NOTE 8—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 this qualified pension plan. Benefits provided by our qualified pension plan were based on years of service and employees’ remuneration over their term of employment. 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 aggregate $304,000 and $287,000 as of December 31, 2016 and 2015, respectively, and are recorded in other assets in our consolidated balance sheets (see NOTE 10 — Fair Value Measurements).

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

	2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	22,358,000		$	23,787,000
Interest cost	867,000			948,000
Actuarial loss (gain)	502,000			(1,870,000		)
Benefits paid	(540,000		)	(507,000		)

Benefit obligation at end of year	23,187,000			22,358,000


Change in plan assets:
Fair value of plan assets at beginning of year	14,442,000			14,655,000
Actual gain (loss) on plan assets	848,000			(59,000		)
Employer contribution	210,000			353,000
Benefits paid	(540,000		)	(507,000		)

Fair value of plan assets at end of year	14,960,000			14,442,000


Unfunded status	$	(8,227,000	)	$	(7,916,000	)

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

	2016			2015
Accrued liabilities	$	(452,000	)	$	(407,000	)
Liability for pension benefits	(7,775,000		)	(7,509,000		)

	$	(8,227,000	)	$	(7,916,000	)

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

		2016			2015
Net actuarial loss, pre-tax		$	7,704,000		$	7,048,000

The components of net periodic pension benefit for the years ended December 31, 2016, 2015 and 2014 are as follows:

	2016			2015			2014
Interest cost	$	867,000		$	948,000		$	915,000
Expected return on plan assets	(1,137,000		)	(1,158,000		)	(1,092,000		)
Recognized net actuarial loss	136,000			146,000			32,000

	$	(134,000	)	$	(64,000	)	$	(145,000	)

For the year ending December 31, 2017, we expect to recognize the following amounts as components of net periodic benefit (expense) which are included in accumulated comprehensive loss as of December 31, 2016:

Actuarial loss

157,000

The principal assumptions used to determine the net periodic pension benefit for the years ended December 31, 2016, 2015 and 2014, and the actuarial value of the benefit obligation at December 31, 2016 and 2015 (the measurement dates) for our pension plans are as follows:

	Net Periodic Pension Cost						Benefit Obligation
	2016		2015		2014		2016		2015
Weighted-average discount rate	4.4	%	4.1	%	5.1	%	4.3	%	4.4	%
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	8.0	%	8.0	%	8.0	%	n/a		n/a

Historically, we used a single weighted-average discount rate approach to determine the pension benefit obligation and the subsequent years’ interest cost component of the net periodic pension benefit. The weighted-average discount rate was determined by matching estimated benefit payment cash flows to a yield curve derived from long-term, high-quality corporate bond curves. This method represented the constant annual rate that would be required to discount all future benefit payments related to past service from the date of expected future payment to the measurement date. As of December 31, 2015, we elected to use a refined method, known as 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. The change in method did not impact the December 31, 2015 benefit obligation, but resulted in a slight decrease in the interest component of the net periodic pension benefit in 2016. We accounted for this as a change in estimate on a prospective basis.

For 2016, 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 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 2014, we adopted the Society of Actuaries’ (“SOA”) RP-2014 mortality tables and MP-2014 mortality improvement tables to determine our December 31, 2014 pension liability. These updated mortality tables, along with a lower discount rate, resulted in the increase in the unfunded status of our pension plans and the increase in accumulated other comprehensive loss at December 31, 2014. During 2015, we reviewed the SOA tables and adopted the MP-2015 mortality improvement tables which resulted in a decrease in our pension benefit obligation. In determining the 2016 pension liability, we adopted the new updated MP-2016 mortality improvement tables. These new mortality tables, along with the lower discount rate, resulted in an increase in our pension liability and accumulated other comprehensive loss at December 31, 2016.

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, 2016 by asset category are as follows (refer to NOTE 10 — 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 stock	$	1,210,000	$	1,210,000	$	—	$	—
Mutual funds/ETFs:
Equity-large cap	3,521,000		3,521,000		—		—
Equity-mid cap	1,419,000		1,419,000		—		—
Equity-small cap	287,000		287,000		—		—
Equity-international	1,666,000		1,666,000		—		—
Fixed income	5,649,000		5,649,000		—		—
Real estate	822,000		822,000		—		—
Money market	386,000		386,000		—		—

Total mutual funds/ETFs	13,750,000		13,750,000		—		—

Grand total	$	14,960,000	$	14,960,000	$	—	$	—

The fair values of our pension assets as of December 31, 2015 by asset category are as follows (refer to NOTE 10 — 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 stock	$	1,548,000	$	1,548,000	$	—	$	—
Mutual funds/ETFs:
Equity-large cap	2,962,000		2,962,000		—		—
Equity-mid cap	1,306,000		1,306,000		—		—
Equity-small cap	285,000		285,000		—		—
Equity-international	1,772,000		1,772,000		—		—
Fixed income	5,369,000		5,369,000		—		—
Real estate	799,000		799,000		—		—
Money market	401,000		401,000		—		—

Total mutual funds/ETFs	12,894,000		12,894,000		—		—

Grand total	$	14,442,000	$	14,442,000	$	—	$	—

We expect to contribute $290,000 to our defined benefit pension plans in 2017.

Estimated future benefit payments are as follows:

2017	$	1,168,000
2018	$	772,000
2019	$	795,000
2020	$	861,000
2021	$	886,000
2022-2026	$	5,328,000

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 contribution 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. During 2016, 2015 and 2014, we recorded expenses of $124,000, $99,000 and $126,000, respectively, related to the SERP. During 2016, 2015 and 2014, we contributed $99,000, $126,000 and $115,000 to the plan, respectively. The liability for SERP pension benefits was $122,000 and $97,000 as of December 31, 2016 and 2015, respectively.

We maintain a defined contribution 401(k) plan which permits participation by substantially all employees. Our matching contributions to the 401(k) plan were $833,000, $874,000 and $829,000 for the years ended December 31, 2016, 2015 and 2014, respectively.