Quarterly report pursuant to Section 13 or 15(d)

Benefit Plans

v2.4.0.8
Benefit Plans
3 Months Ended
Sep. 30, 2014
Benefit Plans [Abstract]  
BENEFIT PLANS

13. Benefit Plans

Huntington sponsors the Plan, 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 and no longer accrues service benefits to participants, provides benefits based upon length of service and compensation levels. The funding policy of Huntington 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 is no required minimum contribution for 2014. During the 2013 third quarter, the board of directors approved, and management communicated, a curtailment of the Company’s pension plan effective December 31, 2013. 

In addition, Huntington has an unfunded defined benefit post-retirement plan that provides certain healthcare and life insurance benefits to retired employees who have attained the age of 55 and have at least 10 years of vesting service under this plan. For any employee retiring on or after January 1, 1993, post-retirement healthcare benefits are based upon the employee’s number of months of service and are limited to the actual cost of coverage. Life insurance benefits are a percentage of the employee’s base salary at the time of retirement, with a maximum of $50,000 of coverage. The employer paid portion of the post-retirement health and life insurance plan was eliminated for employees retiring on and after March 1, 2010. Eligible employees retiring on and after March 1, 2010, who elect retiree medical coverage, will pay the full cost of this coverage. Huntington will not provide any employer paid life insurance to employees retiring on and after March 1, 2010. Eligible employees will be able to convert or port their existing life insurance at their own expense under the same terms that are available to all terminated employees.

Beginning January 1, 2015, Huntington will terminate the company sponsored retiree health care plan for Medicare eligible retirees and their dependents.  Instead, Huntington will partner with a third party to assist the retirees and their dependents in selecting individual policies from a variety of carriers on a private exchange.  This plan amendment resulted in a measurement of the liability at the approval date.  The result of the measurement was a $5.2 million reduction of the liability and increase in accumulated other comprehensive income.  It will also result in a reduction of expense over the estimated life of plan participants.

The following table shows the components of net periodic benefit expense of the Plan and the Post-Retirement Benefit Plan:

Pension Benefits Post Retirement Benefits
Three Months Ended Three Months Ended
September 30, September 30,
(dollar amounts in thousands) 2014 2013 2014 2013
Service cost (1) $ 435 $ 5,428 $ --- $ ---
Interest cost 8,099 7,749 258 216
Expected return on plan assets (11,446) (11,768) --- ---
Amortization of prior service cost --- --- (338) (339)
Amortization of gain 1,442 1,738 (144) (150)
Curtailments --- (34,613) --- ---
Settlements 2,500 2,000 --- ---
Recognized net actuarial loss --- 1,061 --- ---
Benefit expense $ 1,030 $ (28,405) $ (224) $ (273)
(1) Since no participants will be earning benefits after December 31, 2013, the 2014 service cost represents only administrative expenses.
Pension Benefits Post Retirement Benefits
Nine Months Ended Nine Months Ended
September 30, September 30,
(dollar amounts in thousands) 2014 2013 2014 2013
Service cost $ 1,305 $ 19,696 $ --- $ ---
Interest cost 24,299 22,363 776 647
Expected return on plan assets (34,338) (35,950) --- ---
Amortization of prior service cost --- (2,884) (1,016) (1,015)
Amortization of gain 4,326 21,306 (432) (450)
Curtailments --- (34,613) --- ---
Settlements 7,500 5,000 --- ---
Recognized net actuarial loss --- 1,061 --- ---
Benefit expense $ 3,092 $ (4,021) $ (672) $ (818)

The Bank, as trustee, held all Plan assets at September 30, 2014 and December 31, 2013. The Plan assets consisted of the following investments:

Fair Value
(dollar amounts in thousands) September 30, 2014 December 31, 2013
Cash $ 3 --- % $ --- --- %
Cash equivalents:
Huntington funds - money market 12,622 2 803 ---
Fixed income:
Huntington funds - fixed income funds --- --- 74,048 11
Corporate obligations 214,356 33 180,757 28
Mutual funds - fixed income 46,857 7 --- ---
U.S. government obligations 59,290 9 51,932 8
U.S. government agencies 7,047 1 6,146 1
Equities:
Huntington funds 71,061 11 289,379 45
Mutual funds - equities 120,202 19 --- ---
Exchange traded funds 28,014 4 24,705 4
Huntington common stock --- --- 20,324 3
Other common stock 89,768 14 --- ---
Limited partnerships 3,003 --- 926 ---
Fair value of plan assets $ 652,223 100 % $ 649,020 100 %

Investments of the Plan are accounted for at cost on the trade date and are reported at fair value. The Plan’s investments at September 30, 2014, are classified as Level 1 within the fair value hierarchy, except for corporate obligations, U.S. government obligations, and U.S. government agencies, which are classified as Level 2, and limited partnerships, which are classified as Level 3. In general, investments of the Plan 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 investments, it is reasonably possible changes in the values of investments will occur in the near term and such changes could materially affect the amounts reported in the Plan assets.

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 September 30, 2014, Plan assets were invested 48% in equity investments, 50% in bonds, and 2% in cash with an average duration of 11.97 years on bond investments. The estimated life of benefit obligations was 11 years. Although it may fluctuate with market conditions, Management 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 with the allocation to fixed income investments increasing as the funding level increases.

Huntington also sponsors other nonqualified retirement plans, the most significant being the SERP and the SRIP. The SERP provides certain former officers and directors, and the SRIP provides certain current and former officers and directors of Huntington and its subsidiaries with defined pension benefits in excess of limits imposed by federal tax law. During the 2013 third quarter, the board of directors approved, and management communicated, a curtailment of the Company’s SRIP plan effective December 31, 2013.

Huntington has a defined contribution plan that is available to eligible employees. Huntington matches participant contributions, up to the first 4% of base pay contributed to the Plan.

The following table shows the costs of providing the SERP, SRIP, and defined contribution plans:

Three Months Ended Nine Months Ended
September 30, September 30,
(dollar amounts in thousands) 2014 2013 2014 2013
SERP & SRIP $ 504 $ 1,570 $ 1,467 $ 3,949
Defined contribution plan 8,325 4,671 23,239 13,614
Benefit cost $ 8,829 $ 6,241 $ 24,706 $ 17,563