NOTE 9 — Pension Plans

We maintain a non-contributory tax qualified defined benefit pension plan that has been frozen since July 2011. All of our full time employees were eligible to participate in the qualified plan. Benefits provided by our qualified pension plan were based on years of service and employees’ remuneration over their employment period. Pension costs are funded in accordance with the provisions of the Internal Revenue Code. We also maintain a non-qualified, non-contributory defined benefit pension plan, the excess plan, for certain employees that has been frozen since July 2011. This excess plan provided benefits that would otherwise be provided under the qualified pension plan but for maximum benefit and compensation limits applicable under federal tax law. The cost associated with the excess plan is determined using the same actuarial methods and assumptions as those used for our qualified pension plan. The assets for the excess plan aggregate $768,000 and $680,000 as of December 31, 2013 and 2012, respectively, and are recorded in other assets in our consolidated balance sheets (see NOTE 11 — Fair Value Measurements).

On June 15, 2011, we decided to freeze participation and benefit accruals under our pension plans, primarily to reduce some of the impact on earnings and volatility in cash flows that can accompany the maintenance of a defined benefit plan. The freeze was effective July 31, 2011. Compensation earned by employees up to July 31, 2011 is used for purposes of calculating benefits under our pension plan with no future benefit accruals after this date. Participants as of July 31, 2011 continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work. We accounted for the freeze of our pension plans in 2011, which resulted in a curtailment loss of $45,000, reduced our liability for pension benefits by $544,000 and increased comprehensive earnings by $589,000.

Effective December 1, 2012, we created a new non-elective, non-qualified supplemental executive retirement plan (“SERP”) in connection with the freezing of our pension plan. Its purpose is to provide deferred compensation to certain highly compensated employees that approximates the value of benefits lost by the freezing of the pension plan which are not offset by our enhanced matching contributions in our 401(k) plan. The SERP is a discretionary defined contribution plan and contributions made to the SERP in any given year are not guaranteed and will be at the sole discretion of our Compensation and Stock Incentive Committee. In 2013 and 2012, we recorded an expense of $60,000 and $60,000, respectively, related to the SERP and contributed $55,000 and $0, respectively, to the plan. The liability for pension benefits was $65,000 and $60,000 as of December 31, 2013 and 2012, respectively.

The following table sets forth the defined benefit plans’ funded status and amounts recognized in our consolidated balance sheets as of December 31:

	2013			2012
Change in benefit obligation:
Benefit obligation at beginning of year	$	10,736,000		$	9,722,000
Interest cost	443,000			454,000
Actuarial (gain) loss	(1,013,000		)	735,000
Benefits paid	(182,000		)	(188,000		)
Other	(2,000		)	13,000
Benefit obligation at end of year	9,982,000			10,736,000

Change in plan assets:
Fair value of plan assets at beginning of year	7,024,000			6,347,000
Actual gain on plan assets	951,000			714,000
Employer contribution	4,000			151,000
Benefits paid	(182,000		)	(188,000		)
Fair value of plan assets at end of year	7,797,000			7,024,000

Unfunded status	$	(2,185,000	)	$	(3,712,000	)

The following table presents the amounts recognized in our consolidated balance sheets as of December 31:

	2013			2012
Accrued benefit cost	$	(729,000	)	$	(707,000	)
Liability for pension benefits	(1,456,000		)	(3,005,000		)
	$	(2,185,000	)	$	(3,712,000	)

Amounts recognized in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at December 31 are as follows:

	2013		2012
Net actuarial loss, pre-tax	$	2,743,000	$	4,255,000

The accumulated benefit obligation for our pension plans was $9,982,000 and $10,736,000, respectively, as of December 31, 2013 and 2012.

The components of net periodic pension (benefit) cost for the years ended December 31, 2013, 2012 and 2011 are as follows:

	2013			2012			2011
Service cost	$	—		$	—		$	153,000
Interest cost	443,000			454,000			491,000
Expected return on plan assets	(552,000		)	(508,000		)	(526,000		)
Curtailment loss	—			—			45,000
Recognized net actuarial loss	100,000			80,000			139,000
Net amortization	—			—			10,000
	$	(9,000	)	$	26,000		$	312,000

For the year ending December 31, 2014, we expect to recognize the following amounts as components of net periodic benefit cost which are included in accumulated other comprehensive loss as of December 31, 2013:

Actuarial loss

59,000

The principal assumptions used to determine the net periodic pension cost for the years ended December 31, 2013, 2012 and 2011, and the actuarial value of the benefit obligation at December 31, 2013 and 2012 (the measurement dates) for our pension plans are as follows:

	Net Periodic Pension Cost						Benefit Obligation
	2013		2012		2011		2013		2012
Weighted-average discount rate	4.4	%	5.0	%	6.1	%	5.0	%	4.4	%
Weighted-average rate of compensation increase	n/a		n/a		4.0	%	n/a		n/a
Expected long-term rate of return on plan assets	8.0	%	8.0	%	8.5	%	n/a		n/a

The weighted-average discount rates were determined by matching estimated benefit cash flows to a yield curve derived from long-term, high-quality corporate bond curves.

For 2013, we assumed a long-term rate of return on plan assets of 8.0%. In developing the 8.0% expected long-term rate of return assumption, we considered our historical compounded return and reviewed asset class return expectations and long-term inflation assumptions.

Our investment goals are to achieve a combination of moderate growth of capital and income with moderate risk. Acceptable investment vehicles will include mutual funds, exchange-traded funds (ETFs), limited partnerships, and individual securities. Our target allocations for plan assets are 60% equities and 40% fixed income. Of the equity portion, 50% will be invested in passively managed securities using ETFs and the other 50% will be invested in actively managed investment vehicles. We address diversification by investing in mutual funds and ETFs which hold large, mid and small capitalization U.S. stocks, international (non-U.S.) equity, REITS, and real assets (consisting of inflation-linked bonds, real estate and natural resources). A sufficient percentage of investments will be readily marketable in order to be sold to fund benefit payment obligations as they become payable.

The fair values of our pension assets as of December 31, 2013 by asset category are as follows (refer to NOTE 11 — Fair Value Measurements for a description of Level 1, Level 2 and Level 3 categories):

Asset Category	Total		Level 1		Level 2		Level 3
Corporate common stocks	$	779,000	$	779,000	$	—	$	—
Mutual funds/ETFs:
Equity-large cap	1,583,000		1,583,000		—		—
Equity-mid cap	721,000		721,000		—		—
Equity-small cap	158,000		158,000		—		—
Equity-international	1,086,000		1,086,000		—		—
Fixed income	2,831,000		2,831,000		—		—
Real estate	346,000		346,000		—		—
Money market	293,000		293,000		—		—
Total mutual funds/ETFs	7,018,000		7,018,000		—		—
Grand total	$	7,797,000	$	7,797,000	$	—	$	—

The fair values of our pension assets as of December 31, 2012 by asset category are as follows (refer to NOTE 11 — Fair Value Measurements for a description of Level 1, Level 2 and Level 3 categories):

Asset Category	Total		Level 1		Level 2		Level 3
Corporate common stocks	$	693,000	$	693,000	$	—	$	—
Mutual funds/ETFs:
Equity-large cap	1,416,000		1,416,000		—		—
Equity-mid cap	622,000		622,000		—		—
Equity-small cap	141,000		141,000		—		—
Equity-international	992,000		992,000		—		—
Fixed income	2,607,000		2,607,000		—		—
Real estate	380,000		380,000		—		—
Money market	173,000		173,000		—		—
Total mutual funds/ETFs	6,331,000		6,331,000		—		—
Grand total	$	7,024,000	$	7,024,000	$	—	$	—

We expect to contribute approximately $50,000 to our pension plans in 2014.

Estimated future benefit payments are as follows:

2014	$	1,045,000
2015	$	357,000
2016	$	366,000
2017	$	383,000
2018	$	444,000
2019-2023	$	2,437,000

We also maintain a defined contribution 401(k) plan that permits participation by substantially all employees. Beginning on January 1, 2012, we increased our matching contributions to the 401(k) plan in connection with the freezing of our defined benefit pension plan. Our matching contributions to the 401(k) plan were $110,000 and $108,000 in 2013 and 2012, respectively. Matching contributions were insignificant for 2011.