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Retirement Plans
Feb. 14, 2020
Retirement Benefits [Abstract]  
Retirement Plans Retirement Plans
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 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 First Staunton acquisition closed on February 14, 2020, and the employees who met the required criteria as a result of the transaction became eligible to participate in the RAP on February 15, 2020, with their vesting service credit based on their prior hours of service with First Staunton. See Note 2 for additional information on the First Staunton acquisition.
The funded status and amounts recognized in the 2020 and 2019 consolidated balance sheets, as measured on December 31, 2020 and 2019, respectively, for the RAP and Postretirement Plan were as follows:
 RAPPostretirement
Plan		RAPPostretirement
Plan
($ in Thousands)2020202020192019
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year$442,034 $— $390,564 $— 
Actual return on plan assets58,802 — 67,377 — 
Employer contributions— 210 — 270 
Gross benefits paid(21,987)(210)(15,907)(270)
Fair value of plan assets at end of year(a)
$478,849 $— $442,034 $— 
Change in Benefit Obligation
Net benefit obligation at beginning of year$260,576 $2,545 $233,658 $2,523 
Service cost8,244 — 7,263 — 
Interest cost8,185 78 9,752 104 
Actuarial (gain) loss24,998 (169)25,810 188 
Gross benefits paid(21,987)(210)(15,907)(270)
Net benefit obligation at end of year(a)
$280,017 $2,243 $260,576 $2,545 
Funded (unfunded) status$198,832 $(2,243)$181,458 $(2,545)
Noncurrent assets$198,832 $— $181,458 $— 
Current liabilities— (189)— (214)
Noncurrent liabilities— (2,055)— (2,330)
Asset (liability) recognized on the consolidated balance sheets$198,832 $(2,243)$181,458 $(2,545)
(a) The fair value of the plan assets represented 171% and 170% of the net benefit obligation of the pension plan at December 31, 2020 and 2019, respectively.
Amounts recognized in accumulated other comprehensive (income) loss, net of tax, as of December 31, 2020 and 2019 were as follows:
RAPPostretirement
Plan		RAPPostretirement
Plan
($ in Thousands)2020202020192019
Prior service cost$(194)$(477)$(249)$(533)
Net actuarial loss28,029 — 37,075 126 
Amount not yet recognized in net periodic benefit cost, but recognized in accumulated other comprehensive (income) loss$27,835 $(477)$36,827 $(406)
Other changes in plan assets and benefit obligations recognized in OCI, net of tax, in 2020 and 2019 were as follows:
RAPPostretirement
Plan		RAPPostretirement
Plan
($ in Thousands)2020202020192019
Net actuarial gain (loss)$8,209 $169 $17,235 $(188)
Amortization of prior service cost(73)(75)(73)(75)
Amortization of actuarial loss (gain) 3,897 — 480 (4)
Income tax (expense) benefit(3,040)(23)(4,532)67 
Total Recognized in OCI$8,993 $71 $13,109 $(200)
The components of net pension cost for the RAP for 2020, 2019, and 2018 were as follows:
($ in Thousands)202020192018
Service cost$8,244 $7,263 $7,540 
Interest cost8,185 9,752 9,125 
Expected return on plan assets(25,595)(24,332)(23,195)
Amortization of prior service cost(73)(73)(73)
Amortization of actuarial loss (gain)3,897 480 2,195 
Recognized settlement loss (gain)— — 809 
Total net periodic pension cost (income)$(5,342)$(6,910)$(3,600)
The components of net periodic benefit cost for the Postretirement Plan for 2020, 2019, and 2018 were as follows:
($ in Thousands)202020192018
Interest cost$78 $104 $108 
Amortization of prior service cost(75)(75)(75)
Amortization of actuarial loss (gain)— (4)8 
Total net periodic benefit cost$3 $25 $41 
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, 2020, the estimated actuarial losses and prior service cost that will be amortized during 2021 from accumulated other comprehensive income into net periodic pension cost for the RAP includes expense of $4 million for actuarial losses and income of approximately $73,000 for the prior service cost. For the Postretirement Plan, the estimated actuarial losses and prior service cost that will be amortized during 2021 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.
RAPPostretirement
Plan		RAPPostretirement
Plan
2020202020192019
Weighted average assumptions used to determine benefit obligations
Discount rate2.40 %2.40 %3.20 %3.20 %
Rate of increase in compensation levels2.00 %N/A2.00 %N/A
Weighted average assumptions used to determine net periodic benefit costs
Discount rate
3.20 %3.20 %4.30 %4.30 %
Rate of increase in compensation levels2.00 %N/A3.00 %N/A
Expected long-term rate of return on plan assets
6.20 %N/A6.00 %N/A

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 15.18% and 18.29% for 2020 and 2019, 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%, alternative securities 0 to 15%, and other cash equivalents 0 to 10%. 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, 2020 and 2019 measurement dates, respectively, by asset category were as follows:
Asset Category20202019
Equity securities53 %51 %
Fixed-income securities33 %33 %
Group annuity contracts11 %11 %
Alternative securities1 %3 %
Other2 %2 %
Total100 %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.
Based on these inputs, the following table summarizes the fair value of the RAP’s investments as of December 31, 2020 and 2019:
  Fair Value Measurements Using
($ in Thousands)December 31, 2020Level 1Level 2Level 3
RAP Investments
Money market account$9,429 $9,429 $— $— 
Common /collective trust funds172,950 172,950 — — 
Mutual funds245,605 245,605 — — 
Group annuity contracts50,866 — — 50,866 
Total RAP Investments$478,849 $427,983 $— $50,866 
 Fair Value Measurements Using
($ in Thousands)December 31, 2019Level 1Level 2Level 3
RAP Investments
Money market account$8,903 $8,903 $— $— 
Common /collective trust funds155,964 155,964 — — 
Mutual funds227,112 227,112 — — 
Group annuity contracts50,055 — — 50,055 
Total RAP Investments$442,034 $391,979 $— $50,055 
The following presents a summary of the changes in the fair value of the RAP's Level 3 asset during the periods indicated.
Fair Value Reconciliation of Level 3 RAP Investments20202019
Fair value of group annuity contract at beginning of period$50,055 $47,265 
Return on plan assets3,499 5,495 
Benefits paid(2,688)(2,704)
Fair value of group annuity contract at end of period$50,866 $50,055 

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 2020 and 2019.
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, 2020, reflecting expected future services, were as follows:
($ in Thousands)RAPPostretirement Plan
Estimated future benefit payments
2021$19,332 $191 
202220,043 186 
202319,785 181 
202420,304 175 
202521,766 168 
2026-203091,228 732 
The health care trend rate is an assumption as to how much the Postretirement Plan’s medical costs will change each year in the future. There are no remaining participants under age 65 in the Postretirement Plan. The actual change in 2020 health care premium rates for post-65 coverage was a decrease of 6.00%. The health care trend rate assumption for post-65 coverage is an increase of 5.50% in 2021 with the rate of increase slowing by 0.25% in each succeeding year, to an ultimate rate of 5.00% for 2023 and future years.
A one percentage point change in the assumed health care cost trend rate would have the following effect:
 20202019
($ in Thousands)100 bp Increase100 bp Decrease100 bp Increase100 bp Decrease
Effect on total of service and interest cost$5 $(4)$7 $(6)
Effect on postretirement benefit obligation$141 $(124)$170 $(148)
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 $15 million for 2020 and $16 million for both 2019 and 2018.