16.EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan and Unfunded Excess Benefit Plan

PLC sponsors a defined benefit pension plan covering substantially all of its employees, including those of the Company. Benefits are based on years of service and the employee’s compensation.

Effective January 1, 2008, PLC made the following changes to its defined benefit pension plan. These changes have been reflected in the computations within this note.

Employees hired after December 31, 2007, will receive benefits under a cash balance plan.

Employees active on December 31, 2007, with age plus vesting service less than 55 years will receive a final pay-based pension benefit for service through December 31, 2007, plus a cash balance benefit for service after December 31, 2007.

Employees active on December 31, 2007, with age plus vesting service equaling or exceeding 55 years, will receive a final pay-based pension benefit for service both before and after December 31, 2007, with a modest reduction in the formula for benefits earned after December 31, 2007.

All participants terminating employment on or after December of 2007 may elect to receive a lump sum benefit.

PLC’s funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act (“ERISA”) plus such additional amounts as PLC may determine to be appropriate from time to time. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.

Under the Pension Protection Act of 2006 (“PPA”), a plan could be subject to certain benefit restrictions if the plan’s adjusted funding target attainment percentage (“AFTAP”) drops below 80%. Therefore, PLC may make additional contributions in future periods to maintain an AFTAP of at least 80%. In general, the AFTAP is a measure of how well the plan is funded and is obtained by dividing the plan’s assets by the plan’s funding liabilities. AFTAP is based on participant data, plan provisions, plan methods and assumptions, funding credit balances, and plan assets as of the plan valuation date. Some of the assumptions and methods used to determine the plan’s AFTAP may be different from the assumptions and methods used to measure the plan’s funded status on a GAAP basis.

In July of 2012, the Moving Ahead for Progress in the 21st Century Act (“MAP-21”), which includes pension funding stabilization provisions, was signed into law. These provisions establish an interest rate corridor which is designed to stabilize the segment rates used to determine funding requirements from the effects of interest rate volatility. In August of 2014, the Highway and Transportation Funding Act of 2014 (“HATFA”) was signed into law. HAFTA extends the funding relief provided by MAP-21 by delaying the interest rate corridor expansion. The funding stabilization provisions of MAP-21 and HATFA reduced PLC’s minimum required defined benefit plan contributions for the 2013 and 2014 plan years. PLC is evaluating the impact these changes will have on funding requirements in future years. Since the funding stabilization provisions of MAP-21 and HATFA do not apply for Pension Benefit Guaranty Corporation (“PBGC”) reporting purposes, PLC may also make additional contributions in future periods to avoid certain PBGC reporting triggers.

During the twelve months ended December 31, 2014, PLC contributed $9.0 million to its defined benefit pension plan for the 2013 plan year and $6.5 million to its defined benefit pension plan for the 2014 plan year. In addition, during January of 2015, PLC made a $2.2 million contribution to the defined benefit pension plan for the 2014 plan year. PLC has not yet determined what amount it will fund for the remainder of 2015, but estimates that the amount will be between $1 million and $10 million.

PLC also sponsors an unfunded excess benefit plan, which is a nonqualified plan that provides defined pension benefits in excess of limits imposed on qualified plans by federal tax law.

PLC uses a December 31 measurement date for all of its plans. The following table presents the benefit obligation, fair value of plan assets, and the funded status of PLC’s defined benefit pension plan and unfunded excess benefit plan as of December 31. This table also includes the amounts not yet recognized as components of net periodic pension costs as of December 31:

	Defined Benefit						Unfunded Excess
	Pension Plan						Benefit Plan
	2014			2013			2014			2013
	(Dollars In Thousands)

Accumulated benefit obligation, end of year	$	249,453		$	207,999		$	47,368		$	36,306

Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	219,152		$	223,319		$	39,679		$	42,971
Service cost	9,411			9,345			954			1,037
Interest cost	10,493			8,985			1,696			1,387
Amendments	—			—			—			—
Actuarial (gain) loss	38,110			(8,172		)	9,153			(1,505		)
Benefits paid	(9,835		)	(14,325		)	(1,907		)	(4,211		)
Projected benefit obligation at end of year	267,331			219,152			49,575			39,679

Change in plan assets:
Fair value of plan assets at beginning of year	180,173			152,187			—			—
Actual return on plan assets	17,921			33,368			—			—
Employer contributions(1)	15,513			8,943			1,907			4,211
Benefits paid	(9,835		)	(14,325		)	(1,907		)	(4,211		)
Fair value of plan assets at end of year	203,772			180,173			—			—
After reflecting FASB guidance:
Funded status	(63,559		)	(38,979		)	(49,575		)	(39,679		)
Amounts recognized in the balance sheet:
Other liabilities	(63,559		)	(38,979		)	(49,575		)	(39,679		)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss/(gain)	80,430			54,897			20,983			13,346
Prior service cost/(credit)	(1,033		)	(1,425		)	24			36
Total	$	79,397		$	53,472		$	21,007		$	13,382

(1)

Employer contributions disclosed are based on PLC’s fiscal filing year

Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:

	Defined Benefit Pension				Unfunded Excess
	Plan				Benefit Plan
	2014		2013		2014		2013
Discount rate	3.95	%	4.86	%	3.65	%	4.30	%
Rate of compensation increase	4.75% prior to age 40		3.0		4.75% prior to age 40		4.0
	3.75% for age 40 and				3.75% for age 40 and
	above				above
Expected long-term return on plan assets	7.5		7.5		N/A		N/A

Weighted-average assumptions used to determine the net periodic benefit cost for the year ended December 31 are as follows:

	Defined Benefit Pension Plan						Unfunded Excess Benefit Plan
	2014		2013		2012		2014		2013		2012
Discount rate	4.86	%	4.07	%	4.62	%	4.30	%	3.37	%	4.07	%
Rates of compensation increase	3.0		3.0		2.5 - 3.0		4.0		4.0		3.5 - 4.0
Expected long-term return on plan assets	7.5		7.5		7.75		N/A		N/A		N/A

The assumed discount rates used to determine the benefit obligations were based on an analysis of future benefits expected to be paid under the plans. The assumed discount rate reflects the interest rate at which an amount that is invested in a portfolio of high-quality debt instruments on the measurement date would provide the future cash flows necessary to pay benefits when they come due.

To determine an appropriate long-term rate of return assumption, PLC obtained 25 year annualized returns for each of the represented asset classes. In addition, PLC received evaluations of market performance based on PLC’s asset allocation as provided by external consultants. A combination of these statistical analytics provided results that PLC utilized to determine an appropriate long-term rate of return assumption.

Components of the net periodic benefit cost for the year ended December 31 are as follows:

	Defined Benefit Pension Plan									Unfunded Excess Benefit Plan
	2014			2013			2012			2014		2013		2012
	(Dollars In Thousands)
Service cost — benefits earned during the period	$	9,411		$	9,345		$	9,145		$	954	$	1,037	$	867
Interest cost on projected benefit obligation	10,493			8,985			8,977			1,696		1,387		1,473
Expected return on plan assets	(12,166		)	(11,013		)	(10,916		)	—		—		—
Amortization of prior service cost/(credit)	(392		)	(392		)	(392		)	12		12		12
Amortization of actuarial losses(1)	6,821			9,631			7,749			1,516		1,792		1,300
Preliminary net periodic benefit cost	14,167			16,556			14,563			4,178		4,228		3,652
Settlement/curtailment expense(2)	—			—			—			—		928		—
Total net periodic benefit cost	$	14,167		$	16,556		$	14,563		$	4,178	$	5,156	$	3,652

(1)

2014 average remaining service period used is 8.10 years and 7.51 years for the defined benefit pension plan and unfunded excess benefit plan, respectively.

(2)

The unfunded excess pension plan triggered settlement accounting for the year ended December 31, 2013 since the total lump sum payments exceeded the settlement threshold of service cost plus interest cost.

The estimated net actuarial loss/(gain), prior service cost/(credit), and transition obligation/(asset) for these plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2015 is as follows:

	Defined Benefit			Unfunded Excess
	Pension Plan			Benefit Plan
	(Dollars In Thousands)
Net actuarial loss/(gain)	$	7,603		$	1,901
Prior service cost/(credit)	(392		)	12
Transition obligation/(asset)	—			—

The amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the Plan.

Allocation of plan assets of the defined benefit pension plan by category as of December 31 are as follows:

	Target
	Allocation for
Asset Category	2015		2014		2013
Cash and cash equivalents	2	%	4	%	2	%
Equity securities	60		62		64
Fixed income	38		34		34
Total	100	%	100	%	100	%

PLC’s target asset allocation is designed to provide an acceptable level of risk and balance between equity assets and fixed income assets. The weighting towards equity securities is designed to help provide for an increased level of asset growth potential and liquidity.

Prior to July 1999, upon an employee’s retirement, a distribution from pension plan assets was used to purchase a single premium annuity from the Company in the retiree’s name. Therefore, amounts shown above as plan assets exclude assets relating to such retirees. Since July 1999, retiree obligations have been fulfilled from pension plan assets. The defined benefit pension plan has a target asset allocation of 60% domestic equities, 38% fixed income, and 2% cash. When calculating asset allocation, PLC includes reserves for pre- July 1999 retirees.

PLC’s investment policy includes various guidelines and procedures designed to ensure assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans’ actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.

The plan’s equity assets are in a Russell 3000 index fund that invests in a domestic equity index collective trust managed by Northern Trust Corporation and in a Spartan 500 index fund managed by Fidelity. The plan’s cash is invested in a collective trust managed by Northern Trust Corporation. The plan’s fixed income assets are invested in a group deposit administration annuity contract with the Company.

Plan assets of the defined benefit pension plan by category as of December 31, are as follows:

	As of December 31,
Asset Category	2014		2013
	(Dollars In Thousands)
Cash and cash equivalents	$	7,968	$	3,052
Equity securities:
Collective Russell 3000 equity index fund	79,660		74,753
Fidelity Spartan 500 index fund	51,848		45,632
Fixed income	64,296		56,736
Total investments	203,772		180,173
Employer contribution receivable	2,165		2,314
Total	$	205,937	$	182,487

The valuation methodologies used to determine the fair values reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. The Plan’s group deposit administration annuity contract with the Company is recorded at contract value, which, by utilizing a long-term view, PLC believes approximates fair value. Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to purchase annuities. Units in collective short-term and collective investment funds are valued at the unit value, which approximates fair value, as reported by the trustee of the collective short-term and collective investment funds on each valuation date. These methods of valuation may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Collective short-term investment fund	$	7,968	$	—	$	—	$	7,968
Collective investment funds:
Equity index funds	51,848		79,660		—		131,508
Group deposit administration annuity contract	—		—		64,296		64,296
Total investments	$	59,816	$	79,660	$	64,296	$	203,772

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Collective short-term investment fund	$	3,052	$	—	$	—	$	3,052
Collective investment funds:
Equity index funds	45,632		74,753		—		120,385
Group deposit administration annuity contract	—		—		56,736		56,736
Total investments	$	48,684	$	74,753	$	56,736	$	180,173

For the year ended December 31, 2014, $4.5 million was transferred into Level 3 from Level 2. For the year ended December 31, 2013, $4.0 million was transferred into Level 3 from Level 2. These transfers were made to maintain an acceptable asset allocation as set by PLC’s investment policy.

For the year ended December 31, 2014 and 2013, there were no transfers between Level 1 and Level 2.

The following table summarizes the Plan investments measured at fair value based on NAV per share as of December 31, 2014 and 2013, respectively:

			Unfunded	Redemption	Redemption
Name	Fair Value		Commitments	Frequency	Notice Period
	(Dollars In Thousands)
As of December 31, 2014:
Collective short-term investment fund	$	7,968	Not Applicable	Daily	1 day
Collective Russell 3000 index fund(1)	79,660		Not Applicable	Daily	1 day
Fidelity Spartan 500 index fund	51,848		Not Applicable	Daily	1 day

As of December 31, 2013:
Collective short-term investment fund	$	3,052	Not Applicable	Daily	1 day
Collective Russell 3000 index fund(1)	74,753		Not Applicable	Daily	1 day
Fidelity Spartan 500 index fund	45,632		Not Applicable	Daily	1 day

(1)

Non-lending collective trust that does not publish a daily NAV but tracks the Russell 3000 index and provides a daily NAV to the Plan.

A reconciliation of the beginning and ending balances for the fair value measurements for which significant unobservable inputs (Level 3) have been used is as follows:

	As of December 31,
	2014		2013
	(Dollars In Thousands)
Balance, beginning of year	$	56,736	$	50,032
Interest income	3,060		2,704
Transfers from collective short-term investments fund	4,500		4,000
Transfers to collective short-term investments fund	—		—
Balance, end of year	$	64,296	$	56,736

The following table represents the Plan’s Level 3 financial instrument, the valuation technique used, and the significant unobservable input and the ranges of values for that input as of December 31, 2014:

			Principal	Significant	Range of
			Valuation	Unobservable	Significant Input
Instrument	Fair Value		Technique	Inputs	Values
	(Dollars In Thousands)
Group deposit administration annuity contract	$	64,296	Contract Value	Contract Rate	5.28% - 5.47%

Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported.

Estimated future benefit payments under the defined benefit pension plan are as follows:

	Defined Benefit		Unfunded Excess
Years	Pension Plan		Benefit Plan
	(Dollars In Thousands)
2015	$	15,055	$	4,016
2016	15,243		4,036
2017	16,957		5,610
2018	16,515		4,005
2019	19,014		4,303
2020-2024	97,137		17,800

Other Postretirement Benefits

In addition to pension benefits, PLC provides limited healthcare benefits to eligible retired employees until age 65. This postretirement benefit is provided by an unfunded plan. As of December 31, 2014 and 2013, the accumulated postretirement benefit obligation associated with these benefits was $0.2 million and $0.4 million, respectively.

The change in the benefit obligation for the retiree medical plan is as follows:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	447		$	788
Service cost	2			4
Interest cost	4			5
Actuarial (gain)/loss	30			29
Plan participant contributions	254			289
Benefits paid	(490		)	(668		)
Benefit obligation, end of year	$	247		$	447

For the retiree medical plan, PLC’s discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 1.27% and 1.26%, respectively.

For a closed group of retirees over age 65, PLC provides a prescription drug benefit. As of December 31, 2014 and 2013, PLC’s liability related to this benefit was less than $0.1 million. PLC’s obligation is not materially affected by a 1% change in the healthcare cost trend assumptions used in the calculation of the obligation.

PLC also offers life insurance benefits for retirees from $10,000 up to a maximum of $75,000 which are provided through the payment of premiums under a group life insurance policy. This plan is partially funded at a maximum of $50,000 face amount of insurance. The accumulated postretirement benefit obligation associated with these benefits is as follows:

	As of December 31,
	2014			2013
	(Dollars In Thousands)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	8,653		$	10,070
Service cost	97			144
Interest cost	416			405
Actuarial (gain)/loss	694			(1,620		)
Benefits paid	(572		)	(346		)
Benefit obligation, end of year	$	9,288		$	8,653

For the postretirement life insurance plan, PLC’s discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 4.21% and 5.05%, respectively.

PLC’s expected long-term rate of return assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 3.14% and 3.13%, respectively. To determine an appropriate long-term rate of return assumption, PLC utilized 20 year average and annualized return results on the Barclay’s short treasury index.

Investments of PLC’s group life insurance plan are held by Wells Fargo Bank, N.A. Plan assets held by the Custodian are invested in a money market fund.

The fair value of each major category of plan assets for PLC’s postretirement life insurance plan is as follows:

	For The Year Ended December 31,
Category of Investment	2014		2013		2012
	(Dollars In Thousands)
Money market fund	$	5,925	$	6,156	$	6,174

Investments are stated at fair value and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The money market funds are valued based on historical cost, which represents fair value, at year end. This method of valuation may produce a fair value calculation that may not be reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Money market fund	$	5,925	$	—	$	—	$	5,925

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2013:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Money market fund	$	6,156	$	—	$	—	$	6,156

For the year ended December 31, 2014 and 2013, there were no transfers between levels.

Investments are exposed to various risks, such as interest rate and credit risks. Due to the level of risk associated with investments and the level of uncertainty related to credit risks, it is at least reasonably possible that changes in risk in the near term could materially affect the amounts reported.

401(k) Plan

PLC sponsors a 401(k) Plan which covers substantially all employees. Employee contributions are made on a before-tax basis as provided by Section 401(k) of the Internal Revenue Code or as after-tax “Roth” contributions. Employees may contribute up to 25% of their eligible annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service ($17,500 for 2014). The Plan also provides a “catch-up” contribution provision which permits eligible participants (age 50 or over at the end of the calendar year), to make additional contributions that exceed the regular annual contribution limits up to a limit periodically set by the Internal Revenue Service ($5,500 for 2014). PLC matches the sum of all employee contributions dollar for dollar up to a maximum of 4% of an employee’s pay per year per person. All matching contributions vest immediately.

Prior to 2009, employee contributions to PLC’s 401(k) Plan were matched through use of an ESOP established by PLC. Beginning in 2009, PLC adopted a cash match for employee contributions to the 401(k) plan. For the year ended December 31, 2014 and 2013, PLC recorded an expense of $6.3 million and $6.0 million, respectively.

Effective as of January 1, 2005, PLC adopted a supplemental matching contribution program, which is a nonqualified plan that provides supplemental matching contributions in excess of the limits imposed on qualified defined contribution plans by federal tax law. The first allocations under this program were made in early 2006, with respect to the 2005 plan year. The expense recorded by PLC for this employee benefit was $0.4 million, $0.5 million, and $0.4 million, respectively, in 2014, 2013, and 2012.

Deferred Compensation Plan

PLC has established deferred compensation plans for directors, officers, and others. Compensation deferred is credited to the participants in cash, mutual funds, common stock equivalents, or a combination thereof. PLC may, from time to time, reissue treasury shares or buy in the open market shares of common stock to fulfill its obligation under the plans. As of December 31, 2014, the plans had 1,109,595 common stock equivalents credited to participants. PLC’s obligations related to its deferred compensation plans are reported in other liabilities, unless they are to be settled in shares of its common stock, in which case they are reported as a component of shareowners’ equity. On February 1, 2015, PLC became a wholly subsidiary of Dai-ichi Life and PLC’s stock ceased to be publicly traded. Thus, any common stock equivalents within the plans converted into rights to receive the merger consideration of $70.00 per common stock equivalent.