Note 14 – Employee Benefit Plans

The Company has a qualified, defined benefit pension plan that was established to provide benefits to certain employees. The plan is frozen and participants are no longer accruing benefits. Generally, contributions to the plan are not less than the minimum amounts required under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and not more than the maximum amount that can be deducted for federal income tax purposes. The plan’s assets are held by independent trustees and consist primarily of equity and fixed income securities.

The Company also provides certain postretirement health care benefits for certain of its salaried retired employees. Generally, employees may become eligible for health care benefits if they retire after attaining specified age and service requirements. These benefits are subject to deductibles, co-payment provisions and other limitations. As a result of the cost reduction program initiated in January 2017 (see Note 7), certain employees participating in the salaried pension and postretirement benefit plans were impacted, which triggered curtailments of the respective plans.

The Company has elected to utilize a full yield curve approach in estimating the service and interest components of net periodic benefit cost for postretirement benefits and the interest component for pension benefits by applying the specific spot rates along the yield curve used in determining the benefit obligation to the relevant projected cash flows.

The changes in benefit obligation, change in plan assets and funded status as of December 31, 2018 and 2017, are as follows:



	Pension Benefits		Postretirement Benefits
	2018	2017	2018	2017
Change in benefit obligation
Benefit obligation – Beginning of year	$ 54,319	$ 53,293	$ 5,956	$ 6,172
Service cost	-	-	33	48
Interest cost	1,712	1,786	186	199
Actuarial loss (gain)	(4,037)	2,599	(237)	(74)
Benefits paid	(3,404)	(3,629)	(568)	(539)
Lump-sum settlement payment	-	-	-	-
Settlement gain	-	-	-	-
Plan curtailment	-	-	-	-
Special termination benefits	-	270	-	150
Benefit obligation – End of year	48,590	54,319	5,370	5,956
Change in plan assets
Plan assets – Beginning of year	48,556	46,472	-	-
Return on plan assets	(2,403)	5,713	-	-
Employer contributions	-	-	568	539
Benefits paid	(3,404)	(3,629)	(568)	(539)
Lump-sum settlement payment	-	-	-	-
Plan assets at fair value – End of year	42,749	48,556	-	-
Funded status of plans – End of year	$ (5,841)	$ (5,763)	$ (5,370)	$ (5,956)


	Pension Benefits		Postretirement Benefits
	2018	2017	2018	2017
Amounts recognized in the Consolidated Balance Sheets
Current liabilities	$ -	$ -	$ (395)	$ (400)
Noncurrent liabilities	(5,841)	(5,763)	(4,975)	(5,556)
Net amount recognized at December 31	$ (5,841)	$ (5,763)	$ (5,370)	$ (5,956)

Amounts recognized in accumulated other comprehensive loss but not yet recognized in earnings at December 31, 2018 and 2017, are as follows:


	Pension Benefits		Postretirement Benefits
	2018	2017	2018	2017

Net actuarial loss (gain)	$ 16,586	$ 15,827	$ (2,801)	$ (2,846)
Prior service cost	-	-	158	173
	$ 16,586	$ 15,827	$ (2,643)	$ (2,673)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2019 is $530. The estimated net gain and prior service cost for the postretirement benefit plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2019 are $(281) and $14, respectively.

Components of net periodic benefit cost for the years ended December 31, 2018 and 2017, are as follows:


	Pension Benefits		Postretirement Benefits
	2018	2017	2018	2017
Components of net periodic benefit cost
Service cost	$ -	$ -	$ 33	$ 48
Interest cost	1,712	1,786	186	199
Expected return on plan assets	(2,845)	(2,569)	-	-
Amortization of unrecognized prior service cost	-	-	14	14
Amortization of unrecognized net loss (gain)	451	475	(282)	(317)
Lump-sum settlement cost	-	-	-	-
Curtailment recognition	-	-	-	-
Contractual benefit charge	-	270	-	150
Total net periodic benefit cost	$ (682)	$ (38)	$ (49)	$ 94

The increase (decrease) in accumulated other comprehensive loss (pre-tax) for the years ended December 31, 2018 and 2017, are as follows:


	2018		2017
	Pension Benefits	Postretirement Benefits	Pension Benefits	Postretirement Benefits
Net actuarial loss (gain)	$ 1,210	$ (237)	$ (545)	$ (74)
Settlement gain	-	-	-	-
Curtailment - prior service cost	-	-	-	-
Net actuarial loss settlement expense	-	-	-	-
Amortization of net actuarial loss (gain)	(451)	282	(475)	317
Amortization of prior service cost	-	(14)	-	(14)
Total recognized in accumulated other comprehensive loss (gain)	$ 759	$ 31	$ (1,020)	$ 229

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of December 31, 2018:


	Pension Benefits	Postretirement Benefits

2019	$ 3,360	$ 395
2020	3,338	390
2021	3,299	386
2022	3,291	383
2023	3,270	382
2024 through 2028	15,812	1,823

The Company is not required to make any contributions to its pension plan in 2019 to meet its minimum funding requirements. The postretirement benefits in the table above represent benefit payments for the Company’s salaried retirees.

The assumptions used to determine end of year benefit obligations are shown in the following table:


	Pension Benefits		Postretirement Benefits
	2018	2017	2018	2017
Discount rates	4.35%	3.68%	4.32%	3.65%

The discount rate is determined using a yield curve model that uses yields on high quality corporate bonds (AA rated or better) to produce a single equivalent rate. The yield curve model excludes callable bonds except those with make-whole provisions, private placements and bonds with variable rates.

In October 2018, the Society of Actuaries published updated mortality improvement assumptions for U.S. plans, scale (MP-2018), which reflects additional data that the Social Security Administration has released since prior assumptions (MP-2017) were developed. Scale (MP-2018) results in lower projected mortality improvement than scale (MP-2017). The Company has historically utilized the Society of Actuaries’ published mortality data in its plan assumptions. Accordingly, the Company adopted MP-2018 for purposes of measuring its pension and postretirement obligations at December 31, 2018.

The assumptions used in the measurement of net periodic cost are shown in the following table:



	Pension Benefits		Postretirement Benefits
	2018	2017	2018	2017
Discount rate for benefit obligations	3.68%	4.22%	3.65%	4.18%
Expected return on plan assets	6.07%	5.75%	N/A	N/A
Rate for interest on benefit obligations	3.28%	3.51%	3.24%	3.48%
Discount rate for service cost	N/A	N/A	3.89%	4.55%

As benefits under these postretirement healthcare plans have been capped, assumed health care cost trend rates have no effect on the amounts reported for the health care plans.

The Company’s pension plan’s weighted average asset allocations at December 31, 2018 and 2017, and target allocations for 2018, by asset category, are as follows:


	Plan Assets at December 31,		Target Allocation
	2018	2017	2018
Asset Category
Cash and cash equivalents	1%	1%	0% - 5%
Equity securities	51%	57%	45% - 65%
Fixed income securities	43%	37%	30% - 50%
Real estate	5%	5%	4%-6%
	100%	100%	100%

The basic goal underlying the pension plan investment policy is to ensure that the assets of the plans, along with expected plan sponsor contributions, will be invested in a prudent manner to meet the obligations of the plans as those obligations come due under a broad range of potential economic and financial scenarios, maximize the long-term investment return with an acceptable level of risk based on such obligations, and broadly diversify investments across and within the capital markets to protect asset values against adverse movements in any one market. The Company’s investment strategy balances the requirement to maximize returns using potentially higher return

generating assets, such as equity securities, with the need to manage the risk of such investments with less volatile assets, such as fixed-income securities. Investment practices must comply with the requirements of ERISA and any other applicable laws and regulations. The Company, in consultation with its investment advisors, has determined a targeted allocation of invested assets by category and it works with its advisors to reasonably maintain the actual allocation of assets near the target. The long term return on assets was estimated based upon historical market performance, expectations of future market performance for debt and equity securities and the related risks of various allocations between debt and equity securities. Numerous asset classes with differing expected rates of return, return volatility and correlations are utilized to reduce risk through diversification.

The Company’s pension plan assets are invested in one mutual fund for each fund classification. The following table presents the fair value of pension plan assets classified under the appropriate level of the ASC 820 fair value hierarchy (see Note 2 for a description of the fair value hierarchy) as of December 31, 2018 and 2017:


Pension Plan Assets	As of December 31, 2018
	Level 1	Level 2	Level 3	Total
Mutual funds:
Fixed income funds	$ 18,210	-	-	$ 18,210
Large cap funds	12,671	-	-	12,671
Small cap funds	3,562	-	-	3,562
International funds	5,799	-	-	5,799
Real estate funds	2,195	-	-	2,195
Cash and equivalents	312	-	-	312
Total	$ 42,749	$ -	$ -	$ 42,749


Pension Plan Assets	As of December 31, 2017
	Level 1	Level 2	Level 3	Total
Mutual funds:
Fixed income funds	$ 18,250	-	-	$ 18,250
Large cap funds	15,356	-	-	15,356
Small cap funds	4,589	-	-	4,589
International funds	7,755	-	-	7,755
Real estate funds	2,385	-	-	2,385
Cash and equivalents	221	-	-	221
Total	$ 48,556	$ -	$ -	$ 48,556

The Company also maintains qualified defined contribution plans, which provide benefits to their employees based on employee contributions and employee earnings, with discretionary contributions allowed. Expenses related to these plans were $1,603 and $1,486 for the years ended December 31, 2018 and 2017, respectively.