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Retirement Plans
 12 Months Ended
Dec. 31, 2012
Retirement Plans

Note 23—Retirement Plans

First Commonwealth has a savings plan pursuant to the provisions of section 401(k) of the Internal Revenue code. Under the terms of the plan, in 2012, each participant received an employer contribution in an amount equal to 3% of their compensation. In addition, each participating employee may contribute up to 80% of their compensation to the plan of which up to 4% is matched 50% by the employer’s contribution. The 401(k) plan expense was $2.6 million in 2012, $2.5 million in 2011, and $2.6 million in 2010.

First Commonwealth maintains a Supplemental Executive Retirement Plan (“SERP”) to provide deferred compensation for those employees whose total annual or annualized Plan compensation for a calendar year exceeded the maximum limit of compensation that can be recognized for tax-qualified retirement plans. The purpose of this Plan is to restore some of the benefits lost by eligible employees compared to other employees due to limits and restrictions incorporated into First Commonwealth’s 401(k) Plan and ESOP.

Participants in the SERP are eligible to defer (on a pre-tax basis) from 1% to 25% of their Plan compensation (compensation in excess of the tax-qualified plan limit). In 2009, First Commonwealth made a matching contribution to the Plan for each payroll up to the first 4% of their Plan compensation and also made a contribution to the Plan for each payroll equal to 3% of their Plan compensation. In addition, First Commonwealth made a contribution to the Plan at the end of the Plan Year on Plan compensation equal to that percentage of compensation that will be contributed to the ESOP. In April 2009 First Commonwealth suspended all employer contributions.

The SERP will continue to supplement First Commonwealth’s 401(k) and ESOP plans and will therefore be modified at the same time and in the same respect as the basic plans are modified in future periods. There was no SERP plan expense in 2012, while $86 thousand was expensed in 2011 and $96 thousand in 2010.

Select employees from former acquisitions were covered by postretirement benefit plans which provide medical and life insurance coverage. The measurement date for these plans was December 31.

Postretirement Benefits Other than Pensions from Prior Acquisitions

Net periodic benefit cost of these plans for the years ended December 31, was as follows:

 

     2012     2011     2010  
     (dollars in thousands)  

Service cost

    $ 0      $ 0      $ 0   

Interest cost on projected benefit obligation

      75        86        128   

Amortization of transition obligation

      2        2        2   

Gain amortization

      (32 )      (50 )      (10 ) 
  

 

 

    

 

 

    

 

 

  

Net periodic benefit cost

    $ 45      $ 38      $ 120   
  

 

 

    

 

 

    

 

 

  

 

The following table sets forth the change in the benefit obligation and plan assets as of December 31:

 

         2012             2011      
     (dollars in thousands)  

Change in Benefit Obligation

     

Benefit obligation at beginning of year

    $ 1,892      $ 1,897   

Service cost

      0        0   

Interest cost

      75        86   

Amendments

      0        0   

Actuarial gain

      269        210   

Net benefits paid

      (250 )      (301 ) 
  

 

 

    

 

 

  

Benefit obligation at end of year

      1,986        1,892   

Change in Plan Assets

     

Fair value of plan assets at beginning of year

      0        0   

Actual return on plan assets

      0        0   

Employer contributions

      250        301   

Net benefits paid

      (250 )      (301 ) 
  

 

 

    

 

 

  

Fair value of plan assets at end of year

      0        0   

Funded Status at End of Year

      1,986        1,892   

Unrecognized transition obligation

      0        (2 ) 

Unrecognized net gain

      212        513   
  

 

 

    

 

 

  

Amounts recognized in retained earnings

    $ 2,198      $ 2,403   
  

 

 

    

 

 

  

As of December 31, the funded status of the plan is:

 

         2012              2011      
     (dollars in thousands)  

Amounts Recognized in the Statement of Financial Condition as Other liabilities

    $ 1,986       $ 1,892   

The following table sets forth the amounts recognized in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit costs as of December 31:

 

         2012             2011             2010      
     (dollars in thousands)  

Amounts recognized in accumulated other comprehensive income, net of tax:

       

Net (gain) loss

    $ (138 )    $ (333 )    $ (502 ) 

Transition obligation

      0        1        2   
  

 

 

    

 

 

    

 

 

  

Total

    $ (138 )    $ (332 )    $ (500 ) 
  

 

 

    

 

 

    

 

 

  

Weighted-average assumptions used to determine the benefit obligation as of December 31 are as follows:

 

         2012             2011             2010      

Weighted-average Assumptions

       

Discount rate

      3.31 %      4.22 %      4.71 % 

Health care cost trend: Initial

      7.00 %      8.00 %      9.00 % 

Health care cost trend: Ultimate

      4.75 %      4.75 %      4.75 % 

Year ultimate reached

      2022        2016        2016   

 

Weighted-average assumptions used to determine the net benefit costs as of December 31 are as follows:

 

         2012             2011             2010      

Weighted Average Assumptions for Net Periodic Cost

       

Discount rate

      4.22 %      4.71 %      4.71 % 

Health care cost trend: Initial

      8.00 %      9.00 %      10.00 % 

Health care cost trend: Ultimate

      4.75 %      4.75 %      4.75 % 

Year ultimate reached

      2016        2016        2016   

Corridor

      10.00 %      10.00 %      10.00 % 

Recognition period for gains and losses

      12.00        12.7        12.7   

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) introduced a prescription drug benefit under Medicare Part D and a federal subsidy to sponsors of retiree health care benefit plans that provide a prescription drug benefit that is at least actuarially equivalent to Medicare Part D. The postretirement plans of First Commonwealth are provided through insurance coverage; therefore, First Commonwealth will not receive a direct federal subsidy. The preceding measures of the accumulated postretirement benefit cost assume that First Commonwealth will not receive the subsidy due to the relatively small number of retirees.

The health care cost trend rate assumption can have a significant impact on the amounts reported for this plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

 

     One-Percentage-
Point Increase		      One-Percentage-
Point Decrease		  
     (dollars in thousands)  

Effect on total of service and interest cost components

    $ 65       $ (59 ) 

Effect on postretirement benefit obligation

      2         (2 ) 

As of December 31, 2012, the projected benefit payments for the next ten years are as follows:

 

     Projected Benefit
        Payments         		  
     (dollars in thousands)  

2013

    $ 219   

2014

      213   

2015

      206   

2016

      200   

2017

      193   

2018 - 2022

      671   

The projected payments were calculated using the same assumptions as those used to calculate the benefit obligations included in this note.

The estimated costs that will be amortized from accumulated other comprehensive income into net periodic cost for 2013 are as follows (dollars in thousands):

 

     Postretirement
Benefits		  
     (dollars in thousands)  

Net gain

    $ (7 ) 

Transition obligation

      0   
  

 

 

  

Total

    $ (7 )