EMPLOYEE BENEFIT PLANS

Certain subsidiaries of the Company are sponsors or administrators of both qualified and non-qualified defined benefit pension plans (“Pension Plans”). The largest of these plans is a non-contributory qualified defined benefit pension plan sponsored by RGA Reinsurance that covers U.S. employees. The benefits under the Pension Plans are generally based on years of service and compensation levels.

The Company also provides select health care and life insurance benefits for certain retired employees. The health care benefits are provided through a self-insured welfare benefit plan. Employees become eligible for these benefits if they meet minimum age and service requirements. The retiree’s cost for health care benefits varies depending upon the credited years of service. The Company recorded benefits expense of approximately $5.3 million, $6.3 million and $9.1 million in 2017, 2016 and 2015, respectively, that are related to these postretirement plans. Effective January 1, 2017, employees hired in the U. S. are not eligible for retiree health care benefits. Virtually all retirees, or their beneficiaries, contribute a portion of the total cost of postretirement health benefits. Prepaid benefit costs and accrued benefit liabilities are included in other assets and other liabilities, respectively, in the Company’s consolidated balance sheets.

A December 31 measurement date is used for all of the defined benefit and postretirement plans. The status of these plans as of December 31, 2017 and 2016 is summarized below (dollars in thousands):



	December 31,
	Pension Benefits						Other Benefits
	2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	161,955		$	142,239		$	60,524		$	63,307
Service cost	10,686			10,319			2,543			2,883
Interest Cost	5,326			4,790			2,118			2,259
Participant contributions	—			—			354			305
Amendments⁽¹⁾	159			—			—			(13,743		)
Actuarial (gains) losses	11,336			9,973			5,510			6,228
Settlement (gains) losses	(438		)	258			—			—
Settlements	(12,907		)	(3,152		)	—			—
Benefits paid	(5,974		)	(3,047		)	(851		)	(715		)
Foreign exchange translations and other adjustments	2,000			575			—			—
Benefit obligation at end of year	$	172,143		$	161,955		$	70,198		$	60,524


(1)	Reflects effect of the amendment to RGA’s U.S. retiree health care benefit plan announced in 2016, effective January 1, 2017 and other administrative amendments to the pension plans. The amounts were recorded in AOCI and will be amortized through prior service cost.



	December 31,
	Pension Benefits						Other Benefits
	2017			2016			2017			2016
Change in plan assets:
Fair value of plan assets at beginning of year	$	84,770		$	68,435		$	—		$	—
Actual return on plan assets	14,481			6,584			—			—
Employer contributions	22,866			15,950			497			410
Participant contributions	—			—			354			305
Disbursement for settlements	(12,907		)	(3,152		)	—			—
Benefits paid and expenses	(5,974		)	(3,047		)	(851		)	(715		)
Fair value of plan assets at end of year	$	103,236		$	84,770		$	—		$	—
Funded status at end of year	$	(68,907	)	$	(77,185	)	$	(70,198	)	$	(60,524	)



	December 31,
	Qualified Plans						Non-Qualified Plans⁽¹⁾						Total
	2017			2016			2017			2016			2017			2016
Aggregate fair value of plan assets	$	103,236		$	84,770		$	—		$	—		$	103,236		$	84,770
Aggregate projected benefit obligations	107,072			96,418			65,071			65,537			172,143			161,955
Under funded	$	(3,836	)	$	(11,648	)	$	(65,071	)	$	(65,537	)	$	(68,907	)	$	(77,185	)


(1)	For non-qualified plans, there are no required funding levels.



	December 31,
	Pension Benefits				Other Benefits
	2017		2016		2017			2016
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	40,058	$	46,119	$	35,672		$	32,156
Net prior service cost (credit)	804		703		(11,806		)	(13,121		)
Total	$	40,862	$	46,822	$	23,866		$	19,035

The following table presents information for qualified and non-qualified pension plans with a projected benefit obligation in excess of plan assets as of December 31, 2017 and 2016 (dollars in thousands):



	2017		2016
Projected benefit obligation	$	172,143	$	161,955
Fair value of plan assets	103,236		84,770

The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2017 and 2016 (dollars in thousands):



	2017		2016
Accumulated benefit obligation	$	169,705	$	158,580
Fair value of plan assets	103,236		84,770

The components of net periodic benefit cost, included in other operating expenses on the consolidated statements of income, and other changes in plan assets and benefit obligations recognized in other comprehensive income were as follows (dollars in thousands):



	Pension Benefits									Other Benefits
	2017			2016			2015			2017			2016			2015
Net periodic benefit cost:
Service cost	$	10,686		$	10,319		$	9,222		$	2,543		$	2,883		$	4,062
Interest cost	5,326			4,790			5,035			2,118			2,259			2,572
Expected return on plan assets	(6,215		)	(5,138		)	(4,897		)	—			—			—
Amortization of prior actuarial losses	4,382			4,323			3,429			1,992			1,827			2,465
Amortization of prior service cost (credit)	344			294			309			(1,315		)	(622		)	—
Settlements	4,785			1,026			—			—			—			—
Net periodic benefit cost	19,308			15,614			13,098			5,338			6,347			9,099


Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial (gains) losses	2,633			8,785			5,774			5,507			6,228			(2,729		)
Amortization of actuarial (gains) losses	(4,382		)	(4,323		)	(3,429		)	(1,992		)	(1,827		)	(2,465		)
Amortization of prior service cost (credit)	(344		)	(294		)	(309		)	1,315			622			—
Settlements	(4,785		)	(1,026		)	—			—			—			—
Prior service cost (credit) ⁽¹⁾	159			—			—			—			(13,743		)	—
Foreign exchange translations and other adjustments	759			707			(1,797		)	—			—			—
Total recognized in other comprehensive income	(5,960		)	3,849			239			4,830			(8,720		)	(5,194		)
Total recognized in net periodic benefit cost and other comprehensive income	$	13,348		$	19,463		$	13,337		$	10,168		$	(2,373	)	$	3,905


(1)	Reflects effect of the amendment to RGA’s U.S. retiree health care benefit plan announced in 2016, effective January 1, 2017 and other administrative amendments to the pension plans. The amounts were recorded in AOCI and will be amortized through prior service cost.

During 2018, the Company expects to contribute $14.5 million and $1.2 million to the pension plans and other benefit plans, respectively.

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid (dollars in thousands):



	Pension Benefits		Other Benefits
2018	$	9,315	$	1,238
2019	9,765		1,495
2020	10,885		1,842
2021	11,102		2,188
2022	13,184		2,521
2023-2027	69,285		18,205

The estimated net loss and prior service cost for the defined benefit pension plans and post-retirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $3.4 million and $1.1 million, respectively.

Assumptions

Weighted average assumptions used to determine the accumulated benefit obligation and net benefit cost or income were as follows:



	Pension Benefits						Other Benefits
	2017		2016		2015		2017		2016		2015
Discount rate used to determine benefit obligation	3.40	%	3.80	%	3.99	%	3.56	%	4.10	%	4.43	%
Discount rate used to determine net benefit cost or income	3.81	%	3.95	%	3.77	%	4.10	%	4.43	%	4.05	%
Expected long-term rate of return on plan assets	7.35	%	7.35	%	7.35	%	—	%	—	%	—	%
Rate of compensation increases	4.16	%	4.08	%	4.08	%	—	%	—	%	—	%

The expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan invests, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of the plan assets by sector, adjusted for the long-term expectations on the performance of the markets. While the precise expected return derived using this approach may fluctuate from year to year, the policy is to hold this long-term assumption constant as long as it remains within reasonable tolerance from the derived rate. This process is consistent for all plan assets as all the assets are invested in mutual funds.

The assumed health care cost trend rates used in measuring the accumulated non-pension post-retirement benefit obligation were as follows:



	December 31,
	2017	2016
Pre-Medicare eligible claims	9% down to 5% in 2024	10% down to 5% in 2024
Medicare eligible claims	9% down to 5% in 2024	10% down to 5% in 2024

Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects (dollars in thousands):



	One Percent Increase		One Percent Decrease
Effect on total of service and interest cost components	$	7,941	$	(7,104	)
Effect on accumulated postretirement benefit obligation	$	447	$	(359	)

Plan Assets

Target allocations of U.S. qualified pension plan assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification and partial liability immunization. Adjustments are made to target allocations based on the Company’s assessment of the effect of economic factors and market conditions. The target allocations for plan assets are 60% equity securities and 40% debt securities as of December 31, 2017 and 2016. The Company’s plan assets are primarily invested in mutual funds. The mutual funds include holdings of S&P 500 securities, large-cap securities, mid-cap securities, small-cap securities, international securities, corporate debt securities, U.S. and other government securities, mortgage-related securities and cash.

Equity and debt securities are exposed to various risks, such as interest rate risk, credit risk and overall market volatility. Due to the level of risk associated with certain investment securities, changes in the values of investment securities will occur and any change would affect the amounts reported in the financial statements.

The fair values of the Company’s qualified pension plan assets as of December 31, 2017 and 2016 are summarized below (dollars in thousands):



	December 31, 2017
			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
Mutual Funds⁽¹⁾	$	103,106	$	103,106	$	—	$	—
Cash	130		130		—		—
Total	$	103,236	$	103,236	$	—	$	—


(1)	Mutual funds were invested 27% in U.S. equity funds, 36% in U.S. fixed income funds, 22% in non-U.S. equity funds and 15% in other.



	December 31, 2016
			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
Mutual Funds⁽²⁾	$	84,671	$	84,671	$	—	$	—
Cash	99		99		—		—
Total	$	84,770	$	84,770	$	—	$	—


(2)	Mutual funds were invested 28% in U.S. equity funds, 37% in U.S. fixed income funds, 20% in non-U.S. equity funds and 15% in other.

As of December 31, 2017 and 2016, the Company classified all of its qualified pension plan assets in the Level 1 category as quoted prices in active markets are available for these assets. See Note 6 – “Fair Value of Asset and Liabilities” for additional detail on the fair value hierarchy.

Savings and Investment Plans

Certain subsidiaries of RGA also sponsor savings and investment plans under which a portion of employee contributions are matched. Subsidiary contributions to these plans were $14.2 million, $9.9 million and $9.0 million in 2017, 2016 and 2015, respectively.