Employee Benefit Plans

Peoples sponsors a noncontributory defined benefit pension plan that covers substantially all employees hired before January 1, 2010. The plan provides retirement benefits based on an employee’s years of service and compensation. For employees hired before January 1, 2003, the amount of postretirement benefit is based on the employee’s average monthly compensation pay over the highest five consecutive years out of the employee’s last ten years with Peoples while an eligible employee. For employees hired on or after January 1, 2003, the amount of postretirement benefit is based on 2% of the employee’s annual compensation plus accrued interest. Effective January 1, 2010, the pension plan was closed to new entrants. Effective March 1, 2011, the accrual of pension plan benefits for all participants was frozen. Peoples recognized this freeze as a curtailment as of December 31, 2010 and March 1, 2011, under the terms of the pension plan. Peoples also provides post-retirement health and life insurance benefits to former employees and directors. Only those individuals who retired before January 27, 2012 were eligible for life insurance benefits. All retirees are eligible for health benefits; however, Peoples only pays 100% of the cost for those individuals who retired before January 1, 1993. For all others, the retiree is responsible for most, if not all, of the cost of health benefits. Peoples’ policy is to fund the cost of the benefits as they arise.

The following tables detail the components of the net periodic cost for the plans:



	Pension Benefits
	Three Months Ended
	March 31,
(Dollars in thousands)	2014			2013
Interest cost	$	143		$	133
Expected return on plan assets	(169		)	(165		)
Amortization of net loss	33			52
Settlement of benefit obligation	486			—
Net periodic cost	$	493		$	20



	Postretirement Benefits
	Three Months Ended
	March 31,
(Dollars in thousands)	2014			2013
Interest cost	$	1		$	2
Amortization of net loss	(2		)	—
Net periodic (benefit) cost	$	(1	)	$	2

Under US GAAP, Peoples is required to recognize a settlement gain or loss when the aggregate amount of lump-sum distributions to participants equals or exceeds the sum of the service and interest cost components of the net periodic pension cost. The amount of settlement gain or loss recognized is the pro rata amount of the unrealized gain or loss existing immediately prior to the settlement. In general, both the projected benefit obligation and fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss.

In the first quarter of 2014, the total lump-sum distributions made to participants caused the total settlements to exceed the recognition threshold for settlement gains or losses. As a result, Peoples remeasured its pension obligation and plan assets as of January 1, 2014 as part of the calculation of the settlement loss recognized.

The following table summarizes the change in pension obligation and funded status as a result of this remeasurement and the aggregate settlements for the three months ended March 31, 2014:



	As of			March 31, 2014
(Dollars in thousands)	December 31,			Before Settlement			Impact of Settlements			After Settlements
Funded status:	2013
Projected benefit obligation	$	14,723		$	15,856		$	(1,196	)	$	14,660
Fair value of plan assets	11,287			11,369			(1,196		)	10,173
Funded status	$	(3,436	)	$	(4,487	)	$	—		$	(4,487	)

Gross unrealized loss	$	5,436		$	6,480		$	(486	)	$	5,994

Assumptions:
Discount rate	4.30		%	3.90		%				3.90		%
Expected return on plan assets	7.50		%	7.50		%				7.50		%