Note 14 – Defined Benefit and Other Postretirement Benefits

Qualified Pension Plans

Trustmark Capital Accumulation Plan

Trustmark maintained a noncontributory tax-qualified defined benefit pension plan titled the Trustmark Capital Accumulation Plan (the “Plan”) in which substantially all associates who began employment prior to 2007 participated. The Plan provided for retirement benefits based on the length of credited service and final average compensation, as defined in the Plan, which vested upon three years of service. Benefit accruals under the Plan were frozen in 2009, with the exception of benefit accruals for certain employees of acquired financial institutions covered through plans that were subsequently merged into the Plan. Other than certain employees of acquired financial institutions, associates have not earned additional benefits, except for interest as required by law, since the Plan was frozen. Current and former associates who participated in the Plan retained their right to receive benefits that accrued before the Plan was frozen. As previously reported, on July 26, 2016 the Board of Directors of Trustmark authorized the termination of the Plan, effective as of December 31, 2016. As a result of the termination of the Plan, each participant became fully vested in their accrued benefits under the Plan.

During the second quarter of 2017, Trustmark fully funded the Plan on a termination basis by contributing additional assets in the amount of $17.6 million in accordance with Internal Revenue Service (IRS) and Pension Benefit Guaranty Corporation requirements. Participants in the Plan elected to receive either a lump sum cash payment or annuity payments under a group annuity contract purchased from an insurance carrier. Final distributions were made to participants from plan assets and a one-time pension settlement expense was recognized totaling $17.6 million.

Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions

To satisfy commitments made by Trustmark to associates covered through plans obtained in acquisitions and subsequently merged into the Plan (collectively, the “Continuing Associates”), on July 26, 2016, the Board of Directors of Trustmark also approved the spin-off of the portion of the Plan associated with the accrued benefits of the Continuing Associates into a new plan titled the Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions (the “Continuing Plan”), effective as of December 30, 2016, immediately prior to the termination of the Plan.

The following tables present information regarding the benefit obligation, plan assets, funded status, amounts recognized in accumulated other comprehensive loss, net periodic benefit cost and other statistical disclosures for Trustmark’s tax-qualified defined benefit pension plans (the Continuing Plan and the Plan) for the periods presented ($ in thousands):

	December 31,
	2017			2016
Change in benefit obligation:
Benefit obligation, beginning of year	$	75,900		$	91,403
Service cost		253			428
Interest cost		1,461			3,355
Actuarial loss (gain)		391			(893	)
Benefits paid for the Plan		(68,583	)		(18,393	)
Settlement loss		680			—
Benefit obligation, end of year	$	10,102		$	75,900

Change in plan assets:
Fair value of plan assets, beginning of year	$	54,734		$	74,137
Actual return on plan assets		481			(1,079	)
Employer contributions		17,964			69
Benefit payments for the Plan		(68,583	)		(18,393	)
Fair value of plan assets, end of year	$	4,596		$	54,734

Funded status at end of year - net liability	$	(5,506	)	$	(21,166	)

Amounts recognized in accumulated other comprehensive loss:
Net loss - amount recognized	$	3,187		$	21,355

	Years Ended December 31,
	2017			2016			2015
Net periodic benefit cost:
Service cost	$	253		$	428		$	513
Interest cost		1,461			3,355			3,461
Expected return on plan assets		(317	)		(2,897	)		(5,187	)
Recognized net loss due to defined benefit plan termination		17,662			—			—
Recognized net loss due to lump sum settlements		—			3,906			2,221
Recognized net actuarial loss		1,414			2,749			3,878
Net periodic benefit cost	$	20,473		$	7,541		$	4,886

Other changes in plan assets and benefit obligation recognized in other comprehensive income (loss), before taxes:
Net loss - Total recognized in other comprehensive income (loss)	$	(18,168	)	$	(3,572	)	$	(3,173	)
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	2,305		$	3,969		$	1,713

Weighted-average assumptions as of end of year:
Discount rate for benefit obligation		3.32	%		3.71	%		3.86	%
Discount rate for net periodic benefit cost		3.71	%		3.86	%		3.57	%
Expected long-term return on plan assets		5.00	%		4.25	%		7.00	%

Plan Assets

The weighted-average asset allocations by asset category are presented below for the Continuing Plan at December 31, 2017 and 2016, and for the Plan at December 31, 2016. No assets remained in the Plan at December 31, 2017.

	December 31,
	2017			2016
Money market fund		6.0	%		13.0	%
U.S. Treasuries		—			87.0	%
Exchange traded funds:
Equity securities		48.0	%		—
Fixed income		32.0	%		—
International		14.0	%		—
Total		100.0	%		100.0	%

The strategic objective of the investments of the assets in the Continuing Plan aims to provide long-term capital growth with moderate income. The allocation is managed on a total return basis with the average participant age in mind. It is constructed with an intermediate investment time frame with a moderate to high risk tolerance or a long-term investment time frame with a low to moderate risk tolerance. The plan allocation is typically balanced between equity and fixed income. The equity exposure has the potential to earn a return greater than inflation while the fixed income exposure may reduce the risk and volatility of the portfolio to which the equity allocation contributes.

The strategic objective of the investments of the assets in the Plan was changed significantly after the decision to terminate the Plan. The Plan was no longer managed on a total return basis. The Plan was managed with as little market value fluctuation as possible. Given the known fixed actuarial discount rate used until termination to match liabilities, the asset allocation of the Plan was changed to reflect a very conservative posture. Money market and individual U.S. Treasury securities were used solely to maintain a stable market value and achieve a small level of interest income. The Treasury securities matured at or before the projected distribution date. Similarly, a money market allocation was maintained for liquidity purposes due to monthly reoccurring distributions and lump sum distributions until final termination.

Fair Value Measurements

At this time, Trustmark presents no fair values that are derived through internal modeling. Should positions requiring fair valuation arise that are not relevant to existing methodologies, Trustmark will make every reasonable effort to obtain market participant assumptions, or independent evaluation.

The following table sets forth by level, within the fair value hierarchy, the Continuing Plan’s assets measured at fair value at December 31, 2017 and 2016 and the Plan’s assets at December 31, 2016 ($ in thousands):

	December 31, 2017
	Total		Level 1		Level 2		Level 3
Money market fund	$	269	$	269	$	—	$	—
Exchange traded funds:
Equity securities		2,199		2,199		—		—
Fixed income		1,462		1,462		—		—
International		666		666		—		—
Total assets at fair value	$	4,596	$	4,596	$	—	$	—

	December 31, 2016
	Total		Level 1		Level 2		Level 3
Money market fund	$	6,859	$	6,859	$	—	$	—
U.S. Treasuries		47,875		47,875		—		—
Total assets at fair value	$	54,734	$	54,734	$	—	$	—

There have been no changes in the methodologies used in estimating the fair value of plan assets at December 31, 2017. The money market fund approximates fair value due to its immediate maturity.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although Trustmark believes their valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Contributions

The range of potential contributions to the Continuing Plan is determined annually by the Continuing Plan’s actuary in accordance with applicable IRS rules and regulations. Trustmark’s policy is to fund amounts that are sufficient to satisfy the annual minimum funding requirements and do not exceed the maximum that is deductible for federal income tax purposes. The actual amount of the contribution is determined annually based on the Continuing Plan’s funded status and return on plan assets as of the measurement date, which is December 31. For the plan year ending December 31, 2017, Trustmark’s minimum required contribution to the Continuing Plan was $113 thousand. During 2017, Trustmark contributed $200 thousand to the Continuing Plan for the plan year ending December 31, 2017. For the plan year ending December 31, 2018, Trustmark’s minimum required contribution to the Continuing Plan is expected to be $175 thousand; however, Management and the Board of Directors of Trustmark will monitor the Continuing Plan throughout 2018 to determine any additional funding requirements by the plan’s measurement date.

For the plan year ending December 31, 2016, Trustmark’s minimum required contribution to the Plan was zero. Since the Plan was terminated, there were no additional contributions required other than amounts necessary to facilitate the Plan termination.

Estimated Future Benefit Payments and Other Disclosures

The following table presents the expected benefit payments, which reflect expected future service, for the Continuing Plan ($ in thousands):

Year	Amount
2018	$	196
2019		282
2020		333
2021		394
2022		453
2023 - 2027		2,961

Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during 2018 include a net loss of $571 thousand.

Supplemental Retirement Plans

Trustmark maintains a nonqualified supplemental retirement plan covering key executive officers and senior officers as well as directors who have elected to defer fees. The plan provides for retirement and/or death benefits based on a participant’s covered salary or deferred fees. Although plan benefits may be paid from Trustmark’s general assets, Trustmark has purchased life insurance contracts on the participants covered under the plan, which may be used to fund future benefit payments under the plan. The measurement date for the plan is December 31. As a result of mergers prior to 2014, Trustmark became the administrator of small nonqualified supplemental retirement plans, for which the plan benefits were frozen prior to the merger date.

The following tables present information regarding the benefit obligation, plan assets, funded status, amounts recognized in accumulated other comprehensive loss, net periodic benefit cost and other statistical disclosures for Trustmark’s nonqualified supplemental retirement plans ($ in thousands):

	December 31,
	2017			2016
Change in benefit obligation:
Benefit obligation, beginning of year	$	58,495		$	57,766
Service cost		141			295
Interest cost		2,103			2,223
Actuarial loss		642			1,537
Benefits paid		(3,451	)		(3,326	)
Benefit obligation, end of year	$	57,930		$	58,495
Change in plan assets:
Fair value of plan assets, beginning of year	$	—		$	—
Employer contributions		3,451			3,326
Benefit payments		(3,451	)		(3,326	)
Fair value of plan assets, end of year	$	—		$	—

Funded status at end of year - net liability	$	(57,930	)	$	(58,495	)

Amounts recognized in accumulated other comprehensive loss:
Net loss	$	17,514		$	17,739
Prior service cost		1,109			1,359
Amounts recognized	$	18,623		$	19,098

	Years Ended December 31,
	2017			2016			2015
Net periodic benefit cost:
Service cost	$	141		$	295		$	431
Interest cost		2,103			2,223			2,082
Amortization of prior service cost		250			250			250
Recognized net actuarial loss		866			864			992
Net periodic benefit cost	$	3,360		$	3,632		$	3,755

Other changes in plan assets and benefit obligation recognized in other comprehensive income (loss), before taxes:
Net (gain) loss	$	(224	)	$	(810	)	$	(2,694	)
Amortization of prior service cost		(250	)		(250	)		(250	)
Total recognized in other comprehensive income (loss)	$	(474	)	$	(1,060	)	$	(2,944	)
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	2,886		$	2,572		$	811

Weighted-average assumptions as of end of year:
Discount rate for benefit obligation		3.32	%		3.71	%		3.86	%
Discount rate for net periodic benefit cost		3.71	%		3.86	%		3.57	%

Estimated Supplemental Retirement Plan Payments and Other Disclosures

The following table presents the expected benefits payments for Trustmark’s supplemental retirement plans ($ in thousands):

Year	Amount
2018	$	3,475
2019		3,591
2020		4,047
2021		4,105
2022		4,262
2023 - 2027		19,230

Amounts in accumulated other comprehensive loss expected to be recognized as components of net periodic benefit cost during 2018 include a loss of $884 thousand and prior service cost of $250 thousand.

Other Benefit Plans

Defined Contribution Plan

Trustmark provides associates with a self-directed 401(k) retirement plan that allows associates to contribute a percentage of base pay, within limits provided by the Internal Revenue Code and accompanying regulations, into the plan. Trustmark matches 100% of associate contributions to the plan based on the amount of each participant’s contributions up to a maximum of 6% of eligible compensation. Associates may become eligible to make elective deferral contributions the first of the month following 30 days of employment. Eligible associates must complete one year of service in order to vest in Trustmark’s matching contributions. Trustmark’s contributions to this plan were $7.5 million in 2017, $7.2 million in 2016 and $7.0 million in 2015.