NOTE 14: PENSION AND OTHER RETIREMENT PLANS

Employee Pension Plans—The Tribune Company pension plan was frozen as of December 1998 in terms of pay and service. An employee stock ownership plan established in 1988 was fully allocated at the end of 2003 and was replaced by an enhanced 401(k) plan in 2004.

In connection with the Times Mirror acquisition, the Company assumed defined benefit pension plans and various other contributory and non-contributory retirement plans covering substantially all of Times Mirror’s former employees. In general, benefits under the Times Mirror defined benefit plans were based on the employee’s years of service and compensation during the last five years of employment. In December 2005, the pension plan benefits for former Times Mirror non-union and non-Newsday employees were frozen. In March 2006, the pension plan benefits for Newsday union and non-union employees were frozen. Benefits provided by Times Mirror’s Employee Stock Ownership Plan (“Times Mirror ESOP”), which was fully allocated as of December 31, 1994, are used to offset certain pension plan benefits and, as a result, the defined benefit plan obligations are net of the actuarially equivalent value of the benefits earned under the Times Mirror ESOP. The maximum offset is equal to the value of the benefits earned under the defined benefit plan.

Effective January 1, 2008, the Tribune Company pension plan was amended to provide a tax-qualified, non-contributory guaranteed cash balance benefit for eligible employees. In addition, effective December 31, 2007, the Tribune Company pension plan was amended to provide a special one-time initial cash balance benefit for eligible employees. On November 3, 2009, the Company announced that participant cash balance accounts in the Tribune Company pension plan would be frozen after an allocation equal to 3% of eligible compensation for the 2009 plan year was made to the accounts of eligible employees. Such an allocation was made during the first quarter of 2010.

The Company also maintains three small defined benefit pension plans for other employees and former employees and participates in several multiemployer pension plans on behalf of employees represented by certain unions. During 2011, two of these small Company-sponsored defined benefit pension plans were frozen. In March 2011, the pension plan benefits of The Baltimore Sun Company Retirement Plan for Mailers (the “Baltimore Mailers Plan”) were frozen in terms of pay and service for employees covered under the collective bargaining agreement between the Company and the Baltimore Mailers Union Local No. 888. In June 2011, the pension plan benefits of The Baltimore Sun Company Employees’ Retirement Plan were frozen in terms of pay and service for employees covered under the collective bargaining agreement between the Company and the Washington-Baltimore Newspaper Guild. The other small Company-sponsored defined benefit pension plan covers certain union employees covered by collective bargaining agreements and certain hourly employees not covered by a separate collective bargaining agreement. This plan is not frozen and represents less than 2% of the total projected benefit obligation for the Company-sponsored defined benefit pension plans at December 31, 2017.

Multiemployer Pension Plans—As discussed above, the Company contributes to various multiemployer pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer withdraws from or otherwise ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. Alternatively, if the Company chooses to stop participating in one of its multiemployer plans, it may incur a withdrawal liability based on the unfunded status of the plan. The Company’s contributions to multiemployer pension plans were $3 million for each of 2017, 2016 and 2015. Based on contributions reported in the most recent Form 5500 for the largest multiemployer pension plan, the Company’s contributions represent less than 5% of the plan’s total contributions. No multiemployer pension plan contributed to by the Company was individually significant. The Pension Protection Act of 2006 (“PPA”) zone status as of December 31, 2017 for the AFTRA Retirement Plan, which represented 94% of the Company’s contributions in 2017, was green based on the plan’s year-end at November 30, 2016. Pursuant to the PPA, a plan in the green zone is at least 80% funded. The Company’s participation in other plans was immaterial in 2017.

Postretirement Benefits Other Than Pensions—The Company provides postretirement health care and life insurance benefits to eligible employees under a variety of plans. There is some variation in the provisions of these plans, including different provisions for lifetime maximums, prescription drug coverage and certain other benefits. In 2015, the Company notified certain employees that it will no longer offer retiree medical coverage to employees who retire after January 1, 2016 as well as revised benefits for a certain group of plan participants that was effective January 1, 2016. These plan changes decreased the Company’s other postretirement benefit obligation by $4 million. This unrecognized gain will be recognized as amortization of prior service credits over 10 years, which represents the average remaining life expectancy of plan participants.

Obligations and Funded Status—As discussed in Note 1, the Company recognizes the overfunded or underfunded status of its defined benefit pension and other postretirement plans as an asset or liability in its Consolidated Balance Sheets and recognizes changes in that funded status in the year in which changes occur through comprehensive income (loss).

Summarized information for the Company’s defined benefit pension plans and other postretirement plans is provided below (in thousands):



	Pension Plans						Other Postretirement Plans
	December 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
Change in benefit obligations:
Projected benefit obligations, beginning of year	$	1,990,263		$	1,986,971		$	8,875		$	10,055
Service cost	768			692			—			—
Interest cost	78,195			82,724			264			320
Plan amendments	601			1,025			—			—
Impact of Medicare Reform Act	—			—			42			60
Actuarial loss (gain)	94,092			22,615			(593		)	(496		)
Benefits paid	(107,043		)	(103,764		)	(914		)	(1,064		)
Projected benefit obligations, end of year	2,056,876			1,990,263			7,674			8,875
Change in plans’ assets:
Fair value of plans’ assets, beginning of year	1,545,862			1,530,898			—			—
Actual return on plans’ assets	221,182			118,728			—			—
Employer contributions	—			—			914			1,064
Benefits paid	(107,043		)	(103,764		)	(914		)	(1,064		)
Fair value of plans’ assets, end of year	1,660,001			1,545,862			—			—
Under funded status of the plans	$	(396,875	)	$	(444,401	)	$	(7,674	)	$	(8,875	)

Amounts recognized in the Company’s Consolidated Balance Sheets consisted of (in thousands):



	Pension Plans						Other Postretirement Plans
	December 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
Employee compensation and benefits (1)	$	—		$	—		$	(1,157	)	$	(1,324	)
Pension obligations, net (2)	(396,875		)	(444,401		)	—			—
Postretirement medical, life and other benefits (2)	—			—			(6,517		)	(7,551		)
Net amount recognized	$	(396,875	)	$	(444,401	)	$	(7,674	)	$	(8,875	)


(1)	Included in current liabilities within the Company’s Consolidated Balance Sheets.


(2)	Included in non-current liabilities within the Company’s Consolidated Balance Sheets.

The accumulated benefit obligation, which excludes the impact of future compensation increases, for all defined benefit pension plans was $2.057 billion and $1.990 billion at December 31, 2017 and December 31, 2016, respectively.

The components of net periodic benefit (credit) cost for Company-sponsored plans were as follows (in thousands):



	Pension Plans									Other Postretirement Plans
	2017			2016			2015			2017			2016			2015
Service cost	$	768		$	692		$	709		$	—		$	—		$	81
Interest cost	78,195			82,724			81,815			264			320			451
Expected return on plans’ assets	(101,126		)	(107,616		)	(111,690		)	—			—			—
Recognized actuarial loss	—			—			—			—			—			25
Amortization of prior service costs (credits)	116			90			—			(380		)	(380		)	(81		)
Net periodic benefit (credit) cost	$	(22,047	)	$	(24,110	)	$	(29,166	)	$	(116	)	$	(60	)	$	476

Amounts included in the accumulated other comprehensive loss component of shareholders’ equity for Company-sponsored plans were as follows (in thousands):



	Pension Plans						Other Postretirement Plans					Total
	December 31, 2017			December 31, 2016			December 31, 2017		December 31, 2016			December 31, 2017			December 31, 2016
Unrecognized net actuarial (losses) gains, net of tax	$	(46,897	)	$	(66,212	)	$	176	$	(185	)	$	(46,721	)	$	(66,397	)
Unrecognized prior service (cost) credit, net of tax	(942		)	(568		)	1,851		2,082			909			1,514
Total	$	(47,839	)	$	(66,780	)	$	2,027	$	1,897		$	(45,812	)	$	(64,883	)

In accordance with ASC Topic 715, unrecognized net actuarial gains and losses will be recognized in net periodic pension expense over approximately 24 years, which represents the estimated average remaining life expectancy of the inactive participants receiving benefits, due to plans being frozen and participants are deemed inactive for purposes of determining remaining useful life. The Company’s policy is to incorporate asset-related gains and losses into the asset value used to calculate the expected return on plan assets and into the calculation of amortization of unrecognized net actuarial loss over a four-year period.

Assumptions—Weighted average assumptions used each year in accounting for pension benefits and other postretirement benefits were as follows:



	Pension Plans				Other Postretirement Plans
	2017		2016		2017		2016
Discount rate for expense	4.05	%	4.30	%	3.30	%	3.45	%
Discount rate for obligations	3.55	%	4.05	%	3.10	%	3.30	%
Long-term rate of return on plans’ assets for expense	6.60	%	7.00	%	—		—

The Company utilizes the Aon Hewitt AA-Only Bond Universe Yield Curve (the “Aon Hewitt Yield Curve”) for discounting future benefit obligations and calculating interest cost. The Aon Hewitt Yield Curve represents the yield on high quality (AA and above) corporate bonds that closely match the cash flows of the estimated payouts for the Company’s benefit obligations.

The Company used a multi-pronged approach to determine its 6.60% assumption for the long-term expected rate of return on pension plan assets. This approach included a review of actual historical returns achieved and anticipated long-term performance of each asset class. See the “Plan Assets” section below for further information.

For purposes of measuring postretirement health care costs for 2017, the Company assumed a 7.0% annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease gradually to 5.0% for 2024 and remain at that level thereafter. For purposes of measuring postretirement health care obligations at December 31, 2017, the Company assumed a 7.0% annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease gradually to 5.0% for 2025 and remain at that level thereafter.

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. As of December 31, 2017, a 1% change in assumed health care cost trend rates would have the following effects (in thousands):



	1% Increase		1% Decrease
Service cost and interest cost	$	7	$	(6	)
Projected benefit obligation	$	217	$	(199	)

Plan Assets—The Company’s investment strategy with respect to the Company’s pension plan assets is to invest in a variety of investments for long-term growth in order to satisfy the benefit obligations of the Company’s pension plans. Accordingly, when making investment decisions, the Company endeavors to strategically allocate assets within asset classes in order to enhance long-term real investment returns and reduce volatility.

The actual allocations for the pension assets at December 31, 2017 and December 31, 2016 and target allocations by asset class were as follows:



	Percentage of Plan Assets
	Actual Allocations				Target Allocations
Asset category:	2017		2016		2017		2016
Equity securities	52.7	%	53.4	%	50.0	%	50.0	%
Fixed income securities	40.7	%	39.6	%	45.0	%	45.0	%
Cash and other short-term investments	0.7	%	1.0	%	—		—
Other alternative investments	5.9	%	6.0	%	5.0	%	5.0	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

Actual allocations to each asset class varied from target allocations due to market value fluctuations, timing, and overall market volatility during the year. The asset allocation is monitored on a quarterly basis and rebalanced as necessary.

Equity securities are invested broadly in U.S. and non-U.S. companies and are diversified across countries, currencies, market capitalizations and investment styles. These securities use the S&P 500 (U.S. large cap), Russell 2000 (U.S. small cap) and MSCI All Country World Index ex-U.S. (non-U.S.) as their benchmarks.

Fixed income securities are invested in diversified portfolios that invest across the maturity spectrum and include primarily investment-grade securities with a minimum average quality rating of A and insurance annuity contracts. These securities use the Barclays Capital Aggregate (intermediate term bonds) and Barclays Capital Long Government/Credit (long bonds) U.S. Bond Indexes as their benchmarks.

Alternative investments include investments in private real estate assets, private equity funds and venture capital funds. The private equity and venture capital investments use the median internal rate of return for the given strategy and vintage year in the Thomson One/Cambridge database as their benchmarks. The real estate assets use the National Council of Real Estate Investment Fiduciaries Property Index as their benchmark.

The following tables set forth, by asset category, the Company’s pension plan assets as of December 31, 2017 and December 31, 2016, using the fair value hierarchy established under ASC Topic 820 and described in Note 10. The fair value hierarchy in the tables exclude certain investments which are valued using NAV as a practical expedient (in thousands):



	Pension Plan Assets as of December 31, 2017
	Level 1		Level 2			Level 3		Total
Pension plan assets measured at fair value:
Registered investment companies	$	704,141	$	—		$	—	$	704,141
Common/collective trusts	—		12,607			—		12,607
Fixed income:
U.S. government securities	—		250,792			—		250,792
Corporate bonds	—		294,362			—		294,362
Mortgage-backed and asset-backed securities	—		31,188			—		31,188
Other (1)	—		(35,330		)	—		(35,330		)
Pooled separate account	—		16,809			—		16,809
Total pension plan assets measured at fair value	$	704,141	$	570,428		$	—	1,274,569

Pension plan assets measured at NAV as a practical expedient (2)								360,382
Pension plan assets measured at contract value:
Insurance contracts								25,050
Total pension plan assets								$	1,660,001


(1)	Other includes pending net security purchases of $89 million.

(2)

Certain common/collective trusts, the 103-12 investment entity, the international equity limited liability company, real estate, private equity and venture capital limited partnerships that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.



	Pension Plan Assets as of December 31, 2016
	Level 1		Level 2			Level 3		Total
Pension plan assets measured at fair value:
Registered investment companies	$	575,884	$	—		$	—	$	575,884
Common/collective trusts	—		16,060			—		16,060
Fixed income:
U.S. government securities	—		200,782			—		200,782
Corporate bonds	—		264,451			—		264,451
Mortgage-backed and asset-backed securities	—		30,961			—		30,961
Other (1)	—		(9,155		)	—		(9,155		)
Pooled separate account	—		17,403			—		17,403
Total pension plan assets measured at fair value	$	575,884	$	520,502		$	—	1,096,386
Pension plan assets measured at NAV as a practical expedient (2)								424,875
Pension plan assets measured at contract value:
Insurance contracts								24,601
Total pension plan assets								$	1,545,862


(1)	Other includes pending net security purchases of $58 million.

(2)

Certain common/collective trusts, the 103-12 investment entity, the international equity limited partnership, real estate, private equity and venture capital limited partnerships that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.

Registered investment companies are valued at exchange listed prices for exchange traded registered investment companies, which are classified in Level 1 of the fair value hierarchy.

Common/collective trusts are valued on the basis of the relative interest of each participating investor in the fair value of the underlying assets of each of the respective common/collective trusts. Common/collective trusts contain underlying assets valued based on pricing from observable market information in a non-active market and are classified in Level 2 of the fair value hierarchy.

U.S. government securities consist of investments in treasury securities, investment grade municipal securities and unrated or non-investment grade municipal securities and are classified in Level 2 of the fair value hierarchy. U.S. government bonds not traded on an active market are valued at a price which is based on a compilation of primarily observable market information or a broker quote in a non-active market, and are classified in Level 2 of the fair value hierarchy. Corporate bonds, mortgage-backed securities and asset-backed securities are valued using evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences and are categorized in Level 2 of the fair value hierarchy.

The pooled separate account represents an insurance contract under which plan assets are administered through pooled funds. The pooled separate account portfolio may include investments in money market instruments, common stocks and government and corporate bonds and notes. The underlying assets are valued based on the net asset value as provided by the investment account manager and therefore the pooled separate account is classified in Level 2 of the fair value hierarchy.

Cash Flows—In 2017, the Company made no contributions to its qualified pension plans and $1 million to its other postretirement plans. The Company expects to contribute $36 million to its qualified pension plans and $1 million to its other postretirement plans in 2018.

Expected Future Benefit Payments—Benefit payments expected to be paid under the Company’s qualified pension plans and other postretirement benefit plans are summarized below. The benefit payments reflect expected future service, as appropriate (in thousands):



	Qualified Pension Plan Benefits		Other Postretirement Benefits
2018	$	116,955	$	1,157
2019	$	119,454	$	1,041
2020	$	121,577	$	929
2021	$	123,705	$	835
2022	$	125,289	$	745
2023-2027	$	628,065	$	2,570

Defined Contribution Plans—The Company maintains various qualified 401(k) savings plans, which permit eligible employees to make voluntary contributions on a pretax basis. The plans allow participants to invest their savings in various investments. The Company’s current qualified 401(k) savings plans provide for a matching contribution paid by the Company of 100% on the first 2% of eligible pay contributed by eligible employees and 50% on the next 4% of eligible pay contributed. The Tribune Company 401(k) Savings Plan and Tribune Media Company 401(k) Plan also provide for an annual discretionary profit sharing contribution tied to the Company achieving certain financial targets. The Company made contributions of $14 million, $16 million and $14 million, to certain of its defined contribution plans in 2017, 2016 and 2015, respectively. The Company recorded compensation expense related to its defined contribution plans from continuing operations of $13 million in each of 2017, 2016 and 2015. These expenses are included in SG&A in the Company’s Consolidated Statements of Operations.