Quarterly report pursuant to Section 13 or 15(d)

BENEFIT PLANS

v3.5.0.2
BENEFIT PLANS
 9 Months Ended
Sep. 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. 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 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 remeasurement of the liability at the approval date and a reduction of expense over the estimated life of plan participants.
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 components of net periodic benefit expense for all plans:
 
Pension Benefits
 
Post Retirement Benefits
 
 
Three Months Ended September 30,
 
Three Months Ended September 30,
 
(dollar amounts in thousands)
2016
 
2015
 
2016
 
2015
 
Service cost (1)
$
1,425

 
 
$
457

 
$
16

 
 
$
—

 
 
Interest cost
7,978

 
 
7,984

 
79

 
 
142

 
 
Expected return on plan assets
(12,086
)
 
 
(11,044
)
 
—

 
 
—

 
 
Amortization of prior service cost
—

 
 
—

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

 
 
1,984

 
(72
)
 
 
(116
)
 
 
Settlements
3,400

 
 
2,825

 
—

 
 
(3,090
)
(2)
 
Benefit expense
$
2,582

(3)
 
$
2,206

 
$
(469
)
(3)
 
$
(3,556
)
 
 
 
Pension Benefits
 
Post Retirement Benefits
 
 
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
 
 
(dollar amounts in thousands)
2016
 
2015
 
2016
 
2015
 
Service cost (1)
$
3,475

 
 
$
1,372

 
$
16

 
 
$
—

 
 
Interest cost
21,474

 
 
23,953

 
188

 
 
425

 
 
Expected return on plan assets
(32,533
)
 
 
(33,131
)
 
—

 
 
—

 
 
Amortization of prior service credit
—

 
 
—

 
(1,476
)
 
 
(1,476
)
 
 
Amortization of (gain) loss
5,594

 
 
5,950

 
(216
)
 
 
(348
)
 
 
Settlements
10,200

 
 
8,475

 
—

 
 
(3,090
)
(2)
 
Benefit expense
$
8,210

(3)
 
$
6,619

 
$
(1,488
)
(3)
 
$
(4,489
)
 
 
(1)
Since no participants will be earning benefits after December 31, 2013, the 2015 and 2016 service cost represents only administrative expenses.
(2)
During the 2015 third quarter, Huntington transferred the retiree life insurance obligation in a non-participating contract to an insurance carrier.
(3)
Includes expense associated with FirstMerit plans.
Fair value of plan assets consisted of the following investments at September 30, 2016 and December 31, 2015:
 
Fair Value
(dollar amounts in thousands)
September 30, 2016 (1)
 
December 31, 2015
Cash equivalents:
 
 
 
 
 
 
 
Federated-money market
$
161,327

 
15
%
 
$
15,590

 
3
%
Fixed income:
 
 
 
 
 
 
 
Corporate obligations
226,857

 
22

 
205,081

 
34

U.S. government obligations
99,956

 
9

 
64,456

 
11

Mutual funds-fixed income
135,092

 
13

 
32,874

 
6

U.S. government agencies
10,844

 
1

 
6,979

 
1

Equities:
 
 
 
 
 
 
 
Mutual funds-equities
198,120

 
19

 
136,026

 
23

Preferred stock
5,195

 
1

 
—

 
—

Common stock
181,909

 
17

 
120,046

 
20

Exchange traded funds
18,729

 
2

 
6,530

 
1

Limited partnerships
11,297

 
1

 
6,635

 
1

Fair value of plan assets
$
1,049,326

 
100
%
 
$
594,217

 
100
%
(1)
Includes assets associated with the FirstMerit Pension Plan totaling $279 million.
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 September 30, 2016 and December 31, 2015, 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.
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 defined contribution 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 September 30,
 
Nine Months Ended September 30,
(dollar amounts in thousands)
2016
 
2015
 
2016
 
2015
SERP & SRIP
$
567

 
$
578

 
$
1,879

 
$
1,735

Defined contribution plan
9,470

 
8,224

 
25,738

 
23,747

Benefit cost
$
10,037

 
$
8,802

 
$
27,617

 
$
25,482