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PENSION AND OTHER BENEFIT PLANS
 12 Months Ended
Dec. 31, 2024
PENSION AND OTHER BENEFIT PLANS  
PENSION AND OTHER BENEFIT PLANS

NOTE J: PENSION AND OTHER BENEFIT PLANS

Pension and post-retirement 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. Using a measurement date of December 31, the following table shows the funded status of the Company’s plans reconciled with amounts reported in the Company’s consolidated statements of condition:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pension Benefits

​

Post-retirement Benefits

(000’s omitted)

    

2024

    

2023

    

2024

    

2023

Change in benefit obligation:

 

​

  

 

​

  

 

​

​

 

​

  

Benefit obligation at the beginning of year

​

$

158,280

​

$

151,361

​

$

1,714

​

$

1,656

Service cost

​

 

4,693

​

 

4,433

​

 

0

​

 

0

Interest cost

​

 

7,593

​

 

7,561

​

 

86

​

 

92

Deferred actuarial (gain)/loss

​

 

(10,542)

​

 

5,530

​

 

(30)

​

 

165

Benefits paid

​

 

(18,619)

​

 

(10,605)

​

 

(182)

​

 

(199)

Benefit obligation at end of year

​

 

141,405

​

 

158,280

​

 

1,588

​

 

1,714

Change in plan assets:

​

 

​

​

 

​

​

 

​

​

 

​

Fair value of plan assets at beginning of year

​

 

267,462

​

 

244,332

​

 

0

​

 

0

Actual return of plan assets

​

 

18,839

​

 

28,746

​

 

0

​

 

0

Employer contributions

​

 

5,342

​

 

4,989

​

 

182

​

 

199

Benefits paid

​

 

(18,619)

​

 

(10,605)

​

 

(182)

​

 

(199)

Fair value of plan assets at end of year

​

 

273,024

​

 

267,462

​

 

0

​

 

0

Over/(Under) funded status at year end

​

$

131,619

​

$

109,182

​

$

(1,588)

​

$

(1,714)

​

​

​

​

​

​

​

​

​

​

​

​

​

Amounts recognized in the consolidated statement of condition were:

​

 

  

​

 

  

​

 

  

​

 

  

Other assets

​

$

145,264

​

$

123,263

​

$

0

​

$

0

Other liabilities

​

 

(13,645)

​

 

(14,081)

​

 

(1,588)

​

 

(1,714)

Amounts recognized in accumulated other comprehensive loss/(income) (“AOCI”) were:

​

 

  

​

 

  

​

 

  

​

 

  

Net loss

​

$

21,866

​

$

33,977

​

$

341

​

$

398

Net prior service cost (credit)

​

 

1,472

​

 

2,292

​

 

(370)

​

 

(549)

Pre-tax AOCI

​

 

23,338

​

 

36,269

​

 

(29)

​

 

(151)

Taxes

​

 

(5,727)

​

 

(8,955)

​

 

11

​

 

41

AOCI at year end

​

$

17,611

​

$

27,314

​

$

(18)

​

$

(110)

​

The benefit obligation for the defined benefit pension plan was $127.8 million and $144.2 million as of December 31, 2024 and 2023, respectively, and the fair value of plan assets as of December 31, 2024 and 2023 was $273.0 million and $267.5 million, respectively.

The Company has unfunded supplemental pension plans for certain key active and retired executives. The projected benefit obligation for the unfunded supplemental pension plan for certain key executives was $12.8 million and $13.6 million for 2024 and 2023, respectively. The Company also has an unfunded stock balance plan for certain of its nonemployee directors. The projected benefit obligation for the unfunded stock balance plan was immaterial for 2024 and 2023, respectively.

The Company has a non-qualified deferred compensation plan for certain employees (“Restoration Plan”) whose benefits under tax-qualified retirement plans are restricted by the Internal Revenue Code Section 401(a)(17) limitation on compensation. The projected benefit obligation for the unfunded Restoration Plan was $0.8 million for 2024 and $0.4 million for 2023.

Effective December 31, 2009, the Company terminated its post-retirement medical program for current and future employees. Remaining plan participants will include only existing retirees as of December 31, 2010. This change was accounted for as a negative plan amendment and a $3.5 million, net of income taxes, benefit for prior service was recognized in AOCI in 2009. This negative plan amendment is being amortized over the expected benefit utilization period of remaining plan participants.

Amounts recognized in accumulated other comprehensive income, net of tax, for the year ended December 31, are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pension Benefits

​

Post-retirement Benefits

(000’s omitted)

    

2024

    

2023

    

2024

    

2023

Prior service (credit)/cost

​

$

(615)

​

$

(620)

​

$

134

​

$

135

Net (gain) loss

​

 

(9,087)

​

 

(3,720)

​

 

(43)

​

 

108

Total

​

$

(9,702)

​

$

(4,340)

​

$

91

​

$

243

​

The weighted-average assumptions used to determine the benefit obligations as of December 31 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

Pension Benefits

​

Post-retirement Benefits

 

​

    

2024

    

2023

    

2024

    

2023

 

Discount rate

 

5.90

%  

5.20

%  

5.90

%  

5.20

%

Expected return on plan assets

 

7.00

%  

7.00

%  

N/A

 

N/A

​

Rate of compensation increase

​

3.50

%  

3.50% for 2024

+

N/A

​

N/A

​

Interest crediting rates

​

6.00% while employed,

​

6.00% while employed,

​

N/A

​

N/A

​

​

​

4.04% after termination

​

4.47% after termination

​

​

​

​

​

​

The net periodic benefit cost as of December 31 is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pension Benefits

​

Post-retirement Benefits

(000’s omitted)

    

2024

    

2023

    

2022

    

2024

    

2023

    

2022

Service cost

​

$

4,693

​

$

4,433

​

$

4,959

​

$

0

​

$

0

​

$

0

Interest cost

​

 

7,593

​

 

7,561

​

 

5,334

​

 

86

​

 

92

​

 

68

Expected return on plan assets

​

 

(18,401)

​

 

(16,079)

​

 

(19,025)

​

 

0

​

 

0

​

 

0

Plan amendment

​

 

0

​

 

0

​

 

(556)

​

 

0

​

 

0

​

 

0

Amortization of unrecognized net loss (gain)

​

 

1,131

​

 

(2,220)

​

 

842

​

 

27

​

 

22

​

 

23

Amortization of prior service cost

​

 

820

​

 

820

​

 

615

​

 

(179)

​

 

(179)

​

 

(179)

Net periodic benefit

​

$

(4,164)

​

$

(5,485)

​

$

(7,831)

​

$

(66)

​

$

(65)

​

$

(88)

​

Prior service costs in which all or almost all of the plan’s participants are fully eligible for benefits under the plan are amortized on a straight-line basis over the expected future working years of all active plan participants. Unrecognized gains or losses are amortized using the “corridor approach”, which is the minimum amortization required. Under the corridor approach, the net gain or loss in excess of 10 percent of the greater of the projected benefit obligation or the market-related value of the assets is amortized on a straight-line basis over the expected future working years of all active plan participants.

The weighted-average assumptions used to determine the net periodic pension cost for the years ended December 31 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pension Benefits

​

Post-retirement Benefits

 

​

    

2024

    

2023

    

2022

    

2024

    

2023

    

2022

 

Discount rate

 

5.20

%

5.40

%

3.10

%

5.20

%

5.40

%

3.10

%

Expected return on plan assets

 

7.00

%

6.70

%

6.70

%

N/A

 

N/A

 

N/A

​

Rate of compensation increase

 

4.50% for 2023,

​

4.50% for 2023,

​

4.00% for 2022,

​

​

​

​

​

​

​

​

​

3.50% for 2024

+

3.50% for 2024

+

3.50% for 2023

+

N/A

​

N/A

​

N/A

​

Interest crediting rates

​

6.00% while employed,

​

6.00% while employed,

​

6.00% while employed,

​

​

​

​

​

​

​

​

​

4.47% after termination

​

3.55% after termination

​

1.94% after termination

​

N/A

​

N/A

​

N/A

​

​

The amount of benefit payments that are expected to be paid over the next ten years are as follows:

​

​

​

​

​

​

​

​

​

​

​

Pension

​

​

Post-retirement

(000’s omitted)

    

​

Benefits

    

​

Benefits

2025

​

$

14,218

​

$

189

2026

​

 

13,103

​

 

166

2027

​

 

13,031

​

 

162

2028

​

 

12,900

​

 

158

2029

​

 

13,636

​

 

154

2030-2034

​

 

64,476

​

 

675

​

The payments reflect future service and are based on various assumptions including retirement age and form of payment (lump-sum versus annuity). Actual results may differ from these estimates.

The assumed discount rate is used to reflect the time value of future benefit obligations. The discount rate was determined based upon the yield on high-quality fixed income investments expected to be available during the period to maturity of the pension benefits. This rate is sensitive to changes in interest rates. A decrease in the discount rate would increase the Company’s obligation and future expense while an increase would have the opposite effect. The expected long-term rate of return was estimated by taking into consideration asset allocation, long-term capital market assumptions, reviewing historical returns on the type of assets held and current economic factors. The mortality tables used to determine future benefit obligations under the plan as of December 31, 2024 were the sex-distinct Pri-2012 Mortality Tables for employees, healthy annuitants and contingent survivors, adjusted for mortality improvements using Scale MP-2021 mortality improvement scale on a generational basis. The appropriateness of the assumptions are reviewed annually.

Plan Assets

The investment objective for the defined benefit pension plan is to achieve an average annual total return over a five-year period equal to the assumed rate of return used in the actuarial calculations. At a minimum performance level, the portfolio should earn the return obtainable on high quality intermediate-term bonds. The Company’s perspective regarding portfolio assets combines both preservation of capital and moderate risk-taking. Asset allocation favors fixed income securities, with a target allocation of approximately 30% equity securities, 50% fixed income securities, 15% alternative investments, and 5% money market funds. Due to the volatility in the market, the target allocation is not always desirable and asset allocations will fluctuate between acceptable ranges. Prohibited transactions include purchase of securities on margin, uncovered call options, and short sale transactions.

The fair values of the Company’s defined benefit pension plan assets at December 31, 2024 by asset category are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quoted Prices

​

​

​

​

​

​

​

​

​

​

​

in Active

​

Significant

​

Significant

​

​

​

​

​

Markets for

​

Observable

​

Unobservable

​

​

​

​

​

Identical Assets

​

Inputs

​

Inputs

​

​

​

Asset category (000’s omitted)

    

Level 1

    

Level 2

    

Level 3

    

Total

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash equivalents

​

$

1,526

​

$

0

​

$

0

​

$

1,526

Equity securities:

​

 

​

​

 

​

​

 

  

​

 

​

U.S. large-cap

​

 

62,289

​

 

0

​

 

0

​

 

62,289

U.S. mid/small cap

​

 

17,048

​

 

0

​

 

0

​

 

17,048

International

​

 

34,074

​

 

0

​

 

0

​

 

34,074

Other

​

​

1,187

​

​

0

​

​

0

​

​

1,187

​

​

 

114,598

​

 

0

​

 

0

​

 

114,598

​

​

 

​

​

 

​

​

 

  

​

 

​

Fixed income securities:

​

 

​

​

 

​

​

 

  

​

 

​

Government securities

​

 

59,293

​

 

23,511

​

 

0

​

 

82,804

Investment grade bonds

​

 

0

​

 

61,578

​

 

0

​

 

61,578

​

​

 

59,293

​

 

85,089

​

 

0

​

 

144,382

​

​

 

​

​

 

​

​

 

  

​

 

​

Other investments (a)

​

 

0

​

 

2,722

​

 

1,517

​

 

4,239

Alternative investments (c)

​

​

0

​

​

0

​

​

0

​

​

6,431

​

​

 

​

​

 

​

​

 

  

​

 

​

Total (b)

​

$

175,417

​

$

87,811

​

$

1,517

​

$

271,176

​

The fair values of the Company’s defined benefit pension plan assets at December 31, 2023 by asset category are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Quoted Prices

​

​

​

​

​

​

​

​

​

​

​

in Active

​

Significant

​

Significant

​

 

​

​

​

Markets for

​

Observable

​

Unobservable

​

 

​

​

​

Identical Assets

​

Inputs

​

Inputs

​

 

​

Asset category (000’s omitted)

    

Level 1

    

Level 2

    

Level 3

    

Total

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash equivalents

​

$

13,441

​

$

0

​

$

0

​

$

13,441

Equity securities:

​

 

​

​

 

​

​

 

  

​

 

​

U.S. large-cap

​

 

66,709

​

 

0

​

 

0

​

 

66,709

U.S. mid/small cap

​

 

23,127

​

 

0

​

 

0

​

 

23,127

CBU common stock

​

 

5,691

​

 

0

​

 

0

​

 

5,691

International

​

 

50,270

​

 

0

​

 

0

​

 

50,270

Other

​

 

1,966

​

 

0

​

 

0

​

 

1,966

​

​

 

147,763

​

 

0

​

 

0

​

 

147,763

​

​

 

​

​

 

​

​

 

  

​

 

​

Fixed income securities:

​

 

​

​

 

​

​

 

  

​

 

​

Government securities

​

 

59,107

​

 

15,491

​

 

0

​

 

74,598

Investment grade bonds

​

 

0

​

 

17,968

​

 

0

​

 

17,968

​

​

 

59,107

​

 

33,459

​

 

0

​

 

92,566

​

​

 

​

​

 

​

​

 

  

​

 

​

Other investments (a)

​

 

12,759

​

 

0

​

 

0

​

 

12,759

​

​

 

​

​

 

​

​

 

  

​

 

​

Total (b)

​

$

233,070

​

​

33,459

​

$

0

​

$

266,529

(a)This category is comprised of exchange-traded funds and mutual funds holding non-traditional investment classes including private equity funds and alternative exchange funds.
(b)Excludes dividends and interest receivable totaling $1.6 million and $0.9 million at December 31, 2024 and 2023, respectively.
(c)In accordance with fair value measurement guidance, certain investments that are measured at fair value using net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total investments.

​

The valuation techniques used to measure fair value for the items in the table above are as follows:

●Cash equivalents - Money market funds, which are managed portfolios, including commercial paper and other fixed income securities issued by U.S. and foreign corporations, asset-backed commercial paper, U.S. government securities, obligations of foreign governments and U.S. and foreign banks, which are valued at the closing price reported on the market on which the underlying securities are traded.
●Equity securities and other investments – Mutual funds, equity securities and common stock of the Company which are valued at the quoted market price of shares held at year-end.
●Fixed income securities - U.S. Treasuries, municipal bonds and notes, government sponsored entities, and corporate debt valued at the closing price reported on the active market on which the individual securities are traded or for municipal bonds and notes based on quoted prices for similar assets in the active market.
●Alternative investments – Equity securities valued at the net asset value (NAV) or equivalent. The NAV, as provided by the trustee, is used as a practical expedient to estimate fair value. The NAV is generally based on the fair value of the underlying investments held by the alternative investment. This practical expedient is not used when it is determined to be probable that the alternative investment will sell for an amount different than the reported NAV.

The following table sets forth additional disclosures of the Plan’s investments whose fair value is estimated using net asset value per share (or its equivalent) as of December 31, 2024:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unfunded

​

Redemption

​

Redemption Notice

Investment (000’s omitted)

    

Fair Value

    

Commitment

    

Frequency

    

Period

Alternative investments

​

$

6,431

​

$

0

 

Semiannual

 

Announced in advance

​

The Company makes contributions to its funded qualified pension plan as required by government regulation or as deemed appropriate by management after considering the fair value of plan assets, expected return on such assets, and the value of the accumulated benefit obligation. The Company made a $4.4 million and $4.3 million contribution to its defined benefit pension plan in 2024 and 2023, respectively. The Company funds the payment of benefit obligations for the supplemental pension and post-retirement plans because such plans do not hold assets for investment.

401(k) Employee Stock Ownership Plan

The Company has a 401(k) Employee Stock Ownership Plan in which employees can contribute from 1% to 90% of eligible compensation, with the first 3% being eligible for a 100% matching contribution in the form of Company common stock and the next 3% being eligible for a 50% matching contributions in the form of Company common stock. The expense recognized under this plan for the years ended December 31, 2024, 2023 and 2022 was $8.2 million, $7.7 million, and $7.1 million, respectively. Effective January 1, 2010, the defined benefit pension plan was modified to a new plan design that includes an interest credit contribution to be made to the 401(k) plan. The expense recognized for this interest credit contribution for the years ended December 31, 2024, 2023, and 2022 was $2.4 million, $1.9 million, and $1.4 million, respectively.

Effective May 15, 2024, the Plan was amended to change the name from Community Bank System, Inc. 401(k) Employee Stock Ownership Plan to Community Financial System, Inc. 401(k) Employee Stock Ownership Plan.

Other Deferred Compensation Arrangements

In addition to the supplemental pension plans for certain executives, the Company has nonqualified deferred compensation arrangements for several former directors, officers and key employees. All benefits provided under these plans are unfunded and payments to plan participants are made by the Company. At December 31, 2024 and 2023, the Company has recorded a liability of $3.4 million and $3.8 million, respectively. The expense recognized under these plans for the years ended December 31, 2024, 2023, and 2022 was approximately $0.1 million, $0.2 million, and $0.2 million, respectively.

Deferred Compensation Plans for Directors

Directors of the Company may defer all or a portion of their director fees under the Deferred Compensation Plan for Directors. Under this plan, there is a separate account for each participating director which is credited with the amount of shares that could have been purchased with the director’s fees as well as any dividends on such shares. On the distribution date, the director will receive common stock equal to the accumulated share balance in their account. As of December 31, 2024 and 2023, there were 140,071 and 138,787 shares credited to the participants’ accounts, for which a liability of $6.0 million and $5.8 million was accrued, respectively. The expense recognized under the plan for the years ended December 31, 2024, 2023 and 2022, was $0.2 million, $0.2 million, and $0.2 million, respectively.

The Company acquired deferred compensation plans for certain non-employee directors and trustees of Merchants Bancshares, Inc. (“Merchants”). Under the terms of these acquired deferred compensation plans, participating directors could elect to have all, or a specified percentage, of their Merchants director’s fees for a given year paid in the form of cash or deferred in the form of restricted shares of Merchants’ common stock. Directors who elected to have their compensation deferred were credited with a number of shares of Merchants’ common stock equal in value to the amount of fees deferred. These shares were converted to shares of Company stock in connection with the acquisition and are held in a rabbi trust. The shares held in the rabbi trust are considered outstanding for purposes of computing earnings per share. The participating director may not sell, transfer or otherwise dispose of these shares prior to distribution. With respect to shares of common stock issued or otherwise transferred to a participating director, the participating director has the right to receive dividends or other distributions thereon.