Retirement Benefit Plans

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Retirement Benefit Plans

Retirement Benefit Plans

Defined Benefit Pension and Other Postretirement Benefits

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 are based upon employee earnings during the period of credited service. A supplemental defined benefit retirement plan (SERP) was also offered to certain employees who were at the Executive Vice President level or above through December 31, 2007. The SERP provides eligible participants with additional pension benefits. Webster Bank also provides postretirement healthcare benefits to certain retired employees.

The Webster Bank Pension Plan and the SERP 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 benefits after January 1, 2008, and the amount of their qualified and supplemental retirement benefits will not exceed the amount of benefits determined as of December 31, 2007.

The measurement date is December 31 for the Webster Bank Pension Plan, SERP, and postretirement healthcare benefits. The mortality assumptions used in the pension liability assessment for the year ended December 31, 2020 were the Pri-2012 mortality table projected to measurement date with scale MP-2020.

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

	Pension Plan				SERP				Other
(In thousands)	2020		2019		2020		2019		2020		2019
Change in benefit obligation:
Beginning balance	$	241,404	$	209,513	$	1,935	$	1,835	$	2,399	$	2,612
Interest cost	6,511		7,941		46		65		46		85
Actuarial loss (gain)	27,376		33,157		194		163		(307)		(103)
Benefits paid and administrative expenses	(8,877)		(9,207)		(129)		(128)		(140)		(195)
Ending balance (1)	266,414		241,404		2,046		1,935		1,998		2,399
Change in plan assets:
Beginning balance	239,621		191,972		—		—		—		—
Actual return on plan assets	35,524		46,856		—		—		—		—
Employer contributions	—		10,000		129		128		140		195
Benefits paid and administrative expenses	(8,877)		(9,207)		(129)		(128)		(140)		(195)
Ending balance	266,268		239,621		—		—		—		—
Funded status of the plan at year end (2)	$	(146)	$	(1,783)	$	(2,046)	$	(1,935)	$	(1,998)	$	(2,399)

(1)The total accumulated benefit obligation for the defined benefit pension and other postretirement benefits was $270.5 million and $245.7 million at December 31, 2020 and 2019, respectively.

(2)The underfunded status amounts are included in accrued expense and other liabilities in the accompanying Consolidated Balance Sheets.

The following table summarizes the impact on AOCI related to the defined benefit pension and other postretirement benefits at December 31:

	Pension Plan				SERP				Other
(In thousands)	2020		2019		2020		2019		2020		2019
Net actuarial loss (gain) included in AOCI	$	57,902	$	56,555	$	773	$	602	$	(690)	$	(458)
Deferred tax benefit (expense)	12,881		12,528		172		133		(153)		(101)
Amounts included in accumulated AOCI, net of tax	$	45,021	$	44,027	$	601	$	469	$	(537)	$	(357)

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

(In thousands)	Pension Plan		SERP		Other
2021	$	9,657	$	131	$	254
2022	10,294		132		237
2023	10,465		132		219
2024	10,887		138		201
2025	11,304		136		182
2026-2030	61,336		625		638

The components of the net periodic benefit cost (benefit) for the defined benefit pension and other postretirement benefits were as follows for the years ended December 31:

	Pension Plan						SERP						Other
(In thousands)	2020		2019		2018		2020		2019		2018		2020		2019		2018
Service cost	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest cost on benefit obligations	6,511		7,941		7,212		46		65		103		46		85		78
Expected return on plan assets	(13,522)		(11,436)		(12,716)		—		—		—		—		—		—
Recognized net loss (gain)	4,027		5,705		4,862		23		14		2,846		(74)		(13)		—
Net periodic benefit cost (benefit)	$	(2,984)	$	2,210	$	(642)	$	69	$	79	$	2,949	$	(28)	$	72	$	78

Changes in funded status related to the defined benefit pension and other postretirement benefits and recognized as a component of OCI in the consolidated statement of comprehensive income as follows for the years ended December 31:

	Pension Plan						SERP						Other
(In thousands)	2020		2019		2018		2020		2019		2018		2020		2019		2018
Net (gain) loss	$	5,375	$	(2,263)	$	9,952	$	194	$	164	$	—	$	(307)	$	(103)	$	(352)
Amounts reclassified from AOCI	(4,027)		(5,705)		(4,862)		(23)		(14)		(2,846)		74		13		—
Total (gain) loss recognized in OCI	$	1,348	$	(7,968)	$	5,090	$	171	$	150	$	(2,846)	$	(233)	$	(90)	$	(352)

Fair Value Measurement

The following is a description of the valuation methodologies used to measure the fair value of pension plan assets and includes the classification of those instruments within the valuation hierarchy:

Exchange traded fund. The exchange traded fund has quoted market prices on an exchange, in an active market, which represents the net asset value of the shares held in the fund and is classified within Level 1 of the fair value hierarchy. The fair value for the exchange traded fund is benchmarked against the Standard & Poor's 500 Index.

Money market fund. The money market fund is carried at cost, which approximates fair value given the short time frame to maturity for cash and cash equivalents and is classified within Level 1 of the fair value hierarchy.

Common collective trusts. Common collective trusts hold investments in fixed income and equity funds. Transactions may occur daily within a trust. Should a full redemption of the trust be initiated, the investment advisor reserves the right to temporarily delay withdrawals in order to ensure that the liquidation of securities is carried out in an orderly business manner. Common collective trusts 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. As such, common collective trusts are classified within Level 2 of the fair value hierarchy.

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

	At December 31,
	2020								2019
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Exchange traded fund	$	39,645	$	—	$	—	$	39,645	$	36,552	$	—	$	—	$	36,552
Cash and cash equivalents	861		—		—		861		1,225		—		—		1,225
Common collective trusts	—		225,762		—		225,762		—		201,844		—		201,844
Total pension plan assets	$	40,506	$	225,762	$	—	$	266,268	$	37,777	$	201,844	$	—	$	239,621

(1)For 2019, the common collective trusts were reported in the NAV category in the fair value leveling table. Due to the readily available nature of the fair value (at NAV) for these investments, they have been classified as Level 2 within the fair value hierarchy in current and prior periods presented.

Asset Management

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

	Target Allocation		Percentage of Pension Plan Assets
	2021		2020		2019
Fixed income investments	62	%	61	%	61	%
Equity investments	38		38		38
Cash and cash equivalents	—		1		1
Total	100	%	100	%	100	%

The Retirement Plan 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 Retirement Plan Committee in this function, it engages the services of investment managers and advisors 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 are reviewed at a minimum annually by the Retirement Plan 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 assets should not exceed that of the Composite Index. The investment policy guidelines allow the pension 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 investment strategy for the pension plan is designed to maintain a diversified portfolio with an expected weighted-average long-term rate of 5.50%, however, there is no certainty that the portfolio will perform to expectations. Asset allocations are monitored monthly and the portfolio is re-balanced when appropriate.

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

	Pension Plan				SERP				Other
	2020		2019		2020		2019		2020		2019
Discount rate	2.29	%	3.07	%	1.91	%	2.82	%	1.40	%	2.50	%

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

	Pension Plan						SERP						Other
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Discount rate	3.07	%	4.12	%	3.50	%	2.82	%	3.95	%	3.30	%	2.50	%	3.69	%	3.00	%
Expected long-term return on assets	5.75	%	6.00	%	6.00	%	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		6.50	%	6.50	%	7.00	%

The assumed healthcare cost-trend rate for 2020 is 6.50%, declining 0.25% each year thereafter until 2030 when the rate will be 4.40%.

Multiple-Employer Plan

For the benefit of former employees of a bank acquired by the Company, the Bank is a sponsor of a multiple-employer pension plan that does not segregate the assets or liabilities of its employers participating in the plan. The plan administrator confirmed Webster Bank’s portion of the plan is under-funded by $2.6 million as of July 1, 2020, the date of the latest actuarial valuation.

The following table sets forth contributions and funding status of Webster Bank's portion of this plan:

(Dollars in thousands)			Contributions by Webster Bank for the year ended December 31,			Funded Status of the Plan at December 31,
Plan Name	Employer Identification Number	Plan Number	2020	2019	2018	2020	2019
Pentegra Defined Benefit Plan for Financial Institutions	13-5645888	333	$998	$863	$679	At least 80 percent	At least 80 percent

Multi-employer accounting is applied to the Fund. As a multiple-employer pension plan, there are no collective bargained contracts affecting its contribution or benefit provisions. Any shortfall amortization basis is 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 this plan did not exceed more than 5% of total contributions in the plan for the years ended December 31, 2020, 2019, and 2018.

Webster Bank Retirement Savings Plan

Webster Bank provides an employee retirement savings plan governed by section 401(k) of the Internal Revenue Code. Webster Bank matches 100% of the first 2% and 50% of the next 6% of employees’ pre-tax contributions based on annual 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.

Compensation and benefit expense included $13.8 million, $13.2 million, and $12.4 million for the years ended December 31, 2020, 2019, and 2018, respectively, of employer contributions.