Note 11. 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.


	Pension Benefits						Postretirement Benefits
(Dollars in thousands)	2016			2015			2016			2015
Change in benefit obligation
Benefit obligation, beginning of year	$	3,488		$	3,546		$	668		$	771
Service cost		—			—			22			23
Interest cost		134			131			28			30
Actuarial loss (gain)		17			(104	)		(170	)		(147	)
Benefit payments		(279	)		(85	)		(8	)		(9	)
Settlement loss		38			—			—			—

Benefit obligation, end of year		3,398			3,488			540			668

Change in plan assets
Fair value of plan assets, beginning of year		2,806			2,897			—			—
Actual return on plan assets		163			(6	)		—			—
Employer contributions		—			—			8			9
Benefits payments		(279	)		(85	)		(8	)		(9	)

Fair value of plan assets, end of year		2,690			2,806			—			—

Funded status at the end of the year	$	(708	)	$	(682	)	$	(540	)	$	(668	)

Amounts recognized in accumulated other comprehensive loss (income)
Net loss (gain)	$	1,316		$	1,402		$	(234	)	$	(65	)
Prior service cost		—			—			—			—
Net obligation at transition		—			—			—			—

Amount recognized	$	1,316		$	1,402		$	(234	)	$	(65	)

Components of net periodic benefit cost (gain)
Service cost	$	—		$	—		$	22		$	23
Interest cost		134			131			28			30
Expected (return) on plan assets		(189	)		(196	)		—			—
Amortization of prior service cost		—			—			—			—
Amortization of net obligation at transition		—			—			—			—
Recognized net loss due to settlement		90			—			—			—
Recognized net actuarial loss		77			76			—			—

Net periodic benefit (gain) cost		112			11			50			53

Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive (income) loss
Net (gain) loss		(86	)		22			(170	)		(147	)
Amortization of prior service cost		—			—			—			—
Amortization of net obligation at transition		—			—			—			—

Total recognized in other comprehensive loss/(income)		(86	)		22			(170	)		(147	)

Total recognized in net periodic benefit cost and other comprehensive loss/(income)	$	26		$	33		$	(120	)	$	(94	)


	2016			2015			2016			2015
Weighted-average assumptions as of December 31:
Discount rate used for Net Periodic Pension Cost		4.25	%		4.00	%		4.25	%		4.00	%
Discount Rate used for Disclosure		4.00	%		4.25	%		4.00	%		4.25	%
Expected return on plan assets		7.50	%		7.50	%		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 $3.4 million and $3.5 million at December 31, 2016 and 2015, respectively.

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


	Pension		Postretirement
2017	$	523	$	11
2018		38		12
2019		358		15
2020		380		17
2021		228		19
2022 through
2026		1,228		127

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, 2016 Using
Description	Balance		Level 1		Level 2		Level 3
Defined benefit plan assets:
Mutual funds - fixed income	$	1,041	$	1,041	$	—	$	—
Mutual funds - equity		1,649		1,649		—		—

Total defined benefit plan assets	$	2,690	$	2,690	$	—	$	—


			Fair Value Measurements at December 31, 2015 Using
Description	Balance		Level 1		Level 2		Level 3
Defined benefit plan assets:
Cash and cash equivalents	$	3	$	3	$	—	$	—
Mutual funds - fixed income		1,119		1,119		—		—
Mutual funds - equity		1,684		1,684		—		—

Total defined benefit plan assets	$	2,806	$	2,806	$	—	$	—

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.

In November 2015, the Company announced a voluntary early retirement plan to employees over 55 years of age and with a minimum of 10 years of service. There were five employees who elected to participate in the plan with a total cost of $134 thousand recognized during 2015.

The Company expects to make no contributions to its pension plan for the 2017 plan year.

Postretirement benefits plan. As of December 31, 2016, there are no longer any benefits under the Company’s postretirement plan that are impacted by medical trends. The Company expects to contribute $6 thousand to its postretirement plan in 2017. In addition, as of December 31, 2016 and 2015, the Company paid approximately $8 thousand and $9 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. Employees are eligible to participate the month following their hire date and the Company matches 100% of the first 3% and 50% of the next 3% 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 $193 thousand and $176 thousand for the years ended December 31, 2016 and 2015, respectively.