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Employee Benefits
 12 Months Ended
Dec. 31, 2015
Compensation and Retirement Disclosure [Abstract]  
Employee Benefits
EMPLOYEE BENEFITS 
We maintain a qualified defined benefit pension plan, or Plan, covering substantially all employees hired prior to January 1, 2008. The benefits are based on years of service and the employee’s compensation for the highest five consecutive years in the last ten years. Contributions are intended to provide for benefits attributed to employee service to date and for those benefits expected to be earned in the future.
The following table summarizes the activity in the benefit obligation and Plan assets deriving the funded status, which is recorded in other liabilities in the Consolidated Balance Sheets:
(dollars in thousands)
2015

2014

Change in Projected Benefit Obligation
 
 
Projected benefit obligation at beginning of year
$
113,124

$
95,969

Service cost
2,601

2,369

Interest cost
4,425

4,470

Actuarial (gain) loss
(4,257
)
16,020

Benefits paid
(6,146
)
(5,704
)
Projected Benefit Obligation at End of Year
$
109,747

$
113,124

Change in Plan Assets
 
 
Fair value of plan assets at beginning of year
$
93,486

$
89,556

Actual return on plan assets
(2,755
)
9,634

Benefits paid
(6,146
)
(5,704
)
Fair Value of Plan Assets at End of Year
$
84,585

$
93,486

Funded Status
$
(25,162
)
$
(19,638
)

The following table sets forth the amounts recognized in accumulated other comprehensive income (loss) at December 31:
(dollars in thousands)
2015

2014

Prior service credit
$
(1,029
)
$
(1,167
)
Net actuarial loss
34,376

30,726

Total (Before Tax Effects)
$
33,347

$
29,559


Below are the actuarial weighted average assumptions used in determining the benefit obligation:
 
2015

2014

Discount rate
4.25
%
4.00
%
Rate of compensation increase
3.00
%
3.00
%

The following table summarizes the components of net periodic pension cost and other changes in Plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended December 31:
(dollars in thousands)
2015

2014

2013

Components of Net Periodic Pension Cost
 
 
 
Service cost—benefits earned during the period
$
2,601

$
2,369

$
2,767

Interest cost on projected benefit obligation
4,425

4,470

3,985

Expected return on plan assets
(7,180
)
(6,907
)
(6,207
)
Amortization of prior service credit
(138
)
(137
)
(138
)
Recognized net actuarial loss
2,028

941

2,425

Net Periodic Pension Expense
$
1,736

$
736

$
2,832

Other Changes in Plan Assets and Benefit Obligation Recognized in Other Comprehensive Income (Loss)
 
 
 
Net actuarial loss (gain)
$
5,678

$
13,294

$
(15,499
)
Recognized net actuarial loss
(2,028
)
(941
)
(2,425
)
Recognized prior service credit
138

137

138

Total (Before Tax Effects)
$
3,788

$
12,490

$
(17,786
)
Total Recognized in Net Benefit Cost and Other Comprehensive Income (Loss) (Before Tax Effects)
$
5,524

$
13,226

$
(14,954
)

The following table summarizes the actuarial weighted average assumptions used in determining net periodic pension cost:
 
2015

2014

2013

Discount rate
4.00
%
4.75
%
4.00
%
Rate of compensation increase
3.00
%
3.00
%
3.00
%
Expected return on assets
8.00
%
8.00
%
8.00
%

The net actuarial loss included in accumulated other comprehensive income (loss) expected to be recognized in net periodic pension cost during the year ended December 31, 2016 is $2.3 million. The prior service credit expected to be recognized during the same period is $0.1 million.
The accumulated benefit obligation for the Plan was $101.6 million at December 31, 2015 and $104.3 million at December 31, 2014.
We consider many factors when setting the assumed rate of return on Plan assets. As a general guideline the assumed rate of return is equal to the weighted average of the expected returns for each asset category and is estimated based on historical returns as well as expected future returns. The weighted average discount rate is derived from corporate yield curves.
S&T Bank’s Retirement Plan Committee determines the investment policy for the Plan. In general, the targeted asset allocation is 50 percent to 70 percent equities and 30 percent to 50 percent fixed income. A strategic allocation within each asset class is employed based on the Plan’s time horizon, risk tolerances, performance expectations and asset class preferences. Investment managers have discretion to invest in any equity or fixed-income asset class, subject to the securities guidelines of the Plan’s Investment Policy Statement.
At this time, S&T Bank is not required to make a cash contribution to the Plan in 2016. No contributions were made during 2015.
The following table provides information regarding estimated future benefit payments to be paid in each of the next five years and in the aggregate for the five years thereafter:
(dollars in thousands)
Amount

 
 
2016
$
6,455

2017
6,250

2018
6,643

2019
6,676

2020
7,298

2021 - 2025
38,488


We also have nonqualified supplemental executive pension plans, or SERPs, for certain key employees. The SERPs are unfunded. The projected benefit obligations related to the SERPs were $4.0 million and $3.5 million at December 31, 2015 and 2014. These amounts also represent the net amount recognized in the statement of financial position for the SERPs. Net periodic benefit costs for the SERPs were $0.6 million, $0.4 million and $0.4 million for each of the years ended December 31, 2015, 2014 and 2013. Additionally, $2.1 million before tax was reflected in accumulated other comprehensive income (loss) at both December 31, 2015 and 2014, in relation to the SERPs. The actuarial assumptions used for the SERPs are the same as those used for the Plan.
On January 25, 2016, the Board of Directors approved an amendment to freeze benefit accruals under the qualified and nonqualified defined benefit pension plans effective March 31, 2016. This change will result in no additional benefits being earned by participants in those plans based on service or pay after March 31, 2016. The Plan was previously closed to new participants effective December 31, 2007.
We maintain a Thrift Plan, a qualified defined contribution plan, in which substantially all employees are eligible to participate. We make matching contributions to the Thrift Plan up to 3.5 percent of participants’ eligible compensation and may make additional profit-sharing contributions as provided by the Thrift Plan. Expense related to these contributions amounted to $1.5 million in 2015, $1.3 million in 2014 and $1.4 million in 2013.

Fair Value Measurements
The following tables present our Plan assets measured at fair value on a recurring basis by fair value hierarchy level at December 31, 2015 and 2014. There were no transfers between Level 1 and Level 2 for items of a recurring basis during the periods presented. There were no purchases or transfers of Level 3 plan assets in 2015.
 
December 31, 2015
 
Fair Value Asset Classes(1)
(dollars in thousands)
Level 1

Level 2

Level 3

Total

Cash and cash equivalents(2)
$
—

$
3,371

$
—

$
3,371

Fixed income(3)
27,054

—

—

27,054

Equities:
 
 
 
 
Equity index mutual funds—international(4)
3,421

—

—

3,421

Domestic individual equities(5)
50,739

—

—

50,739

Total Assets at Fair Value
$
81,214

$
3,371

$
—

$
84,585

(1)
Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy.
(2)
This asset class includes FDIC insured money market instruments.
(3)
This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the U.S. dollar.
(4)
The sole investment within this asset class is the Harbor International Institutional Fund.
(5)
This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.
 
December 31, 2014
 
Fair Value Asset Classes(1)
(dollars in thousands)
Level 1

Level 2

Level 3

Total

Cash and cash equivalents(2)
$
—

$
5,073

$
—

$
5,073

Fixed income(3)
26,726

—

—

26,726

Equities:
 
 
 
 
Equity index mutual funds—international(4)
3,728

—

—

3,728

Domestic individual equities(5)
57,085

—

—

57,085

International individual equities(6)
874

—

—

874

Total Assets at Fair Value
$
88,413

$
5,073

$
—

$
93,486

(1)
Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy.
(2)
This asset class includes FDIC insured money market instruments.
(3)
This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the U.S. dollar.
(4)
The sole investment within this asset class is MSCI EAFE Index iShares.
(5)
This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.
(6)
This asset class includes American Depository Receipts.