Retirement Plans

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Retirement Plans

NOTE 7 — Retirement Plans

As of December 31, 2022, we have two active noncocntributory defined benefit pension plans ("pension plans") covering less than 1% of our active employees. These two plans consist of a U.S. supplemental retirement plan ("SERP") and a Taiwan pension plan. The SERP is comprised entirely of participants who were past employees of the Company.

We also provide post-retirement life insurance benefits for certain retired employees. Domestic employees who were hired prior to 1982 and certain former union employees are eligible for life insurance benefits upon retirement. We fund life insurance benefits through term life insurance policies and intend to continue funding all of the premiums on a pay-as-you-go basis.

We recognize the funded status of a benefit plan in our consolidated balance sheets. The funded status is measured as the difference between plan assets at fair value and the projected benefit obligation. We also recognize, as a component of other comprehensive earnings, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit/cost.

The measurement dates for the pension plans for our U.S. and non-U.S. locations were December 31, 2022 and 2021.

In February 2020, the CTS Board of Directors authorized management to explore termination of the U.S.-based pension plan ("Plan"), subject to certain conditions. On June 1, 2020, we entered into the fifth amendment to the Plan whereby we set an effective termination date for the Plan of July 31, 2020. In February 2021, we received a determination letter from the Internal Revenue Service that allowed us to proceed with the termination process for the Plan. During the second quarter of 2021, the Company offered the option of receiving a lump sum payment to eligible participants with vested qualified Plan benefits in lieu of receiving monthly annuity payments. Approximately 365 participants elected to receive the settlement, and lump sum payments of approximately $35,594 were made from Plan assets to these participants in June 2021.

As required under U.S. GAAP, the Company recognizes a settlement gain or loss when the aggregate amount of lump-sum distributions to participants equals or exceeds the sum of the service and interest cost components of the net periodic pension cost. The amount of settlement gain or loss recognized is the pro rata amount of the existing unrealized gain or loss immediately prior to the settlement. In general, both the projected benefit obligation and fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss.

Upon the partial settlement of the pension liability due to the lump sum offering in the second quarter of 2021, the Company recognized a non-cash and non-operating settlement charge of $20,063 related to pension losses, reclassified from accumulated other comprehensive loss to other (income) expense in the Company's Condensed Consolidated Statements of Earnings (Loss).

On July 29, 2021, the Plan purchased a group annuity contract that transferred our benefit obligations for approximately 2,700 CTS participants and beneficiaries in the United States (“Transferred Participants”). As part of the purchase of the group annuity contract, Plan benefit obligations and related annuity administration services for Transferred Participants were irrevocably assumed and guaranteed by the insurance company effective as of August 3, 2021. There will be no change to pension benefits for Transferred Participants. The purchase of the group annuity contract was fully funded directly by Plan assets.

As a result of the final settlement of the pension liability with the purchase of annuities, we reclassified the remaining related unrecognized pension losses of $106,206 that were previously recorded in accumulated other comprehensive loss to the Consolidated Statements of Earnings (Loss) in the third quarter of 2021.

In January 2022, we transferred approximately $17,500 of funds from Plan assets to a qualified replacement plan (QRP) managed by the Company. This plan requires that these assets be used to fund future annual Company contributions to our U.S. 401(k) program. The remaining Plan assets were transferred to the Company in the third quarter of 2022 as part of the final termination process. As a result, approximately $34,016 was transferred to the Company, which resulted in $6,803 of excise tax being recorded in Other Expense in the Company's Condensed Consolidated Statements of Earnings (Loss).

The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the pension plans for U.S. and non-U.S. locations at the measurement dates.

	U.S. Pension Plans						Non-U.S. Pension Plans
	2022			2021			2022			2021
Accumulated benefit obligation	$	814		$	1,008		$	1,771		$	1,957
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	1,008		$	230,205		$	2,335		$	2,686
Service cost		—			—			20			26
Interest cost		18			2,861			13			17
Benefits paid		(103	)		(12,206	)		(238	)		(476	)
Actuarial (gain) loss		(109	)		(3,533	)		239			44
Plan settlements		—			(216,319	)		—			—
Foreign exchange impact		—			—			(223	)		38
Projected benefit obligation at December 31	$	814		$	1,008		$	2,146		$	2,335
Change in plan assets:
Assets at fair value at January 1	$	49,382		$	285,675		$	1,421		$	1,595
Actual return on assets		2,134			(7,967	)		116			28
Company contributions		103			199			213			252
Benefits paid		(103	)		(12,206	)		(238	)		(476	)
Plan settlements		—			(216,319	)		—			—
Qualified replacement plan transfer		(17,500	)		—			—			—
Asset reversion		(34,016	)		—			—			—
Foreign exchange impact		—			—			(136	)		22
Assets at fair value at December 31	$	—		$	49,382		$	1,376		$	1,421
Funded status (plan assets less projected benefit obligations)	$	(814	)	$	48,374		$	(770	)	$	(914	)

The measurement dates for the post-retirement life insurance plan were December 31, 2022 and 2021. The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the post-retirement life insurance plan at those measurement dates.

	Post-Retirement Life Insurance Plan
	2022			2021
Accumulated benefit obligation	$	4,018		$	5,231
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	5,231		$	5,376
Service cost		1			1
Interest cost		102			80
Benefits paid		(147	)		(151	)
Actuarial (gain) loss		(1,169	)		(75	)
Projected benefit obligation at December 31	$	4,018		$	5,231
Change in plan assets:
Assets at fair value at January 1	$	—		$	—
Actual return on assets		—			—
Company contributions		147			151
Benefits paid		(147	)		(151	)
Other		—			—
Assets at fair value at December 31	$	—		$	—
Funded status (plan assets less projected benefit obligations)	$	(4,018	)	$	(5,231	)

The components of the prepaid (accrued) cost of the domestic and foreign pension plans are classified in the following lines in the Consolidated Balance Sheets at December 31:

	U.S. Pension Plans						Non-U.S. Pension Plans
	2022			2021			2022			2021
Prepaid pension asset	$	—		$	49,382		$	—		$	—
Accrued expenses and other liabilities		(99	)		(100	)		—			—
Long-term pension obligations		(715	)		(908	)		(770	)		(914	)
Net (accrued) prepaid cost	$	(814	)	$	48,374		$	(770	)	$	(914	)

The components of the accrued cost of the post-retirement life insurance plan are classified in the following lines in the Consolidated Balance Sheets at December 31:

	Post-Retirement Life Insurance Plan
	2022			2021
Accrued expenses and other liabilities	$	(455	)	$	(489	)
Long-term pension obligations		(3,563	)		(4,742	)
Total accrued cost	$	(4,018	)	$	(5,231	)

We have also recorded the following amounts to accumulated other comprehensive loss for the U.S. and non-U.S. pension plans, net of tax:

	U.S. Pension Plans			Non-U.S. Pension Plans
	Unrecognized Loss			Unrecognized Loss
Balance at January 1, 2021	$	91,237		$	1,901
Amortization of retirement benefits, net of tax		(2,851	)		(152	)
Net actuarial gain		3,777			27
Settlement charges		(91,851	)		—
Foreign exchange impact		—			27
Balance at January 1, 2022	$	312		$	1,803
Amortization of retirement benefits, net of tax		—			(155	)
Net actuarial gain (loss)		(108	)		132
Foreign exchange impact		—			(172	)
Balance at December 31, 2022	$	204		$	1,608

We have recorded the following amounts to accumulated other comprehensive loss for the post-retirement life insurance plan, net of tax:

	Unrecognized Gain
Balance at January 1, 2021	$	(51	)
Amortization of retirement benefits, net of tax		—
Net actuarial loss		(58	)
Balance at January 1, 2022	$	(109	)
Amortization of retirement benefits, net of tax		—
Net actuarial loss		(900	)
Balance at December 31, 2022	$	(1,009	)

The accumulated actuarial gains and losses included in other comprehensive earnings are amortized in the following manner:

The component of unamortized net gains or losses related to our qualified pension plan is amortized based on the expected future life expectancy of the plan participants (estimated to be approximately 11 years at December 31, 2022), because substantially all of the participants in those plans are inactive. The component of unamortized net gains or losses related to our post-retirement life insurance plan is amortized based on the estimated remaining future service period of the plan participants (estimated to be approximately 3 years at December 31, 2022). The Company uses a market-related approach to value plan assets, reflecting changes in the fair value of plan assets over a five-year period. The variance resulting from the difference between the expected and actual return on plan assets is included in the amortization calculation upon reflection in the market-related value of plan assets.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for those pension plans with accumulated benefit obligation in excess of fair value of plan assets is shown below:

	As of December 31,
	2022		2021
Projected benefit obligation	$	2,961	$	3,343
Accumulated benefit obligation	$	2,585	$	2,965
Fair value of plan assets	$	1,377	$	1,421

Net pension expense includes the following components:

	Years Ended December 31,									Years Ended December 31,
	U.S. Pension Plans									Non-U.S. Pension Plans
	2022			2021			2020			2022			2021			2020
Service cost	$	—		$	—		$	—		$	20		$	26		$	31
Interest cost		18			2,861			5,773			13			17			28
Expected return on plan assets(1)		(2,134	)		(474	)		(9,817	)		(9	)		(17	)		(16	)
Amortization of unrecognized loss		30			3,703			6,488			167			184			174
Settlement charges		—			126,269			—			—			—			—
Net expense	$	(2,086	)	$	132,359		$	2,444		$	191		$	210		$	221
Weighted-average actuarial assumptions(2)
Benefit obligation assumptions:
Discount rate		5.04	%		2.46	%		2.26	%		1.75	%		0.63	%		0.63	%
Rate of compensation increase	N/A			N/A			N/A				5.00	%		3.00	%		3.00	%
Pension income/expense assumptions:
Discount rate		2.46	%		2.10	%		3.15	%		0.63	%		0.63	%		0.63	%
Expected return on plan assets(1)	N/A				1.44	%		3.76	%		0.63	%		0.63	%		0.63	%
Rate of compensation increase	N/A			N/A			N/A				5.00	%		3.00	%		3.00	%

(1)Expected return on plan assets is net of expected investment expenses and certain administrative expenses.

(2)During the fourth quarter of each year, we review our actuarial assumptions in light of current economic factors to determine if the assumptions need to be adjusted. 2020 assumptions reflect termination basis accounting for our Plan.

Net post-retirement expense includes the following components:

	Post-Retirement Life Insurance Plan
	Years Ended December 31,
	2022			2021			2020
Service cost	$	1		$	1		$	1
Interest cost		102			80			122
Amortization of unrecognized gain		—			—			(84	)
Net expense	$	103		$	81		$	39
Weighted-average actuarial assumptions(1)
Benefit obligation assumptions:
Discount rate		5.11	%		2.66	%		2.27	%
Rate of compensation increase	N/A			N/A			N/A
Pension income/post-retirement expense assumptions:
Discount rate		2.66	%		2.27	%		3.09	%
Rate of compensation increase	N/A			N/A			N/A

(1)During the fourth quarter of each year, we review our actuarial assumptions in light of current economic factors to determine if the assumptions need to be adjusted.

All pension plan assets were allocated to fixed income/debt securities as of December 31, 2021. Historically, we employed a liability-driven investment strategy whereby a mix of equity and fixed-income investments are used to pursue a de-risking strategy which over time seeks to reduce interest rate mismatch risk and other risks while achieving a return that matches or exceeds the growth in projected pension plan liabilities. Risk tolerance was established through careful consideration of plan liabilities and funded status. The investment portfolio primarily contained a diversified mix of equity and fixed-income investments. Other assets such as private equity were used modestly to enhance long-term returns while improving portfolio diversification. Investment risk was measured and monitored on an

ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and asset/liability studies at regular intervals.

As a result of the termination of the Plan and final reversion activities in 2022, no assets remained in the Plan as of December 31, 2022.

The following table summarizes the fair values of our pension plan assets:

	As of December 31,
	2021
Equity securities - U.S. holdings(1)	$	8
Bond funds - other(3) (4)		31,380
Cash and cash equivalents(2)		19,415
Total fair value of plan assets	$	50,803

The fair values at December 31, 2021, are classified within the following categories in the fair value hierarchy:

	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Not Leveled		Total
Equity securities - U.S. holdings(1)	$	8	$	—	$	—	$	—	$	8
Bond funds - other(3) (4)		31,380		—		—		—		31,380
Cash and cash equivalents(2)		19,415		—		—		—		19,415
Total	$	50,803	$	—	$	—	$	—	$	50,803

(1)Comprised of common stocks of companies in various industries. The Pension Plan fund manager may shift investments from value to growth strategies or vice-versa, from small cap to large cap stocks or vice-versa, in order to meet the Pension Plan's investment objectives, which are to provide for a reasonable amount of long-term growth of capital without undue exposure to volatility and protect the assets from erosion of purchasing power.

(2)Comprised of investment grade short-term investment and money-market funds.

(3)Comprised predominately of investment grade U.S. corporate bonds with various maturities and U.S. high-yield corporate bonds; emerging market debt (local currency sovereign bonds, U.S. dollar-denominated sovereign bonds and U.S. dollar-denominated corporate bonds); and U.S. bank loans.

(4)Comprised of investments that are measured at fair value using the NAV per share practical expedient. In accordance with the provisions of ASC 820-10, these investments have not been classified in the fair value hierarchy. The fair value amount not leveled is presented to allow reconciliation of the fair value hierarchy to total fund pension plan assets.

The pension plan assets recorded at fair value are measured and classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs available in the marketplace used to measure fair value as discussed below:

•Level 1: Fair value measurements that are based on quoted prices (unadjusted) in active markets that the pension plan trustees have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs include quoted prices for similar assets in active or inactive markets, and inputs other than quoted prices that are observable for the asset, such as interest rates and yield curves that are observable at commonly quoted intervals.

•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable.

The table below reconciles the Level 3 partnership assets within the fair value hierarchy:

	Amount
Fair value of Level 3 partnership assets at January 1, 2021	$	6,792
Capital contributions		13
Realized and unrealized loss		(2,075	)
Capital distributions		(4,730	)
Fair value of Level 3 partnership assets at December 31, 2021	$	—
Capital contributions		—
Realized and unrealized loss		—
Capital distributions		—
Fair value of Level 3 partnership assets at December 31, 2022	$	—

The partnership fund manager used a market approach in estimating the fair value of the plan's Level 3 assets. The market approach estimates fair value by first determining the entity's earnings before interest, taxes, depreciation, and amortization and then multiplying that value by an estimated multiple. When establishing an appropriate multiple, the fund manager considered recent comparable private company transactions and multiples paid. The entity's net debt was then subtracted from the calculated amount to arrive at an estimated fair value for the entity.

We expect to make $99 of contributions to the U.S. plans and $220 of contributions to the non-U.S. plans during 2023.

Expected benefit payments under the defined benefit pension plans and the postretirement benefit plan, for the next five years subsequent to 2022 and in the aggregate for the following five years are as follows:

	U.S. Pension Plans		Non-U.S. Pension Plans		Post- Retirement Life Insurance Plan
2023	$	99	$	51	$	455
2024		95		64		425
2025		91		74		398
2026		88		82		373
2027		84		117		351
2028-2031		335		638		1,488
Total	$	792	$	1,026	$	3,490

Defined Contribution Plans

We sponsor a 401(k) plan that covers substantially all of our U.S. employees as well as offer similar defined contribution plans at certain foreign locations. Contributions and costs were generally determined as a percentage of the covered employee's annual salary. We ceased matching employee contributions in the second quarter of 2020 in light of COVID-19 concerns, and we reimplemented the match in February 2021. During 2022, our investment committee, in consultation with the plan’s advisors, determined the 401(k) plan’s position in CTS stock would be liquidated and funds would be reinvested in other investments. This was completed in the fourth quarter of 2022.

Effective January 1, 2022, in connection with the U.S. Plan termination process, we amended our 401(k) plan and transitioned to a non-elective contribution for all U.S. employees that is also determined as a percentage of the covered employee's salary, provides for immediate vesting and is provided regardless of individual contribution plans. In addition, we began offering a Roth 401(k) option to employees.

Expenses related to defined contribution plans include the following:

	Years Ended December 31,
	2022		2021		2020
401(k) and other defined contribution plan expense	$	3,878	$	3,242	$	1,636