NOTE 11: PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

The Company has two defined benefit pension plans covering certain management and non-management employees who reached at least 21 years of age and have completed one year of service before the plan was frozen with respect to benefit accruals and new eligibility. The non-management plan was frozen as of May 1, 2003 and the management plan was frozen as of March 1, 2005. For an eligible employee, benefits are based on years of service and the average of the employee's three highest consecutive years' of base compensation for years prior to the date on which the plan was frozen. The Company's policy is to fund the minimum required contribution disregarding any credit balance arising from excess amounts contributed in the past.

The Company sponsors a postretirement medical benefit plan that covers all employees that retire directly from active service on or after age 55 with at least 10 years of service. The projected unit credit actuarial method was used in determining the cost of future benefits. Assets of the plan are principally invested in fixed income securities and a money market fund. The Company uses an annual measurement date of December 31 for all of its benefit plans.

The components of the pension and postretirement expense (credit) for the years ended December 31 are as follows:


		Pension Benefits						Postretirement Benefits
		For the Years Ended December 31,
($ in thousands)		2014			2013			2014			2013
Components of net periodic costs:
Service cost	$	-		$	-		$	12		$	13
Interest cost		806			756			119			112
Expected return on plan assets		(892	)		(975	)		(32	)		(178	)
Amortization of prior service cost		56			56			(197	)		(330	)
Recognized actuarial gain		662			840			24			37
Net periodic loss (gain)	$	632		$	677		$	(74	)	$	(346	)

The amortization of prior service cost and recognized actuarial (gain) loss included in pension and postretirement expense represent reclassifications out of other comprehensive income (loss).

The estimated amounts for the defined benefit pension plans and the postretirement benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost (income) over the next fiscal year are as follows:


				Postretirement
($ in thousands)		Pension Plans		Benefits
Amortization of net actuarial loss	$	947	$	78
Amortization of prior service cost (credit)	$	56	$	(45	)

The following table presents a summary of the projected benefit obligation and assets of the plans at December 31:


								Postretirement
($ in thousands)		Pension Benefits						Benefits
		For the Years Ended December 31,
		2014			2013			2014			2013
Change in Benefit Obligation
Benefit obligation, beginning of year	$	18,493		$	19,908		$	2,842		$	3,655
Service cost		-			-			12			13
Interest cost		806			756			119			112
Actuarial losses (income)		2,918			(1,240	)		32			(805	)
Benefit payments		(979	)		(931	)		(141	)		(133	)
Benefit obligation, end of year		21,238			18,493			2,864			2,842


Changes in fair value of plan assets
Fair value of plan assets, beginning of year		13,116			12,443			2,206			2,221
Actual return on plan		825			1,084			(57	)		(16	)
Employer contributions		219			520			85			134
Benefit payments		(979	)		(931	)		(141	)		(133	)

Fair value of plan assets, end of year		13,181			13,116			2,093			2,206
Unfunded status, end of year	$	(8,057	)	$	(5,377	)	$	(771	)	$	(636	)

Amounts recognized in the consolidated balance sheets consisted of the following:


							Postretirement
		Pension Benefits					Benefits
		As of December 31,
($ in thousands)		2014		2013			2014		2013

Pension and postretirement benefit obligations-current	$	(234	) $	(267	)	$	-	$	-
Pension and postretirement benefit obligations-long term		(7,823	)	(5,110	)		(771	)	(636	)
Total	$	(8,057	) $	(5,377	)	$	(771	) $	(636	)

The Company also has deferred compensation agreements in place with certain former officers that became effective upon retirement. These non-qualified plans are not currently funded and a liability representing the present value of future payments has been established, with balances of $0.3 million as of December 31, 2014 and 2013.

Amounts recognized in the accumulated other comprehensive loss consisted of the following:


								Postretirement
		Pension Benefits						Benefits
		As of December 31,
($ in thousands)		2014			2013			2014			2013

Actuarial net loss	$	(6,148	)	$	(3,824	)	$	(264	)	$	(168	)
Net prior service credit		(122	)		(178	)		310			507
Income tax expense (benefit)		(2,235	)		(2,235	)		8			8
Total	$	(4,035	)	$	(1,767	)	$	38		$	331

Actuarial assumptions used to calculate the projected benefit obligation were as follows for the years ended December 31, 2014 and 2013:


	Pension Benefits				Postretirement Benefits
	For the Years Ended December 31,
	2014		2013		2014		2013
Discount rate	3.70- 3.85%		4.50- 4.70%		3.65	%	4.50	%
Expected return on plan assets	7.00	%	8.00	%	1.50	%	8.00	%
Healthcare cost trend	-		-		7.50	%	8.50	%

Actuarial assumptions used to calculate net periodic benefit cost were as follows for the years ended December 31, 2014 and 2013:


					Postretirement
	Pension Benefits				Benefits
	For the Years Ended December 31,
	2014		2013		2014		2013
Discount rate	4.5- 4.7	%	3.7- 3.9	%	4.50	%	3.60	%
Expected return on assets	7.00	%	8.00	%	1.50	%	8.00	%

The rate of return assumption, currently 1.5% for postretirement benefit and 7% for pension benefits, estimates the portion of plan benefits that will be derived from investment return and the portion that will come directly from Company contributions. Accordingly, the Company strives to maintain an investment portfolio that generates annual returns from funds invested consistent with achieving the projected long-term rate of return required for plan assets. The decrease in the expected rate of return on plan assets for the postretirement benefit plans was due to a change in the investment strategy based on the expected utilization of plan assets.

The projected pension benefit obligation of $21.2 million at December 31, 2014 was in excess of plan assets of $13.2 million, leading to an unfunded projected benefit obligation of $8.1 million as of December 31, 2014. The projected benefit obligation of $18.5 million at December 31, 2013 was in excess of plan assets of $13.1 million, leading to an unfunded projected benefit obligation of $5.4 million as of December 31, 2013. The projected pension benefit obligation exceeded the fair value of plan assets at December 31, 2014, and the projected benefit obligation increased from the same period December 31, 2013. The Company was required to record an increase to its pension liability on its Consolidated Balance Sheet as of December 31, 2014, and the effect of this adjustment was an increase in the pension liability of $2.7 million and an increase in accumulated other comprehensive loss of $2.5 million. The increase in the projected benefit obligation was primarily attributable to a decrease in the discount rate and the adoption of new mortality tables.

The Company's postretirement plans had an unfunded projected benefit obligation of $0.8 million as of December 31, 2014. The projected benefit obligation of $2.9 million at December 31, 2014 was in excess of plan assets of $2.1 million. The Company's postretirement plans had a benefit obligation of $2.8 million as of December 31, 2013. The health care cost trend rates (representing the assumed annual percentage increase in claim costs by year) was 7.5% for the year 2014 grading down to 5% in 2021 and later by 0.5% per year. The Company's most recent actuarial calculation anticipates that this trend will continue into 2015. An increase in the assumed health care cost trend rate by 1.0% would increase the accumulated postretirement benefit obligation as of December 31, 2014 by approximately $0.3 million. A 1.0% decrease in the health care cost trend rate would decrease these components by $0.2 million. The projected postretirement benefit obligation exceeded the fair value of plan assets at December 31, 2014, and the projected benefit obligation increased from the same period December 31, 2013. The Company was required to record an increase to its postretirement liability on its Consolidated Balance Sheet as of December 31, 2014 and the effect of this adjustment was an increase in the postretirement liability of $0.1 million and an decrease in accumulated other comprehensive income of $0.1 million.

On December 8, 2003, the Medicare Prescription Drug Improvement Modernization Act of 2003 (the "Act") was signed into law. The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide benefits at least actuarially equivalent to Medicare Part D. The Company has not applied for a subsidy as it has not done an assessment to determine if it is actuarially equivalent to Medicare Part D under the Act. Therefore, a subsidy is not included in the actuarial assumptions for its postretirement benefits plan.

Plan Assets

The Company diversifies its pension and postretirement plan assets across domestic and international common stock and fixed income asset classes.

As of December 31, 2014, the current target allocations for pension and postretirement plan assets are 50-60% for equity securities, 40-50% for fixed income securities and 0-10% for cash and certain other investments.

The fair values of the Company's pension plan assets at December 31, 2014 by asset category are as follows:


($ in thousands)
		Total		Level 1		Level 2		Level 3
Asset Category
Equity securities	$	6,394	$	6,394	$	-	$	-
Fixed income securities		6,426		6,426		-		-
Cash and cash equivalents		361		361		-		-
Total pension assets	$	13,181	$	13,181	$	-	$	-

The fair values of the Company's postretirement plan assets at December 31, 2014 by asset category are as follows:


($ in thousands)
		Total		Level 1		Level 2		Level 3
Asset Category
Fixed income securities	$	1,770	$	1,770	$	-	$	-
Cash and cash equivalents		323		323		-		-
Total pension assets	$	2,093	$	2,093	$	-	$	-

The fair values of the Company's pension plan assets at December 31, 2013 by asset category are as follows:


($ in thousands)
		Total		Level 1		Level 2		Level 3
Asset Category
Equity securities	$	6,777	$	1,361	$	5,416	$	-
Fixed income securities		5,528		4,605		923		-
Cash and cash equivalents		811		811		-		-
Total pension assets	$	13,116	$	6,777	$	6,339	$	-

The fair values of the Company's postretirement plan assets at December 31, 2013 by asset category are as follows:


($ in thousands)
		Total		Level 1		Level 2		Level 3
Asset Category
Fixed income securities	$	1,744	$	1,744	$	-	$	-
Cash and cash equivalents		462		462		-		-
Total pension assets	$	2,206	$	2,206	$	-	$	-

Equity securities and fixed income securities categorized as Level 1 represent mutual funds that are traded on national and international exchanges and are valued at their closing prices on the last trading day of the year. Additionally, some equity securities and fixed income securities are public investment vehicles valued using the Net Asset Value ("NAV") provided by the fund manager. The NAV is the total value of the fund divided by the number of shares outstanding. As the underlying securities to these funds are nationally traded and these funds do not have redemption restrictions, they are categorized as Level 2.

In accordance with its contribution policy, in 2015 the Company expects to make the required contribution of $0.2 million to its pension plan.

Benefit payments, under the provisions of the plans, are expected to be paid as follows:


		Pension		Postretirement
($ in thousands)		Benefits		Benefits
2015	$	1,094	$	176
2016		1,107		153
2017		1,153		160
2018		1,201		158
2019		1,239		172
2020-2023		6,185		916

The Company also has a defined contribution 401(k) Profit Sharing Plan covering certain eligible employees. Under the plan, employees may contribute up to 100% of compensation not to exceed certain legal limitations. The Company matches 100% of the participant's contributions, up to either 4.0% or 4.5% of compensation, as set forth in the plan. The Company contributed and expensed $0.4 million for the years ended December 31, 2014 and 2013.