Employee Benefit Plans

The company maintains an unfunded Arrow supplemental executive retirement plan ("SERP") under which the company will pay supplemental pension benefits to certain employees upon retirement. As of December 31, 2013, there were 10 current and 16 former corporate officers participating in this plan. The Board determines those employees who are eligible to participate in the Arrow SERP.

The Arrow SERP, as amended, provides for the pension benefits to be based on a percentage of average final compensation, based on years of participation in the Arrow SERP. The Arrow SERP permits early retirement, with payments at a reduced rate, based on age and years of service subject to a minimum retirement age of 55. Participants whose accrued rights under the Arrow SERP, prior to the 2002 amendment, which were adversely affected by the amendment, will continue to be entitled to such greater rights.

Additionally, as part of the company's acquisition of Wyle Electronics ("Wyle") in 2000, Wyle provided retirement benefits for certain employees under a defined benefit plan. Benefits under this plan were frozen as of December 31, 2000.

The company uses a December 31 measurement date for the Arrow SERP and the Wyle defined benefit plan. Pension information for the years ended December 31 is as follows:



	Arrow SERP						Wyle Defined Benefit Plan
	2013			2012			2013			2012
Accumulated benefit obligation	$	67,320		$	63,584		$	126,481		$	128,771
Changes in projected benefit obligation:
Projected benefit obligation at beginning of year	$	73,327		$	61,690		$	128,771		$	118,191
Service cost	2,126			2,064			—			—
Interest cost	2,846			3,031			5,038			5,442
Actuarial loss (gain)	301			9,780			(1,158		)	10,808
Benefits paid	(3,288		)	(3,238		)	(6,170		)	(5,670		)
Projected benefit obligation at end of year	$	75,312		$	73,327		$	126,481		$	128,771
Changes in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—		$	92,976		$	81,719
Actual return on plan assets	—			—			17,608			11,477
Company contributions	—			—			300			5,450
Benefits paid	—			—			(6,170		)	(5,670		)
Fair value of plan assets at end of year	$	—		$	—		$	104,714		$	92,976
Funded status	$	(75,312	)	$	(73,327	)	$	(21,767	)	$	(35,795	)
Amounts recognized in the company's consolidated balance sheets:
Current liabilities	$	(3,531	)	$	(3,483	)	$	—		$	—
Noncurrent liabilities	(71,781		)	(69,844		)	(21,767		)	(35,795		)
Net assets (liabilities) at end of year	$	(75,312	)	$	(73,327	)	$	(21,767	)	$	(35,795	)
Components of net periodic pension cost:
Service cost	$	2,126		$	2,064		$	—		$	—
Interest cost	2,846			3,031			5,038			5,442
Expected return on plan assets	—			—			(6,516		)	(6,200		)
Amortization of net loss	2,707			2,013			1,956			1,745
Amortization of prior service cost	42			42			—			—
Net periodic pension cost	$	7,721		$	7,150		$	478		$	987
Weighted-average assumptions used to determine benefit obligation:
Discount rate	4.50		%	4.00		%	4.50		%	4.00		%
Rate of compensation increase	5.00		%	5.00		%	N/A			N/A
Expected return on plan assets	N/A			N/A			6.75		%	7.25		%
Weighted-average assumptions used to determine net periodic pension cost:
Discount rate	4.00		%	4.75		%	4.00		%	4.75		%
Rate of compensation increase	5.00		%	5.00		%	N/A			N/A
Expected return on plan assets	N/A			N/A			7.25		%	7.50		%

The amounts reported for net periodic pension cost and the respective benefit obligation amounts are dependent upon the actuarial assumptions used. The company reviews historical trends, future expectations, current market conditions, and external data to determine the assumptions. The discount rate represents the market rate for a high-quality corporate bond. The rate of compensation increase is determined by the company, based upon its long-term plans for such increases. The expected return on plan assets is based on current and expected asset allocations, historical trends, and projected returns on those assets. The actuarial assumptions used to determine the net periodic pension cost are based upon the prior year's assumptions used to determine the benefit obligation.

Benefit payments are expected to be paid as follows:



	Arrow SERP		Wyle Defined Benefit Plan
2014	$	3,602	$	6,755
2015	3,564		6,804
2016	3,617		6,980
2017	3,568		7,053
2018	4,054		7,089
2019-2023	25,890		37,572

The company makes contributions to the Wyle defined benefit plan so that minimum contribution requirements, as determined by government regulations, are met. The company made contributions of $300 and $5,450 in 2013 and 2012, respectively, and expects to make estimated contributions of $5,600 in 2014.

The fair values of the company's pension plan assets for the Wyle defined benefit plan at December 31, 2013, utilizing the fair value hierarchy discussed in Note 7, are as follows:



	Level 1		Level 2		Level 3		Total
Equities:
U.S. common stocks	$	42,638	$	—	$	—	$	42,638
International mutual funds	15,276		—		—		15,276
Index mutual funds	15,482		—		—		15,482
Fixed Income:
Mutual funds	27,827		—		—		27,827
Insurance contracts	—		3,491		—		3,491
Total	$	101,223	$	3,491	$	—	$	104,714

The fair values of the company's pension plan assets for the Wyle defined benefit plan at December 31, 2012, utilizing the fair value hierarchy discussed in Note 7, are as follows:



	Level 1		Level 2		Level 3		Total
Cash Equivalents:
Common collective trusts	$	—	$	749	$	—	$	749
Equities:
U.S. common stocks	33,806		—		—		33,806
International mutual funds	12,714		—		—		12,714
Index mutual funds	12,674		—		—		12,674
Fixed Income:
Mutual funds	30,374		—		—		30,374
Insurance contracts	—		2,659		—		2,659
Total	$	89,568	$	3,408	$	—	$	92,976

The investment portfolio contains a diversified blend of common stocks, bonds, cash equivalents, and other investments, which may reflect varying rates of return. The investments are further diversified within each asset classification. The portfolio diversification provides protection against a single security or class of securities having a disproportionate impact on aggregate performance. The long-term target allocations for plan assets are 65% in equities and 35% in fixed income, although the actual plan asset allocations may be within a range around these targets. The actual asset allocations are reviewed and rebalanced on a periodic basis to maintain the target allocations.

Comprehensive Income Items

In 2013, 2012, and 2011, actuarial (gains) losses of $(7,615), $9,120, and $15,228, respectively, were recognized in comprehensive income, net of related taxes, related to the company's defined benefit plans. In 2013, 2012, and 2011, the following amounts were recognized as a reclassification adjustment of comprehensive income, net of related taxes, as a result of being recognized in net periodic pension cost: prior service cost of $19, $19, and $19, respectively and an actuarial loss of $2,854, $2,311, and $1,103, respectively.

Included in accumulated other comprehensive loss at December 31, 2013 and 2012 are the following amounts, net of related taxes, that have not yet been recognized in net periodic pension cost: unrecognized prior service costs of $7 and $25, respectively, and unrecognized actuarial losses of $36,584 and $47,053, respectively.

The prior service cost and actuarial loss included in accumulated other comprehensive loss, net of related taxes, which are expected to be recognized in net periodic pension cost for the year ended December 31, 2014 are $19 and $2,500, respectively.

Stock Ownership Plan

Effective December 31, 2012, the company froze its noncontributory employee stock ownership plan to new participants and no further contributions were made by the company in 2013 on behalf of participants in the plan. The account balances of participants in the plan as of December 31, 2012 became fully vested. The plan enabled most United States employees to acquire shares of the company's common stock. Contributions, which were determined by the Board, were in the form of common stock or cash, which was used to purchase the company's common stock for the benefit of participating employees. Contributions to the plan in 2012 and 2011 were $5,966 and $5,222, respectively.

Defined Contribution Plan

The company has defined contribution plans for eligible employees, which qualify under Section 401(k) of the Internal Revenue Code. The company's contribution to the plans, which are based on a specified percentage of employee contributions, amounted to $14,102, $14,014, and $10,063 in 2013, 2012, and 2011, respectively. In lieu of contributions to the employee stock ownership plan, which was frozen on December 31, 2012 as described above, the company made discretionary contributions to the company's defined benefit 401(k) plan, which amounted to $7,403 in 2013. Certain international subsidiaries maintain separate defined contribution plans for their employees and made contributions thereunder, which amounted to $26,038, $23,990, and $23,450 in 2013, 2012, and 2011, respectively.