The Corporation’s defined-benefit pension plans, including non-qualified plans for certain employees, former employees and former non-employee directors, cover approximately 10 percent of the Corporation’s employees. In 2005, the Board of Directors of the Corporation approved the curtailment of the accumulation of defined benefits for future services provided by certain participants in the First Merchants Corporation Retirement Plan. No additional pension benefits have been earned by any employees who had not attained both the age of 55 and accrued at least 10 years of vesting service as of March 1, 2005. The benefits are based primarily on years of service and employees’ pay near retirement. Contributions are intended to provide not only for benefits attributed to service-to-date, but also for those expected to be earned in the future.



	2019			2018
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	73,193		$	82,157
Service cost	39			8
Interest cost	2,975			2,816
Actuarial (gain) loss	4,007			(6,129		)
Benefits paid	(5,145		)	(5,659		)
Net transfer in from MBT acquisition	1,701			—
Benefit obligation at end of year	$	76,770		$	73,193

Change in Plan Assets:
Fair value of plan assets at beginning of year	$	76,736		$	85,213
Actual return on plan assets	12,972			(3,427		)
Employer contributions	558			609
Benefits paid	(5,145		)	(5,659		)
End of year	85,121			76,736
Funded status at end of year	$	8,351		$	3,543

Assets and Liabilities Recognized in the Balance Sheets:
Deferred tax asset	$	3,278		$	3,855
Assets	$	13,291		$	7,024
Liabilities	$	4,940		$	3,481

Amounts Recognized in Accumulated Other Comprehensive Income Not Yet Recognized as Components of Net Periodic Cost, net of tax, consist of:
Accumulated loss	$	(9,712	)	$	(14,111	)
Prior service cost	(325		)	(409		)
	$	(10,037	)	$	(14,520	)

Information for pension plans with an accumulated benefit obligation in excess of plan assets consists solely of the non-qualified plans for certain employees, former employees and former non-employee directors, and is included in the table below.



	December 31, 2019			December 31, 2018			December 31, 2017
Service cost	$	39		$	8		$	10
Interest cost	2,975			2,816			3,353
Expected return on plan assets	(4,414		)	(4,891		)	(4,778		)
Amortization of prior service cost	87			87			90
Amortization of net loss	404			287			1,218
Settlement loss recognized	—			—			761
Net periodic pension benefit cost	$	(909	)	$	(1,693	)	$	654



	December 31, 2019			December 31, 2018			December 31, 2017
Net periodic pension benefit cost	$	(909	)	$	(1,693	)	$	654
Net gain (loss)	4,552			(2,189		)	1,504
Amortization of net loss	404			287			1,979
Amortization of prior service cost	87			87			90
Total recognized in other comprehensive income (loss)	5,043			(1,815		)	3,573
Total recognized in net periodic pension benefit cost and other comprehensive income (loss)	$	5,952		$	(122	)	$	2,919



	December 31, 2019			December 31, 2018			December 31, 2017
Amortization of net loss	$	(208	)	$	(432	)	$	(830	)
Amortization of prior service cost	(87		)	(87		)	(87		)
Total	$	(295	)	$	(519	)	$	(917	)



	December 31, 2019		December 31, 2018		December 31, 2017
Weighted-average Assumptions Used to Determine Benefit Obligation:
Discount rate	3.20	%	4.30	%	3.60	%
Rate of compensation increase for accruing active participants	n/a		n/a		n/a
Weighted-average Assumptions Used to Determine Cost:
Discount rate	4.30	%	3.60	%	4.20	%
Expected return on plan assets	6.00	%	6.00	%	6.00	%
Rate of compensation increase for accruing active participants	n/a		n/a		n/a

At December 31, 2019 and 2018, the Corporation based its estimate of the expected long-term rate of return on analysis of the historical returns of the plans and current market information available. The plans’ investment strategies are to provide for preservation of capital with an emphasis on long-term growth without undue exposure to risk. The assets of the plans’ are invested in accordance with the plans’ Investment Policy Statement, subject to strict compliance with ERISA and any other applicable statutes.

The plans’ risk management practices include semi-annual evaluations of investment managers, including reviews of compliance with investment manager guidelines and restrictions; ability to exceed performance objectives; adherence to the investment philosophy and style; and ability to exceed the performance of other investment managers. The evaluations are reviewed by management with appropriate follow-up and actions taken, as deemed necessary. The Investment Policy Statement generally allows investments in cash and cash equivalents, real estate, fixed income debt securities and equity securities, and specifically prohibits investments in derivatives, options, futures, private placements, short selling, non-marketable securities and purchases of individual non-investment grade bonds.

At December 31, 2019, the maturities of the plans’ debt securities ranged from 15 days to 7.67 years, with a weighted average maturity of 4.00 years. At December 31, 2018, the maturities of the plans’ debt securities ranged from 15 days to 8.24 years, with a weighted average maturity of 4.29 years.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of December 31, 2019. The minimum contribution required in 2020 will likely be zero, but the Corporation may decide to make a discretionary contribution during the year.



	December 31, 2019				December 31, 2018
	Actual		Target		Actual		Target
Cash and cash equivalents	3.0	%	3.0	%	3.9	%	3.0	%
Equity securities	52.3		50.0		48.4		50.0
Debt securities	42.3		45.0		45.6		45.0
Alternative investments	2.4		2.0		2.1		2.0
	100.0	%	100.0	%	100.0	%	100.0	%

The Savings Plan, a Section 401(k) qualified defined contribution plan, was amended on March 1, 2005 to provide enhanced retirement benefits, including employer and matching contributions, for eligible employees of the Corporation and its subsidiaries. The Corporation matches employees’ contributions at the rate of 100 percent for the first 3 percent of base salary contributed by participants and 50 percent of the next 3 percent of base salary contributed by participants.

Beginning in 2005, employees who have completed 1000 hours of service and are an active employee on the last day of the year receive an additional retirement contribution after year-end. Employees hired after January 1, 2010 do not participate in the additional retirement contribution. Effective January 1, 2013, the additional retirement contribution was fixed at 2 percent. Full vesting occurs after five years of service. The Corporation’s expense for the Savings Plan, including the additional retirement contribution, was $4,560,000, $5,114,000 and $3,691,000 for 2019, 2018 and 2017, respectively.

The Corporation also maintains a post retirement benefit plan that provides health insurance benefits for a closed group of participants that came to the Corporation through the 2019 MBT acquisition. To be eligible for the post retirement plan, the participants must (1) have been hired by MBT prior to January 1, 2007, (2) be a full-time employee of the Corporation and employed by MBT prior to the acquisition, and (3) be at least 55 of age with 5 years of full-time service with MBT. The plan allowed retirees to be carried under the Corporation’s health insurance plan, generally from ages 55 to 65. The retirees' premiums are determined based on their retiree class (per historical MBT guidelines) and also determined by the plan type for which the retiree is enrolled. As of December 31, 2019, the obligation payable under the post retirement plan was $4.0 million. Post retirement plan expense totaled $43,000 for the year ended December 31, 2019.

Following is a description of the valuation methodologies used for pension plan assets measured at fair value on a recurring basis, as well as the general classification of pension plan assets pursuant to the valuation hierarchy.

Where quoted market prices are available in an active market, plan assets are classified within Level 1 of the valuation hierarchy. Level 1 plan assets total $80,689,000 and $71,277,000 as of December 31, 2019 and 2018, respectively, and include cash and cash equivalents, common stocks, mutual funds and corporate bonds and notes. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of plan assets with similar characteristics or discounted cash flows. Level 2 plan assets total $4,432,000 and $5,459,000 as of December 31, 2019 and 2018, respectively, and include governmental agencies, taxable municipal bonds and notes, and certificates of deposit. In certain cases where Level 1 or Level 2 inputs are not available, plan assets are classified within Level 3 of the hierarchy. There are no assets classified within Level 3 of the hierarchy at December 31, 2019 and 2018.



			Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2019	Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	2,578	$	2,578	$	—	$	—
Corporate Bonds and Notes	17,629		17,629		—		—
Government Agency and Municipal Bonds and Notes	3,660		—		3,660		—
Certificates of Deposit	772		—		772		—
Party-in-Interest Investments
Common Stock	2,516		2,516		—		—
Mutual Funds
Taxable Bond	13,938		13,938		—		—
Large Cap Equity	21,958		21,958		—		—
Mid Cap Equity	10,407		10,407		—		—
Small Cap Equity	5,753		5,753		—		—
International Equity	3,898		3,898		—		—
Specialty Alternative Equity	2,012		2,012		—		—
	$	85,121	$	80,689	$	4,432	$	—



			Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2018	Fair Value		(Level 1)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	3,026	$	3,026	$	—	$	—
Corporate Bonds and Notes	16,691		16,691		—		—
Government Agency and Municipal Bonds and Notes	4,479		—		4,479		—
Certificates of Deposit	980		—		980		—
Party-in-Interest Investments
Common Stock	2,073		2,073		—		—
Mutual Funds
Taxable Bond	12,817		12,817		—		—
Large Cap Equity	18,269		18,269		—		—
Mid Cap Equity	8,735		8,735		—		—
Small Cap Equity	4,713		4,713		—		—
International Equity	3,336		3,336		—		—
Specialty Alternative Equity	1,617		1,617		—		—
	$	76,736	$	71,277	$	5,459	$	—