ASSOCIATE (EMPLOYEE) BENEFIT PLANS

Associate 401(k) Savings Plan

Certain subsidiaries of ours maintain a qualified plan in which Associates may participate. Participants in the plan may elect to direct a portion of their wages into investment accounts that include professionally managed mutual and money market funds and our Common Stock. Generally, the principal and related earnings are tax deferred until withdrawn. We match a portion of the Associates’ contributions. As a result, our total cash contributions to the plan on behalf of our Associates resulted in an expense of $3.6 million, $3.1 million, and $2.6 million for 2017, 2016, and 2015, respectively.

All contributions are invested in accordance with the Associates’ selection of investments. If Associates do not designate how discretionary contributions are to be invested, 100% is invested in target-date fund that corresponds with the participant’s age. Associates may generally make transfers to various other investment vehicles within the plan. The plan’s yearly activity includes net sales of 156,000, 36,000 and 25,000 shares of our Common Stock in 2017, 2016 and 2015 respectively and net purchases of 83,000 shares in 2017. There were no purchases in 2016 and 2015.

Postretirement Medical Benefits

We share certain costs of providing health and life insurance benefits to eligible retired Associates and their eligible dependents. Prior to March 31, 2014, all Associates were eligible for these benefits if they reached normal retirement age while working for us. Effective March 31, 2014, we changed the eligibility of this plan to include only those Associates who had achieved ten years of service with us as of March 31, 2014.

We account for our obligations under the provisions of ASC 715, Compensation - Retirement Benefits (ASC 715). ASC 715 requires that the costs of these benefits be recognized over an Associate's active working career. Amortization of unrecognized net gains or losses resulting from experience different from that assumed and from changes in assumptions is included as a component of net periodic benefit cost over the remaining service period of active employees to the extent that such gains and losses exceed 10% of the accumulated postretirement benefit obligation, as of the beginning of the year.

ASC 715 requires that we recognize the funded status of our defined benefit postretirement plan in our statement of financial condition, with a corresponding adjustment to accumulated other comprehensive (loss) income, net of tax. The adjustment to accumulated other comprehensive (loss) income at adoption represented the net unrecognized actuarial losses and unrecognized transition obligation remaining from the initial adoption of ASC 715, all of which were previously netted against the plan’s funded status in our statement of financial condition pursuant to the provisions of ASC 715. These amounts will be subsequently recognized as net periodic pension costs pursuant to our historical accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in subsequent periods, and are not recognized as net periodic pension cost in the same periods, will be recognized as a component of other comprehensive income. Those amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in accumulated other comprehensive income at adoption of ASC 715.

In accordance with ASC 715, during 2018 we expect to recognize less than $0.1 million of amortization related to net actuarial gain and $0.1 million of amortization related to the net transition obligation.

The following disclosures relating to postretirement medical benefits were measured at December 31:



(Dollars in thousands)	2017			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	1,764		$	1,805		$	2,266
Service cost	53			58			59
Interest cost	71			76			89
Actuarial gain	207			(68		)	(502		)
Benefits paid	(105		)	(107		)	(107		)
Benefit obligation at end of year	$	1,990		$	1,764		$	1,805
Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—		$	—
Employer contributions	105			107			107
Benefits paid	(105		)	(107		)	(107		)
Fair value of plan assets at end of year	$	—		$	—		$	—
Funded status:
Unfunded status	$	(1,990	)	$	(1,764	)	$	(1,805	)
Total (income) recognized in other comprehensive income	(1,348		)	(1,701		)	(1,271		)
Net amount recognized	$	(3,338	)	$	(3,465	)	$	(3,076	)
Components of net periodic benefit cost:
Service cost	$	53		$	58		$	59
Interest cost	71			76			89
Amortization of transition obligation	(76		)	(76		)	(76		)
Net (gain) loss recognition	(70		)	505			(20		)
Net periodic benefit cost	$	(22	)	$	563		$	52
Assumption used to determine net periodic benefit cost:
Discount rate	4.10		%	4.25		%	4.00		%
Assumption used to value the Accumulated Postretirement Benefit Obligation (APBO):
Discount rate	3.60		%	4.10		%	4.25		%

Estimated future benefit payments:

The following table shows the expected future payments for the next 10 years:



(Dollars in thousands)
During 2018	$	68
During 2019	69
During 2020	69
During 2021	70
During 2022	72
During 2023 through 2027	439
	$	787

We assume medical benefits will increase at an average rate of less than 10% per annum. The costs incurred for retirees’ health care are limited since certain current and all future retirees are restricted to an annual medical premium cap indexed (since 1995) by the lesser of 4% or the actual increase in medical premiums paid by us. For 2017, this annual premium cap amounted to $3,416 per retiree. We estimate that we will contribute approximately $3,553 per retiree to the plan during fiscal 2018.

Alliance Associate Pension Plan

During the fourth quarter of 2015, we completed the acquisition of Alliance and its wholly-owned subsidiary, Alliance Bank, headquartered in Broomall, Pennsylvania. At the time of the acquisition we assumed the Alliance pension plan offered to current Alliance associates. The plan’s benefit obligation and fair value of assets were each $7.5 million at December 31, 2016. The net amount recognized in 2017 was $0.2 million.

No estimated net loss and prior service cost for the defined benefit pension plans will be amortized from the accumulated other comprehensive income into net periodic benefit cost over the next fiscal year.

The following disclosures relating to Alliance pension benefits were measured at December 31:



(Dollars in thousands)	2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	7,517		$	7,148
Interest cost	297			301
Disbursements	(407		)	(374		)
Actuarial loss	446			442
Benefit obligation at end of year	$	7,853		$	7,517
Change in plan assets:
Fair value of plan assets at beginning of year	$	7,504		$	7,397
Actual return on Plan Assets	1,314			518
Benefits paid	(407		)	(374		)
Administrative Expenses	(33		)	(37		)
Fair value of plan assets at end of year	$	8,378		$	7,504
Funded status:
Unfunded status	$	(7,853	)	$	(7,517	)
Total loss (income) recognized in other comprehensive income	8,378			7,504
Net amount recognized	$	525		$	(13	)
Components of net periodic benefit cost:
Service cost	$	40		$	40
Interest cost	297			301
Expected return on plan assets	(548		)	(541		)
Net gain recognition	(170		)	(157		)
Net periodic benefit cost	$	(381	)	$	(357	)
Assumptions used to value the Accumulated Postretirement Benefit Obligation (APBO):
Discount rate for Net Periodic Benefit Cost	4.00		%	4.00		%
Salary Scale for Net Periodic Benefit Cost	N/A			N/A
Expected Return on Plan Assets	7.50		%	7.50		%
Discount rate for Disclosure Obligations	3.60		%	4.00		%
Salary Scale for Disclosure Obligations	N/A			N/A

Estimated future benefit payments:

The following table shows the expected future payments for the next 10 years:



(Dollars in thousands)
During 2018	$	400
During 2019	317
During 2020	316
During 2021	432
During 2022	324
During 2023 through 2027	2,811
	$	4,600

We have five additional plans which are no longer being provided to Associates: (1) a Supplemental Pension Plan with a corresponding liability of $0.7 million and $0.8 million for December 31, 2017 and 2016 respectively; (2) an Early Retirement Window Plan with a corresponding liability of $0.1 million and $0.2 million for December 31, 2017 and 2016 respectively; (3) a Director’s Plan with a corresponding asset of less than $0.1 million for December 31, 2017 and 2016; (4) a Supplemental Executive Retirement Plan with a corresponding liability of $1.5 million and $1.8 million for December 31, 2017 and 2016 respectively, and; (5) a Post-Retirement Medical Plan with a corresponding liability of $0.1 million for December 31, 2017 and 2016.