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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2019

Pension Plan

The Company maintains a legacy, employer-sponsored defined benefit pension plan (the “Plan”) for which participation and benefit accruals were frozen on January 1, 2003. The Plan was assumed in connection with the Rome Bancorp acquisition in 2011. Accordingly, no employees are permitted to commence participation in the Plan and future salary increases and years of credited service are not considered when computing an employee’s benefits under the Plan. As of December 31, 2019, all minimum Employee Retirement Income Security Act (“ERISA”) funding requirements have been met.

Information regarding the pension plan is as follows:



	December 31,
(In thousands)	2019			2018
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	5,669		$	6,353
Service Cost	72			74
Interest cost	228			217
Actuarial loss (gain)	542			(503		)
Benefits paid	(333		)	(323		)
Settlements	(330		)	(149		)
Projected benefit obligation at end of year	5,848			5,669
Accumulated benefit obligation	5,848			5,669

Change in fair value of plan assets:
Fair value of plan assets at plan beginning of year	5,522			5,446
Actual return on plan assets	940			(359		)
Contributions by employer	—			907
Benefits paid	(333		)	(323		)
Settlements	(330		)	(149		)
Fair value of plan assets at end of year	5,799			5,522

Underfunded status	$	49		$	147



Amounts Recognized on Consolidated Balance Sheets
Other Liabilities	$	49	$	147

Net periodic pension cost is comprised of the following:



	December 31,
(In thousands)	2019			2018
Service Cost	$	72		$	74
Interest Cost	228			217
Expected return on plan assets	(373		)	(369		)
Amortization of unrecognized actuarial loss	117			84
Net periodic pension costs	$	44		$	6

Changes in plan assets and benefit obligations recognized in accumulated other comprehensive income are as follows:



	December 31,
(In thousands)	2019			2018
Amortization of actuarial (loss)	$	(117	)	$	(84	)
Actuarial (gain) loss	(25		)	225
Settlement charge	(70		)	—
Total recognized in accumulated other comprehensive income	(212		)	141
Total recognized in net periodic pension cost recognized and other comprehensive income	$	(168	)	$	147

The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost are a net loss of $1.2 million and $1.5 million in 2019 and 2018, respectively.

The Company did not make any cash contributions to the pension trust during 2019. The Company made cash contributions of $907 thousand during 2018, which was equal to the underfunded status of the trust as of December 31, 2017. The Company does not expect to make any cash contributions in 2020. The amount expected to be amortized from other comprehensive income into net periodic pension cost over the next fiscal year is $93 thousand.

The principal actuarial assumptions used are as follows:



	December 31,
	2019		2018
Projected benefit obligation
Discount rate	3.15	%	4.16	%
Net periodic pension cost
Discount rate	4.16	%	3.51	%
Long term rate of return on plan assets	7.00	%	7.00	%

The discount rate that is used in the measurement of the pension obligation is determined by comparing the expected future retirement payment cash flows of the pension plan to the Above Median FTSE Pension Discount Curve as of the measurement date. The expected long-term rate of return on Plan assets reflects long-term earnings expectations on existing Plan assets and those contributions expected to be received during the current plan year. In estimating that rate, appropriate consideration was given to historical returns earned by Plan assets in the fund and the rates of return expected to be available for reinvestment. The rates of return were adjusted to reflect current capital market assumptions and changes in investment allocations.

The Company’s overall investment strategy with respect to the Plan’s assets is primarily for preservation of capital and to provide regular dividend and interest payments. The Plan’s targeted asset allocation is 65% equity securities via investment in the Long-Term Growth - Equity Portfolio ("LTGE"), 34% intermediate-term investment grade bonds via investment in the Long-Term Growth - Fixed-Income Portfolio ("LTGFI"), and 1% in cash equivalents portfolio (for liquidity). Equity securities include investments in a diverse mix of equity funds to gain exposure in the US and international markets. The fixed income portion of the Plan assets is a diversified portfolio that primarily invests in intermediate-term bond funds. The overall rate of return is based on the historical performance of the assets applied against the Plan’s target allocation, and is adjusted for the long-term inflation rate.

The fair values for investment securities are determined by quoted prices in active markets, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

The fair value of the Plan’s assets by category within the fair value hierarchy are as follows at December 31, 2019 and December 31, 2018. The Plan did not hold any assets classified as Level 3, nor were there any transfers.



	December 31, 2019
Asset Category (In thousands)	Total		Level 1		Level 2
Equity Mutual Funds:
Large-Cap	$	1,900	$	—	$	1,900
Mid-Cap	453		—		453
Small-Cap	429		—		429
International	828		—		828
Fixed Income - US Core	1,535		—		1,535
Intermediate Duration	517		—		517
Cash Equivalents - money market	137		60		77
Total	$	5,799	$	60	$	5,739



	December 31, 2018
Asset Category (In thousands)	Total		Level 1		Level 2
Equity Mutual Funds:
Large-Cap	$	1,659	$	—	$	1,659
Mid-Cap	407		—		407
Small-Cap	418		—		418
International	751		—		751
Fixed Income - US Core	1,628		—		1,628
Intermediate Duration	545		—		545
Cash Equivalents - money market	114		52		62
Total	$	5,522	$	52	$	5,470

Estimated benefit payments under the pension plans over the next 10 years at December 31, 2019 are as follows:



Year		Payments (In thousands)
2020		370
2021		358
2022		371
2023		357
2024 - 2029		1,924

Multi-Employer Pension Plan

As a result of the Company's acquisition of SI Financial Group, Inc. (“SIFI”), the Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Plan”), a tax-qualified defined benefit pension plan. The Plan operates as a multiple-employer plan under ERISA and the Internal Revenue Code, and as as a multi-employer plan for accounting purposes. The Plan was frozen effective September 6, 2013 and SIFI recorded a contingent obligation to settle the plan at a future date, which was assumed by the Company via acquisition. As of December 31, 2019, the Company's liability related to the Plan totaled $4.8 million. The Company made contributions of $290 thousand in 2019. As of July 1, 2019, the Plan held assets with a market value of $4.3 million and liabilities with a market value of $7.2 million. The funded status (market value of plan assets divided by funding target) of the Plan, was greater than 80% as of July 1, 2019, as required by federal and state regulations. Market value of the Plan's assets reflects contributions received through June 30, 2019. There are no collective bargaining agreements in place that require contributions to the Plan by the Company. The Plan is a single plan under the Internal Revenue Code and, as a result, all of the assets stand behind all of the liabilities. Accordingly, contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

Postretirement Benefits

The Company maintains an unfunded postretirement medical plan assumed in connection with the Rome Bancorp acquisition in 2011. The postretirement plan has been modified so that participation is closed to those employees who did not meet the retirement eligibility requirements by March 31, 2011. The Company contributes partially to medical benefits and life insurance coverage for retirees. Such retirees and their surviving spouses are responsible for the remainder of the medical benefits, including increases in premiums levels, between the total premium and the Company’s contribution.

The Company also has an executive long-term care (“LTC”) postretirement benefit plan which started August 1, 2014. The LTC plan reimburses executives for certain costs in the event of a future chronic illness. Funding of the plan comes from Company paid insurance policies or direct payments. At plan’s inception, a $558 thousand benefit obligation was recorded against equity representing the prior service cost of plan participants.

Information regarding the postretirement plans is as follows:



	December 31,
(In thousands)	2019			2018
Change in accumulated postretirement benefit obligation:
Accumulated post-retirement benefit obligation at beginning of year	$	3,422		$	3,693
Service Cost	38			40
Interest cost	142			130
Participant contributions	—			46
Actuarial loss (gain)	565			(391		)
Benefits paid	(128		)	(96		)
Accumulated post-retirement benefit obligation at end of year	$	4,039		$	3,422

Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—
Contributions by employer	128			50
Contributions by participant	—			46
Benefits paid	(128		)	(96		)
Fair value of plan assets at end of year	$	—		$	—



Amounts Recognized on Consolidated Balance Sheets
Other Liabilities	$	4,039	$	3,422

Net periodic post-retirement cost is comprised of the following:



	December 31,
(In thousands)	2019		2018
Service cost	$	38	$	40
Interest costs	142		130
Amortization of net prior service credit	83		83
Amortization of net actuarial loss	—		—
Net periodic post-retirement costs	$	263	$	253

Changes in benefit obligations recognized in accumulated other comprehensive income are as follows:



	December 31,
(In thousands)	2019			2018
Amortization of prior service credit	$	(83	)	$	(83	)
Net actuarial loss (gain)	374			(191		)
Total recognized in accumulated other comprehensive income	291			(274		)
Accrued post-retirement liability recognized	$	4,039		$	3,422

The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost are as follows:



	December 31,
(In thousands)	2019		2018
Net prior service cost (credit)	$	1,409	$	1,492
Net actuarial loss (gain)	374		(191		)
Total recognized in accumulated other comprehensive income	$	1,783	$	1,301

The amount expected to be amortized from other comprehensive income into net periodic postretirement cost over the next fiscal year is $83 thousand.

The discount rates used in the measurement of the postretirement plan obligations are determined by comparing the expected future retirement payment cash flows of the plans to the Above Median FTSE Pension Discount Curve as of the measurement date.

The assumed discount rates on a weighted-average basis were 3.06% and 4.11% as of December 31, 2019 and December 31, 2018, respectively. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit medical obligation is expected to be 7.25% for 2020, and is gradually expected to decrease to 3.84% by 2075. This assumption may have a significant effect on the amounts reported. However, as noted above, increases in premium levels are the financial responsibility of the plan beneficiary. Thus an increase or decrease in 1% of the health care cost trend rates utilized would have had an immaterial effect on the service and interest cost as well as the accumulated post-retirement benefit obligation for the postretirement plan as of December 31, 2019.

For participants in the LTC plan covered by insurance policies, no increase in annual premiums is assumed based on the history of the corresponding insurance provider.

Estimated benefit payments under the post-retirement benefit plan over the next ten years at December 31, 2019 are as follows:



Year		Payments (In thousands)
2020		98
2021		103
2022		76
2023		103
2024 - 2029		658

401(k) Plan

The Company provides a 401(k) Plan in which most eligible employees participate. Expense related to the plan was $4.1 million in 2019, $3.9 million in 2018, and $3.4 million in 2017.

Employee Stock Ownership Plan (“ESOP”)

As part of the Savings Institute acquisition in 2019, the Company acquired an ESOP plan that was frozen and terminated prior to the completion of the transaction. On acquisition date, all amounts in the plan were vested and the loan under the plans was repaid from the sale proceeds of unallocated shares.

Other Plans

The Company maintains supplemental executive retirement plans (“SERPs”) for select current and former executives. Benefits generally commence no earlier than age sixty-two and are payable either as an annuity or as a lump sum at the executive’s option. Most of these SERPs were assumed in connection with acquisitions. At year-end 2019 and 2018, the accrued liability for these SERPs was $20.3 million and $3.4 million, respectively. SERP expense was $928 thousand in 2019, $638 thousand in 2018, and $968 thousand in 2017, and is recognized over the required service period.

During 2018, the Company released $5.4 million of accrued SERP liability, following a transition in the Company's Chief Executive Officer position. The separation agreement did not entitle the former executive to any future benefits, including the associated SERP, other than those described in the agreement.

The Company has endorsement split-dollar arrangements pertaining to certain current and former executives and directors. Under these arrangements, the Company purchased policies insuring the lives of the executives and directors, and separately entered into agreements to split the policy benefits with the individuals. There are no post-retirement benefits associated with these policies. The Company also assumed split-dollar life insurance agreements from multiple prior acquisitions. The accrued liability for these split-dollar arrangements was $7.1 million as of year-end 2019 and $4.6 million as of year-end 2018.