

NOTE M – EMPLOYEE BENEFIT PLANS

The following summarizes the Corporation’s expense under its retirement plans for the years ended December 31:



	2014		2013		2012
	(in thousands)
401(k) Retirement Plan	$	8,643	$	11,807	$	11,983
Pension Plan	1,514		2,477		1,834
	$	10,157	$	14,284	$	13,817

401(k) Retirement Plan – A defined contribution plan that includes two contribution features:


•	Employer Profit Sharing – elective contributions based on a formula providing for an amount not to exceed 5% of each eligible employee’s covered compensation. Employees hired after July 1, 2007 are not eligible for this contribution. Beginning January 1, 2015, the Corporation suspended all contributions to the plan.


•	401(k) Contributions – eligible employees may defer a portion of their pre-tax covered compensation on an annual basis, with employer matches of up to 5% of employee contributions. Employee and employer contributions under these features are 100% vested.

Defined Benefit Pension Plan – Contributions to the Corporation’s defined benefit pension plan (Pension Plan) are actuarially determined and funded annually, if necessary. The Corporation recognizes the funded status of its Pension Plan and postretirement benefits plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income. See the heading “Postretirement Benefits” below for a description of the Corporation’s postretirement benefits plan.

Pension Plan

The net periodic pension cost for the Pension Plan, as determined by consulting actuaries, consisted of the following components for the years ended December 31:



	2014			2013			2012
	(in thousands)
Service cost (1)	$	367		$	202		$	157
Interest cost	3,413			3,087			3,223
Expected return on assets	(3,240		)	(3,194		)	(3,230		)
Net amortization and deferral	974			2,382			1,684
Net periodic pension cost	$	1,514		$	2,477		$	1,834


(1)	The Pension Plan was curtailed effective January 1, 2008. Pension plan service cost for all years presented was related to administrative costs associated with the plan and not due to the accrual of additional participant benefits.

The following table summarizes the changes in the projected benefit obligation and fair value of plan assets for the plan years ended December 31:



	2014			2013
	(in thousands)
Projected benefit obligation at beginning of year	$	73,362		$	84,032
Service cost	367			202
Interest cost	3,413			3,087
Benefit payments	(5,164		)	(3,009		)
Change due to change in assumptions	22,055			(10,773		)
Experience gain	(954		)	(177		)
Projected benefit obligation at end of year	$	93,079		$	73,362

Fair value of plan assets at beginning of year	$	55,448		$	54,772
Actual return on assets	1,446			3,685
Benefit payments	(5,164		)	(3,009		)
Fair value of plan assets at end of year	$	51,730		$	55,448

The following table presents the funded status of the Pension Plan, included in other liabilities on the consolidated balance sheets, as of December 31:



	2014			2013
	(in thousands)
Projected benefit obligation	$	(93,079	)	$	(73,362	)
Fair value of plan assets	51,730			55,448
Funded status	$	(41,349	)	$	(17,914	)

The following table summarizes the changes in the unrecognized net loss included as a component of accumulated other comprehensive loss:



	Unrecognized Net Loss
	Gross of tax			Net of tax
	(in thousands)
Balance as of December 31, 2012	$	29,984		$	19,490
Recognized as a component of 2013 periodic pension cost	(2,382		)	(1,548		)
Unrecognized gains arising in 2013	(11,441		)	(7,437		)
Balance as of December 31, 2013	16,161			10,505
Recognized as a component of 2014 periodic pension cost	(974		)	(633		)
Unrecognized losses arising in 2014	22,895			14,882
Balance as of December 31, 2014	$	38,082		$	24,754

The total amount of unrecognized net loss that will be amortized as a component of net periodic pension cost in 2015 is expected to be $3.6 million.

The following rates were used to calculate net periodic pension cost and the present value of benefit obligations as of December 31:



	2014		2013		2012
Discount rate-projected benefit obligation	3.75	%	4.75	%	3.75	%
Expected long-term rate of return on plan assets	6.00	%	6.00	%	6.00	%

As of December 31, 2014, 2013 and 2012, the discount rate used to calculate the present value of benefit obligations was determined using the Citigroup Average Life discount rate table, as adjusted based on the Pension Plan's expected benefit payments and rounded to the nearest 0.25%.

As of December 31, 2014, the mortality table used to calculate the present value of benefit obligations was determined using the RP-2014 White Collar Mortality Table, compared to the IRS 2014 Static Mortality Table as of December 31, 2013.

The 6.00% long-term rate of return on plan assets used to calculate the net periodic pension cost was based on historical returns, adjusted for expectations of long-term asset returns based on the December 31, 2014 weighted average asset allocations. The expected long-term return is considered to be appropriate based on the asset mix and the historical returns realized.

The following table presents a summary of the fair values of the Pension Plan’s assets as of December 31:



	2014				2013
	Estimated Fair Value		% of Total Assets		Estimated Fair Value		% of Total Assets
	(dollars in thousands)
Equity mutual funds	$	8,503			$	5,882
Equity common trust funds	6,018				8,418
Equity securities	14,521		28.1	%	14,300		25.8	%
Cash and money market funds	8,957				10,574
Fixed income mutual funds	9,845				9,579
Corporate debt securities	4,971				7,815
U.S. Government agency securities	3,856				3,938
Fixed income securities and cash	27,629		53.4	%	31,906		57.5	%
Other alternative investment funds	9,580		18.5	%	9,242		16.7	%
	$	51,730	100.0	%	$	55,448	100.0	%

Investment allocation decisions are made by a retirement plan committee. The goal of the investment allocation strategy is to match certain benefit obligations with maturities of fixed income securities. Pension Plan assets are invested with a conservative growth objective, with target asset allocations of approximately 25% in equities, 55% in fixed income securities and cash and 20% in alternative investments. Alternative investments may include managed futures, commodities, real estate investment trusts, master limited partnerships, and long-short strategies with traditional stocks and bonds. All alternative investments are in the form of mutual funds, not individual contracts, to enable daily liquidity.

The fair values for all assets held by the Pension Plan, excluding equity common trust funds, are based on quoted prices for identical instruments and would be categorized as Level 1 assets under FASB ASC Topic 810. Equity common trust funds would be categorized as Level 2 assets under FASB ASC Topic 810.

Estimated future benefit payments are as follows (in thousands):



Year
2015	$	2,889
2016	3,123
2017	3,388
2018	3,758
2019	3,881
2020 – 2024	23,574
	$	40,613

Postretirement Benefits

The Corporation provides medical benefits and life insurance benefits under a postretirement benefits plan (Postretirement Plan) to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998. Prior to February 1, 2014 certain full-time employees became eligible for these discretionary benefits if they reached retirement age while working for the Corporation.

Effective February 1, 2014, the Corporation amended the Postretirement Plan, making all active full-time employees ineligible for benefits under this plan. As a result of this amendment, the Corporation recorded a $1.5 million curtailment gain as a reduction to salaries and employee benefits in 2014, as determined by consulting actuaries. The curtailment gain resulted from the recognition of the remaining pre-curtailment prior service cost as of December 31, 2013. In addition, this amendment resulted in a $3.4 million decrease in the accumulated postretirement benefit obligation and a corresponding increase in unrecognized prior service cost credits.

The components of the expense for postretirement benefits other than pensions are as follows:



	2014			2013			2012
	(in thousands)
Service cost	$	15		$	228		$	211
Interest cost	206			322			346
Expected return on plan assets	—			(1		)	(2		)
Net amortization and deferral	(347		)	(363		)	(363		)
Net postretirement benefit cost	$	(126	)	$	186		$	192

The following table summarizes the changes in the accumulated postretirement benefit obligation and fair value of plan assets for the years ended December 31:



	2014			2013
	(in thousands)
Accumulated postretirement benefit obligation at beginning of year	$	8,169		$	9,272
Service cost	15			228
Interest cost	206			322
Benefit payments	(209		)	(230		)
Experience gain	(532		)	(423		)
Change due to change in assumptions	1,261			(1,000		)
Effect of curtailment	(3,358		)	—
Accumulated postretirement benefit obligation at end of year	$	5,552		$	8,169

Fair value of plan assets at beginning of year	$	23		$	45
Employer contributions	194			208
Benefit payments	(209		)	(230		)
Fair value of plan assets at end of year	$	8		$	23

The following table presents the funded status of the Postretirement Plan, included in other liabilities on the consolidated balance sheets as of December 31:



	2014			2013
	(in thousands)
Accumulated postretirement benefit obligation	$	(5,552	)	$	(8,169	)
Fair value of plan assets	8			23
Funded status	$	(5,544	)	$	(8,146	)

The following table summarizes the changes in items recognized as a component of accumulated other comprehensive loss:



	Gross of tax
	Unrecognized Prior Service Cost			Unrecognized Net Loss (Gain)			Total			Net of tax
	(in thousands)
Balance as of December 31, 2012	$	(1,847	)	$	297		$	(1,550	)	$	(1,008	)
Recognized as a component of 2013 postretirement benefit cost	363			—			363			236
Unrecognized gains arising in 2013	—			(1,434		)	(1,434		)	(932		)
Balance as of December 31, 2013	(1,484		)	(1,137		)	(2,621		)	(1,704		)
Recognized as a component of 2014 postretirement benefit cost, before curtailment	32			10			42			26
Unrecognized gains arising in 2014, prior to curtailment	—			(313		)	(313		)	(203		)
Curtailment gain	1,452			—			1,452			944
Recognized as a component of 2014 postretirement benefit cost, after curtailment	235			70			305			199
Unrecognized gains arising in 2014, after curtailment	(3,358		)	1,034			(2,324		)	(1,511		)
Balance as of December 31, 2014	$	(3,123	)	$	(336	)	$	(3,459	)	$	(2,249	)

For measuring the postretirement benefit obligation, the annual increase in the per capita cost of health care benefits was assumed to be 6% in year one, declining to an ultimate rate of 5.5% by year two. This health care cost trend rate has a significant impact on the amounts reported. Assuming a 1.0% increase in the health care cost trend rate above the assumed annual increase, the accumulated postretirement benefit obligation would increase by approximately $430,000 and the current period expense would increase by approximately $10,000. Conversely, a 1.0% decrease in the health care cost trend rate would decrease the accumulated postretirement benefit obligation by approximately $380,000 and the current period expense by approximately $10,000.

The following rates were used to calculate net periodic postretirement benefit cost and the present value of benefit obligations as of December 31:



	2014		2013		2012
Discount rate-projected benefit obligation	3.75	%	4.75	%	3.75	%
Expected long-term rate of return on plan assets	3.00	%	3.00	%	3.00	%

As of December 31, 2014 and 2013, the discount rate used to calculate the accumulated postretirement benefit obligation was determined using the Citigroup Average Life discount rate table, as adjusted based on the Postretirement Plan's expected benefit payments and rounded to the nearest 0.25%.

As of December 31, 2014, the mortality table used to calculate the accumulated postretirement benefit obligation was determined using the RP-2014 White Collar Mortality Table, compared to the IRS 2014 Static Mortality Table as of December 31, 2013.

Estimated future benefit payments under the Postretirement Plan are as follows (in thousands):



Year
2015	$	404
2016	400
2017	392
2018	389
2019	384
2020 – 2024	1,809
	$	3,778