Note 6. Components of Net Periodic Benefit Cost

The Bank has a noncontributory defined benefit pension plan (the “Plan”) covering its full-time employees who had attained age 21 with at least one year of service as of April 1, 2003, the date on which the Plan was frozen. All participants in the Plan are 100% vested. The Plan’s assets are invested in investment funds and group annuity contracts currently managed by the Principal Financial Group and Allmerica Financial.

The Company, in its effort to lower and reduce the volatility of its future pension costs, offered a lump sum pension distribution option to its vested terminated employees. For the three and six months ended June 30, 2014, the Plan paid $4.3 million to those employees that elected to receive lump sum pension distributions and the Company realized an associated charge of $1.3 million. This charge was a pro rata share of the unrecognized losses recorded in other comprehensive income.

In addition to pension benefits, certain health care and life insurance benefits are currently made available to certain of the Bank’s retired employees. The costs of such benefits are accrued based on actuarial assumptions from the date of hire to the date the employee became fully eligible to receive the benefits. Effective January 1, 2003, eligibility for retiree health care benefits was frozen as to new entrants, and benefits were eliminated for employees with less than 10 years of service as of December 31, 2002. Effective January 1, 2007, eligibility for retiree life insurance benefits was frozen as to new entrants, and retiree life insurance benefits were eliminated for employees with less than 10 years of service as of December 31, 2006.

Net periodic benefit (increase) cost for pension benefits and other post-retirement benefits for the three and six months ended June 30, 2014 and 2013 includes the following components (in thousands):



	Three months ended June 30,									Six months ended June 30,
	Pension benefits					Other post- retirement benefits				Pension benefits					Other post- retirement benefits
	2014			2013		2014		2013		2014			2013		2014		2013
Service cost	$	—		—		42		60		$	—		—		84		120
Interest cost	352			318		272		245		704			636		544		490
Expected return on plan assets	(894		)	(792	)	—		—		(1,788		)	(1,584	)	—		—
Amortization of prior service cost	—			—		(1	)	(1	)	—			—		(2	)	(2	)
Amortization of the net loss	93			338		(51	)	4		186			676		(102	)	8
Net periodic benefit (increase) cost	$	(449	)	(136	)	262		308		$	(898	)	(272	)	524		616

In its consolidated financial statements for the year ended December 31, 2013, the Company previously disclosed that it does not expect to contribute to the Plan in 2014. As of June 30, 2014, no contributions to the Plan have been made.

The net periodic benefit cost (increase) for pension benefits and other post-retirement benefits for the three and six months ended June 30, 2014 were calculated using the actual January 1, 2014 pension valuation and the other post-retirement benefits valuations.