DEFINED BENEFIT PENSION PLAN

12 Months Ended

Dec. 31, 2020

DEFINED BENEFIT PENSION PLAN

DEFINED BENEFIT PENSION PLAN

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 2021 are $57,000.

The anticipated distributions over the next five years and through December 31, 2030 are detailed in the table below (dollars in thousands):

2021	$	133
2022		140
2023		144
2024		142
2025		157
2026-2030		901
Total	$	1,617

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):

	2020		2019
Change in benefit obligation:
Benefit obligation, beginning of year	$	3,447	$	2,991
Interest cost		99		117
Actuarial (gain) loss		220		469
Benefits paid		(132)		(130)
Benefit obligation at end of year		3,634		3,447
Change in plan assets:
Fair value of plan assets, beginning of year		2,259		1,987
Actual return on plan assets		29		381
Employer contributions		108		22
Benefits paid		(132)		(131)
Fair value of plan assets at end of year		2,264		2,259
Funded status, included with other liabilities	$	(1,370)	$	(1,188)

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

Assumptions in the actuarial valuation were:

	2020	2019
Weighted average discount rate	2.45%	2.92%
Rate of increase in future compensation levels	N/A	N/A
Expected long-term rate of return on plan assets	2.00%	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, 2020 and December 31, 2019:

	Target	Actual
	Allocation	Allocation
Equity securities	50% to 70%	0%
Fixed income securities	30% to 50%	100%