Employer Sponsored Benefit Plans

As of September 30, 2014, the Company maintains a defined benefit pension plan that covers certain domestic Lydall employees (“domestic pension plan”) that is closed to new employees and benefits are no longer accruing. The domestic pension plan is noncontributory and benefits are based on either years of service or eligible compensation paid while a participant is in the plan. The Company’s funding policy is to fund not less than the ERISA minimum funding standard and not more than the maximum amount that can be deducted for federal income tax purposes.

On April 1, 2014, the Company offered a voluntary one-time lump sum payment option to certain former U.S. employees who were vested defined benefit plan participants and not currently receiving monthly payments from the Company's domestic pension plan. The election period for this voluntary offer ended in the second quarter of 2014. Approximately 62% of eligible participants elected to receive a one-time lump sum payout resulting in $10.3 million being paid out of domestic pension plan assets in July 2014. This payout required a re-measurement of the domestic pension plan and a partial plan settlement charge, which resulted in a non-cash pre-tax loss of $4.9 million in net periodic pension benefit expense, which was recorded in selling, product development and administrative expenses in the third quarter of 2014, with an offset to accumulated other comprehensive loss in shareholder’s equity, net of $1.9 million tax benefit. The non-cash charge is required to accelerate the recognition of a portion of the previously unrecognized actuarial losses in the domestic pension plan. As a result of the settlement charge in the third quarter of 2014, the net pension plan liability was remeasured and recorded as of July 1, 2014 to be $12.2 million, as compared to the $12.7 million measured and recorded at December 31, 2013.

The Company expects to contribute approximately $4.2 million in cash to its domestic pension plan in 2014, of which $3.8 million was contributed during the nine months ended September 30, 2014. Contributions of $0.4 million were made during the third quarter of 2014. Contributions of $0.3 million were made during the third quarter of 2013 and $0.9 million were made during the nine months ended September 30, 2013.

The following is a summary of the components of net periodic benefit cost, which is recorded primarily within selling, product development and administrative expenses, for the domestic pension plan for the quarters ended September 30, 2014 and 2013:



	Quarter Ended September 30,						Nine Months Ended September 30,
In thousands	2014			2013			2014			2013
Components of net periodic benefit cost
Interest cost	$	509		$	614		$	1,840		$	1,841
Expected return on assets	(605		)	(673		)	(2,192		)	(2,019		)
Amortization of actuarial loss	182			267			542			801
Pension settlement cost	4,870			—			4,870			—
Net periodic benefit cost	$	4,956		$	208		$	5,060		$	623