Employee Benefit Plans

Supplemental Retirement Plans

We have three unfunded supplemental retirement plans. The first plan was suspended in 1986, but continues to cover certain former executives. The second plan was suspended in 1997, but continues to cover certain current and retired directors. The third plan covers certain current and retired employees and further employee contributions to this plan were suspended on August 5, 2011. The liability for the third plan and interest thereon is included in accrued employee compensation and long-term liabilities and was approximately $0.5 million and $1.7 million, respectively, at December 31, 2015 and $0.3 million and $2.0 million, respectively, at December 31, 2014. The accumulated benefit obligations of the other two plans at December 31, 2015 and December 31, 2014 were approximately $0.9 million and $0.9 million, respectively, and are included in accrued liabilities.

Defined Contribution 401(K) Plans

We sponsor, for all our employees, two 401(k) defined contribution plans.The first plan covers all employees, other than employees at our Miltec subsidiary, and allows the employees to make annual voluntary contributions not to exceed the lesser of an amount equal to 25% of their compensation or limits established by the Internal Revenue Code. Under this plan, we generally provide a match equal to 50% of the employee’s contributions up to the first 6% of compensation, except for union employees who are not eligible to receive the match. The second plan covers only the employees at our Miltec subsidiary, and in 2013 the provisions of the Miltec plan were changed to be the same as our other plan. Prior to 2013, the Miltec plan allowed employees to make annual voluntary contributions not to exceed the lesser of an amount equal to 100% of their compensation or limits established by the Internal Revenue Code. Under this plan, Miltec generally (i) provided a match equal to 100% of the employee’s contributions up to the first 5% of compensation, (ii) contributions of 3% of an employee’s compensation annually, and (iii) contributions, at our discretion of 0% to 7% of an employee’s compensation annually. Our provision for matching and profit sharing contributions for the three years ended December 31, 2015, 2014, and 2013 was approximately $3.2 million, $3.3 million, and $3.1 million, respectively.

Other Plans

We have a defined benefit pension plan covering certain hourly employees of a subsidiary (the “Pension Plan”). Pension plan benefits are generally determined on the basis of the retiree’s age and length of service. Assets of this defined benefit pension plan are composed primarily of fixed income and equity securities. We also have a retirement plan covering certain current and retired employees (the “LaBarge Retirement Plan”).

The components of net periodic pension cost for both plans are as follows:



	(In thousands) Years Ended December 31,
	2015			2014			2013
Service cost	$	785		$	693		$	843
Interest cost	1,350			1,278			1,160
Expected return on plan assets	(1,495		)	(1,400		)	(1,222		)
Amortization of actuarial losses	887			419			1,093
Net periodic pension cost	$	1,527		$	990		$	1,874

The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for 2015 were as follows:



	(In thousands) Year Ended December 31,
	2015
Amortization of actuarial loss - total before tax ⁽¹⁾	$	887
Tax benefit	(330		)
Net of tax	$	557


(1)	The amortization expense is included in the computation of periodic pension cost and is a decrease to net income upon reclassification from accumulated other comprehensive loss.

The estimated net actuarial loss for both plans that will be amortized from accumulated other comprehensive loss into net periodic cost during 2016 is approximately $0.8 million.

The obligations and funded status of both plans are as follows:



	(In thousands) December 31,
	2015			2014
Change in benefit obligation⁽¹⁾
Beginning benefit obligation (January 1)	$	33,299		$	28,438
Service cost	785			693
Interest cost	1,350			1,278
Actuarial (gain) loss	(2,599		)	4,117
Benefits paid	(1,325		)	(1,227		)
Ending benefit obligation (December 31)	$	31,510		$	33,299
Change in plan assets
Beginning fair value of plan assets (January 1)	$	19,725		$	18,367
Return on assets	(296		)	669
Employer contribution	1,829			1,916
Benefits paid	(1,325		)	(1,227		)
Ending fair value of plan assets (December 31)	$	19,933		$	19,725
Funded status (under funded)	$	(11,577	)	$	(13,574	)
Amounts recognized in the consolidated balance sheet
Current liabilities	$	527		$	464
Non-current liabilities	$	11,050		$	13,110
Unrecognized loss included in accumulated other comprehensive loss
Beginning unrecognized loss, before tax (January 1)	$	10,614		$	6,183
Amortization	(887		)	(419		)
Liability (gain) loss	(2,599		)	4,117
Asset loss	1,791			733
Ending unrecognized loss, before tax (December 31)	8,919			10,614
Tax impact	(3,316		)	(3,970		)
Unrecognized loss included in accumulated other comprehensive loss, net of tax	$	5,603		$	6,644
Prepaid benefit cost included in other assets	$	1,984		$	1,832
Accrued benefit cost included in other liabilities	$	4,646		$	4,795


(1)	Projected benefit obligation equals the accumulated benefit obligation for the plans.

On December 31, 2015, our annual measurement date, the accumulated benefit obligation exceeded the fair value of the plans assets by approximately $11.6 million. Such excess is referred to as an unfunded accumulated benefit obligation. We recorded unrecognized loss included in accumulated other comprehensive loss, net of tax at December 31, 2015 and 2014 of approximately $5.6 million and $6.6 million, respectively, which decreased shareholders’ equity and was included in other long-term liabilities. This charge to shareholders’ equity represents a net loss not yet recognized as pension expense. This charge did not affect reported earnings, and would be decreased or be eliminated if either interest rates increase or market performance and plan returns improve or contributions cause the Pension Plan to return to fully funded status.

Our Pension Plan asset allocations at December 31, 2015 and 2014, by asset category, were as follows:



	December 31,
	2015		2014
Equity securities	74	%	76	%
Cash and equivalents	6	%	4	%
Debt securities	20	%	20	%
Total⁽¹⁾	100	%	100	%


(1)	Our overall investment strategy is to achieve an asset allocation within the following ranges to achieve an appropriate rate of return relative to risk.



Cash	0-25%
Fixed income securities	0-50%
Equities	50-95%

Pension Plan assets consist primarily of listed stocks and bonds and do not include any of the Company’s securities. The return on assets assumption reflects the average rate of return expected on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. We select the return on asset assumption by considering our current and target asset allocation. We consider information from various external investment managers, forward-looking information regarding expected returns by asset class and our own judgment when determining the expected returns.



	(In thousands) Year Ended December 31, 2015
	Level 1		Level 2		Level 3		Total
Cash and other investments	$	1,149	$	—	$	—	$	1,149
Fixed income securities	3,986		—		—		3,986
Equities⁽¹⁾	9,468		5,330		—		14,798
Total	$	14,603	$	5,330	$	—	$	19,933



	(In thousands) Year Ended December 31, 2014
	Level 1		Level 2		Level 3		Total
Cash and other investments	$	886	$	—	$	—	$	886
Fixed income securities	3,896		—		—		3,896
Equities⁽¹⁾	9,687		5,256		—		14,943
Total	$	14,469	$	5,256	$	—	$	19,725


(1)	Represents mutual funds and commingled accounts which invest primarily in equities, but may also hold fixed income securities, cash and other investments.

The valuation techniques used to determine fair value are as follows. Commingled funds with publicly quoted prices and active trading are classified as Level 1 investments. For commingled funds that are not publicly traded and have ongoing subscription and redemption activity, the fair value of the investment is the net asset value (“NAV”) per share, derived from the underlying securities’ quoted prices in active markets. These funds are classified as Level 2 investments.

The assumptions used to determine the benefit obligations and expense for our two plans are presented in the tables below. The expected long-term return on assets, noted below, represents an estimate of long-term returns on investment portfolios consisting of a mixture of fixed income and equity securities. The estimated cash flows from the plans for all future years are determined based on the plans’ population at the measurement date. We took the expected benefit payouts from the plans for each year into the future, and discounted them back to the present using the Wells Fargo yield curve rate for that duration.

The weighted-average assumptions used to determine the net periodic benefit costs under the two plans were as follows:



	Years Ended December 31,
	2015		2014		2013
Discount rate used to determine pension expense
Pension Plan	4.25	%	4.75	%	4.00	%
LaBarge Retirement Plan	3.70	%	4.00	%	3.10	%

The weighted-average assumptions used to determine the benefit obligations under the two plans were as follows:



	December 31,
	2015		2014		2013
Discount rate used to determine value of obligations
Pension Plan	4.55	%	4.25	%	4.75	%
LaBarge Retirement Plan	4.00	%	3.70	%	4.00	%
Long-term rate of return - Pension Plan only	7.50	%	7.50	%	8.00	%

The following benefit payments under both plans, which reflect expected future service, as appropriate, are expected to be paid:



	(In thousands)
	Pension Plan		LaBarge Retirement Plan
2016	$	1,038	$	527
2017	1,062		521
2018	1,172		512
2019	1,213		500
2020	1,286		485
Thereafter	7,442		2,139

Our funding policy is to contribute cash to our plans so that the minimum contribution requirements established by government funding and taxing authorities are met. We expect to make contributions of approximately $0.9 million to the plans in 2016.