11. EMPLOYEE RETIREMENT PLANS

The Company has a defined benefit pension plan covering substantially all employees, as well as an unfunded supplemental pension plan for key executives. Retirement benefits are provided based on employees’ years of credited service and average earnings or stated amounts for years of service. Normal retirement age is 65 with provisions for earlier retirement. The plan also has provisions for disability and death benefits. The plan closed to new participants as of August 1, 2011. The Company’s funding policy for the defined benefit pension plan is to make contributions to the plan such that all employees’ benefits will be fully provided by the time they retire. Plan assets are stated at market value and consist primarily of equity securities and fixed income securities, mainly U.S. government and corporate obligations.

The Company follows ASC 715, Compensation — Retirement Benefits (“ASC 715”) which requires employers to recognize the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability in their statements of financial position and to recognize changes in the funded status in the year in which the changes occur as a component of comprehensive income. In addition, ASC 715 requires employers to measure the funded status of their plans as of the date of their year-end statements of financial position. ASC 715 also requires additional disclosures regarding amounts included in accumulated other comprehensive loss.

The Company’s pension plan’s weighted average asset allocation at December 31, 2014 and 2013, by asset category, was as follows:

	Plan Assets at December 31,
	2014			2013
Asset Category:
Equity Securities		50	%		56	%
Fixed Income Securities		43	%		35	%
Other		7	%		9	%
Total		100	%		100	%

The Company has a Retirement Plan Committee, consisting of the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, to manage the operations and administration of all benefit plans and related trusts. The committee has an investment policy for the pension plan assets that establishes target asset allocation ranges for the above listed asset classes as follows: equity securities: 20% – 80%; fixed income securities: 20% – 80%; and other, principally cash: 0% – 20%. On a semi-annual basis, the committee reviews progress towards achieving the pension plan’s performance objectives.

To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 7.50% long-term rate of return on assets assumption for 2014.

Assumptions used in determining the funded status at December 31, 2014 and 2013 were:

	2014			2013
Discount rate		4.17	%		5.03	%
Rate of compensation increase		4.00	%		4.50	%

The following is a reconciliation of the change in benefit obligation and plan assets of both the defined benefit pension plan and the unfunded supplemental pension plan for the years ended December 31, 2014 and 2013:


	Defined Benefit Pension Plan						Supplemental Pension Plan
	2014			2013			2014			2013
	(Dollars in thousands)
Change in projected benefit obligation
Projected benefit obligation, beginning of year	$	41,470		$	43,452		$	12,337		$	12,270
Service cost		1,042			1,406			221			320
Interest cost		1,999			1,832			586			570
Actuarial loss (gain)		8,221			(3,466	)		2,047			(468	)
Benefits paid		(1,800	)		(1,754	)		(350	)		(355	)
Projected benefit obligation, end of year	$	50,932		$	41,470		$	14,841		$	12,337
Change in plan assets
Fair value of plan assets, beginning of year		31,522			27,819			—			—
Actual return on plan assets		1,145			4,316			—			—
Administrative expenses		(140	)		(141	)		—			—
Contributions		1,300			1,282			350			355
Benefits paid		(1,800	)		(1,754	)		(350	)		(355	)
Fair value of plan assets, end of year	$	32,027		$	31,522		$	—		$	—
Funded status of plan	$	(18,905	)	$	(9,948	)	$	(14,841	)	$	(12,337	)
Amounts recognized in the consolidated balance sheets consist of:
Accrued liabilities – other	$	—		$	—		$	(367	)	$	(384	)
Long-term pension liability		(18,905	)		(9,948	)		(14,474	)		(11,953	)
Net amount recognized	$	(18,905	)	$	(9,948	)	$	(14,841	)	$	(12,337	)
Amounts recognized in accumulated other comprehensive loss consist of:
Accumulated loss, net of income tax benefit of $7,559, $4,054, $2,431 and $1,729, respectively	$	11,824		$	6,341		$	3,803		$	2,705
Prior service cost (credit), net of income tax benefit (liability) of $0, $1, ($314) and ($358), respectively		—			1			(491	)		(559	)
Net amount recognized	$	11,824		$	6,342		$	3,312		$	2,146

The actuarial loss recognized in 2014 primarily resulted from a decrease in the discount rate used to determine the funded status and the use of an updated mortality table. The accumulated benefit obligation for the defined benefit pension plan and the supplemental pension plan was $45.3 million and $14.3 million, respectively, at December 31, 2014 and $36.3 million and $11.3 million, respectively, at December 31, 2013.

Assumptions used in determining net periodic pension cost for the years ended December 31, 2014, 2013 and 2012 were:

	2014			2013			2012
Discount rate		5.03	%		4.23	%		4.60	%
Rate of compensation increase		4.00	%		4.50	%		4.50	%
Long-term rate of return on plan assets		7.50	%		7.75	%		7.75	%

The components of net periodic pension cost for the years ended December 31, 2014, 2013 and 2012, were:

	2014			2013			2012
	(Dollars in thousands)
Benefits earned during the period	$	1,263		$	1,726		$	1,472
Interest cost on projected benefit obligation		2,586			2,403			2,317
Expected return on plan assets		(2,343	)		(2,094	)		(1,994	)
Net amortization and deferral		706			1,702			1,612
Net pension expense	$	2,212		$	3,737		$	3,407

The Company expects to recognize expense of approximately $1.9 million due to the amortization of unrecognized loss and income of approximately $100,000 due to the amortization of prior service cost as components of net periodic benefit cost in 2015, which are included in accumulated other comprehensive loss at December 31, 2014.

It is the Company’s intention to satisfy the minimum funding requirements and maintain at least an 80% funding percentage in its defined benefit retirement plan in future years. At this time, the level of cash contribution that will be required in 2015 to maintain the minimum funding balance is unknown.

Projected benefit payments for the plans as of December 31, 2014 were estimated as follows:

	Defined Benefit Pension Plan		Supplemental Pension Plan
	(Dollars in thousands)
2015	$	2,033	$	367
2016	$	2,154	$	383
2017	$	2,234	$	552
2018	$	2,360	$	568
2019	$	2,510	$	578
2020 – 2024	$	13,579	$	4,244

The following table summarizes the fair value of the Company’s pension plan assets as of December 31, 2014 by asset category within the fair value hierarchy (for further level information, see Note 3):


	December 31, 2014
	Quoted Prices in Active Markets		Significant Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Common stocks	$	11,888	$	1,139	$	—	$	13,027
Preferred stocks		414		20		—		434
Exchange traded funds		3,030		—		—		3,030
Corporate obligations		—		4,762		—		4,762
State and municipal obligations		—		1,592		—		1,592
Pooled fixed income funds		5,893		—		—		5,893
U.S. government securities		—		1,131		—		1,131
Cash and cash equivalents		2,069		—		—		2,069
Subtotal	$	23,294	$	8,644	$	—	$	31,938
Other assets⁽¹⁾								89
Total							$	32,027

(1)

This category represents trust receivables that are not leveled.

The following table summarizes the fair value of the Company’s pension plan assets as of December 31, 2013 by asset category within the fair value hierarchy (for further level information, see Note 3):

	December 31, 2013
	Quoted Prices in Active Markets		Significant Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Common stocks	$	13,339	$	1,470	$	—	$	14,809
Preferred stocks		786		—		—		786
Exchange traded funds		2,761		—		—		2,761
Corporate obligations		—		4,636		—		4,636
State and municipal obligations		—		538		—		538
Pooled fixed income funds		4,150		—		—		4,150
U.S. government securities		—		838		—		838
Cash and cash equivalents		2,927		—		—		2,927
Subtotal	$	23,963	$	7,482	$	—	$	31,445
Other assets⁽¹⁾								77
Total							$	31,522

(1)

This category represents trust receivables that are not leveled.

The Company also has a defined contribution plan covering substantially all employees. The Company contributed approximately $302,000, $227,000 and $221,000 in 2014, 2013 and 2012, respectively.