NOTE 8: EMPLOYEE BENEFIT PLANS

Multi-Employer Pension Plans

The Company participates in multi-employer pension plans that provide benefits to certain employees covered by collective bargaining agreements. The Company paid contributions to the plans based on specified amounts per day’s work for covered employees. Expense for these plans is recognized in operating expenses – compensation and benefits on the consolidated statements of comprehensive loss as contributions are funded. In the event of termination or withdrawal from the plans or certain other events, the Company could be liable for its share of vested benefits over plan assets.

The Company is a participating employer in the Central States, Southeast and Southwest Areas Pension Plan (the “Central States Fund”), a multi‑employer pension plan. The Company has been informed that the Central States Fund’s funding status has been adversely affected by severe investment losses in recent years, a decline in the number of active participants and an increasing number of retirees among other factors. Consequently, employer contribution levels set by collective bargaining agreements are expected to be inadequate to meet the minimum funding standard requirements imposed by the Internal Revenue Code and related regulations. On December 16, 2014, Congress enacted The Kline-Miller Multi-employer Pension Reform Act (the “MPRA”), which established a new process for multi-employer pension plans to propose a temporary or permanent reduction of pension benefits if the plan is projected to become insolvent. In order for the reductions to take place, the plan trustees have to submit an application to the U.S. Department of Treasury (the “Treasury”) showing that proposed pension benefit reductions are necessary to keep the plan from becoming insolvent. On September 25, 2015, the Central States Pension Fund submitted a proposed pension rescue plan to the Treasury under the MPRA and on May 6, 2016, the Treasury notified the Central States Pension Fund that the application was rejected.

The Company contributed $40.3 million, $42.4 million and $42.5 million to the U.S. and Canadian multi-employer pension plans for the years ended December 31, 2016, 2015 and 2014, respectively. The following table provides additional information related to its participation in U.S. multi-employer pension plans for the year ended December 31, 2016:

Expiration

Pension

date of

Protection Act

FIP/RP Status

collective

Zone Status(a)

Pending/

5% Contributor

Contributions (in thousands)

Surcharge

bargaining

Fund

Plan's EIN

2016

2015

Implemented

2016

2015

2014

2016

2015

2014

Imposed

agreement

Central States, Southeast and Southwest Areas Pension Plan

36-6044243

Red

Implemented

Yes

35,298

35,639

34,663

8/31/2015

Teamsters Union Local No. 710 Pension Fund

36-2377656

Green

N/A

541

608

412

8/31/2015

Teamsters Local 560 Benefit Fund

73-0493030

Red

Implemented

Yes

1,364

1,588

1,939

8/31/2015

Central Pennsylvania Teamsters Defined Benefit Plan(b)

23-6262789

Green

N/A

8/31/2015

Teamster Pension Fund of Philadelphia and Vicinity(c)

23-1511735

Yellow

Implemented

153

402

372

8/31/2015

Teamsters Joint Council No. 83 of Virginia Pension Fund

54-6097996

Yellow

Implemented

273

314

386

8/31/2015

New England Teamsters & Trucking Industry Pension Fund

04-6372430

Red

Implemented

280

311

232

8/31/2015

Freight Drivers and Helpers Local Union No. 557

52-6118055

Red

Implemented

Yes

728

1,295

1,622

8/31/2015

Western Conference of Teamsters Pension Plan(d)

91-6145047

Green

N/A

171

8/31/2015

Total contributions

38,641

40,240

39,830

(a)

The Pension Protection Zone Status is based on information that the Company obtained from the plans’ Forms 5500. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available for 2016 and 2015 is for the plan’s year-end during calendar years 2015 and 2014, respectively. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded.

(b)

The Company fully withdrew from the Central Pennsylvania Teamsters Defined Benefit Plan during 2016 and as of December 31, 2016, is no longer a participating employer.

(c)

The Company fully withdrew from the Teamster Pension Fund of Philadelphia and Vicinity during 2016 and as of December 31, 2016, is no longer a participating employer.

(d)

The Company fully withdrew from the Western Conference of Teamsters Pension Plan during 2015 and as of December 31, 2015, is no longer a participating employer.

In connection with the four Canadian defined benefit plans, the Company contributed approximately $0.9 million, $1.8 million, and $2.3 million for the years ended December 31, 2016, 2015, and 2014, respectively, to such plans. As these are foreign plans not subject to ERISA or the Pension Protection Act, they have not been included in the above tabular disclosure. The related Canadian collective bargaining agreements expire between May 2016 and November 2021.

Withdrawal Liability

Pursuant to collective bargaining agreements that are currently in place, the Company contributes to ten different multi-employer pension funds on behalf of covered union employees. On the most recent withdrawal liability estimates provided to the Company by the respective funds, six of the ten multi-employer pension funds are underfunded exposing the Company to aggregate potential liability exceeding $1.2 billion if it were to withdraw from all of these funds, with the largest potential withdrawal liability exposure of $1.08 billion related to the Central States Fund. If the Company were to withdraw from any multi-employer pension fund, either completely or partially, whether voluntarily or otherwise, it could be assessed with a multi‑million dollar withdrawal liability. The withdrawing employer can pay the obligation in a lump sum or over time as determined by the employer’s annual contribution rate prior to withdrawal, which, in some cases, could be up to 20 years.

If contribution base units (“CBU”) decline during a three-year period, the Company calculates an estimated liability if it has triggered a partial or full withdrawals from the multiemployer pension plans it participates in. Although the ultimate liabilities are determined based on actual CBUs, the Company records initial estimated liabilities resulting from such partial or full withdrawals and re-evaluates the liabilities as additional information became known, including notifications from the trustee.

Assessed and estimated partial or full withdrawal liabilities as of December 31, 2016 and 2015 were as follows:


					Expense
	2015		Payments		(Reclassification)		2016
Note Payable (A)	$	1,170	$	(280)	$	—	$	890
Note Payable (B)		3,232		(145)		—		3,087
Note Payable (C)		3,328		(888)		—		2,440
Note Payable (D)		2,173		(2,173)		—		—
Note Payable (E)		—		(1,684)		1,882		198
Note Payable (F)		—		—		290		290
Estimated pension withdrawal liabilities (G)		—		—		2,863		2,863
Estimated pension withdrawal liabilities (H)		—		—		162		162
Estimated pension withdrawal liabilities (I)		2,231		(349)		(1,882)		—

Partial and full withdrawal assessments (Note Payables) are recorded within current portion and long-term debt on the consolidated balance sheets:

(A)

Freight Drivers Local and Helpers Local Union No. 557 Pension Fund withdrawal liability with monthly payments of principal and interest of less than $0.1 million at a fixed interest rate of 6.4%, maturing October 1, 2019. In June 2009, the Company received a notice of assessment of partial withdrawal from the Freight Drivers and Helpers Local Union No. 557 Pension Fund (the “Drivers Fund”) due to a decline in its contributions to the Drivers Fund during a three year period from 2005 to 2007. The liability associated with this partial withdrawal totaled $2.6 million and is payable in monthly installments of principal and interest totaling less than $0.1 million with interest computed at 6.4%. Payments commenced in August 2009 and will continue through October 2019.

(B)

Automotive Industries Pension withdrawal liability with quarterly payments of principal and interest at a fixed rate of 6.5%, maturing December 31, 2031. In December 2011, the Company withdrew from the Automotive Industries pension plan, a multi-employer defined benefit pension plan. The liability associated with this full withdrawal totaled $3.6 million and is payable in quarterly installments of principal and interest totaling less than $0.1 million with interest computed at 7.25%. Payments commenced in March 2012 and will continue through December 2031.

(C)

Teamsters of Philadelphia and Vicinity Pension Plan withdrawal liability with quarterly payments of principal and interest of $0.3 million, maturing June 7, 2019. On July 9, 2015, the Company received an assessment from the Teamsters of Philadelphia and Vicinity Pension Plan (the “Philadelphia Plan”) indicating the Company has a partial withdrawal liability of $3.7 million related to the three year period ended December 31, 2011, and as a result the Company recorded $0.2 million of additional liability during the year ended December 31, 2015. The withdrawal assessment bears interest at a rate of 5.3% per annum and is payable in eleven equal quarterly installments of $0.3 million, with final payment of $0.3 million due on June 7, 2019.

(D)

Western Conference of Teamsters Pension Trust withdrawal liability with eight monthly payments of principal of $0.4 million and one final payment of $0.1 million, maturing June 10, 2016. On August 10, 2015, the Company received an assessment from the Western Conference of Teamsters Pension Trust (the “Western Conference Trust”) indicating the Company had a partial withdrawal liability of $3.4 million related to the three year period ended December 31, 2011, and as a result the Company recorded $0.3 million of additional expense during the year ended December 31, 2015. The assessed withdrawal bore interest at a rate of 7.0% per annum and was payable in seven equal monthly installments of $0.4 million beginning on October 10, 2015, a payment of $0.8 million on May 10, 2016, and with final payment in the amount of $0.1 million paid on June 10, 2016.

(E)

Western Conference Trust withdrawal liability with four monthly payments of principal of $0.4 million and one final payment of $0.2 million, maturing January 10, 2017. On July 8, 2016, the Company received a $1.9 million assessment in connection with triggering a partial withdrawal from the Western Conference Trust related to the three year period ended December 31, 2012, which was fully accrued as of December 31, 2015 and noted in footnote (I). The partial withdrawal assessment bore interest at a rate of 7.0% per annum and was payable in four equal monthly installments of $0.4 million beginning on September 10, 2016, with final payment in the amount of $0.1 million paid on January 10, 2017.

(F)

Western Conference Trust withdrawal liability with one payment of principal of $0.3 million maturing April 10, 2017. On January 10, 2017, we received a $0.3 million assessment in connection with triggering a partial withdrawal from the Western Conference Trust related to the 2013 plan year. As of December 31, 2016, the liability of $0.3 million related to the 2013 partial withdrawal for which notification was received from the Western Conference Pension Trust is included within current maturities of long-term debt on the consolidated balance sheet, does not bears interest and is payable in one payment of $0.3 due on April 10, 2017.

Estimated partial and full withdrawal liabilities are included within other liabilities on the consolidated balance sheets:

(G)

Estimated full withdrawal liability of Philadelphia Plan of $2.9 million as of December 31, 2016. During the year ended December 31, 2016, the Company estimated it had triggered a full withdrawal liability from the Philadelphia Plan due to the closure of one of the Company’s terminals during the second quarter of 2016. The Company recorded a $2.9 million estimate, net of previously recorded estimated partial withdrawal liabilities, for the full withdrawal liability during the year ended December 31, 2016.

(H)

Estimated full withdrawal liability of $0.2 million Central Pennsylvania Teamsters Defined Benefit Plan as of December 31, 2016. In December of 2016, we estimated that we had triggered a full pension withdrawal liability of $0.2 million from the Central Pennsylvania Teamsters Defined Benefit Plan. As a result, we recorded an estimated lability of $0.2 million during the year ended December 31, 2016.

(I)

Estimated withdrawal liability for the Western Conference Trust of $2.3 million as of December 31, 2015. As of December 31, 2015, the Company had recorded an estimated partial withdrawal liability of $2.2 million related to the three year period ended December 31, 2012 and for a full withdrawal liability as of December 31, 2015. The Company received a $1.9 million partial withdrawal assessment from the Western Conference Trust related to the three year period ended December 31, 2012, see footnote (E), and as a result reclassified the estimated liability from other liabilities to current portion and long-term debt on the consolidated balance sheets. During March 2016, the company also received a $0.3 million full withdrawal assessment for the three year period ended December 31, 2015, that was paid in one payment during May 2016 and as a result had no recorded estimated withdrawal liability as of December 31, 2016.

Defined Benefit Pension Plan

The Company has a noncontributory defined benefit pension plan (the “JCT Plan”) covering certain maintenance employees who meet the eligibility requirements. The Company’s funding policy is to make the annual contribution to the plan equal to the maximum amount that can be deducted for income tax purposes. The benefits are based on years of service times a fixed monthly amount.

The Company uses a December 31 measurement date for the plans. Information about the plans’ benefit obligations, assets and funded status are provided in the following tables:


(in thousands)	2016		2015
Change in benefit obligation
Beginning of year	$	6,571	$	6,565
Service cost		172		194
Interest cost		263		237
Actuarial gain		(94)		(158)
Curtailments, settlements, and special termination benefits		—		—
Benefits paid		(297)		(267)
End of year	$	6,615	$	6,571

(in thousands)	2016		2015
Change in fair value of plan assets
Beginning of year	$	4,716	$	4,751
Actual return on plan assets		(2)		169
Employer contributions		—		63
Settlement		—		—
Benefits paid		(297)		(267)
End of year		4,417		4,716
Funded status at end of year	$	(2,198)	$	(1,855)

The pension liability recognized on the consolidated balance sheets at December 31, 2016 and 2015 was $2.2 million and $1.9 million, respectively. Net actuarial gains (losses) recognized in accumulated other comprehensive income not yet recognized as components of net periodic benefit cost for the years ended December 31, 2016, 2015, and 2014 was $(0.1) million, less than $0.1 million and $(1.0) million, respectively.

Components of net periodic benefit cost are as follows:


(in thousands)	2016		2015		2014
Service cost	$	172	$	194	$	124
Interest cost		263		237		246
Expected return on plan assets		(307)		(312)		(313)
Amortization of net loss		131		133		104
Net periodic benefit cost	$	259	$	252	$	161

The estimated amount that will be recognized from accumulated other comprehensive income into net periodic benefit cost during the year ended December 31, 2017 is comprised of $0.1 million of actuarial net loss. Assumptions used to determine pension information for the plans were:


	2016		2015		2014
Expected return on assets	6.75	%	6.75	%	6.75	%
Discount rate for defined benefit obligation	4.00	%	3.70	%	3.70	%
Discount rate for net periodic benefit cost	4.00	%	4.00	%	4.54	%

The Company selected the discount rate based on weighted average market rates for a hypothetical portfolio of high-quality corporate bonds rated AA or better with maturities closely matched to the timing of projected benefit payments for each plan at its annual measurement date. The Company has estimated the long-term rate of return on plan assets based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations and recent changes in long-term interest rates based on publicly available information. The following benefit payments, which reflect expected future services as of December 31, 2016, are expected to be paid:


	(in thousands)
2017	$	346
2018		366
2019		370
2020		375
2021		364
2022-2026	$	1,860

Plan assets are held by a bank-administered trust fund, which invests the plan assets in accordance with the provision of the plan agreement. The plan agreements permit investments in equity securities, debt securities and cash and cash equivalents, based on certain target allocation percentages. Asset allocation is primarily based on a strategy to provide stable earnings while still permitting the plan to recognize potentially higher returns through a limited investment in equity securities. The target allocation percentages for 2016 and actual asset allocation percentages are as follows:


	Target					2016		2015
Asset Category	Allocations					Actual		Actual
Equity securities	50	%	to	70	%	61	%	67	%
Debt securities	30	%	to	50	%	37	%	32	%
Cash and cash equivalents	0	%	to	15	%	3	%	1	%

The following tables present the fair value measurements of assets of the plan measured at fair value on a recurring basis and the level within the fair value hierarchy as of December 31, 2016 and 2015:


	2016
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	111	$	111	$	—	$	—
Equity securities
U.S. companies		1,793		1,793		—		—
International companies		890		890		—		—
Fixed income securities
U.S. government		—		—		—		—
U.S. corporate bonds		1,623		—		1,623		—
Total	$	4,417	$	2,794	$	1,623	$	—


	2015
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	24	$	24	$	—	$	—
Equity securities
U.S. companies		2,606		2,606		—		—
International companies		564		564		—		—
Fixed income securities
U.S. government		742		—		742		—
U.S. corporate bonds		690		—		690		—
International bonds		90		—		90		—
Total	$	4,716	$	3,194	$	1,522	$	—

Contributions to the plan were $0.1 million for the year ended December 31, 2015, and no contributions to the plan were made during the years ended December 31, 2016 and 2014. During 2017, the Company expects to make contributions to the plan of $0.2 million.

Defined Contribution Plan

The Company has defined contribution plans for all eligible union and non-union employees. Employer contributions under these plans are discretionary. Participants may elect to make contributions to the plans by salary reduction subject to certain limits. Benefits are limited to plan assets, and the Company may amend or terminate the plans at any time. The Company contributed $0.9 million, $0.8 million, and $0.8 million of employer matching contributions for the years ended December 31, 2016, 2015, and 2014, respectively.