Note 17.

Retirement Plans

The Company has six retirement plans which cover its hourly and salaried employees in the United States: three defined benefit plans (one active / two frozen) and three defined contribution plans. Employees are eligible to participate in the appropriate plan based on employment classification. The Company's funding to the defined benefit and defined contribution plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA), applicable plan policy and investment guidelines. The Company policy is to contribute at least the minimum in accordance with the funding standards of ERISA.

The Company’s subsidiary, L.B. Foster Rail Technologies (Rail Technologies), maintains two defined contribution plans for its employees in Canada, as well as a post-retirement benefit plan. In the United Kingdom, Rail Technologies maintains both a defined contribution plan and a defined benefit plan. These plans are discussed in further detail below.

United States Defined Benefit Plans

The following tables present a reconciliation of the changes in the benefit obligation, the fair market value of the assets, and the funded status of the plans:



		2014		2013

Changes in benefit obligation:
Benefit obligation at beginning of year	$	16,112	$	18,034
Service cost		23		33
Interest cost		771		707
Actuarial loss (gain)		2,753		(1,924)
Benefits paid		(734)		(738)
Benefit obligation at end of year	$	18,925	$	16,112



Change to plan assets:
Fair value of assets at beginning of year	$	15,039	$	13,262
Actual gain on plan assets		601		2,019
Employer contribution		299		496
Benefits paid		(734)		(738)
Fair value of assets at end of year		15,205		15,039
Funded status at end of year	$	(3,720)	$	(1,073)



Amounts recognized in the consolidated balance sheet consist of:
Other long-term liabilities	$	(3,720)	$	(1,073)



Amounts recognized in accumulated other comprehensive income consist of:
Net loss	$	4,429	$	1,375
Prior service cost		3		4
	$	4,432	$	1,379

The actuarial loss included in accumulated other comprehensive loss that will be recognized in net periodic pension cost during 2015 is $278, before taxes.

Net periodic pension costs for the three years ended December 31, 2014 are as follows:



		2014		2013		2012
Components of net periodic benefit cost:
Service cost	$	23	$	33	$	31
Interest cost		771		707		748
Expected return on plan assets		(968)		(856)		(810)
Amortization of prior service cost		1		1		1
Recognized net actuarial loss		65		212		194
Net periodic pension (income) cost	$	(108)	$	97	$	164

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year.



	2014		2013		2012
Discount rate	4.0	%	4.9	%	4.0	%
Expected rate of return on plan assets	5.5	%	6.5	%	6.5	%

The expected long-term rate of return is based on numerous factors including the target asset allocation for plan assets, historical rate of return, long-term inflation assumptions, and current and projected market conditions. The decline in the expected rate of return on plan assets reflects a shift in the Plans’ investment strategy toward a higher focus on fixed income investments.

Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan assets are as follows:



		2014		2013

Projected benefit obligation	$	18,925	$	12,513
Accumulated benefit obligation		18,925		12,513
Fair value of plan assets	$	15,205	$	11,321

Plan assets consist primarily of various fixed income and equity investments. The Company’s primary investment objective is to provide long-term growth of capital while accepting a moderate level of risk. The investments are limited to cash and equivalents, bonds, preferred stocks, and common stocks. The investment target ranges and actual allocation of pension plan assets by major category at December 31, 2014 and 2013 are as follows:



	Target		2014		2013
Asset Category
Cash and cash equivalents	0 - 10	%	2	%	4	%
Total fixed income funds	25 - 50		34		27
Total mutual funds and equities	50 - 70		64		69
Total			100	%	100	%

In accordance with the fair value disclosure requirements with FASB ASC 820, “Fair Value Measurements and Disclosures,” the following assets were measured at fair value on a recurring basis at December 31, 2014 and 2013. Additional information regarding FASB ASC 820 and the fair value hierarchy can be found in Note 19, Fair Value Measurements.




		2014		2013

Asset Category
Cash and cash equivalents	$	347	$	568
Fixed income funds
Corporate bonds		5,194		4,005
Total fixed income funds		5,194		4,005
Equity funds and equities
Mutual funds		3,566		9,142
Common stock		6,098		1,324
Total mutual funds and equities		9,664		10,466
Total	$	15,205	$	15,039

Cash equivalents. The Company uses quoted market prices to determine the fair value of these investments in interest-bearing cash accounts and they are classified in Level 1 of the fair value hierarchy. The carrying amounts approximate fair value because of the short maturity of the instruments.

Fixed income funds. Investments within the fixed income funds category consist of fixed income corporate debt. The Company uses quoted market prices to determine the fair value of these fixed income funds. These instruments consist of exchange-traded government and corporate bonds and are classified in Level 1 of the fair value hierarchy.

Equity funds and equities. The valuation of investments in registered investment companies is based on the underlying investments in securities. Securities traded on security exchanges are valued at the latest quoted sales price. Securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask quotations. These investments are classified in Level 1 of the fair value hierarchy.

The Company currently does not anticipate contributions to its United States defined benefit plans in 2015.

The following benefit payments are expected to be paid:



		Pension
		Benefits

2015	$	793
2016		822
2017		882
2018		915
2019		993
Years 2020-2024		5,606

United Kingdom Defined Benefit Plan

The Portec Rail Products (UK) Limited Pension Plan covers certain current employees, former employees, and retirees. The plan has been frozen to new entrants since April 1, 1997 and also covers the former employees of a merged plan after January 2002. Benefits under the plan were based on years of service and eligible compensation during defined periods of service. Our funding policy for the plan is to make minimum annual contributions required by applicable regulations.

The funded status of the United Kingdom defined benefit plan at year end is as follows:



		2014		2013

Changes in benefit obligation:
Benefit obligation at beginning of year	$	8,450	$	8,034
Interest cost		360		348
Actuarial loss		883		162
Benefits paid		(397)		(247)
Foreign currency exchange rate changes		(499)		153
Benefit obligation at end of year	$	8,797	$	8,450



Change to plan assets:
Fair value of assets at beginning of year	$	6,769	$	6,051
Actual gain on plan assets		502		545
Employer contribution		284		303
Benefits paid		(397)		(247)
Foreign currency exchange rate changes		(401)		117
Fair value of assets at end of year		6,757		6,769
Funded status at end of year	$	(2,040)	$	(1,681)




Amounts recognized in the consolidated balance sheet consist of:
Other long-term liabilities	$	(2,040)	$	(1,681)


Amounts recognized in accumulated other comprehensive income consist of:
Net loss	$	1,413	$	906
Prior service cost		112		142
Transition obligation		-		(50)
	$	1,525	$	998

Net periodic pension costs for the three years ended December 31, 2014 are as follows:



		2014		2013		2012
Components of net periodic benefit cost:
Interest cost	$	360	$	348	$	338
Expected return on plan assets		(370)		(321)		(307)
Amortization of transition obligation		(50)		(46)		(49)
Amortization of prior service cost		30		22		23
Recognized net actuarial loss		185		229		221
Net periodic pension cost	$	155	$	232	$	226



	2014		2013		2012
Discount rate	3.6	%	4.6	%	4.3	%
Expected rate of return on plan assets	5.0	%	5.8	%	5.2	%

Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan assets are as follows:



		2014		2013

Projected benefit obligation	$	8,797	$	8,450
Accumulated benefit obligation		8,797		8,450
Fair value of plan assets		6,757		6,769

The Company has estimated the long-term rate of return on plan assets based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations, and recent changes in long-term interest rates based on publicly available information.

Plan assets are invested by the trustees in accordance with a written statement of investment principles. This statement permits investment in equities, corporate bonds, United Kingdom government securities, commercial property, and cash, based on certain target allocation percentages. Asset allocation is primarily based on a strategy to provide steady growth without undue fluctuations. The target asset allocation percentages for 2014 are as follows:



	Portec Rail
	Plan
Equity securities	Up to 100%
Commercial property	Not to exceed 50%
U.K. Government securities	Not to exceed 50%
Cash	Up to 100%

Plan assets held within the Portec Rail Plan consist of cash and marketable securities which have been classified as Level 1 of the fair value hierarchy. All other plan assets have been classified as Level 2 of the fair value hierarchy.

The plan assets by category for the years ended December 31, are as follows:




		2014		2013
Asset Category
Cash and cash equivalents	$	218	$	369
Equity securities		2,156		2,803
Bonds		1,899		1,468
Commercial property		2,484		2,129
Total	$	6,757	$	6,769

United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans. The Company anticipates making contributions of $280 to the Portec Rail Plan during 2015.

The following estimated future benefits payments are expected to be paid under the Portec Rail Plan:



		Pension
		Benefits

2015	$	246
2016		270
2017		288
2018		307
2019		334
Years 2020-2024		1,965