NOTE 7 — 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. 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. 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 were $1,322,000 and $1,182,000 as of December 31, 2020 and 2019, respectively, and are recorded in other assets in our consolidated balance sheets (see NOTE 9 — Fair Value Measurements).

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


	2020		2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	15,455,000	$	13,359,000
Interest cost		436,000		516,000
Actuarial loss		1,569,000		1,998,000
Benefits paid		(432,000)		(418,000)
Benefit obligation at end of year		17,028,000		15,455,000

Change in plan assets:
Fair value of plan assets at beginning of year		13,134,000		11,440,000
Actual gain on plan assets		2,009,000		2,108,000
Contributions		—		—
Benefits paid		(432,000)		(418,000)
Other		4,000		4,000
Fair value of plan assets at end of year		14,715,000		13,134,000

Unfunded status	$	(2,313,000)	$	(2,321,000)

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


	2020		2019
Accrued liabilities	$	(1,442,000)	$	(1,305,000)
Liability for pension benefits		(871,000)		(1,016,000)
	$	(2,313,000)	$	(2,321,000)

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


	2020		2019
Net actuarial loss, pre-tax	$	6,306,000	$	6,176,000

The components of net periodic pension benefit for our defined benefit pension plans for the years ended December 31, 2020, 2019 and 2018 are as follows:


	2020		2019		2018
Interest cost	$	436,000	$	516,000	$	463,000
Expected return on plan assets		(740,000)		(727,000)		(699,000)
Recognized net actuarial loss		167,000		149,000		151,000
	$	(137,000)	$	(62,000)	$	(85,000)

The net periodic pension benefit is included in other income (expense), net in our consolidated statements of earnings and comprehensive income.

The principal assumptions used to determine the net periodic pension benefit for the years ended December 31, 2020, 2019 and 2018, and the actuarial value of the benefit obligation at December 31, 2020 and 2019 (the measurement dates) for our pension plans are as follows:


	Net Periodic Pension Cost						Benefit Obligation
	2020		2019		2018		2020		2019
Weighted-average discount rate	3.4	%	4.4	%	3.8	%	2.8	%	3.4	%
Weighted-average rate of compensation increase	n/a		n/a		n/a		n/a		n/a
Expected long-term rate of return on plan assets	5.75	%	6.5	%	6.5	%	n/a		n/a

We use the spot rate approach to determine the benefit obligation and the subsequent years’ interest cost component of the net periodic pension benefit. This method uses individual spot rates along the yield curve that correspond with the timing of each benefit payment and will provide a more precise measurement of the interest cost by improving the correlation between projected benefit cash flows and the corresponding spot yield curve rates.

For 2020, we assumed a long-term rate of return on plan assets of 5.75%. In developing the expected long-term rate of return assumption, we reviewed asset class return expectations and long-term inflation assumptions and considered our historical compounded return, which was consistent with our long-term rate of return assumption.

In determining the 2019 pension liability, we updated from the Society of Actuaries (“SOA”) RP-2014 mortality tables with SOA MP-2018 mortality improvement tables to the SOA Pri-2012 mortality tables with the SOA MP-2019 mortality improvement tables. This mortality update, along with a lower discount rate, resulted in an increase in our benefit obligation and accumulated other comprehensive loss at December 31, 2019. For 2020, we updated to the SOA MP-2020 mortality improvement tables, which along with a lower discount rate, resulted in an increase in our benefit obligation and accumulated other comprehensive loss at December 31, 2020.

Historically, our investment goals were to achieve a combination of moderate growth of capital and income with moderate risk. Beginning in 2018, our investment strategy changed to a liability driven investment policy. Our asset management decisions are largely determined by the sum of current and future liabilities of our pension plan. Our liability driven investment strategies involve hedging, in whole or in part, the plan’s exposure to changes in interest rates and inflation. Our liability driven investments consist of exchange traded mutual funds that may have underlying investments in hedge funds that are comprised of bonds, swaps and other derivatives that over time seeks to achieve a return that matches or exceeds the growth in projected pension plan liabilities and duration. Our target allocations for plan assets are 20% equities and 80% liability hedges.

The fair values of our pension assets as of December 31, 2020 by asset category are as follows (refer to NOTE 9 — Fair Value Measurements for a description of Level 1, Level 2 and Level 3 categories):


Asset Category	Total		Level 1		Level 2		Level 3
Mutual funds/ETFs:
Equity-large cap	$	1,108,000	$	1,108,000	$	—	$	—
Equity-mid cap		405,000		405,000		—		—
Equity-small cap		313,000		313,000		—		—
Equity-international		750,000		750,000		—		—
Fixed income		11,798,000		11,798,000		—		—
Money market		341,000		341,000		—		—
Total mutual funds/ETFs	$	14,715,000	$	14,715,000	$	—	$	—

The fair values of our pension assets as of December 31, 2019 by asset category are as follows (refer to NOTE 9 — Fair Value Measurements for a description of Level 1, Level 2 and Level 3 categories):


Asset Category	Total		Level 1		Level 2		Level 3
Mutual funds/ETFs:
Equity-large cap	$	995,000	$	995,000	$	—	$	—
Equity-mid cap		502,000		502,000		—		—
Equity-small cap		560,000		560,000		—		—
Equity-international		667,000		667,000		—		—
Fixed income		10,358,000		10,358,000		—		—
Money market		52,000		52,000		—		—
Total mutual funds/ETFs	$	13,134,000	$	13,134,000	$	—	$	—

We have no minimum required pension contributions for 2021, but will consider making additional contributions.

Estimated future benefit payments are as follows:


2021	$	1,989,000
2022	$	605,000
2023	$	665,000
2024	$	669,000
2025	$	722,000
2026-2030	$	3,643,000

We also maintain a non-elective, non-qualified supplemental executive retirement plan (“SERP”) which provides 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 2020, 2019 and 2018, we recorded general and administrative expenses of $88,000, $120,000, and $112,000, respectively, related to the SERP. During 2020, 2019 and 2018, we contributed $120,000, $108,000, and $85,000 to the plan, respectively. The liability for SERP pension benefits was $88,000 and $120,000 as of December 31, 2020 and 2019, respectively, and is included in accrued liabilities in our consolidated balance sheets.

We maintain a defined contribution 401(k) plan that permits participation by substantially all employees. Our matching contributions to the 401(k) plan were $132,000, $118,000, and $129,000 in 2020, 2019 and 2018, respectively.