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12. Employee Benefits | 12 Months Ended
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Dec. 31, 2018
Employee Benefits |
Employee Benefits | (12) Employee Benefits We sponsor a pretax savings and profit sharing plan (the “401(k) Plan”) qualified under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, eligible employees are able to contribute up to the maximum allowed under the law. We may, at our discretion, match 100% of employees’ contributions up to $2,000 per employee per calendar year. Our matching contributions to the 401(k) Plan were $1.5 million, $1.2 million, and $929,000 respectively, for the years ended December 31, 2018, 2017 and 2016. We also sponsor a defined benefit plan, the MFN Financial Corporation Pension Plan (the “Plan”). The Plan benefits were frozen on June 30, 2001. The following tables represents a reconciliation of the change in the plan’s benefit obligations, fair value of plan assets, and funded status at December 31, 2018 and 2017:
|  | December 31, |
|  | 2018 |  |  | 2017 |
|  | (In thousands) |
Change in Projected Benefit Obligation |  |  |  |  |  |  |  |
Projected benefit obligation, beginning of year |  | $ | 22,562 |  |  | $ | 21,515 |
Service cost |  |  | – |  |  |  | – |
Interest cost |  |  | 775 |  |  |  | 855 |
Assumption changes |  |  | (1,867 | ) |  |  | 1,535 |
Actuarial (gain) loss |  |  | (361 | ) |  |  | (298 | )
Settlements |  |  | – |  |  |  | – |
Benefits paid |  |  | (1,024 | ) |  |  | (1,045 | )
Projected benefit obligation, end of year |  | $ | 20,085 |  |  | $ | 22,562 |
Change in Plan Assets |  |  |  |  |  |  |  |
Fair value of plan assets, beginning of year |  | $ | 16,446 |  |  | $ | 16,243 |
Return on assets |  |  | (1,806 | ) |  |  | 1,508 |
Employer contribution |  |  | 1,000 |  |  |  | – |
Expenses |  |  | (248 | ) |  |  | (260 | )
Settlements |  |  | – |  |  |  | – |
Benefits paid |  |  | (1,024 | ) |  |  | (1,045 | )
Fair value of plan assets, end of year |  | $ | 14,368 |  |  | $ | 16,446 |
Funded Status at end of year |  | $ | (5,717 | ) |  | $ | (6,116 | )
Additional Information Weighted average assumptions used to determine benefit obligations and cost at December 31, 2018 and 2017 were as follows:
|  | December, 31 |
|  | 2018 |  |  | 2017 |
Weighted average assumptions used to determine benefit obligations |  |  |  |  |  |  |  |
Discount rate |  |  | 4.11% |  |  |  | 3.50% |
Weighted average assumptions used to determine net periodic benefit cost |  |  |  |  |  |  |  |
Discount rate |  |  | 3.50% |  |  |  | 4.05% |
Expected return on plan assets |  |  | 7.25% |  |  |  | 7.25% |
Our overall expected long-term rate of return on assets is 7.25% per annum as of December 31, 2018. The expected long-term rate of return is based on the weighted average of historical returns on individual asset categories, which are described in more detail below.
|  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (In thousands) |
Amounts recognized on Consolidated Balance Sheet |  |  |  |  |  |  |  |  |  |  |  |
Other assets |  | $ | – |  |  | $ | – |  |  | $ | – |
Other liabilities |  |  | (5,717 | ) |  |  | (6,116 | ) |  |  | (5,272 | )
Net amount recognized |  | $ | (5,717 | ) |  | $ | (6,116 | ) |  | $ | (5,272 | )
Amounts recognized in accumulated other comprehensive loss consists of: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | 11,896 |  |  | $ | 11,350 |  |  | $ | 10,618 |
Unrecognized transition asset |  |  | – |  |  |  | – |  |  |  | – |
Net amount recognized |  | $ | 11,896 |  |  | $ | 11,350 |  |  | $ | 10,618 |
Components of net periodic benefit cost |  |  |  |  |  |  |  |  |  |  |  |
Interest cost |  | $ | 775 |  |  | $ | 855 |  |  | $ | 882 |
Expected return on assets |  |  | (1,163 | ) |  |  | (1,149 | ) |  |  | (1,199 | )
Amortization of transition asset |  |  | – |  |  |  | – |  |  |  | – |
Amortization of net loss |  |  | 443 |  |  |  | 405 |  |  |  | 553 |
Net periodic benefit cost |  |  | 55 |  |  |  | 111 |  |  |  | 236 |
Settlement (gain)/loss |  |  | – |  |  |  | – |  |  |  | – |
Total |  | $ | 55 |  |  | $ | 111 |  |  | $ | 236 |
Benefit Obligation Recognized in Other Comprehensive Loss (Income) |  |  |  |  |  |  |  |  |  |  |  |
Net loss (gain) |  | $ | 545 |  |  | $ | 732 |  |  | $ | 25 |
Prior service cost (credit) |  |  | – |  |  |  | – |  |  |  | – |
Amortization of prior service cost |  |  | – |  |  |  | – |  |  |  | – |
Net amount recognized in other comprehensive loss (income) |  | $ | 545 |  |  | $ | 732 |  |  | $ | 25 |
The estimated net loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2019 is $376,000. The weighted average asset allocation of our pension benefits at December 31, 2018 and 2017 were as follows:
|  | December 31, |
|  | 2018 |  |  | 2017 |
Weighted Average Asset Allocation at Year-End |  |  |  |  |  |  |  |
Asset Category |  |  |  |  |  |  |  |
Equity securities |  |  | 78% |  |  |  | 83% |
Debt securities |  |  | 22% |  |  |  | 17% |
Cash and cash equivalents |  |  | 0% |  |  |  | 0% |
Total |  |  | 100% |  |  |  | 100% |
Our investment policies and strategies for the pension benefits plan utilize a target allocation of 75% equity securities and 25% fixed income securities (excluding Company stock). Our investment goals are to maximize returns subject to specific risk management policies. We address risk management and diversification by the use of a professional investment advisor and several sub-advisors which invest in domestic and international equity securities and domestic fixed income securities. Each sub-advisor focuses its investments within a specific sector of the equity or fixed income market. For the sub-advisors focused on the equity markets, the sectors are differentiated by the market capitalization, the relative valuation and the location of the underlying issuer. For the sub-advisors focused on the fixed income markets, the sectors are differentiated by the credit quality and the maturity of the underlying fixed income investment. The investments made by the sub-advisors are readily marketable and can be sold to fund benefit payment obligations as they become payable.
| Cash Flows |  |  |  |
| Estimated Future Benefit Payments (In thousands) |  |  |  |
| 2019 |  | $ | 829 |
| 2020 |  |  | 873 |
| 2021 |  |  | 911 |
| 2022 |  |  | 947 |
| 2023 |  |  | 976 |
| Years 2024 - 2028 |  |  | 5,507 |
| Anticipated Contributions in 2019 |  | $ | – |
The fair value of plan assets at December 31, 2018 and 2017, by asset category, is as follows:
|  | December 31, 2018 |
|  | Level 1 (1) |  |  | Level 2 (2) |  |  | Level 3 (3) |  |  | Total |
Investment Name: |  | (in thousands) |
Company Common Stock |  | $ | 2,635 |  |  | $ | – |  |  | $ | – |  |  | $ | 2,635 |
Large Cap Value |  |  | – |  |  |  | 1,983 |  |  |  | – |  |  |  | 1,983 |
Mid Cap Index |  |  | – |  |  |  | 563 |  |  |  | – |  |  |  | 563 |
Small Cap Growth |  |  | – |  |  |  | 559 |  |  |  | – |  |  |  | 559 |
Small Cap Value |  |  | – |  |  |  | 558 |  |  |  | – |  |  |  | 558 |
Large Cap Blend |  |  | – |  |  |  | 587 |  |  |  | – |  |  |  | 587 |
Growth |  |  | – |  |  |  | 2,031 |  |  |  | – |  |  |  | 2,031 |
International Growth |  |  | – |  |  |  | 2,301 |  |  |  | – |  |  |  | 2,301 |
Core Bond |  |  | – |  |  |  | 1,921 |  |  |  | – |  |  |  | 1,921 |
High Yield |  |  | – |  |  |  | 364 |  |  |  | – |  |  |  | 364 |
Inflation Protected Bond |  |  | – |  |  |  | 510 |  |  |  | – |  |  |  | 510 |
Money Market |  |  | – |  |  |  | 356 |  |  |  | – |  |  |  | 356 |
Total |  | $ | 2,635 |  |  | $ | 11,733 |  |  | $ | – |  |  | $ | 14,368 |
|  | December 31, 2017 |
|  | Level 1 (1) |  |  | Level 2 (2) |  |  | Level 3 (3) |  |  | Total |
Investment Name: |  | (in thousands) |
Company Common Stock |  | $ | 3,633 |  |  | $ | – |  |  | $ | – |  |  | $ | 3,633 |
Large Cap Value |  |  | – |  |  |  | 2,324 |  |  |  | – |  |  |  | 2,324 |
Mid Cap Index |  |  | – |  |  |  | 654 |  |  |  | – |  |  |  | 654 |
Small Cap Growth |  |  | – |  |  |  | 657 |  |  |  | – |  |  |  | 657 |
Small Cap Value |  |  | – |  |  |  | 647 |  |  |  | – |  |  |  | 647 |
Large Cap Blend |  |  | – |  |  |  | 661 |  |  |  | – |  |  |  | 661 |
Growth |  |  | – |  |  |  | 2,313 |  |  |  | – |  |  |  | 2,313 |
International Growth |  |  | – |  |  |  | 2,683 |  |  |  | – |  |  |  | 2,683 |
Core Bond |  |  | – |  |  |  | 1,870 |  |  |  | – |  |  |  | 1,870 |
High Yield |  |  | – |  |  |  | 373 |  |  |  | – |  |  |  | 373 |
Inflation Protected Bond |  |  | – |  |  |  | 505 |  |  |  | – |  |  |  | 505 |
Money Market |  |  | – |  |  |  | 126 |  |  |  | – |  |  |  | 126 |
Total |  | $ | 3,633 |  |  | $ | 12,813 |  |  | $ | – |  |  | $ | 16,446 |
| (1) | Company common stock is classified as level 1 and valued using quoted prices in active markets for identical assets.
| (2) | All other plan assets in stock, bond and money market funds are classified as level 2 and valued using significant observable inputs.
| (3) | There are no plan assets classified as level 3 in the fair value hierarchy as a result of having significant unobservable inputs.

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 712 -URI http://asc.fasb.org/topic&trid=2197446 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -URI http://asc.fasb.org/topic&trid=2127225 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
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