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Employee Benefits
 12 Months Ended
Dec. 31, 2023
Retirement Benefits [Abstract]  
Employee Benefits Employee Benefits
Pension Plans
The Company provides pension benefits for its employees using a noncontributory, qualified defined benefit plan, through membership in SBERA. SBERA offers a common and collective trust as the underlying investment structure for pension plans participating in the association. The target allocation mix for the common and collective trust portfolio calls for an equity-based investment deployment range of 49% to 63% of total common and collective trust portfolio assets. The remainder of the common and collective trust’s portfolio is allocated to fixed income securities with a target range of 28% to 42% and other investments, including global asset allocation and hedge funds, from 3% to 15%. The Trustees of SBERA, through SBERA's Investment Committee, select investment managers for the common and collective trust portfolio. A professional investment advisory firm is retained by the Investment Committee to provide allocation analysis and performance measurement, and to assist with manager searches. The overall investment objective is to diversify investments across a spectrum of investment types to limit risks from large market swings.
In connection with the Company’s acquisition of Century during the year ended December 31, 2021, the Company acquired Century’s Qualified Defined Benefit Pension Plan. At the time of the acquisition, the plan had been frozen to new participants since 2006, and all participants in the plan were fully vested. Additionally, all Century employees retained following the acquisition were eligible to join the Company’s Defined Benefit Plan to the extent that eligibility requirements were satisfied based upon such employees’ prior service with Century. In connection with the sale of its insurance agency business, the Company amended its Defined Benefit Plan to allow for accelerated vesting for any employees of the insurance agency business and several employees of the Bank transitioning to Gallagher who were otherwise not vested in the Defined Benefit Plan at the time of sale.
The Company has a BEP to provide retirement benefits to certain employees whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code. In connection with the Company’s acquisition of Century, any Century employee retained following the acquisition and whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code were added to the BEP. Additionally, such Century employees were credited for prior service with Century for purposes of determining vesting and eligibility pursuant to the BEP. In connection with the sale of its insurance agency business, the Company amended the BEP to allow for accelerated vesting for all employees of the insurance agency business and several employees of the Bank transitioning to Gallagher who were participating in the BEP and were otherwise not vested in the BEP at the time of sale. In addition, the Company amended the vesting criteria for the BEP to align with that of the Defined Benefit Plan, so that all BEP participants have been credited with service vesting in the same manner and vest according to the same three year cliff vesting schedule as provided under the Defined Benefit Plan.
The Company has a DB SERP which provides certain retired officers with defined pension benefits in excess of qualified plan limits imposed by U.S. federal tax law. In connection with the Company’s acquisition of Century, the Company acquired Century’s Supplemental Executive Insurance/Retirement Plan (the “Supplemental Plan”). Upon completion of the acquisition, the Supplemental Plan was merged for accounting purposes only into the Company’s DB SERP, but it continues to be administered according to its terms. Further, the plan document of the Century Supplemental Plan contained change in control provisions which became effective upon the Company’s acquisition of Century. Accordingly, all participants of the Century Supplemental Plan were deemed to be fully vested upon the closing of the acquisition.
The Company has a ODRCP which provides pension benefits to outside directors who retire from service. Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants.
Refer to Note 2, Summary of Significant Accounting Policies, for additional discussion of the Company’s pension plans.
Obligations and Funded Status
The funded status and amounts recognized in the Company’s Consolidated Financial Statements for the Defined Benefit Plan, the BEP, the DB SERP, and the ODRCP are set forth in the following table:
As of and for the Year Ended December 31,
202320222021
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of the year$362,530 $501,507 $361,147 
Service cost (1)24,474 31,382 31,660 
Interest cost17,559 10,582 5,694 
Amendments1,351 — (1,106)
Actuarial loss (gain)13,943 (133,282)(1,697)
Acquisitions— — 125,854 
Benefits paid(20,493)(47,659)(20,045)
Benefit obligation at end of the year$399,364 $362,530 $501,507 
Change in plan assets:
Fair value of plan assets at beginning of year$419,366 $546,056 $449,643 
Actual return on plan assets63,811 (91,474)50,879 
Acquisitions— — 63,468 
Employer contribution5,680 12,443 2,111 
Benefits paid(20,493)(47,659)(20,045)
Fair value of plan assets at end of year468,364 419,366 546,056 
Overfunded status$69,000 $56,836 $44,549 
Reconciliation of funding status:
Past service credit$80,090 $108,909 $120,792 
Unrecognized net loss(69,697)(99,002)(128,402)
Prepaid benefit cost58,607 46,929 52,159 
Overfunded status$69,000 $56,836 $44,549 
Accumulated benefit obligation$399,364 $362,530 $501,507 
Amounts recognized in accumulated other comprehensive income (“AOCI”), net of tax:
Unrecognized past service credit$57,501 $78,295 $86,837 
Unrecognized net loss(50,039)(71,172)(92,308)
Net amount$7,462 $7,123 $(5,471)
(1)Includes service costs related to employees of our insurance agency business. Refer to the later discussion within the “Components of Net Periodic Benefit Cost” section within this Note for further discussion.
In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan year beginning November 1, 2022. Accordingly, during the year ended December 31, 2023, there were no contributions to the Defined Benefit Plan. Similarly, in accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan year beginning November 1, 2021. However, the Company made a discretionary contribution to the Defined Benefit Plan of $7.2 million during the year ended December 31, 2022. The Company expects to make no contribution during the plan year beginning November 1, 2023.
The net actuarial loss of $13.9 million during the year ended December 31, 2023 was primarily attributable to a decrease in the discount rate assumptions used for determining the benefit obligation which was partially offset by higher returns on plan assets than initially expected. The net actuarial gain of $133.3 million during the year ended December 31, 2022 was primarily attributable to higher returns on plan assets than initially expected and an increase in the discount rate assumptions which were partially offset by changes in demographic assumptions and in the participant mortality rate
assumption. The net actuarial loss of $(1.7) million during the year ended December 31, 2021 was primarily attributable to a decrease in the discount rate assumptions used for determining the benefit obligation in that year from the corresponding prior year.
Actuarial Assumptions
The assumptions used in determining the benefit obligations at December 31, 2023 and 2022 were as follows:
DB PlanBEPDB SERPODRCP
As of December 31,As of December 31,As of December 31,As of December 31,
20232022202320222023202220232022
Discount rate4.99 %5.18 %4.89 %5.07 %4.96 %5.18 %4.91 %5.13 %
Rate of increase in compensation levels4.50 %4.50 %4.50 %4.50 %— %— %— %— %
Interest rate credit for determining projected cash balance4.47 %3.55 %4.47 %3.55 %— %— %— %— %
The assumptions used in determining the net periodic benefit cost for the years ended December 31, 2023, 2022, and 2021 were as follows:
DB Plan
For the Year Ended December 31,
202320222021
Discount rate - benefit cost5.18 %2.65 %2.26 %
Rate of compensation increase4.50 %4.50 %5.25 %
Expected rate of return on plan assets7.50 %7.00 %7.50 %
Interest rate credit for determining projected cash balance3.55 %3.50 %3.50 %
BEP
For the Year Ended December 31,
202320222021
Discount rate - benefit cost5.07 %2.32 %1.77 %
Rate of compensation increase4.50 %4.50 %5.25 %
Interest rate credit for determining projected cash balance3.55 %3.50 %3.50 %
DB SERP
For the Year Ended December 31,
202320222021
Discount rate - benefit cost5.18 %2.68 %1.63 %
ODRCP
For the Year Ended December 31,
202320222021
Discount rate - benefit cost5.13 %2.32 %1.81 %
In general, the Company has selected its assumptions with respect to the expected long-term rate of return based on prevailing yields on high quality fixed income investments increased by a premium for equity return expectations.
To determine the discount rate used in calculating the benefit obligation and the benefit cost for all of its defined benefit plans, the Company uses the spot rate approach whereby the individual spot rates on the FTSE above-median yield curve are applied to each corresponding year’s projected cash flow used to measure the respective plan’s service cost and interest cost.
Plan Assets
The Company owns a percentage of the SBERA defined benefit common collective trust. Based upon this ownership percentage, plan assets managed by SBERA on behalf of the Company amounted to $468.4 million and $419.4 million at December 31, 2023 and 2022, respectively. Investments held by the common collective trust include Level 1, 2 and 3 assets such as: collective funds, equity securities, mutual funds, hedge funds and short-term investments. The Fair Value Measurements and Disclosures Topic of the FASB ASC stipulates that an asset’s fair value measurement level within the fair
value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. As such, the Company classifies its interest in the common collective trust as a Level 3 asset.
The table below presents a reconciliation of the Company’s interest in the SBERA common collective trust during the years indicated:
For the Year Ended December 31,
20232022
(In thousands)
Balance at beginning of year$419,366 $546,056 
Net realized and unrealized gains and (losses)63,811 (91,474)
Contributions— 7,222 
Benefits paid(14,813)(42,438)
Balance at end of year$468,364 $419,366 
Components of Net Periodic Benefit Cost
The components of net pension expense for the plans for the periods indicated are as follows:
For the Year Ended December 31,
202320222021
(In thousands)
Components of net periodic benefit cost:
Service cost (1)$24,474 $31,382 $31,660 
Interest cost17,559 10,582 5,694 
Expected return on plan assets(30,127)(35,486)(33,333)
Past service credit(11,560)(11,882)(11,796)
Recognized net actuarial loss9,563 11,032 13,400 
Curtailment (2)(15,908)— — 
Settlement— 12,045 — 
Net periodic benefit cost$(5,999)$17,673 $5,625 
(1)Includes service costs related to employees of our insurance agency business. Such service costs were included in net income from discontinued operations as such costs are no longer incurred by the Company following the sale of the insurance agency business in October 2023. All other costs included in the determination of the benefit obligation for the Defined Benefit Plan and the BEP were included in net income from continuing operations as the Bank will assume the related liability upon dissolution of its Eastern Insurance Group subsidiary. Service costs included in net income from discontinued operations and included in the above table were $5.1 million, $7.5 million, and $7.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.
(2)The pension curtailment gain recognized during the year ended December 31, 2023 is included in discounted operations. Refer to the below discussion under “Pension Curtailment and Settlement” for further discussion.
Except as indicated above as it relates to service costs included in discontinued operations, service costs for the Defined Benefit Plan, the BEP, and the DB SERP are recognized within salaries and employee benefits in the Consolidated Statement of Income. In addition, as indicated above, the pension curtailment gain is also included in discontinued operations within the gain on sale of discontinued operations. The remaining components of net periodic benefit cost are recognized in other noninterest expense in the Consolidated Statements of Income.
Pension Curtailment and Settlement
As discussed in the earlier “Pension Plans” section, during the year ended December 31, 2023 and in connection with the sale of its insurance agency business, the Company remeasured the plan assets and obligations of the Defined Benefit Plan and the obligations of the BEP to determine the resulting curtailment gain or loss. As a result and in accordance with ASC 715-30, “Compensation-Retirement Benefits - Defined Benefit Plans,” the Company recognized a curtailment gain upon completion of the sale of the insurance agency business associated with the prior service credits attributable to the employees of the insurance agency business, all of which transferred to Gallagher. The Company determined, with assistance from its actuaries, the amount of the resulting non-cash curtailment amount to be a gain of $15.9 million which was included in the gain on sale of the insurance agency business.
As a practical expedient, ASC 715, “Compensation–Retirement Benefits,” permits employers to not apply pension plan settlement accounting and to treat settlement transactions as normal benefit payments if the cost of all settlements in the year is less than or equal to the sum of the service cost and interest cost components of net periodic benefit cost. The Company has elected this practical expedient.
During the year ended December 31, 2022, lump sum payments from the Defined Benefit Plan exceeded the sum of the service cost and interest cost components (the “threshold”) of the Defined Benefit Plan’s net periodic pension cost. ASC 715-20, “Compensation-Retirement Benefits - Defined Benefit Plans,” requires that upon determining it is probable that such threshold will be met, an entity shall immediately recognize in earnings a pro rata portion of the aggregate unamortized gain or loss (e.g., “non-cash settlement charge”). In accordance with the applicable accounting guidance, the Company elected to apply a practical expedient to remeasure the plan assets and obligations as of the nearest month-end date upon the triggering of the previously mentioned threshold. Accordingly, the Company performed a remeasurement as of October 31, 2022 and, subsequently, as of December 31, 2022. The Company determined, with assistance from its actuaries, the amount of the resulting non-cash settlement charge to be a loss of $12.0 million which was recorded in other noninterest expense in the Consolidated Statement of Income.
Benefits expected to be paid
The following table summarizes estimated benefits to be paid from the Defined Benefit Plan and BEP for the plan years beginning on November 1, and the DB SERP and ODRCP for the plan years beginning January 1:
Year(In thousands)
2024$46,490 
202532,612 
202633,261 
202735,240 
202837,175 
In aggregate for 2029-2033186,883 
Employee Tax Deferred Incentive Plan
The Company has an employee tax deferred incentive plan, otherwise known as a 401(k) plan, under which the Company makes voluntary contributions within certain limitations. All employees who meet specified age and length of service requirements are eligible to participate in the 401(k) plan. The amount contributed by the Company is included in salaries and employee benefits expense. The amounts contributed to the plan for the years ended December 31, 2023, 2022, and 2021, were $5.2 million, $5.0 million and $4.6 million, respectively.
Defined Contribution Supplemental Executive Retirement Plan
The Company’s DC SERP, a defined contribution supplemental executive retirement plan, allows certain senior officers to earn benefits calculated as a percentage of their compensation. The participant benefits are adjusted based upon a deemed investment performance of measurement funds selected by the participant. These measurement funds are for tracking purposes and are used only to track the performance of a mutual fund, market index, savings instrument, or other designated investment or portfolio of investments. The Company recorded expense related to the DC SERP of $0.1 million, $0.4 million and $0.9 million in the years ended December 31, 2023, 2022, and 2021, respectively. The total amount due to participants under this plan was included in other liabilities on the Company’s Consolidated Balance Sheets and amounted to $20.3 million and $17.3 million at December 31, 2023 and 2022, respectively. Effective December 31, 2021, the Company closed the DC SERP to new participants and froze benefit accruals for active participants.
Deferred Compensation Plans
The Company sponsors three plans which allow for elective compensation deferrals by directors, former trustees, and certain senior-level employees. Each plan allows its participants to designate deemed investments for deferred amounts from certain options which include diversified choices, such as exchange traded funds and mutual funds. Portfolios with various risk profiles are available to participants with the approval of the Compensation Committee of the Board of Directors. The Company purchases and sells investments which track the deemed investment choices, so that it has available funds to meet its payment liabilities. Deferred amounts, adjusted for deemed investment performance, are paid at the time of a participant designated date or event, such as separation from service, death, or disability. The total amounts due to participants under the three plans were included in other liabilities on the Company’s Consolidated Balance Sheets and amounted to $28.2 million and $25.4 million at December 31, 2023 and 2022, respectively.
Rabbi Trust Variable Interest Entity
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 VIEs 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.
Assets held in rabbi trust accounts by plan type, at fair value, were as follows:
As of December 31,
20232022
(In thousands)
DB SERP$16,349 $17,209 
BEP18,656 11,734 
ODRCP2,819 3,670 
DC SERP20,785 17,764 
Deferred compensation plans28,826 25,909 
Total rabbi trust assets$87,435 $76,286 
The following tables present the book value, net unrealized gain or loss, and market value of assets held in rabbi trust accounts by asset type:
As of December 31, 2023As of December 31, 2022
Book ValueUnrealized
Gain/(Loss)		Fair ValueBook ValueUnrealized
Gain		Fair Value
Asset Type(In thousands)
Cash and cash equivalents$12,269$—$12,269$5,575 $— $5,575 
Equities (1)56,14012,86969,00960,056 3,626 63,682 
Fixed income6,676(519)6,1577,799 (770)7,029 
Total assets$75,085$12,350$87,435$73,430 $2,856 $76,286 
(1)Equities include mutual funds and other exchange-traded funds.
The Company had equity securities held in rabbi trust accounts of $69.0 million and $63.7 million as of December 31, 2023 and 2022, respectively. Included in the equity securities presented in the tables above are exchange-traded mutual funds which had a net asset value of $48.9 million and $38.9 million as of December 31, 2023 and 2022, respectively.