NOTE 10—RETIREMENT PLANS AND RELATED POST RETIREMENT BENEFITS

The Company has two non-qualified supplemental retirement defined benefit plans (“SERP” and “SERP II”) for certain current and retired executive officers. On March 6, 2012 the Company adopted SERP II for eligible current executive officers. The Company recorded a liability at the date of adoption of the new plan in the amount of approximately $5.8 million for the projected benefit obligation.

The accumulated benefit obligation of the plans as of December 31, 2013 and 2012 amounts to $10.1 million and $9.5 million, respectively.

The Plans provide for benefits based upon average annual compensation and years of service and in the case of SERP, there are offsets for Social Security and Profit Sharing benefits. It is the Company’s intent to fund the plans as plan benefits become payable, since no assets exist at December 31, 2013 or 2012 for either of the plans.

The Company accounts for the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of its pension plans in accordance with the recognition and disclosure provisions of ASC Topic 715, Compensation, Retirement Benefits (“ASC Topic 715”), which requires the Company to recognize the funded status in its balance sheet, with a corresponding adjustment to AOCI, net of tax. These amounts will be subsequently recognized as net periodic pension cost pursuant to the Company’s historical policy for amortizing such amounts. Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic pension cost in the same periods will be recognized as a component of AOCI. Those amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in AOCI.

Unrecognized prior service costs of $3.5 million ($5.3 million net of $1.8 million in taxes) and unrecognized actuarial losses of $1.2 million ($1.9 million net of $0.7 million in taxes) are included in AOCI at December 31, 2013 and have not yet been recognized in net periodic pension cost. The prior service cost included in AOCI and amounts expected to be recognized in net periodic pension cost during the fiscal year-ended December 31, 2014 is $0.3 million ($0.5 million net of $0.2 million in taxes). The actuarial loss included in AOCI expected to be recognized in net periodic pension cost during the fiscal year-ended December 31, 2014 is $0.1 million, net of taxes.

The reconciliation of the beginning and ending balances of the projected benefit obligation of the plans for the years ended December 31 is as follows:

 

(In thousands)		2013				2012
Funded Status
Projected Benefit Obligation
Beginning of the Year — January 1		$	15,042			$	7,588
Adoption of SERP II			—				5,790
Service Cost			295				303
Interest Cost			624				548
Actuarial (Gain) Loss			(1,299	)			1,161
Benefits Paid			(348	)			(348	)
End of the Year — December 31		$	14,314			$	15,042

The decrease in the 2013 projected benefit obligation is due primarily to an increase in the discount rate. The increase in the 2012 projected benefit obligation is due primarily to the adoption of SERP II, the decrease in the discount rate and differences between estimated and actual salaries.

The assumptions used to calculate the projected benefit obligation as of December 31 are as follows:

 

		2013				2012
Discount Rate			5.10	%			4.20	%
Future Average Compensation Increases			5.00	%			5.00	%

 

The plans are unfunded at December 31, 2013 and are recognized in the accompanying Consolidated Balance Sheets as a current accrued pension liability of $0.3 million and a long-term accrued pension liability of $14.0 million. This also is the expected future contribution to the plan, since the plan is unfunded.

The following table summarizes the components of the net periodic cost for the years ended December 31:

 

(In thousands)		2013				2012				2011
Net Periodic Cost
Service Cost — Benefits Earned During Period		$	295			$	303			$	46
Interest Cost			624				548				328
Amortization of Prior Service Cost			495				426				109
Amortization of Losses			128				91				11
Net Periodic Cost		$	1,542			$	1,368			$	494

The assumptions used to determine the net periodic cost are as follows:

 

		2013				2012				2011
Discount Rate			4.20	%			4.50	%			5.50	%
Future Average Compensation Increases			5.00	%			5.00	%			5.00	%

The Company expects the benefits to be paid in each of the next five years to be $0.3 million and $1.7 million in the aggregate for the next five years after that. This also is the expected Company contribution to the plans.

Participants in SERP are entitled to paid medical, dental and long-term care insurance benefits upon retirement under the plan. The measurement date for determining the plan obligation and cost is December 31.

The reconciliation of the beginning and ending balances of the accumulated postretirement benefit obligation for the years ended December 31, is as follows:

 

(In thousands)		2013				2012
Funded Status
Accumulated Postretirement Benefit Obligation
Beginning of the Year — January 1		$	593			$	568
Service Cost			3				2
Interest Cost			24				24
Actuarial Loss			55				42
Benefits Paid			(45	)			(43	)
End of the Year — December 31		$	630			$	593

The assumptions used to calculate the accumulated postretirement benefit obligation as of December 31 are as follows:

 

		2013				2012
Discount Rate			5.10	%			4.20	%

The following table summarizes the components of the net periodic cost for the years ended December 31:

 

(In thousands)		2013				2012				2011
Net Periodic Cost
Service Cost — Benefits Earned During Period		$	3			$	2			$	2
Interest Cost			24				24				27
Amortization of Prior Service Cost			25				26				25
Amortization of (Gains) Losses			—				—				(4	)
Net Periodic Cost		$	52			$	52			$	50

The assumptions used to determine the net periodic cost are as follows:

 

		2013				2012				2011
Discount Rate			4.20	%			4.50	%			5.50	%
Future Average Healthcare Benefit Increases			5.76	%			6.00	%			9.00	%

 

The Company estimates that the prior service costs and net losses in AOCI for medical, dental and long-term care insurance benefits as of December 31, 2013, that will be recognized as components of net periodic benefit cost during the year ended December 31, 2014 for the Plan will be insignificant. For measurement purposes, a 7.8% and 6.4% increase in the cost of health care benefits was assumed for 2014 and 2015 respectively and a range between 6.2% and 5.1% from 2016 through 2050. A one percentage point increase or decrease in this rate would change the post retirement benefit obligation insignificantly. The Company expects the benefits to be paid in each of the next five years to be insignificant per year and approximately $0.3 million in the aggregate for the next five years after that. This also is the expected Company contribution to the plan, as it is unfunded.

As of July 18, 2013 upon completion of the acquisition of Peco, the Company is now a participating employer in a trustee-managed multiemployer defined benefit pension plan for employees who participate in collective bargaining agreements. The plan generally provides retirement benefits to employees based on years of service to the Company. The multiemployer pension plan is managed by a board of trustees. Contributions are based on the hours worked and are expensed on a current basis.

The risks of participating in a multiemployer defined benefit pension plan are different from a single-employer plan because: (a) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (b) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be required to be borne by the remaining participating employers, and (c) if the Company chooses to stop participating in a multiemployer plan, it may be required to pay a withdrawal liability to the plan. In connection with ongoing renegotiation of collective bargaining agreements, the Company may discuss and negotiate for the complete or partial withdrawal from its multiemployer pension plan. Depending on the number of employees withdrawn in any future period and the financial condition of the multiemployer plan at the time of withdrawal, the associated withdrawal liabilities could be material to the Company in the period of the withdrawal. The Company has no plans to withdraw from its multiemployer pension plan.

Western Conference of Teamsters Pension Plan (“WCTPP”) provides fixed retirement payments as a function of the total employer contributions payable for all service after 1986. However in the event WCTPP is underfunded, the monthly benefit amount can be reduced by the trustees of the plan. Plan information for the WCTPP, Employer Identification Number 91-6145047, is not publicly available for 2013. According to the most recently available Form 5500 for the plan year ended December 31, 2012, plan net assets are $32.3 billion, the total actuarial present value of accumulated plan benefits is $37.9 billion, and contributions receivable from all employers totaled $99.2 million. WCTPP is over 90.1% funded as of December 31, 2012.

The collective bargaining agreement of WCTPP requires contributions on the basis of hours worked. The agreement also has a minimum contribution requirement of $2.50 per compensable hour to a maximum of 184 hours per calendar year month and cumulatively to a maximum of 2,080 hours per calendar year, for subsequent periods.

 

Pension Fund

EIN/Pension Plan Number

Zone Status

Rehabilitation Plan Status

2013 Company Contributions (In thousands)

Surcharge Imposed

Expiration Date of Collective Bargaining Agreement

Plan Year End

WCTPP

91-6145047

Green

None

$

830

*

None

10/31/16

12/31

* - Total contributions for fiscal year 2013, post-acquisition contributions totaled 0.3 million.