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 $0.7 million and $0.1 million, respectively, at December 31, 2018 and $0.1 million and $0.7 million, respectively, at December 31, 2017. The accumulated benefit obligations of the first two plans at December 31, 2018 and December 31, 2017 were both $0.6 million, and are included in accrued liabilities.

Defined Contribution 401(K) Plans

We sponsor a 401(k) defined contribution plan for all our employees. The plan 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. Our provision for matching and profit sharing contributions for the three years ended December 31, 2018, 2017, and 2016 was $2.6 million, $2.7 million, and $2.7 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 the 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”). As part of the acquisition of CTP, we acquired their defined benefit pension plan (the “CTP Pension Plan”), which covers certain current and retired employees that was fully funded by CTP as of the acquisition date of April 23, 2018. The CTP Pension Plan has been suspended as of the acquisition date but continues to cover certain current and former CTP employees. The CTP Pension Plan gross assets, liabilities, and current year expense are immaterial for disclosure purposes. The CTP Pension Plan is in the process of being liquidated with a termination date of July 31, 2018 and it may take up to 12 to 18 months to be completed.

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



	(In thousands) Years Ended December 31,
	2018			2017			2016
Service cost	$	601		$	531		$	531
Interest cost	1,268			1,329			1,367
Expected return on plan assets	(1,784		)	(1,530		)	(1,482		)
Amortization of actuarial losses	743			810			762
Net periodic pension cost	$	828		$	1,140		$	1,178

The components of the reclassifications of net actuarial losses from accumulated other comprehensive loss to net income for 2018 were as follows:



	(In thousands) Year Ended December 31,
	2018
Amortization of actuarial loss - total before tax ⁽¹⁾	$	743
Tax benefit	(173		)
Net of tax	$	570


(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 2019 is $0.9 million.

The obligations, fair value of plan assets, and funded status of both plans are as follows:



	(In thousands) December 31,
	2018			2017
Change in benefit obligation⁽¹⁾
Beginning benefit obligation (January 1)	$	36,002		$	33,154
Service cost	601			531
Interest cost	1,268			1,329
Actuarial (gain) loss	(2,415		)	2,449
Benefits paid	(1,505		)	(1,461		)
Ending benefit obligation (December 31)	$	33,951		$	36,002
Change in plan assets
Beginning fair value of plan assets (January 1)	$	25,646		$	22,015
Return on assets	(1,951		)	3,481
Employer contribution	1,559			1,611
Benefits paid	(1,505		)	(1,461		)
Ending fair value of plan assets (December 31)	$	23,749		$	25,646
Funded status (underfunded)	$	(10,202	)	$	(10,356	)
Amounts recognized in the consolidated balance sheet
Current liabilities	$	580		$	560
Non-current liabilities	$	9,622		$	9,796
Unrecognized loss included in accumulated other comprehensive loss
Beginning unrecognized loss, before tax (January 1)	$	8,908		$	9,220
Amortization	(743		)	(810		)
Liability (gain) loss	(2,415		)	2,449
Asset loss (gain)	3,735			(1,951		)
Ending unrecognized loss, before tax (December 31)	9,485			8,908
Tax impact	(2,263		)	(3,309		)
Unrecognized loss included in accumulated other comprehensive loss, net of tax	$	7,222		$	5,599


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

On December 31, 2018, our annual measurement date, the accumulated benefit obligation exceeded the fair value of the plans assets by $10.2 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, 2018 and 2017 of $7.2 million and $5.6 million, respectively, which decreased shareholders’ equity. 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 which will cause the Pension Plan to return to fully funded status.

Our Pension Plan asset allocations at December 31, 2018 and 2017, by asset category, were as follows:



	December 31,
	2018		2017
Equity securities	57	%	70	%
Cash and equivalents	1	%	1	%
Debt securities	42	%	29	%
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	0-5%
Fixed income securities	15-75%
Equities	30-80%

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, 2018
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	153	$	—	$	—	$	153
Fixed income securities	3,647		—		—		3,647
Equities⁽¹⁾	1,475		—		—		1,475
Other investments	851		—		—		851
Total plan assets at fair value	$	6,126	$	—	$	—	6,126
Pooled funds							17,623
Total fair value of plan assets							$	23,749



	(In thousands) Year Ended December 31, 2017
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	135	$	—	$	—	$	135
Fixed income securities	3,494		—		—		3,494
Equities⁽¹⁾	1,625		—		—		1,625
Other investments	910		—		—		910
Total plan assets at fair value	$	6,164	$	—	$	—	6,164
Pooled funds							19,482
Total fair value of plan assets							$	25,646


(1)	Represents mutual funds and commingled accounts which invest primarily in equities, but may also hold fixed income securities, cash and other investments. Commingled funds with publicly quoted prices and actively traded are classified as Level 1 investments.

Pooled funds are measured using the net asset value (“NAV”) as a practical expedient for fair value as permissible under the accounting standard for fair value measurements and have not been categorized in the fair value hierarchy in accordance with ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” Pooled fund NAVs are provided by the trustee and are determined by reference to the fair value of the underlying securities of the trust, less its liabilities, which are valued primarily through the use of directly or indirectly observable inputs. Depending on the pooled fund, underlying securities may include marketable equity securities or fixed income securities.

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 used 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,
	2018		2017		2016
Discount rate used to determine pension expense
Pension Plan	3.64	%	4.18	%	4.55	%
LaBarge Retirement Plan	3.40	%	3.75	%	4.00	%

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



	December 31,
	2018		2017		2016
Discount rate used to determine value of obligations
Pension Plan	4.23	%	3.64	%	4.18	%
LaBarge Retirement Plan	4.00	%	3.40	%	3.75	%
Long-term rate of return - Pension Plan only	7.00	%	7.00	%	7.50	%

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
2019	$	1,206	$	581
2020	1,282		561
2021	1,378		538
2022	1,479		512
2023	1,522		483
2024 - 2028	8,741		1,991

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 $0.9 million to the plans in 2019.