Post-retirement Plans

In connection with our PCLI acquisition, we agreed to establish employee benefit plans including union and non-union pension plans and a post-retirement healthcare plan for PCLI employees that were previously covered under legacy Suncor plans.

Our agreement with Suncor also provides that pension assets related to the union and non-union pension plans are transferred to to a pension trust, which we established, and are computed in accordance with the share purchase agreement, subject to regulatory approval. The asset transfer to our PCLI pension plan trust was a cash transfer that occurred in September 2018. As of December 31, 2018, these retirement plan assets are all in cash.

The following table sets forth the changes in the benefit obligation and plan assets of our PCLI pension plans for the year ended December 31, 2018 and the eleven months ended December 31, 2017:



	Year Ended December 31, 2018			February 1, 2017 to December 31, 2017
	(In thousands)
Change in plans' benefit obligations
Pension plans' benefit obligation - beginning of period	$	63,582		$	52,155
Service cost	4,420			3,598
Interest cost	2,249			1,979
Actuarial loss	1,058			4,503
Benefits paid	(1,429		)	(966		)
Foreign currency exchange rate changes	(5,445		)	2,313
Pension plans' benefit obligation - end of year	$	64,435		$	63,582

Change in pension plans assets
Fair value of plans assets - beginning of period	$	59,261		$	51,870
Actual return on plans assets	3,599			6,182
Employer contributions	6,239			—
Benefits paid	(1,429		)	(966		)
Foreign currency exchange rate changes	(5,208		)	2,175
Fair value of plans assets - end of year	$	62,462		$	59,261

Funded status
Under-funded balance	$	(1,973	)	$	(4,321	)

Amounts recognized in consolidated balance sheets
Accrued pension liability	$	(1,973	)	$	(4,321	)

Amounts recognized in accumulated other comprehensive income
Cumulative actuarial loss	$	1,977		$	1,162

The accumulated benefit obligation was $52.5 million and $52.8 million at December 31, 2018 and 2017, respectively, which are also the measurement dates used for our pension plans.

The following table provides information regarding pension plans with a projected benefit obligation in excess of the fair value of plan assets:



	December 31,
	2018		2017
	(In thousands)
Projected benefit obligation	$	36,144	$	63,582
Plan assets	$	34,145	$	59,261

The weighted average assumptions used to determine end of period benefit obligations:



	December 31,
	2018		2017

Discount rate	3.70	%	3.40	%
Rate of future compensation increases	3.00	%	3.00	%

Net periodic pension expense consisted of the following components:



	Year Ended December 31, 2018			February 1, 2017 to December 31, 2017
	(In thousands)
Service cost - benefit earned during the period	$	4,420		$	3,598
Interest cost on projected benefit obligations	2,249			1,979
Expected return on plans assets	(3,464		)	(2,841		)
Net periodic pension expense	$	3,205		$	2,736

The weighted average assumptions used to determine net periodic pension expense:



	Year Ended December 31, 2018		February 1, 2017 to December 31, 2017

Discount rate	3.40	%	3.80	%
Rate of future compensation increases	3.00	%	3.00	%
Expected long-term rate of return on assets	5.75	%	5.75	%

The expected long-term rate of return on assets is based on a target investment mix of 60% long-term bonds and 40% global equities.

It is estimated that there will be no actuarial loss that will be amortized from accumulated other comprehensive income into net periodic benefit expense in 2019.

We expect to contribute $3.3 million to the PCLI pensions plans in 2019. Benefit payments, which reflect expected future service, are expected to be paid as follows: $1.0 million in 2019, $1.3 million in 2020, $1.5 million in 2021, $1.8 million in 2022, $2.0 million in 2023 and $13.1 million in 2024 to 2028.

Post-retirement Healthcare Plans

We have a post-retirement healthcare and other benefits plan that is available to certain of our employees who satisfy certain age and service requirements. This plan is unfunded and provides differing levels of healthcare benefits dependent upon hire date and work location. Not all of our employees are covered by this plan at December 31, 2018. In addition, we established a post-retirement healthcare and other benefits plan for our PCLI employees.

The following table sets forth the changes in the benefit obligation and plan assets of our post-retirement healthcare plans for the years ended December 31, 2018 and 2017:



	Years Ended December 31,
	2018			2017
	(In thousands)
Change in plans' benefit obligation
Post-retirement plans' benefit obligation - beginning of year	$	29,499		$	18,992
PCLI acquisition	—			8,212
Service cost	1,648			1,511
Interest cost	938			987
Participant contributions	178			181
Benefits paid	(1,931		)	(1,800		)
Actuarial loss (gain)	(2,643		)	1,058
Foreign currency exchange rate changes	(809		)	358
Post-retirement plans' benefit obligation - end of year	$	26,880		$	29,499

Change in plan assets
Fair value of plan assets - beginning of year	$	—		$	—
Employer contributions	1,676			1,542
Participant contributions	255			258
Benefits paid	(1,931		)	(1,800		)
Fair value of plan assets - end of year	$	—		$	—

Funded status
Under-funded balance	$	(26,880	)	$	(29,499	)

Amounts recognized in consolidated balance sheets
Accrued post-retirement liability	$	(26,880	)	$	(29,499	)

Amounts recognized in accumulated other comprehensive income
Cumulative actuarial (loss) gain	$	2,379		$	(287	)
Prior service credit	25,473			28,953
Total	$	27,852		$	28,666

Benefit payments, which reflect expected future service, are expected to be paid as follows: $1.9 million in 2019; $1.7 million in 2020; $1.7 million in 2021; $1.8 million in 2022; $1.9 million in 2023; and $9.2 million in 2024 through 2028.

The weighted average assumptions used to determine end of period benefit obligations:



	December 31, 2018				December 31, 2017
	HFC		PCLI		HFC		PCLI

Discount rate	3.95	%	3.70	%	3.35	%	3.40	%
Current health care trend rate	6.50	%	6.50	%	7.00	%	6.50	%
Ultimate health care trend rate	5.00	%	5.00	%	5.00	%	5.00	%
Year rate reaches ultimate trend rate	2028		2022		2028		2022

Net periodic post-retirement credit consisted of the following components:



	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Service cost – benefit earned during the year	$	1,648		$	1,511		$	1,294
Interest cost on projected benefit obligations	938			987			787
Amortization of prior service credit	(3,481		)	(3,481		)	(3,482		)
Net periodic post-retirement credit	$	(895	)	$	(983	)	$	(1,401	)

Prior service credits are amortized over the average remaining effective period to obtain full benefit eligibility for participants.

Assumed health care cost trend rates have an effect on the amounts reported for the post-retirement health care benefit plan. The weighted average assumptions used to determine net periodic benefit expense follow:



	Years Ended December 31,
	2018				2017				2016
	HFC		PCLI		HFC		PCLI		HFC

Discount rate	3.35	%	3.40	%	3.75	%	3.80	%	3.90	%
Current health care trend rate	7.00	%	6.50	%	7.00	%	6.50	%	8.00	%
Ultimate health care trend rate	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%
Year rate reaches ultimate trend rate	2028		2022		2030		2022		2041

The effect of a 1% change in health care cost trend rates is as follows:



	1% Point Increase		1% Point Decrease
	(In thousands)
Service cost	$	185	$	(154	)
Interest cost	$	65	$	(55	)
Year-end accumulated post-retirement benefit obligation	$	1,719	$	(1,462	)

Retirement Restoration Plan

We have an unfunded retirement restoration plan that provides for additional payments from us so that total retirement plan benefits for certain executives will be maintained at the levels provided in the retirement plan before the application of Internal Revenue Code limitations. We expensed $0.1 million, $0.1 million and $0.1 million for the years ended December 31, 2018, 2017 and 2016, respectively, in connection with this plan. The accrued liability reflected in the consolidated balance sheets was $2.3 million and $2.7 million at December 31, 2018 and 2017, respectively. As of December 31, 2018, the projected benefit obligation under this plan was $2.3 million. Annual benefit payments of $0.2 million are expected to be paid through 2028, which reflect expected future service.

Defined Contribution Plan

We have a defined contribution “401(k)” plan that covers substantially all U.S. employees. Our contributions are based on an employee's eligible compensation and years of service. We also partially match our employees’ contributions. We expensed $19.1 million, $17.6 million and $17.5 million for the years ended December 31, 2018, 2017 and 2016, respectively, in connection with this plan.