Note 7. Postretirement Benefits

Pension plans

Our pension plans consist of a noncontributory defined benefit pension plan covering substantially all employees and an unfunded supplemental employee retirement plan for certain members of executive and senior management. Although we are the sponsor of these postretirement plans and record the funded status of these plans, the Exchange reimburses us for approximately 58% of the annual benefit expense of these plans, which represents pension benefits for our employees performing claims and life insurance functions and their share of service department costs.

A $19.0 million contribution was made to the defined benefit pension plan in the first quarter of 2017. We expect to make an additional $20 million contribution during the third quarter of 2017.

Prior to 2003, the employee pension plan purchased annuities from Erie Family Life Insurance Company ("EFL"), a wholly owned subsidiary of the Exchange, for certain plan participants that were receiving benefit payments under the pension plan. These are nonparticipating annuity contracts under which EFL has unconditionally contracted to provide specified benefits to beneficiaries; however, the pension plan remains the primary obligor to the beneficiaries. A contingent liability of $20.2 million at June 30, 2017 exists in the event EFL does not honor the annuity contracts.

The cost of our pension plans are as follows:



(in thousands)	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Service cost for benefits earned	$	7,776		$	7,050		$	15,553		$	14,100
Interest cost on benefits obligation	8,568			8,282			17,137			16,563
Expected return on plan assets	(10,316		)	(9,880		)	(20,633		)	(19,760		)
Prior service cost amortization	218			174			436			348
Net actuarial loss amortization	2,325			2,027			4,650			4,055
Pension plan cost ⁽¹⁾	$	8,571		$	7,653		$	17,143		$	15,306


(1)	Pension plan costs represent the total cost before reimbursements to Indemnity from the Exchange and EFL.