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Employee Benefits
 6 Months Ended
Jun. 30, 2023
Retirement Benefits [Abstract]  
Employee Benefits Employee Benefits
Pension Plans
The Company provides pension benefits for its employees through membership in the Savings Banks Employees’ Retirement Association. The plan through which benefits are provided is a noncontributory, qualified defined benefit plan and is referred to as the Defined Benefit Plan. The Company’s annual contribution to the Defined Benefit Plan is based upon standards established by the Pension Protection Act. The contribution is based on an actuarial method intended to provide not only for benefits attributable to service to date, but also for those expected to be earned in the future. The Defined Benefit Plan has a plan year end of October 31.
The Company has an unfunded Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) that provides certain Company officers upon their retirement with defined pension benefits in excess of qualified plan limits imposed by U.S. federal tax law. The DB SERP has a plan year end of December 31.
In addition, the Company has an unfunded Benefit Equalization Plan (“BEP”) to provide retirement benefits to certain employees whose retirement benefits under the qualified pension plan are limited per the Internal Revenue Code. The BEP has a plan year end of October 31.
The Company also has an unfunded Outside Directors’ Retainer Continuance Plan (“ODRCP”) that provides pension benefits to outside directors who retire from service. The ODRCP has a plan year end of December 31. Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants.
Components of Net Periodic Benefit Cost
The components of net pension expense for the plans for the periods indicated are as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In thousands)
Components of net periodic benefit cost:
Service cost$6,338 $8,092 $12,677 $16,184 
Interest cost4,298 2,430 8,596 4,860 
Expected return on plan assets(7,532)(9,281)(15,064)(18,562)
Prior service credit(2,970)(2,970)(5,940)(5,940)
Recognized net actuarial loss2,468 2,798 4,936 5,596 
Net periodic benefit cost$2,602 $1,069 $5,205 $2,138 
Service costs for the Defined Benefit Plan and the BEP are recognized within salaries and employee benefits in the Consolidated Statements of Income. There were no service costs associated with the DB SERP or ODRCP during the three and six months ended June 30, 2023 and June 30, 2022. The remaining components of net periodic benefit cost are recognized in other noninterest expense in the Consolidated Statements of Income.
In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan years beginning November 1, 2022 and 2021. Accordingly, during the three and six months ended June 30, 2023, there were no contributions made to the Defined Benefit Plan. During the three months ended June 30, 2022 there were no contributions made to the Defined Benefit Plan. The Company made discretionary contributions to the Defined Benefit Plan of $7.2 million during the six months ended June 30, 2022.
Rabbi Trust Variable Interest Entities
The Company established rabbi trusts to meet its obligations under certain executive non-qualified retirement benefits and deferred compensation plans and to mitigate the expense volatility of the aforementioned retirement plans. The rabbi trusts are considered variable interest entities (“VIE”) as the equity investment at risk is insufficient to permit the trusts to finance their activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities of the rabbi trusts that significantly affect the rabbi trusts’ economic performance and it has the obligation to absorb losses of the rabbi trusts that could potentially be significant to the rabbi trusts by virtue of its contingent call options on the rabbi trusts’ assets in the event of the Company’s bankruptcy. As the primary beneficiary of these VIEs, the Company consolidates the rabbi trust investments. In general, the rabbi trust investments and any earnings received thereon are accumulated, reinvested and used exclusively for trust purposes. These rabbi trust investments consist primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in other assets in the Company’s Consolidated Balance Sheets. Changes in fair value are recorded in noninterest income in the Company’s Consolidated Statements of Income.
The following table presents the book value, mark-to-market, and fair value of assets held in rabbi trust accounts by asset type:
As of June 30, 2023As of December 31, 2022
Book ValueMark-to-MarketFair ValueBook ValueMark-to-MarketFair Value
Asset Type(In thousands)
Cash and cash equivalents$6,658 $— $6,658 $5,575 $— $5,575 
Equities (1)59,616 9,979 69,595 60,056 3,626 63,682 
Fixed income7,026 (641)6,385 7,799 (770)7,029 
Total assets$73,300 $9,338 $82,638 $73,430 $2,856 $76,286 
(1)Equities include mutual funds and other exchange-traded funds.