Note 9 - Employee Benefit Plans

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Retirement Benefits [Text Block]

Note 9: 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, 2020, and the funded status as of December 31, 2020 and December 31, 2019 (in thousands):

	Pension Benefits
	2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	172,909		$	144,638
Service cost		5,334			4,401
Interest cost		5,618			6,482
Change due to mortality change		(1,521	)		(2,130	)
Change due to discount rate change		17,040			25,806
Actuarial return (loss)		121			(395	)
Benefits paid		(6,547	)		(5,893	)
Benefit obligation at end of year		192,954			172,909
Change in fair value of plan assets:
Fair value of plan assets at beginning of year		116,067			96,329
Actual return on plan assets		14,801			21,536
Employer contributions		23,731			4,095
Benefits paid		(6,547	)		(5,893	)
Fair value of plan assets at end of year		148,052			116,067
Underfunded status at end of year	$	(44,902	)	$	(56,842	)

The following table provides the amounts recognized in the consolidated balance sheets as of December 31, 2020 and December 31, 2019 (in thousands):

	Pension Benefits
	2020			2019
Current liabilities:
Accrued benefit liability	$	(758	)	$	(622	)
Non- current pension liability:
Accrued benefit liability		(44,144	)		(56,219	)
Accumulated other comprehensive loss		53,085			49,525
Net amount recognized	$	8,183		$	(7,316	)

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

	Pension Benefits
	2020			2019
Discount rate: net periodic pension cost		3.32	%		4.59	%
Discount rate: projected benefit obligation		2.64	%		3.32	%
Expected rate of return on plan assets		6.45	%		6.37	%
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, 2020 and December 31, 2019, 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 6.4%. 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 2020, 2019, and 2018 (in thousands):

	Pension Benefits
	2020			2019			2018
Service cost	$	5,334		$	4,401		$	5,009
Interest cost		5,618			6,482			5,508
Expected return on plan assets		(7,489	)		(5,982	)		(6,536	)
Amortization of prior service benefit		117			61			61
Amortization of net gain from earlier periods		4,652			4,389			3,726
Net periodic pension cost	$	8,232		$	9,351		$	7,768

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. The net expense of $2.9 million, $5.0 million and $2.8 million for 2020, 2019, and 2018, 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.

The allocations of investments at December 31, 2020 and December 31, 2019, 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
	2020			2019			2020			2019
Cash		—	%		6	%		—	%		6	%
Large cap U.S. equities		17	%		14	%		16	%		14	%
Small cap U.S. equities		8	%		7	%		9	%		7	%
Non-U.S. equities		26	%		22	%		26	%		22	%
Fixed income		21	%		19	%		21	%		19	%
Real estate		11	%		14	%		12	%		15	%
Absolute return hedge funds		5	%		5	%		4	%		5	%
Company stock		12	%		13	%		12	%		12	%
Total		100	%		100	%		100	%		100	%

"Company stock" asset category in the table above includes our common stock in the amounts of $17.2 million and $14.7 million at December 31, 2020 and December 31, 2019, respectively, in total for both plans.

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, 2020 (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	$	367	$	—	$	—	$	367	$	111	$	—	$	—	$	111
Common stock		13,947		—		—		13,947		3,203		—		—		3,203
Mutual funds		69,994		—		—		69,994		15,786		—		—		15,786
Total investments in the fair value hierarchy		84,308		—		—		84,308		19,100		—		—		19,100
Investments measured at net asset value
Real estate funds								12,708								3,428
Hedge funds								5,823								1,215
Common collective funds								17,545								3,925
Total investments measured at net asset value								36,076								8,568
Total fair value	$	84,308	$	—	$	—	$	120,384	$	19,100	$	—	$	—	$	27,668

The fair values by asset category in each plan, along with their hierarchy levels, were 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

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, 2020, 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
2021	$	8,314
2022		8,199
2023		8,420
2024		8,661
2025		9,419
Years 2026-2030		47,269

During 2020, we contributed $16.0 million in shares of our common stock, and contributed $6.0 million in cash, to our defined benefit plans. In January 2021, we contributed $16.8 million in shares of our common stock to our supplemental executive retirement plan. We do not expect to be required to contribute to our defined benefit plans in 2021, but we may choose to do so. We expect to contribute an additional approximately $0.8 million to our supplemental executive retirement plan during 2021.

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, 2020				December 31, 2019
	ABO Exceeds Plan Assets		Plan Assets Exceed ABO		ABO Exceeds Plan Assets		Plan Assets Exceed ABO
Projected benefit obligation	$	192,954	$	—	$	172,908	$	—
Accumulated benefit obligation		189,931		—		168,239		—
Fair value of plan assets		148,051		—		116,067		—

For the pension plans, the following amounts are included in "Accumulated other comprehensive loss, net" on our balance sheet as of December 31, 2020, that have not yet been recognized as components of net periodic benefit cost (in thousands):

	Pension Benefits
Unamortized net (gain)/loss	$	51,660
Unamortized prior service cost		1,425

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 an employee and employer contributory, earnings-related social insurance program, and (ii) the Old Age Security program. 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 $4.6 million in 2020, $3.9 million in 2019, and $3.7 million in 2018. 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 2020, 2019, and 2018.

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 2020, $10,000 in 2019, and $4,000 in 2018.