Annual report pursuant to Section 13 and 15(d)

Pension and Other Postretirement Benefits

v3.22.4
Pension and Other Postretirement Benefits
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Pension and Other Postretirement Benefits Pension and Other Postretirement Benefits
 
TPL has a defined contribution plan available to all eligible employees. Qualifying participants may receive a matching contribution based on the amount participants contribute to the plan up to 6% of their qualifying compensation. TPL contributed approximately $0.7 million, $0.6 million and $0.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
 
TPL has a noncontributory pension plan (the “Pension Plan”) available to all eligible employees who have completed one year of continuous service with TPL during which they completed at least 1,000 hours of service. The Pension Plan provides for a normal retirement benefit at age 65. Contributions to the Pension Plan reflect benefits accrued with respect to participants’ services to date, as well as the amount actuarially determined to pay lifetime benefits to participants and their beneficiaries upon retirement.
 
The following table sets forth the Pension Plan’s changes in benefit obligation, changes in fair value of assets, and funded status as of December 31, 2022 and 2021 using a measurement date of December 31 (in thousands):

  December 31, 2022 December 31, 2021
Change in projected benefits obligation:
Projected benefit obligation at beginning of year
 $ 11,324  $ 9,717 
Service cost
 2,870  3,225 
Interest cost
 336  264 
Actuarial loss (6,111) (1,637)
Benefits paid
 (242) (245)
 Projected benefit obligation at end of year
 $ 8,177  $ 11,324 
Change in Pension Plan assets:
Fair value of Pension Plan assets at beginning of year $ 10,713  $ 7,567 
Actual return on Pension Plan assets (947) 874 
Contributions by employer
 2,126  2,517 
Benefits paid
 (242) (245)
Fair value of Pension Plan assets at end of year 11,650  10,713 
Funded (unfunded) status at end of year $ 3,473  $ (611)
 
The projected Pension Plan benefit obligation as of December 31, 2022 was impacted by changes in assumptions used as of that date compared to assumptions used as of December 31, 2021. These changes included an increase in the discount rate from 3.00% as of December 31, 2021 to 5.25% as of December 31, 2022. The effect of the assumption changes was a decrease in the projected benefit obligation of approximately $6.0 million.

Amounts recognized in the balance sheets as of December 31, 2022 and 2021 consist of (in thousands):

  December 31, 2022 December 31, 2021
Assets $ 3,473  $ — 
Liabilities —  611 
  $ 3,473  $ 611 
Amounts recognized in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets consist of the following as of December 31, 2022 and 2021 (in thousands):
  December 31, 2022 December 31, 2021
Net actuarial gain (loss) $ 3,189  $ (1,275)
Amounts recognized in accumulated other comprehensive income (loss), before taxes 3,189  (1,275)
Income tax (expense) benefit (673) 268 
Amounts recognized in accumulated other comprehensive income (loss), after taxes $ 2,516  $ (1,007)
 
Net periodic benefit cost for the years ended December 31, 2022, 2021 and 2020 include the following components (in thousands):
Years Ended December 31,
  2022 2021 2020
Components of net periodic benefit cost:
Service cost $ 2,870  $ 3,225  $ 1,835 
Interest cost 336  264  210 
Expected return on Pension Plan assets (741) (521) (454)
Amortization of net loss 41  144  66 
Net periodic benefit cost $ 2,506  $ 3,112  $ 1,657 
 
Service cost, a component of net periodic benefit cost, is reflected in our consolidated statements of income and total comprehensive income within salaries and related employee expenses. The other components of net periodic benefit cost are included in other income, net on the consolidated statements of income and total comprehensive income.

Other changes in Pension Plan assets and benefit obligations recognized in other comprehensive (income) loss for the years ended December 31, 2022, 2021 and 2020 (in thousands):
Years Ended December 31,
  2022 2021 2020
Net actuarial (gain) loss $ (4,422) $ (1,990) $ 1,626 
Recognized actuarial loss (41) (144) (66)
Total recognized in other comprehensive (income) loss, before taxes $ (4,463) $ (2,134) $ 1,560 
Total recognized in net benefit cost and other comprehensive (income) loss, before taxes $ (1,958) $ 978  $ 3,217 
 
TPL reclassified less than $0.4 million (net of income tax benefit of less than $0.1 million) out of accumulated other comprehensive loss for net periodic benefit cost to other income, net for the years ended December 31, 2022 and $0.2 million (net of income tax benefit of less than $0.1 million) for each of the years ended December 31, 2021 and 2020.

The following table summarizes the projected benefit obligation in excess of Pension Plan assets and Pension Plan assets in excess of accumulated benefit obligation as of December 31, 2022 and 2021 (in thousands):

  December 31, 2022 December 31, 2021
Projected benefit obligation in excess of Pension Plan assets:
Projected benefit obligation
 $ 8,177  $ 11,324 
Fair value of Pension Plan assets $ 11,650  $ 10,713 
Plan assets in excess of accumulated benefit obligation:
Accumulated benefit obligation
 $ 5,277  $ 7,009 
Fair value of Pension Plan assets $ 11,650  $ 10,713 
 
The following are weighted-average assumptions used to determine benefit obligations and costs as of December 31, 2022, 2021 and 2020:
Years Ended December 31,
  2022 2021 2020
Weighted average assumptions used to determine benefit obligations as of December 31:
Discount rate
 5.25  % 3.00  % 2.75  %
Rate of compensation increase
 7.29  % 7.29  % 7.29  %
Weighted average assumptions used to determine benefit costs for the years ended December 31:
Discount rate
 3.00  % 2.75  % 3.25  %
Expected return on Pension Plan assets 7.00  % 7.00  % 7.00  %
Rate of compensation increase
 7.29  % 7.29  % 7.29  %
 
The expected return on Pension Plan assets assumption of 7.0% was selected by TPL based on historical real rates of return for the current asset mix and an assumption with respect to future inflation. The rate was determined based on a long-term allocation of about two-thirds fixed income and one-third equity securities; historical real rates of return of about 2.5% and 8.5% for fixed income and equity securities, respectively; and assuming a long-term inflation rate of 2.5%.
 
The Pension Plan has a formal investment policy statement. The Pension Plan’s investment objective is balanced income, with a moderate risk tolerance. This objective emphasizes current income through a 30.0% to 80.0% allocation to fixed income securities, complemented by a secondary consideration for capital appreciation through an equity allocation in the range of 20.0% to 60.0%. Diversification is achieved through investment in equities and bonds. The asset allocation is reviewed annually with respect to the target allocations and rebalancing adjustments and/or target allocation changes are made as appropriate. Our current funding policy is to maintain the Pension Plan’s fully funded status on an ERISA minimum funding basis.

Fair Value Measurements
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date.
 
The fair value accounting standards establish a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect our assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs used in measuring fair value, as follows:

Level 1 – Inputs are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Since inputs are based on quoted prices that are readily and regularly available in an active market, Level 1 inputs require the least judgment.
 
Level 2 – Inputs are based on quoted prices for similar instruments in active markets, or are observable either directly or indirectly. Inputs are obtained from various sources including financial institutions and brokers.
 
Level 3 – Inputs that are unobservable and significant to the overall fair value measurement. The degree of judgment exercised by us in determining fair value is greatest for fair value measurements categorized in Level 3.
 
The fair values of the Pension Plan assets by major asset category as of December 31, 2022 and 2021, respectively, are as follows (in thousands):
  Total Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
As of December 31, 2022:
Cash and cash equivalents — money markets $ 2,571  $ 2,571  $ —  $ — 
Equities 392  392  —  — 
Equity funds 2,884  2,884  —  — 
Fixed income funds 598  598  —  — 
Taxable bonds 5,205  5,205  —  — 
Total $ 11,650  $ 11,650  $ —  $ — 
As of December 31, 2021:
Cash and cash equivalents — money markets $ 567  $ 567  $ —  $ — 
Equities 3,490  3,490  —  — 
Equity funds 1,342  1,342  —  — 
Fixed income funds 596  596  —  — 
Taxable bonds 4,718  4,718  —  — 
Total $ 10,713  $ 10,713  $ —  $ — 

Management intends to at least fund the minimum ERISA amount for 2023 and may make some discretionary contributions to the Pension Plan, the amounts of which have not yet been determined.
 
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the following ten-year period (in thousands):
 
Year ending December 31, Amount
2023 $ 254 
2024 251 
2025 247 
2026 247 
2027 258 
2028 to 2032 1,873