Retirement Plans

12 Months Ended

Dec. 31, 2019

The Corporation has a noncontributory defined benefit retirement plan, the RAP, covering substantially all employees who meet participation requirements. The benefits are based primarily on years of service and the employee’s compensation paid. Employees of acquired entities generally participate in the RAP after consummation of the business combinations. Any retirement plans of acquired entities are typically merged into the RAP after completion of the mergers, and credit is usually given to employees for years of service at the acquired institution for vesting and eligibility purposes.

The Corporation also provides legacy healthcare access to a limited group of retired employees from a previous acquisition in the Postretirement Plan. There are no other active retiree healthcare plans.

Bank Mutual was acquired on February 1, 2018. The Bank Mutual Pension Plan was merged into the RAP on December 31, 2018. Bank Mutual's Postretirement Plan was merged into the Corporation's Postretirement Plan during the first quarter of 2018. The reported figures in 2018 for both the RAP and Postretirement Plan only include 11 months of Bank Mutual expense due to the timing of the Bank Mutual acquisition.

The Huntington branch acquisition closed on June 14, 2019, and the employees gained as a result of the transaction became eligible to participate in the RAP on the same date, with their vesting service credit based on their prior hours of service with Huntington. See Note 2 for additional information on the Huntington branch acquisition.

The funded status and amounts recognized in the 2019 and 2018 consolidated balance sheets, as measured on December 31, 2019 and 2018, respectively, for the RAP and Postretirement Plan were as follows:


	RAP		Postretirement Plan		RAP		Bank Mutual Pension		Postretirement Plan
($ in Thousands)	2019		2019		2018		2018		2018
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year	$	390,564	$	—	$	331,609	N/A		$	—
Fair value of Bank Mutual plan assets at February 1, 2018	N/A		—		N/A		59,445		—
Actual return on plan assets	67,377		—		(14,609)		(1,665)		—
Employer contributions	—		270		4,340		37,537		292
Gross benefits paid	(15,907)		(270)		(10,582)		(15,513)		(292)
Bank Mutual plan assets transferred at December 31, 2018	N/A		—		79,805		(79,805)		—
Fair value of plan assets at end of year^(a)	$	442,034	$	—	$	390,564	$	—	$	—
Change in Benefit Obligation
Net benefit obligation at beginning of year	$	233,658	$	2,523	$	186,423	N/A		$	2,478
Net Bank Mutual benefit obligation at February 1, 2018	N/A		—		N/A		66,364		576
Service cost	7,263		—		7,540		—		—
Interest cost	9,752		104		6,727		2,398		108

Actuarial (gain) loss	25,810		188		(8,000)		(1,701)		(347)
Gross benefits paid	(15,907)		(270)		(10,582)		(2,644)		(292)
Lump sums paid	—		—		—		(12,868)		—
Bank Mutual benefit obligations transferred at December 31, 2018	N/A		—		$	51,549	(51,549)		—
Net benefit obligation at end of year^(a)	$	260,576	$	2,545	$	233,658	$	—	$	2,523
Funded (unfunded) status	$	181,458	$	(2,545)	$	156,906	$	—	$	(2,523)
Noncurrent assets	$	181,458	$	—	$	156,906	$	—	$	—
Current liabilities	—		(214)		—		—		(219)
Noncurrent liabilities	—		(2,330)		—		—		(2,304)
Asset (Liability) Recognized on the Consolidated Balance Sheets	$	181,458	$	(2,545)	$	156,906	$	—	$	(2,523)

(a) The fair value of the plan assets represented 170% and 167% of the net benefit obligation of the pension plan at December 31, 2019 and 2018, respectively.

Amounts recognized in accumulated other comprehensive (income) loss, net of tax, as of December 31, 2019 and 2018 follow:


	RAP		Postretirement Plan		RAP		Postretirement Plan
($ in Thousands)	2019		2019		2018		2018
Prior service cost	$	(249)	$	(533)	$	(303)	$	(588)
Net actuarial loss	37,075		126		50,238		(17)
Amount not yet recognized in net periodic benefit cost, but recognized in accumulated other comprehensive (income) loss	$	36,827	$	(406)	$	49,935	$	(605)

Other changes in plan assets and benefit obligations recognized in OCI, net of tax, in 2019 and 2018 were as follows:


	RAP		Postretirement Plan		RAP		Postretirement Plan
($ in Thousands)	2019		2019		2018		2018
Net actuarial gain (loss)	$	17,235	$	(188)	$	(28,959)	$	347
Amortization of prior service cost	(73)		(75)		(73)		(75)
Amortization of actuarial loss (gain)	480		(4)		2,195		8

Adjustment for adoption of ASU 2018-02	—		—		(5,235)		—
Income tax (expense) benefit	(4,532)		67		6,838		(71)
Total Recognized in OCI	$	13,109	$	(200)	$	(25,234)	$	209

The components of net pension cost for the RAP for 2019, 2018, and 2017 were as follows:


($ in Thousands)	2019		2018		2017
Service cost	$	7,263	$	7,540	$	6,955
Interest cost	9,752		9,125		7,121
Expected return on plan assets	(24,332)		(23,195)		(19,646)
Amortization of prior service cost	(73)		(73)		(73)
Amortization of actuarial loss (gain)	480		2,195		2,278
Recognized settlement loss (gain)	—		809		—
Total net periodic pension cost	$	(6,910)	$	(3,600)	$	(3,365)

The components of net periodic benefit cost for the Postretirement Plan for 2019, 2018, and 2017 were as follows:


($ in Thousands)	2019		2018		2017
Interest cost	$	104	$	108	$	101
Amortization of prior service cost	(75)		(75)		(75)
Amortization of actuarial loss (gain)	(4)		8		4
Total net periodic benefit cost	$	25	$	41	$	30

The components of net periodic pension cost and net periodic benefit cost, other than the service cost component, are included in the line item other of noninterest expense on the consolidated statements of income. The service cost components are included in personnel on the consolidated statements of income.

As of December 31, 2019, the estimated actuarial losses and prior service cost that will be amortized during 2020 from accumulated other comprehensive income into net periodic pension cost for the RAP includes expense of $3 million for actuarial losses and income of approximately $75,000 for the prior service cost. For the Postretirement Plan, the estimated actuarial losses and prior service cost that will be amortized during 2020 from accumulated other comprehensive income into net periodic benefit cost includes income of approximately $75,000 for the prior service cost while no actuarial gains or losses are expected.


	RAP		Postretirement Plan		RAP		Postretirement Plan
	2019		2019		2018		2018
Weighted average assumptions used to determine benefit obligations
Discount rate	3.20	%	3.20	%	4.30	%	4.30	%
Rate of increase in compensation levels	2.00	%	N/A		3.00	%	N/A
Weighted average assumptions used to determine net periodic benefit costs
Discount rate^(a)	4.30	%	4.30	%	3.77	%	3.77	%
Rate of increase in compensation levels	3.00	%	N/A		3.00	%	N/A
Expected long-term rate of return on plan assets^(b)	6.00	%	N/A		5.93	%	N/A

(a) Weighted average of the 2018 fiscal year discount rate assumption for the RAP was 3.70% and the Bank Mutual Pension Plan was 4.00%

(b) Weighted average of the 2018 fiscal year expected return on asset assumption for the RAP was 6.00% and the Bank Mutual Pension Plan was 5.50%

The expected long-term (more than 20 years) rate of return was estimated using market benchmarks for equities and bonds applied to the RAP’s anticipated asset allocations. The expected return on equities was computed utilizing a valuation framework, which projected future returns based on current equity valuations rather than historical returns. The actual rates of return for the RAP assets were 18.29% and (3.69)% for 2019 and 2018, respectively.

The RAP’s investments are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risks associated with certain investments and the level of uncertainty related to changes in the value of the investments, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported. The investment objective for the RAP is to maximize total return with a tolerance for average risk. The RAP has a diversified portfolio designed to provide liquidity, current income, and growth of income and principal, with anticipated asset allocation ranges of: equity securities 50 to 70%, fixed-income securities 30 to 50%, other cash equivalents 0 to 10%, and alternative securities 0 to 15%. Based on changes in economic and market conditions, the Corporation could be outside of the allocation ranges for brief periods of time. The asset allocation for the RAP as of the December 31, 2019 and 2018 measurement dates, respectively, by asset category were as follows:


Asset Category	2019		2018
Equity securities	51	%	49	%
Fixed-income securities	33	%	34	%
Group annuity contracts	11	%	12	%
Alternative securities	3	%	3	%
Other	2	%	2	%
Total	100	%	100	%

The RAP assets include cash equivalents, such as money market accounts, mutual funds, common / collective trust funds (which include investments in equity and bond securities), and a group annuity contract. Money market accounts are stated at cost plus accrued interest, mutual funds are valued at quoted market prices, investments in common / collective trust funds are valued at the amount at which units in the funds can be withdrawn, and the group annuity contract is valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations and considering the credit worthiness of the issuer. The group annuity contract was obtained as part of the Bank Mutual Pension Plan that was acquired on February 1, 2018 and merged into the RAP on December 31, 2018.

Based on these inputs, the following table summarizes the fair value of the RAP’s investments as of December 31, 2019 and 2018:


			Fair Value Measurements Using
($ in Thousands)	December 31, 2019		Level 1		Level 2		Level 3
RAP Investments
Money market account	$	8,903	$	8,903	$	—	$	—
Common /collective trust funds	155,964		155,964		—		—
Mutual funds	227,112		227,112		—		—
Group annuity contracts	50,055		—		—		50,055
Total RAP Investments	$	442,034	$	391,979	$	—	$	50,055

			Fair Value Measurements Using
($ in Thousands)	December 31, 2018		Level 1		Level 2		Level 3
RAP Investments
Money market account	$	7,159	$	7,159	$	—	$	—
Common /collective trust funds	138,020		138,020		—		—
Mutual funds	198,120		198,120		—		—
Group annuity contracts	47,265		—		—		47,265
Total RAP Investments	$	390,564	$	343,299	$	—	$	47,265

The following presents a summary of the changes in the fair value of the RAP's Level 3 asset during the periods indicated. As noted above, the Corporation's Level 3 asset consists entirely of a group annuity contract issued by a life insurance company.


Fair Value Reconciliation of Level 3 RAP Investments	2019		2018^(a)
Fair value of group annuity contract at beginning of period	$	47,265	$	49,191
Return on plan assets	5,495		565

Benefits paid	(2,704)		(2,491)
Fair value of group annuity contract at end of period	$	50,055	$	47,265

(a) Period begins on February 1, the date the Corporation acquired the group annuity contract from the Bank Mutual acquisition.

The Corporation’s funding policy is to pay at least the minimum amount required by federal law and regulations, with consideration given to the maximum funding amounts allowed. The Corporation regularly reviews the funding of its RAP. The Corporation did not make any contributions to the RAP during 2019. The Corporation made contributions of $38 million to the Bank Mutual Pension Plan and $4 million to the RAP during 2018, with the plans merging on December 31, 2018.

The projected benefit payments were calculated using the same assumptions as those used to calculate the benefit obligations listed above. The projected benefit payments for the RAP and Postretirement Plan at December 31, 2019, reflecting expected future services, were as follows:


($ in Thousands)	RAP		Postretirement Plan
Estimated future benefit payments
2020	$	19,659	$	218
2021	19,755		213
2022	20,729		208
2023	20,392		202
2024	20,710		196
2025-2029	91,264		867

The health care trend rate is an assumption as to how much the Postretirement Plan’s medical costs will change each year in the future. There are no remaining participants under age 65 in the Postretirement Plan. The actual change in 2019 health care premium rates for post-65 coverage was an increase of 2.00%. The health care trend rate assumption for post-65 coverage is an increase of 5.75% in 2020 with the rate of increase decreasing 0.25% in each succeeding year, to an ultimate rate of 5.00% for 2023 and future years.

A one percentage point change in the assumed health care cost trend rate would have the following effect:


	2019						2018
($ in Thousands)	100 bp Increase		100 bp Decrease		100 bp Increase		100 bp Decrease
Effect on total of service and interest cost	$	7	$	(6)	$	7	$	(6)
Effect on postretirement benefit obligation	$	170	$	(148)	$	164	$	(143)

The Corporation also has a 401(k) and Employee Stock Ownership Plan (the “401(k) plan”). The Corporation’s contribution is determined by the Compensation and Benefits Committee of the Board of Directors. Total expenses related to contributions to the 401(k) plan were $16 million, $16 million, and $14 million in 2019, 2018, and 2017, respectively.