Pension and Employee Benefit Plans

United offers a defined contribution 401(k) and Profit Sharing Plan (the “401(k) Plan”) that covers substantially all employees meeting certain minimum service requirements. The Plan allows employees to make pre-tax contributions to the 401(k) Plan and, prior to April 1, 2016, United matched 50% of these employee contributions up to 5% of eligible compensation, subject to Plan and regulatory limits. Effective April 1, 2016, the matching contribution was increased to 70% of employee contributions up to 5% of eligible compensation. The matching contribution was increased again to 100% of employee contributions up to 5% of eligible compensation effective March 1, 2018. Employees begin to receive matching contributions after completing one year of service and benefits vest after three years of service. United’s Plan is administered in accordance with applicable laws and regulations. Compensation expense from continuing operations related to the 401(k) Plan totaled $4.73 million, $2.66 million and $2.28 million in 2018, 2017 and 2016, respectively. The 401(k) Plan allows employees to choose to invest among a number of investment options that previously included United’s common stock. Effective January 1, 2015, United’s common stock was no longer offered as an investment option for new contributions.

United sponsors a non-qualified deferred compensation plan for its executive officers, certain other key employees and members of United’s Board of Directors and its community banks’ advisory boards of directors. The deferred compensation plan provides for the pre-tax deferral of compensation, fees and other specified benefits. The deferred compensation plan also permits each employee participant to elect to defer a portion of his or her base salary, bonus or vested restricted stock units and permits each eligible director participant to elect to defer all or a portion of his or her director’s fees. Further, the deferred compensation plan allows for additional contributions by an employee, with matching contributions by United, for amounts that exceed the allowable amounts under the 401(k) Plan. During 2018, 2017 and 2016, United recognized $119,000, $35,000 and $26,000, respectively, in matching contributions for this provision of the deferred compensation plan. The Board of Directors may also elect to make a discretionary contribution to any or all participants. No discretionary contributions were made in 2018, 2017 or 2016.

Defined Benefit Pension Plans

United has an unfunded noncontributory defined benefit pension plan (“Modified Retirement Plan”) that covers certain executive officers and other key employees. The Modified Retirement Plan provides a fixed annual retirement benefit to plan participants.

United acquired Palmetto Bancshares, Inc. (“Palmetto”) on September 1, 2015, including its funded noncontributory defined benefit pension plan (“Funded Plan”), which covered all full-time Palmetto employees who had fulfilled at least 12 months of continuous service and attained age 21 by December 31, 2007. Benefits under the Funded Plan are no longer accrued for service subsequent to 2007. On December 28, 2018, United filed a Notice of Standard Termination with the Pension Benefit Guaranty Corporation in accordance with regulatory requirements. As such, United anticipates making final distributions of funds to participants and beneficiaries of the Funded Plan mid-year 2019.

Weighted-average assumptions used to determine pension benefit obligations at year end and net periodic pension cost are shown in the table below:



	2018				2017
	Modified Retirement Plan		Funded Plan		Modified Retirement Plan		Funded Plan
Discount rate for disclosures	4.40	%	Various		3.75	%	3.75	%
Discount rate for net periodic benefit cost	3.75	%	3.75	%	4.00	%	4.00	%
Expected long-term rate of return	N/A		4.00	%	N/A		4.00	%
Rate of compensation increase	N/A		N/A		N/A		N/A
Measurement date	12/31/2018		12/31/2018		12/31/2017		12/31/2017

The Modified Retirement Plan discount rates are determined in consultation with the third-party actuary and are set by matching the projected benefit cash flow to a notional yield curve developed by reference to high-quality fixed income investments. The discount rates are determined as the rate which would provide the same present value as the plan cash flows discounted to the measurement date using the full series of spot rates along the notional yield curve as of the measurement date. This process is also utilized when determining the Funded Plan discount rate for net periodic benefit cost. Because plan termination of the Funded Plan is imminent, when determining the 2018 discount rate for disclosures, assumptions were utilized that were consistent with those to be used with regard to plan termination. For retirees, a discount rate of 3.6% was determined based on the third-party actuary’s recent experience with group annuities from insurance companies. For non-retirees, the assumption is that all participants will elect a lump-sum payment and, as a result, the IRS assumptions for lump-sum payments were utilized (discount rate of 3.33% for payments in first five years, 4.39% for payments during next 15 years and 4.72% for payments beyond 20 years).

The expected long-term rate of return is designed to approximate the actual long-term rate of return over time. Therefore, the pattern of income / expense recognition should match the stable pattern of services provided by employees over the life of the pension obligation. Expected returns on plan assets are developed in conjunction with input from external advisors and take into account the investment policy, actual investment allocation, long-term expected rates of return on the relevant asset classes and considers any material forward-looking return expectations for these major asset classes.

United recognizes the underfunded status of the plans as a liability in the consolidated balance sheets. Information about changes in obligations and plan assets follows (in thousands):



	2018						2017
	Modified Retirement Plan			Funded Plan			Modified Retirement Plan			Funded Plan
Accumulated benefit obligation:
Accumulated benefit obligation - beginning of year	$	21,705		$	17,700		$	19,408		$	18,501
Service cost	363			—			551			—
Interest cost	801			647			778			738
Plan amendments	412			—			699			—
Actuarial (gains) losses	(949		)	(839		)	773			1,291
Benefits paid	(596		)	(1,497		)	(504		)	(2,830		)
Accumulated benefit obligation - end of year	21,736			16,011			21,705			17,700
Change in plan assets, at fair value:
Beginning plan assets	—			14,308			—			16,264
Actual return	—			(216		)	—			874
Employer contribution	596			—			504			—
Benefits paid	(596		)	(1,497		)	(504		)	(2,830		)
Plan assets - end of year	—			12,595			—			14,308
Funded status - end of year (plan assets less benefit obligations)	$	(21,736	)	$	(3,416	)	$	(21,705	)	$	(3,392	)

Components of net periodic benefit cost and other amounts recognized in other comprehensive income (in thousands):



	2018					2017					2016
	Modified Retirement Plan		Funded Plan			Modified Retirement Plan		Funded Plan			Modified Retirement Plan		Funded Plan
Service cost	$	363	$	—		$	551	$	—		$	382	$	—
Interest cost	801		647			778		738			740		842
Expected return on plan assets	—		(551		)	—		(630		)	—		(696		)
Amortization of prior service cost	666		—			560		—			501		—
Amortization of net losses	241		—			238		—			167		—
Net periodic benefit cost	$	2,071	$	96		$	2,127	$	108		$	1,790	$	146

The estimated net loss and prior service costs for the Modified Retirement Plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $59,000 and $635,000, respectively, as of December 31, 2018. For the Funded Plan, United does not expect to amortize any estimated net loss or prior service costs from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year. In 2019, United expects to make contributions to the Modified Retirement Plan of $1.14 million. During 2019, the Company also expects to make contributions to the Funded Plan in conjunction with its termination and final settlement, but such contributions are not estimable at this time.

The following table summarizes the estimated future benefit payments expected to be paid from the plans for the periods indicated (in thousands). With regard to the Funded Plan, the estimated future benefit payments were determined without regard to termination.



	Modified Retirement Plan		Funded Plan
2019	$	1,142	$	1,083
2020	1,227		1,073
2021	1,221		1,056
2022	1,214		1,058
2023	1,207		1,037
2024-2026	6,755		4,984
	$	12,766	$	10,291

The following table summarizes the Funded Plan assets by major category as of the dates indicated, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands).



December 31, 2018	Level 1		Level 2		Level 3		Total
Money market fund	$	—	$	1,033	$	—	$	1,033
Mutual funds	4,881		—		—		4,881
U.S. Treasuries	4,465		—		—		4,465
Exchange traded funds	2,216		—		—		2,216
Total plan assets	$	11,562	$	1,033	$	—	$	12,595



December 31, 2017	Level 1		Level 2		Level 3		Total
Money market fund	$	—	$	516	$	—	$	516
Mutual funds	526		—		—		526
Corporate stocks	1,346		—		—		1,346
Exchange traded funds	11,920		—		—		11,920
Total plan assets	$	13,792	$	516	$	—	$	14,308

As previously disclosed, on December 28, 2018, United filed a Notice of Standard Termination with the Pension Benefit Guaranty Corporation and anticipates making final distributions of funds to participants and beneficiaries of the Funded Plan mid-year 2019. As such, given the short-term horizon, the investment objectives of the plan portfolio have been revised to position the assets in such a manner as to minimize exposure to market or interest rate volatility to ensure assets are liquid and readily available to meet the pension obligations. The precise amounts for which these obligations will be settled ultimately will depend on future events including the life expectancy of plan participants and annuity settlement rates.

Plan assets are managed by a third-party firm as approved by United’s Employee Benefits Committee. The Board of Directors delegated certain responsibilities to the Employee Benefits Committee including maintaining the investment policy of the plan, approving the appointment of the investment manager, reviewing the performance of the plan assets at least annually and supervising the plan termination process.

For fair value measurement, money market funds are valued at amortized cost, which approximates fair value. Mutual funds, U.S. treasuries, corporate stocks, and exchange traded funds are valued at the closing price reported in the active market in which the instrument is traded. See Note 23 for more details regarding fair value measurements and the fair value hierarchy.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although management believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.