Annual report pursuant to Section 13 and 15(d)

Supplemental Retirement Plan and Related Post Retirement Benefits

v2.4.0.6
Supplemental Retirement Plan and Related Post Retirement Benefits
 12 Months Ended
Dec. 31, 2012
Profit Sharing/401(K) Plan/Supplemental Retirement Plan And Related Post Retirement Benefits [Abstract]  
SUPPLEMENTAL RETIREMENT PLAN AND RELATED POST RETIREMENT BENEFITS

NOTE 10— SUPPLEMENTAL RETIREMENT PLAN 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, 2012 and 2011 amounts to $9.5 million and $5.9 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, 2012 or 2011 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 $3.8 million ($5.8 million net of $2.0 million in taxes) and unrecognized actuarial losses of $2.1 million ($3.3 million net of $1.2 million in taxes) are included in AOCI at December 31, 2012 and have not yet been recognized in net periodic pension cost. The prior service cost included in AOCI and expected to be recognized in net periodic pension cost during the fiscal year-ended December 31, 2013 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, 2013 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)   2012     2011  

Funded Status

                

Projected Benefit Obligation

                

Beginning of the Year — January 1

   $ 7,588     $ 6,141  

Adoption of SERP II

     5,790       —    

Service Cost

     303       46  

Interest Cost

     548       328  

Actuarial Loss

     1,161       1,421  

Benefits Paid

     (348 )      (348 ) 
   

 

 

    

 

 

  

End of the Year — December 31

   $ 15,042     $ 7,588  
   

 

 

    

 

 

  

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 increase in the 2011 projected benefit obligation is due primarily to 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:

 

                 
    2012     2011  

Discount Rate

     4.20 %      4.50 % 

Future Average Compensation Increases

     5.00 %      5.00 % 

The plans are unfunded at December 31, 2012 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 $14.7 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)   2012     2011     2010  

Net Periodic Cost

                        

Service Cost — Benefits Earned During Period $

   $ 303     $ 46     $ 38  

Interest Cost

     548       328       330  

Amortization of Prior Service Cost

     426       109       109  

Amortization of Losses

     91       11       —    
   

 

 

    

 

 

    

 

 

  

Net Periodic Cost $

   $ 1,368     $ 494     $ 477  
   

 

 

    

 

 

    

 

 

  

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

 

                         
    2012     2011     2010  

Discount Rate

     4.50 %      5.50 %      6.00 % 

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 $1.5 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)   2012     2011  

Funded Status

                

Accumulated Postretirement Benefit Obligation

                

Beginning of the Year — January 1

   $ 568     $ 511  

Service Cost

     2       2  

Interest Cost

     24       27  

Actuarial Loss

     42       68  

Benefits Paid

     (43 )      (40 ) 
   

 

 

    

 

 

  

End of the Year — December 31

   $ 593     $ 568  
   

 

 

    

 

 

  

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

 

                 
    2012     2011  

Discount Rate

     4.20 %      4.50 % 

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

 

                         
(In thousands)   2012     2011     2010  

Net Periodic Cost

                        

Service Cost — Benefits Earned During Period

   $ 2     $ 2     $ 4  

Interest Cost

     24       27       50  

Amortization of Prior Service Cost

     26       25       25  

Amortization of (Gains) Losses

     —         (4 )      11  
   

 

 

    

 

 

    

 

 

  

Net Periodic Cost

   $ 52     $ 50     $ 90  
   

 

 

    

 

 

    

 

 

  

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

 

                         
    2012     2011     2010  

Discount Rate

     4.50 %      5.50 %      6.00 % 

Future Average Healthcare Benefit Increases

     6.00 %      9.00 %      10.00 % 

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, 2012, that will be recognized as components of net periodic benefit cost during the year ended December 31, 2013 for the Plan will be insignificant. For measurement purposes, a 5.7% and 10.8% increase in the cost of health care benefits was assumed for 2013 and 2014 respectively and a range between 6.1% and 5.1% from 2015 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 approximately forty-three thousand dollars per year and $0.2 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.