DEFINED BENEFIT PENSION PLAN

12 Months Ended

Dec. 31, 2019

NOTE 14 — DEFINED BENEFIT PENSION PLAN

The Corporation acquired the Peninsula Financial Corporation noncontributory defined benefit pension plan. Effective December 31, 2005, the plan was amended to freeze participation in the plan; therefore, no additional employees are eligible to become participants in the plan. The benefits are based on years of service and the employee’s compensation at the time of retirement. The Plan was amended effective December 31, 2010, to freeze benefit accrual for all participants. Expected contributions to the Plan in 2020 are $139,000.

The anticipated distributions over the next five years and through December 31, 2029 are detailed in the table below (dollars in thousands):


2020	$	131
2021		129
2022		137
2023		143
2024		141
2025-2029		869
Total	$	1,550

The following table sets forth the plan’s funded status and amounts recognized in the Corporation’s balance sheets and the activity from date of acquisition (dollars in thousands):


	2019		2018
Change in benefit obligation:
Benefit obligation, beginning of year	$	2,991	$	3,332
Interest cost		117		109
Actuarial (gain) loss		469		(316)
Benefits paid		(130)		(134)
Benefit obligation at end of year		3,447		2,991
Change in plan assets:
Fair value of plan assets, beginning of year		1,987		2,191
Actual return on plan assets		381		(134)
Employer contributions		22		64
Benefits paid		(131)		(134)
Fair value of plan assets at end of year		2,259		1,987

Funded status, included with other liabilities	$	(1,188)	$	(1,004)

Net pension costs included in the Corporation’s results of operations was immaterial.

Assumptions in the actuarial valuation were:


	2019	2018
Weighted average discount rate	2.92%	4.02%
Rate of increase in future compensation levels	N/A	N/A
Expected long-term rate of return on plan assets	8.00%	8.00%

The expected long-term rate of return on plan assets reflects management’s expectations of long-term average rates of return on funds invested to provide for benefits included in the projected benefit obligation. The expected return is based on the outlook for inflation, fixed income returns and equity returns, while also considering historical returns, asset allocation and investment strategy. The discount rate assumption is based on investment yields available on AA rated long-term corporate bonds.

The primary investment objective is to maximize growth of the pension plan assets to meet the projected obligations to the beneficiaries over a long period of time, and to do so in a manner that is consistent with the Corporation’s risk tolerance. The intention of the plan sponsor is to invest the plan assets in mutual funds with the following asset allocation, which was in place at both December 31, 2019 and December 31, 2018:


	Target	Actual
	Allocation	Allocation
Equity securities	50% to 70%	60%
Fixed income securities	30% to 50%	40%