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Note 9 - Retirement Plans
12 Months Ended
Dec. 31, 2012
Pension and Other Postretirement Benefits Disclosure [Text Block]
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, 2012 and 2011, respectively.  The following summarizes the active pension plan’s funded status and amounts recognized on our consolidated balance sheets at December 31, 2012 and 2011, respectively (dollars in thousands):

   
December 31,
 
   
2012
   
2011
 
Change in projected benefit obligation:
           
Projected benefit obligation at beginning of year
  $ 67,033     $ 50,055  
Service cost
    4,452       3,447  
Interest cost
    3,315       2,943  
Actuarial losses
    9,546       11,521  
Benefits paid
    (1,110 )     (933 )
Projected benefit obligation at end of year
  $ 83,236     $ 67,033  
                 
Change in plan assets:
               
Fair value of pension plan assets at beginning of year
  $ 35,011     $ 33,039  
Actual return on plan assets
    3,728       275  
Company contributions
    9,033       2,630  
Benefits paid
    (1,110 )     (933 )
Fair value of pension plan assets at end of year
    46,662       35,011  
Funded status of pension plan
  $ (36,574 )   $ (32,022 )
                 
Amounts recognized in our balance sheets consist of:
               
Accrued benefit cost
  $ (6,336 )   $ (7,684 )
Accumulated other comprehensive income
    (30,238 )     (24,338 )
Net liability recognized
  $ (36,574 )   $ (32,022 )

The accumulated benefit obligation amounts for our active defined benefit pension plan were $71.8 million and $58.1 million at December 31, 2012 and 2011, 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) a 1% risk-free rate of return and (iii) a 3% risk premium. The estimated rate of increase in compensation levels is based on historical compensation increases for our employees.

   
Year Ended December 31,
 
   
2012
   
2011
 
Weighted-average assumptions used to determine net periodic benefit cost for our active pension plan:
           
Discount rate
    4.84 %     5.85 %
Expected long-term rate of return on pension plan assets
    7.00 %     7.00 %
Estimated rate of increase in compensation levels
    5.63 %     5.00 %

   
As of December 31,
 
   
2012
   
2011
 
Weighted-average assumptions used to determine benefit obligations:
       
Discount rate
    4.31 %     4.84 %
Estimated rate of increase in compensation levels
    5.63 %     5.63 %

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,
       
   
2012
   
2011
   
2010
 
Components of net periodic pension cost:
                 
Service cost
  $ 4,452     $ 3,447     $ 3,199  
Interest cost
    3,315       2,943       2,658  
Expected return on plan assets
    (2,609 )     (2,351 )     (1,987 )
Recognized net actuarial loss
    2,527       958       912  
Net periodic pension cost
  $ 7,685     $ 4,997     $ 4,782  

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

Years
 
Amount
 
2013
  $ 1,594  
2014
    1,724  
2015
    1,879  
2016
    2,051  
2017
    2,203  
2018 - 2022
    14,625  

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

   
As of December 31,
 
   
2012
   
2011
 
Asset category:
           
Insurance general account
    37 %     38 %
Cash management accounts
    3 %     3 %
Equity accounts
    54 %     53 %
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 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 by the fair value hierarchy proscribed by Accounting Standards Codification Topic 820, described in Note 4 “Fair Value Measurement.”

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, 2012 and 2011, respectively (in thousands):

Active Pension Plan Fair Value Measurements

   
As of December 31, 2012
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets:
                       
Insurance general account
  $ -     $ 17,381     $ -     $ 17,381  
Cash management accounts
    -       1,457       -       1,457  
Equity accounts
    -       24,911       -       24,911  
Fixed income account
    -       2,913       -       2,913  
Total
  $ -     $ 46,662     $ -     $ 46,662  

   
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  

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, 2012, the Acquired Pension Plans had combined plan assets of $4.9 million and the combined projected benefit obligations of $7.4 million.  As of December 31, 2011, the Acquired Pension Plans had combined plan assets of $4.4 million and combined projected benefit obligations of $6.8 million. The net liability for the two Acquired Pension Plans is recorded as a liability in our financial statements as of December 31, 2012 and 2011.

Contributions

We expect to contribute a combined total of between approximately $3.1 million and $8.0 million to our active pension plan and the Acquired Pension Plans during the year ending December 31, 2013.

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, 2012, 1,600,988 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, if any, is determined 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, 2012, 2011 and 2010, 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, 2012, 2011 and 2010 are as follows (in thousands):

   
Year Ended December 31,
 
   
2012
   
2011
   
2010
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
 
Matching contributions to the Capital Accumulation Plan
    14     $ 26       14     $ 29       14     $ 29