(14) PENSION, OTHER POST RETIREMENT BENEFIT AND PROFIT SHARING PLANS

The Basic Plan is a non-contributory defined benefit pension plan managed by a trustee covering substantially all full-time employees who have at least one year of service and have attained the age of 21. For such employees hired prior to January 1, 2006, benefits are based on years of service and the employee’s compensation until January 1, 2017, at which time benefits will be based on a 2.5% cash balance formula. For such employees hired on or after January 1, 2006, benefits accrue based on a cash balance formula, effective January 1, 2012. The Company's funding policy is to contribute to the Basic Plan the amount that meets the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as the Company determines to be appropriate. The difference between the plan assets and projected benefit obligation is included in other assets or other liabilities, as appropriate. Actuarial assumptions are evaluated periodically.

The Restoration Plan provides for the payment of retirement benefits to certain participants in the Basic Plan. The Restoration Plan is a non-qualified plan that covers any employee whose benefit under the Basic Plan is limited by the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and any employee who elects to participate in the BancorpSouth, Inc. Deferred Compensation Plan, which reduces the employee’s benefit under the Basic Plan. For such employees hired prior to January 1, 2006, benefits are based on years of service and the employee’s compensation until January 1, 2017, at which time benefits will be based on a 2.5% cash balance formula. For such employees hired on or after January 1, 2006, benefits accrue based on a cash balance formula, effective January 1, 2012. The Supplemental Plan is a non-qualified defined benefit supplemental retirement plan for certain key employees. Benefits commence when the employee retires and are payable over a period of ten years.

The Company uses a December 31 measurement date for its pension and other benefit plans.

A summary of the three defined benefit retirement plans at and for the years ended December 31, 2013, 2012 and 2011 follows:


	Pension Benefits
	2013	2012	2011
Change in benefit obligations:	(In thousands)
Projected benefit obligations at beginning of year	$ 213,804	$ 182,362	$ 156,595
Service cost	10,735	9,670	8,107
Interest cost	8,212	8,104	8,327
Amendments	10,850	300	(8,494)
Actuarial loss	(18,794)	22,417	22,253
Benefits paid	(22,116)	(8,232)	(4,197)
Administrative expenses paid	(995)	(817)	(229)
Projected benefit obligations at end of year	$ 201,696	$ 213,804	$ 182,362
Change in plans' assets:
Fair value of plans' assets at beginning of year	$ 203,704	$ 195,004	$ 197,536
Actual return on assets	13,960	16,631	1,347
Employer contributions	1,894	1,118	547
Benefits paid	(22,116)	(8,232)	(4,197)
Administrative expenses paid	(995)	(817)	(229)
Fair value of plans' assets at end of year	$ 196,447	$ 203,704	$ 195,004
Funded status:
Projected benefit obligations	$ (201,696)	$ (213,804)	$ (182,362)
Fair value of plans' assets	196,447	203,704	195,004
Net amount recognized	$ (5,249)	$ (10,100)	$ 12,642

Amounts recognized in the consolidated balance sheets consisted of:


	Pension Benefits
	2013	2012	2011
	(In thousands)
Prepaid benefit cost	$ 72,886	$ 94,046	$ 102,307
Accrued benefit liability	(23,241)	(22,123)	(20,572)
Intangible asset	-	-	-
Accumulated other comprehensive
income adjustment	(54,894)	(82,023)	(69,093)
Net amount recognized	$ (5,249)	$ (10,100)	$ 12,642

Pre-tax amounts recognized in accumulated other comprehensive income consisted of:


	Year ended December 31,
	2013	2012
	(In thousands)

Net transition obligation	$ 19	$ 37
Net prior service benefit	(5,366)	(6,134)
Net actuarial loss	60,241	88,120
Total accumulated other comprehensive income	$ 54,894	$ 82,023

The net transition obligation, net prior service credit and net actuarial loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are approximately $18,000, ($768,000) and $3.7 million, respectively.

The components of net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011 were as follows:


	Pension Benefits
	2013	2012	2011
Components of net periodic benefit cost:	(In thousands)
Service cost	$ 10,735	$ 9,670	$ 8,107
Interest cost	8,212	8,104	8,327
Expected return on assets	(10,974)	(11,263)	(14,864)
Amortization of unrecognized transition amount	18	18	18
Recognized prior service (benefit) cost	(768)	(768)	31
Recognized net loss	6,099	4,868	3,264
Special termination benefit	10,850	300	-
Net periodic benefit cost	$ 24,172	$ 10,929	$ 4,883

The weighted-average assumptions used to determine benefit obligations at December 31, 2013 and 2012 were as follows:


	Basic Plan		Restoration Plan		Supplemental Plan
	2013	2012	2013	2012	2013	2012
Discount rate	4.90%	4.05%	4.50%	3.65%	3.65%	2.85%
Rate of compensation increase	3.00%	3.00%	3.00%	3.00%	3.00%	3.00%

The weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011 were as follows:


	Basic Plan
	2013	2012	2011
Discount rate	4.05%	4.80%	5.50%
Rate of compensation increase	3.00%	3.00%	3.00%
Expected rate of return on plan assets	5.50%	6.00%	8.00%

	Restoration Plan
	2013	2012	2011
Discount rate	3.65%	4.45%	5.15%
Rate of compensation increase	3.00%	3.00%	3.00%
Expected rate of return on plan assets	N/A	N/A	N/A

	Supplemental Plan
	2013	2012	2011
Discount rate	2.85%	3.85%	4.50%
Rate of compensation increase	3.00%	3.00%	3.00%
Expected rate of return on plan assets	N/A	N/A	N/A

The following table presents information related to the Restoration Plan and Supplemental Plan that had accumulated benefit obligations in excess of plan assets at December 31, 2013 and 2012:


	2013	2012
	(In thousands)
Projected benefit obligation	$ 31,512	$ 32,659
Accumulated benefit obligation	29,191	31,154
Fair value of assets	-	-

The following table presents information related to the Company’s defined benefit pension plans at December 31, 2013 and 2012:


	2013	2012
	(In thousands)
Accumulated benefit obligation	$ 193,317	$ 205,298

In selecting the expected long-term rate of return on assets used for the Basic Plan, the Company considered the average rate of earnings expected on the funds invested or to be invested to provide for the benefits of the plan. This included considering the trust asset allocation and the expected returns likely to be earned over the life of the plan. This basis is consistent with the prior year. The discount rate is the rate used to determine the present value of the Company’s future benefit obligations for its pension and other postretirement benefit plans. The discount rate used to discount plan liabilities is determined by matching the timing and duration of expected cash flows of the Company’s pension obligations to a yield curve generated from a broad portfolio of high-quality fixed income debt instruments.

The Company’s pension plan weighted-average asset allocations at December 31, 2013 and 2012 and the Company’s target allocations for 2014, by asset category, were as follows:


	Plan assets at December 31		Target for
Asset category:	2013	2012	2014

Equity securities	34.50%	32.92%	33%
Debt securities	62.10%	61.19%	67%
Cash and equivalents	3.40%	5.89%	0%
Total	100.00%	100.00%

Equity securities held in the Basic Plan included shares of the Company’s common stock with a fair value of $2.1 million (1.06% of total plan assets) and $1.2 million (0.58% of total plan assets) at December 31, 2013 and 2012, respectively. An analysis by management is performed annually to determine whether the Company will make a contribution to the Basic Plan.

The following table presents information regarding expected future benefit payments, which reflect expected service, as appropriate:


		Pension
		Benefits
Expected future benefit payments:		(In thousands)
2014		$ 12,157
2015		13,852
2016		12,688
2017		13,138
2018		13,611
2019-2023		72,519

The following table presents the fair value of each major category of plan assets held in the Basic Plan at December 31, 2013 and 2012:


	Pension Benefits
	2013	2012
Investments, at fair value:	(In thousands)
Cash	$ 57	$ 88
U.S. agency debt obligations	64,298	49,886
Mutual funds	121,178	138,904
Common stock of BancorpSouth, Inc.	2,091	1,196
Money market funds	5,303	9,356
Brokered certificates of deposit	2,973	3,784
Total investments, at fair value	195,900	203,214
Accrued interest and dividends	547	490
Fair value of plan assets	$ 196,447	$ 203,704

Fair values are determined based on valuation techniques categorized as follows: Level 1 means the use of quoted prices for identical instruments in active markets; Level 2 means the use of quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; Level 3 means the use of unobservable inputs. Quoted market prices, when available, are used to value investments. Pension plan investments include funds which invest in various types of investment securities and in various companies within various markets. Investment securities are exposed to several risks, such as interest rate, market and credit risks. Because of the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported.

The following tables set forth by level, within the FASB ASC 820, Fair Value Measurements and Disclosure (“FASB ASC 820”), fair value hierarchy, the plan investments at fair value as of December 31, 2013 and 2012:


	December 31, 2013
	Level 1	Level 2	Level 3	Total
	(In thousands)
U.S. agency debt obligations	$ -	$ 64,298	$ -	$ 64,298
Mutual funds	121,178	-	-	121,178
Common stock of BancorpSouth, Inc.	2,091	-	-	2,091
Money market funds	-	5,303	-	5,303
Brokered certificates of deposit	-	2,973	-	2,973
Total	$ 123,269	$ 72,574	$ -	$ 195,843


	December 31, 2012
	Level 1	Level 2	Level 3	Total
	(In thousands)
U.S. agency debt obligations	$ -	$ 49,886	$ -	$ 49,886
Mutual funds	138,904	-	-	138,904
Common stock of BancorpSouth, Inc.	1,196	-	-	1,196
Money market funds	-	9,356	-	9,356
Brokered certificates of deposit	-	3,784	-	3,784
Total	$ 140,100	$ 63,026	$ -	$ 203,126

There were no transfers between Levels of the fair value hierarchy in 2013 or 2012.

The following investments represented 5% or more of the total plan asset value as of December 31, 2013:


		2013
		(In thousands)
Fidelity Advisor New Insights Institutional Fund		$ 11,285
Fidelity Low Price Stock Fund		14,266
Franklin Mutual Discovery Z Fund		11,486
T. Rowe Price Equity Income Fund		11,337
Pioneer Multi-Asset Floating Rate Fund		25,093

The Company has a defined contribution plan (commonly referred to as a “401(k) Plan”). Pursuant to the 401(k) Plan, employees may contribute a portion of their compensation, as set forth in the 401(k) Plan, subject to the limitations as established by the Code. Employee contributions (up to 5% of defined compensation) are matched dollar-for-dollar by the Company. Employer contributions were $9.8 million, $9.2 million and $8.6 million for the years ended December 31, 2013, 2012 and 2011, respectively. Until December 31, 2011, the 401(k) Plan provided that the Company make a profit sharing contribution on behalf of each eligible employee in an amount equal to two percent of each such employee’s eligible compensation. Eligible employees were those hired after December 31, 2005 who worked at least 1,000 hours during the plan year and had attained the age of 21. As of December 31, 2011, the 401(k) Plan was amended and the profit sharing contribution was discontinued. Employer profit sharing contributions were $1.3 million in 2011.