NOTE 10, BENEFIT PLANS:

We have a defined benefit pension plan (the “pension plan”) covering substantially all employees hired on or before December 31, 2005. The pension plan was closed to any employees hired after that date. The benefits are based on years of service and the employee’s final average compensation. Effective January 1, 2007, there are no new benefits earned under the pension plan for additional years of service after December 31, 2006. All current participants in the pension plan keep any and all benefits that they had accrued up until December 31, 2006.

We also have a non-qualified, non-contributory supplemental executive retirement plan (the “SERP”) for employees whose retirement benefits are reduced due to their annual compensation levels. The SERP provides annual benefits amounting to 55% of final average earnings less benefits payable from our pension plan and Social Security benefits. The SERP limits the total amount of annual retirement benefits that may be paid to a participant from all sources (Retirement Plan, Social Security and the SERP) to $125,000. The SERP is not funded so we pay benefits directly to participants.

The following table summarizes information about our pension plan and SERP.

	Pension Plan						SERP
(In thousands)	2013			2012			2013			2012
Change in benefit obligation:
Benefit obligation at beginning of the year	$	80,610		$	77,677		$	6,368		$	6,175
Service cost		—			—			134			97
Interest cost		3,278			3,506			259			262
Actuarial losses		(6,838	)		5,172			(595	)		31
Benefits paid		(3,594	)		(5,745	)		(192	)		(197	)
Benefit obligation at end of year		73,456			80,610			5,974			6,368
Change in plan assets:
Fair value of plan assets at beginning of year		73,842			66,571			—			—
Employer contribution		4,200			3,000			192			197
Actual return on plan assets		8,456			10,016			—			—
Benefits paid		(3,594	)		(5,745	)		(192	)		(197	)
Fair value of plan assets at end of year		82,904			73,842			—			—
Funded status of the plan – (underfunded)	$	9,448		$	(6,768	)	$	(5,974	)	$	(6,368	)

Accumulated benefit obligations	$	73,456		$	80,610		$	5,974		$	6,309

Amounts recognized in the consolidated balance sheets consist of:

	Pension Plan					SERP
(In thousands)	2013		2012			2013			2012
Noncurrent assets	$	9,448	$	—		$	—		$	—
Current liabilities		—		—			(214	)		(222	)
Noncurrent liabilities		—		(6,768	)		(5,760	)		(6,146	)
	$	9,448	$	(6,768	)	$	(5,974	)	$	(6,368	)

Amounts recognized in accumulated other comprehensive income (loss) before the effect of income taxes consist of:

	Pension Plan								SERP
(In thousands)	2013				2012				2013				2012
Prior service cost		$	—			$	—			$	(641	)		$	(851	)
Net actuarial loss			(11,176	)			(23,150	)			(568	)			(1,232	)
		$	(11,176	)		$	(23,150	)		$	(1,209	)		$	(2,083	)

Net pension cost included the following components:

	Pension Plan									SERP
(In thousands)	2013			2012			2011			2013		2012		2011
Service cost-benefits earned during the period	$	—		$	—		$	—		$	134	$	97	$	102
Interest cost on projected benefit obligation		3,278			3,506			3,686			259		262		286
Expected return on plan assets		(4,948	)		(4,474	)		(4,230	)		—		—		—
Amortization of prior service cost		—			—			—			210		210		210
Amortization of actuarial loss		1,627			1,847			941			68		26		6
Net pension costs	$	(43	)	$	879		$	397		$	671	$	595	$	604

The estimated amount that will be amortized from accumulated other comprehensive loss into net periodic cost in 2014 is approximately $316,000 for the pension plan and $210,000 for the SERP.

Assumptions

We use a measurement date of December 31 for our pension and other benefit plan. Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:

	2013			2012
Discount rate		4.93	%		4.13	%
Rate of compensation increase		n/a			3.50	%

Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31 are as follows:

	2013			2012			2011
Discount rate		4.13	%		4.60	%		5.45	%
Expected long-term return on plan assets		6.65	%		6.75	%		7.10	%
Rate of compensation increase		3.50	%		3.50	%		3.50	%

For purposes of determining the periodic expense of our defined benefit plans, we use fair market value of plan assets as the market related value.

Plan Assets

The Board of Director’s Executive Compensation and Employee Benefits Committee (the “Compensation Committee”) is responsible for administering our pension plan. The primary investment objective of the pension plan is to ensure, over its long-term life, an adequate pool of assets to support the benefit obligations to participants, retirees and beneficiaries. An important secondary objective is to be able to improve the pension plan’s funded status which reduces employer contributions. In meeting these objectives, the Compensation Committee seeks to achieve a high level of investment return consistent with a prudent level of portfolio risks.

Factors such as asset class allocations, long-term rates of return (expected and actual), and results of periodic asset liability modeling studies are considered when constructing the long-term rate of return assumptions for our pension plan. While historical rates of return are an important factor in the analysis, we also take into consideration data points from other external sources.

The assets of the plan, excluding Haverty stock, are being invested according to the following asset allocation guidelines, established to reflect the growth expectations and risk tolerance of the Compensation Committee. Haverty stock has a target weight of 5% of total plan assets with a tactical range of zero to 10%.

Security Class	Strategic Target			Tactical Range
Equity:
International Equity		10	%		0% - 20	%
Domestic Equity		15	%		5% - 25	%
Total Equity		25	%		15% - 35	%
U.S. Fixed Income		75	%		65% - 85	%
Cash		0	%		0% - 10	%
Total Fund		100	%

Our pension plan assets are valued based on observable inputs obtained from independent sources. Most of the assets are held in audited institutional mutual funds and collective trusts. Since the net asset values of these funds are not quoted on actively traded markets, they are classified in a Level 2 valuation category. Some of the holdings in these funds are valued using quoted market prices for similar instruments in active markets, a Level 2 valuation technique. The remaining assets are valued using quoted market prices, a Level 1 valuation technique. The fair values by asset category are as follows (in thousands):

	Fair Value Measurements
	December 31, 2013						December 31, 2012
	Total		Level 1		Level 2		Total		Level 1		Level 2
Money Market Funds	$	380	$	380	$	—	$	518	$	518	$	—
Equity Securities:
Haverty Class A Common Stock		6,348		6,348				3,348		3,348
U.S. Large Cap Passive^(a)		9,151				9,151		16,927				16,927
U.S. Small/Mid Cap Growth		1,183				1,183		2,162				2,162
U.S. Small/Mid Cap Value		1,174				1,174		2,052				2,052
International Equity		6,316				6,316		11,276				11,276
Emerging Markets Equity		1,530				1,530		2,891				2,891
		25,702		6,348		19,354		38,656		3,348		35,308

Fixed Income:
Opportunistic^(b)		8,143				8,143		5,125				5,125
Passive		4,294				4,294		2,641				2,641
Long Duration Active^(c)		16,964				16,964		10,278				10,278
Long Duration Passive		6,478				6,478		3,150				3,150
Long Duration Investment Grade^(d)		20,943				20,943		13,474				13,474
		56,822		—		56,822		34,668		—		34,668
Total	$	82,904	$	6,728	$	76,176	$	73,842	$	3,866	$	69,976

(a)	This category comprises low-cost equity index funds not actively managed that track the S&P 500.

(b)

This fund invests primarily in U.S. dollar-denominated, investment grade bonds, including government securities, corporate bonds, and mortgage and asset-backed securities. This fund may also invest a significant portion of its assets in any combination of non-investment grade bonds, non-U.S. dollar denominated bonds, and bonds issued by issuers in emerging capital markets.

(c)	This category invests primarily in U.S. dollar-denominated, investment grade bonds, including government securities, corporate bonds, and mortgage and asset-backed securities, among others.

(d)	This category invests primarily in U.S. dollar-denominated, investment grade corporate bonds as well as U.S. Treasury bonds.

Cash Flows

There were no minimum funding requirements to the pension plan in 2013. We contributed $4,200,000 to the pension plan in 2013 or 2014 and do not expect to make contributions in 2014. The following schedule outlines the expected benefit payments:

(In thousands)	Pension Plan		SERP
2014	$	3,875	$	214
2015		3,997		225
2016		4,157		256
2017		4,378		365
2018		4,528		370
2019-2023		23,454		2,100

Other Plans

We have an employee savings/retirement (401(k)) plan to which substantially all our employees may contribute. We match employee contributions 100% of the first 1% of eligible pay and 50% of the next 5% contributed by participants. We expensed matching employer contributions of approximately $3,104,000, $2,907,000 and $2,666,000 in 2013, 2012 and 2011, respectively.

We offer no post-retirement benefits other than the plans discussed above and no significant post-employment benefits.