Annual report pursuant to Section 13 and 15(d)

BENEFIT PLANS

v3.10.0.1
BENEFIT PLANS
 12 Months Ended
Dec. 31, 2018
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 2018.
The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 2018 and 2017, and the net periodic benefit cost for the years then ended:
 
Pension Benefits
 
2018
 
2017
Weighted-average assumptions used to determine benefit obligations
 
 
 
Discount rate
4.41
%
 
3.73
%
Weighted-average assumptions used to determine net periodic benefit cost
 
 
 
Discount rate
3.73

 
4.38

Expected return on plan assets
5.75

 
6.50


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)
2018
 
2017
Projected benefit obligation at beginning of measurement year
$
900

 
$
851

Changes due to:
 
 
 
Service cost
3

 
3

Interest cost
29

 
30

Benefits paid
(26
)
 
(27
)
Settlements
(18
)
 
(31
)
Actuarial assumptions and gains (losses)
(67
)
 
74

Total changes
(79
)
 
49

Projected benefit obligation at end of measurement year
$
821

 
$
900


The following table reconciles the beginning and ending balances of the fair value of Plan assets at the December 31, 2018 and 2017 measurement dates:
 
Pension Benefits
(dollar amounts in millions)
2018
 
2017
Fair value of plan assets at beginning of measurement year
$
903

 
$
841

Changes due to:
 
 
 
Actual return on plan assets
(30
)
 
118

Settlements
(19
)
 
(29
)
Benefits paid
(26
)
 
(27
)
Total changes
(75
)
 
62

Fair value of plan assets at end of measurement year
$
828

 
$
903


As of December 31, 2018, the difference between the accumulated benefit obligation and the fair value of Huntington’s plan assets was $7 million and is recorded in other liabilities.
The following table shows the components of net periodic benefit costs recognized in the three years ended December 31, 2018:
 
Pension Benefits (1)
(dollar amounts in millions)
2018
 
2017
 
2016
Service cost
$
3

 
$
3

 
$
5

Interest cost
29

 
30

 
30

Expected return on plan assets
(49
)
 
(55
)
 
(45
)
Amortization of loss
9

 
7

 
7

Settlements
7

 
11

 
(8
)
Benefit costs
$
(1
)
 
$
(4
)
 
$
(11
)

(1)
The pension costs for 2018 were recorded in noninterest income - other income. For 2017 and 2016 the costs were recorded in noninterest expense - personnel costs, in the Consolidated Statements of Income.
Included in benefit costs above are $2 million, $2 million, and $2 million of plan expenses that were recognized in each of the three years ended December 31, 2018, 2017, and 2016. It is Huntington’s policy to recognize settlement gains and losses as incurred. Assuming no cash contributions are made to the Plan during 2019, Huntington expects net periodic pension benefit, excluding any expense of settlements, to approximate $3 million for 2019.
At December 31, 2018 and 2017, The Huntington National Bank, as trustee, held all Plan assets. The Plan assets consisted of investments in a variety of corporate and government fixed income investments, money market funds, and mutual funds as follows:
 
Fair Value
(dollar amounts in millions)
2018
 
2017
Cash equivalents:
 
 
 
 
 
 
 
Mutual funds-money market
$
4

 
—
%
 
$
14

 
2
%
U.S. Treasury bills
4

 
1

 
5

 
1

Fixed income:
 
 
 
 
 
 


Corporate obligations
272

 
33

 
293

 
32

U.S. Government obligations
298

 
36

 
216

 
24

U.S. Government agencies
22

 
3

 
23

 
3

Equities:
 
 


 
 
 


Mutual funds-equities
64

 
8

 
118

 
13

Common stock
98

 
12

 
158

 
17

Preferred stock
5

 
1

 
5

 
1

Exchange traded funds
45

 
5

 
58

 
6

Limited Partnerships
16

 
1

 
13

 
1

Fair value of plan assets
$
828

 
100
%
 
$
903

 
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, 2018, 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. Mutual funds and exchange traded funds are valued at quoted market prices that represent the net asset value of shares held by the Plan at year-end. The mutual funds held by the Plan are actively traded 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. 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, 2018, Plan assets were invested 1% in cash equivalents, 27% in equity investments, and 72% in bonds, with an average duration of 12.7 years on bond investments. The estimated life of benefit obligations was 12.4 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, 2018, the following table shows when benefit payments were expected to be paid:
(dollar amounts in millions)
Pension Benefits
2019
$
49

2020
49

2021
48

2022
48

2023
48

2024 through 2028
238


Huntington also sponsors an unfunded defined benefit post-retirement plan as well as other nonqualified retirement plans, the most significant being the SRIP and FirstMerit SERP. The SRIP and FirstMerit SERP plans provide certain former officers and directors, with defined pension benefits in excess of limits imposed by federal tax law.
The following table presents the amounts recognized in the Consolidated Balance Sheets at December 31, 2018 and 2017, for all defined benefit and nonqualified retirement plans:
(dollar amounts in millions)
2018
 
2017
Other liabilities
$
63

 
$
78

The following tables present the amounts recognized in OCI as of December 31, 2018, 2017, and 2016, and the changes in accumulated OCI for the years ended December 31, 2018, 2017, and 2016: 
(dollar amounts in millions)
2018
 
2017
 
2016
Net actuarial loss
$
(257
)
 
$
(264
)
 
$
(217
)
Prior service cost
11

 
14

 
12

Defined benefit pension plans
$
(246
)
 
$
(250
)
 
$
(205
)
 
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:
 
 
 
 
 
Amounts arising during the year
—

 
—

 
—

Amortization included in net periodic benefit costs
(4
)
 
1

 
(3
)
Total recognized in OCI
$
4

 
$
—

 
$
4

 
2017
(dollar amounts in millions)
Pretax
 
Tax (expense) Benefit
 
After-tax (1)
Net actuarial (loss) gain:
 
 
 
 
 
Amounts arising during the year
$
(16
)
 
$
6

 
$
(10
)
Amortization included in net periodic benefit costs
18

 
(7
)
 
11

Prior service cost:
 
 
 
 
 
Amounts arising during the year
—

 
—

 
—

Amortization included in net periodic benefit costs
(2
)
 
1

 
(1
)
Total recognized in OCI
$
—

 
$
—

 
$
—

(1)
TCJA reclassification from AOCI to retained earnings recorded during 2017 was $45 million.
 
2016
(dollar amounts in millions)
Pretax
 
Tax (expense) Benefit
 
After-tax
Net actuarial (loss) gain:
 
 
 
 
 
Amounts arising during the year
$
38

 
$
(13
)
 
$
25

Amortization included in net periodic benefit costs
2

 
(1
)
 
1

Prior service cost:
 
 
 
 
 
Amounts arising during the year
—

 
—

 
—

Amortization included in net periodic benefit costs
(2
)
 
1

 
(1
)
Total recognized in OCI
$
38

 
$
(13
)
 
$
25


Huntington has a defined contribution plan that is available to eligible employees. Beginning January 1, 2018, Huntington increased the company match such that Huntington matches participant contributions 150% of the first 2% of base pay and 100% of the next 2%. Huntington’s expense related to the defined contribution plans for the years ended December 31, 2018, 2017, and 2016 was $46 million, $35 million, and $36 million, respectively. For 2018, the discretionary contribution was not made.
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)
2018
 
2017
Shares in Huntington common stock
11,635

 
13,566

Market value of Huntington common stock
$
139

 
$
198

Dividends received on shares of Huntington stock
6

 
4