(11) BENEFIT PLANS

Pension plan

The Company has a defined benefit pension plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. Under generally accepted accounting principles, the Company’s defined benefit pension plan was underfunded as of April 30, 2021 by $476,000, with $21,102,000 of assets and $21,578,000 of liabilities and was underfunded as of April 30, 2020 by $5,014,000, with $18,260,000 of assets and $23,274,000 of liabilities. The pension plan liabilities were determined using a weighted average discount interest rate of 2.48% per year as of April 30, 2021 and 2.29% per year as of April 30, 2020, which are based on the FTSE Pension Discount Curve as of such dates as it corresponds to the projected liability requirements of the pension plan.

The Company made voluntary contributions to the pension plan of $1,847,000 and $3,600,000 during 2021 and 2020. The Company recognized a non-cash pre-tax pension settlement loss of $2,929,000 in 2020 due to the Company's defined benefit pension plan paying an aggregate of $7,280,000 in lump sum payouts of pension benefits to former employees. There were no such charges in 2021.

Pension assets and liabilities are measured at fair value (measured in accordance with the guidance described in Note 10) and are subject to fair value adjustment in certain circumstances (for example, when there is evidence of impairment). There were no impairments resulting in a change in fair value during 2021 and 2020.

Net periodic pension cost for 2021 and 2020 was comprised of the following components (in thousands):


	Year Ended April 30,
	2021		2020
Interest cost on projected benefit obligation	$	504	$	716
Expected return on assets		(1,409)		(1,591)
Plan expenses		340		410
Recognized net actuarial loss		529		563
Settlement loss		—		2,929
Net periodic pension cost	$	(36)	$	3,027

The estimated net loss, transition obligation and prior service cost for the pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost over fiscal year 2022 are $392,000, $0 and $0. Assumptions used in determining net periodic pension cost and the benefit obligation were:


	Year Ended April 30,
	2021		2020
Discount rate used to determine net periodic pension cost	2.29	%	3.54	%
Discount rate used to determine pension benefit obligation	2.48	%	2.29	%
Expected long-term rate of return on assets used for pension cost on assets	7.75	%	7.75	%

The following table sets forth changes in the pension plan’s benefit obligation and assets, and summarizes components of amounts recognized in the Company’s consolidated balance sheet (in thousands):


	April 30,
	2021		2020
Change in benefit obligation:
Benefit obligation at beginning of year	$	23,274	$	30,304
Interest cost		504		716
Actuarial loss (gain)		(537)		1,550
Benefits paid		(1,663)		(2,016)
Settlement paid		—		(7,280)
Benefit obligation at end of year	$	21,578	$	23,274
Change in plan assets:
Fair value of plan assets at beginning of year	$	18,260	$	23,903
Actual return on plan assets		2,808		393
Company contributions		1,847		3,600
Benefits paid		(1,663)		(2,016)
Settlement paid		—		(7,280)
Plan expenses		(150)		(340)
Fair value of plan assets at end of year	$	21,102	$	18,260
Underfunded status	$	(476)	$	(5,014)

The funded status of the pension plan is equal to the net liability recognized in the consolidated balance sheets. The following table summarizes the amounts recorded in accumulated other comprehensive loss, which have not yet been recognized as a component of net periodic pension costs (in thousands):

The following table summarizes the changes in accumulated other comprehensive loss related to the pension plan for the years ended April 30, 2021 and 2020 (in thousands):


	Pension Benefits
	Pretax		Net of Tax
Accumulated comprehensive loss, May 1, 2019	$	11,896	$	7,031
Net actuarial loss		2,678		1,868
Recognized settlement gain		(2,929)		(2,049)
Amortization of net loss		(563)		(383)
Accumulated comprehensive loss, April 30, 2020	$	11,082	$	6,467
Net actuarial gain		(2,127)		(1,483)
Amortization of net loss		(529)		(361)
Accumulated comprehensive loss, April 30, 2021	$	8,426	$	4,623

The Company recorded, net of tax, other comprehensive income of $1,844,000 and $564,000, including the pension settlement, net of tax, of $2,049,000 in 2021 and 2020 to account for the net effect of changes to the unfunded portion of pension liability.

The asset allocation for the pension plan by asset category was as follows:


	April 30,
	2021		2020
Equity securities	51	%	27	%
Fixed income securities	39		59
Other (principally cash and cash equivalents)	10		14
Total	100	%	100	%

The investment mix between equity securities and fixed income securities seeks to achieve a desired return by balancing equity securities and fixed-income securities. Pension plan assets are invested in portfolios of diversified public-market equity securities and fixed income securities. The pension plan holds no securities of the Company. Investment allocations are made across a range of markets, industry sectors, market capitalization sizes and, in the case of fixed income securities, maturities and credit quality.

The expected return on assets for the pension plan is based on management’s expectation of long-term average rates of return to be achieved by the underlying investment portfolio. In establishing this assumption, management considers historical and expected returns for the asset classes in which the pension plan is invested, as well as current economic and market conditions. For 2021, the Company used a 7.75 % assumed rate of return for purposes of the expected return rate on assets for the development of net periodic pension costs for the pension plan. For years following 2021, the assumed rate of return for purposes of the expected return rate on assets is anticipated to be 7.75%.

The Company funds the pension plan in compliance with IRS funding requirements. The Company made voluntary contributions to the pension plan of $1,847,000 in 2021 and $3,600,000 in 2020. The Company is required to make minimum contributions to the pension plan; however, no minimum contributions are expected to be required during fiscal year 2022.

The amount of future annual benefit payments to pension plan participants payable from plan assets is expected to be as follows: 2022 - $2,580,000, 2023 - $1,712,000, 2024 - $1,640,000, 2025 - $1,577,000 and 2026 - $1,539,000 and an aggregate of $6,674,000 is expected to be paid in the fiscal five-year period 2027 through 2031.

The Company has adopted the disclosure requirements in ASC 715, which requires additional fair value disclosures consistent with those required by ASC 820. The following is a description of the valuation methodologies used for pension plan assets measured at fair value: common stock – valued at the closing price reported on a listed stock exchange; corporate bonds, debentures and government agency securities – valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flow; and U.S. Treasury securities – valued at the closing price reported in the active market in which the security is traded.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level within the fair value hierarchy the pension plan’s assets at fair value as of April 30, 2021 and 2020 (in thousands):

2021:


	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	2,215	$	2,215	$	—	$	—
Investments at fair value:
Equity securities		10,707		10,707		—		—
Fixed income securities		8,180		8,180		—		—
Total assets at fair value	$	21,102	$	21,102	$	—	$	—

2020:


	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	2,655	$	2,655	$	—	$	—
Investments at fair value:
Equity securities		4,880		4,880		—		—
Fixed income securities		10,725		10,725		—		—
Total assets at fair value	$	18,260	$	18,260	$	—	$	—

Simple IRA

The Company provides a Simple IRA plan as a retirement plan for eligible employees who earned at least $5,000 of annual compensation. Under the Simple IRA plan, eligible employees may contribute a portion of their pre-tax yearly salary, up to the maximum contribution limit for Simple IRA plans as set forth under the Internal Revenue Code of 1986, as amended, with the Company matching on a dollar-for-dollar basis up to 3% of the employees’ annual pre-tax compensation. The Company’s employer contribution was $36,000 and $14,000 for 2021 and 2020.

Equity compensation plan

The AMREP Corporation 2016 Equity Compensation Plan (the “ Equity Plan”) authorizes stock-based awards of various kinds to non-employee directors and employees covering up to a total of 500,000 shares of common stock of the Company. The Equity Plan will expire by its terms on, and no award will be granted under the Equity Plan on or after, September 19, 2026. As of April 30, 2021, the Company had 372,000 shares of common stock of the Company available for issuance under the Equity Plan.

Shares of restricted common stock that are issued under the Equity Plan (“restricted shares”) are considered to be issued and outstanding as of the grant date and have the same dividend and voting rights as other common stock. Compensation expense related to the restricted shares is recognized over the vesting period of each grant based on the fair value of the shares as of the date of grant. The fair value of each grant of restricted shares is determined based on the trading price of the Company’s common stock on the date of such grant, and this amount will be charged to expense over the vesting term of the grant. Forfeitures are recognized as reversals of compensation expense on the date of forfeiture.

The summary of the 2020 and 2021 restricted share award activity presented below represents the maximum number of shares issued to employees that could be vested:


		Weighted Average
	Number of	Grant Date Fair Value
Restricted share awards	Shares	Per Share
Non-vested at May 1, 2019	42,667	$	6.87
Granted during 2020	9,000		6.35
Vested during 2020	(14,833)		6.59
Forfeited during 2020	(4,000)		6.76
Non-vested as of April 30, 2020	32,834	$	6.86
Granted during 2021	9,000		4.63
Vested during 2021	(12,834)		6.86
Forfeited during 2021	—		—
Non-vested as of April 30, 2021	29,000	$	6.18

The Company recognized non-cash compensation expense related to the vesting of restricted shares of common stock net of forfeitures of $78,000 and $113,000 for 2021 and 2020. As of April 30, 2021, there was $34,000 of unrecognized compensation expense related to restricted shares of common stock previously issued under the Equity Plan which had not vested as of those dates, which is expected to be recognized over the remaining vesting term not to exceed three years.

On December 31, 2019, each non-employee member of the Company’s Board of Directors was issued the number of deferred common share units of the Company under the Equity Plan equal to $25,000 divided by the closing price per share of Common Stock reported on the New York Stock Exchange on such date. Based on the closing price per share of $5.98 on December 31, 2019, the Company issued a total of 16,720 deferred common share units to members of the Company’s Board of Directors.

On December 31, 2020, each non-employee member of the Company’s Board of Directors was issued the number of deferred common share units of the Company under the Equity Plan equal to $30,000 divided by the closing price per share of Common Stock reported on the New York Stock Exchange on such date. Based on the closing price per share of $8.54 on December 31, 2020, the Company issued a total of 10,536 deferred common share units to members of the Company’s Board of Directors.

Each deferred common share unit represents the right to receive one share of Common Stock within 30 days after the first day of the month to follow such director’s termination of service as a director of the Company. In connection with the resignation of a director in September 2020, the Company (i) issued 12,411 shares of common stock in October 2020 pursuant to an equivalent number of deferred common share units previously issued to such director and (ii) paid $20,000 in September 2020 to such director in lieu of issuance of deferred common share units earned for calendar year 2020.

Director compensation non-cash expense, which is recognized for the annual grant of deferred common share units ratably over the director’s service in office during the calendar year, was $90,000 and $100,000 for 2021 and 2020. At April 30, 2021 and 2020, there was $30,000 and $33,000 of accrued compensation expense related to the deferred stock units expected to be issued in December of the following fiscal year.

Year Ended April 30,

Pretax accumulated comprehensive loss