EMPLOYEE BENEFIT PLANS

Pension

The Company maintains a multiemployer defined benefit pension plan (the “Pension Plan”) administered by Pentegra Retirement Services (the “Fund” or “Pentegra Defined Benefit Plan for Financial Institutions”). The Fund does not segregate the assets or liabilities of all participating employers and accordingly, disclosure of plan assets, accumulated vested and nonvested benefits is not possible. Effective July 1, 2006, the Company froze the defined benefit plan by eliminating all future benefit accruals. Contributions to the Pension Plan are based on each individual employer’s experience. The Company bears the market risk relating to the Pension Plan and will continue to fund the Pension Plan as required. The Pension Plan year is July 1^st through June 30^th.

In conjunction with the acquisition of Peoples Federal Savings Bank in 2015, the Company acquired the Peoples Federal Defined Benefit Pension Plan (“Peoples Plan”). The Peoples Plan was frozen at the date of acquisition and will be maintained in the same manner as the Pension Plan. The Peoples Plan is also administered by Pentegra Retirement Services under the same Fund as the Pension Plan.

The Company’s participation in the Pension Plan and the Peoples Plan (the "Pension Plans") for the annual period ended December 31, 2016, is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit plan number. The funding status of the Pension Plans is determined on the basis of the financial statements provided by the Fund using total plan assets and accumulated benefit obligation. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. The “Expiration Date of Collective-Bargaining Agreement” column lists the expiration dates of any collective-bargaining agreement(s) to which the Pension Plans are subject.

Funding Status
of Pension Plan

FIP/RP Status
Pending/
Implemented

Surcharge
Imposed

Expiration
Date of
Collective-
Bargaining
Agreement

Minimum
Contributions
Required for
Future
Periods

EIN/Pension
Plan Number

2016

2015

Pentegra defined benefit plan for financial institutions

13-5645888/333

At least 80 percent

N/A

—

Contributions to the Fund are based on each individual employer’s experience. The Company’s total contributions to the Pension Plans did not represent more than 5% of the total contributions to the Pension Plan as indicated in the Pension Plan’s most recently available annual report dated June 30, 2016. The comparability of employer contributions is impacted by asset performance, discount rates and the reduction in the number of covered employees year over year.

The Company’s contributions to the Pension Plans were as follows for the periods indicated:



					Required Contributions - Plan Year Allocation
	Cash Payment		Future period funding		2016-2017		2015-2016		2014-2015
	(Dollars in thousands)
2016	$	6,245	$	4,000	$	2,245	$	—	$	—
2015	$	2,983	$	1,215	$	—	$	1,768	$	—
2014	$	1,320	$	—	$	—	$	—	$	1,320

The Company’s total defined benefit plan expense was $2.0 million, $1.6 million, and $1.5 million, for the years ending December 31, 2016, 2015, and 2014, respectively.

Financial information for the Fund is made available through the public Form 5500 which is available by April 15^th of the year following the plan year end.

Postretirement Benefit Plans

Employees retiring from the Bank after attaining age 65, who have rendered at least 10 years of continuous service are entitled to a fixed contribution toward the premium for postretirement health care benefits and a $5,000 benefit paid upon death. The health care benefits are subject to deductibles, co-payment provisions and other limitations. The Bank may amend or change these benefits periodically. Additionally, the Company has acquired small postretirement plans and/or agreements in conjunction with various acquisitions, which do not have a material impact on the amount of expense realized by the Company. The expense related to these plans for the years ending December 31, 2016, 2015, and 2014 was not material.

Supplemental Executive Retirement Plans

The Bank maintains defined benefit supplemental executive retirement plans (“SERP”) for certain highly compensated employees designed to offset the impact of regulatory limits on benefits under qualified pension plans. The Bank also maintains defined benefit SERPs acquired from previous acquisitions. The Bank has established and funded Rabbi Trusts to accumulate funds in order to satisfy the contractual liability of these supplemental retirement plan benefits. These agreements provide for the Bank to pay all benefits from its general assets, and the establishment of these trust funds does not reduce nor otherwise affect the Bank’s continuing liability to pay benefits from such assets except that the Bank’s liability shall be offset by actual benefit payments made from the trusts. The related trust assets, included in the Company's available for sale securities portfolio, totaled $16.0 million and $10.0 million at December 31, 2016 and 2015, respectively.

During 2014, the Company amended the retirement benefit amounts for certain participants. The Company then froze its defined benefit SERP by closing it to new participants and restricting future adjustments to the retirement benefit amounts.

The following table shows the defined benefit supplemental retirement expense, and the contributions paid to the plans which were used only to pay the current year benefits as of the dates indicated:



	2016		2015		2014
	(Dollars in thousands)
Retirement expense	$	1,513	$	1,834	$	954
Contributions paid	$	320	$	276	$	271

Expected future benefit payments for the defined benefit supplemental executive retirement plans are presented below:



	Defined Benefit Supplemental Executive Retirement Plans Expected Benefit Payments
	(Dollars in thousands)
2017	$	412
2018	$	414
2019	$	485
2020	$	471
2021	$	466
2022-2026	$	4,348

The measurement date used to determine the defined benefit supplemental executive retirement plans' benefits is December 31 for each of the years reported. The following table illustrates the status of the defined benefit supplemental executive retirement plans at December 31 for the years presented:



	Defined Benefit Supplemental Executive Retirement Benefits
	2016			2015			2014
	(Dollars in thousands)
Change in accumulated benefit obligation
Benefit obligation at beginning of year	$	13,290		$	12,537		$	8,243
Accumulated service cost	395			742			397
Interest cost	539			470			390
Plan amendment	—			—			1,357
Actuarial loss/(gain)	273			(183		)	2,421
Benefits paid	(320		)	(276		)	(271		)
Accumulated benefit obligation at end of year	$	14,177		$	13,290		$	12,537
Change in plan assets
Fair value of plan assets at beginning of year	$	—		$	—		$	—
Employer contribution	320			276			271
Benefits paid	(320		)	(276		)	(271		)
Fair value of plan assets at end of year	$	—		$	—		$	—
Funded status at end of year	$	(14,177	)	$	(13,290	)	$	(12,537	)
Assets	—			—			—
Liabilities	(14,177		)	(13,290		)	(12,537		)
Accrued benefit cost	$	(14,177	)	$	(13,290	)	$	(12,537	)
Amounts recognized in accumulated other comprehensive income (“AOCI”)
Net loss	$	2,830		$	2,859		$	3,305
Prior service cost	1,323			1,599			1,904
Amounts recognized in AOCI	$	4,153		$	4,458		$	5,209
Information for plans with an accumulated benefit obligation in excess of plan assets
Projected benefit obligation	$	14,177		$	13,290		$	12,537
Accumulated benefit obligation	$	14,177		$	13,290		$	12,537
Net periodic benefit cost
Service cost	$	395		$	742		$	397
Interest cost	539			470			390
Amortization of prior service cost	276			305			113
Recognized net actuarial loss	303			317			54
Net periodic benefit cost	$	1,513		$	1,834		$	954
Amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit cost over next fiscal year
Net actuarial loss	$	338		$	270		$	309
Net prior service cost	$	276		$	276		$	947
Discount rate used for benefit obligation	2.49-3.94%			2.49-4.16%			2.24-3.84%
Discount rate used for net periodic benefit cost	2.49-4.16%			2.24-3.84%			2.43-4.76%
Rate of compensation increase	n/a			n/a			n/a

Other Employee Benefits

The Bank from time to time creates an incentive compensation plan for senior management and other officers to participate in at varying levels. In addition, the Bank may also pay a discretionary bonus to senior management, officers, and/or nonofficers of the Bank. The expense for the incentive plans and the discretionary bonus amounted to $10.3 million in both 2016 and 2015, and $8.5 million in 2014.

The Bank has an Employee Savings Plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the Employee Savings Plan, participating employees may defer a portion of their earnings, not to exceed the Internal Revenue Service annual contribution limits. The Bank matches 25% of each employee’s contributions up to the first 6% of the employee’s earnings. The 401(k) Plan incorporates an Employee Stock Ownership Plan for contributions invested in the Company’s common stock. This Plan also provides nondiscretionary contributions in which employees, with one year and 1,000 hours of service, receive a 5% cash contribution of eligible pay up to the social security limit and a 10% cash contribution of eligible pay over the social security limit up to the maximum amount permitted by law. Benefits contributed to employees under this defined contribution plan vest immediately. The defined contribution plan expense was $4.8 million, $4.5 million and $4.2 million for the years ended December 2016, 2015, in 2014, respectively.

The Company has a non-qualified deferred compensation plan which allows for deferrals of incentive payments until an elected distribution date in the future. This deferred compensation plan is available to certain highly compensated employees. Deferrals are invested at the election of the participant into one of the actively managed funds made available to the participant through the Company's Investment Management Group. The funds are held in a Rabbi Trust until the elected date of distribution.

The Company has a non-qualified 401(k) Restoration Plan ("Restoration Plan") for certain executive officers. The Restoration Plan is intended to contribute to each participant the amount of matching and discretionary contributions which would have been made to the existing Rockland Trust 401(k) plan on the participant's behalf, but were prohibited due to Internal Revenue Code limitations. Deferrals are invested at the election of the participant into one of the actively managed funds made available to the participant through the Company's Investment Management Group or in the Company's stock. The funds, which are not invested in the Company's stock are held in a Rabbi Trust until the elected date of distribution. The Company recognized expense of $425,000, $232,000 and $56,000 related to this plan for services already performed for the years ended December 31, 2016, 2015 and 2014, respectively.

As a result of the Peoples acquisition in 2015, the Company assumed an Employee Stock Ownership Plan and a 401(k) Plan. The Company received approval and terminated both plans during 2016, and as such, there was no expense associated with either plan during 2016 and 2015.

Also as part of the Peoples acquisition, the Company assumed various Salary Continuation Agreements with certain current and former senior executives. The agreements require the payment of specified benefits upon retirement over periods of ten or twenty years as described in each agreement. Expense related to the Salary Continuation Agreements was $272,000 and $222,000 for the years ended December 31, 2016 and 2015, respectively.

The Company also assumed a Peoples supplemental retirement plan with a former executive, whereby the amounts paid under this plan commenced upon the executive's retirement and continue for his lifetime. Expense related to the supplemental retirement plan was $13,000 and $11,000 for the years ended December 31, 2016 and 2015.

Director Benefits

The Company maintains a deferred compensation plan for the Company’s Board of Directors. The Board of Directors is entitled to elect to defer their director’s fees until retirement. If the Director elects to do so, their compensation is invested in the Company’s stock and maintained within the Company’s Investment Management Group. The amount of compensation deferred during 2016, 2015, and 2014 was $142,000, $149,000, and $135,000, respectively. At December 31, 2016 and 2015, the Company had 168,352 and 172,580 of shares provided for the plan with a related liability of $4.2 million and $3.9 million established within shareholders’ equity, respectively.

As a result of the Peoples acquisition during 2015, the Company assumed several Director Retirement Agreements. The agreements require the payment of specified benefits upon retirement over periods of ten or twenty years as described in each agreement. Expense for the Director Retirement Agreements was $40,000 and $35,000 for the years ended December 31, 2016 and 2015, respectively.