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Employee Benefits
 12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
EMPLOYEE BENEFITS EMPLOYEE BENEFITS 
We maintain a qualified defined benefit pension plan, or Plan, covering substantially all employees hired prior to January 1, 2008. The benefits are based on years of service and the employee’s compensation for the highest five consecutive years in the last ten years through March 31, 2016 when the Plan was frozen. Contributions are intended to provide for benefits attributed to employee service to date and for those benefits expected to be earned in the future.
Our qualified and nonqualified defined benefit plans were amended to freeze benefit accruals for all persons entitled to benefits under the plan in 2016. We will continue recording pension expense related to these plans, primarily representing interest costs on the accumulated benefit obligation and amortization of actuarial losses accumulated in the plan, as well as income from expected investment returns on pension assets. Since the plans have been frozen, no service costs are included in net periodic pension expense. The expected long-term rate of return on plan assets is 3.45 percent.
The following table summarizes the activity in the benefit obligation and Plan assets deriving the funded status:
(dollars in thousands)20202019
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year$113,679 $95,200 
Interest cost3,456 3,987 
Actuarial gain/(loss)10,525 13,996 
Acquisitions - DNB merger— 6,778 
Benefits paid(10,154)(6,282)
Projected Benefit Obligation at End of Year$117,506 $113,679 
Change in Plan Assets
Fair value of plan assets at beginning of year$116,652 $101,765 
Actual return on plan assets15,731 16,358 
Employer contributions115 — 
Acquisitions - DNB merger— 4,811 
Benefits paid(10,154)(6,282)
Fair Value of Plan Assets at End of Year$122,344 $116,652 
Funded Status$4,838 $2,973 
The following table sets forth the amounts recognized in accumulated other comprehensive income at December 31:
(dollars in thousands)20202019
Net actuarial loss(19,572)(23,106)
Total (Before Tax Effects)
$(19,572)$(23,106)
Below are the actuarial weighted average assumptions used in determining the benefit obligation:
20202019
Discount rate2.48 %3.25 %
Rate of compensation increase(1)
- %— %
(1)Rate of compensation increase is not applicable for 2020 and 2019 due to the amendment to freeze benefit accruals under the qualified and nonqualified defined benefit pension plans effective March 31, 2016.
The following table summarizes the components of net periodic pension cost and other changes in Plan assets and benefit obligations recognized in other comprehensive loss for the years ended December 31:
(dollars in thousands)202020192018
Components of Net Periodic Pension Cost
Interest cost on projected benefit obligation3,456 3,987 3,882 
Expected return on plan assets(3,925)(4,731)(6,266)
Amortization of prior service credit - DNB merger— 7 — 
Recognized net actuarial loss1,419 1,604 2,134 
Settlement charge833 — — 
Net Periodic Pension Expense$1,783 $867 $(250)
Other Changes in Plan Assets and Benefit Obligation Recognized in Other Comprehensive Income (Loss)
Net actuarial loss/(gain)$(1,282)$2,370 $(3,271)
Recognized net actuarial loss(1,419)(1,604)(2,134)
Settlement loss recognized(833)— — 
Recognized prior service credit— — — 
Total (Before Tax Effects)$(3,534)$766 $(5,405)
Total Recognized in Net Benefit Cost and Other Comprehensive Income/(Loss) (Before Tax Effects)$(1,751)$1,633 $(5,655)
The following table summarizes the actuarial weighted average assumptions used in determining net periodic pension cost:
202020192018
Discount rate3.25 %4.31 %3.75 %
Rate of compensation increase(1)
- %— %— %
Expected return on assets3.45 %4.80 %7.50 %
(1)Rate of compensation increase is not applicable for 2020, 2019, and 2018 due to the amendment to freeze benefit accruals under the qualified and nonqualified defined benefit pension plans effective March 31, 2016.
The accumulated benefit obligation for the Plan was $117.5 million at December 31, 2020 and $113.7 million at December 31, 2019.
We consider many factors when setting the assumed rate of return on Plan assets. As a general guideline the assumed rate of return is equal to the weighted average of the expected returns for each asset category and is estimated based on historical returns as well as expected future returns. The weighted average discount rate is derived from corporate yield curves.
S&T Bank’s Retirement Plan Committee determines the investment policy for the Plan. In general, the targeted asset allocation is 5 percent to 15 percent equities and alternatives and 85 percent to 95 percent fixed income. A strategic allocation within each asset class is based on the Plan’s duration, time horizon, risk tolerances, performance expectations, and asset class preferences. Investment managers have discretion to invest in any equity or fixed-income asset class, subject to the securities guidelines of the Plan’s Investment Policy Statement. At this time, S&T Bank is not required to make a cash contribution to the Plan in 2021.
The following table provides information regarding estimated future benefit payments to be paid in each of the next five years and in the aggregate for the five years thereafter:
(dollars in thousands)Amount
2021$8,200 
20227,535 
20237,364 
20247,548 
20257,020 
2026 - 203032,237 
We also have nonqualified supplemental executive pension plans, or SERPs, for certain key employees. The SERPs are unfunded. The projected benefit obligations related to the SERPs were $5.6 million and $5.3 million at December 31, 2020 and 2019. These amounts also represent the net amount recognized in the statement of financial position for the SERPs. Net periodic benefit costs for the SERPs were $0.7 million for the year ended December 31, 2020 and $0.4 million for the year ended December 31, 2019 and 0.5 million for the year ended December 31, 2018. Additionally, $2.4 million before tax was reflected in accumulated other comprehensive income (loss) at December 31, 2020 and 2019 and $1.9 million at December 31, 2018, in relation to the SERPs. Net periodic benefit cost of $0.7 million for the year ended December 31, 2020 included a settlement charge of $0.2 million. The actuarial assumptions used for the SERPs are the same as those used for the Plan.
We maintain a Thrift Plan, a qualified defined contribution plan, in which substantially all employees are eligible to participate. We make matching contributions to the Thrift Plan up to 3.5 percent of participants’ eligible compensation and may make additional profit-sharing contributions as provided by the Thrift Plan. Expense related to these contributions amounted to $2.4 million in 2020, $2.0 million in 2019 and $1.7 million in 2018.
Fair Value Measurements
The following tables present our Plan assets measured at fair value on a recurring basis by fair value hierarchy level at December 31, 2020 and 2019. During the years ended December 31, 2020 and 2019 there were no transfers between Level 1 and Level 2 for items of a recurring basis. There were no purchases or transfers of Level 3 plan assets in 2020 or 2019.
December 31, 2020
Fair Value Asset Classes(1)
(dollars in thousands)Level 1Level 2Level 3Total
Cash and cash equivalents(2)
$1,563 $— $— $1,563 
Fixed income(3)
108,583 — — 108,583 
Equities:
Equity index mutual funds—international(4)
3,332 — — 3,332 
Domestic individual equities(5)
8,866 — — 8,866 
Total Assets at Fair Value$122,344 $— $— $122,344 
(1)Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy.
(2)This asset class includes FDIC insured money market instruments.
(3)This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the U.S. dollar.
(4)The sole investment within this asset class is the Vanguard Total International Stock Index Fund Admiral Shares.
(5)This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.
December 31, 2019
Fair Value Asset Classes(1)
(dollars in thousands)Level 1Level 2Level 3Total
Cash and cash equivalents(2)
$1,831 $— $— $1,831 
Fixed income(3)
101,320 — — 101,320 
Equities:
Equity index mutual funds—international(4)
3,066 — — 3,066 
Domestic individual equities(5)
10,435 — — 10,435 
Total Assets at Fair Value$116,652 $— $— $116,652 
(1)Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy.
(2)This asset class includes FDIC insured money market instruments.
(3)This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the U.S. dollar.
(4)The sole investment within this asset class is Vanguard Total International Stock Index Fund Admiral Shares.
(5)This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.