Employee Benefit Plans

The Company provides full-time employees with pension benefits under defined benefit and defined contribution plans. The measurement date for all plans is December 31. The Company's expense for its defined contribution plans amounted to $11.2 million in 2014, $10.3 million in 2013 and $8.8 million in 2012. The Company also provides certain health insurance benefits to employees as well as retirees.

The Company has both funded and unfunded noncontributory defined benefit pension plans. The plans provide defined benefits based on years of service and average monthly compensation using a career average formula. Pension benefits for the retail line of business employees were frozen at December 31, 2006. Pension benefits for the non-retail line of business employees were frozen at July 1, 2010.

In the fourth quarter of 2014, we began the process of terminating the funded defined benefit plan (the "Plan"), which will include settling the Plan liabilities by offering lump sum distributions to plan participants or purchasing annuity contracts for those who do not elect lump sums. While we expect to complete the termination in the near future, the timing is subject to regulatory approvals and other market factors. As part of the planned termination, in 2014 we adjusted our asset portfolio to a target asset allocation of 100% fixed income investments (up from 49%), which will provide a better matching of Plan assets to the characteristics of the liabilities. In the fourth quarter of 2014, we provided notice to plan participants of our intent to terminate the Plan and we applied for a determination with the Internal Revenue Service with regards to the termination. We will take further actions to minimize the volatility of the value of our pension assets relative to pension liabilities and to settle remaining Plan liabilities, including making such contributions to the Plan as may be necessary to make the Plan sufficient to settle all Plan liabilities.

As of December 31, 2014, we have valued the projected benefit obligations of the Plan based on the present value of estimated costs to settle the liabilities through a combination of lump sum payments to participants and purchasing annuities from an insurance company. This reflects an estimate of how many participants we expect will accept a lump sum offering, and an estimate of lump sum payouts for those participants based on the current lump sum rates approved by the IRS. Liabilities expected to be settled through annuity contracts have been estimated based on future benefit payments, discounted based on current interest rates that correspond to the liability payouts, adjusted to reflect a premium that would be assessed by the insurer. As the liabilities are settled, unamortized losses in accumulated other comprehensive income will be recognized based on the projected benefit obligations and assets measured as of the dates the settlements occur. Based on current rates, the amount of unamortized losses in other comprehensive income that would result in a one-time noncash charge is estimated at $64.6 million at December 31, 2014. Prior to settling the liabilities, we will contribute such additional amounts (currently estimated to be approximately $10.3 million) as may be necessary to fully fund the Plan. Such contributions are expected to be made concurrent with settling the liabilities but may be made earlier at our discretion. The impact of termination is subject to rate changes at the time of settlement. This termination does not yet constitute a settlement of liability under applicable accounting guidance for pension plans. The Company anticipates the conversion to individual annuity policies along with the liability discharge to occur in the near future. The defined benefit plan is included in the accompanying table for all years presented.

The Company also has postretirement health care benefit plans covering substantially all of its full time employees hired prior to January 1, 2003. These plans are generally contributory and include a cap on the Company's share of the related costs.

Obligation and Funded Status

Following are the details of the obligation and funded status of the pension and postretirement benefit plans:



(in thousands)	Pension Benefits						Postretirement Benefits
Change in benefit obligation	2014			2013			2014			2013
Benefit obligation at beginning of year	$	103,612		$	117,890		$	33,383		$	36,054
Service cost	180			—			687			841
Interest cost	4,774			4,227			1,511			1,366
Actuarial (gains) losses	29,059			(15,393		)	7,341			(4,359		)
Participant contributions	—			—			532			514
Retiree drug subsidy received	—			—			107			61
Benefits paid	(3,641		)	(3,112		)	(1,261		)	(1,094		)
Benefit obligation at end of year	$	133,984		$	103,612		$	42,300		$	33,383



(in thousands)	Pension Benefits						Postretirement Benefits
Change in plan assets	2014			2013			2014			2013
Fair value of plan assets at beginning of year	$	110,862		$	99,857		$	—		$	—
Actual gains on plan assets	8,689			12,487			—			—
Company contributions	131			1,630			729			580
Participant contributions	—			—			532			514
Benefits paid	(3,641		)	(3,112		)	(1,261		)	(1,094		)
Fair value of plan assets at end of year	$	116,041		$	110,862		$	—		$	—

Over (under) funded status of plans at end of year	$	(17,943	)	$	7,250		$	(42,300	)	$	(33,383	)

Amounts recognized in the Consolidated Balance Sheets at December 31, 2014 and 2013 consist of:



	Pension Benefits						Postretirement Benefits
(in thousands)	2014			2013			2014			2013
Accrued expenses	$	(165	)	$	(254	)	$	(1,274	)	$	(1,244	)
Employee benefit plan assets	—			14,328			—			—
Employee benefit plan obligations	(17,778		)	(6,824		)	(41,012		)	(32,139		)
Net amount recognized	$	(17,943	)	$	7,250		$	(42,286	)	$	(33,383	)

Following are the details of the pre-tax amounts recognized in accumulated other comprehensive loss at December 31, 2014:



	Pension Benefits					Postretirement Benefits
(in thousands)	Unamortized Actuarial Net Losses			Unamortized Prior Service Costs		Unamortized Actuarial Net Losses			Unamortized Prior Service Costs
Balance at beginning of year	$	37,536		$	—	$	11,738		$	(1,441	)
Amounts arising during the period	27,986			—		7,341			—
Amounts recognized as a component of net periodic benefit cost	(934		)	—		(812		)	543
Balance at end of year	$	64,588		$	—	$	18,267		$	(898	)

The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost during the next fiscal year, excluding the impact of the pension termination, are as follows:



(in thousands)	Pension		Postretirement			Total
Prior service cost	$	—	$	(543	)	$	(543	)
Net actuarial loss	934		812			1,746

Amounts applicable to the Company's defined benefit plans with accumulated benefit obligations in excess of plan assets are as follows:



	December 31,
(in thousands)	2014		2013
Projected benefit obligation	$	17,943	$	7,078
Accumulated benefit obligation	$	17,943	$	7,078

The combined benefits expected to be paid for all Company defined benefit plans over the next ten years (in thousands) are as follows:



Year	Expected Pension Benefit Payout		Expected Postretirement Benefit Payout		Medicare Part D Subsidy
2015	$	126,481	$	1,431	$	(157	)
2016	371		1,532		(180		)
2017	1,002		1,628		(203		)
2018	1,241		1,734		(233		)
2019	1,319		1,846		(263		)
2020-2024	3,686		10,918		(1,850		)

Following are components of the net periodic benefit cost for each year:



	Pension Benefits									Postretirement Benefits
	December 31,									December 31,
(in thousands)	2014			2013			2012			2014			2013			2012
Service cost	$	180		$	—		$	—		$	687		$	841		$	752
Interest cost	4,774			4,227			4,496			1,511			1,366			1,319
Expected return on plan assets	(7,615		)	(7,005		)	(6,145		)	(543		)	(543		)	(543		)
Recognized net actuarial loss	934			1,530			1,497			812			1,473			1,280
Benefit cost (income)	$	(1,727	)	$	(1,248	)	$	(152	)	$	2,467		$	3,137		$	2,808

Following are weighted average assumptions of pension and postretirement benefits for each year:



	Pension Benefits						Postretirement Benefits
	2014		2013		2012		2014		2013		2012
Used to Determine Benefit Obligations at Measurement Date
Discount rate (a)	0.65	%	4.7	%	3.8	%	3.9	%	4.8	%	3.9	%
Used to Determine Net Periodic Benefit Cost for Years ended December 31
Discount rate (b)	4.7	%	3.8	%	4.3	%	4.8	%	3.9	%	4.3	%
Expected long-term return on plan assets	7	%	7.25	%	7.25	%	—		—		—
Rate of compensation increases	N/A		N/A		N/A		—		—		—


(a)	In 2014, 2013 and 2012, the calculated discount rate for the unfunded pension plan was different than the defined benefit pension plan. The calculated rate for the supplemental employee retirement plan was 2.40%, 2.90% and 2.10% in 2014, 2013 and 2012, respectively.


(b)	In 2014, 2013 and 2012, the calculated discount rate for the unfunded pension plan was different than the defined benefit pension plan. The calculated rate for the supplemental employee retirement plan was 2.90%, 2.10% and 3.20% in 2014, 2013 and 2012, respectively.

The discount rate for the funded pension plan is reflected based on the Company's intent to terminate the Plan in the near future. The discount rate is calculated based on projecting future cash flows and aligning each year's cash flows to the Citigroup Pension Discount Curve and then calculating a weighted average discount rate for the unfunded plan. The Company has elected to use the nearest tenth of a percent from this calculated rate.

The expected long-term return on plan assets was determined based on the current asset allocation and historical results from plan inception. The expected long-term rate of return is based on plan assets earning the best rate of return while maintaining risk at acceptable levels. The rate is disclosed in the Plan Assets section of this Note. The plan strives to have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio.



Assumed Health Care Cost Trend Rates at Beginning of Year
	2014		2013
Health care cost trend rate assumed for next year	6.0	%	6.5	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.0	%	5.0	%
Year that the rate reaches the ultimate trend rate	2017		2017

The assumed health care cost trend rate has an effect on the amounts reported for postretirement benefits. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:



	One-Percentage-Point
(in thousands)	Increase			Decrease
Effect on total service and interest cost components in 2014	$	(3	)	$	2
Effect on postretirement benefit obligation as of December 31, 2014	(173		)	149

Plan Assets

The Company's pension plan weighted average asset allocations at December 31 by asset category, are as follows:



Asset Category	2014		2013
Equity securities	—	%	51	%
Fixed income securities	98	%	48	%
Cash and equivalents	2	%	1	%
	100	%	100	%

The plan assets are allocated within the broader asset categories in investments that focus on more specific sectors. Within equity securities, subcategories include large cap growth, large cap value, small cap growth, small cap value, and internationally focused investment funds. These funds are judged in comparison to benchmark indexes that best match their specific category. Within fixed income securities, the funds are invested in a broad cross section of securities to ensure diversification. These include treasury, government agency, corporate, securitization, high yield, global, emerging market and other debt securities. We have shifted to a more conservative asset allocation in 2014 in anticipation of the termination of the Plan.

The investment policy and strategy for the assets of the Company's funded defined benefit plan includes the following objectives:


•	ensure superior long-term capital growth and capital preservation;


•	reduce the level of the unfunded accrued liability in the plan; and


•	offset the impact of inflation.

Risks of investing are managed through asset allocation and diversification. Investments are given extensive due diligence by an impartial third-party investment firm. All investments are monitored and re-assessed by the Company's Retirement Benefit Committee on a semi-annual basis. Available investment options include U.S. Government and agency bonds and instruments, equity and debt securities of public corporations listed on U.S. stock exchanges, exchange listed U.S. mutual funds and institutional portfolios investing in equity and debt securities of publicly traded domestic or international companies and cash or money market securities. In order to reduce risk and volatility, the Company has placed the following portfolio market value limits on its investments, to which the investments must be rebalanced after each quarterly cash contribution. Note that the single security restriction does not apply to mutual funds or institutional investment portfolios. No securities are purchased on margin, nor are any derivatives used to create leverage. The overall expected long-term rate of return is determined by using long-term historical returns for equity and fixed income securities in proportion to their weight in the investment portfolio.



	Percentage of Total Portfolio Market Value
	Minimum		Maximum		Single Security
Equity based	—	%	70	%	<5%
Fixed income based	20	%	100	%	<5%
Cash and equivalents	1	%	100	%	<5%
Alternative investments	—	%	20	%	<5%

The following tables present the fair value of the assets (by asset category) in the Company's defined benefit pension plan at December 31, 2014 and 2013:



(in thousands)	December 31, 2014
Assets	Level 1		Level 2		Level 3		Total
Money market fund	—		2,478		—		2,478
Fixed income funds	—		113,544		—		113,544
Total	$	—	$	116,022	$	—	$	116,022



(in thousands)	December 31, 2013
Assets	Level 1		Level 2		Level 3		Total
Mutual funds	$	15,898	$	—	$	—	$	15,898
Money market fund	—		987		—		987
Equity funds	—		40,702		—		40,702
Fixed income funds	—		53,275		—		53,275
Total	$	15,898	$	94,964	$	—	$	110,862

There is no equity or debt of the Company included in the assets of the defined benefit plan.

Cash Flows

The Company expects to make contributions necessary to fully fund the plan prior to termination. The shortfall is currently estimated at $10.3 million. In the event the plan is not terminated, the Company reserves the right to make contributions in an amount of its choosing. For the year ended December 31, 2014, the Company did not make contributions to the defined benefit plan.