Employee Benefit Plans and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Employee Benefit Plans and Other Postretirement Benefits

Employee Benefit Plans and Other Postretirement Benefits

The Company has a qualified defined benefit pension plan and postretirement healthcare benefit plans. The plans cover certain eligible employees and retirees of the HDMC segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees.

Pension benefits are based primarily on years of service and, for certain participants, levels of compensation. Plan participants are generally eligible to receive postretirement healthcare benefits upon attaining age 55 after rendering at least 10 years of service to the Company. Some of the plans require participant contributions to partially offset benefit costs.

Obligations and Funded Status:

The changes in the benefit obligation, fair value of plan assets and the funded status of the Company’s pension and SERPA plans and the postretirement healthcare plans as of the Company’s measurement dates of December 31, were as follows (in thousands):

	Pension and SERPA Benefits				Postretirement Healthcare Benefits
	2023		2022		2023		2022
Change in benefit obligation:
Benefit obligation, beginning of period	$	1,553,912	$	2,174,595	$	210,811	$	286,301
Service cost	5,174		19,052		3,184		4,642

	Pension and SERPA Benefits				Postretirement Healthcare Benefits
	2023		2022		2023		2022
Interest cost	81,911		61,890		11,089		7,617
Actuarial loss / (gains)	35,608		(561,142)		(18,350)		(67,903)
Plan participant contributions	—		—		1,790		2,029
Plan amendment	—		—		12,959		—
Benefits paid	(106,493)		(137,645)		(14,977)		(16,657)
Settlements	(1,835)		(2,838)		—		(5,218)
Benefit obligation, end of period	1,568,277		1,553,912		206,506		210,811
Change in plan assets:
Fair value of plan assets, beginning of period	1,809,543		2,486,467		205,803		262,945
Return on plan assets	198,212		(539,800)		29,211		(48,257)
Plan participant contributions	—		—		1,790		2,029
Benefits paid	(105,931)		(137,124)		(11,637)		(10,914)
Fair value of plan assets, end of period	1,901,824		1,809,543		225,167		205,803
Funded status of the plan	$	333,547	$	255,631	$	18,661	$	(5,008)
Funded status as recognized on the Consolidated balance sheets:
Pension and postretirement assets	$	343,619	$	268,317	$	69,489	$	51,816
Accrued liabilities	(1,129)		(1,331)		—		(224)
Pension and postretirement liabilities	(8,943)		(11,355)		(50,828)		(56,600)
	$	333,547	$	255,631	$	18,661	$	(5,008)
Amounts included in Accumulated other comprehensive loss, net of tax:
Prior service credits	$	2,886	$	3,461	$	8,542	$	(1,884)
Actuarial losses (gains)	277,825		289,340		(59,631)		(39,699)
	$	280,711	$	292,801	$	(51,089)	$	(41,583)

During 2023, actuarial losses related to the obligation for pension and SERPA benefits were due primarily to a decrease in the discount rate and changes in other demographic assumptions. During 2022, actuarial gains related to the obligation for pension and SERPA benefits were due primarily to an increase in the discount rate and experience study adjustments, partially offset by changes in other demographic assumptions.

During 2023, the actuarial gains related to the obligation for postretirement healthcare benefits were due primarily to changes in benefit utilization assumptions and claims cost adjustments. During 2022, the actuarial gains related to the obligation for postretirement healthcare benefits were due primarily to an increase in the discount rate, claim cost adjustments, experience study adjustments and changes in other demographic assumptions, partially offset by healthcare inflation rate trends.

The funded status of the qualified pension plan and the SERPA plans are combined above. The SERPA plans had projected benefit obligations (PBO) and accumulated benefit obligations (ABO) in excess of the fair value of plan assets at December 31, as presented below (in thousands):

	2023		2022
Plans with PBO in excess of fair value of plan assets:
PBO	$	10,072	$	12,686
Fair value of plan assets	$	—	$	—
Plans with ABO in excess of fair value of plan assets:
ABO	$	10,035	$	12,643
Fair value of plan assets	$	—	$	—

The total ABO for all the Company's pension and SERPA plans combined was $1.57 billion and $1.55 billion as of December 31, 2023 and 2022, respectively.

Benefit Costs:

Service cost is allocated among Selling, administrative and engineering expense, Motorcycles and related products cost of goods sold and Inventories, net. Amounts capitalized in inventory are not significant. Non-service cost components of net periodic benefit cost are presented in Other income (expense), net. Components of net periodic benefit costs for the Company's defined benefit plans for the years ended December 31, were as follows (in thousands):

	Pension and SERPA Benefits						Postretirement Healthcare Benefits
	2023		2022		2021		2023		2022		2021
Service cost	$	5,174	$	19,052	$	24,570	$	3,184	$	4,642	$	5,147
Interest cost	81,911		61,890		61,988		11,089		7,617		6,505
Expected return on plan assets	(146,076)		(125,904)		(131,494)		(17,124)		(15,237)		(13,978)
Amortization of unrecognized:
Prior service credit	751		(1,312)		(1,247)		(665)		(2,323)		(2,323)
Net loss	(722)		31,912		67,933		(4,388)		488		1,056
Curtailment (gain) loss	—		—		(10,562)		—		—		—
Settlement (gain) loss	(759)		(1,471)		722		—		(1,244)		—
Net periodic benefit cost	$	(59,721)	$	(15,833)	$	11,910	$	(7,904)	$	(6,057)	$	(3,593)

The expected return on plan assets is calculated based on the market related value of plan assets. The market related value of plan assets is different from the fair value in that asset gains and losses are smoothed over a five-year period. 

Unrecognized gains and losses related to plan obligations and assets are initially recorded in other comprehensive income and result from actual experience that differs from assumed or expected results, and the impacts of changes in assumptions. Unrecognized plan asset gains and losses not yet reflected in the market related value of plan assets are not subject to amortization. Remaining unrecognized gains and losses that exceed 10% of the greater of the projected benefit obligation or the market related value of plan assets are amortized to earnings over the estimated future service period of active plan participants. The impacts of plan amendments, if any, are amortized over the estimated future service period of plan participants at the time of the amendment.

Assumptions:

Weighted-average assumptions used to determine benefit obligations and net periodic benefit cost at December 31, were as follows:

	Pension and SERPA Benefits						Postretirement Healthcare Benefits
	2023		2022		2021		2023		2022		2021
Assumptions for benefit obligations:
Discount rate	5.31	%	5.45	%	2.89	%	5.36	%	5.42	%	2.72	%
Rate of compensation increase	4.00	%	4.00	%	3.49	%	n/a		n/a		n/a
Assumptions for net periodic benefit cost:
Discount rate	5.45	%	2.89	%	2.67	%	5.42	%	2.72	%	2.11	%
Expected return on plan assets	6.80	%	5.60	%	6.20	%	7.48	%	6.77	%	6.69	%
Rate of compensation increase	4.00	%	3.49	%	3.34	%	n/a		n/a		n/a

Plan Assets:

Pension Plan Assets – The Company’s investment objective is to ensure assets are sufficient to pay benefits while mitigating the volatility of retirement plan assets or liabilities recorded in the balance sheet. The Company mitigates volatility through asset diversification and partial asset/liability matching. The investment portfolio for the Company's pension plan assets contains a diversified blend of equity and fixed-income investments. The Company’s current overall targeted asset allocation as a percentage of total market value was 30% equities and 70% fixed-income and cash. Assets are rebalanced regularly to keep the actual allocation in line with targets. Equity holdings primarily include investments in small-, medium- and large-cap companies in the U.S., investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign obligations. In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews.

Postretirement Healthcare Plan Assets – The Company's investment objective is to maximize the return on assets to help pay benefits by prudently investing in equities, fixed income and alternative assets. The Company's current overall targeted asset allocation as a percentage of total market value was 68% equities and 32% fixed-income and cash. Equity holdings primarily include investments in small-, medium- and large-cap companies in the U.S., investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign obligations. In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews.

The following tables present the fair values of the plan assets related to the Company’s pension and postretirement healthcare plans within the fair value hierarchy as defined in Note 1. Equity holdings are primarily exchange-traded and are valued based on quoted prices for identical securities. Fixed income holdings are generally measured at fair value using quoted prices for identical or similar securities. Certain assets measured are valued at fair value using the net asset value practical expedient and are not classified in the fair value hierarchy. The fair values of the Company’s pension plan assets at December 31, 2023 were as follows (in thousands):

	Balance		Level 1		Level 2
Cash and cash equivalents	$	27,730	$	—	$	27,730
Equity holdings:
U.S. companies	346,895		346,844		51
Foreign companies	22,425		22,425		—
Pooled equity funds	124,853		124,853		—
Other	21		21		—
	494,194		494,143		51
Fixed-income holdings:
U.S. Treasuries	110,767		110,766		—
Federal agencies	11,028		—		11,028
Corporate bonds	708,790		—		708,790
Pooled fixed income funds	442,409		55,487		386,922
Foreign bonds	93,034		462		92,572
Municipal bonds	11,486		—		11,486
	1,377,514		166,715		1,210,798
Plan assets subject to fair value leveling	1,899,438		$	660,858	$	1,238,579
Plan assets measured at net asset value:
Private equity investments	794
Real estate investments	1,592
	2,386
	$	1,901,824

Included in the pension plan assets are 1,273,592 shares of the Company’s common stock with a market value of $46.9 million at December 31, 2023.

The fair values of the Company’s postretirement healthcare plan assets at December 31, 2023 were as follows (in thousands): 

	Balance		Level 1		Level 2
Cash and cash equivalents	$	2,391	$	—	$	2,391
Equity holdings:
U.S. companies	113,135		113,135		—
Foreign companies	21,034		21,034		—
Pooled equity funds	26,355		26,355		—
Other	5		5		—
	160,529		160,529		—
Fixed-income holdings:
U.S. Treasuries	359		359		—
Federal agencies	36		—		36
Corporate bonds	2,286		—		2,286
Pooled fixed income funds	44,512		43,248		1,264
Foreign bonds	300		2		298
Municipal bonds	37		—		37
	47,530		43,609		3,921
Plan assets subject to fair value leveling	210,450		$	204,138	$	6,312
Plan assets measured at net asset value:
Private equity investments	$	13,773
Real estate investments	944
	$	225,167

The fair values of the Company’s pension plan assets at December 31, 2022 were as follows (in thousands):

	Balance		Level 1		Level 2
Cash and cash equivalents	$	43,062	$	—	$	43,062
Equity holdings:
U.S. companies	537,587		537,548		39
Foreign companies	22,445		22,444		1
Pooled equity funds	241,412		241,412		—
Other	35		35		—
	801,479		801,439		40
Fixed-income holdings:
U.S. Treasuries	94,128		94,128		—
Federal agencies	11,054		—		11,054
Corporate bonds	640,875		—		640,875
Pooled fixed income funds	111,649		49,472		62,177
Foreign bonds	93,112		4		93,108
Municipal bonds	10,375		—		10,375
	961,193		143,604		817,589
Plan assets subject to fair value leveling	1,805,734		$	945,043	$	860,691
Plan assets measured at net asset value:
Private equity investments	799
Real estate investments	3,010
	3,809
	$	1,809,543

Included in the pension plan assets were 1,273,592 shares of the Company’s common stock with a market value of $53.0 million at December 31, 2022.

The fair values of the Company’s postretirement healthcare plan assets at December 31, 2022 were as follows (in thousands):

	Balance		Level 1		Level 2
Cash and cash equivalents	$	7,998	$	—	$	7,998
Equity holdings:
U.S. companies	95,014		95,014		—
Foreign companies	20,784		20,784		—
Pooled equity funds	24,181		24,181		—
Other	5		5		—
	139,984		139,984		—
Fixed-income holdings:
U.S. Treasuries	287		287		—
Federal agencies	34		—		34
Corporate bonds	1,938		—		1,938
Pooled fixed income funds	40,043		39,855		188
Foreign bonds	282		—		282
Municipal bonds	31		—		31
	42,615		40,142		2,473
Plan assets subject to fair value leveling	190,597		$	180,126	$	10,471
Plan assets measured at net asset value:
Limited partnership interests	$	13,502
Real estate investments	1,704
	$	205,803

For 2024, the Company’s overall expected long-term rate of return is 6.20% for pension assets and 7.50% for postretirement healthcare plan assets. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based on historical returns adjusted to reflect the current view of the long-term investment market.

Postretirement Healthcare Cost:

The weighted-average healthcare cost trend rates used in determining the accumulated postretirement benefit obligation of the healthcare plans were as follows:

	2023		2022
Healthcare cost trend rate for next year	7.50	%	7.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2032		2032

Future Contributions and Benefit Payments:

Based on the funded status of the qualified pension plan, there is no requirement for the Company to make contributions to the qualified pension plan in 2024. The Company expects that 2024 postretirement healthcare plan benefits and benefits due under the SERPA plans will be paid by the Company or, in the case of postretirement healthcare plan benefits, partially funded with plan assets.

The Company's future expected benefit payments as of December 31, 2023 were as follows (in thousands):

	Pension Benefits		SERPA Benefits		Postretirement Healthcare Benefits
2024	$	115,265	$	1,159	$	17,179
2025	$	114,856	$	1,119	$	18,050
2026	$	116,507	$	1,070	$	18,830
2027	$	116,698	$	945	$	19,442
2028	$	116,234	$	854	$	19,930
2029-2033	$	581,079	$	3,594	$	100,332

Defined Contribution Plans:

The Company has various defined contribution benefit plans that in total cover substantially all full-time employees. Employees can make voluntary contributions in accordance with the provisions of their respective plan, which includes a 401(k) tax deferral option. The Company makes additional contributions to the plans on behalf of the employees and expensed $30.5 million, $30.9 million and $19.4 million during 2023, 2022 and 2021, respectively related to the contributions.