Note 16. Retirement Benefit Plans

The Company offers a qualified defined benefit pension plan, the Hancock Holding Company Pension Plan and Trust Agreement (“Pension Plan”), covering certain eligible associates. Eligibility is based on minimum age and service-related requirements. During the second quarter of 2017, the Pension Plan was amended to exclude any individual hired or rehired by the Company after June 30, 2017 from eligibility to participate. The Pension Plan amendment further provides that the accrued benefits of each participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 totals less than 55 will be frozen as of January 1, 2018 and will not thereafter increase. As a result of the plan amendments, pension assets and the benefit obligations were re-measured as of June 30, 2017. The impact of the amendment to the benefit obligation was a reduction of $17.3 million. The Company makes contributions to this pension plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. The Company does not anticipate making a contribution to the pension plan during 2018.

The Company also offers a defined contribution retirement benefit plan (401(k) plan), the Hancock Holding Company 401(k) Savings Plan and Trust Agreement (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan. The 401(k) Plan was also amended during the second quarter of 2017 for participants whose benefits are frozen under the Pension Plan to add an enhanced Company contribution beginning January 1, 2018, in the amount of 2%, 4% or 6% of such participant’s eligible compensation, based on the participant’s age and years of service with the Company. The 401(k) Plan’s amendment further provides that the Company will contribute to the benefit of those associates of the Company hired or rehired after June 30, 2017 and those associates of the Company never enrolled in the Pension Plan an additional basic contribution in an amount equal to 2% of the associate’s eligible compensation beginning January 1, 2018. Participants will vest in the new basic and enhanced Company contributions upon completion of three years of service.

The Company’s 401(k) plan matching expense totaled $8.4 million, $7.7 million and $7.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Certain associates who were designated executive officers of Whitney Holding Company and/or Whitney National Bank before the acquisition by the Company are also covered by an unfunded nonqualified defined benefit pension plan. The benefits under this nonqualified plan were designed to supplement amounts to be paid under the defined benefit plan previously maintained for employees of Whitney Holding Company and/or Whitney National Bank (the “Whitney Pension Plan”), and are calculated using the Whitney Pension Plan’s formula, but without applying the restrictions imposed on qualified plans by certain provisions of the Internal Revenue Code. Accrued benefits under this plan were frozen as of December 31, 2012 in connection with the merger of the Whitney Pension Plan into the Company’s qualified defined benefit pension plan, and no future benefits will be accrued under this plan.

The Company also sponsors defined benefit postretirement plans for certain associates. The Hancock postretirement plans are available only to associates hired by the Company prior to January 1, 2000. The Hancock plans provide health care and life insurance benefits to retiring associates who participate in medical and/or group life insurance benefit plans for active associates and have reached 55 years of age with ten years of service, at the time of retirement. The postretirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain employer contribution maximums.

The Whitney postretirement plans are available only to former employees of Whitney Holding Company and/or Whitney National Bank who meet the eligibility requirements, and offer health care and life insurance benefits for eligible retirees and their eligible dependents. Participant contributions are required under the health plan. These plans restrict eligibility for postretirement health benefits to retirees already receiving benefits as of the date of the plan amendments in 2007 and to those active participants who were eligible to receive benefits as of December 31, 2007 (i.e., were age 55 with ten years of credited service). Life insurance benefits are currently only available to associates who retired before December 31, 2007.

The Company assumed certain trends in health care costs in the determination of the benefit obligations. At December 31, 2017, the plans assumed a 8.0% increase in the pre- and post-Medicare age health costs for 2018, declining over a period of ten years to a 5.0% annual rate. At December 31, 2017, the mortality assumption was based on Revised RP-2014 Employee and Healthy Annuitants Bottom Quartile Generational Mortality Table for Males and Females - Projected with Improvement Scale MP-2017. At December 31, 2016, the mortality assumption was based on the Revised RP-2014 Employee Health Annuitants Bottom Quartile Table for Males and Females, with projected improvement MP-2016. In 2016, the post-retirement benefit plan was amended to change post-65 coverage resulting in a re-measurement of the benefit obligation.

The following tables detail the changes in the benefit obligations and plan assets of the defined benefit plans for the years ended December 31, 2017 and 2016 as well as the funded status of the plans at each year end and the amounts recognized in the Company’s balance sheets. The Company uses a December 31 measurement date for all defined benefit pension plans and other postretirement benefit plans.



	2017		2016		2017		2016
(in thousands)	Pension Benefits				Other Post- Retirement Benefits
Change in benefit obligation
Benefit obligation:
at beginning of year	$	479,281	$	462,819	$	22,481	$	22,281
Service cost		15,381		14,098		129		170
Interest cost		16,514		16,907		668		773
Plan participants' contributions		—		—		636		1,269
Plan amendments		(17,315)		—		—		(1,224)
Net actuarial loss		39,419		16,944		993		1,844
Benefits paid		(19,436)		(31,487)		(1,871)		(2,632)
Benefit obligation, end of year		513,844		479,281		23,036		22,481
Change in plan assets
Fair value of plan assets:
at beginning of year		515,555		491,550		—		—
Actual return on plan assets		68,307		40,375		—		—
Employer contributions		1,132		16,123		1,235		1,363
Plan participants' contributions		—		—		636		1,269
Benefit payments		(19,436)		(31,487)		(1,871)		(2,632)
Expenses		(1,193)		(1,006)		—		—
Fair value of plan assets, end of year		564,365		515,555		—		—
Funded status at end of year - net asset (liability)	$	50,521	$	36,274	$	(23,036)	$	(22,481)
Amounts recognized in accumulated other comprehensive loss
Unrecognized loss:
at beginning of year	$	115,910	$	109,565	$	(2,078)	$	(2,553)
Net actuarial loss (gain)		(12,932)		6,345		1,346		475
Unrecognized loss at end of year	$	102,978	$	115,910	$	(732)	$	(2,078)

Projected benefit obligation	$	513,844	$	479,281
Accumulated benefit obligation		489,075		443,261
Fair value of plan assets		564,365		515,555

The net funded status of $50.5 million for pension benefits plans includes an excess of plan assets over the benefit obligation of $66.2 million on the defined benefit pension plan, offset by an unfunded benefit obligation of $15.7 million for the nonqualified retirement plan.

The following table shows net periodic benefit cost included in expense and the changes in the amounts recognized in AOCI during 2017, 2016, and 2015.



	Years Ended December 31,
	2017		2016		2015		2017		2016		2015
($ in thousands)	Pension Benefits						Other Post-Retirement Benefits
Net periodic benefit cost
Service cost	$	15,381	$	14,098	$	13,511	$	129	$	170	$	117
Interest cost		16,514		16,907		18,635		668		773		891
Expected return on plan assets		(37,632)		(34,554)		(32,833)		—		—		—
Amortization of net loss/ prior service cost		5,554		5,783		3,169		(353)		145		6
Net periodic benefit cost		(183)		2,234		2,482		444		1,088		1,014
Other changes in plan assets and benefit obligations recognized in other comprehensive income, before taxes
Net (loss) gain recognized during the year		(5,554)		(5,783)		(3,169)		353		(145)		(6)
Net actuarial loss (gain)		(7,378)		12,128		39,876		993		620		(5,905)
Total recognized in other comprehensive income		(12,932)		6,345		36,707		1,346		475		(5,911)
Total recognized in net periodic benefit cost and other comprehensive income	$	(13,115)	$	8,579	$	39,189	$	1,790	$	1,563	$	(4,897)

Discount rate for benefit obligations		3.57%		4.10%		4.40%		3.52%		3.95%		4.32%
Discount rate for net periodic benefit cost		4.10%		4.40%		4.11%		3.95%		4.32%		4.02%
Expected long-term return on plan assets		7.25%		7.25%		7.50%		n/a		n/a		n/a
Rate of compensation increase		scaled *		scaled *		scaled *		n/a		n/a		n/a

* Graded scale, declining from 7.00% at age 20 to 2.00% at age 60

The long term rate of return on plan assets is determined by using the weighted-average of historical real returns for major asset classes based on target asset allocations. The discount rates for the benefit obligation were calculated by matching expected future cash flows to the BPSM-AA Only Pension Discount Curve for 2017 and to the Wells Fargo Pension Discount Curve Liability Index for 2016.

The following shows expected plan benefit payments over the ten years following December 31, 2017:



(in thousands)	Pension		Post-Retirement		Total
2018	$	21,143	$	1,346	$	22,489
2019		21,869		1,364		23,233
2020		22,882		1,350		24,232
2021		23,881		1,404		25,285
2022		24,824		1,320		26,144
2023-2027		140,214		6,394		146,608
	$	254,813	$	13,178	$	267,991

The expected benefit payments are estimated based on the same assumptions used to measure the Company’s benefit obligations at December 31, 2017.

The estimated amounts of actuarial loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next year is $4.0 million.

The following table illustrates the effect on the annual periodic postretirement benefit costs and postretirement benefit obligation of a 1% increase or 1% decrease in the assumed health care cost trend rates from the rates assumed at December 31, 2017:



	1% Decrease		Assumed		1% Increase
(in thousands)	in Rates		Rates		in Rates
Aggregated service and interest cost	$	722	$	797	$	889
Postretirement benefit obligation		20,964		23,036		25,564

The fair values of pension plan assets at December 31, 2017 and 2016, by asset category, are shown in the following tables. The fair value is presented based on the Financial Accounting Standards Board’s fair value hierarchy that prioritizes inputs into the valuation techniques used to measure fair value. Level 1 uses quoted prices in active markets for identical assets, Level 2 uses significant observable inputs, and Level 3 uses significant unobservable inputs. In accordance with Subtopic 820-10 common trust funds are reported at fair value using net asset value per share (or its equivalent) as a practical expedient and are not classified in the fair value hierarchy.

For all investments, the plan attempts to use quoted market prices of identical assets on active exchanges, or Level 1 measurements. Where such quoted market prices are not available, the plan will use quoted prices for similar instruments or discounted cash flows to estimate the value, reported as Level 2.



	December 31, 2017
Fair Value Measurements by Asset Category / Fund		Level 1		Level 2		Level 3	Total
(in thousands)
Cash and equivalents	$	5,496	$	—	$	—	$	5,496
Total cash and cash equivalents		5,496		—		—		5,496

Fixed income securities		—		113,169		162		113,331
Mutual fund-fixed income		31,839		—		—		31,839
Total fixed income		31,839		113,169		162		145,170

Domestic and foreign stock		102,416		6		—		102,422
Mutual funds-equity		168,299		—		—		168,299
Total equity		270,715		6		—		270,721

Real assets fund		—		—		—		—
Total assets at fair value		308,050		113,175		162		421,387
Common trust funds (fixed income)		—		—		—		114,068
Common trust fund (real assets)		—		—		—		28,910
Total	$	308,050	$	113,175	$	162	$	564,365



	December 31, 2016
Fair Value Measurements by Asset Category / Fund		Level 1		Level 2		Level 3		Total
(in thousands)
Cash and equivalents	$	15,568	$	—	$	—	$	15,568
Total cash and cash equivalents		15,568		—		—		15,568

Fixed income securities		—		136,085		—		136,085
Mutual fund-fixed income		48,805		—		—		48,805
Total fixed income		48,805		136,085		—		184,890

Domestic and foreign stock		104,455		6		—		104,461
Mutual funds-equity		157,630		—		—		157,630
Total equity		262,085		6		—		262,091

Real assets fund		27,690		—		—		27,690
Total assets at fair value		354,148		136,091		—		490,239
Common trust fund (fixed income)		—		—		—		25,316
Total	$	354,148	$	136,091	$	—	$	515,555

The following table presents the percentage allocation of the plan assets by asset category and corresponding target allocations at December 31, 2017 and 2016.


	Plan Assets				Target Allocation
	at December 31,				at December 31,
Asset category	2017		2016		2017	2016
Cash and equivalents	1	%	3	%	0 - 5%	0 - 5%
Fixed income securities	46		41		35 - 63%	25 - 65%
Equity securities	48		51		35 - 51%	30 - 60%
Real assets	5		5		0 - 12%	0 - 10%
	100	%	100	%

Plan assets are invested in long-term strategies and evaluated within the context of a long-term investment horizon. Plan assets will be diversified across multiple asset classes so as to minimize the risk of large losses. Short-term fluctuations in value will be considered secondary to long-term results. The Company employs a total return approach whereby a diversified mix of asset class investments are used to maximize the long-term return of plan assets for an acceptable level of risk. Risk tolerance is established through careful consideration of the plan liabilities, plan funded status and the Company’s financial condition. The investment performance of the plan is regularly monitored to ensure that appropriate risk levels are being taken and to evaluate returns versus a suitable market benchmark. The benefits investment committee meets periodically to review the policy, strategy, and performance of the plans.