RETIREMENT PLANS (Dollars in Thousands)

Arrow sponsors qualified and nonqualified defined benefit pension plans and other postretirement benefit plans for its employees. Arrow maintains a non-contributory pension plan, which covers substantially all employees. Effective December 1, 2002, all active participants in the qualified defined benefit pension plan were given a one-time irrevocable election to continue participating in the traditional plan design, for which benefits were based on years of service and the participant’s final compensation (as defined), or to begin participating in the new cash balance plan design. All employees who participate in the plan after December 1, 2002 automatically participate in the cash balance plan design. The interest credits under the cash balance plan are based on the 30-year U.S. Treasury rate in effect for November of the prior year. The service credits under the cash balance plan are equal to 6.0% of eligible salaries for employees who become participants on or after January 1, 2003. For employees in the plan prior to January 1, 2003, the service credits are scaled based on the age of the participant, and range from 6.0% to 12.0%. The funding policy is to contribute up to the maximum amount that can be deducted for federal income tax purposes and to make all payments required under ERISA. Arrow also maintains a supplemental non-qualified unfunded retirement plan to provide eligible employees of Arrow and its subsidiaries with benefits in excess of qualified plan limits imposed by federal tax law.

Arrow has multiple non-pension postretirement benefit plans. The health care, dental and life insurance plans are contributory, with participants’ contributions adjusted annually. Arrow’s policy is to fund the cost of postretirement benefits based on the current cost of the underlying policies. However, the health care plan provision for automatic increases of Company contributions each year is based on the increase in inflation and is limited to a maximum of 5%.

As of December 31, 2017, Arrow utilized the mortality assumption from the RP-2014 Mortality Table for annuitants and non-annuitants but updated the projected generational mortality improvements by using Scale MP-2017. Revision of this assumption effective December 31, 2016 resulted in a decrease in the Company's pension and postretirement liabilities.

The following tables provide the components of net periodic benefit costs for the three- and nine-month periods ended September 30, 2018 and 2017.



				Select
	Employees'			Executive		Postretirement
	Pension			Retirement		Benefit
	Plan			Plan		Plans
Net Periodic Benefit Cost
For the Three Months Ended September 30, 2018:
Service Cost ¹	$	389		$	104	$	34
Interest Cost ²	400			48		81
Expected Return on Plan Assets ²	(841		)	—		—
Amortization of Prior Service (Credit) Cost ²	(12		)	14		25
Amortization of Net Loss ²	48			33		—
Net Periodic (Benefit) Cost	$	(16	)	$	199	$	140

Plan Contributions During the Period	$	—		$	116	$	56

For the Three Months Ended September 30, 2017:
Service Cost ¹	$	350		$	10	$	37
Interest Cost ²	362			55		75
Expected Return on Plan Assets ²	(800		)	—		—
Amortization of Prior Service (Credit) Cost ²	(14		)	14		(3		)
Amortization of Net Loss ²	148			31		—
Net Periodic (Benefit) Cost	$	46		$	110	$	109

Plan Contributions During the Period	$	—		$	116	$	65

Net Periodic Benefit Cost
For the Nine Months Ended September 30, 2018:
Service Cost ¹	$	1,168		$	311	$	102
Interest Cost ²	1,199			152		248
Expected Return on Plan Assets ²	(2,522		)	—		—
Amortization of Prior Service (Credit) Cost ²	(37		)	43		75
Amortization of Net Loss ²	145			99		—
Net Periodic (Benefit) Cost	$	(47	)	$	605	$	425

Plan Contributions During the Period	$	—		$	349	$	175

Estimated Future Contributions in the Current Fiscal Year	$	—		$	—	$	—



For the Nine Months Ended September 30, 2017:
Service Cost ¹	$	1,050		$	30	$	110
Interest Cost ²	1,085			164		224
Expected Return on Plan Assets ²	(2,399		)	—		—
Amortization of Prior Service (Credit) Cost ²	(43		)	43		(8		)
Amortization of Net Loss ²	443			94		—
Net Periodic (Benefit) Cost	$	136		$	331	$	326

Plan Contributions During the Period	$	—		$	345	$	295

Footnotes:

1. Included in Salaries and Employee Benefits on the Consolidated Statements of Income

2. Included in Other Operating Expense on the Consolidated Statements of Income

We are not required to make a contribution to the qualified pension plan in 2018, and currently, we do not expect to make additional contributions in 2018. Arrow makes contributions to its other post-retirement benefit plans in an amount equal to benefit payments for the year.