valuation as of July 1, 2019. The final funded status as of July 1, 2019, will not be available until the Form 5500 for the plan year July 1, 2019, through June 30, 2020 is filed. This Form 5500 is due to be filed no later than April 2021.

(3)

The funded status as of July 1, 2018, is preliminary and may increase because the plan's participants were permitted to make contributions for the plan year ended June 30, 2018, through March 15, 2019. Contributions made on or before March 15, 2019, and designated for the plan year ended June 30, 2018, will be included in the final valuation as of July 1, 2018. The final funded status as of July 1, 2018, will not be available until the Form 5500 for the plan year July 1, 2018, through June 30, 2019 is filed. This Form 5500 is due to be filed no later than April 2020.

Qualified Defined Contribution Plan. We also participate in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan. The plan covers substantially all of our employees. We contribute a percentage of the participants' compensation by making a matching contribution equal to a percentage of voluntary employee contributions, subject to certain limitations. Our matching contributions are charged to compensation and benefits expense and are not considered to be material.

Nonqualified Defined Contribution Plan. We also maintain the Thrift Benefit Equalization Plan, a nonqualified, unfunded deferred compensation plan covering certain of our senior officers and directors. The plan's liability consists of the accumulated compensation deferrals and the accumulated earnings on these deferrals. Our obligation from this plan was $12.6 million and $9.7 million at December 31, 2019 and 2018, respectively, which is recorded in other liabilities on the statement of condition. We maintain a rabbi trust, which is recorded in other assets on the statement of condition, intended to satisfy future benefit obligations. Our matching contributions are charged to compensation and benefits expense and are not considered to be material.

Nonqualified Supplemental Defined Benefit Retirement Plan. We also maintain a nonqualified, single-employer unfunded defined-benefit plan covering certain senior officers, for which our obligation is detailed below. We maintain a rabbi trust which is recorded in other assets on the statement of condition, intended to satisfy future benefit obligations.

Postretirement Benefits. We sponsor a fully insured postretirement benefit program that includes life insurance benefits for eligible retirees. We provide life insurance to all employees who retire on or after age 55 after completing six years of service. No contributions are required from the retirees. There are no funded plan assets that have been designated to provide postretirement benefits.

Table 18.2 - Pension and Postretirement Benefit Obligation, Fair Value of Plan Assets, and Funded Status (dollars in thousands)

	Nonqualified Supplemental Defined Benefit Retirement Plan						Postretirement Benefits
	December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Change in benefit obligation ⁽¹⁾
Benefit obligation at beginning of year	$	22,321		$	19,366		$	955		$	1,056
Service cost	1,235			1,490			38			45
Interest cost	699			654			42			37
Actuarial loss	1,874			831			321			(161		)
Benefits paid	(6		)	(5		)	(17		)	(22		)
Settlements	—			(15		)	—			—
Benefit obligation at end of year	26,123			22,321			1,339			955

Change in plan assets
Fair value of plan assets at beginning of year	—			—			—			—
Employer contribution	6			20			17			22
Benefits paid	(6		)	(5		)	(17		)	(22		)
Settlements	—			(15		)	—			—
Fair value of plan assets at end of year	—			—			—			—
Funded status at end of year	$	(26,123	)	$	(22,321	)	$	(1,339	)	$	(955	)

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(1)	Represents the projected benefit obligation for the nonqualified supplemental defined benefit retirement plan and the accumulated postretirement benefit obligation for postretirement benefits.

Table 18.3 - Pension and Postretirement Benefits Recognized in Accumulated Other Comprehensive Loss (dollars in thousands)

	Nonqualified Supplemental Defined Benefit Retirement Plan				Postretirement Benefits
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Net actuarial loss	$	6,223	$	4,920	$	437	$	123
Prior service cost	148		234		—		—
Total	$	6,371	$	5,154	$	437	$	123

The accumulated benefit obligation for the nonqualified supplemental defined benefit retirement plan was $22.7 million and $18.3 million at December 31, 2019 and 2018, respectively.

Table 18.4 - Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income (dollars in thousands)

	Nonqualified Supplemental Defined Benefit Retirement Plan									Postretirement Benefits
	2019			2018			2017			2019			2018			2017
Net Periodic Benefit Cost
Service cost	$	1,235		$	1,490		$	1,179		$	38		$	45		$	38
Interest cost	699			654			600			42			37			36
Amortization of prior service cost	86			86			86			—			—			—
Amortization of net actuarial loss	571			1,248			676			7			15			8
Net periodic benefit cost	2,591			3,478			2,541			87			97			82

Other Changes in Benefit Obligations Recognized in Accumulated Other Comprehensive Loss
Amortization of prior service cost	(86		)	(86		)	(86		)	—			—			—
Amortization of net actuarial loss	(571		)	(1,248		)	(676		)	(7		)	(15		)	(8		)
Net actuarial loss (gain)	1,874			831			459			321			(161		)	127
Total amount recognized in other comprehensive income	1,217			(503		)	(303		)	314			(176		)	119
Total amount recognized in net periodic benefit cost and other comprehensive income	$	3,808		$	2,975		$	2,238		$	401		$	(79	)	$	201

The estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic benefit cost during 2020 is $811 thousand for our nonqualified supplemental defined benefit retirement plan and $27 thousand for our postretirement benefits.

Table 18.5 - Pension and Postretirement Benefit Plan Key Assumptions

	Nonqualified Supplemental Defined Benefit Retirement Plan				Postretirement Benefits
	2019		2018		2019		2018
Benefit obligation
Discount rate	2.68	%	3.81	%	3.25	%	4.25	%
Salary increases	5.50	%	5.50	%	—		—

Net periodic benefit cost
Discount rate	3.81	%	3.09	%	4.25	%	3.64	%
Salary increases	5.50	%	5.50	%	—		—

The discount rate for the nonqualified supplemental defined benefit retirement plan was determined by using a discounted cash-flow analysis using the FTSE Pension Discount Curve as of December 31, 2019.

Our nonqualified supplemental defined benefit retirement plan and postretirement benefits are not funded; therefore, no contributions will be made in 2020 other than the payment of benefits.

Table 18.6 - Estimated Future Benefit Payments (dollars in thousands)

	Estimated Future Payments
	Nonqualified Supplemental Defined Benefit Retirement Plan		Postretirement Benefits
2020	$	6,066	$	18
2021	2,459		19
2022	1,900		21
2023	2,464		23
2024	4,083		26
2025-2029	9,268		168