Employee Benefit Plans

The Company maintains a noncontributory defined-benefit plan (the "DB Pension Plan") and two noncontributory defined-contribution retirement plans (the "DC Retirement Plan" and "2015 DC Retirement Plan") which cover substantially all employees of the Company.

The DB Pension Plan was closed to new employees at year-end 2009 and was frozen on July 31, 2015. The benefits under the DB Pension Plan are based on years of service, age and percentages of the employees' average final compensation. Assets of the Company's DB Pension Plan are invested in common and preferred stock, mutual funds and cash equivalents. At December 31, 2017 and 2016, DB Pension Plan assets included 42,192 shares of Tompkins' common stock that had a fair value of $3.4 million and $4.0 million, respectively.

The defined-contribution retirement plans cover substantially all employees of the Company who have reached the age of 21 and completed one year of service. For participants in these plans, the Company makes contributions to an account set up in the participant's name. The amount equals a percentage of pay and varies based on the participant's age, service, and tenure with the Company. The defined-contribution retirement plans offer the participant a wide range of investment alternatives from which to choose. Expenses related to the defined-contribution plans totaled $4.1 million in 2017, $3.8 million in 2016, and $2.4 million in 2015.

The Company maintains supplemental employee retirement plans (“SERPs”) for certain executives. On November 9, 2016, certain SERPs were amended and restated to reflect changes resulting from the freezing of the DB Pension Plan. The Company entered into additional SERP agreements with certain executives. The amount related to this change is reflected in the table below as an amendment in 2016. All benefits provided under the SERPs are unfunded and the Company makes payments to plan participants.

The Company also maintains a post-retirement life and healthcare benefit plan (the “Life and Healthcare Plan”), which was amended in 2005. For employees commencing employment after January 1, 2005, the Company does not contribute towards post-retirement healthcare benefits. Retirees and employees who were eligible to retire when the Life and Healthcare Plan was amended were unaffected. Generally, all other employees were eligible for Health Reimbursement Accounts (“HRA”) with an initial balance equal to the amount of the Company’s estimated then current liability. Contributions to the plan are limited to an annual contribution of 4% of the total HRA balances. Employees, upon retirement, will be able to utilize their HRA for qualified health costs and deductibles. Effective January 1, 2017, the Company no longer allowed retirees under the age of 65 to participate in the employee health plan. The amount related to this change is reflected in the table below as an amendment in 2017.

The Company engages independent, external actuaries to compute the amounts of liabilities and expenses relating to these plans, subject to the assumptions that the Company selects. The benefit obligation for these plans represents the liability of the Company for current and former employees, and is affected primarily by the following: service cost (benefits attributed to employee service during the period); interest cost (interest on the liability due to the passage of time); actuarial gains/losses (experience during the year different from that assumed and changes in plan assumptions); and benefits paid to participants.

The following table sets forth the changes in the projected benefit obligation for the DB Pension Plan and SERPs and the accumulated post-retirement benefit obligation for the Life and Healthcare Plan; and the respective plan assets, and the plans’ funded status and amounts recognized in the Company’s Consolidated Statements of Condition at December 31, 2017 and 2016 (the measurement dates of the plans).



(in thousands)	DB Pension Plan						Life and Healthcare Plan						SERPs
	2017			2016			2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	77,304		$	76,219		$	9,121		$	8,732		$	23,399		$	22,160
Service cost	0			0			192			258			166			171
Interest cost	2,501			2,473			268			283			852			832
Plan participants’ contributions	0			0			98			185			0			0
Amendments	0			0			(964		)	0			0			188
Curtailments	0			0			0			0			0			0
Actuarial loss (gain)	5,928			1,403			708			210			2,407			697
Benefits paid	(2,985		)	(2,791		)	(428		)	(547		)	(682		)	(649		)
Benefit obligation at end of year	$	82,748		$	77,304		$	8,995		$	9,121		$	26,142		$	23,399
Change in plan assets:
Fair value of plan assets at beginning of year	$	71,807		$	68,931		$	0		$	0		$	0		$	0
Actual return on plan assets	9,582			4,367			0			0			0			0
Plan participants’ contributions	0			0			98			185			0			0
Employer contributions	1,750			1,300			330			362			682			649
Benefits paid	(2,985		)	(2,791		)	(428		)	(547		)	(682		)	(649		)
Fair value of plan assets at end of year	$	80,154		$	71,807		$	0		$	0		$	0		$	0
Unfunded status	$	(2,594	)	$	(5,497	)	$	(8,995	)	$	(9,121	)	$	(26,142	)	$	(23,399	)

The accumulated benefit obligation for the DB Pension Plan for 2017 and 2016 was $82.7 million and $77.3 million, respectively. The accumulated benefit obligation for the Life and Healthcare Plan for 2017 and 2016 was $9.0 million and $9.1 million, respectively. The accumulated benefit obligation for the SERPs for 2017 and 2016 was $26.1 million and $23.4 million, respectively. The unfunded status of the DB Pension Plan, the Life and Healthcare Plan, and SERPs was recognized in other liabilities in the Consolidated Statement of Condition at December 31, 2017 in the amounts of $2.6 million, $9.0 million, and $26.1 million, respectively. The unfunded status of the DB Pension Plan, the Life and Healthcare Plan, and SERPs in the amount of $5.5 million, $9.1 million, and $23.4 million, respectively, was recognized in other liabilities in the Consolidated Statement of Condition at December 31, 2016.

Net periodic benefit cost and other comprehensive income (loss) includes the following components:



(in thousands)	DB Pension Plan									Life and Healthcare Plan									SERPs
Components of net periodic benefit cost (credit)	2017			2016			2015			2017			2016			2015			2017			2016			2015
Service cost	$	0		$	0		$	1,587		$	192		$	258		$	236		$	166		$	171		$	201
Interest cost	2,501			2,473			2,987			268			283			323			852			832			928
Expected return on plan assets	(5,088		)	(4,844		)	(5,028		)	0			0			0			0			0			0
Amortization of prior service (credit) cost	(10		)	(15		)	(448		)	(62		)	16			16			87			75			73
Recognized net actuarial loss	1,075			975			1,573			34			5			19			399			358			626
Recognized net actuarial gain due to curtailments	0			0			(6,003		)	0			0			0			0			0			0
Net periodic benefit (credit) cost	$	(1,522	)	$	(1,411	)	$	(5,332	)	$	432		$	562		$	594		$	1,504		$	1,436		$	1,828
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss)
Net actuarial loss (gain)	$	1,434		$	1,880		$	(169	)	$	708		$	210		$	(467	)	$	2,407		$	697		$	(1,210	)
Recognized actuarial loss	(1,075		)	(975		)	(1,573		)	(34		)	(5		)	(19		)	(399		)	(358		)	(626		)
Prior service (credit) cost	0			0			0			(964		)	0			0			0			188			0
Recognized prior service cost (credit)	10			15			6,451			62			(16		)	(16		)	(87		)	(75		)	(73		)
Recognized in other comprehensive income (loss)	$	369		$	920		$	4,709		$	(228	)	$	189		$	(502	)	$	1,921		$	452		$	(1,909	)
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	(1,153	)	$	(491	)	$	(623	)	$	204		$	751		$	92		$	3,425		$	1,888		$	(81	)

Pre-tax amounts recognized as a component of accumulated other comprehensive income (loss) as of year-end that have not been recognized as a component of the Company’s combined net periodic benefit cost of the Company’s DB Pension Plan, Life and Healthcare Plan and SERPs are presented in the following table.



(in thousands)	DB Pension Plan									Life and Healthcare Plan							SERPs
	2017			2016			2015			2017			2016		2015		2017		2016		2015
Net actuarial loss (gain)	$	39,960		$	39,601		$	38,695		$	1,767		$	1,093	$	889	$	9,086	$	7,077	$	6,739
Prior service cost (credit)	(30		)	(40		)	(55		)	(668		)	235		250		602		689		576
Total	$	39,930		$	39,561		$	38,640		$	1,099		$	1,328	$	1,139	$	9,688	$	7,766	$	7,315

The pre-tax amounts included in accumulated other comprehensive income (loss) that are expected to be recognized in net periodic pension cost during the fiscal year ended December 31, 2018 are shown below.



(in thousands)	DB Pension Plan		Life and Healthcare Plan		SERPs
Actuarial loss	1,041		62		529
Prior service cost	(10	)	(62	)	87
Total	1,031		0		616

Weighted-average assumptions used in accounting for the plans were as follows:



(in thousands)	DB Pension Plan						Life and Healthcare Plan						SERPs
	2017		2016		2015		2017		2016		2015		2017		2016		2015
Discount Rates
Benefit Cost for Plan Year	3.89	%	4.05	%	3.81	%	3.97	%	4.14	%	3.80	%	4.10	%	4.32	%	4.00	%
Benefit Obligation at End of Plan Year	3.43	%	3.89	%	4.05	%	3.51	%	3.97	%	4.14	%	3.55	%	4.10	%	4.32	%
Expected long-term return on plan assets	7.25	%	7.25	%	7.25	%	N/A		N/A		N/A		N/A		N/A		N/A
Rate of compensation increase
Benefit Cost for Plan Year	N/A		N/A		5.00	%	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%
Benefit Obligation at End of Plan Year	N/A		N/A		5.00	%	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%

Tompkins offers post-retirement life and healthcare benefits, although as previously mentioned, has discontinued providing post-retirement healthcare to participants hired after 2004. The weighted average annual assumed rate of increase in the per capita cost of covered benefits (the health care cost trend rate) was 6.10% beginning in 2017 and is assumed to decrease gradually to 4.5% in 2027 and beyond. A 1% increase in the assumed health care cost trend rate would increase service and interest costs by approximately $1,500 and increase the Company’s benefit obligation by approximately $48,000. A 1% decrease in the assumed health care cost trend rate, would decrease service and interest costs by approximately $1,300 and decrease the Company’s benefit obligation by approximately $43,000.

To develop the expected long-term rate of return on assets assumption for the DB Pension Plan, the Company considered the historical returns and the future expectations for returns for each asset class, as well as target asset allocations of the pension portfolio. Based on this analysis, the Company selected 7.25% as the long-term rate of return on asset assumption.

The discount rates used to determine the Company’s DB Pension Plan and other post-retirement benefit obligations as of December 31, 2017, and December 31, 2016, were determined by matching estimated benefit cash flows to a yield curve derived from Citigroup’s regular bond yield at December 31, 2017 and December 31, 2016.

Based on the Company’s anticipation of future experience under the DB Pension Plan, the mortality tables used to determine future benefit obligations under the plan were updated as of December 31, 2017 to the RP 2014 Total Employee and Healthy Annuitant Mortality Tables rolled back to 2006 and projected with Mortality Improvement Scale MP 2017. The Company updated this assumption based on the new improvement table released by The Society of Actuaries in October 2017. The appropriateness of the assumptions is reviewed annually.

Cash Flows

Plan assets are amounts that have been segregated and restricted to provide benefits, and include amounts contributed by the Company and amounts earned from investing contributions, less benefits paid. The Company funds the cost of the SERPs and the Life and Healthcare Plan benefits on a pay-as-you-go basis.

The benefits as of December 31, 2017, expected to be paid in each of the next five fiscal years, and in the aggregate for the five fiscal years thereafter were as follows:



(in thousands)	DB Pension Plan		Life and Healthcare Plan		SERPs
2018	$	3,947	$	502	$	673
2019	4,273		460		668
2020	4,155		446		693
2021	4,324		435		684
2022	4,227		435		738
2023-2027	23,444		2,262		4,453
Total	$	44,370	$	4,540	$	7,909

Plan Assets

The Company’s DB Pension Plan’s weighted-average asset allocations at December 31, 2017 and 2016, respectively, by asset category are as follows:



	2017		2016
Equity securities	65	%	68	%
Debt securities	34	%	30	%
Other	1	%	2	%
Total Allocation	100	%	100	%

It is the policy of the Trustees to invest the Pension Trust Fund (the “Fund”) for total return. The Trustees seek the maximum return consistent with the interests of the participants and beneficiaries and prudent investment management. The management of the Fund’s assets is in compliance with the guidelines established in the Company’s Pension Plan and Trust Investment Policy, which is reviewed and approved annually by the Tompkins Board of Directors, and the Pension Investment Review Committee.

The intention is for the Fund to be prudently diversified. The Fund’s investments will be invested among the fixed income, equity and cash equivalent sectors. The pension committee will designate minimum and maximum positions in any of the sectors. In no case shall more than 10% of the Fund assets consist of qualified securities or real estate of the Company. Unless otherwise approved by the Trustees, the following investments are prohibited:


1.	Restricted stock, private placements, short positions, calls, puts, or margin transactions;


2.	Commodities, oil and gas properties, real estate properties, or


3.	Any investment that would constitute a prohibited transaction as described in the Employee Retirement Income Security Act of 1974 (“ERISA”), section 407, 29 U.S.C. 1106.

In general, the investment in debt securities is limited to readily marketable debt securities having a Standard & Poor’s rating of “A” or Moody’s rating of “A”, securities of, or guaranteed by the United States Government or its agencies, or obligations of banks or their holding companies that are rated in the three highest ratings assigned by Fitch Investor Service, Inc. In addition, investments in equity securities must be listed on the NYSE or traded on the national Over The Counter market or listed on the NASDAQ. Cash equivalents generally may be United States Treasury obligations, commercial paper having a Standard & Poor’s rating of “A-1” or Moody’s National Credit Officer rating of “P-1”or higher.

The major categories of assets in the Company’s DB Pension Plan as of year-end are presented in the following table. Assets are segregated by the level of valuation inputs within the fair value hierarchy established by ASC Topic 820 utilized to measure fair value (see Note 19-Fair Value Measurements).



Fair Value Measurements
December 31, 2017
(in thousands)	Fair Value 2017		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	448	$	448	$	0	$	0
Common stocks	24,994		24,994		0		0
Mutual funds	54,712		54,712		0		0
Total Fair Value of Plan Assets	$	80,154	$	80,154	$	0	$	0



Fair Value Measurements
December 31, 2016
(in thousands)	Fair Value 2016		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	1,147	$	1,147	$	0	$	0
Common stocks	23,291		23,291		0		0
Mutual funds	46,619		46,619		0		0
Preferred stocks	750		0		750		0
Total Fair Value of Plan Assets	$	71,807	$	71,057	$	750	$	0

The Company determines the fair value for its pension plan assets using an independent pricing service. The pricing service uses a variety of techniques to determine fair value, including market maker bids, quotes and pricing models. Inputs to the model include recent trades, benchmark interest rates, spreads, and actual and projected cash flows. Based on the inputs used by our independent pricing services, the Company identifies the appropriate level within the fair value hierarchy to report these fair values. U.S. Treasury securities, common stocks and mutual funds are considered Level 1 based on quoted prices in active markets.

The Company has an Employee Stock Ownership Plan (ESOP) and a 401(k) Investment and Stock Ownership Plan (ISOP) covering substantially all employees of the Company. The ESOP allows for Company contributions in the form of common stock of the Company. Annually, the Tompkins Board of Directors determines a profit-sharing payout to its employees in accordance with a performance-based formula. A percentage of the approved amount is paid in Company common stock into the ESOP. Contributions are limited to a maximum amount as stipulated in the ESOP. The remaining percentage is either paid out in cash or deferred into the ISOP at the direction of the employee. Compensation expense related to the profit-sharing totaled $5.8 million in 2017, $4.9 million in 2016, and $4.4 million in 2015.

Under the ISOP, employees may contribute a percentage of their eligible compensation with a Company match of such contributions up to a maximum match of 4%. Participation in the 401(k) Plan is contingent upon certain age and service requirements. The Company’s expense associated with these matching provisions was $2.5 million in 2017, $2.4 million in 2016, and $2.3 million in 2015.

Life insurance benefits are provided to certain officers of the Company. In connection with these policies, the Company reflects life insurance assets on its Consolidated Statements of Condition of $80.1 million at December 31, 2017, and $77.9 million at December 31, 2016. The insurance is carried at its cash surrender value on the Consolidated Statements of Condition. Increases in the cash surrender value of the insurance are reflected as noninterest income, net of any related mortality expense.

The Company provides split dollar life insurance benefits to certain employees. The plan is unfunded and the estimated liability of the plan of $1.5 million and $1.4 million is recorded in other liabilities in the Consolidated Statements of Condition at December 31, 2017 and 2016, respectively. Compensation expense related to the split dollar life insurance was approximately $115,000 in 2017 and $110,000 in 2016.