Employee Benefit Plans

12 Months Ended

Dec. 31, 2023

Employee Benefit Plans

Employee Benefit Plans

13. Employee Benefit Plans

The company maintains an unfunded Arrow supplemental executive retirement plan (“SERP”) under which the company will pay supplemental pension benefits to certain employees upon retirement. As of December 31, 2023, there were 12 current and 25 former corporate officers participating in this plan. The Board determines those employees who are eligible to participate in the Arrow SERP.

The Arrow SERP, as amended, provides for the pension benefits to be based on a percentage of average final compensation, based on years of participation in the Arrow SERP. The Arrow SERP permits early retirement, with payments at a reduced rate, based on age and years of service subject to a minimum retirement age of 55.

The company uses a December 31 measurement date for the Arrow SERP benefit plan. Pension information for the years ended December 31 is as follows:

	Arrow SERP
(thousands)	2023			2022
Accumulated benefit obligation	$	77,737		$	74,438
Changes in projected benefit obligation:
Projected benefit obligation at beginning of year		84,148			105,474
Service cost		3,250			3,296
Interest cost		4,082			2,782
Actuarial loss (gain)		1,328			(25,709)
Benefits paid		(4,724)			(4,724)
Plan amendments		—			3,029
Projected benefit obligation at end of year		88,084			84,148
Funded status	$	(88,084)		$	(84,148)
Amounts recognized in the company's consolidated balance sheets:
Current liabilities	$	(6,186)		$	(5,084)
Noncurrent liabilities		(81,898)			(79,064)
Net liability at end of year	$	(88,084)		$	(84,148)
Components of net periodic pension cost:
Service cost	$	3,250		$	3,296
Interest cost		4,082			2,782
Amortization of prior service cost		336			—
Amortization of net loss		(668)			776
Net periodic pension cost	$	7,000		$	6,854
Weighted-average assumptions used to determine benefit obligation:
Discount rate		4.80	%		5.00	%
Rate of compensation increase		5.00	%		5.00	%
Expected return on plan assets		N/A			N/A
Weighted-average assumptions used to determine net periodic pension cost:
Discount rate		5.00	%		2.70	%
Rate of compensation increase		5.00	%		5.00	%
Expected return on plan assets		N/A			N/A

The amounts reported for net periodic pension cost and the respective benefit obligation amounts are dependent upon the actuarial assumptions used. The company reviews historical trends, future expectations, current market conditions, and external data to determine the assumptions. The discount rate represents the market rate for a high-quality corporate bond. The rate of compensation increase is determined by the company, based upon its long-term plans for such increases. The actuarial assumptions used to determine the net periodic pension cost are based upon the prior year’s assumptions used to determine the benefit obligation.

Benefit payments are expected to be paid as follows:

(thousands)	Arrow SERP
2024	$	6,186
2025		6,076
2026		6,238
2027		6,109
2028		6,136
2029 - 2033		36,358

As of December 31, 2023, the company had designated $114.9 million in assets to cover the ongoing costs of SERP payouts for both current and former executives. These assets were comprised primarily of life insurance policies and mutual fund investments, and $111.2 million of these investments were held in a rabbi trust. Contributions to the rabbi trust are irrevocable by the company. In the event of bankruptcy by the company, the assets held by the rabbi trust are subject to claims made by the company’s creditors.

Other Comprehensive Income Items

In 2023, 2022, and 2021, actuarial (losses) gains of $(1.0) million, $19.5 million, and $4.2 million, respectively, were recognized in other comprehensive income, net of related taxes, related to the Arrow SERP. In 2022, prior service (costs) of $(2.3) million were recognized in other comprehensive income, net of taxes. In 2023, 2022, and 2021, a reclassification adjustment of comprehensive income was recognized, net of related taxes, as a result of being recognized in net periodic pension cost for an actuarial (gain) loss of $(0.5) million, $0.6 million, and $1.9 million, respectively. In 2023, a reclassification adjustment of comprehensive income was recognized, net of related taxes, as a result of being recognized in net periodic pension cost for prior service costs of $0.3 million.

Accumulated other comprehensive income (loss) at December 31, 2023 and 2022 includes unrecognized actuarial gains, net of related taxes, of $7.3 million and $8.8 million, respectively, that have not yet been recognized in net periodic pension cost. Accumulated other comprehensive income (loss) at December 31, 2023 includes prior service (costs), net of related taxes, of $2.0 million that have not yet been recognized in net periodic pension cost.

Defined Contribution Plans

The company has defined contribution plans for eligible employees, which qualify under Section 401(k) of the Internal Revenue Code. The company’s contribution to the plans, which are based on a specified percentage of employee contributions, amounted to $21.2 million, $20.3 million, and $19.1 million in 2023, 2022, and 2021, respectively. Certain international subsidiaries maintain separate defined contribution plans for their employees and made contributions thereunder, which amounted to $22.6 million, $22.1 million, and $23.0 million in 2023, 2022, and 2021, respectively.