7. Pension Plan

12 Months Ended

Jun. 30, 2013

Notes to Financial Statements

Pension Plan

The Company has a non-contributory defined benefit retirement plan covering substantially all its employees which is qualified under the Internal Revenue Code (the Plan). In general, employees can receive an amount per month equal to 0.8% multiplied by their years of service (up to a maximum of 35 years of service) multiplied by their average monthly earnings (based on earnings during the five years preceding retirement), up to a specified maximum of $850 per month for life assuming normal retirement at age 65. Upon the employee’s death, 50% of the monthly benefit is payable to the employee’s spouse for life. The Company’s policy is to contribute the amounts allowable under Internal Revenue Service regulations.

The investment policy of the Company for its pension plan is to maximize value within the context of providing benefit security for Plan participants. The Plan assets are invested in a fixed income investment account.

The Company has assumed, based upon high quality corporate bond yields with similar maturities as the benefit obligation, AA rated or higher, that its assumed discount rate will be 4.50% as of June 30, 2013, which is higher than the assumed discount rate of 3.75% as of June 30, 2012. The Company’s management conducts an analysis which includes a review of plan asset investments and projected future performance of those investments to determine the plan’s assumed long-term rate of return.

The Company expects to continue to contribute within the range of legally acceptable contributions as identified by the Plan’s enrolled actuary. The Company made cash contributions to the Plan of approximately $124,000 and $100,000 in fiscal years 2013 and 2012 respectively. The estimated fiscal year 2014 minimum contributions to the Plan are approximately $133,000.

The following tables provide information about changes in the benefit obligation and Plan assets and the funded status of the Company’s pension plan.

	2013			2012
Change in benefit obligation:
Benefit obligation at beginning of year	$	2,617,579		$	1,997,461
Service cost		67,443			56,779
Interest cost		96,512			103,211
Actuarial (gain)/loss		(185,734	)		495,042
Benefits paid plus administrative expenses		(42,911	)		(34,914	)
Benefit obligation at end of year	$	2,552,889		$	2,617,579
Change in plan assets:
Fair value of plan assets at beginning of Year	$	1,538,081		$	1,418,515
Actual return on plan assets		63,811			54,404
Employer contributions		123,962			100,076
Benefits paid plus administrative expenses		(42,911	)		(34,914	)
Fair value of plan assets at end of year	$	1,682,943		$	1,538,081
Funded status		(869,946	)		(1,079,498	)
Unrecognized net loss		714,986			1,013,706
Accrued pension expense	$	(154,960	)	$	(65,792	)

Measurement Date	July 1, 2013			July 1, 2012
Weighted Average Assumptions
Discount rate		4.50	%		3.75	%
Expected long-term rate of return on assets		5.25	%		5.25	%
Rate of increase in future compensation levels		3.00	%		3.00	%

Set forth below is a summary of the amounts reflected in the Company’s Balance Sheet at the end of the last two fiscal years:

	June 30, 2013			June 30, 2012
Total accrued pension liability	$	(869,946	)	$	(1,079,498	)
Accumulated other comprehensive loss, pre-tax		714,986			1,013,706
Net amount recognized	$	(154,960	)	$	(65,792	)

The accumulated benefit obligation for the Plan was $2,552,889 and $2,617,579 at June 30, 2013, and 2012, respectively.

Other changes in Plan assets and benefit obligations recognized in the Other Comprehensive Loss for each fiscal year are as follows:

	June 30, 2013			June 30, 2012
Change in net loss /(gain)	$	(167,490	)	$	516,258
Amortization of net loss		(131,230	)		(36,173	)
	$	(298,720	)	$	480,085

Accumulated Other Comprehensive Loss consisted of the following amounts that had not, as of year end, been recognized in net benefit cost.

	June 30, 2013		June 30, 2012
Unrecognized Net Loss	$	714,986	$	1,013,706

Amounts included in Accumulated Other Comprehensive Loss as of June 30, 2013 that are expected to be recognized as a component of benefit cost during fiscal 2014 consist of amortization of net loss of $131,230.

Components of periodic pension costs as of June 30, 2013 and 2012 are as follows:

	2013			2012
Service cost-benefits earned during the period	$	67,443		$	56,779
Interest cost on projected benefit obligation		96,512			103,211
Expected return on plan assets		(82,055	)		(75,620	)
Amortization of actuarial loss		131,230			36,173
Net periodic pension cost	$	213,130		$	120,543

Weighted Average Assumptions for Net Periodic Pension Expense

	2013			2012
Discount Rate		3.75	%		5.25	%
Expected Long-term Rate of Return on Assets		5.25	%		5.25	%
Rate of Increase in Future Compensation Levels		3.00	%		3.00	%

Retirement Plan for Employees of Dewey Electronics Corporation’s weighted average asset allocations at June 30, 2013, and 2012, by asset category are as follows:

	2013			2012
Asset Category
Fixed Funds with Guaranteed Interest Rates		100	%		100	%
Total		100	%		100	%

Fair Value of Plan Assets

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). See Note 1-M, “Fair Value Measurements,” for a description of the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

All of the Plan’s investments are in fixed funds with guaranteed interest rates which are valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active market. Inputs used vary by type of security, but include spreads, yields, rate benchmarks, rate of prepayment, cash flows, rating changes and collateral performance and type. All fixed income funds are included as a Level 3 measurement.

The following table sets forth a summary of changes of fair value of the Retirement Plan’s Level 3 assets for the fiscal year ended June 30, 2013.

	All Fixed Funds
Balance, June 30, 2012	$	1,538,081
Actual return on plan assets:
On assets still held at the reporting date		62,079
On assets sold during the period		1,732
Purchases and sales		81,051
Transfers in and/or out of Level 3		--
Balance June 30, 2013	$	1,682,943

The expected future benefit payments for the years ended June 30, are as follows:

2014	$	93,000
2015	$	101,000
2016	$	110,000
2017	$	122,000
2018	$	143,000
Five years thereafter	$	826,000