Note 6 - Employee Retirement Benefit Plans

12 Months Ended

Dec. 31, 2017

Notes

Note 6 - Employee Retirement Benefit Plans

Note 6 - Employee Retirement Benefit Plans

Settlement of Pension Plan Liabilities

On April 21, 2015, the Company, as the administrator of its qualified defined benefit pension plan (“Pension Plan”), and the Pension Benefit Guaranty Corporation (“PBGC”) entered into an Agreement for Appointment of Trustee and Termination of Plan (the “Termination Agreement”) (a) terminating the Pension Plan, (b) establishing March 8, 2013 as the Plan’s termination date and (c) appointing the PBGC as statutory trustee of the Pension Plan.

In connection with the Termination Agreement, on April 21, 2015, the Company entered into the Pension Settlement Agreement with the PBGC to settle all liabilities of the Pension Plan including any termination premium resulting from the Pension Plan termination (the “Settled ERISA Liabilities”). Pursuant to the Pension Settlement Agreement, the Company agreed to (a) pay to the PBGC a total of $10,500, with $1,500 due within ten days following the effective date of the Pension Settlement Agreement and the remainder paid in twelve annual installments of $750 beginning on October 31, 2015 (the “Pension Settlement Obligation”) and (b) issue within ten days following the effective date of the Pension Settlement Agreement 88,117 shares of the Company’s treasury stock in the name of the PBGC. The Pension Settlement Agreement further provides that the PBGC will be deemed to have released the Company from all Settled ERISA Liabilities upon payment of the Pension Settlement Obligation. In the event of a default by the Company of its obligations under the Pension Settlement Agreement or the underlying agreements which secure the Pension Settlement Obligation, the PBGC may enforce payment of the Settled ERISA Liabilities, which would accrue interest at various rates until payment is made and be reduced by any payments made by the Company pursuant to the Pension Settlement Agreement.  The estimated total Settled ERISA Liabilities as of the settlement date is $46,000.

To secure the Company’s obligations under the Pension Settlement Agreement, on April 21, 2015, the Company also entered into a Security Agreement with the PBGC (the “Security Agreement”), and executed an Open-End Mortgage in favor of the PBGC (the “Mortgage”) on certain real property owned by the Company’s subsidiary, Spitz, Inc. (“Spitz”). The Security Agreement and Mortgage grant to the PBGC a security interest on all of the Company’s presently owned and after-acquired property and proceeds thereof, free and clear of all liens and other encumbrances, except those described therein (the “Senior Liens”). The PBGC’s security interest in the Company’s property is subordinate to the Company’s two senior lenders pursuant to the Security Agreement and agreements between the PBGC and the lenders (the “Intercreditor Agreements”). The Intercreditor Agreements provide for the lenders to extend credit to the Company, secured by the Senior Liens, up to specified limits. The Intercreditor Agreement between the lender of the mortgage notes and line of credit (see Note 7) and the PBGC provides for total aggregate loans of up to $6,500 secured by Senior Liens on Spitz assets. The second Intercreditor Agreement between another lender and the PBGC provides for up to $3,000 of letter of credit indebtedness secured by Senior Liens on cash deposits.

The balance of the Pension Settlement Obligation is recorded on the balance sheet as of December 31, 2017 and 2016 as follows:  

	2017	2016
Current portion of pension settlement obligation	$ 409	$ 382
Pension settlement obligation, net of current portion	4,478	4,886
Total Pension Settlement Obligation	$ 4,887	$ 5,268

Supplemental Executive Retirement Plan (SERP)

The SERP provides eligible former executives, employed by the Company prior to 2002, defined pension benefits based on average salary, years of service and age at retirement.  The SERP was amended in 2002 to discontinue further SERP gains from future salary increases and close the SERP to new participants.

401(k) Deferred Savings Plan

The Company has a deferred savings plan that qualifies under Section 401(k) of the Internal Revenue Code.  The 401(k) plan covers all employees of the Company who have at least one year of service and who are age 18 or older.  Matching contributions of 50% are made on the first 6% of employee contributions after the employee has achieved one year of service.  Extra matching contributions can be made based on profitability and other financial and operational considerations.  Effective January 1, 2017, the Company started making a 3% contribution in addition to the matching contribution.  Contributions to the 401(k) plan for 2017 and 2016 were $451 and $182, respectively.

Obligations and Funded Status for SERP

E&S uses a December 31 measurement date for the SERP.

Information concerning the obligations, plan assets and funded status of employee retirement defined benefit plans are provided below:

Changes in benefit obligation	2017	2016
Projected benefit obligation - beginning of year	$ 4,851	$ 5,320
Interest cost	156	190
Actuarial loss (gain)	103	(184)
Benefits paid	(460)	(475)
Projected benefit obligation - end of year	$ 4,650	$ 4,851

Changes in plan assets	2017	2016
Contributions	$ 460	$ 475
Benefits paid	(460)	(475)
Fair value of plan assets - end of year	$ -	$ -

Net amount recognized	2017	2016
Unfunded status	$ (4,650)	$ (4,851)
Unrecognized net actuarial loss	2,176	2,146
Net amount recognized	$ (2,474)	$ (2,705)

Amounts recognized in the consolidated balance sheets consisted of:

	2017	2016
Accrued liability	$ (4,650)	$ (4,851)
Accumulated other comprehensive loss	2,176	2,146
Net amount recognized	$ (2,474)	$ (2,705)

Components of net periodic benefit cost:

	2017	2016
Interest cost	$ 156	$ 190
Amortization of actuarial loss	75	82
Amortization of prior year service cost	-	(10)
Net periodic benefit expense	$ 231	$ 262

Additional information

Pension expense was $231 for the year ended December 31, 2017, which consisted of net periodic benefit expense of $231 for the SERP.  Pension expense was $262 for the year ended December 31, 2016, which consisted of net periodic benefit expense of $262 for the SERP.  

The SERP minimum liability recorded in other comprehensive loss increased $30 in 2017 compared to a decrease of $258 in 2016.  The increase in 2017 was caused by a decrease in the discount rate, partly offset by a change to the mortality table.  The decrease in 2016 was primarily due to the death of one participant.  

Assumptions

The weighted average assumptions used to remeasure benefit obligations as of December 31, 2017 and 2016 included a discount rate of 3.4% and 3.7%, respectively, for the SERP.  The weighted average assumptions used to determine net periodic cost for the years ended December 31, 2017 and 2016 included a discount rate of 3.4% and 3.7%, respectively, in each year for the SERP.

Cash Flows

Employer contributions

The Company is not currently required to fund the SERP.  All benefit payments are made by E&S directly to those who receive benefits from the SERP.  As such, these payments are treated as both contributions and benefits paid for reporting purposes.

The Company expects to contribute and pay benefits of approximately $500 related to the SERP in 2018.  

Estimated future benefit payments

As of December 31, 2017, the following benefits are expected to be paid based on actuarial estimates and prior experience:

Years Ending
December 31,	SERP
2018	$ 500
2019	427
2020	421
2021	415
2022	408
2023-2027	$ 1,806