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. The accumulated benefit obligation of the plans as of December 31, 2014 and 2013 amounts to $16.5 million and $10.1 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, 2014 or 2013 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 $3.1 million ($4.8 million net of $1.7 million in taxes) and unrecognized actuarial losses of $5.1 million ($7.8 million net of $2.7 million in taxes) are included in AOCI at December 31, 2014 and have not yet been recognized in net periodic pension cost. The prior service cost included in AOCI that is expected to be recognized in net periodic pension cost during the fiscal year-ended December 31, 2015 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, 2015 is $0.3 million ($0.5 million net of $0.2 million in 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)		2014				2013
Funded Status
Projected Benefit Obligation
Beginning of the Year — January 1		$	14,314			$	15,042
Service Cost			247				295
Interest Cost			721				624
Actuarial (Gain) Loss			6,056				(1,299	)
Benefits Paid			(348	)			(348	)
End of the Year — December 31		$	20,990			$	14,314

The increase in the 2014 projected benefit obligation is due primarily to the implementation of an updated mortality table and a decrease in the discount rate.

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

 

		2014				2013
Discount Rate			4.05	%			5.10	%
Future Average Compensation Increases			5.00	%			5.00	%

The plans are unfunded at December 31, 2014 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 $20.7 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)		2014				2013				2012
Net Periodic Cost
Service Cost — Benefits Earned During Period		$	247			$	295			$	303
Interest Cost			721				624				548
Amortization of Prior Service Cost			495				495				426
Amortization of Losses			108				128				91
Net Periodic Cost		$	1,571			$	1,542			$	1,368

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

 

		2014				2013				2012
Discount Rate			5.10	%			4.20	%			4.50	%
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 $1.8 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)		2014				2013
Funded Status
Accumulated Postretirement Benefit Obligation
Beginning of the Year — January 1		$	630			$	593
Service Cost			3				3
Interest Cost			31				24
Actuarial Loss			373				55
Benefits Paid			(47	)			(45	)
End of the Year — December 31		$	990			$	630

 

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

 

		2014				2013
Discount Rate			4.05	%			5.10	%

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

 

(In thousands)		2014				2013				2012
Net Periodic Cost
Service Cost — Benefits Earned During Period		$	3			$	3			$	2
Interest Cost			31				24				24
Amortization of Prior Service Cost			25				25				26
Amortization of (Gains) Losses			—				—				—
Net Periodic Cost		$	59			$	52			$	52

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

 

		2014				2013				2012
Discount Rate			5.10	%			4.20	%			4.50	%
Future Average Healthcare Benefit Increases			5.48	%			5.76	%			6.00	%

Unrecognized prior service costs of $0.1 million and unrecognized actuarial losses of $0.3 million for medical, dental and long-term care insurance benefits (net of taxes of $0.2 million) are included in AOCI at December 31, 2014 and have not been recognized in net periodic cost. The Company estimates that the prior service costs and net losses in AOCI as of December 31, 2014 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 5.6% and 6.1% increase in the cost of health care benefits was assumed for 2015 and 2016, respectively, and a range between 3.8% and 6.6% from 2017 through 2060. A one percentage point increase or decrease in this rate would change the post retirement benefit obligation by approximately $0.1 million. The plan is recognized in the accompanying Consolidated Balance Sheets as a current accrued pension liability of $0.1 million and a long-term accrued pension liability of $0.9 million. The Company expects the benefits to be paid in each of the next five years to be less than $0.1 million 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. Contributions are based on the hours worked and are expensed on a current basis. The Plan is 90.7% funded as of January 1, 2014. The Company’s contributions to the plan were $0.9 million in 2014 and $0.3 million in 2013 for the post-acquisition period. These contributions represent less than 1% of total contributions to the plan. There was no participation in multiemployer plans prior to 2013.