Note 10.

Employee Benefit Plans

The Company has a non-contributory, cash balance pension plan for substantially all full-time employees over 21 years of age and that were vested in the plan by December 31, 2012. Under this cash balance plan, until December 31, 2012, the account balance for each participant grew each year with annual pay credits based on age and years of service and monthly interest credits based on an amount established each year by the Company’s Board of Directors, subject to a minimum of 3% per the Internal Revenue Code. Effective December 31, 2012, this plan was frozen. Subsequently, annual pay credits will be discontinued, but each participant’s account balance will continue to grow based on monthly interest credits. The Company funds pension costs in accordance with the funding provisions of the Employee Retirement Income Security Act.

The Company sponsors a postretirement benefit plan covering current and future retirees who acquire age 55 and 10 years of service or age 65 and 5 years of service. The postretirement benefit plan provides coverage toward a retiree’s eligible medical and life insurance benefits expenses.

The following tables provide the reconciliation of changes in the benefit obligations and fair value of assets and a statement of funded status for the pension plan and postretirement plan of the Company.


	Pension Benefits						Postretirement Benefits
	2013			2012			2013			2012
Change in benefit obligation
Benefit obligation, beginning of year	$	2,854,443		$	3,948,661		$	759,503		$	676,618
Service cost		—			254,285			22,950			26,002
Interest cost		143,259			178,298			29,906			29,957
Actuarial (gain) loss		225,315			319,817			(190,153	)		42,235
Benefit payments		(478,454	)		(2,017,995	)		(15,061	)		(15,309	)
Settlement (gain) loss		(7,278	)		171,377			—			—

Benefit obligation, end of year	$	2,737,285		$	2,854,443		$	607,145		$	759,503


Change in plan assets
Fair value of plan assets, beginning of year	$	2,844,808		$	4,385,574		$	—		$	—
Actual return on plan assets		453,556			477,229			—			—
Employer contributions		—			—			15,061			15,309
Benefits payments		(478,454	)		(2,017,995	)		(15,061	)		(15,309	)

Fair value of plan assets, end of year	$	2,819,910		$	2,844,808		$	—		$	—


Funded Status at the End of the Year	$	82,625		$	(9,635	)	$	(607,145	)	$	(759,503	)


Amounts Recognized in Accumulated Other Comprehensive Loss (Income)
Net loss (gain)	$	625,226		$	849,356		$	(47,038	)	$	147,611
Prior service cost		—			—			—			—
Net obligation at transition		—			—			—			2,913

Amount recognized	$	625,226		$	849,356		$	(47,038	)	$	150,524


Components of Net Periodic Benefit Cost (Gain)
Service cost	$	—		$	254,285		$	22,950		$	26,002
Interest cost		143,259			178,298			29,906			29,957
Expected (return) on plan assets		(214,661	)		(321,864	)		—			—
Amortization of prior service cost		—			(755,465	)		—			—
Amortization of net obligation at transition		—			—			2,913			2,913
Recognized net loss due to settlement		113,527			534,220			—			—
Recognized net actuarial loss		89,745			71,440			4,496			2,942

Net periodic benefit cost (gain)	$	131,870		$	(39,086	)	$	60,265		$	61,814


Other Changes in Plan Assets and Benefit Obligations Recognized in Accumulated Other Comprehensive (Income) Loss
Net (gain) loss	$	(224,130	)	$	(269,831	)	$	(194,649	)	$	39,293
Amortization of prior service cost		—			755,465			—			—
Amortization of net obligation at transition		—			—			(2,913	)		(2,913	)

Total recognized in other comprehensive (income)/loss	$	(224,130	)	$	485,634		$	(197,562	)	$	36,380


Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Income)/loss	$	(92,260	)	$	446,548		$	(137,297	)	$	98,194


	2013			2012			2013			2012
Weighted-average assumptions as of December 31:
Discount rate used for Net Periodic Pension Cost		4.00	%		4.50	%		4.00	%		4.50	%
Discount Rate used for Disclosure		5.00	%		4.00	%		5.00	%		4.00	%
Expected return on plan assets		8.00	%		8.00	%		N/A			N/A
Rate of compensation increase		N/A			3.00	%		N/A			N/A
Rate of compensation increase for net periodic pension cost		N/A			3.00	%		N/A			N/A
Expected future interest crediting rate		3.00	%		3.00	%		N/A			N/A

The accumulated benefit obligation for the cash balance pension plan was $2,737,285 and $2,854,443 at December 31, 2013 and 2012, respectively.

Estimated future benefit payments for the pension and postretirement plans are as follows:


	Pension		Postretirement
2014	$	42,037	$	20,136
2015		292,372		22,044
2016		51,523		23,291
2017		209,097		25,343
2018		41,286		27,135
2019 and thereafter		1,631,170		172,514

Long-term rate of return. The pension plan sponsor selects the assumption for the expected long-term rate of return on assets in consultation with their investment advisors and actuary. This rate is intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience that may not continue over the measurement period, with higher significance placed on current forecasts of future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further, solely for this purpose, the plan is assumed to continue in force and not terminate during the period during which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly estimated within periodic cost).

The fair value of the Company’s pension plan assets by asset category are as follows:


			Fair Value Measurements at December 31, 2013 Using
Description	Balance		Level 1		Level 2		Level 3
Defined benefit plan assets:
Cash and cash equivalents	$	2,582	$	2,582	$	—	$	—
Mutual funds - fixed income		1,070,272		1,070,272		—		—
Mutual funds - equity		1,747,056		1,747,056		—		—


Total defined benefit plan assets	$	2,819,910	$	2,819,910	$	—	$	—


				Fair Value Measurements at December 31, 2012 Using
Description	Balance			Level 1			Level 2		Level 3
Defined benefit plan assets:
Cash and cash equivalents	$	(5,539	)	$	(5,539	)	$	—	$	—
Mutual funds - fixed income		1,091,176			1,091,176			—		—
Mutual funds - equity		1,759,171			1,759,171			—		—

Total defined benefit plan assets	$	2,844,808		$	2,844,808		$	—	$	—

The trust fund is sufficiently diversified to maintain a reasonable level of risk without imprudently sacrificing return, with a targeted asset allocation of 40% fixed income and 60% equities. The investment manager of the fund selects investment fund managers with demonstrated experience and expertise, and funds with demonstrated historical performance, for the implementation of the plan’s investment strategy. The investment manager will consider both actively and passively managed investment strategies and will allocate funds across the asset classes to develop an efficient investment structure.

It is the responsibility of the trustee to administer the investments of the trust within reasonable costs, being careful to avoid sacrificing quality. These costs include, but are not limited to, management and custodial fees, consulting fees, transaction costs and other administrative costs chargeable to the trust.

The Company expects to make no contributions to its pension plan for the 2014 plan year.

Postretirement benefits plan. For measurement purposes, the assumed annual rate of increase in per capita health care costs of covered benefits is 8% in 2014 and 2015, 6% in 2016 and 2017, and 5% in 2018 and thereafter. If assumed health care cost trend rates were increased by one percentage point each year, the accumulated postretirement benefit obligation at December 31, 2013, would be increased by $771 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 2013, would be increased by $101. If assumed health care cost trend rates were decreased by one percentage point each year, the accumulated postretirement benefit obligation at December 31, 2013, would be decreased by $723 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 2013, would be decreased by $95.

The Company expects to contribute $20,136 to its postretirement plan in 2014. In addition, as of December 31, 2013 and 2012, the Company paid approximately $15,061 and $15,309, respectively, for employees who retired.

401(k) retirement plan. The Company has a 401(k) retirement plan covering substantially all employees who have completed six months of service. Employees may contribute up to 15% of their salaries. Effective January 1, 2010, the Company matches 100% of the first 2% and 25% of the next 4% of an employee’s contributions. Additional contributions can be made at the discretion of the Company’s Board of Directors. Contributions to this plan amounted to $97,329 and $86,821 for the years ended December 31, 2013 and 2012, respectively.