Note 10.

Employee Benefit Plans

The Company has a non-contributory, cash balance pension plan for employees who were vested in the plan as of December 31, 2012 when it was frozen. Each participant’s account balance grows 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. In 2014, the $755 thousand net loss related to pension benefits and the $130 thousand net loss related to post-retirement benefits was primarily due to the increase in the discount rate assumption to 5% in 2014 from 4% in 2013 and longer assumed lives of participants resulting from updated mortality tables for 2014.


	Pension Benefits						Postretirement Benefits
(Dollars in thousands)	2014			2013			2014			2013
Change in benefit obligation
Benefit obligation, beginning of year	$	2,737		$	2,854		$	607		$	759
Service cost		—			—			15			23
Interest cost		142			143			30			30
Actuarial loss (gain)		721			225			130			(190	)
Benefit payments		(54	)		(478	)		(11	)		(15	)
Settlement gain		—			(7	)		—			—

Benefit obligation, end of year		3,546			2,737			771			607


Change in plan assets
Fair value of plan assets, beginning of year		2,820			2,845			—			—
Actual return on plan assets		131			453			—			—
Employer contributions		—			—			11			15
Benefits payments		(54	)		(478	)		(11	)		(15	)

Fair value of plan assets, end of year		2,897			2,820			—			—

Funded status at the end of the year	$	(649	)	$	83		$	(771	)	$	(607	)


Amounts recognized in accumulated other comprehensive loss (income)
Net loss (gain)	$	1,380		$	625		$	83		$	(47	)
Prior service cost		—			—			—			—
Net obligation at transition		—			—			—			—

Amount recognized	$	1,380		$	625		$	83		$	(47	)


Components of net periodic benefit cost (gain)
Service cost	$	—		$	—		$	15		$	23
Interest cost		142			143			30			30
Expected (return) on plan assets		(202	)		(215	)		—			—
Amortization of prior service cost		—			—			—			—
Amortization of net obligation at transition		—			—			—			3
Recognized net loss due to settlement		—			114			—			—
Recognized net actuarial loss		37			90			—			4

Net periodic benefit (gain) cost		(23	)		132			45			60


Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive (income) loss
Net loss (gain)		755			(224	)		130			(194	)
Amortization of prior service cost		—			—			—			—
Amortization of net obligation at transition		—			—			—			(3	)

Total recognized in other comprehensive loss/(income)		755			(224	)		130			(197	)


Total recognized in net periodic benefit cost and other comprehensive loss/(income)	$	732		$	(92	)	$	175		$	(137	)


	2014			2013			2014			2013
Weighted-average assumptions as of December 31:
Discount rate used for Net Periodic Pension Cost		5.00	%		4.00	%		5.00	%		4.00	%
Discount Rate used for Disclosure		4.00	%		5.00	%		4.00	%		5.00	%
Expected return on plan assets		7.50	%		8.00	%		N/A			N/A
Rate of compensation increase		N/A			N/A			N/A			N/A
Rate of compensation increase for net periodic pension cost		N/A			N/A			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 $3.5 million and $2.7 million at December 31, 2014 and 2013, respectively.

Estimated future benefit payments for the pension and postretirement plans are as follows (in thousands):


	Pension		Postretirement
2015	$	525	$	22
2016		50		24
2017		222		26
2018		38		28
2019		366		31
2020 and thereafter		1,502		190

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:


(Dollars in thousands)			Fair Value Measurements at December 31, 2014 Using
Description	Balance		Level 1		Level 2		Level 3
Defined benefit plan assets:
Cash and cash equivalents	$	4	$	4	$	—	$	—
Mutual funds - fixed income		1,139		1,139		—		—
Mutual funds - equity		1,754		1,754		—		—

Total defined benefit plan assets	$	2,897	$	2,897	$	—	$	—


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

Total defined benefit plan assets	$	2,820	$	2,820	$	—	$	—

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 2015 plan year.

Postretirement benefits plan. For measurement purposes, the assumed annual rate of increase in per capita health care costs of covered benefits is 8.0% in 2015, 8.0% in 2016, 6.0% in 2017, 6.0% in 2018, and 5.0% in 2019 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, 2014 would be increased by $893 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 2014 would be increased by $39. If assumed health care cost trend rates were decreased by one percentage point each year, the accumulated postretirement benefit obligation at December 31, 2014 would be decreased by $838 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 2014 would be decreased by $36.

The Company expects to contribute $22,435 to its postretirement plan in 2015. In addition, as of December 31, 2014 and 2013, the Company paid approximately $11 thousand and $15 thousand, respectively, for employees who retired.

401(k) retirement plan. Substantially all employees are eligible to participate in the Company’s 401(k) retirement plan beginning the first of the month following their hire date. Prior to August 14, 2014, employees were eligible to participate in the plan after six months of service. Employees may contribute up to the maximum established by the Internal Revenue Service. 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 $110 thousand and $97 thousand for the years ended December 31, 2014 and 2013, respectively.

In January 2015, the Company’s Board of Directors approved an increase in the Company’s match. Effective March 9, 2015, the Company will match 100% of the first 3% and 50% of the next 3% of an employee’s contributions.