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Employee Benefit Plans
 12 Months Ended
Dec. 31, 2013
Employee Benefit Plans [Abstract]  
Employee Benefit Plans

NOTE I – EMPLOYEE BENEFIT PLANS

Pension and Postretirement Benefits

 

We maintain a defined benefit pension plan (the “Retirement Plan”) for employees hired prior to September 1, 2006, and all such employees of our domestic subsidiaries who are not covered by union sponsored plans may participate after one year of service. Employees hired on or after September 1, 2006 with at least one year of service as of June 30, 2008, are eligible to participate in the Cash Balance Plan as of July 1, 2008.  Computation of benefits payable under the defined pension plan is based on years of service, up to thirty years, and the employee's highest sixty consecutive months of compensation, which is defined as the participant’s base salary plus overtime (excluding incentive pay), bonuses or other extra compensation, in whatever form.  Our funding policy is based on minimum contributions required under ERISA as determined through an actuarial computation.  Retirement Plan assets consist primarily of investments in equity and fixed income mutual funds and money market holdings.  The target asset allocation range is 30% in fixed income investments and 70% in equity investments.  The asset allocation on December 31, 2013 was 28.5%, or approximately $9.8 million, in fixed income investments and 71.5%, or approximately $24.6 million, in equity investments.  The asset allocation on December 31, 2012 was 30%, or approximately $8.7 million, in fixed income investments and 70%, or approximately $20.2 million, in equity investments.  The plan’s prohibited investments include selling short, commodities and futures, letter stock, unregistered securities, options, margin transactions, derivatives, leveraged securities, and International Shipholding Corporation securities.  The plan’s diversification strategy includes limiting equity securities in any single industry to 25% of the equity portfolio fair value, limiting the equity holdings in any single corporation to 10% of the fair value of the equity portfolio, and diversifying the fixed income portfolio so that no one issuer comprises more than 10% of the aggregate fixed income portfolio, except for issues of the U.S. Treasury or other Federal Agencies.  The plan’s assumed future returns are based primarily on the asset allocation and on the historic returns for the plan’s asset classes determined from both actual plan returns and, over longer time periods, market returns for those asset classes.  As of December 31, 2013, the plan has assets of approximately $34.4 million  and a projected pension obligation of approximately $32.9 million, and as of December 31, 2012, the plan had assets of approximately $28.9 million and a projected pension obligation of approximately $36.6 million.  As of December 31, 2013, the plan was overfunded by approximately $1.5 million.  The significant improvement in funding was primarily due to a change in the discount rate from 3.75% to 4.75% and improved return on plan assets.  

 

Our postretirement benefit plans currently provide medical, dental, and life insurance benefits to eligible retired employees and their eligible dependents. 

 

 

The following tables summarize our financial assets measured at fair value on a recurring basis as of December 31, 2013 and 2012, respectively, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, as defined in Note X – Fair Value Measurements. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2013

 

 

Level 1 Inputs

 

 

Level 2 Inputs

 

 

Level 3 Inputs

 

 

Total Fair Value

(All Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Funds

 

$
344 

 

$

 -

 

$

 -

 

$
344 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Equity Mutual Funds

 

$
20,939 

 

$

 -

 

$

 -

 

$
20,939 

International  Equity Mutual Funds

 

$
3,676 

 

$

 -

 

$

 -

 

$
3,676 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Income

 

 

 

 

 

 

 

 

 

 

 

 

Taxable Fixed Income Funds

 

$
9,455 

 

$

 -

 

$

 -

 

$
9,455 

Total Assets at Fair Value

 

$
34,414 

 

$

 -

 

$

 -

 

$
34,414 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

Level 1 Inputs

 

 

Level 2 Inputs

 

 

Level 3 Inputs

 

 

Total Fair Value

(All Amounts in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Funds

 

$
236 

 

$

 -

 

$

 -

 

$
236 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Equity Mutual Funds

 

$
17,631 

 

$

 -

 

$

 -

 

$
17,631 

International  Equity Mutual Funds

 

$
2,614 

 

$

 -

 

$

 -

 

$
2,614 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Income

 

 

 

 

 

 

 

 

 

 

 

 

Taxable Fixed Income Funds

 

$
8,432 

 

$

 -

 

$

 -

 

$
8,432 

Total Assets at Fair Value

 

$
28,913 

 

$

 -

 

$

 -

 

$
28,913 

 

 

 

The following table sets forth the two plans’ changes in the projected benefit obligation and fair value of assets and a statement of the funded status:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement Plan

 

Postretirement Benefits

 

Year Ended December 31,

 

Year Ended December 31,

(All Amounts in Thousands)

 

2013

 

 

2012

 

 

2013

 

 
2012 

Change in Projected Benefit Obligation

 

 

 

 

 

 

 

 

 

 

 

Projected Benefit Obligation at Beginning of Year

$
36,617 

 

$
32,496 

 

$
13,084 

 

$
11,898 

Service Cost (Credit)

 
671 

 

 
649 

 

 
16 

 

 
(6)

Interest Cost

 
1,335 

 

 
1,426 

 

 
531 

 

 
471 

Plan Amendments

 

 -

 

 

 -

 

 

 -

 

 
1,318 

Actuarial Loss (Gain)

 
(4,367)

 

 
3,371 

 

 
(611)

 

 
(133)

Benefits Paid and Expected Expenses

 
(1,359)

 

 
(1,325)

 

 
(539)

 

 
(506)

Medicare Part D Reimbursements

 

 -

 

 

-

 

 
49 

 

 
41 

Projected Benefit Obligation at End of Year

$
32,897 

 

$
36,617 

 

$
12,530 

 

$
13,083 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Plan Assets

 

 

 

 

 

 

 

 

 

 

 

Fair Value of Plan Assets at Beginning of Year

$
28,913 

 

$
25,645 

 

$

 -

 

$

 -

Actual Return on Plan Assets

 
5,274 

 

 
2,994 

 

 

 -

 

 

 -

Employer Contribution

 
1,600 

 

 
1,600 

 

 
490 

 

 
464 

Benefits Paid and Actual Expenses

 
(1,373)

 

 
(1,326)

 

 
(539)

 

 
(505)

Medicare Part D reimbursements

 

 -

 

 

-

 

 
49 

 

 
41 

Fair Value of Plan Assets at End of Year

$
34,414 

 

$
28,913 

 

$

 -

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

Funded Status

$
1,517 

 

$
(7,704)

 

$
(12,530)

 

$
(13,083)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Assumptions

 

 

 

 

 

 

 

 

 

 

 

Discount Rate

 
4.75% 

 

 
3.75% 

 

 
4.75% 

 

 
3.75% 

Rate of Compensation Increase

 
4.50% 

 

 
4.50% 

 

 

N/A

 

 

N/A

 

 

The accumulated benefit obligation for the pension plan was approximately $30.1 million and $33.1 million at December 31, 2013 and 2012, respectively.

 

The following table shows amounts recognized in accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(All Amounts in Thousands)

Retirement Plan

 

Postretirement Benefits

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

2013

 

 

2012

 

 

2013

 

 

2012

Prior Service Credit (Cost)

$
16 

 

$
19 

 

$
(1,187)

 

$
(1,288)

Net Loss

 
(4,768)

 

 
(13,054)

 

 
(3,278)

 

 
(4,253)

Change in Other Comprehensive Loss

$
(4,752)

 

$
(13,035)

 

$
(4,465)

 

$
(5,541)

 

 

The following table provides the components of net periodic benefit cost for the plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Plan

 

Postretirement Benefits

 

(All Amounts in Thousands)

 

 

Years Ended December 31,

 

Years Ended December 31,

 

Components of net periodic benefit cost:

 

 

2013

 

 

2012

 

 

2011

 

 

2013

 

 

2012

 

 

2011

 

Service cost

 

$
671 

 

$
649 

 

$
542 

 

$
16 

 

$
(6)

 

$
41 

 

Interest cost

 

 
1,335 

 

 
1,426 

 

 
1,496 

 

 
531 

 

 
471 

 

 
565 

 

Expected return on plan assets

 
(2,229)

 

 
(1,987)

 

 
(1,907)

 

 

 -

 

 

 -

 

 

 -

 

Amortization of prior service cost

 
(3)

 

 
(3)

 

 
(3)

 

 
100 

 

 
(12)

 

 
(11)

 

Amortization of Net Loss

 

 
888 

 

 
778 

 

 
380 

 

 
365 

 

 
201 

 

 
213 

 

Net periodic benefit cost

 

$
662 

 

$
863 

 

$
508 

 

$
1,012 

 

$
654 

 

$
808 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The assumptions used in the measurement of net pension cost are shown in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Assumptions

 

 

2013

 

2012

 

2011

 

2013

 

2012

 

2011

Discount Rate

 

 
3.75 

%

 
4.50 

%

 
5.50 

%

 
4.75 

%

 
3.75 

%

 
5.50 

%

Expected Return on Plan Assets

 

 
7.75 

%

 
7.75 

%

 
7.75 

%

 

N/A

%

 

N/A

%

 

N/A

%

Rate of Compensation Increase

 

 
4.50 

%

 
4.50 

%

 
4.50 

%

 

N/A

%

 

N/A

%

 

N/A

%

 

For measurement purposes, the health cost trend was assumed to be 9.9% and the dental care cost trend rate was assumed to be 5.0% in 2014-2080. It is assumed that the health care cost trend will decrease by 3.1% in 2014, 0.7% in 2015, increase by 0.2% in 2016, and decrease by 0.20% in 2017-2023. The health cost and dental care cost trends above are approximately the same for employees over 65.  A one percent change in the assumed health care cost trend rates would have the following effects:

 

 

 

 

 

 

 

 

 

(All Amounts in Thousands)

 

1% Increase

 

1% Decrease

Change in total service and interest cost components

 

 

 

 

 

 

  for the year ended December 31, 2013

 

$
64 

 

$
(53)

Change in postretirement benefit obligation as of December 31, 2013

$
1,542 

 

$
(1,293)

 

 

The following table provides the expected future benefit payments as of December 31, 2013:

 

 

 

 

 

 

 

 

(All Amounts in Thousands)

 

 

 

 

 

 

Fiscal Year Beginning

 

Retirement Plan

 

Postretirement Benefits

2014

 

$
1,654 

 

$
691 

2015

 

$
1,697 

 

$
705 

2016

 

$
1,789 

 

$
717 

2017

 

$
1,810 

 

$
742 

2018

 

$
1,903 

 

$
752 

2019-2023

 

$
11,197 

 

$
3,996 

 

We continue to evaluate ways in which we can better manage these benefits and control the costs of the plans.  Any changes in the plans or revisions to assumptions that affect the amount of expected future benefits may have a significant effect on the amount of the reported obligation and annual expense.

 

In December of 2003, the Medicare Prescription Drug, Improvements, and Modernization Act of 2003 (“Act”) was signed into law.  In addition to including numerous other provisions that have potential effects on an employer’s retiree health plan, the Act includes a special subsidy beginning in 2006 for employers that sponsor retiree health plans with prescription drug benefits that are at least as favorable as the new Medicare Part D benefit.  We have determined that our plan is actuarially equivalent and as such we qualify for this special subsidy.  The law resulted in a decrease in our annual net periodic benefit cost. 

 

In early 2010, Congress passed and the President signed into law the Health Care and Education Affordability Reconciliation Act of 2010. Based on our review and evaluation of the law, we do not believe the impact on our postretirement benefits will be material to us at this time.

 

Union Plans

 

In September 2011, the FASB issued guidance for disclosures of multi-employer pension and other postretirement benefit plans. The guidance requires an employer to provide additional quantitative and qualitative disclosures for these plans. The disclosures provide users with more detailed information about an employer’s involvement in multi-employer pension plans. We adopted this guidance during 2011 and applied the requirements retrospectively for all periods presented.

 

Crew members on our U.S. Flag vessels belong to union-sponsored, multi-employer pension plans.  We contributed approximately $3.0 million, $3.2 million, and $3.5 million to these plans for the years ended December 31, 2013, 2012, and 2011, respectively.  These contributions are in accordance with provisions of negotiated labor contracts and generally are based on the amount of straight pay received by the union members. As of December 31, 2013, all plans pension protection act zone status is green. Green Zone status means that the Fund is at least 80% funded with a Funding Standard account credit balance that is projected to be positive for more than seven years.

 

Information from the plans’ administrators can be found in the table below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan

 

Company

EIN

Pension Protection Act Zone Status

FIP/RP Status Pending/       Implemented (5)

 

Contribution Amount (In Thousands)

 

Surcharge Imposed

Expiration Date

 

 

 

 

 

 

 

 

2013

 

 

2012

 

 

2011

 

 

 

MM&P

(1)

WSC

13-100310

Green

Yes

 

$
664 

 

$
996 

 

$
1,297 

 

No

9/30/2025 & 9/30/2025

 

 

SCI

 

 

 

 

$
468 

 

$
298 

 

$
280 

 

 

6/30/27

 

 

CGL

 

 

 

 

$
950 

 

$
1,039 

 

$
1,029 

 

 

9/30/2025 & 6/30/2020

MEBA

(2)

WSC

51-029896

Green

No

 

$
259 

 

$
311 

 

$
408 

 

No

9/30/20

 

 

SCI

 

 

 

 

$
125 

 

$
68 

 

$
62 

 

 

6/30/17

 

 

CGL

 

 

 

 

$
249 

 

$
242 

 

$
237 

 

 

9/30/2020 & 6/30/2020

ARA

(3)

WSC

13-161999

Green

No

 

$

 -

 

$
2 

 

$
20 

 

No

*

 

 

CGL

 

 

 

 

$
54 

 

$
52 

 

$
51 

 

 

9/30/15 & 6/30/17

SPP

(4)

WSC

13-100329

Green

No

 

$
80 

 

$
81 

 

$
61 

 

No

9/30/2017 & 12/31/2016

 

 

SCI

 

 

 

 

$
72 

 

$
20 

 

$
18 

 

 

6/30/17

 

 

CGL

 

 

 

 

$
90 

 

$
86 

 

$
85 

 

 

12/31/2016 & 6/30/2017

 

 

Total Contributions

 

 

 

$
3,011 

 

$
3,195 

 

$
3,548 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Masters, Mates & Pilots Pension Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

MEBA Pension Trust

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)

American Radio Association Pension Trust

 

 

 

 

 

 

 

 

 

 

 

 

 

(4)

Seafarers Pension Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

(5)

Financial Improvement Plan/Rehabilitation Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*In full force and effect until otherwise noted

 

 

 

 

 

 

 

 

 

 

 

 

In 2013 and 2012, due to the changes in the pension regulations and the fact that the MM&P adopted the new amortization periods for the 2008 losses, the plan continues to meet the requirements for the green zone.  Due to a critical status in 2011, a rehabilitation plan was adopted and the pension plan is still operating under the changes that were made as a result of the rehabilitation plan.

 

401(k) Savings Plan

 

We provide a 401(k) tax-deferred savings plan to all full-time employees. The plan is a defined contribution plan established under the provisions of Section 401(a) of the Internal Revenue Code (the Code) and covers eligible employees of the Company and our domestic subsidiaries. Employees become eligible to participate in the plan on the first day of the calendar month following their date of hire. Effective July 1, 2008, a participant must be age 21 to participate in the plan. The plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). We match 50% of the employee’s first $2,000 contributed to the plan annually.  We contributed approximately  $118,000,  $102,000, and $102,000 to the plan for the years ended December 31, 2013, 2012, and 2011, respectively.

 

Stock Incentive Plan

 

In April 2011, the stockholders of International Shipholding Corporation approved the International Shipholding Corporation 2011 Stock Incentive Plan (the “Plan”). The compensation committee of the Board of Directors of the Company will generally administer the Plan, and has the authority to grant awards under the Plan, including setting the terms of the awards. Incentives under the Plan may be granted in any one or a combination of the following forms: incentive stock options under Section 422 of the Internal Revenue Code, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards.

 

A total of 400,000 shares of the Company’s common stock are authorized to be issued under the Plan with 118,705 shares available to be issued. The Company has no other equity compensation plans with shares available for issuance. Officers, directors, and key employees of the Company and the Company’s consultants and advisors will be eligible to receive incentives under the Plan when designated by the compensation committee as Plan participants (See Note V – Stock-Based Compensation).

 

Life Insurance

 

We have agreements with the two former Chairmen of the Company whereby their estates or designated beneficiaries will be paid approximately $822,000 and $627,000, respectively, upon death.  We reserved amounts to fund a portion of these death benefits, which amount to $822,000 at December 31, 2013 and 2012 and $480,000, and $457,000 at December 31, 2013 and 2012, respectively.