Annual report pursuant to Section 13 and 15(d)

BENEFIT PLANS

v3.20.4
BENEFIT PLANS
 12 Months Ended
Dec. 31, 2020
Retirement Benefits [Abstract]  
BENEFIT PLANS BENEFIT PLANS
Huntington sponsors a non-contributory defined benefit pension plan covering substantially all employees hired or rehired prior to January 1, 2010. The plan, which was modified in 2013, no longer accrues service benefits to participants and provides benefits based upon length of service and compensation levels. Huntington’s funding policy is to contribute an annual amount that is at least equal to the minimum funding requirements but not more than the amount deductible under the Internal Revenue Code. There were no required minimum contributions during 2020.
The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 2020 and 2019, and the net periodic benefit cost for the years then ended:
Pension Benefits
2020 2019
Weighted-average assumptions used to determine benefit obligations
Discount rate
 2.50  % 3.40  %
Weighted-average assumptions used to determine net periodic benefit cost
Discount rate
 3.40  4.41 
Expected return on plan assets
 5.00  5.25 
The expected long-term rate of return on plan assets is an assumption reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The expected long-term rate of return is established at the beginning of the plan year based upon historical returns and projected returns on the underlying mix of invested assets.
The following table reconciles the beginning and ending balances of the benefit obligation of the Plan with the amounts recognized in the consolidated balance sheets at December 31:
Pension Benefits
(dollar amounts in millions) 2020 2019
Projected benefit obligation at beginning of measurement year $ 923  $ 821 
Changes due to:
Service cost 3  2 
Interest cost 26  32 
Benefits paid (29) (29)
Settlements (19) (14)
Actuarial assumptions and gains (losses) 122  111 
Total changes 103  102 
Projected benefit obligation at end of measurement year $ 1,026  $ 923 
The increase in the benefit obligation compared with the end of the prior year is primarily attributed to a decrease in the discount rate.
The following table reconciles the beginning and ending balances of the fair value of plan assets at the December 31, 2020 and 2019 measurement dates:
Pension Benefits
(dollar amounts in millions) 2020 2019
Fair value of plan assets at beginning of measurement year $ 931  $ 828 
Changes due to:
Actual return on plan assets 164  145 
Settlements (16) (13)
Benefits paid (29) (29)
Total changes 119  103 
Fair value of plan assets at end of measurement year $ 1,050  $ 931 
As of December 31, 2020, the difference between the accumulated benefit obligation and the fair value of Huntington’s plan assets was $24 million and is recorded in other assets.
The following table shows the components of net periodic benefit costs recognized in the three years ended December 31, 2020, 2019 and 2018:
Pension Benefits (1)
(dollar amounts in millions) 2020 2019 2018
Service cost $ 3  $ 2  $ 3 
Interest cost 26  32  29 
Expected return on plan assets (42) (44) (49)
Amortization of loss 9  6  9 
Settlements 5  5  7 
Benefit costs $ 1  $ 1  $ (1)
(1)    The pension costs are recognized in noninterest income - other income in the Consolidated Statements of Income.
It is Huntington’s policy to recognize settlement gains and losses as incurred. Assuming no cash contributions are made to the plan during 2021, Huntington expects net periodic pension benefit, excluding any expense of settlements, to approximate $6 million for 2021.
At December 31, 2020 and 2019, The Huntington National Bank, as trustee, held all plan assets. The plan assets consisted of investments in a variety of cash equivalent, corporate and government fixed income, and equity investments as follows:
Fair Value
(dollar amounts in millions) 2020 2019
Cash equivalents:
Mutual funds-money market $ 20  2  % $ 7  1  %
Fixed income:
Corporate obligations 522  50  460  49 
U.S. Government obligations 208  20  199  21 
Municipal obligations 6  —  5  1 
Collective trust funds 118  11  105  11 
Equities:
Common stock 48  5  53  6 
Preferred stock 5  —  5  1 
Limited liability companies 39  4  43  4 
Collective trust funds 33  3  35  4 
Limited partnerships 51  5  19  2 
Fair value of plan assets $ 1,050  100  % $ 931  100  %
Investments of the Plan are accounted for at cost on the trade date and are reported at fair value. The valuation methodologies used to measure the fair value of pension plan assets vary depending on the type of asset. At December 31, 2020, cash equivalent money market funds and U.S. Treasury bills are valued at the closing price reported from an actively traded exchange and are classified as Level 1. Fixed income investments are valued using unadjusted quoted prices from active markets for similar assets are classified as Level 2. Common and preferred stock are valued using the year-end closing price as determined by a national securities exchange and are classified as Level 1. Collective trust funds and limited liability companies are valued at net asset value per unit as a practical expedient, which is calculated based on the fair values of the underlying investments held by the fund less its liabilities as reported by the issuer of the fund. The investment in the limited partnerships is reported at net asset value per share as determined by the general partners of each limited partnership, based on their proportionate share of the partnership’s fair value as recorded in the partnership’s audited financial statements.
The investment objective of the plan is to maximize the return on plan assets over a long-time period, while meeting the plan obligations. At December 31, 2020, plan assets were invested 2% in cash equivalents, 17% in equity investments, and 81% in bonds, with an average duration of 15.3 years on bond investments. The estimated life of benefit obligations was 13.5 years. Although it may fluctuate with market conditions, Huntington has targeted a long-term allocation of plan assets of 20% to 50% in equity investments and 80% to 50% in bond investments. The allocation of plan assets between equity investments and fixed income investments will change from time to time.
At December 31, 2020, the following table shows when benefit payments were expected to be paid:
(dollar amounts in millions) Pension Benefits
2021 $ 58 
2022 55 
2023 53 
2024 51 
2025 50 
2026 through 2030 243 
Huntington also sponsors an unfunded defined benefit post-retirement plan as well as other nonqualified retirement plans.
The following table presents the amounts recognized in the Consolidated Balance Sheets at December 31, 2020 and 2019, for all defined benefit and nonqualified retirement plans:
(dollar amounts in millions) 2020 2019
Other liabilities $ 48  $ 67 
The following tables present the amounts recognized in OCI as of December 31, 2020, 2019, and 2018, and the changes in accumulated OCI for the years ended December 31, 2020, 2019, and 2018: 
(dollar amounts in millions) 2020 2019 2018
Net actuarial loss $ (253) $ (261) $ (257)
Prior service cost —  10  11 
Defined benefit pension plans $ (253) $ (251) $ (246)
2020
(dollar amounts in millions) Pretax Tax (expense) Benefit After-tax
Net actuarial (loss) gain:
Amounts arising during the year $ (7) $ 2  $ (5)
Amortization included in net periodic benefit costs 17  (4) 13 
Prior service cost:
Amounts arising during the year (11) 3  (8)
Amortization included in net periodic benefit costs (2) —  (2)
Total recognized in OCI $ (3) $ 1  $ (2)
2019
(dollar amounts in millions) Pretax Tax (expense) Benefit After-tax
Net actuarial (loss) gain:
Amounts arising during the year $ (17) $ 5  $ (12)
Amortization included in net periodic benefit costs 12  (3) 9 
Prior service cost:
Amortization included in net periodic benefit costs (2) —  (2)
Total recognized in OCI $ (7) $ 2  $ (5)
2018
(dollar amounts in millions) Pretax Tax (expense) Benefit After-tax
Net actuarial (loss) gain:
Amounts arising during the year $ (5) $ 2  $ (3)
Amortization included in net periodic benefit costs 13  (3) 10 
Prior service cost:
Amortization included in net periodic benefit costs (4) 1  (3)
Total recognized in OCI $ 4  $ —  $ 4 
Huntington has a defined contribution plan that is available to eligible employees. Huntington’s expense related to the defined contribution plans for the years ended December 31, 2020, 2019, and 2018 was $47 million, $51 million, and $46 million, respectively.
The following table shows the number of shares, market value, and dividends received on shares of Huntington stock held by the defined contribution plan:
December 31,
(dollar amounts in millions, share amounts in thousands) 2020 2019
Shares in Huntington common stock
10,121  10,334 
Market value of Huntington common stock
 $ 128  $ 156 
Dividends received on shares of Huntington stock
 6  6