14. EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan and Unfunded Excess Benefit Plan

The Company sponsors a defined benefit pension plan covering substantially all of its employees. Benefits are based on years of service and the employee's compensation.

Effective January 1, 2008, the Company made the following changes to its defined benefit pension plan. These changes have been reflected in the computations within this note.

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Employees hired after December 31, 2007, will receive benefits under a cash balance plan.

•

Employees active on December 31, 2007, with age plus vesting service less than 55 years will receive a final pay-based pension benefit for service through December 31, 2007, plus a cash balance benefit for service after December 31, 2007.

•

Employees active on December 31, 2007, with age plus vesting service equaling or exceeding 55 years, will receive a final pay-based pension benefit for service both before and after December 31, 2007, with a modest reduction in the formula for benefits earned after December 31, 2007.

•

All participants terminating employment on or after December of 2007 may elect to receive a lump sum benefit.

The Company's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act ("ERISA") plus such additional amounts as the Company may determine to be appropriate from time to time. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.

Under the Pension Protection Act of 2006 ("PPA"), a plan could be subject to certain benefit restrictions if the plan's adjusted funding target attainment percentage ("AFTAP") drops below 80%. Therefore, the Company may make additional contributions in future periods to maintain an AFTAP of at least 80%. In general, the AFTAP is a measure of how well the plan is funded and is obtained by dividing the plan's assets by the plan's funding liabilities. AFTAP is based on participant data, plan provisions, plan methods and assumptions, funding credit balances, and plan assets as of the plan valuation date. Some of the assumptions and methods used to determine the plan's AFTAP may be different from the assumptions and methods used to measure the plan's funded status on a GAAP basis.

In July of 2012, the Moving Ahead for Progress in the 21^st Century Act ("MAP-21"), which includes pension funding stabilization provisions, was signed into law. These provisions establish an interest rate corridor which is designed to stabilize the segment rates used to determine funding requirements from the effects of interest rate volatility. The funding stabilization provisions of MAP-21 will reduce our minimum required defined benefit plan contributions for the 2012 and 2013 plan years. We are evaluating the impact this change will have on funding requirements in future years. Since the funding stabilization provisions of MAP-21 do not apply for Pension Benefit Guaranty Corporation ("PBGC") reporting purposes, we may also make additional contributions in future periods to maintain an 80% funded status for PBGC reporting purposes.

During the twelve months ended December 31, 2012, the Company contributed $11.6 million to its defined benefit pension plan for the 2011 plan year and $9.6 million to its defined benefit pension plan for the 2012 plan year. The Company has not yet determined what amount it will fund during 2013, but estimates that the amount will be between $6 million and $15 million.

The Company also sponsors an unfunded excess benefit plan, which is a nonqualified plan that provides defined pension benefits in excess of limits imposed on qualified plans by federal tax law.

The Company uses a December 31 measurement date for all of its plans. The following table presents the benefit obligation, fair value of plan assets, and the funded status of the Company's defined benefit pension plan and unfunded excess benefit plan as of December 31. This table also includes the amounts not yet recognized as components of net periodic pension costs as of December 31:

	Defined Benefit Pension Plan						Unfunded Excess Benefits Plan

	2012			2011			2012			2011
	(Dollars In Thousands)
Accumulated benefit obligation, end of year	$	210,319		$	186,300		$	39,828		$	33,675

Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	199,162		$	165,704		$	36,256		$	31,592
Service cost		9,145			8,682			867			679
Interest cost		8,977			8,938			1,473			1,506
Amendments		—			94			—			3
Actuarial (gain) or loss		15,286			23,859			6,946			4,187
Benefits paid		(9,251	)		(8,115	)		(2,571	)		(1,711	)

Projected benefit obligation at end of year		223,319			199,162			42,971			36,256

Change in plan assets:
Fair value of plan assets at beginning of year		125,058			117,856			—			—
Actual return on plan assets		15,202			2,874			—			—
Employer contributions⁽¹⁾		21,178			12,443			2,571			1,711
Benefits paid		(9,251	)		(8,115	)		(2,571	)		(1,711	)

Fair value of plan assets at end of year		152,187			125,058			—			—

After reflecting FASB guidance:
Funded status		(71,132	)		(74,104	)		(42,971	)		(36,256	)

Amounts recognized in the balance sheet:
Other liabilities		(71,132	)		(74,104	)		(42,971	)		(36,256	)

Amounts recognized in accumulated other comprehensive income:
Net actuarial loss		95,055			91,804			17,571			11,924
Prior service cost/(credit)		(1,816	)		(2,208	)		48			60

Total	$	93,239		$	89,596		$	17,619		$	11,984

⁽¹⁾: Employer contributions disclosed are based on the Company's fiscal filing year

Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:

	Defined Benefit Pension Plan						Unfunded Excess Benefits Plan

	2012			2011			2012			2011
Discount rate		4.07	%		4.62	%		3.37	%		4.07	%
Rate of compensation increase		3.0			2.5 - 3.0			4.0			3.5 - 4.0
Expected long-term return on plan assets		7.5			7.75			N/A			N/A

The assumed discount rates used to determine the benefit obligations were based on an analysis of future benefits expected to be paid under the plans. The assumed discount rate reflects the interest rate at which an amount that is invested in a portfolio of high-quality debt instruments on the measurement date would provide the future cash flows necessary to pay benefits when they come due.

In assessing the reasonableness of its long-term rate of return assumption, the Company obtained 25 year annualized returns for each of the represented asset classes. In addition, the Company received evaluations of market performance based on the Company's asset allocation as provided by external consultants. A combination of these statistical analytics provided results that the Company utilized to determine an appropriate long-term rate of return assumption.

Weighted-average assumptions used to determine the net periodic benefit cost for the year ended December 31 are as follows:

	Defined Benefit Pension Plan									Unfunded Excess Benefits Plan

	2012			2011			2010			2012			2011			2010
Discount rate		4.62	%		5.30	%		5.57	%		4.07	%		4.79	%		5.40	%
Rates of compensation increase		2.5 - 3.0			2.5 - 3.0			0 - 3.75			3.5 - 4.0			3.5 - 4.0			0 - 4.75
Expected long-term return on plan assets		7.75			7.75			8.00			N/A			N/A			N/A

Components of the net periodic benefit cost for the year ended December 31 are as follows:

	Defined Benefit Pension Plan									Unfunded Excess Benefits Plan

	2012			2011			2010			2012		2011		2010
	(Dollars In Thousands)
Service cost—benefits earned during the period	$	9,145		$	8,682		$	7,423		$	867	$	679	$	584
Interest cost on projected benefit obligation		8,977			8,938			8,091			1,473		1,506		1,545
Expected return on plan assets		(10,916	)		(10,021	)		(9,349	)		—		—		—
Amortization of prior service cost/(credit)		(392	)		(392	)		(403	)		12		12		12
Amortization of actuarial losses⁽¹⁾		7,749			5,625			3,905			1,300		881		653

Total benefit cost	$	14,563		$	12,832		$	9,667		$	3,652	$	3,078	$	2,794

⁽¹⁾: 2012 average remaining service period used is 8.14 years and 7.51 years for the defined benefit pension plan and unfunded excess benefit plan, respectively.

The estimated net actuarial loss, prior service cost/(credit), and transition obligation for these plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2013 is as follows:

	Defined Benefit Pension Plan			Unfunded Excess Benefits Plan

	(Dollars In Thousands)
Net actuarial loss	$	9,150		$	1,767
Prior service cost/(credit)		(392	)		12
Transition obligation		—			—

The amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the Plan.

Allocation of plan assets of the defined benefit pension plan by category as of December 31 are as follows:

Asset Category

Cash and cash equivalents	2.0	%	4.0	%	1.0	%
Equity securities	60.0		60.0		61.0
Fixed income	38.0		36.0		38.0

Total	100.0	%	100.0	%	100.0	%

The Company's target asset allocation is designed to provide an acceptable level of risk and balance between equity assets and fixed income assets. The weighting towards equity securities is designed to help provide for an increased level of asset growth potential and liquidity.

Prior to July 1999, upon an employee's retirement, a distribution from pension plan assets was used to purchase a single premium annuity from PLICO in the retiree's name. Therefore, amounts shown above as plan assets exclude assets relating to such retirees. Since July 1999, retiree obligations have been fulfilled from pension plan assets. The defined benefit pension plan has a target asset allocation of 60% domestic equities, 38% fixed income, and 2% cash. When calculating asset allocation, the Company includes reserves for pre-July 1999 retirees.

The Company's investment policy includes various guidelines and procedures designed to ensure assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans' actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.

The plan's equity assets are in a Russell 3000 index fund that invests in a domestic equity index collective trust managed by Northern Trust Corporation and in a Spartan 500 index fund managed by Fidelity. The plan's cash is invested in a collective trust managed by Northern Trust Corporation. The plan's fixed income assets are invested in a group deposit administration annuity contract with PLICO.

Plan assets of the defined benefit pension plan by category as of December 31, are as follows:

	As of December 31,

Asset Category	2012		2011
	(Dollars In Thousands)
Cash	$	6,222	$	1,004
Equity securities:
Collective Russell 3000 Equity Index Fund		61,451		52,792
Fidelity Spartan U.S. Equity Index Fund		34,482		29,735
Fixed income		50,032		41,527

Total investments		152,187		125,058
Employer contribution receivable		—		2,270

Total	$	152,187	$	127,328

The valuation methodologies used to determine the fair values reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. The Plan's group deposit administration annuity contract with PLICO is recorded at contract value, which, by utilizing a long-term view, the Company believes approximates fair value. Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to purchase annuities. Units in collective short-term and collective investment funds are valued at the unit value, which approximates fair value, as reported by the trustee of the collective short-term and collective investment funds on each valuation date. These methods of valuation may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2012:

	Level 1		Level 2		Level 3		Total

	(Dollars In Thousands)
Collective short-term investment fund	$	—	$	6,222	$	—	$	6,222
Collective investment funds		—		95,933		—		95,933
Group deposit administration annuity contract		—		—		50,032		50,032

Total investments	$	—	$	102,155	$	50,032	$	152,187

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2011:

	Level 1		Level 2		Level 3		Total

	(Dollars In Thousands)
Collective short-term investment fund	$	—	$	1,004	$	—	$	1,004
Collective investment funds		—		82,527		—		82,527
Group deposit administration annuity contract		—		—		41,527		41,527

Total investments	$	—	$	83,531	$	41,527	$	125,058

For the year ended December 31, 2012, $6.0 million was transferred into Level 3 from Level 2. This transfer was made to maintain an acceptable asset allocation as set by the Company's investment policy.

For the year ended December 31, 2012, there were no transfers between Level 1 and Level 2.

For the year ended December 31, 2011, there were no transfers between levels.

A reconciliation of the beginning and ending balances for the fair value measurements for which significant unobservable inputs (Level 3) have been used is as follows:

	As of December 31,

	2012		2011
	(Dollars In Thousands)
Balance, beginning of year	$	41,527	$	39,403
Interest income		2,505		2,124
Transfers from collective short-term investments fund		6,000		—
Transfers to collective short-term investments fund		—		—

Balance, end of year	$	50,032	$	41,527

Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported.

Estimated future benefit payments under the defined benefit pension plan are as follows:

Years	Defined Benefit Pension Plan		Unfunded Excess Benefits Plan

	(Dollars In Thousands)
2013	$	13,088	$	3,614
2014		12,516		3,742
2015		12,949		3,843
2016		13,603		3,838
2017		15,250		4,001
2018 - 2022		81,524		17,486

Other Postretirement Benefits

In addition to pension benefits, the Company provides limited healthcare benefits to eligible retired employees until age 65. This postretirement benefit is provided by an unfunded plan. As of December 31, 2012 and 2011, the accumulated postretirement benefit obligation associated with these benefits was $0.8 million and $0.9 million, respectively.

The change in the benefit obligation for the retiree medical plan is as follows:

	As of December 31,

	2012			2011
	(Dollars In Thousands)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	949		$	1,309
Service cost		6			9
Interest cost		17			28
Amendments		—			(29	)
Actuarial (gain) or loss		(144	)		(297	)
Plan participant contributions		293			255
Benefits paid		(333	)		(326	)
Special termination benefits		—			—

Benefit obligation, end of year	$	788		$	949

For the retiree medical plan, the Company's discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2012, is 1.09% and 1.97%, respectively.

For a closed group of retirees over age 65, the Company provides a prescription drug benefit. As of December 31, 2012 and 2011, the Company's liability related to this benefit was less than $0.1 million. The Company's obligation is not materially affected by a 1% change in the healthcare cost trend assumptions used in the calculation of the obligation.

The Company also offers life insurance benefits for retirees from $10,000 up to a maximum of $75,000 which are provided through the payment of premiums under a group life insurance policy. This plan is partially funded at a maximum of $50,000 face amount of insurance. The accumulated postretirement benefit obligation associated with these benefits is as follows:

	As of December 31,

	2012			2011
	(Dollars In Thousands)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	8,951		$	7,955
Service cost		123			118
Interest cost		412			416
Amendments		—			—
Actuarial (gain) or loss		895			816
Plan participant contributions		—			—
Benefits paid		(311	)		(354	)
Special termination benefits		—			—

Benefit obligation, end of year	$	10,070		$	8,951

For the postretirement life insurance plan, the Company's discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2012, is 4.10% and 4.62%, respectively.

The Company's expected long-term rate of return assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2012, is 3.26% and 3.45%, respectively. In assessing the reasonableness of its long-term rate of return assumption, the Company utilized a 20 year annualized return and a 20 year average return on Barclay's short treasury index. The Company's long-term rate of return assumption was determined based on analytics related to these 20 year return results.

Investments of the Company's group life insurance plan are held by Wells Fargo Bank, N.A. Plan assets held by the Custodian are invested in a money market fund.

The fair value of each major category of plan assets for the Company's postretirement life insurance plan is as follows:

	For The Year Ended December 31,

Category of Investment	2012		2011		2010
	(Dollars In Thousands)
Money Market Fund	$	6,174	$	6,193	$	6,217

Investments are stated at fair value and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The money market funds are valued based on historical cost, which represents fair value, at year end. This method of valuation may produce a fair value calculation that may not be reflective of future fair values. Furthermore, while the Company believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2012:

	Level 1		Level 2		Level 3		Total

	(Dollars In Thousands)
Money Market Fund	$	6,174	$	—	$	—	$	6,174

The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2011:

	Level 1		Level 2		Level 3		Total

	(Dollars In Thousands)
Money Market Fund	$	6,193	$	—	$	—	$	6,193

For the year ended December 31, 2012 and 2011, there were no transfers between levels.

Investments are exposed to various risks, such as interest rate and credit risks. Due to the level of risk associated with investments and the level of uncertainty related to credit risks, it is at least reasonably possible that changes in risk in the near term could materially affect the amounts reported.

401(k) Plan

The Company sponsors a 401(k) Plan which covers substantially all employees. Employee contributions are made on a before-tax basis as provided by Section 401(k) of the Internal Revenue Code or as after-tax "Roth" contributions. Employees may contribute up to 25% of their eligible annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service ($17,000 for 2012). The Plan also provides a "catch-up" contribution provision which permits eligible participants (age 50 or over at the end of the calendar year), to make additional contributions that exceed the regular annual contribution limits up to a limit periodically set by the Internal Revenue Service ($5,500 for 2012). The Company matches the sum of all employee contributions dollar for dollar up to a maximum of 4% of an employee's pay per year per person. All matching contributions vest immediately.

Prior to 2009, employee contributions to the Company's 401(k) Plan were matched through use of an ESOP established by the Company. Beginning in 2009, the Company adopted a cash match for employee contributions to the 401(k) plan. For the year ended December 31, 2012 and 2011, the Company recorded an expense of $5.9 million and $5.6 million, respectively.

Effective as of January 1, 2005, the Company adopted a supplemental matching contribution program, which is a nonqualified plan that provides supplemental matching contributions in excess of the limits imposed on qualified defined contribution plans by federal tax law. The first allocations under this program were made in early 2006, with respect to the 2005 plan year. The expense recorded by the Company for this employee benefit was $0.4 million, $0.4 million, and $0.2 million, respectively, in 2012, 2011, and 2010.

Deferred Compensation Plan

The Company has established deferred compensation plans for directors, officers, and others. Compensation deferred is credited to the participants in cash, mutual funds, common stock equivalents, or a combination thereof. The Company may, from time to time, reissue treasury shares or buy in the open market shares of common stock to fulfill its obligation under the plans. As of December 31, 2012, the plans had 932,801 common stock equivalents credited to participants. The Company's obligations related to its deferred compensation plans are reported in other liabilities, unless they are to be settled in shares of its common stock, in which case they are reported as a component of shareowners' equity.