Note 8 - Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 8: Employee Benefit Plans

Pensions and Other Post-retirement Plans

We sponsor defined benefit pension plans covering substantially all U.S. employees. The following tables provide a reconciliation of the changes in the plans’ benefit obligations and fair value of assets over the two-year period ended December 31, 2019, and the funded status as of December 31, 2019 and December 31, 2018 (in thousands):

	Pension Benefits
	2019			2018
Change in benefit obligation:
Benefit obligation at beginning of year	$	144,638		$	147,023
Service cost		4,401			5,009
Interest cost		6,482			5,508
Amendments					—
Change due to mortality change		(2,130	)		2,713
Change due to discount rate change		25,806			(13,716	)
Actuarial loss		(395	)		3,487
Benefits paid		(5,893	)		(5,386	)
Benefit obligation at end of year		172,909			144,638
Change in fair value of plan assets:
Fair value of plan assets at beginning of year		96,329			99,922
Actual (loss) return on plan assets		21,536			(8,772	)
Employer contributions		4,095			10,565
Benefits paid		(5,893	)		(5,386	)
Fair value of plan assets at end of year		116,067			96,329
Underfunded status at end of year	$	(56,842	)	$	(48,309	)

The following table provides the amounts recognized in the consolidated balance sheets as of December 31, 2019 and December 31, 2018 (in thousands):

	Pension Benefits
	2019			2018
Current liabilities:
Accrued benefit liability	$	(622	)	$	(597	)
Non- current pension liability:
Accrued benefit liability		(56,219	)		(47,711	)
Accumulated other comprehensive loss		49,525			46,248
Net amount recognized	$	(7,316	)	$	(2,060	)

The benefit obligation and prepaid benefit costs were calculated by applying the following weighted average assumptions:

	Pension Benefits
	2019			2018
Discount rate: net periodic pension cost		4.59	%		3.83	%
Discount rate: projected benefit obligation		3.32	%		4.59	%
Expected rate of return on plan assets		6.37	%		6.62	%
Rate of compensation increase: net periodic pension cost		2.00	%		2.00	%
Rate of compensation increase: projected benefit obligation		2.00	%		2.00	%

The above assumptions were calculated based on information as of December 31, 2019 and December 31, 2018, the measurement dates for the plans. The discount rate is based on the yield curve for investment-grade corporate bonds as published by the U.S. Treasury Department. The expected rate of return on plan assets is based upon consideration of the plan’s current asset mix, historical long-term return rates and the plan’s historical performance. Our current assumption for the rate on plan assets is 6.45%. The vested benefit obligation is determined based on the actuarial present value of benefits to which employees are currently entitled, based on employees' expected date of separation or retirement.

Net periodic pension cost for the plans consisted of the following in 2019, 2018, and 2017 (in thousands):

	Pension Benefits
	2019			2018			2017
Service cost	$	4,401		$	5,009		$	4,786
Interest cost		6,482			5,508			5,356
Expected return on plan assets		(5,982	)		(6,536	)		(5,849	)
Amortization of prior service benefit		61			61			(337	)
Amortization of net gain from earlier periods		4,389			3,726			4,132
Net periodic pension cost	$	9,351		$	7,768		$	8,088

For 2019 and 2018, the service cost component of net periodic pension cost is included in the same line items of our consolidated financial statements as other employee compensation costs, and the net expense of $5.0 million and $2.8 million, respectively, related to all other components of net periodic pension cost is included in other (expense) income on our consolidated statements of operations and comprehensive (loss) income. For 2017, all components of net periodic pension cost are included in the same line items of our consolidated financial statements as other employee compensation costs.

The allocations of investments at December 31, 2019 and December 31, 2018, the measurement dates of the plan, by asset category in the Hecla Mining Company Retirement Plan and the Lucky Friday Pension Plan are as follows:

	Hecla						Lucky Friday
	2019			2018			2019			2018
Cash		6	%		1	%		6	%		1	%
Large cap U.S. equities		14	%		15	%		14	%		15	%
Small cap U.S. equities		7	%		6	%		7	%		6	%
Non-U.S. equities		22	%		23	%		22	%		23	%
Fixed income		19	%		24	%		19	%		24	%
Real estate		14	%		15	%		15	%		17	%
Absolute return hedge funds		5	%		6	%		5	%		6	%
Company stock		13	%		10	%		12	%		8	%
Total		100	%		100	%		100	%		100	%

"Company stock" asset category in the table above includes our common stock in the amounts of $14.7 million and $9.3 million at December 31, 2019 and December 31, 2018.

Each plan's statement of investment policy delineates the responsibilities of the board, the retirement/pension committee, the investment manager(s), and investment adviser/consultant, and provides guidelines on investment management. Investment objectives are established for each of the asset categories included in the pension plans with comparisons of performance against appropriate benchmarks. Each plan's policy calls for investments to be supervised by qualified investment managers. The investment managers are monitored on an ongoing basis by our outside consultant, with formal reporting to us and the consultant performed each quarter. The policy sets forth the following allocation of assets:

	Target			Maximum
Large cap U.S. equities		17	%		20	%
Small cap U.S. equities		8	%		10	%
Non-U.S. equities		25	%		30	%
Fixed income		23	%		28	%
Real estate		15	%		18	%
Absolute return		5	%		7	%
Company stock/Real return		7	%		13	%

Each plan's statement of investment policy and objectives aspires to achieve the assumed long term rate of return on plan assets established by the plan’s actuary plus one percent.

Accounting guidance has established a hierarchy of assets measured at fair value on a recurring basis. The three levels included in the hierarchy are:

Level 1: quoted prices in active markets for identical assets or liabilities

Level 2: significant other observable inputs

Level 3: significant unobservable inputs

The fair values by asset category in each plan, along with their hierarchy levels, are as follows as of December 31, 2019 (in thousands):

	Hecla								Lucky Friday
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Investments measured at fair value
Interest-bearing cash	$	5,709	$	—	$	—	$	5,709	$	1,441	$	—	$	—	$	1,441
Common stock		11,835		—		—		11,835		2,827		—		—		2,827
Mutual funds		46,317		—		—		46,317		10,999		—		—		10,999
Total investments in the fair value hierarchy		63,861		—		—		63,861		15,267		—		—		15,267
Investments measured at net asset value
Real estate funds								12,659								3,445
Hedge funds								4,336								1,161
Common collective funds								12,255								3,083
Total investments measured at net asset value								29,250								7,689
Total fair value	$	63,861	$	—	$	—	$	93,111	$	15,267	$	—	$	—	$	22,956

The fair values by asset category in each plan, along with their hierarchy levels, were as follows as of December 31, 2018 (in thousands):

	Hecla								Lucky Friday
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Investments measured at fair value
Interest-bearing cash	$	389	$	—	$	—	$	389	$	111	$	—	$	—	$	111
Common stock		7,874		—		—		7,874		1,428		—		—		1,428
Mutual funds		43,960		—		—		43,960		10,431		—		—		10,431
Total investments in the fair value hierarchy		52,223		—		—		52,223		11,970		—		—		11,970
Investments measured at net asset value
Real estate funds								11,926								3,231
Hedge funds								4,283								1,149
Common collective funds								9,221								2,326
Total investments measured at net asset value		—		—		—		25,430		—		—		—		6,706
Total fair value	$	52,223	$	—	$	—	$	77,653	$	11,970	$	—	$	—	$	18,676

Generally, investments are valued based on information provided by fund managers to each plan's trustee as reviewed by management and its investment advisers. Mutual funds and equities are valued based on available exchange data. Commingled equity funds consist of publicly-traded investments.

Fair value for real estate funds, hedge funds and common collective equity funds is measured using the net asset value per share (or its equivalent) practical expedient ("NAV"), and has not been categorized in the fair value hierarchy. There are no unfunded commitments related to these investments. There are no restrictions on redemptions of these funds as of December 31, 2019, except as limited by the redemption terms discussed below. The following summarizes information on the asset classes measured using NAV:

	Investment strategy	Redemption terms
Real estate funds	Invest in real estate properties among the four major property types (office, industrial, retail and multi-family)	Allowed quarterly with notice of between 45 and 60 days
Hedge funds	Invest in a variety of asset classes which aim to diversify sources of returns	Allowed quarterly with notice of 90 days
Common collective funds	Invest in U.S. large cap or small/medium cap public equities in actively traded managed equity portfolios	Allowed daily or with notice of 30 days

The following are estimates of future benefit payments, which reflect expected future service as appropriate, related to our pension plans (in thousands):

Year Ending December 31,	Pension Plans
2020	$	7,383
2021		7,620
2022		8,126
2023		8,385
2024		8,624
Years 2025-2029		46,076

In May 2019, we contributed $3.6 million in common stock to our defined benefit plans. We expect to contribute a total of $6.8 million in cash or shares of our common stock to our defined benefit plans in 2020. We expect to contribute approximately $0.6 million to our unfunded supplemental executive retirement plan during 2020.

The following table indicates whether our pension plans had accumulated benefit obligations ("ABO") in excess of plan assets, or plan assets exceeded ABO (amounts are in thousands).

	December 31, 2019				December 31, 2018
	ABO Exceeds Plan Assets		Plan Assets Exceed ABO		ABO Exceeds Plan Assets		Plan Assets Exceed ABO
Projected benefit obligation	$	172,908	$	—	$	144,637	$	—
Accumulated benefit obligation		168,239		—		140,350		—
Fair value of plan assets		116,067		—		96,329		—

For the pension plans, the following amounts are included in "Accumulated other comprehensive loss, net" on our balance sheet as of December 31, 2019, that have not yet been recognized as components of net periodic benefit cost (in thousands):

	Pension Benefits
Unamortized net (gain)/loss	$	47,983
Unamortized prior service cost		1,542

The amounts in "Accumulated other comprehensive loss, net" expected to be recognized as components of net periodic benefit cost during 2020 are (in thousands):

	Pension Benefits
Amortization of net loss	$	4,652
Amortization of prior service benefit		117

We do not expect to have any of the pension plans’ assets returned during 2020.

Non-U.S. employees are not eligible to participate in the defined benefit pension plans that we maintain for U.S. employees. Canadian employees participate in Canada's public retirement income system, which includes the following components: (i) the Canada (or Quebec) Pension Plan, which is a contributory, earnings-related social insurance program, and (ii) the Old Age Security program. In addition, the Registered Retirement Savings Plan is a tax-deferred individual savings plan available to Canadian employees. Mexican employees participate in Mexico's public retirement income system, which is based on contributions the employee, employer and the government submit to the retirement savings system. The system is administered through savings accounts managed by private fund managers selected by the participant.

Capital Accumulation Plans

Our Capital Accumulation Plan ("Hecla 401(k) Plan") is available to all U.S. salaried and certain hourly employees and applies immediately upon employment. Employees may contribute from 1% to 50% of their annual compensation to the plan (subject to statutory limits). We make a matching contribution in the form of cash or stock of 100% of an employee’s contribution up to 6% of the employee’s earnings. Our matching contributions were approximately $3.9 million in 2019, $3.7 million in 2018, and $3.5 million in 2017. Payment of matching contributions to the Hecla 401(k) Plan is allowed to be made in Hecla common stock on a quarterly basis, which was done for 2019.

We also maintain a 401(k) plan that is available to all hourly employees at the Lucky Friday unit after completion of six months of service. Employees may contribute from 2% to 50% of their compensation to the plan (subject to statutory limits). The matching contribution is 55% of an employee’s contribution up to, but not exceeding, 5% of the employee’s earnings.  Our contributions were approximately $10,000 in 2019, $4,000 in 2018, and $114,000 in 2017, with the decrease in 2018 and 2019 due to the strike that ended in early January 2020 (see Note 11 for more information).