NOTE 14.

PENSION PLAN

The Company maintains a Defined Benefit Pension Plan (the “Pension Plan”) which prior to December 31, 2011 was for all employees who had attained the age of 21 and completed one year of service. The pension benefits were based primarily on years of service and the average compensation for the five highest consecutive years during the final ten years of employment. The benefit formula generally provided for a life annuity benefit.

Effective December 31, 2011, the Company amended its Pension Plan to freeze participants’ benefits with no future accruals after that date. Any current or future employee who was not a participant of the Pension Plan on December 31, 2011 will not be eligible to enter the Pension Plan. In January 2013, the Company made a cash contribution to the Pension Plan of $84,600 related to the 2012 Pension Plan year. The Company did not make any contributions related to the 2013 Pension Plan year during year ended December 31, 2013.

On October 23, 2013 the Company’s Board of Directors approved the commencement of the steps necessary to terminate the Pension Plan, pursuant to the Pension Plan, and, if necessary, for the Company to make the required level of contribution whereby the Pension Plan would have sufficient funds to pay all benefits owed participants and beneficiaries. On January 22, 2014, the Company’s Board of Directors approved the termination of the Pension Plan effective March 31, 2014. Termination of the Pension Plan will be completed through the distribution of the Pension Plan assets to participants and beneficiaries through either the purchase of an annuity from an insurance company or, payment of the benefit owed in a one-time lump sum payment based on a final calculation of benefit as of March 31, 2014. While the Company expects that the aforementioned distribution of the Pension Plan assets will be completed prior to December 31, 2014, there can be no assurance that the Company will complete the termination of the Pension Plan or if completed, the timing within which the termination will occur.

The Company uses a December 31 measurement date.

Following are the components of the Net Period Pension Cost (Benefit):


	December 31,
	2013			2012			2011
Service Cost	$	87,496		$	94,374		$	298,378
Interest Cost		385,884			406,689			455,732
Actual Return on Plan Assets		(1,310,053	)		(932,366	)		(396,687	)
Amortization of Unrecognized Transition Loss (Gain) from Earlier Periods		91,111			69,699			(7,487	)
Amortization of Unrecognized Prior Service Cost		—			—			21,218
Amortization of Net Gain (Loss) from Earlier Periods		736,025			390,400			(129,257	)

Net Periodic Pension Cost (Benefit)	$	(9,537	)	$	28,796		$	241,897

The Company made contributions totaling $84,600 in 2013 and $473,540 in 2012.

The change in projected benefit obligation is as follows:


	December 31,
	2013			2012
Benefit Obligation at Beginning of Year	$	9,827,454		$	9,309,585
Service Cost		87,496			94,374
Interest Cost		385,884			406,689
Actuarial Loss (Gain)		(804,080	)		636,013
Benefits and Plan Expenses Paid		(644,492	)		(619,207	)

Benefit Obligation at End of Year	$	8,852,262		$	9,827,454

The change in plan assets is as follows:


	December 31,
	2013			2012
Fair Value of Plan Assets at Beginning of Year	$	8,509,771		$	7,723,072
Actual Return on Plan Assets		1,310,053			932,366
Employer Contribution		84,600			473,540
Plan Expenses Paid		(71,585	)		(84,131	)
Benefits Paid		(572,907	)		(535,076	)

Fair Value of Plan Assets at End of Year	$	9,259,932		$	8,509,771

The funded status of the pension obligation consists of the following:


	December 31,
	2013			2012
Estimated Pension Benefit Obligation
Projected Benefit Obligation	$	(8,852,262	)	$	(9,827,454	)
Fair Value of Plan Assets		9,259,932			8,509,771

Accrued Net Pension Asset (Obligation)	$	407,670		$	(1,317,683	)

The increase in the Net Pension Asset, is due primarily to gains in the underlying pension assets, as well as a change in the discount rate from 4% to 5%.

The actuarial assumptions made to determine the projected benefit obligation and the fair value of plan assets are as follows:


	December 31,
	2013			2012
Weighted Average Discount Rate		5.00	%		4.00	%
Weighted Average Asset Rate of Return		7.00	%		7.00	%
Compensation Scale		N/A			N/A

The Company uses the “Citigroup Pension Liability Index” to determine the discount rate. The weighted average asset rate of return is primarily based on both historical and projected future returns of the portfolio as a whole.

Amortization Periods

The transition liability (asset), was considered fully amortized as a result of the 2011 curtailment.

The excess of the unrecognized (gain) or loss (if any) over the larger of 10% of the projected benefit obligation or 10% of the market related value of assets is amortized in level amounts over 12.60 years.

The prior service cost re-established on January 1, 2001, was considered fully amortized as a result of the 2011 curtailment.

The prior service cost established on January 1, 2002, was considered fully amortized as a result of the 2011 curtailment.

Funding Policy

Periodic employer contributions are made in conformance with minimum funding requirements and maximum deductible limitations.

Benefit Payments and Other Disbursements

During the measurement period, disbursements from Pension Plan assets were as follows:


	December 31,
	2013		2012
Benefit Payments	$	572,907	$	535,076
Administrative Expenses		71,585		84,131

Total	$	644,492	$	619,207

Unrecognized (Gain) or Loss

The unrecognized (gain) or loss determined subsequent to last year’s measurement date is determined as follows:


Liability loss determined from the January 1, 2013 census and included in this year’s net periodic cost	$	129,024
Asset gain occurring over the measurement period		(736,025	)
Gain due to assumption changes effective as of December 31, 2013		(933,104	)

Total unrecognized gain	$	(1,540,105	)

Plan Assets

The Company’s investment policy for pension funds is to achieve four major objectives as follows:

Growth in the invested assets to maintain future purchasing power;

Provide a stable, increasing stream of investment income to support needs;

Ensure the preservation of asset values equal to or greater than the nominal book value of assets over the intermediate term or a complete economic cycle, whichever is longer; and

Maintain liquidity.

The allocation of investments is targeted at 60% in common equities and 40% in fixed income securities, exclusive of cash and cash equivalents with a typical 10% range of fluctuation. Equity securities primarily include investments in large-cap, mid-cap, and small-cap companies located in the United States and internationally. Fixed income securities primarily include corporate bonds of diversified industries and government bonds primarily located in the United States. No single security, except short-term obligations of the U.S. government, shall constitute more than 4% of consolidated assets.

The Pension Plan’s weighted average asset allocations at December 31, 2013 and 2012 by asset category are as follows:


	December 31,
	2013			2012
Cash and Cash Equivalents		3	%		6	%
Equity Securities		66	%		63	%
Fixed Income Securities		30	%		31	%
Alternative Investments		1	%		0	%

Total		100	%		100	%

The following is a table of the Fair Values of Pension Plan Assets and Fair Value Measurements at December 31, 2013 and 2012 (measured with quoted prices in active markets – Level 1 inputs):


	December 31,
	2013		2012
Cash and Cash Equivalents	$	263,452	$	369,174
Equity Securities		6,134,969		5,305,492
Fixed Income Securities		2,730,912		2,835,105
Alternative Investments		130,599		—

Total	$	9,259,932	$	8,509,771

The long-term rate of return on Pension Plan assets represents an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income, and alternative investments. When determining the long-term rate of return on Pension Plan assets, the Company considers long-term rates of return on the asset classes (both historical and forecasted) in which the Company expects the pension funds to be invested.

Cash Flows

The Company makes periodic contributions in accordance with minimum funding requirements and maximum allowable deductions. It is estimated that no contribution will be required for 2014.

Estimated Future Benefit Payments

If termination of the Pension Plan is completed prior to December 31, 2014, the benefit payments will have been satisfied, otherwise the following benefit payments, which reflect expected future service as appropriate, would be expected to be paid.


Year Ending December 31,	Amount
2014	$	646,200
2015		659,900
2016		668,100
2017		671,900
2018		671,900
2019-2023		3,522,100

The following assumptions have been made regarding estimated benefit payments:

•

All currently retired participants survive through 2023;

•

All currently active participants survive and retire on their normal retirement dates; and

•

No additional benefits will accrue on or after January 1, 2012.