8.	Retirement Plans

We sponsor and in some cases contribute to defined benefit and defined contribution retirement plans covering substantially all of our full-time employees. Our defined benefit pension plans are the Gray Television, Inc. Retirement Plan (the “Gray Pension Plan”) as well as two plans assumed when we acquired the related businesses in prior years. Effective July 1, 2015, monthly plan benefits under the Gray Pension Plan were frozen and no longer increase after June 30, 2015, and no new participants can be added to the Gray Pension Plan, therefore all of our defined benefit pension plans are frozen plans.

Gray Pension Plan

The Gray Pension Plan’s 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 the Gray Pension Plan were December 31, 2015 and 2014, respectively. The following summarizes the Gray Pension Plan’s funded status and amounts recognized on our consolidated balance sheets at December 31, 2015 and 2014, respectively (dollars in thousands):

	December 31,
	2015			2014
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	108,006		$	83,533
Service cost		3,130			5,162
Interest cost		4,159			4,106
Actuarial losses		420			16,712
Benefits paid		(1,683	)		(1,507	)
Effect of pension curtailment		(10,833	)		-
Projected benefit obligation at end of year	$	103,199		$	108,006

Change in plan assets:
Fair value of pension plan assets at beginning of year	$	66,813		$	58,063
Actual return on plan assets		(1,034	)		3,940
Company contributions		5,150			6,317
Benefits paid		(1,683	)		(1,507	)
Fair value of pension plan assets at end of year		69,246			66,813
Funded status of pension plan	$	(33,953	)	$	(41,193	)

Amounts recognized in our balance sheets consist of:
Accrued benefit cost	$	(8,994	)	$	(10,057	)
Accumulated other comprehensive loss		(24,959	)		(31,136	)
Net liability recognized	$	(33,953	)	$	(41,193	)

The accumulated benefit obligation amounts of the Gray Pension plan are frozen and were $103.2 million and $92.8 million at December 31, 2015 and 2014, respectively. 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 Gray Pension Plan is invested. The estimated rate of increase in compensation levels used to calculate the net periodic benefit cost for the year ended December 31, 2015 applied only to the period prior to the Gray Pension Plan becoming frozen. This factor was not applicable after that time in the determination of the benefit obligation as of December 31, 2015.

	Year Ended December 31,
	2015			2014
Weighted-average assumptions used to determine net periodic benefit cost for the Gray pension plan:
Discount rate		4.00	%		4.97	%
Expected long-term rate of return on pension plan assets		7.00	%		7.00	%
Estimated rate of increase in compensation levels		5.63	%		5.63	%

	As of December 31,
	2015			2014
Weighted-average assumptions used to determine benefit obligations:
Discount rate		4.31	%		4.00	%
Estimated rate of increase in compensation levels		N/A			5.63	%

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

	Year Ended December 31,
	2015			2014			2013
Components of net periodic pension cost:
Service cost	$	3,130		$	5,162		$	5,165
Interest cost		4,159			4,106			3,553
Expected return on plan assets		(4,782	)		(4,200	)		(3,400	)
Recognized net actuarial loss		1,580			969			3,131
Net periodic pension cost	$	4,087		$	6,037		$	8,449

For the Gray Pension Plan, the estimated future benefit payments are as follows (in thousands):

Years				Amount
	2016		$	2,312
	2017			2,464
	2018			2,646
	2019			2,931
	2020			3,372
2021	-	2025		20,521

The Gray Pension Plan’s weighted-average asset allocations by asset category were as follows:

	As of December 31,
	2015		2014
Asset category:
Insurance general account		26%		28%
Cash management accounts		2%		3%
Equity accounts		54%		64%
Fixed income accounts		14%		5%
Real estate accounts		4%		0%
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
	Strategic Allocation		Lower Limit		Upper Limit
Asset class:
Equities:
Large cap value		5%		0%		50%
Large cap blend		5%		0%		50%
Large cap growth		5%		0%		50%
Mid-cap blend		15%		0%		40%
Small cap core		5%		0%		25%
Foreign large blend		10%		0%		40%
Emerging markets		10%		0%		25%
Real estate		5%		0%		20%
Fixed Income:
U.S. Treasury inflation protected		5%		0%		25%
Intermediate term bond		10%		0%		50%
Long term government bond		5%		0%		40%
Hight yield bond		10%		0%		25%
Emerging markets bond		10%		0%		20%
Money market taxable		0%		0%		100%

Our equity portfolio contains securities of companies necessary to build a diversified portfolio, and that we believe are financially sound. 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 Gray

Pension Plan Assets

We calculate the fair value of the Gray 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 the Gray Pension Plan’s assets and classifies them by level within the fair value hierarchy as of December 31, 2015 and 2014, respectively (in thousands):

Gray Pension Plan Fair Value Measurements

	As of December 31, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Insurance general account	$	-	$	17,918	$	-	$	17,918
Cash management accounts		1,273		-		-		1,273
Equity accounts		37,621		-		-		37,621
Fixed income accounts		9,924		-		-		9,924
Real estate accounts		2,510		-		-		2,510
Total	$	51,328	$	17,918	$	-	$	69,246

	As of December 31, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Insurance general account	$	-	$	18,598	$	-	$	18,598
Cash management accounts		-		2,319		-		2,319
Equity accounts		-		42,608		-		42,608
Fixed income account		-		3,288		-		3,288
Total	$	-	$	66,813	$	-	$	66,813

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, 2015, the Acquired Pension Plans had combined plan assets of $5.7 million and combined projected benefit obligations of $8.1 million. As of December 31, 2014, the Acquired Pension Plans had combined plan assets of $5.9 million and combined projected benefit obligations of $8.0 million. The net liability for the two Acquired Pension Plans is recorded as a liability in our financial statements as of December 31, 2015 and 2014.

Expected Pension

Contributions

We expect to contribute a combined total of approximately $2.3 million to our three frozen defined benefit pension plans during the year ending December 31, 2016.

Capital Accumulation Plan

The Gray Television, Inc. Capital Accumulation Plan (the “Capital Accumulation Plan”) is a defined contribution plan intended to meet the requirements of section 401(k) of the Internal Revenue Code. Effective beginning on July 1, 2015, employer contributions under the Capital Accumulation Plan include matching cash contributions at a rate of 100% of the first 3% of each employee’s salary deferral, and 50% of the next 2% of each employee’s salary deferral. For the year ended December 31, 2015, our matching cash contributions to our Capital Accumulation Plan were $1.8 million. As of February 19, 2016, including the employees added in the Schurz Acquisition and Related Transactions, we estimate that our matching cash contributions to the Capital Accumulation Plan for year ending December 31, 2016 will be approximately

$5.9

million.

In addition, the Company, at its discretion, may make an additional profit sharing contribution, based on annual Company performance, to those employees who meet certain criteria. In the year ended December 31, 2015, the Company has accrued a discretionary contribution of $1.6 million as a profit sharing contribution. Also during the years ended December 31, 2015, 2014 and 2013, we made other matching contributions of our Common Stock to the Capital Accumulation Plan as follows (dollars in thousands):

	Year Ended December 31,
	2015				2014				2013
	Shares		Amount		Shares		Amount		Shares		Amount
Matching contributions to the Capital Accumulation Plan		1,898	$	26		2,341	$	25		5,235	$	28