Quarterly report pursuant to Section 13 or 15(d)

BENEFIT PLANS

v3.5.0.2
BENEFIT PLANS
 6 Months Ended
Jun. 30, 2016
Compensation and Retirement Disclosure [Abstract]  
BENEFIT PLANS
.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 2016. 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 additional information on benefit plans, see the Benefit Plan footnote in our 2015 Form 10-K.
On January 1, 2015, Huntington terminated the Company sponsored retiree health care plan for Medicare eligible retirees and their dependents. Instead, Huntington partnered 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 during the 2014 third quarter. It also resulted 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 June 30,
 
Three Months Ended June 30,
(dollar amounts in thousands)
2016
 
2015
 
2016
 
2015
Service cost (1)
$
1,025

 
$
458

 
$
—

 
$
—

Interest cost
6,748

 
7,984

 
54

 
142

Expected return on plan assets
(10,224
)
 
(11,044
)
 
—

 
—

Amortization of prior service cost
—

 
—

 
(492
)
 
(492
)
Amortization of gain (loss)
1,865

 
1,984

 
(72
)
 
(116
)
Settlements
3,400

 
3,100

 
—

 
—

Benefit expense
$
2,814

 
$
2,482

 
$
(510
)
 
$
(466
)
 
Pension Benefits
 
Post Retirement Benefits
 
Six months ended June 30,
 
Six months ended June 30,
(dollar amounts in thousands)
2016
 
2015
 
2016
 
2015
Service cost (1)
$
2,050

 
$
915

 
$
—

 
$
—

Interest cost
13,496

 
15,969

 
109

 
283

Expected return on plan assets
(20,447
)
 
(22,087
)
 
—

 
—

Amortization of prior service credit
—

 
—

 
(984
)
 
(984
)
Amortization of gain (loss)
3,729

 
3,966

 
(144
)
 
(232
)
Settlements
6,800

 
5,650

 
—

 
—

Benefit expense
$
5,628

 
$
4,413

 
$
(1,019
)
 
$
(933
)
(1)
Since no participants will be earning benefits after December 31, 2013, the 2015 and 2016 service cost represents only administrative expenses.
The Bank, as trustee, held all Plan assets at June 30, 2016 and December 31, 2015. The Plan assets consisted of the following investments:
 
Fair Value
(dollar amounts in thousands)
June 30, 2016
 
December 31, 2015
Cash equivalents:
 
 
 
 
 
 
 
Federated-money market
$
5,841

 
1
%
 
$
15,590

 
3
%
Fixed income:
 
 
 
 
 
 
 
Corporate obligations
220,504

 
36

 
205,081

 
34

U.S. government obligations
65,827

 
11

 
64,456

 
11

Mutual funds-fixed income
26,661

 
4

 
32,874

 
6

U.S. government agencies
7,904

 
1

 
6,979

 
1

Equities:
 
 
 
 
 
 
 
Mutual funds-equities
129,997

 
21

 
136,026

 
23

Preferred stock
5,100

 
1

 
—

 
—

Common stock
135,757

 
22

 
120,046

 
20

Exchange traded funds
6,574

 
1

 
6,530

 
1

Limited partnerships
10,395

 
2

 
6,635

 
1

Fair value of plan assets
$
614,560

 
100
%
 
$
594,217

 
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 June 30, 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 June 30, 2016, Plan assets were invested 47% in equity investments, 52% in bonds, and 1% in cash equivalents with an average duration of 12.9 years on bond investments. The estimated life of benefit obligations was 11.9 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. For 2015, a discretionary profit-sharing contribution equal to 1% of eligible participants’ 2015 base pay was awarded during the 2016 first quarter.
The following table shows the costs of providing the SERP, SRIP, and defined contribution plans:
 
Three Months Ended June 30,
 
Six months ended June 30,
(dollar amounts in thousands)
2016
 
2015
 
2016
 
2015
SERP & SRIP
$
598

 
$
578

 
$
1,312

 
$
1,157

Defined contribution plan
8,348

 
8,078

 
16,269

 
15,523

Benefit cost
$
8,946

 
$
8,656

 
$
17,581

 
$
16,680