|12 Months Ended|
Dec. 31, 2016
|Compensation and Retirement Disclosure [Abstract]|
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. Although not required, Huntington made a $150 million contribution to the Plan in the third quarter of 2016.
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.
On January 1, 2015, Huntington terminated 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 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 weighted-average assumptions used to determine the benefit obligation at December 31, 2016 and 2015, and the net periodic benefit cost for the years then ended:
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 and the post-retirement benefit plan with the amounts recognized in the consolidated balance sheets at December 31:
The following table reconciles the beginning and ending balances of the fair value of Plan assets at the December 31, 2016 and 2015 measurement dates:
Huntington’s accumulated benefit obligation under the Plan was $736 million and $755 million at December 31, 2016 and 2015. As of December 31, 2016, the difference between the accumulated benefit obligation and the fair value of Huntington's plan assets was $9 million and is recorded in noncurrent liabilities.
The following table shows the components of net periodic benefit costs recognized in the three years ended December 31, 2016:
Included in benefit costs are $2 million, $4 million, and $2 million of plan expenses that were recognized in the three years ended December 31, 2016, 2015, and 2014. It is Huntington’s policy to recognize settlement gains and losses as incurred. Assuming no cash contributions are made to the Plan during 2017, Management expects net periodic pension benefit, excluding any expense of settlements, to approximate $14 million for 2017. The post-retirement medical and life subsidy was eliminated for anyone who retires on or after March 1, 2010. As such, there were no incremental net periodic post-retirement benefits costs associated with this plan.
The estimated transition obligation, prior service credit, and net actuarial loss for the plans that will be amortized from OCI into net periodic benefit cost over the next fiscal year is zero, $2 million, and a $7 million benefit, respectively.
At December 31, 2016 and 2015, 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:
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. For an explanation of the fair value hierarchy, refer to Note 1 “Significant Accounting Policies” under the heading “Fair Value Measurements”. At December 31, 2016, equities and money market funds are classified as Level 1; mutual funds-fixed income, corporate obligations, U.S. government obligations, and U.S. government agencies are classified as Level 2; and limited partnerships 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 December 31, 2016, Plan assets were invested 2% in cash and cash equivalents, 44% in equity investments, and 54% in bonds, with an average duration of 14.2 years on bond investments. The estimated life of benefit obligations was 12.7 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.
At December 31, 2016, the following table shows when benefit payments were expected to be paid:
Although not required, a cash contribution can be made to the Plan up to the maximum deductible limit in the plan year. Anticipated contributions for 2017 to the post-retirement benefit plan are zero.
The 2017 healthcare cost trend rate is projected to be 6.8% for participants. This rate is assumed to decrease gradually until it reaches 4.5% in the year 2028 and remain at that level thereafter. Huntington updated the immediate healthcare cost trend rate assumption based on current market data and Huntington’s claims experience. This trend rate is expected to decline over time to a trend level consistent with medical inflation and long-term economic assumptions.
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. At December 31, 2016 and 2015, Huntington has an accrued pension liability of $33 million and $34 million, respectively, associated with these plans. Pension expense for the plans was $1 million, $1 million, and $1 million in 2016, 2015, and 2014, respectively.
The following table presents the amounts recognized in the Consolidated Balance Sheets at December 31, 2016 and 2015, for all defined benefit plans:
The following tables present the amounts recognized in OCI as of December 31, 2016, 2015, and 2014, and the changes in accumulated OCI for the years ended December 31, 2016, 2015, and 2014:
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. For 2015 and 2016, a discretionary profit-sharing contribution equal to 1% of eligible participants’ annual base pay was awarded.
The following table shows the costs of providing the defined contribution plan:
The following table shows the number of shares, market value, and dividends received on shares of Huntington stock held by the defined contribution plan:
FirstMerit Benefit Plans
As part of the FirstMerit acquisition, Huntington agreed to assume and honor all FirstMerit benefit plans. The FirstMerit Pension Plan was frozen for nonvested employees and closed to new entrants after December 31, 2006. Effective December 31, 2012, the FirstMerit Pension Plan was frozen for vested employees. At the time of acquisition, the benefit obligation was $330 million and the fair value of assets was $280 million. In addition, FirstMerit had a post retirement benefit plan which provided medical and life insurance for retired employees. At the time of acquisition, the benefit obligation was $7 million.
The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 2016, and the net periodic benefit cost for the year then ended:
The following table reconciles the beginning and ending balances of the benefit obligation of FirstMerit's pension and post-retirement benefit plan with the amounts recognized in the consolidated balance sheet at the December 31, 2016:
During the 2016 fourth quarter, Huntington completed two settlements of the FirstMerit pension benefit obligation totaling $181 million. The settlements triggered settlement accounting, requiring a remeasurement of the plan as of November 30, 2016, and the recognition in the income statement of previously deferred amounts in OCI. The result was a gain of approximately $18 million and is reflected in personnel costs.
The following table reconciles the beginning and ending balances of the fair value of FirstMerit's plan assets at the December 31, 2016 measurement date:
FirstMerit’s accumulated benefit obligation under the pension plan was $115 million at December 31, 2016. As of December 31, 2016, the difference between the accumulated benefit obligation and the fair value was $19 million and is recorded in noncurrent liabilities.
The following table shows the components of FirstMerit's net periodic benefit costs recognized in the year ended December 31, 2016:
Included in FirstMerit's benefit costs is $1 million of plan expenses that were recognized in the year ended December 31, 2016. It is Huntington’s policy to recognize settlement gains and losses as incurred. Assuming no cash contributions are made to the Plan during 2017, Management expects net periodic pension benefit, excluding any expense of settlements, to approximate $1 million in 2017.
At December 31, 2016 the fair value of FirstMerit plan assets are as follows:
At December 31, 2016, the following table shows when benefit payments were expected to be paid:
The entire disclosure for pension and other postretirement benefits.
Reference 1: http://www.xbrl.org/2003/role/presentationRef