Pension and Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

United offers a defined contribution 401(k) plan (the “401(k) Plan”) that covers substantially all employees meeting certain minimum service requirements. The 401(k) Plan allows employees to make pre-tax contributions to the 401(k) Plan and, prior to March 1, 2018, United matched 70% of employee contributions up to 5% of eligible compensation. The matching contribution was increased 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 401(k) Plan is administered in accordance with applicable laws and regulations. Compensation expense from continuing operations related to the 401(k) Plan totaled $5.30 million, $4.73 million and $2.66 million in 2019, 2018 and 2017, 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 2019, 2018 and 2017, United recognized $162,000, $119,000 and $35,000, 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 2019, 2018 or 2017.

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 were 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. During 2019, United settled the liabilities of its Funded Plan. Participants elected to receive either lump sum distributions or annuity contracts purchased from a third-party insurance company that provided for the payment of vested benefits. United contributed $4.90 million to the Funded Plan in the third quarter 2019 to fund its liquidation.

As a result of the pension termination, unrecognized losses of $1.56 million, which were previously recorded in accumulated other comprehensive income (loss) on the consolidated balance sheets, were recognized as expense and an additional pension plan settlement loss of $1.38 million was recorded in the consolidated statements of income. Including both charges, the total Funded Plan settlement loss was$2.94 million, which was included in merger-related and other charges for the year ended December 31, 2019.

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



	2019		2018
	Modified Retirement Plan		Modified Retirement Plan		Funded Plan
Discount rate for disclosures	3.25	%	4.40	%	Various
Discount rate for net periodic benefit cost	4.40	%	3.75	%	3.75	%
Expected long-term rate of return	N/A		N/A		4.00	%
Rate of compensation increase	N/A		N/A		N/A
Measurement date	12/31/2019		12/31/2018		12/31/2018

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 was also utilized when determining the Funded Plan discount rate for net periodic benefit cost. Because plan termination of the Funded Plan was 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 was that all participants would 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 was 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 were developed in conjunction with input from external advisors and took into account the investment policy, actual investment allocation, long-term expected rates of return on the relevant asset classes and considered 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):



	2019						2018
	Modified Retirement Plan			Funded Plan			Modified Retirement Plan			Funded Plan
Accumulated benefit obligation:
Accumulated benefit obligation - beginning of year	$	21,736		$	16,011		$	21,705		$	17,700
Service cost	392			—			363			—
Interest cost	931			166			801			647
Plan amendments	386			—			412			—
Actuarial (gains) losses	2,390			1,489			(949		)	(839		)
Benefits paid	(730		)	(17,666		)	(596		)	(1,497		)
Accumulated benefit obligation - end of year	25,105			—			21,736			16,011
Change in plan assets, at fair value:
Beginning plan assets	—			12,595			—			14,308
Actual return	—			173			—			(216		)
Employer contribution	730			4,898			596			—
Benefits paid	(730		)	(17,666		)	(596		)	(1,497		)
Plan assets - end of year	—			—			—			12,595
Funded status - end of year (plan assets less benefit obligations)	$	(25,105	)	$	—		$	(21,736	)	$	(3,416	)

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



	2019					2018					2017
	Modified Retirement Plan		Funded Plan			Modified Retirement Plan		Funded Plan			Modified Retirement Plan		Funded Plan
Service cost	$	392	$	—		$	363	$	—		$	551	$	—
Interest cost	931		166			801		647			778		738
Expected return on plan assets	—		(106		)	—		(551		)	—		(630		)
Amortization of prior service cost	635		—			666		—			560		—
Amortization of net losses	59		—			241		—			238		—
Net periodic benefit cost	$	2,017	$	60		$	2,071	$	96		$	2,127	$	108

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 $326,000 and $531,000, respectively, as of December 31, 2019.

The following table summarizes the estimated future benefit payments expected to be paid from the Modified Retirement Plan for the periods indicated (in thousands).



2020	$	1,301
2021	1,176
2022	1,170
2023	1,164
2024	1,156
2025-2029	7,133

The following table summarizes the Funded Plan assets by major category as of the December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands).



	Level 1		Level 2		Level 3		Total
Money market fund	$	—	$	1,033	$	—	$	1,033
Mutual funds	4,881		—		—		4,881
Corporate stocks	4,465		—		—		4,465
Exchange traded funds	2,216		—		—		2,216
Total plan assets	$	11,562	$	1,033	$	—	$	12,595

For fair value measurement, money market funds were valued at amortized cost, which approximates fair value. Mutual funds, U.S. treasuries, corporate stocks, and exchange traded funds were valued at the closing price reported in the active market in which the instrument is traded. See Note 24 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 were 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.