Employee Benefit Plans

Defined Contribution Plan

The Company has a domestic defined contribution plan administered by its general partner for (i) all full-time employees that are eligible to participate in the plan (the “401(k) Plan”). Participants in the 401(k) Plan are allowed to contribute 1% to 70% of their pre-tax earnings to the plan, subject to government imposed limitations. The Company matches 100% of each 1% of eligible compensation contributed by the participant up to 4% and 50% of each additional 1% of eligible compensation contributed up to 6%, for a maximum contribution by the Company of 5% of eligible compensation contributed per participant. The plan also includes a profit-sharing component for eligible employees. Contributions under the profit-sharing component are determined by the board of directors of the Company’s general partner and are discretionary. The funding policy is consistent with funding requirements of applicable laws and regulations.

The Company recorded the following 401(k) Plan matching contribution expense in the consolidated statements of operations (in millions):



	Year Ended December 31,
	2019		2018		2017
401(k) Plan matching contribution expense	$	5.9	$	5.4	$	5.7

Defined Benefit Pension Plan

The Company has domestic noncontributory defined benefit plans for those salaried employees as well as those employees represented by either the United Steelworkers (the “USW”) or the International Union of Operating Engineers (the “IUOE”); who (i) were formerly employees of Penreco and became employees of the Company as a result of the acquisition of Penreco on January 3, 2008 (the “Penreco Pension Plan”) or (ii) were formerly employees of Montana Refining Company, Inc. and who became employees of the Company as a result of the acquisition of the Great Falls refinery on October 1, 2012 (the “Great Falls Pension Plan” and together with the Penreco Pension Plan, the “Pension Plan”). The Company sold the Superior Refinery in 2017 and Husky assumed the retirement plan covering the Superior employees. Therefore, during 2017, the pension benefit obligation was reduced and certain applicable retirement plan assets were distributed to Husky related to the plan liabilities assumed by Husky. As a result of the completion of the sale of the Superior Refinery, the Company was required to remeasure certain pension plan obligations, which resulted in immaterial impact to the consolidated statements of operations in 2017.

During 2019, the Company made an immaterial amount of contributions to its Pension Plan and expects to contribute less than $0.1 million to its Pension Plan in 2020.

Under the Penreco Pension Plan, benefits are based primarily on years of service for USW and IUOE represented employees and the employee’s final 60 months’ average compensation for salaried employees. In 2009, the Company amended the Penreco Pension Plan, which curtailed Penreco employees from accumulating additional benefits subsequent to December 31, 2009.

Under the Great Falls Pension Plan, benefits are based primarily on years of service and the employees’ 36 months’ highest average compensation for salaried employees. Effective October 1, 2012, the date of the acquisition of the Great Falls refinery, the Company amended the Montana Pension Plan, which curtailed only the Montana salaried employees from accumulating additional benefits subsequent to October 31, 2012. Effective August 31, 2015, the Company again amended the Great Falls Pension Plan, which curtailed the collective bargaining employees from accumulating additional benefits subsequent to December 31, 2015. The Company recorded no curtailment gain for the years ended December 31, 2019, 2018 and 2017.

Defined Benefit Other Plans

The Company also has domestic contributory defined benefit post-retirement medical plans and contributory life insurance plans for (i) those salaried employees, as well as those employees represented by either the International Brotherhood of Teamsters (the “IBT”) or USW, who were formerly employees of Penreco and who became employees of the Company as a result of the acquisition of Penreco on January 3, 2008 (the “Penreco Other Plan”). The funding policy is consistent with funding requirements of applicable laws and regulations.

Effective 2009, the Company amended the Penreco Other Plan, which curtailed employees from accumulating additional benefits subsequent to February 28, 2009. The long-term accrued benefit obligation recognized in the consolidated balance sheets for the Penreco Other Plan was $0.2 million as of December 31, 2019 and 2018. In addition, there was no other post-retirement benefit income related to this plan for years ended December 31, 2019 and 2018.

The change in the benefit obligations, change in the plan assets, funded status and amounts recognized in the consolidated balance sheets were as follows (in millions):



	Year Ended December 31,
	2019			2018
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	35.6		$	38.3
Service cost	—			0.1
Interest cost	1.5			1.3
Benefit payments	(2.4		)	(1.6		)
Actuarial (gain) loss	5.5			(2.5		)
Benefit obligation at end of year	$	40.2		$	35.6
Change in plan assets:
Fair value of plan assets at beginning of year	$	31.3		$	35.4
Benefit payments	(2.4		)	(1.6		)
Actual return on assets	3.6			(2.5		)
Fair value of plan assets at end of year	$	32.5		$	31.3
Funded status — benefit obligation in excess of plan assets	$	(7.7	)	$	(4.3	)
Reconciliation of amounts recognized in the consolidated balance sheets:
Accrued benefit obligation, long-term	$	(7.7	)	$	(4.3	)
Unrecognized net actuarial loss	10.8			7.5
Accumulated other comprehensive loss	10.8			7.5
Net amount recognized at end of year	$	3.1		$	3.2

The accumulated and projected benefit obligations for the Pension Plan were $40.2 million and $35.6 million as of December 31, 2019 and 2018, respectively. Selected information for the Company’s Pension Plan with an accumulated and projected benefit obligation in excess of plan assets were as follows (in millions):



	Year Ended December 31,
	2019		2018
Accumulated and projected benefit obligation	$	40.2	$	35.6
Fair value of plan assets	$	32.5	$	31.3

The components of net periodic benefit cost (income) were as follows (in millions):



	Pension Plan
	Year Ended December 31,
	2019			2018			2017
Service cost	$	—		$	0.1		$	0.1
Interest cost	1.5			1.3			2.3
Expected return on assets	(1.5		)	(1.7		)	(2.9		)
Amortization of net loss	—			0.1			0.2
Settlement loss recognized	0.2			—			0.7
Net periodic benefit cost (income)	$	0.2		$	(0.2	)	$	0.4

The components of net periodic benefit cost (income), other than the service cost component, are presented in the Other financial statement line of Other income (expense) in the consolidated statements of operations.

The components of changes recognized in other comprehensive (income) loss for the Pension Plan were as follows (in millions):



	Pension Plan
	Year Ended December 31,
	2019			2018			2017
Changes in plan assets and benefit obligations recognized in other comprehensive (income) loss:
Net (gain) loss	$	3.5		$	1.6		$	(0.2	)
Amounts recognized as a component of net periodic benefit cost:
Amortization of actual gains	(0.2		)	(0.1		)	(0.9		)
Total recognized in other comprehensive (income) loss	$	3.3		$	1.5		$	(1.1	)

The portion relating to the Pension Plan classified in accumulated other comprehensive loss includes losses of $10.8 million and $7.5 million as of December 31, 2019 and 2018, respectively. In 2020, the estimated amount that will be amortized from accumulated other comprehensive loss includes a net loss of $0.3 million for the Pension Plan.

For the Pension Plan, the Company uses a corridor approach to amortize actuarial gains and losses. Under this approach, net actuarial gains or losses in excess of ten percent of the larger of the projected benefit obligation or the fair value of plan assets are amortized on a straight-line basis. The period of amortization is the average remaining service of active participants who are expected to receive benefits under the plans.

All pension plans have a December 31 measurement date. The significant weighted average assumptions used to determine the benefit obligations for the years ended December 31, 2019 and 2018, were as follows:



	Benefit Obligations Assumptions
	2019		2018
Discount rate for Penreco Pension Plan	3.15	%	4.18	%
Discount rate for Great Falls Pension Plan	3.14	%	4.16	%

The significant weighted average assumptions used to determine the net periodic benefit cost (income) for the years ended December 31, 2019, 2018 and 2017 were as follows:



	Net Periodic Benefit (Income) Cost Assumptions
	2019		2018		2017
Discount rate for Penreco Pension Plan	4.18	%	3.56	%	4.08	%
Discount rate for Superior Pension Plan	—		—	%	4.06	%
Discount rate for Great Falls Pension Plan	4.16	%	3.54	%	4.04	%
Expected return on plan assets for Penreco Pension Plan ⁽¹⁾	5.00	%	5.00	%	6.35	%
Expected return on plan assets Superior Pension Plan ⁽¹⁾	—		—	%	6.35	%
Expected return on plan assets for Great Falls Pension Plan⁽¹⁾	5.00	%	5.00	%	6.35	%


⁽¹⁾	The Company considered the historical returns, the future expectation for returns for each asset class and fair value of the plan assets, as well as the target asset allocation of the Pension Plan portfolio, which was developed in accordance with the Company’s Statement of Investment Policy, to develop the expected long-term rate of return on plan assets.

Investment Policy

The Benefits Plan Committee (the “Investment Committee”) is responsible for the overall management of the Pension Plan assets, and its responsibilities encompass establishing the investment strategies and policies, monitoring the management of plan assets, reviewing the asset allocation mix on a regular basis, monitoring the performance of the Pension Plan assets to determine whether the investments objectives are met and guidelines followed and taking the appropriate action if objectives are not followed. The Company uses different investment managers with various asset management objectives to eliminate any significant concentration of risk. The Investment Committee believes there are no significant concentrations of risks associated with the investment assets. The Company’s investment advisor will assist in the continual assessment of assets and the potential reallocation of certain investments and will evaluate the selection of investment managers for the Pension Plan assets based on such factors as organizational stability, depth of resources, experience, investment strategy and process, performance expectations and fees.

Long-term strategic investment objectives utilize a diversified mix of equity and fixed income securities to preserve the funded status of the trusts, and balance risk and return in relationship to the respective liabilities. The primary investment strategy currently employed is a dynamic de-risking strategy that periodically rebalances among various investment categories depending on the current funded position and maximizes the effectiveness of the Pension Plan asset allocation strategy. This program is designed to actively move from return-seeking investments (such as equities) toward liability-hedging investments (such as fixed income) as funding levels improve.

The assets are invested in accordance with prudent expert standards as mandated by the Employee Retirement Income Security Act (“ERISA”). The Pension Plan’s target asset allocation based on funded status is currently comprised of the following:



Asset Class	Range of Asset Allocation	Target Allocation
Equity funds	20–50%	40%
Fixed income	50–80%	60%

Investment Fund Strategies

Domestic equity funds include funds that invest in U.S. common and preferred stocks. Foreign equity funds invest in securities issued by companies listed on international stock exchanges. Certain funds have value and growth objectives and managers may attempt to profit from security mis-pricing in equity markets to meet these objectives. Short-term investments (including commercial paper, certificates of deposits and government repurchase agreements) and derivatives may be used for hedging purposes to limit exposure to various risk factors.

Fixed income funds invest primarily in U.S. dollar-denominated, investment grade bonds, including U.S. Treasury and government agency securities, corporate bonds and mortgage and asset-backed securities. These funds may also invest in any combination of non-investment grade bonds, non-U.S. dollar-denominated bonds and bonds issued by issuers in emerging capital markets. Short-term investments (including commercial paper, certificates of deposits and government repurchase agreements) and derivatives may be used for hedging purposes to limit exposure to various risk factors.

The Company’s Pension Plan asset allocations, as of December 31, 2019 and 2018, by asset category, are as follows:



	2019		2018
Cash and cash equivalents	1	%	—	%
Equity funds	27	%	—	%
Balanced funds	4	%	—	%
Domestic equities	—	%	10	%
Foreign equities	—	%	11	%
Fixed income	68	%	79	%
	100	%	100	%

At December 31, 2019, the Company’s investments associated with its Pension Plan (as such term is hereinafter defined) consisted of (i) cash and cash equivalents, (ii) fixed income bond funds, (iii) mutual equity funds, and (iv) mutual balanced funds. The fixed income bond funds, mutual equity funds, and mutual balanced funds are measured at fair value using a market approach based on quoted prices from national securities exchanges and are categorized in Level 1 of the fair value hierarchy. During 2019, the Company entered into a new investment strategy of investing in exchange traded funds which resulted in the pension assets being categorized in Level1.

At December 31, 2018, the Company’s investments associated with its Pension Plan primarily consisted of (i) cash and cash equivalents and (ii) mutual funds. Mutual funds are valued based on the NAV per share (or its equivalent) as a practical expedient to estimate fair value due to the absence of readily available market prices. NAV’s are provided by the respective investment sponsors or investment advisers and are subsequently reviewed and approved by management. In the event management concludes a reported NAV does not reflect fair value or is not determined as of the financial reporting measurement date, the Company will consider whether and when deemed necessary to make an adjustment at the balance sheet date. In determining whether an adjustment to the external valuation is required, the Company will review material factors that could affect the valuation, such as changes to the composition or performance of the underlying investments or comparable investments, overall market conditions, expected sale prices for private investments which are probable of being sold in the short-term and other economic factors that may possibly have a favorable or unfavorable effect on the reported external valuation. Please read Note 12 for the definition of Level 1.

The Company’s Pension Plan assets measured at fair value, were as follows (in millions):



	Fair Value of Pension Assets at December 31,
	2019				2018
	Level 1		Total		Level 1		Total
Cash and cash equivalents	$	0.3	$	0.3	$	0.1	$	0.1
Fixed income	22.2		22.2		—		—
Equity funds	8.8		8.8		—		—
Balanced funds	1.2		1.2		—		—
Total plan assets subject to leveling	$	32.5	$	32.5	$	0.1	$	0.1
Plan assets measured at net asset value
Domestic equities			—				3.2
Foreign equities			—				3.4
Fixed income			—				24.6
Total plan assets measured at net asset value			—				31.2
Total plan assets			$	32.5			$	31.3

The following benefit payments for the Pension Plan, which reflect expected future service, as appropriate, are expected to be paid in the years indicated as of December 31, 2019 (in millions):



	Pension Benefits
2020	$	1.9
2021	2.0
2022	2.0
2023	2.2
2024	2.1
2025 to 2029	11.7
Total	$	21.9