Retirement Plans

12 Months Ended

Dec. 31, 2011

Retirement Plans [Abstract]

Retirement Plans

9. Retirement Plans

We sponsor and contribute to defined benefit and defined contribution retirement plans covering substantially all of our full time employees. Our defined benefit pension plans include our active plan as well as two frozen plans that we assumed when we acquired the related businesses. The Gray Television, Inc. Capital Accumulation Plan (“the Capital Accumulation Plan”) is a defined contribution plan that is intended to meet the requirements of section 401(k) of the Internal Revenue Code.

Gray Pension Plan

Our active defined benefit plan covers substantially all of our full-time employees. Retirement benefits are based on years of service and the employee’s highest average compensation for five consecutive years during the last ten years of employment. The funding policy is consistent with the funding requirements of existing federal laws and regulations under the Employee Retirement Income Security Act of 1974.

The measurement dates used to determine the benefit information for our active defined benefit pension plan were December 31, 2011 and 2010, respectively. The following summarizes the active pension plan’s funded status and amounts recognized in our consolidated balance sheets at December 31, 2011 and 2010, respectively (dollars in thousands):

	December 31,
	2011		2010
Change in projected bene fit obligation:
Projected benefit obligation at beginning of year	$	50,055	$	39,517
Service cost		3,447		3,199
Interest cost		2,943		2,658
Actuarial losses		11,521		5,483
Benefits paid		(933)		(802)
Projected benefit obligation at end of year	$	67,033	$	50,055
Change in plan assets:
Fair value of pension plan assets at beginning of year	$	33,039	$	26,716
Actual return on plan assets		275		2,939
Company contributions		2,630		4,186
Benefits paid		(933)		(802)
Fair value of pension plan assets at end of year		35,011		33,039
Funded status of pension plan	$	(32,022)	$	(17,016)
Amounts recognized in our balance sheets consist of:
Accrued benefit cost	$	(7,684)	$	(5,317)
Accumulated other comprehensive income		(24,338)		(11,699)
Net liability recognized	$	(32,022)	$	(17,016)

The accumulated benefit obligation amounts for our active defined benefit pension plan were $58.1 million and $41.3 million at December 31, 2011 and 2010, respectively. The increase in the accumulated benefit obligation is due primarily to increases in salaries and past service and decreases in the discount period until retirement for continuing employees, as well as discount rate changes. The long-term rate of return on assets assumption was chosen from a best estimate range based upon the anticipated long-term returns for asset categories in which the pension plan is invested. The long-term rate of return may be viewed as the sum of (i) 3% inflation, (ii) 1% risk-free rate of return and (iii) 3% risk premium. The estimated rate of increase in compensation levels is based on historical compensation increases for our employees.

	Year Ended December 31,
	2011		2010
Weighted-average assumptions used to determine net periodic benefit cost for our active pension plan:
Discount rate		5.85%		6.27%
Expected long-term rate of return on pension plan assets		7.00%		7.00%
Estimated rate of increase in compensation levels		5.00%		5.00%

	As of December 31,
	2011		2010
Weighted-average assumptions used to determine benefit obligations:
Discount rate		4.84%		5.85%
Estimated rate of increase in compensation levels		5.63%		5.00%

Pension expense is computed using the projected unit credit actuarial cost method. The net periodic pension cost for our active pension plan includes the following components (in thousands):

	Year Ended December 31,
	2011		2010		2009
Components of net periodic pension cost:
Service cost	$	3,447	$	3,199	$	3,248
Interest cost		2,943		2,658		2,189
Expected return on plan assets		(2,351)		(1,987)		(1,558)
Recognized net actuarial loss		958		912		1,176
Net periodic pension cost	$	4,997	$	4,782	$	5,055

For our active pension plan, the estimated future benefit payments for subsequent years are as follows (in thousands):

Years	Amount
2012	$	1,451
2013		1,605
2014		1,727
2015		1,908
2016		2,122
2017 - 2021		15,178

The active pension plan’s weighted-average asset allocations by asset category are as follows:

	As of December 31,
	2011		2010
Asset category:
Insurance general account		38%		34%
Cash management accounts		3%		4%
Equity accounts		53%		56%
Fixed income account		6%		6%
Total		100%		100%

The investment objective is to achieve a consistent total rate of return (income, appreciation, and reinvested funds) that will equal or exceed the actuarial assumption with aversion to significant volatility. The following is the target asset allocation:

	Target Range
Asset class:
Large cap equities		23%	to	91%
Mid cap equities		0%	to	15%
Small cap equities		0%	to	16%
International equities		5%	to	25%
Fixed income		0%	to	30%
Cash		0%	to	20%

Our equity portfolio contains attractively priced securities of financially sound companies necessary to build a diversified portfolio. Our fixed income portfolio contains obligations generally rated A or better with no maturity restrictions and an actively managed duration. The cash equivalents strategy uses securities of the highest credit quality.

Fair Value of Active Pension Plan Assets

We calculate the fair value of our active pension plan’s assets based upon the observable and unobservable net asset value of its underlying investments. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized into a hierarchy that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1”) and the lowest priority to unobservable inputs that require assumptions to measure fair value (“Level 3”). Level 2 inputs are those that are other than quoted prices included within Level 1 that are observable for the assets or liability either directly or indirectly (“Level 2”).

The following table presents the fair value of our active pension plan’s assets and classifies them by level within the fair value hierarchy as of December 31, 2011 and 2010, respectively (in thousands):

Active Pension Plan Fair Value Measurements

	As of December 31, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Insurance general account	$	-	$	13,335	$	-	$	13,335
Cash management accounts		-		846		-		846
Equity accounts		-		18,668		-		18,668
Fixed income account		-		2,162		-		2,162
Total	$	-	$	35,011	$	-	$	35,011

	As of December 31, 2010
	Level 1		Level 2		Level 3		Total
Assets:
Insurance general account	$	-	$	11,434	$	-	$	11,434
Cash management accounts		-		1,167		-		1,167
Equity accounts		-		18,489		-		18,489
Fixed income account		-		1,949		-		1,949
Total	$	-	$	33,039	$	-	$	33,039

Acquired Pension Plans

In 2002 and 1998, we acquired companies with two underfunded pension plans (the “Acquired Pension Plans”). The Acquired Pension Plans were frozen by their prior plan sponsors and no new participants can be added to the Acquired Pension Plans. As of December 31, 2011, the Acquired Pension Plans had combined plan assets of $4.4 million and the combined projected benefit obligations of $6.8 million. As of December 31, 2010, the Acquired Pension Plans had combined plan assets of $4.2 million and combined projected benefit obligations of $5.8 million. The net liability for the two Acquired Pension Plans is recorded as a liability in our financial statements as of December 31, 2011 and 2010.

Contributions

We expect to contribute a combined total of approximately $6.9 million to the active pension plan and the Acquired Pension Plans during the year ending December 31, 2012.

Capital Accumulation Plan

The Capital Accumulation Plan provides additional retirement benefits for substantially all employees. The Capital Accumulation Plan provides our employees with an investment option in our common stock and Class A common stock. It also allows for our matching contribution to be made in the form of our common stock. On December 9, 2008 and May 2, 2007, our Board of Directors increased the number of shares reserved for the Capital Accumulation Plan by 2,000,000 and 1,000,000 shares of our common stock, respectively. As of December 31, 2011, 1,615,281 shares remained available for issuance under the plan.

We may match employee contributions to the Capital Accumulation Plan, and such contributions may not exceed 6% of the employees’ gross pay. Our percentage match amount is declared by our Board of Directors before the beginning of each plan year and is made by a contribution of our common stock. Effective December 31, 2008, our Board of Directors suspended our matching contributions for the majority of our employees. For the years ended December 31, 2011, 2010 and 2009, our percentage match was 50% for certain employees included in a collective bargaining unit at one of our stations and we did not match contributions for the remainder of our employees. Our contributions vest, based upon each employee’s number of years of service, over a period not to exceed five years.

Our matching contributions for the years ended December 31, 2011, 2010 and 2009 are as follows (in thousands):

	Year Ended December 31,
	2011				2010				2009
	Shares		Amount		Shares		Amount		Shares		Amount
Matching contributions to the Capital Accumulation Plan		14	$	29		14	$	29		351	$	147