PENSIONS AND OTHER BENEFITS

12 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

PENSIONS AND OTHER BENEFITS

NOTE 13 – PENSION AND OTHER BENEFITS

Salisbury has an insured noncontributory defined benefit retirement plan which was available to employees prior to December 31, 2012 based upon age and length of service. Effective December 31, 2012, the pension plan was frozen, by amending the plan to freeze retirement benefits at current levels and discontinue future benefit accruals. During 2012 Salisbury decided to complete its transition from providing retirement benefits under a defined benefit pension plan to a defined contribution 401(K) plan which is discussed below.

Years ended December 31, (in thousands)		2013			2012			2011
Change in projected benefit obligation
Benefit obligation at beginning of year	$	6,039		$	7,949		$	6,639
Actuarial  (gain)/loss		(860	)		1,012			1,073
Service cost		—			404			343
Interest cost		255			358			383
Curtailments and settlements		—			(3,586	)		—
Benefits paid		(184	)		(98	)		(489	)
Benefit obligation at end of year		5,250			6,039			7,949
Change in plan assets
Plan assets at estimated fair value at beginning of year		6,019			6,164			5,668
Actual return on plan assets		1,033			720			97
Contributions by employer		—			129			888
Curtailments and settlements		—			(896	)		—
Benefits paid		(184	)		(98	)		(489	)
Fair value of plan assets at end of year		6,868			6,019			6,164
Funded status and recognized asset (liability)
included in other assets (liabilities) on the balance sheet	$	1,618		$	(20	)	$	(1,785	)

The components of amounts recognized in accumulated other comprehensive income, before tax effect, are as follows:

Years ended December 31, (in thousands)		2013		2012			2011
Net gain (loss)	$	924	$	(711	)	$	(3,118	)
	$	924	$	(711	)	$	(3,118	)

The accumulated benefit obligation for the plan was $5,250,000 and $6,039,000 at December 31, 2013 and 2012, respectively. The discount rate used in determining the actuarial present value of the projected benefit obligation was 5.10% for 2013, 4.35% for 2012 and 4.75% for 2011. The rate of increase in future compensation levels was based on the following graded table for 2013 and 2012:

Age		Rate
	25	4.75	%
	35	4.25
	45	3.75
	55	3.25
	65	3.00

The components of net periodic cost are as follows:

Years ended December 31, (in thousands)		2013			2012			2011
Service cost	$	—		$	404		$	343
Interest cost on benefit obligation		255			358			383
Expected return on plan assets		(258	)		(455	)		(418	)
Amortization of net loss		—			123			75
Net periodic benefit cost		(3	)		430			383
Additional amount recognized due to settlement or curtailment		—			341			—
		(3	)		771			383
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss:
Net actuarial (gain) loss		(1,635	)		(2,284	)		1,394
Amortization of net loss		—			(123	)		(75	)
Total recognized in other comprehensive (income) loss		(1,635	)		(2,407	)		1,319
Total recognized in net periodic cost and other comprehensive (income) loss	$	(1,638	)	$	(1,636	)	$	1,702

 The estimated net gain that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the year ended December 31, 2014 is $15,000.

The discount rate used to determine the net periodic benefit cost was 4.35% for 2013, 4.75% for 2012 and 5.75% for 2011; and the expected return on plan assets was 4.35% for 2013, and 7.50% for 2012 and 2011.

The graded table above was also used for the rate of compensation increase in determining the net periodic benefit cost in 2013 and 2012.

Pension expense is calculated based upon a number of actuarial assumptions, including an expected long-term rate of return on pension plan assets of 7.50% for 2012. The Bank has modified their long term rate of return assumption in recognition of the Plan freeze on accruals.  With the plan being frozen, using short-term interest rates makes more sense than a long-term asset return approach.  For the 2013 expense calculation, 4.35% was used as both the discount rate and long term rate of return.   The Bank regularly reviews the asset allocations and periodically rebalances investments when considered appropriate. While all future forecasting contains some level of estimation error, the Bank believes that 4.35% falls within a range of reasonable long-term rate of return expectations for pension plan assets. The Bank will continue to evaluate the actuarial assumptions, including expected rate of return, at least annually, and will adjust as necessary.

Plan Assets

The pension plan investments are co-managed by Salisbury’s Trust and Wealth Advisory Services division and Bradley, Foster and Sargent, Inc. The investments in the plan are reviewed and approved by Salisbury’s Trust Investment Committee. The asset allocation of the plan is a balanced allocation. Debt securities are timed to mature when employees are due to retire and provide cash flow for annuity payouts. Debt securities are laddered for coupon and maturity. Equities are held in the plan to achieve a moderate growth allocation and to provide growth of the principal portion of the plan and to provide diversification. The Trust Investment Committee reviews the policies of the plan. The prudent investor rule and applicable ERISA regulations apply to the management of the funds and investment selections.

The fair values of the pension plan assets are as follows:

		Fair Value Measurements at Reporting Date Using						Assets at fair
(in thousands)		Level 1		Level 2		Level 3		value
December 31, 2013
Fixed Income
Corporate Debt	$	—	$	637	$	—	$	637
Preferred Stock		57		—		—		57
Equities		4,115		—		—		4,115
Mutual Funds		1,719		—		—		1,719
Money Fund		340		—		—		340
Totals	$	6,231	$	637	$	—	$	6,868
December 31, 2012
Fixed Income
Corporate Debt	$	—	$	714	$	—	$	714
Preferred Stock		63		—		—		63
Equities		4,605		—		—		4,605
Mutual Funds		268		—		—		268
Money Fund		369		—		—		369
Totals	$	5,305	$	714	$	—	$	6,019

Salisbury’s pension plan assets are generally all classified within level 1 and level 2 of the fair value hierarchy (see Note 19 for a description of the fair value hierarchy) because they are valued using quoted market prices, pricing service, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

There were no securities of Salisbury or related parties included in plan assets as of December 31, 2013 and 2012. Salisbury does not expect to make a contribution in 2014. Based on current data and assumptions, future expected benefit payments are as follows:

Future expected benefit payments (in thousands)
2014	$	140
2015		382
2016		91
2017		532
2018		87
2019 to 2023		1,967

401(k) Plan

Salisbury offers a 401(k) Plan to eligible employees. Under the Plan, eligible participants may contribute a percentage of their pay subject to IRS limitations. Salisbury may make discretionary contributions to the Plan.Effective December 31, 2012, and simultaneously with the freezing of the pension plan, the 401(k) Plan was amended to increase the safe harbor contribution for all qualifying employees to 4% from 3%. The Bank’s safe harbor contribution percentage is reviewed annually and, under provisions of the plan, is subject to change in the future. An additional discretionary match, of up to 6%, may also be made for all employees that meet the plans qualifying requirements for such a match. This discretionary matching percentage, if any, is also subject to review under the provisions of the plan.

Both the safe harbor and additional discretionary match, if any, vest immediately.

Salisbury’s 401(k) Plan contribution expense for 2013, 2012 and 2011 was $657,000, $292,000 and $288,000, respectively.

Employee Stock Ownership Plan (ESOP)

Salisbury offers an Employee Stock Ownership Plan (ESOP) to eligible employees.  Under the Plan, Salisbury may make discretionary contributions to the Plan. Discretionary contributions vest in full upon six years and reflect the following schedule of qualified service:

20% after the second year, 20% per year thereafter, vesting at 100% after six full years of service.  2013 was the first year for this plan with benefit expenses amounting to $159,800.

Other Retirement Plans

Salisbury adopted ASC 715-60, “Compensation - Retirement Benefits - Defined Benefit Plans - Other Postretirement" and recognized a liability for Salisbury’s future postretirement benefit obligations under endorsement split-dollar life insurance arrangements. The total liability for the arrangements included in other liabilities was $528,000 and $479,000 at December 31, 2013, and 2012, respectively. Expense under this arrangement was $49,000 for 2013 and $45,000 for 2012.

The Bank entered into a Supplemental Retirement Plan Agreement with its former Chief Executive Officer that provides for supplemental post retirement payments for a ten year period as described in the agreement. The related liability was $121,000 and $136,000 at December 31, 2013, and 2012, respectively. The related expense amounted to $9,000, $12,000 and $11,000 for 2013, 2012 and 2011, respectively.

A Non-Qualified Deferred Compensation Plan (the "Plan") was effective January 1, 2013. This Plan was adopted by Salisbury Bank and Trust Company (the "Bank") for the benefit of certain key employees, ("Executive" or "Executives"), who have been selected and approved by the Bank to participate in this Plan and who have evidenced their participation by execution of a Non-Qualified Deferred Compensation Plan Participation Agreement ("Participation Agreement") in a form provided by the Bank. This Plan is intended to comply with Internal Revenue Code ("Code") Section 409A and any regulatory or other guidance issued under such Section.

In 2013, the Bank awarded six (6) Executives with a discretionary contribution to this account for a total of $59,590. This was the first year for this benefit. Based on the Executive’s date of retirement, the vesting schedule ranges from 10% per year to 50% per year.