PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

For the years ended December 31, 2017 and 2016, pension and other benefit liabilities are included in other liabilities in the consolidated balance sheets.

Pension Plans

In connection with the November 2006 acquisition of Maritrans, the Company assumed the obligations under the defined benefit retirement plan of Maritrans Inc. (“the Maritrans Plan”). As of December 31, 2006, the Company froze the benefits under the Maritrans Plan. At December 31, 2017, the Maritrans Plan is the only domestic defined benefit pension plan in existence at the Company. The Maritrans Plan was noncontributory and covered substantially all shore-based employees and substantially all of the seagoing supervisors who were supervisors in 1984, or who were hired in, or promoted into, supervisory roles between 1984 and 1998 for that period of time. Beginning in 1999, the seagoing supervisors’ retirement benefits are provided through contributions to an industry-wide, multiemployer union sponsored pension plan. Upon retirement, those seagoing supervisors are entitled to retirement benefits from the Maritrans Plan for service periods between 1984 and 1998 and from the multiemployer union sponsored plan for other covered periods. Retirement benefits are based primarily on years of service and average compensation for the five consecutive plan years that produce the highest results.

Multiemployer Pension and Postretirement Benefit Plans

The Company’s subsidiaries are parties to collective-bargaining agreements that require them to make contributions to three jointly managed (Company and union) multiemployer pension plans covering seagoing personnel of U.S. Flag vessels. All three plans, the American Maritime Officers (“AMO”) Pension Plan, the Seafarers Pension Plan (“SIU”) and the Marine Engineers’ Beneficial Association (“MEBA”) Defined Benefit Pension Plan, are deemed individually significant by management.

Plan level information is available in the public domain for each of the multiemployer pension plans the Company participates in. The table below provides additional information about the Company’s participation in the above multi-employer pension plans:



		Pension Protection Act Zone Status			Contributions made by the Company
Pension Plan	EIN / Pension Plan Number	2017	2016	Rehabilitation Plan Status	2017		2016		2015
AMO Pension Plan	13-1936709	Yellow ⁽¹⁾	Yellow ⁽¹⁾	Implemented	$	984	$	1,015	$	1,001

MEBA Pension Plan	51-6029896	Green ⁽¹⁾	Green ⁽¹⁾	None	1,411		1,406		1,286

Seafarers Pension Plan	13-6100329	Green ⁽¹⁾	Green ⁽¹⁾	None	400		434		427
				Total contributions	$	2,795	$	2,855	$	2,714


(1)	A "Yellow" Zone Status plan is a plan that has a funding ratio between 65% and 80%. A "Green" Zone Status plan is a plan that is 80% funded or more.

The plan years for the three union plans end as follows: MEBA and SIU on December 31 and AMO on September 30. The Company has no future minimum contribution requirements under the three multiemployer pension plans shown above as of December 31, 2017 and any future contributions are subject to negotiations between the employers and the unions.

Under the Employee Retirement Income Security Act of 1974 (“ERISA”) as amended by the Pension Protection Act of 2006 (“PPA”) and the Multiemployer Pension Reform Act of 2014 (“MPRA”), on March 31, 2015, the actuary of the MEBA Pension Plan (“Plan”) certified the Plan as being in neither endangered nor critical status as of January 1, 2015. The actuary also certified that the Plan was projected to be in critical status in at least one of the five succeeding Plan years. Under MPRA, a multiemployer pension plan that has been actuarially projected to be in critical status within the succeeding five plan years may elect to be in critical status for the current plan year within 30 days of the actuary’s certification. In accordance with applicable law, on April 30, 2015 the Plan’s Board of Trustees (“Trustees”) elected that the Plan enter critical status for the plan year beginning January 1, 2015. The Plan entered into a Rehabilitation Plan (“RP”) whereby lump sum payment options previously available under the Plan will no longer be paid to beneficiaries, and each employer became obligated to pay a 5% contribution surcharge to the Plan, effective with respect to contributions for work performed on or after June 1, 2015. On October 27, 2015, the Company received correspondence from MEBA indicating that Federal law requires that the Trustees adopt an RP with a schedule of increases in contributions and reductions in future benefits that will help the Plan emerge from critical status. However, because the Plan’s actuary has projected that the Plan will emerge from critical status without any contribution increases or benefit reductions; the RP does not include any. The letter also indicated that since the Company signed a Memorandum of Understanding on October 21, 2015 whereby the Company and MEBA amended their collective bargaining agreement to adopt the preferred schedule of the RP that was adopted by the Pension Plan’s Board of Trustees on October 21, 2015, the surcharges required to be paid to the Plan by the Company since June 1, 2015 ceased as of October 31, 2015. During April 2016, the Company received correspondence from MEBA indicating that due to the actions of the Trustees, the Plan’s actuaries certified in March 2016 that the Plan has emerged from critical status, and the Plan is not in endangered, critical, or critical and declining status for the plan year commencing January 1, 2016. As a result, the rehabilitation plan period has terminated.

ERISA requires employers who are contributors to U.S. multiemployer plans to continue funding their allocable share of each plan’s unfunded vested benefits in the event of withdrawal from or termination of such plans. Based on information received from the trustees of the SIU Pension Plan, the Company is not subject to withdrawal liabilities under that plan. Based on the actuarial report received from the trustees of the MEBA Pension Plan, as of December 31, 2016, the Company’s estimated withdrawal liability would have been approximately $24,867 had the Company elected to withdrawal from the plan in 2017. Based on the actuarial report received from the trustees of the AMO Pension Plan, as of September 30, 2016, the Company’s estimated withdrawal liability would have been approximately $21,891 had the Company elected to withdraw from the plan in 2017. The Company has no intentions of terminating its participation in any of the three multiemployer pension plans and has no expectations that the plans will be terminated. Accordingly, no provisions have been made for the estimated withdrawal liability as of December 31, 2017.

The SIU – Tanker Agreement, SIU – Tug Agreement, AMO and MEBA collective bargaining agreements expire in June 2022, March 2018, March 2018 and June 2020, respectively. The collective bargaining agreements also require the Company to make contributions to certain other postretirement employee benefit plans the unions offer to their members. Such contributions were not material during the three years ended December 31, 2017.

Postretirement Benefit Plans

The Company also provides certain postretirement health care and life insurance benefits to qualifying domestic retirees and their eligible dependents. The health care plan for shore-based employees and their dependents and seagoing licensed deck officers (“Deck Officers”) and their dependents is contributory at retirement, while the life insurance plan for all employees is noncontributory. In general, postretirement medical coverage is provided to shore-based employees hired prior to January 1, 2005 and all Deck Officers who retire and have met minimum age and service requirements under a formula related to total years of service. The Company no longer provides prescription drug coverage to its retirees or their beneficiaries once they reach age 65. The Company does not currently fund these benefit arrangements and has the right to amend or terminate the health care and life insurance benefits at any time.

Information with respect to the domestic pension and postretirement benefit plans for which the Company uses a December 31 measurement date, follow:



	Pension Benefits						Other Benefits
At December 31,	2017			2016			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	47,468		$	49,622		$	4,094		$	4,623
Cost of benefits earned (service cost)	—			—			113			138
Interest cost on benefit obligation	1,830			1,893			165			189
Curtailment gain	—			—			—			(451		)
Actuarial (gains)/losses	1,788			(1,520		)	389			(192		)
Benefits paid	(2,586		)	(2,527		)	(213		)	(213		)
Benefit obligation at year end	48,500			47,468			4,548			4,094
Change in plan assets:
Fair value of plan assets at beginning of year	32,013			33,127			—			—
Actual return on plan assets	5,082			1,413			—			—
Employer contributions	1,082			—			213			213
Benefits paid	(2,586		)	(2,527		)	(213		)	(213		)
Fair value of plan assets at year end	35,591			32,013			—			—
Unfunded status at December 31	$	(12,909	)	$	(15,455	)	$	(4,548	)	$	(4,094	)

Information for defined benefit pension plans with accumulated benefit obligations in excess of plan assets follows:



At December 31,	2017		2016
Projected benefit obligation	$	48,500	$	47,468
Accumulated benefit obligation	48,500		47,468
Fair value of plan assets	35,591		32,013

Information for defined benefit pension plans and other postretirement benefit plans net periodic cost/(benefit) follows:



	Pension Benefits									Other Benefits
For the year ended December 31,	2017			2016			2015			2017			2016			2015
Components of expense:
Cost of benefits earned	$	—		$	—		$	—		$	113		$	138		$	137
Interest cost on benefit obligation	1,830			1,893			1,928			165			189			191
Expected return on plan assets	(2,258		)	(2,309		)	(2,412		)	—			—			—
Amortization of prior-service costs	—			—			—			(229		)	(271		)	(316		)
Recognized net actuarial loss	688			688			792			56			97			157
Curtailment	—			97			157			—			(149		)	—
Net periodic benefit cost	$	260		$	369		$	465		$	105		$	4		$	169

The weighted-average assumptions used to determine benefit obligations follow:



	Pension Benefits				Other Benefits
At December 31,	2017		2016		2017		2016
Discount rate	3.55	%	3.95	%	3.70	%	4.15	%
Rate of future compensation increases	—		—		—		—

The selection of a single discount rate for the Maritrans Plan was derived from bond yield curves, which the Company believed as of such dates to be appropriate for ongoing plans with a long duration, such as the Maritrans Plan, and that generally mirror the type of high yield bond portfolio the Company could acquire to offset its obligations under the Maritrans Plan.

The weighted-average assumptions used to determine net periodic benefit cost follow:



	Pension Benefits						Other Benefits
For the year ended December 31,	2017		2016		2015		2017		2016		2015
Discount rate	3.95	%	4.00	%	3.75	%	4.15	%	4.25	%	4.00	%
Expected (long-term) return on plan assets	7.25	%	7.25	%	7.00	%	—		—		—
Rate of future compensation increases	—		—		—		—		—		—

The assumed health care cost trend rate for measuring the benefit obligation included in Other Benefits above is an increase of 7.00% as of December 31, 2017, with the rate of increase declining to an ultimate trend rate of 4.75% per annum by 2027. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have the following effects:



	1% increase		1% decrease
Effect on total of service and interest cost components in 2017	$	50	$	(37	)
Effect on postretirement benefit obligation as of December 31, 2017	$	637	$	(444	)

Expected benefit payments are as follows:



	Pension Benefits		Other Benefits
2018	$	2,753	$	215
2019	2,848		192
2020	2,999		194
2021	3,010		198
2022	3,040		200
Years 2023-2027	15,817		1,074
Total	$	30,467	$	2,073

The expected long-term rate of return on plan assets is based on the current and expected asset allocations. Additionally, the long-term rate of return is based on historical returns, investment strategy, inflation expectations and other economic factors. The expected long-term rate of return is then applied to the market value of plan assets.

The fair values of the Company’s pension plan assets at December 31, 2017, by asset category are as follows:



Description	Fair Value		Level 1
Cash and cash equivalents	$	655	$	655
Equity securities:
Large cap exchange traded fund	14,396		14,396
Small company - mid value	2,165		2,165
Small company - mid growth	2,284		2,284
International value	2,726		2,726
International growth	2,799		2,799
Fixed income and preferred stock:
Intermediate term bond fund	10,553		10,553
Small company - mid value - preferred stock	13		13
Total	$	35,591	$	35,591

Plan fiduciaries of the Retirement Plan of Maritrans, Inc. set investment policies, strategies and oversee its investment allocation, which includes selecting investment managers and setting long term strategic targets. The primary strategic investment objective is to maximize total return while maintaining a broadly diversified portfolio for the primary purpose of satisfying obligations for future benefit payments. Equities are the primary holdings of the Plan. Other investments, including fixed income investments, provide diversification, and, in certain cases, lower the volatility of returns. In general, equity can range from 55 to 75 percent of total plan assets, fixed income securities can range from 25 to 45 percent of total plan assets, and cash can be held in amounts up to 5 percent of plan assets. Actual asset allocation within the approved ranges varies from time to time based on economic conditions (both current and forecast) and the advice of professional advisors.

The Company contributed $1,082, $0 and $0 to the Maritrans Plan in 2017, 2016 and 2015, respectively. The Company expects to make contributions of approximately $1,279 to the Maritrans Plan in 2018.

Defined Contribution Plans

The Company also had defined contribution plans covering all eligible employees. Contributions are limited to amounts allowable for income tax purposes. Commencing in 2006, employer contributions include both employer contributions made regardless of employee contributions and matching contributions to the plans. All contributions to the plans are at the discretion of the Company. The Company's contributions to the plan were $2,244 for the year ended December 31, 2017.

The Company also has an unfunded, nonqualified supplemental savings plan covering highly compensated U.S. shore-based employees of the Company, which was terminated in connection with the Company’s filing for bankruptcy in 2012. This plan provided for levels of hypothetical employer contributions that would otherwise have been made under the Company’s defined contribution plans in the absence of limitations imposed by income tax regulations. The Company’s unfunded obligations under this plan at December 31, 2017 and 2016 were $22 and $741, respectively.