CHFC 2018 Annual Report

Note 19: Retirement Plans The Corporation's retirement plans include a qualified defined benefit pension plan, a nonqualified pension plan, a nonqualified postretirement benefit plan, a 401(k) savings plan, and a multi-employer defined benefit plan. Qualified Defined Benefit Pension Plan The Chemical Financial Corporation Employees’ Pension Plan (the "Pension Plan") is a qualified defined benefit, noncontributory pension plan, which provides for postretirement pension benefits for certain salaried employees of the Corporation and its subsidiary, Chemical Bank. Benefits under the Pension Plan were partially frozen effective June 30, 2006. Under the partial freeze of the Pension Plan, benefits for employees with less than 15 years of service or whose combined age plus years of service were less than 65 at June 30, 2006, were based on years of vested service at June 30, 2006 and generally the average of the employee's salary for the five years ended June 30, 2006. In addition, no employee hired after January 1, 2006 was eligible to participate in the Pension Plan. Effective September 30, 2017, the Pension and Compensation Committee approved an amendment to the Pension Plan to cease accruing additional benefits under the existing pension benefit formula after the effective date and all accrued benefits were frozen. Retirement benefits under the Pension Plan are based on years of vested service at September 30, 2017, up to a maximum of thirty years, and the employee's average annual pay for the five highest consecutive years during the ten years preceding September 30, 2017, except for employees whose benefits were previously frozen during 2006. Pension Plan benefits are the present value of estimated future periodic payments that are attributable to services rendered by the employees to the valuation date. Benefits include the benefits expected to be paid to (a) retired or terminated employees or their beneficiaries and (b) present employees or their beneficiaries. The freeze of the Pension Plan effective September 30, 2017, required a remeasurement of the plan's projected benefit obligation. The combined impact of the remeasurement, an increase in fair value of underlying assets, the impact of the freeze and changes to participant's status as a result of the Corporation's restructuring efforts during the year ended December 31, 2017, resulted in an increase of the funded status of the Pension Plan. A discount rate of 3.68% was utilized to remeasure the projected benefit obligation as of December 31, 2017. There was less than $0.1 million of curtailment cost to the Corporation as a result of the amendment. A discount rate of 4.32% was utilized for the projected benefit obligation as of December 31, 2018. The Pension Plan is fully funded as of December 31, 2018. At December 31, 2018, the Corporation had 80 employees who had accrued benefits under the Pension Plan, which contributions are intended to provide benefits attributable to service-to-date employees. Pension Plan expense was a benefit of $3.8 million in 2018, compared to a benefit of $1.5 million in 2017 and an expense of $0.1 million in 2016. Nonqualified Pension Plan The Corporation has a supplemental defined benefit nonqualified pension plan, the Chemical Financial Corporation Supplemental Pension Plan ("SERP"). The Corporation established the SERP to provide payments to certain executive officers of the Corporation, as determined by the Compensation and Pension Committee. The Internal Revenue Code limits both the amount of eligible compensation for benefit calculation purposes and the amount of annual benefits that may be paid from a tax-qualified retirement plan. The SERP was designed to provide benefits to executive officers of the Corporation would have been entitled, calculated under the provisions of the Pension Plan, as if the limits imposed by the Internal Revenue Code did not apply. The SERP is an unfunded plan and, therefore, has no assets. Effective September 30, 2017, the Pension and Compensation Committee approved a curtailment to the SERP, due to the retirement of the final remaining participant in the SERP. The curtailment, in addition to changes in valuation of liabilities, resulted in a reduction in obligation during the year ended December 31, 2017. As of December 31, 2018, a $0.3 million liability included in other liabilities was recorded in the Consolidated Statements of Financial Position related to a former participant of the SERP. As of December 31, 2018, the SERP had no active participants. Nonqualified Postretirement Benefit Plan The Corporation has a nonqualified postretirement benefit plan ("Postretirement Plan") that provides medical and dental benefits, upon retirement, to a limited number of active and retired employees. The majority of the retirees are required to make contributions toward the cost of their benefits based on their years of credited service and age at retirement. Beginning January 1, Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2018 153