NOTE H:

BENEFIT PLANS

The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives, and an unfunded stock balance plan for certain of its nonemployee directors. The Company accrues for the estimated cost of these benefits through charges to expense during the years that employees earn these benefits.

Effective May 12, 2017, the Merchants Bank Pension Plan was merged into the Community Bank System, Inc. Pension Plan and the combined plan was revalued resulting in an additional unamortized actuarial gain of approximately $1.9 million, due primarily to a gain on plan assets that was partially offset by a decrease in the discount rate from 4.50% to 4.40% as of the valuation date.

Effective June 1, 2018, the Company adopted the Community Bank System, Inc. Restoration Plan (“Restoration Plan”). The Restoration Plan is a non-qualified deferred compensation plan for certain employees whose benefits under tax-qualified retirement plans are restricted by the Internal Revenue Code Section 401(a)(17) limitation on compensation. Adoption of the plan resulted in an unfunded initial projected benefit obligation of approximately $0.8 million that will be amortized over the average expected future years of service of active plan participants.

The net periodic benefit cost for the three and nine months ended September 30, 2018 and 2017 is as follows:

	Pension Benefits												Post-retirement Benefits
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(000's omitted)	2018			2017			2018			2017			2018			2017			2018			2017
Service cost	$	1,154		$	1,037		$	3,396		$	3,143		$	0		$	0		$	0		$	0
Interest cost		1,422			1,453			4,251			4,265			18			19			52			57
Expected return on plan assets		(3,705	)		(3,448	)		(11,115	)		(9,977	)		0			0			0			0
Amortization of unrecognized net loss		299			148			895			619			5			2			15			6
Amortization of prior service cost		(60	)		13			(225	)		43			(45	)		(45	)		(134	)		(134	)
Net periodic benefit cost (income)	$	(890	)	$	(797	)	$	(2,798	)	$	(1,907	)	$	(22	)	$	(24	)	$	(67	)	$	(71	)