The Company provides defined benefit pension and other postretirement benefits (including health care and life insurance benefits) to qualified retired employees. The Company uses a December 31 measurement date for all of its plans.

Net periodic pension expense for defined benefit plans consisted of the following:

Net other postretirement benefits expense for defined benefit plans consisted of the following:

Service cost is reflected in salaries and employee benefits expense. The other components of net periodic benefit expense are reflected in other costs of operations.

Data relating to the funding position of the defined benefit plans were as follows:

	Pension Benefits						Other Postretirement Benefits
	2018			2017			2018			2017
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	2,188,736		$	2,007,158		$	68,637		$	109,922
Service cost		20,346			20,193			938			1,172
Interest cost		74,704			79,270			2,293			3,716
Plan participants’ contributions		—			—			2,974			2,929
Amendments and curtailments		—			—			—			(30,088	)
Actuarial (gain) loss		(228,897	)		172,180			(4,758	)		(8,511	)
Medicare Part D reimbursement		—			—			508			630
Benefits paid		(105,276	)		(90,065	)		(10,601	)		(11,133	)
Benefit obligation at end of year		1,949,613			2,188,736			59,991			68,637
Change in plan assets:
Fair value of plan assets at beginning of year		2,014,891			1,642,131			—			—
Actual return on plan assets		(90,657	)		251,381			—			—
Employer contributions		14,875			211,444			7,119			7,574
Plan participants’ contributions		—			—			2,974			2,929
Medicare Part D reimbursement		—			—			508			630
Benefits paid		(105,276	)		(90,065	)		(10,601	)		(11,133	)
Fair value of plan assets at end of year		1,833,833			2,014,891			—			—
Funded status	$	(115,780	)	$	(173,845	)	$	(59,991	)	$	(68,637	)
Accrued liabilities recognized in the consolidated balance sheet	$	(115,780	)	$	(173,845	)	$	(59,991	)	$	(68,637	)
Amounts recognized in accumulated other comprehensive income (“AOCI”) were:
Net loss (gain)	$	401,716		$	460,622		$	(17,868	)	$	(13,936	)
Net prior service cost (credit)		2,391			2,948			(31,737	)		(36,466	)
Pre-tax adjustment to AOCI		404,107			463,570			(49,605	)		(50,402	)
Taxes		(106,240	)		(121,873	)		13,041			13,251
Net adjustment to AOCI	$	297,867		$	341,697		$	(36,564	)	$	(37,151	)

The Company has an unfunded supplemental pension plan for certain key executives and others. The projected benefit obligation and accumulated benefit obligation included in the preceding data related to such plan were $143,406,000 as of December 31, 2018 and $165,210,000 as of December 31, 2017.

The accumulated benefit obligation for all defined benefit pension plans was $1,925,741,000 and $2,158,601,000 at December 31, 2018 and 2017, respectively.

GAAP requires an employer to recognize in its balance sheet as an asset or liability the overfunded or underfunded status of a defined benefit postretirement plan, measured as the difference between the fair value of plan assets and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation. Gains or losses and prior service costs or credits that arise during the period, but are not included as components of net periodic benefit expense, are recognized as a component of other comprehensive income. Amortization of net gains and losses is included in annual net periodic benefit expense if, as of the beginning of the year, the net gain or loss exceeds 10% of the greater of the benefit obligation or the fair value of the plan assets. As indicated in the preceding table, as of December 31, 2018 the Company recorded a minimum liability adjustment of $354,502,000 ($404,107,000 related to pension plans and $(49,605,000) related to other postretirement benefits) with a corresponding reduction of shareholders’ equity, net of applicable deferred taxes, of $261,303,000. In aggregate, the benefit plans realized a net gain during 2018 that resulted in a decrease to the minimum liability adjustment from that which was recorded at December 31, 2017 of $58,666,000. The net gain was mainly the result of raising the discount rate used to measure the benefit obligation of all plans to 4.25% at December 31, 2018 from 3.50% used at the prior year-end and the amortization of actuarial losses during 2018, offset, in part, by losses on plan assets in 2018. The table below reflects the changes in plan assets and benefit obligations recognized in other comprehensive income related to the Company’s postretirement benefit plans.

The following table reflects the amortization of amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit expense during 2019:

The Company also provides a qualified defined contribution pension plan to eligible employees who were not participants in the defined benefit pension plan as of December 31, 2005 and to other employees who have elected to participate in the defined contribution plan. The Company makes contributions to the defined contribution plan each year in an amount that is based on an individual participant’s total compensation (generally defined as total wages, incentive compensation, commissions and bonuses) and years of service. Participants do not contribute to the defined contribution pension plan. Pension expense recorded in 2018, 2017 and 2016 associated with the defined contribution pension plan was approximately $29 million, $30 million and $25 million, respectively.

The assumed weighted-average rates used to determine benefit obligations at December 31 were:

The assumed weighted-average rates used to determine net benefit expense for the years ended December 31 were:

The discount rate used by the Company to determine the present value of the Company’s future benefit obligations reflects specific market yields for a hypothetical portfolio of highly rated corporate bonds that would produce cash flows similar to the Company’s benefit plan obligations and the level of market interest rates in general as of the year-end.

The expected long-term rate of return assumption as of each measurement date was developed through analysis of historical market returns, current market conditions, anticipated future asset allocations, the funds’ past experience, and expectations on potential future market returns. The expected rate of return assumption represents a long-term average view of the performance of the plan assets, a return that may or may not be achieved during any one calendar year.

The Company’s defined benefit pension plan is sensitive to the long-term rate of return on plan assets and the discount rate. To demonstrate the sensitivity of pension expense to changes in these assumptions, with all other assumptions held constant, 25 basis point increases in: the rate of return on plan assets would have resulted in a decrease in pension expense of approximately $5 million; and the discount rate would have resulted in a decrease in pension expense of approximately $7 million. Decreases of 25 basis points in those assumptions would have resulted in similar changes in amount, but in the opposite direction from the changes presented in the preceding sentence. Additionally, an increase of 25 basis points in the discount rate would have decreased the benefit obligation by

$62 million and a decrease of 25 basis points in the discount rate would have increased the benefit obligation by $65 million at December 31, 2018.

For measurement of other postretirement benefits, a 6.25% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019. The rate was assumed to decrease to 5.00% over ten years. A one-percentage point change in assumed health care cost trend rates would have had the following effects:

The Company’s policy is to invest the pension plan assets in a prudent manner for the purpose of providing benefit payments to participants and mitigating reasonable expenses of administration. The Company’s investment strategy is designed to provide a total return that, over the long-term, places an emphasis on the preservation of capital. The strategy attempts to maximize investment returns on assets at a level of risk deemed appropriate by the Company while complying with applicable regulations and laws. The investment strategy utilizes asset diversification as a principal determinant for establishing an appropriate risk profile while emphasizing total return realized from capital appreciation, dividends and interest income. The target allocations for plan assets are generally 25 to 60 percent equity securities, 10 to 65 percent debt securities, and 10 to 85 percent money-market investments/cash equivalents and other investments, although holdings could be more or less than these general guidelines based on market conditions at the time and actions taken or recommended by the investment managers providing advice to the Company. Assets are managed by a combination of internal and external investment managers. Equity securities may include investments in domestic and international equities, through individual securities, mutual funds and exchange-traded funds. Debt securities may include investments in corporate bonds of companies from diversified industries, mortgage-backed securities guaranteed by government agencies and U.S. Treasury securities, through individual securities and mutual funds. Additionally, the Company’s defined benefit pension plan held $361,178,000 (20% of total assets) of real estate funds, private investments, hedge funds and other investments at December 31, 2018. Returns on invested assets are periodically compared with target market indices for each asset type to aid management in evaluating such returns. Furthermore, management regularly reviews the investment policy and may, if deemed appropriate, make changes to the target allocations noted above.

The fair values of the Company’s pension plan assets at December 31, 2018 and 2017, by asset category, were as follows:

	Fair Value Measurement of Plan Assets At December 31, 2018
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Asset category:
Money-market investments	$	23,049	$	10,794	$	12,255	$	—
Equity securities:
M&T		125,299		125,299		—		—
Domestic(a)		191,640		191,640		—		—
International(b)		7,752		7,752		—		—
Mutual funds:
Domestic(a)		216,523		216,523		—		—
International(b)		316,923		316,923		—		—
		858,137		858,137		—		—
Debt securities:
Corporate(c)		103,672		—		103,672		—
Government		182,034		—		182,034		—
International		2,140		—		2,140		—
Mutual funds:
Domestic(d)		280,902		280,902		—		—
International		20,661		20,661		—		—
		589,409		301,563		287,846		—
Other:
Diversified mutual fund		74,446		74,446		—		—
Real estate partnerships		11,807		2,791		—		9,016
Private equity		63,699		—		—		63,699
Hedge funds		200,811		125,309		—		75,502
Guaranteed deposit fund		10,415		—		—		10,415
		361,178		202,546		—		158,632
Total(e)	$	1,831,773	$	1,373,040	$	300,101	$	158,632

	Fair Value Measurement of Plan Assets At December 31, 2017
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Asset category:
Money-market investments	$	117,648	$	62,706	$	54,942	$	—
Equity securities:
M&T		154,818		154,818		—		—
Domestic(a)		240,763		240,763		—		—
International(b)		13,349		13,349		—		—
Mutual funds:
Domestic(a)		205,509		205,509		—		—
International(b)		405,200		405,200		—		—
		1,019,639		1,019,639		—		—
Debt securities:
Corporate(c)		89,751		—		89,751		—
Government		235,984		—		235,984		—
International		2,176		—		2,176		—
Mutual funds:
Domestic(d)		243,456		243,456		—		—
		571,367		243,456		327,911		—
Other:
Diversified mutual fund		80,227		80,227		—		—
Real estate partnerships		3,747		842		—		2,905
Private equity		31,484		—		—		31,484
Hedge funds		178,080		125,966		—		52,114
Guaranteed deposit fund		10,925		—		—		10,925
		304,463		207,035		—		97,428
Total(e)	$	2,013,117	$	1,532,836	$	382,853	$	97,428

(a)	This category is mainly comprised of equities of companies primarily within the mid-cap and large-cap sectors of the U.S. economy and range across diverse industries.

(b)	This category is comprised of equities in companies primarily within the mid-cap and large-cap sectors of international markets mainly in developed markets in Europe and the Pacific Rim.

(c)	This category represents investment grade bonds of U.S. issuers from diverse industries.

(d)	Approximately 77% of the mutual funds were invested in investment grade bonds and 23% in high-yielding bonds at December 31, 2018 and December 31, 2017. The holdings within the funds were spread across diverse industries.

(e)	Excludes dividends and interest receivable totaling $2,060,000 and $1,774,000 at December 31, 2018 and 2017, respectively.

Pension plan assets included common stock of M&T with a fair value of $125,299,000 (7% of total plan assets) at December 31, 2018 and $154,818,000 (8% of total plan assets) at December 31, 2017. No investment in securities of a non-U.S. Government or government agency issuer exceeded ten percent of plan assets at December 31, 2018.

The changes in Level 3 pension plan assets measured at estimated fair value on a recurring basis during the year ended December 31, 2018 were as follows:

The Company makes contributions to its funded qualified defined benefit pension plan as required by government regulation or as deemed appropriate by management after considering factors such as the fair value of plan assets, expected returns on such assets, and the present value of benefit obligations of the plan. The Company made voluntary contributions of $200 million to the qualified defined benefit pension plan in 2017. The Company did not make any contributions to the plan in 2018 or 2016. The Company is not required to make contributions to the qualified defined benefit plan in 2019, however, subject to the impact of actual events and circumstances that may occur in 2019, the Company may make contributions, but the amount of any such contributions has not been determined. The Company regularly funds the payment of benefit obligations for the supplemental defined benefit pension and postretirement benefit plans because such plans do not hold assets for investment. Payments made by the Company for supplemental pension benefits were $14,875,000 and $11,444,000 in 2018 and 2017, respectively. Payments made by the Company for postretirement benefits were $7,119,000 and $7,574,000 in 2018 and 2017, respectively. Payments for supplemental pension and other postretirement benefits for 2019 are not expected to differ from those made in 2018 by an amount that will be material to the Company’s consolidated financial position.

Estimated benefits expected to be paid in future years related to the Company’s defined benefit pension and other postretirement benefits plans are as follows:

The Company has a retirement savings plan (“RSP”) that is a defined contribution plan in which eligible employees of the Company may defer up to 50% of qualified compensation via contributions to the plan. The Company makes an employer matching contribution in an amount equal to 75% of an employee’s contribution, up to 4.5% of the employee’s qualified compensation. Employees’ accounts, including employee contributions, employer matching contributions and accumulated earnings thereon, are at all times fully vested and nonforfeitable. Employee benefits expense resulting from the Company’s contributions to the RSP totaled $42,897,000, $38,229,000 and $36,776,000 in 2018, 2017 and 2016, respectively.