Annual report pursuant to Section 13 and 15(d)

PENSION AND OTHER RETIREMENTS BENEFITS

v3.22.4
PENSION AND OTHER RETIREMENTS BENEFITS
 12 Months Ended
Dec. 31, 2022
Retirement Benefits [Abstract]  
PENSION AND OTHER RETIREMENTS BENEFITS
NOTE 12: PENSION AND OTHER RETIREMENT BENEFITS
Certain current and former employees of the Company are covered under a funded qualified defined benefit retirement plan. Plan provisions covering certain of the Company’s salaried employees generally provide pension benefits based on years of service and compensation. Plan provisions covering certain of the Company’s union members generally provide stated benefits for each year of credited service. The Company’s funding policy is to contribute annually the statutory required amount as actuarially determined. The Company froze the qualified pension plan on December 31, 2019. In addition, the Company has unfunded non-qualified plans covering certain salaried employees with additional retirement benefits in excess of qualified plan limits imposed by federal tax law, which were frozen by the Company on December 31, 2022. The Company uses December 31 as a measurement date for the plans.
In February 2021, the Compensation Committee approved the termination of the Company’s qualified defined benefit retirement plan at Flavors & Ingredients. During the fourth quarter of 2021, the Company offered the option of receiving a lump sum payment to certain participants with vested benefits in lieu of receiving monthly annuity payments. Approximately 125 participants elected to receive the settlement, and lump sum payments of approximately $16.8 million were paid from plan assets to these participants in December 2021. The benefit obligation settled approximated payments to plan participants and a pre-tax settlement gain of $0.5 million was recorded in the fourth quarter of 2021. During 2022, the Company purchased non-participating annuity contracts to settle the remaining liabilities of the plan for approximately $9.3 million which was fully funded by plan assets. The annuity contracts purchased along with the plan termination activities resulted in a settlement gain of $1.2 million for the year ended December 31, 2022. The remaining surplus of the plan will be used, as prescribed in the applicable regulations, to fund future contributions to the defined contribution plan at Flavors & Ingredients. At December 31, 2022, the remaining surplus of the plan was approximately $2.5 million.
The following table reconciles the funded status of the Company’s defined benefit pension plans (in thousands):
Year Ended December 31, 2022 Year Ended December 31, 2021
Accumulated benefit obligations $ 7,706  $ 20,314 
Changes in projected benefit obligations:
Projected benefit obligations at beginning of year $ 20,314  $ 41,112 
Service cost 41  63 
Interest cost 326  1,047 
Actuarial gain (3,084) (1,054)
Benefits paid (9,891) (20,854)
Projected benefit obligations at end of year 7,706  20,314 
Change in plans’ assets:
Fair value of plans’ assets at beginning of year 12,902  33,058 
Actual returns on plans’ assets (349) 372 
Employee contributions 360  326 
Benefits paid (9,891) (20,854)
Transfers related to plan termination (500) — 
Fair value of plans’ assets at end of year 2,522  12,902 
Net pension liability $ (5,184) $ (7,412)
The projected benefit obligation at December 31, 2022 and December 31, 2021 included $7.7 million and $9.8 million, respectively, related to the Company’s unfunded non-qualified plans.
Amounts recognized in the Company’s consolidated and combined balance sheets consisted of (in thousands):
Year Ended December 31, 2022 Year Ended December 31, 2021
Other assets $ 2,522  $ 2,367 
Accrued expenses and other current liabilities (355) (488)
Other liabilities (7,351) (9,291)
Net amount recognized $ (5,184) $ (7,412)
Amounts recognized in accumulated other comprehensive income (loss), net of tax, which have not yet been recognized as a component of net periodic pension expense for the Company’s defined benefit pension plans, are as follows (in thousands):
(Successor) (Predecessor)
Year Ended December 31, 2022 Year Ended December 31, 2021 From June 26, 2020 to December 31, 2020 From January 1, 2020 to
June 25, 2020
Prior service cost $ —  $ —  $ —  $ 169 
Net actuarial (gain) loss (1,523) (207) (620) 13,997 
$ (1,523) $ (207) $ (620) $ 14,166 
As a result of the Business Combination on June 25, 2020, unamortized amounts previously charged to accumulated other comprehensive income (loss) were eliminated.
The components of the changes in unrecognized amounts included in pension obligation, net in other comprehensive income (loss) for the Company’s defined benefit pension plans were as follows (in thousands):
(Successor) (Predecessor)
Year Ended December 31, 2022 Year Ended December 31, 2021 From June 26, 2020 to December 31, 2020 From January 1, 2020 to
June 25, 2020
Net actuarial (gain) loss $ (1,316) $ 527  $ —  $ 1,912 
Amortization of prior service costs —  —  —  (33)
Amortization of actuarial loss —  (36) —  (276)
Total (gain) loss recognized in other comprehensive income (loss) $ (1,316) $ 491  $ —  $ 1,603 
The components of net periodic benefit (credit) cost for the Company’s defined benefit pension plans for the Successor and Predecessor were as follows (in thousands):
(Successor) (Predecessor)
Year Ended December 31, 2022 Year Ended December 31, 2021 From June 26, 2020 to December 31, 2020 From January 1, 2020 to
June 25, 2020
Service cost $ 41  $ 63  $ 94  $ 41 
Interest cost 326  1,047  545  593 
Expected return on plan assets 144  (1,310) (783) (817)
Amortization of prior service cost —  —  —  33 
Amortization of net actuarial loss —  36  —  276 
Settlement income (1,178) (644) (25) — 
Net periodic benefit (credit) cost $ (667) $ (808) $ (169) $ 126 
Net periodic benefit (credit) cost is reflected in the Company’s consolidated and combined financial statements as follows for the Successor and Predecessor periods presented (in thousands):
(Successor) (Predecessor)
Year Ended December 31, 2022 Year Ended December 31, 2021 From June 26, 2020 to December 31, 2020 From January 1, 2020 to
June 25, 2020
Selling, general and administrative expense $ 41  $ 63  $ 69  $ 41 
Other (income) expense, net (708) (871) (238) 85 
Net periodic benefit (credit) cost $ (667) $ (808) $ (169) $ 126 
Assumptions—The following assumptions were used to determine the benefit obligation at year end and net periodic benefit (credit) cost during the year for the Company’s funded defined benefit pension plan:
Year Ended December 31, 2022 Year Ended December 31, 2021
Weighted-average assumptions used to determine benefit obligation at year end:
Discount rate (1) —  % 2.38  %
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate 2.38  % 2.61  %
Expected long-term rate of return on plan assets 1.70  % 4.90  %
(1) The discount rate assumption used to determine the benefit obligation at December 31, 2021 was based on blended 7 year and 15 year duration annuity purchase contracts.
The following assumptions were used to determine the benefit obligation at year end and net periodic benefit (credit) cost during the year for the Company’s unfunded supplemental defined benefit pension plan:
Year Ended December 31, 2022 Year Ended December 31, 2021
Weighted-average assumptions used to determine benefit obligation at year end:
Discount rate 5.01  % 2.78  %
Rate of compensation increase —  % 3.50  %
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate 2.78  % 2.42  %
Rate of compensation increase 3.50  % 3.50  %
The Company bases the discount rate assumption on current investment yields of high quality fixed income investments during the retirement benefits maturity period. The rate of increase in future compensation assumptions reflects the Company’s long-term actual experience and future and near-term outlook.
The Company considered a number of factors to determine its expected rates of return on the assets in its plan, including, without limitation, historical performance of the plan assets, investment style, asset allocations and other third-party studies and surveys. The Company considered the plan portfolio’s asset allocation over a variety of time periods and compared them with third-party studies and reviewed performance of the capital markets in recent years and other factors and advice from various third parties, such as the pension plan’s advisors, investment managers and actuaries. While the Company considered recent performance and the historical performance of its plan assets, the Company’s assumptions are based primarily on its estimates of long-term, prospective rates of return. Differences between actual and expected asset returns are recognized in the net periodic benefit cost over the remaining service period of the active participating employees.
Plan Assets—The investment committee for the Company’s plan adopted investment policies with the objective of meeting and exceeding over time, the expected long-term rate of return on plan assets assumptions, weighted against a reasonable risk level and considering the appropriate liquidity levels. In connection with this objective, the plan’s assets were mainly invested in mutual funds, common and collective funds, corporate bonds, government bonds, private equity funds, as well as a real estate fund, in order to achieve the Company’s goals to enhance the expected returns of its investments together with their liquidity and protect the plan’s funded status. As a result of the planned termination of the qualified pension plan, certain of the plan’s assets were liquidated during the fourth quarter of 2021 and used to satisfy lump sum benefit payments as further described above, and any remaining plan assets were liquidated during 2022. Therefore, at December 31, 2022 the plan’s assets were invested in cash and cash equivalents and at December 31, 2021, the plan’s assets were primarily invested in cash and fixed income securities.
The following tables set forth, by category, the Company’s pension plan assets as of December 31, 2022 and December 31, 2021, using the fair value hierarchy established under ASC Topic 820 and as described in Note 9. The fair value hierarchy in the table as of December 31, 2021 excludes certain investments which are valued using Net Asset Value (“NAV”) as a practical expedient (in thousands):
Pension Plan Assets as of December 31, 2022
Level 1 Level 2 Level 3 Total
Pension plan assets measured at fair value:
Cash and cash equivalents $ 2,522  $ —  $ —  $ 2,522 
Total pension plan assets measured at fair value $ 2,522  $ —  $ —  $ 2,522 
Pension Plan Assets as of December 31, 2021
Level 1 Level 2 Level 3 Total
Pension plan assets measured at fair value:
Cash and cash equivalents $ 325  $ —  $ —  $ 325 
U.S. Government securities —  6,283  —  6,283 
Corporate bonds —  6,283  —  6,283 
Total pension plan assets measured at fair value $ 325  $ 12,566  $ —  $ 12,891 
Pension plan assets measured at NAV as a practical expedient (1) 11 
Total pension plan assets $ 12,902 
(1)    Certain investments in real estate funds that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.
Cash and cash equivalents are stated at cost, which approximates fair market value. Corporate and government bonds are generally valued on the basis of evaluated bids furnished by a pricing service, which determines valuations for normal, institutional size-trading units of such securities using market information, transactions for comparable securities and various relationships between securities. There were no transfers between levels within the three-tier fair value hierarchy in 2022 and 2021.
Contributions—The Company does not expect to make further contributions to its funded defined benefit pension plan due to its termination.
Expected Future Benefit Payments—The projected benefit payments for the unfunded non-qualified defined benefit pension plans are as follows (in thousands):
2023 $ 355 
2024 357 
2025 426 
2026 587 
2027 584 
2028-2032 3,125 
The Company also participates in certain state-sponsored defined benefit plans covering certain non-U.S. employees with total net liabilities of $1.9 million and $3.6 million as of December 31, 2022 and December 31, 2021, respectively. The primary state-sponsored plan relates to Merisant employees in Switzerland and France, which had pension benefit obligations of $5.5 million and plan assets of $3.6 million as of December 31, 2022 and a pension benefit obligation of $6.9 million and plan assets of $3.4 million as of December 31, 2021. Net periodic pension cost for 2022, 2021, for the period June 26, 2020 through December 31, 2020, and January 1, 2020 through June 25, 2020 was $0.4 million, $0.4 million, $0.2 million, and $0.3 million, respectively.
Defined Contribution Pension Plans—The Company has defined contribution 401(k) plans covering certain eligible domestic employees, as defined by the plans. The plans provide for certain employer matching contributions. The Company recorded compensation expense related to its defined contribution plans of $1.2 million for 2022, $1.0 million for 2021, $0.2 million for the period from June 26, 2020 to December 31, 2020, and $0.3 million for the period from January 1, 2020 to June 25 2020.