Note 10: Pension and Other Retirement Plans

Defined Benefit Plans. The Company sponsors the A. H. Belo Pension Plans (the “Pension Plans”), which provide benefits to approximately 1,400 current and former employees of the Company. A. H. Belo Pension Plan I provides benefits to certain current and former employees primarily employed with The Dallas Morning News or the A. H. Belo corporate offices. A. H. Belo Pension Plan II provides benefits to certain former employees of The Providence Journal Company. This obligation was retained by the Company upon the sale of the newspaper operations of The Providence Journal. No additional benefits are accruing under the A. H. Belo Pension Plans, as future benefits were frozen.

The Company is the sole sponsor of the Pension Plans and is required to meet certain pension funding requirements as established under the Employment Retirement Income Security Act (“ERISA”). Instability in global and domestic capital markets may result in low returns on the assets contributed to the Pension Plans. Additionally, low yields on corporate bonds may decrease the discount rate, resulting in a higher funding obligation. Although legislation was enacted into law in 2012, which provided limited funding relief, market conditions could materially increase the funding requirements associated with the Pension Plans, with an adverse effect on the Company’s liquidity and financial condition. The Company was not required to make contributions to the A. H. Belo Pension Plans in 2019 and 2018 under ERISA. The Company will continue to evaluate the feasibility of de-risking strategies based on the economic benefits to the Company.

Actuarial gains (losses) of $5,282 and $(13,240) were recorded to other comprehensive income (loss) in 2019 and 2018, respectively; see Note 11 - Shareholders' Equity for information on amounts recorded to accumulated other comprehensive loss.

The table below sets forth summarized financial information about the A. H. Belo Pension Plans.



	2019		2018
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year	$	203,424	$	219,635
Interest cost		7,896		7,185
Actuarial (gain) loss		20,202		(11,697)
Benefit payments		(12,078)		(11,699)
Projected benefit obligation at end of year		219,444		203,424
Change in Plan Assets
Fair value of plan assets at beginning of year		171,535		196,597
Return on plan assets		36,948		(13,363)
Benefit payments		(12,078)		(11,699)
Fair value of plan assets at end of year		196,405		171,535
Funded Status	$	(23,039)	$	(31,889)
Amounts Recorded on the Balance Sheet
Noncurrent liability - accrued benefit cost	$	23,039	$	31,889
Accumulated Benefit Obligation	$	219,444	$	203,424

Net Periodic Pension Benefit

The projected benefit obligations of the A. H. Belo Pension Plans are estimated using the FTSE Pension Discount Curve, which is based upon a portfolio of high-quality corporate debt securities with maturities that correlate to the expected timing of estimated benefit payments to the Pension Plans’ participants. Future estimated benefit payments are discounted to their present value at the appropriate yield curve spot rate to determine the projected benefit obligation outstanding at each year end. The single equivalent discount rate as of December 31, 2019 was 2.9 percent and 4.0 percent for December 31, 2018.

Interest expense included in net periodic pension benefit is based on the FTSE Pension Discount Curve established at the beginning of the fiscal year. The discount rate for fiscal year 2019 and 2018 interest cost was 4.0 percent and 3.4 percent, respectively.

The Company assumed a 6.5 percent long-term return on the Pension Plans’ assets in 2019 and 2018. This return is based upon historical returns of similar investment pools having asset allocations consistent with the expected allocations of the A. H. Belo Pension Plans. Investment strategies for the Pension Plans’ assets are based upon factors such as the effective duration of the actuarial liabilities and market risks.

The Company’s estimates of net periodic pension expense (benefit) are based on the expected return on plan assets, interest on the projected benefit obligations and the amortization of actuarial gains and losses that are deferred in accumulated other comprehensive loss. Participation in and accrual of new benefits to participants has been frozen since 2007 and, accordingly, on-going service costs are not a component of net periodic pension expense (benefit). The table below sets forth components of net periodic pension benefit, which are included in other income, net in the Consolidated Statements of Operations.



	Years Ended December 31,
	2019		2018
Interest cost	$	7,896	$	7,185
Expected return on plans' assets		(11,464)		(11,575)
Amortization of actuarial loss		278		671
Net periodic pension benefit	$	(3,290)	$	(3,719)

Plan Assets

The Company is responsible for directing the investment strategies of the A. H. Belo Pension Plans’ assets. The investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risks. The long-term targeted allocation of the Pension Plans’ assets invested in equity securities and fixed income securities is 45.0 percent and 55.0 percent, respectively. These targets are determined based on the effective duration of the actuarial liabilities, the expected long-term rate of return on assets, and expected market risks. Investment risk is continuously monitored and Pension Plans’ assets are rebalanced to target allocations to meet the Company’s strategy and the Pension Plans’ liquidity needs. At December 31, 2019, the Pension Plans’ investments in equity securities and fixed income securities accounted for 43.0 percent and 57.0 percent of the total noncash holdings, respectively.

The table below sets forth the A. H. Belo Pension Plans’ assets at fair value as of December 31, 2019 and 2018, with inputs used to develop fair value measurements.



	Fair Value Measurements Using
	Total				Quoted Price in Active Markets for Identical Assets (Level I)				Significant Other Observable Inputs (Level II)				Significant Unobservable Inputs (Level III)
Description	2019		2018		2019		2018		2019		2018		2019		2018
Cash and Money Market Funds	$	1,743	$	7,000	$	1,743	$	7,000	$	—	$	—	$	—	$	—
Equity Funds
U.S. equity securities		54,258		46,346		—		—		54,258		46,346		—		—
International equity securities		29,519		22,783		—		—		29,519		22,783		—		—
Fixed Income Funds
Domestic corporate and government debt securities		60,743		52,179		—		—		60,743		52,179		—		—
Domestic corporate debt securities		46,115		38,814		—		—		46,115		38,814		—		—
International corporate and government debt securities		4,027		4,413		—		—		4,027		4,413		—		—
Total	$	196,405	$	171,535	$	1,743	$	7,000	$	194,662	$	164,535	$	—	$	—

Inputs and valuation techniques used to measure the fair value of Pension Plans’ assets vary according to the type of asset being valued. Cash and money market funds are designated as Level I. Remaining investments are in commingled funds and fair values are determined by the fund manager primarily based upon closing market quotes of the assets. Equity securities held through units in these funds are monitored as to issuer and industry. As of December 31, 2019, there were no significant concentrations of equity or debt securities in any single issuer or industry.

Other

The table below sets forth the Company’s expected future benefit payments as of December 31, 2019.



Payment year	Expected Benefit Payments
2020	$	13,354
2021		13,364
2022		13,455
2023		13,300
2024		13,267
2025 - 2029		64,577

The Company currently does not expect to make contributions to the A. H. Belo Pension Plans in 2020 and no contributions are required to these plans in 2020 under ERISA.

Other defined benefit plans. A. H. Belo also sponsors other post-employment benefit (the “OPEB”) plans, which provide health and life insurance benefits for certain retired employees. These plans were frozen subsequent to the separation from the Company’s former parent company; therefore, no future benefits accrue and on-going service costs are not a component of net periodic benefit cost. The Company recorded a liability of $1,347 and $1,165 related to the OPEB plans as of December 31, 2019 and 2018, respectively. A net periodic benefit cost of $9 and $4 in 2019 and 2018, respectively, was recorded to other income, net. The net periodic benefit cost primarily represents amortization of actuarial gains (losses) and prior service costs, offset by interest expense associated with the actuarial liability. Actuarial losses of $(182) and $(99) were recorded to other comprehensive income (loss) in 2019 and 2018, respectively; see Note 11 - Shareholders' Equity.

Defined Contribution Plans. The A. H. Belo Savings Plan (the “Savings Plan”), a defined contribution 401(k) plan, covers substantially all employees of A. H. Belo. Participants may elect to contribute a portion of their pretax compensation as provided by the Savings Plan and the Internal Revenue Code. Employees can contribute up to 100 percent of their annual eligible compensation less required withholdings and deductions up to statutory limits. The Company provides an ongoing dollar-for-dollar match of eligible employee contributions, up to 1.5 percent of the employees’ compensation. The Company recorded expense of $702 and $855 in 2019 and 2018 respectively, for matching contributions to the Savings Plan.