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Pension Benefits
 6 Months Ended
Jun. 30, 2023
Pension Benefits  
Pension Benefits

16.  Pension Benefits

The Company has a noncontributory defined benefit pension plan covering certain employees who work at least 1,000 hours per year. The participants have a vested interest in their accrued benefit after five full years of service. The benefits of the plan are based upon the employee’s years of service and average annual earnings for the highest five

consecutive calendar years during the final ten-year period of employment. Plan assets are primarily debt securities (including U.S. Treasury and Agency securities and corporate bonds), listed common stocks (including shares of AmeriServ Financial, Inc. common stock which is limited to 10% of the plan’s assets), mutual funds, and short-term cash equivalent instruments. The net periodic pension cost for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):

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Three months ended

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Six months ended

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June 30, 

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June 30, 

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2023

    

2022

    

2023

    

2022

COMPONENTS OF NET PERIODIC BENEFIT COST:

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Service cost

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$

258

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$

363

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$

516

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$

727

Interest cost

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435

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349

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870

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697

Expected return on plan assets

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(1,034)

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(1,045)

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(2,068)

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(2,091)

Amortization of net loss

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—

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364

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—

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728

Settlement charge

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—

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1,014

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—

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1,014

Net periodic pension (benefit) cost

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$

(341)

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$

1,045

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$

(682)

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$

1,075

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The service cost component of net periodic benefit cost is included in salaries and employee benefits and all other components of net periodic benefit cost are included in other expense on the Consolidated Statements of Operations.

The reduced pension expense in the second quarter and first six months of 2023 reflects the retirement of a larger than typical number of employees over the past two years who chose to take a lump sum payment instead of receiving future monthly annuity payments. These individuals are no longer included in the pension plan which therefore favorably impacts the Company’s basic pension expense. Additionally, the Company recognized a $1,014,000 settlement charge in connection with its defined benefit pension plan in the second quarter and first six months of 2022 while no such charge was recognized in the same periods of this year. A settlement charge must be recognized when the total dollar amount of lump sum distributions paid from the pension plan to retired employees exceeds a threshold of expected annual service and interest costs in the current year.

The accrued pension liability, which had a positive (debit) balance of $22.0 million and $21.3 million, was reclassified to other assets on the Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively. The balance of the accrued pension liability continues to be a positive value as a result of Company contributions to the plan and the revaluation of the obligation.

The Company implemented a soft freeze of its defined benefit pension plan to provide that non-union employees hired on or after January 1, 2013 and union employees hired on or after January 1, 2014 are not eligible to participate in the pension plan. Instead, such employees are eligible to participate in a qualified 401(k) plan. This change was made to help reduce pension costs in future periods.