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. As of January 1, 2011, all retirees who desire to participate in the Peoples Bank medical plan do so by electing COBRA, which provides up to 18 months of coverage; retirees over the age of 65 also have the option to participate in a group Medicare supplemental plan. Peoples’ policy is to fund the cost of the health benefits as they arise.

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



	Pension Benefits
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2015			2014			2015			2014
Interest cost	$	111		$	121		$	335		$	395
Expected return on plan assets	(122		)	(139		)	(373		)	(458		)
Amortization of net loss	28			34			92			103
Settlement of benefit obligation	82			361			454			1,383
Net periodic cost	$	99		$	377		$	508		$	1,423



	Postretirement Benefits
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2015			2014			2015			2014
Interest cost	$	2		$	1		$	4		$	4
Amortization of net loss	(2		)	(2		)	(4		)	(6		)
Net periodic benefit	$	—		$	(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 the fair value of plan assets are required to be remeasured in order to determine the settlement gain or loss.

In the first three months of 2015, year-to-date lump sum distributions made to participants exceeded the recognition threshold for settlement gains or losses. As a result, Peoples remeasured its pension obligation and plan assets as of January 1, 2015 as part of the calculation of the settlement loss of $269,000 that was recognized in the first quarter of 2015. The pension obligation and plan assets were remeasured again as of April 1, 2015 as part of the calculation of the settlement loss of $103,000 recognized in connection with lump sum distributions made during the second quarter of 2015. The pension obligation and plan assets were remeasured again at July 1, 2015 as part of the calculation of the settlement loss of $82,000 recognized in connection with lump sum distributions made during the third quarter of 2015.

The following table summarizes the change in pension obligation and funded status as a result of the remeasurement and the aggregate settlement for the three months ended September 30, 2015:



	As of			September 30, 2015
(Dollars in thousands)	December 31,			Before Settlement			Impact of Settlements			After Settlements
Funded status:	2014
Projected benefit obligation	$	13,695		$	12,114		$	(190	)	$	11,924
Fair value of plan assets	8,259			7,056			(190		)	6,866
Funded status	$	(5,436	)	$	(5,058	)	$	—		$	(5,058	)

Gross unrealized loss (gain)	$	5,979		$	5,175		$	(82	)	$	5,093

Assumptions:
Discount rate	3.50		%	3.90		%				3.90		%
Expected return on plan assets	7.50		%	7.50		%				7.50		%