Retirement Benefit Plans

Webster Bank offered a defined benefit noncontributory pension plan through December 31, 2007 for eligible employees who met certain minimum service and age requirements. Pension plan benefits were based upon employee earnings during the period of credited service. A supplemental defined benefit retirement plan was also offered to certain employees who were at the Executive Vice President level or above through December 31, 2007. The supplemental defined benefit retirement plan provides eligible participants with additional pension benefits. Webster also provides postretirement healthcare benefits to certain retired employees.

The Webster Bank Pension Plan and the supplemental defined benefit retirement plan were frozen as of December 31, 2007. No additional benefits have been accrued since that time. Employees hired on or after January 1, 2007 receive no qualified or supplemental retirement income under the plans. All other employees accrue no additional qualified or supplemental retirement income after January 1, 2008, and the amount of their qualified and supplemental retirement income will not exceed the amount of benefits determined as of December 31, 2007. Additional contributions to the Webster Bank Pension Plan will be made as deemed appropriate by management in conjunction with information provided by the Plan’s actuaries.

There were $241 thousand and $143 thousand in Company contributions to the supplemental defined benefit retirement plan for the years ended December 31, 2015 and 2014, respectively.

Effective December 31, 2014, the mortality assumptions used in the pension liability assessment was updated to the RP-2014 table with the Mercer MMP-2007 mortality improvement projection scale applied generationally.

December 31^st is the measurement date used for the pension, supplemental pension, and postretirement benefit plans.

The following table sets forth changes in benefit obligation, changes in plan assets, and the funded status of the pension plans and other postretirement benefit plans at December 31:



	Webster Pension						Webster SERP						Other Benefits
(In thousands)	2015			2014			2015			2014			2015			2014
Change in benefit obligation:
Beginning balance	$	210,548		$	171,189		$	10,041		$	8,675		$	4,133		$	3,821
Service cost	45			40			—			—			—			—
Interest cost	8,008			8,068			345			364			123			139
Actuarial (gain) loss	(8,588		)	38,472			373			1,145			(178		)	470
Benefits paid and administrative expenses	(6,368		)	(7,221		)	(241		)	(143		)	(225		)	(297		)
Ending balance	203,645			210,548			10,518			10,041			3,853			4,133
Change in plan assets:
Beginning balance	172,976			162,182			—			—			—			—
Actual return on plan assets	(5,239		)	18,015			—			—			—			—
Employer contributions	—			—			241			143			225			297
Benefits paid and administrative expenses	(6,368		)	(7,221		)	(241		)	(143		)	(225		)	(297		)
Ending balance	161,369			172,976			—			—			—			—
Funded status of the plan at year end	$	(42,276	)	$	(37,572	)	$	(10,518	)	$	(10,041	)	$	(3,853	)	$	(4,133	)

The accumulated benefit obligation for the pension plans and the postretirement benefit plan was $218.0 million and $224.7 million at the years ended December 31, 2015 and 2014, respectively. An asset is recognized for an overfunded plan, and a liability is recognized for an underfunded plan.

Amounts recognized in the statement of financial position consist of the following:



	2015									2014
(In thousands)	Webster Pension			Webster SERP			Other Benefits			Webster Pension			Webster SERP			Other Benefits
Accrued expenses and other liabilities	$	(42,276	)	$	(10,518	)	$	(3,853	)	$	(37,572	)	$	(10,041	)	$	(4,133	)

Webster expects that $7.2 million in net actuarial loss and $14 thousand in prior service cost will be recognized as components of net periodic benefit cost in 2016. The components of accumulated other comprehensive loss related to pensions and other postretirement benefits at December 31, 2015 and 2014 are summarized below:



	2015						2014
(In thousands)	Webster Pension		Webster SERP		Other Benefits		Webster Pension		Webster SERP		Other Benefits
Net actuarial loss	$	73,238	$	2,412	$	591	$	70,437	$	2,430	$	816
Prior service cost	—		—		14		—		—		87
Total pre-tax amounts included in accumulated other comprehensive loss	$	73,238	$	2,412	$	605	$	70,437	$	2,430	$	903
Deferred tax benefit	26,447		871		218		25,415		877		326
Amounts included in accumulated other comprehensive loss, net of tax	$	46,791	$	1,541	$	387	$	45,022	$	1,553	$	577

Expected future benefit payments for the pension plans and other postretirement benefit plans are presented below:



(In thousands)	Webster Pension		Webster SERP		Other Benefits
2016	$	7,034	$	4,015	$	391
2017	7,785		928		388
2018	8,425		801		380
2019	8,728		5,597		367
2020	9,050		142		349
2021-2025	52,144		679		1,441

The components of the net periodic benefit cost (benefit) for the Company’s defined benefit pension plans were as follows:



	Years ended December 31,
	2015			2014			2013			2015		2014		2013		2015		2014		2013
(In thousands)	Webster Pension									Webster SERP						Other Postretirement Benefits
Service cost	$	45		$	40		$	40		$	—	$	—	$	—	$	—	$	—	$	—
Interest cost on benefit obligations	8,008			8,068			7,365			345		364		289		123		139		109
Expected return on plan assets	(11,873		)	(11,495		)	(11,114		)	—		—		—		—		—		—
Amortization of prior service cost	—			—			—			—		—		—		73		73		73
Recognized net loss	5,724			2,781			6,355			390		135		125		47		5		—
Net periodic benefit cost (benefit)	$	1,904		$	(606	)	$	2,646		$	735	$	499	$	414	$	243	$	217	$	182

Changes in funded status related to the Company’s defined benefit pension plans recognized as a component of other comprehensive income in the accompanying Consolidated Statements of Comprehensive Income were as follows:



	Years ended December 31,
	2015			2014			2013			2015			2014			2013			2015			2014			2013
(In thousands)	Webster Pension									Webster SERP									Other Postretirement Benefits
Net loss (gain)	$	8,525		$	31,951		$	(23,238	)	$	372		$	1,145		$	(160	)	$	(178	)	$	470		$	(239	)
Amounts reclassified from accumulated other comprehensive income	(5,724		)	(2,781		)	(6,355		)	(390		)	(134		)	(125		)	(47		)	(5		)	—
Amortization of prior service cost	—			—			—			—			—			—			(73		)	(73		)	(73		)
Total loss (gain) recognized in other comprehensive income (loss)	$	2,801		$	29,170		$	(29,593	)	$	(18	)	$	1,011		$	(285	)	$	(298	)	$	392		$	(312	)

Fair Value Measurements

The following is a description of the valuation methodologies used for the pension plan assets measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy:

Registered investment companies. Exchange traded funds are quoted at market prices in an exchange and active market, which represent the net asset values of shares held by the plan at year end. Money market funds are shown at cost, which approximates fair value. The exchange traded fund is benchmarked against the S&P 500 Index.

Common collective trust. The net asset value ("NAV"), as provided by the trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Plan transactions (purchases and sales) may occur daily. Were the Plan to initiate a full redemption of the collective trust, the investment adviser reserves the right to temporarily delay withdrawal from the trust in order to ensure that securities liquidations will be carried out in an orderly business manner. The common collective trust funds performance are benchmarked against the Standard and Poor’s 500 Stock Index, the S&P 400 Mid Cap Index, the Russell 2000 Index, the MSCI ACWI ex U.S. Index, and the Barclays Capital U.S. Long Credit Index.

Investment contract with insurance company. These investments are valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations considering the credit-worthiness of the issuer. Holdings of insurance company investment contracts are classified as Level 3 investments.

A summary of the fair value and hierarchy classification of financial assets of the pension plan is as follows:



	At December 31,
	2015								2014
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Registered investment companies:
Exchange traded funds	$	28,329	$	28,329	$	—	$	—	$	28,287	$	28,287	$	—	$	—
Cash and cash equivalents	295		295		—		—		871		871		—		—
Common collective funds:
Fixed Income funds	80,783		—		80,783		—		94,928		—		94,928		—
Equity Funds	51,028		—		51,028		—		47,813		—		47,813		—
Insurance company investment contract	934		—		—		934		1,077		—		—		1,077
Total	$	161,369	$	28,624	$	131,811	$	934	$	172,976	$	29,158	$	142,741	$	1,077

The following table sets forth a summary of changes in the fair value of Level 3 assets of the pension plan:



	Years ended December 31,
(In thousands)	2015			2014
Beginning balance	$	1,077		$	1,196
Unrealized gains relating to instruments still held at the reporting date	(28		)	(2		)
Benefit payments, administrative expenses, and interest income, net	(115		)	(117		)
Ending balance	$	934		$	1,077

The following table presents the target allocation and the pension plan asset allocation for the periods indicated, by asset category:



	Target Allocation		Percentage of plan assets
	2016		2015		2014
Fixed income investments	50	%	51	%	56	%
Equity investments	50		49		44
Total	100	%	100	%	100	%

The Retirement Plan Committee (the “Committee”) is a fiduciary under ERISA and is charged with the responsibility for directing and monitoring the investment management of the pension plan. To assist the Committee in this function, it engages the services of investment managers and advisor's who possess the necessary expertise to manage the pension plan assets within the established investment policy guidelines and objectives. The investment policy guidelines and objectives is reviewed at a minimum annually by the Committee.

The primary objective of the pension plan investment strategy is to provide long-term total return through capital appreciation and dividend and interest income. The Plan invests in registered investment companies and bank collective trusts. The volatility, as measured by standard deviation, of the pension plan’s assets should not exceed that of the Composite Index. The investment policy guidelines allow the plan assets to be invested in certain types of cash equivalents, fixed income securities, equity securities, mutual funds, and collective trusts. Investments in mutual funds and collective trust funds are substantially limited to funds with the securities characteristic of their assigned benchmarks.

The pension plan investment strategy is designed to maintain a diversified portfolio, with a target average long-term rate of 7.00%, however, there is no certainty that the portfolio will perform to expectations. Asset allocations are monitored monthly, and the portfolio is rebalanced as needed.

Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:



	Webster Pension				Webster SERP				Other Benefits
	2015		2014		2015		2014		2015		2014
Discount rate	4.20	%	3.85	%	3.75	%	3.50	%	3.35	%	3.15	%
Rate of compensation increase	n/a		n/a		n/a		n/a		n/a		n/a

Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 are as follows:



	Webster Pension						Webster SERP						Other Benefits
	2015		2014		2013		2015		2014		2013		2015		2014		2013
Discount rate	3.85	%	4.80	%	3.90	%	3.50	%	4.25	%	3.40	%	3.15	%	3.75	%	2.85	%
Expected long-term return on assets	7.00	%	7.25	%	7.50	%	n/a		n/a		n/a		n/a		n/a		n/a
Rate of compensation increase	n/a		n/a		n/a		n/a		n/a		n/a		n/a		n/a		n/a
Assumed healthcare cost trend	n/a		n/a		n/a		n/a		n/a		n/a		8.0	%	8.0	%	8.0	%

The assumed healthcare cost-trend rate is 8.0% for 2015 and 2016, declining 1.0% each year thereafter until 2019 when the rate will be 5.0%. An increase of 1.0% in the assumed healthcare cost-trend rate for 2015 would have increased the net periodic postretirement benefit cost by $6 thousand and increased the accumulated benefit obligation by $211 thousand. A decrease of 1.0% in the assumed healthcare cost trend rate for 2015 would have decreased the net periodic postretirement benefit cost by $6 thousand and decreased the accumulated benefit obligation by $190 thousand.

Multiple-employer plan

Webster Bank is a sponsor of a multiple-employer pension plan administered by Pentegra (the “Fund”) for the benefit of former employees of a bank acquired by Webster. The Fund does not segregate the assets or liabilities of its participating employers in the ongoing administration of this plan. According to the Fund’s administrators, as of July 1, 2015, the date of the latest actuarial valuation, Webster’s portion of the plan was under-funded by $0.9 million.

The following table sets forth contributions and funding status of the Fund:



(In thousands)	Contributions by Webster Bank period ended December 31,			Funded Status of Plan
EIN/Pension Plan Number	2015	2014	2013	2015	2014
13-5645888/333	$340	$765	$870	At least 80 percent	At least 80 percent

Multi-employer accounting is applied to the Fund. As a multiple-employer plan, there are no collective bargained contracts affecting the Fund's contribution or benefit provisions. All shortfall amortization basis are being amortized over seven years, as required by the Pension Protection Act. All benefit accruals were frozen as of September 1, 2004. The Company's contributions to the Fund did not exceed more than 5 percent of total Fund contributions for the years ended December 31, 2015, 2014, and 2013.

Webster Bank Retirement Savings Plan

Webster provides an employee retirement savings plan governed by section 401(k) of the Internal Revenue Code (the "Code”). For the period March 1, 2009 through February 1, 2012, Webster matched 100% of a participant’s pre-tax contributions to the extent the pre-tax contributions did not exceed 5% of compensation. If a participant fails to make a pre-tax contribution election within 90 days of his or her date of hire, automatic pre-tax contributions will commence 90 days after his or her date of hire at a rate equal to 3% of compensation. The 2% non-elective contribution has been eliminated; however, Webster continues to contribute the special transition credits.

Effective February 1, 2012, Webster matches 100% of the first 2% and 50% of the next 6% of employees’ pre-tax contributions based on annual compensation. Webster continues to contribute the special transition credits under the employee retirement savings plan.

Compensation and benefit expense included $10.9 million, $10.6 million, and $11.2 million for the years ended December 31, 2015, 2014, and 2013, respectively, for employer contributions.