Yellow Corporation and certain of our operating subsidiaries sponsor qualified defined benefit pension plans for certain employees not covered by collective bargaining agreements, which as of December 31, 2022 includes approximately 4,600 current, former and retired employees. These domestic, qualified non-union pension plans include the Yellow Corporation Pension Plan, the Roadway LLC Pension Plan, and the Yellow Retirement Pension Plan (formerly known as the YRC Retirement Pension Plan) (collectively, the "Plans"). Qualified pension benefits are based on years of service and the employees’ covered earnings. Employees covered by collective bargaining agreements participate in various multi-employer pension plans to which the Company contributes, as discussed separately below. The Plans closed to new participants effective January 1, 2004 and benefit accruals for participants were frozen July 1, 2008. Our actuarial valuation measurement date for the Plans is December 31.

Our long-term strategy has been focused on de-risking the Plans and improving the overall funded status. In prior years, the Company has worked to execute this strategy through efforts that included amending the Plans to provide an automatic commencement of benefit at age 65, regardless of employment status, in an effort to reduce our long-term pension obligations and ongoing annual pension expense, and one plan was amended to permit the payment of lump sum benefit payments for all participants. These amendments triggered immaterial non-cash settlement charges that are included in certain tabular disclosures below, due to the amount of lump sum benefit payments distributed from plan assets. The lump sum benefit payments reduce pension obligations and are funded from existing plan assets. The non-cash settlement charges result from the requirement to expense the unrecognized actuarial losses associated with the lump sum settlements, which are reflected in nonoperating expenses. These charges had no effect on total equity because the actuarial losses were already recognized in accumulated other comprehensive loss. Accordingly, the effect on retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss.

On December 6, 2021, the Plans entered into a contract for a group annuity to transfer the obligation to pay the remaining retirement benefits of certain specific plan participants in the Plans to a highly rated insurance company (the “2021 Partial Pension Annuitization"). Upon issuance of the group annuity contracts, the value of each affected retiree’s benefit obligation was irrevocably guaranteed by the insurer. The plan participants did not have any changes to their benefits as a result of the transfer. By irrevocably transferring the obligations to the insurer, the Company reduced its overall pension projected benefit obligation by approximately $243 million. The purchase of group annuity contracts was funded directly by assets of the Plans of approximately $253 million.

Prior to the 2021 Partial Pension Annuitization, the Plans had approximately 8,500 participants. The 2021 Partial Pension Annuitization eliminated the Plan's obligations to pay retirement benefits to approximately 3,700 participants and resulted in annual savings for the Plans, including for Pension Benefit Guarantee Corporation premiums. Consistent with our long-term strategy, the Company and the Plans expect to continue to look for opportunities to manage the domestic, qualified non-union pension plans obligations, which may include additional settlements in future years.

As a result of the 2021 Partial Pension Annuitization, the Company recorded a non-cash, non-operating settlement loss during the fourth quarter of 2021 of approximately $54.9 million reflecting the accelerated recognition of unamortized losses in these plans from the obligation that was settled.

During the year ended December 31, 2022 our pension expense was $10.2 million, which includes a $12.1 million expense recognition of settlements from lump sum payouts during the year. Using our current plan assumptions for the discount rate of 5.70% and an assumed 7.00% return on assets we expect to record expense of $8.8 million for the year ended December 31, 2023, which excludes expenses of settlement from lump sum payments.

The reconciliation of the beginning and ending balances of the projected benefit obligation and the fair value of plan assets for the years ended December 31, 2022 and 2021, and the funded status at December 31, 2022 and 2021, is as follows:


(in millions)	2022			2021
Change in benefit obligation:
Benefit obligation at beginning of year	$	813.3		$	1,142.3
Interest cost		23.7			30.7
Benefits paid, including lump sum and annuity transfers		(80.3	)		(353.0	)
Actuarial (gain) loss		(171.2	)		(6.7	)
Other		—			—
Benefit obligation at year end	$	585.5		$	813.3
Change in plan assets:
Fair value of plan assets at prior year end	$	767.4		$	1,190.7
Actual return on plan assets		(199.8	)		(71.4	)
Employer contributions		0.6			1.1
Benefits paid, including lump sum and annuity transfers		(80.3	)		(353.0	)
Fair value of plan assets at year end	$	487.9		$	767.4
Funded status at year end	$	(97.6	)	$	(45.9	)

The net underfunded status of the plans of $97.6 million and $45.9 million at December 31, 2022 and 2021, respectively are recognized in the consolidated balance sheets as shown in the table below. No plan assets are expected to be returned to the Company during the year ending December 31, 2023.

As shown above, included in accumulated other comprehensive loss at December 31, 2022, are unrecognized actuarial losses of $248.9 million ($239.3 million, net of tax).

Information for pension plans with an accumulated benefit obligation (“ABO”) in excess of plan assets and plan assets that exceed ABO at December 31, 2022 and 2021 is as follows:


	At December 31, 2022
(in millions)	ABO Exceeds Assets		Assets Exceed ABO		Total
Projected benefit obligation	$	553.4	$	32.1	$	585.5
Accumulated benefit obligation		553.4		32.1		585.5
Fair value of plan assets		421.5		66.4		487.9


	At December 31, 2021
(in millions)	ABO Exceeds Assets		Assets Exceed ABO		Total
Projected benefit obligation	$	759.3	$	54.0	$	813.3
Accumulated benefit obligation		759.3		54.0		813.3
Fair value of plan assets		673.2		94.2		767.4

Weighted average actuarial assumptions used to determine benefit obligations at December 31:


	2022			2021
Discount rate		5.70	%		3.08	%

Weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:


	2022			2021			2020
Discount rate		3.08	%		2.81	%		3.56	%
Expected rate of return on assets		5.0	%		5.0	%		7.0	%
Mortality table (a)	Pri-2012 (MP-2021 Scale, Custom)			Pri-2012 (MP-2021 Scale, Custom)			Pri-2012 (MP-2020 Scale, Custom)

(a)

The 2022, 2021 and 2020 mortality tables were based on a custom mortality improvement scale to reflect expectations of underlying plan participants.

The discount rate refers to the interest rate used to discount the estimated future benefit payments to their present value, also referred to as the benefit obligation. The discount rate allows us to estimate what it would cost to settle the pension obligations as of the measurement date, December 31, and is used as the interest rate factor in the following year’s pension cost. We determine the discount rate by selecting a portfolio of high-quality noncallable bonds such that the coupons and maturities exceed or are similar to our expected benefit payments.

In determining the expected rate of return on assets, we consider our historical experience in the plans’ investment portfolio, historical market data and long-term historical relationships, as well as a review of other objective indices including current market factors such as inflation and interest rates. Due to the underfunded nature of these plans, the investment portfolio was allocated to more return seeking investments, and the Company selected an expected rate of return on assets of 7.0% effective for the 2023 valuation, compared to 5.0% for 2022. We will continue to review our long-term rate of return on an annual basis, and if and when appropriate, revise that assumption. The pension trust holds no Company securities.

We expect cash contributions, if required at all, for the defined benefit pension plans that the Company sponsors to be nominal for 2023 and in years thereafter. The average remaining life expectancy of plan participants is approximately 21 years.

The components of our net periodic pension cost, other post-retirement costs and other amounts recognized in other comprehensive loss (income) before tax for the years ended December 31, 2022, 2021 and 2020 were as follows:


(in millions)	2022			2021			2020
Net periodic benefit cost:
Interest cost	$	23.7		$	30.7		$	37.1
Expected return on plan assets		(33.8	)		(48.0	)		(61.1	)
Amortization of prior net losses		8.6			12.1			14.3
Amortization of prior net service credit		(0.4	)		(0.4	)		(0.4	)
Settlement - Annuitization(s)		—			54.9			—
Settlements - All Others		12.1			9.8			3.6
Net periodic pension cost (benefit)	$	10.2		$	59.1		$	(6.5	)
Other changes in plan assets and benefit obligations recognized in other comprehensive loss (income):
Net actuarial (gains) losses and other adjustments	$	62.4		$	112.7		$	(216.7	)
Settlement - Annuitization(s)		—			(54.9	)		—
Settlements - All Others		(12.1	)		(9.8	)		(3.6	)
Amortization of prior net losses		(8.6	)		(12.1	)		(14.3	)
Amortization of prior net service credit		0.4			0.4			0.4
Total recognized in other comprehensive loss (income)	$	42.1		$	36.3		$	(234.2	)
Total recognized in net periodic benefit cost and other comprehensive loss (income)	$	52.3		$	95.4		$	(240.7	)

During the years ended December 31, 2022 and 2021, there was no income tax expense (benefit) related to pension amounts in other comprehensive income. During the year ended December 31, 2020 the income tax expense related to pension amounts in other comprehensive (income) loss was $14.6 million.

Gains and losses occur due to changes in the amount of either the projected benefit obligation or plan assets from experience being different than assumed and from changes in assumptions. We recognize an amortization of the net gain or loss as a component of net pension cost during a year if, as of the beginning of the year, that net gain or loss exceeds ten percent of the greater of the benefit obligation or the market-related value of plan assets. If an amortization is required, it equals the amount of net gain or loss that exceeds the ten percent corridor, amortized over the average remaining life expectancy of plan participants.

Our pension assets are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of Level 1 assets are based on quoted market prices. The majority of the Level 1 assets presented in the table below include common stock of both U.S. and, to a lesser extent, international companies, and mutual funds, which are actively traded and priced in the market. The fair value of Level 2 assets are based on other significant observable inputs, including quoted prices for similar securities. The Level 2 assets presented in the below table consist primarily of fixed income and absolute return funds where values are based on the quoted prices of similar securities and observable market data. Level 3 assets are those where the fair value is determined based on unobservable inputs. The Level 3 assets consist primarily of private equities, and the assets are either priced at cost less cash distributions for recent asset purchases, third-party valuations or discounted cash flow methods. Assets that are not considered Level 1, 2 or 3 assets are valued at the net asset value (“NAV”) of the underlying investments held, as determined by the fund managers.

The methods and assumptions used by third-party pricing sources may include a variety of factors, such as recently executed transactions, existing contracts, economic conditions, industry or market developments, and overall credit ratings. These estimated fair values may differ significantly from the values that would have been used had a ready market for these investments existed and as such, differences could be material. The availability of observable data is monitored by plan management to assess

appropriate classification of financial instruments within the fair value hierarchy. Depending upon the availability of such inputs, specific securities may transfer between levels. In such instances, the transfer is reported at the end of the reporting period.

The tables below detail by level, within the fair value hierarchy, the pension assets at fair value as of December 31, 2022 and December 31, 2021:


	Pension Assets at Fair Value as of December 31, 2022
(in millions)	Total		Level 1		Level 2		Level 3
Equities	$	2.5	$	2.5	$	—	$	—
Private equities		19.1		—		—		19.1
Fixed income:
Corporate and other		8.2		—		—		8.2
Government		158.7		63.2		95.5		—
Interest bearing		54.2		53.0		1.2		—
Investments measured at NAV(a)		245.2		—		—		—
Total plan assets	$	487.9	$	118.7	$	96.7	$	27.3


	Pension Assets at Fair Value as of December 31, 2021
(in millions)	Total		Level 1		Level 2		Level 3
Equities	$	59.0	$	59.0	$	—	$	—
Private equities		18.6		—		—		18.6
Fixed income:
Corporate and other		81.4		—		73.4		8.0
Government		206.2		8.2		198.0		—
Interest bearing		58.9		57.5		1.4		—
Investments measured at NAV(a)		343.3
Total plan assets	$	767.4	$	124.7	$	272.8	$	26.6

(a)

Certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.

The table below presents the activity of our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


(in millions)	Private Equities			Fixed income			Total Level 3
Balance at December 31, 2020	$	36.9		$	8.4		$	45.3
Purchases		1.0			0.8			1.8
Sales		(24.4	)		(1.3	)		(25.7	)
Unrealized losses		5.1			0.1			5.2
Balance at December 31, 2021	$	18.6		$	8.0		$	26.6
Sales		(0.8	)		(1.5	)		(2.3	)
Unrealized gain		1.3			1.7			3.0
Balance at December 31, 2022	$	19.1		$	8.2		$	27.3

The following table sets forth a summary of the assets for which a reported NAV is used to estimate the fair value as of December 31, 2022:


	Fair value estimated using Net Asset Value per Share
(in millions)	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Private equities (a)	$	65.6	$	4.7	Redemptions not permitted
Fixed income (b)		23.6		—	Redemptions not permitted
Equities (c)		114.0		—	Daily, Monthly, Quarterly	5-60 days
Absolute return (d)		42.0		—	Monthly, Quarterly, Semi-Annually	5-180 days
Total	$	245.2

(a)

Consists of private equity investments in pharmaceuticals and companies primarily in the technology and healthcare sectors.

(b)

Consists of investment in debt securities, secured and unsecured, including collateralized loan obligations of global companies, primarily across the U.S. and Europe. While certain fixed income investments allow redemptions, others do not.

(c)

Consists of public equity investments in U.S. and non-U.S. markets.

(d)

Consists of investments in publicly traded securities including long and short positions in equities and exchange traded funds, equity index options, corporate and convertible debt securities and other derivatives on equities, commodities and interest rates.

The following table sets forth a summary of the assets for which a reported NAV is used to estimate the fair value as of December 31, 2021:


	Fair value estimated using Net Asset Value per Share
(in millions)	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Private equities (a)	$	122.7	$	7.5	Redemptions not permitted
Fixed income (b)		41.5		—	Monthly, Quarterly	35-90 days
Equities (c)		59.0		—	Monthly, Quarterly	3-60 days
Absolute return (d)		120.1		—	Monthly, Quarterly	5-90 days
Total	$	343.3

(a)

Consists of private equity investments in pharmaceuticals and companies primarily in the technology and healthcare sectors.

(b)

Primarily consists of investments in royalty payments from marketers of pharmaceuticals and related debt securities.

(c)

Consists of public equity investments in U.S. and non-U.S. markets.

(d)

Consists of investments in global markets, including derivative securities of equity and fixed income indexes, commodities and interest rates.

Historically, the investment strategy for private equities has consisted of direct investments or investments through limited partnerships with managers who purchase interests in non-public companies. In addition, the typical investment strategies of the fixed income and equity funds was based on fundamental and quantitative analysis and consisted of long and hedged strategies. Lastly, the general strategy of the absolute return funds consisted of alternative investment techniques, including derivative instruments and other unconventional assets, to achieve an absolute return rate.

The Company contributes to various separate multi-employer health, welfare and pension plans for employees that are covered by our collective bargaining agreements (approximately 82% of total employees of the Company and its subsidiaries). The collective bargaining agreements determine the amounts of these contributions. The health and welfare plans provide medical-related benefits to active employees and retirees. The pension plans provide retirement benefits to retired participants. We recognize multi-employer pension cost within salaries, wages and employee benefits for the contractually required contributions for the period and recognize as a liability any contributions due and unpaid at period end. We do not directly manage the multi-employer plans to which we contribute. These pension plans' assets and liabilities are not included in our consolidated balance sheets. The trusts covering these plans are generally managed by trustees, half of whom the unions appoint and half of whom various contributing employers appoint.

We expensed the following amounts related to these plans for the years ended December 31:


(in millions)	2022		2021		2020
Health and welfare	$	490.0	$	485.2	$	488.7
Pension		111.1		114.5		123.6
Total	$	601.1	$	599.7	$	612.3

The following table provides additional information related to our participation in individually significant multi-employer pension plans:

Expiration Date

Funding

of Collective-

Pension Protection Zone Status(b)

Improvement or

Employer

Bargaining

Pension Fund(a)

EIN Number

2022

2021

Rehabilitation Plan

Surcharge Imposed

Agreement

Central States, Southeast and Southwest Areas Pension Fund

36-6044243

Critical and
Declining

Critical and
Declining

Yes

No

3/31/2024

Teamsters National 401(k) Savings Plan(c)

52-1967784

N/A

N/A

N/A

No

3/31/2024

Road Carriers Local 707 Pension Fund

51-6106510

Critical and
 Declining

Critical and
 Declining

Yes

No

3/31/2024

Teamsters Local 641 Pension Fund

22-6220288

Critical and
Declining

Critical and
Declining

Yes

No

3/31/2024

The determination of individually significant multi-employer plans is based on our contributions to the plans relative to our total contributions over the periods presented, as well as our contributions to the plans relative to the total contributions that the individual plans received during the periods presented.

The Pension Protection Zone Status indicated herein is based on information that the Company obtained from the plans’ Forms 5500. Unless otherwise noted, the most recent PPA zone status available for 2022 and 2021 is for the plan’s year-end during calendar years 2021 and 2020, respectively. Among other factors, plans in the critical or critical and declining zone are generally less than 65 percent funded, plans in the endangered zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded.

The policies of the Western Conference of Teamsters Pension Trust precluded the Company from reentering the plan on June 1, 2011. The plan did not assess a withdrawal liability and has not done so since June 1, 2011. Based on our most recent letter of understanding which has extended through 2024, no liability has been assessed. Contributions related to the employees previously covered by this plan are now being made to the Teamsters National 401(k) Plan.

The Company was listed in the Central States, Road Carriers Local 707 Pension Fund and Teamsters Local 641 Pension Fund’s Forms 5500 as providing more than 5 percent of the total contributions for 2022 and 2021.

We contributed a total of $111.5 million, $115.4 million and $115.0 million in cash to the multi-employer pension funds for the years ended December 31, 2022, 2021 and 2020, respectively. The following table provides the pension amounts contributed by fund for those funds that are considered to be individually significant for the years ended December 31:


(in millions)	2022		2021		2020
Central States, Southeast and Southwest Areas Pension Fund	$	63.0	$	68.4	$	69.0
Teamsters National 401(k) Savings Plan		21.7		18.9		17.5
Road Carriers Local 707 Pension Fund		1.9		1.9		1.9
Teamsters Local 641 Pension Fund		1.7		1.9		1.9

In March 2021, the American Rescue Plan Act of 2021 (the “ARPA”) was passed, which includes, among many other provisions, significant financial assistance for eligible, underfunded multi-employer pension plans. The Company believes that several multi-employer pension plans for employees covered by our collective bargaining agreements are eligible, including the Central States, Southeast and Southwest Areas Pension Fund and the Teamsters Local 641 Pension Fund. The special financial assistance provided by the ARPA is designed to cover the payments of accrued pension benefits through the 2051 plan year and is not subject to any repayment obligations. The Pension Benefit Guaranty Corporation ("PBGC") has issued the application requirements for special financial assistance and additional guidance, and has begun providing approvals to certain plans. To date we have not been impacted and based upon our understanding of these regulations and guidance, the Company does not anticipate any material short-term impacts of this financial assistance. On January 12, 2023, Central States announced that they had received $35.8 billion in funding from the American Rescue Plan. The Company is monitoring applications submitted by the relevant multi-employer pension plans.

If we fail to make our required contributions to a multi-employer plan, it would expose us to penalties including potential withdrawal liabilities. The Company has no intention of triggering such withdrawal liabilities due to contributions or otherwise.

We sponsor the Yellow Corporation 401(k) Plan and the Reddaway Hourly 401(k) Plan, which are defined contribution plans primarily for employees that our collective bargaining agreements do not cover. The plans permit participants to make contributions to the plans and permit the employer of participants to make contributions on behalf of the participants. Additionally, the Reddaway Hourly 401(k) Plan allows for a non-elective employer contribution. Including non-elective

employer contributions, total employer contributions were $8.9 million in 2022, $6.7 million in 2021 and $3.7 million in 2020. Our employees covered under collective bargaining agreements may also participate in union-sponsored 401(k) plans.

The Company provides an annual incentive compensation plan (Annual Incentive Plan, or AIP) to certain salaried employees across various levels of the organization which is based on factors such as operating revenues and Adjusted EBITDA achieved for the year, compared to targeted operating results. Results from operations include incentive compensation expense of $8.2 million in 2022, $33.1 million in 2021 and $10.0 million in 2020, primarily for the AIP.