(11) BENEFIT PLANS:

Pension plan

The Company has a defined benefit pension plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. Under generally accepted accounting principles, the Company’s defined benefit pension plan was underfunded at April 30, 2020 by $5,014,000, with $18,260,000 of assets and $23,274,000 of liabilities and was underfunded at April 30, 2019 by $6,401,000, with $23,903,000 of assets and $30,304,000 of liabilities. The pension plan liabilities were determined using a weighted average discount interest rate of 2.29% per year at April 30, 2020 and 3.54% per year at April 30, 2019, which are based on the FTSE Pension Discount Curve as of such dates as it corresponds to the projected liability requirements of the pension plan.

The closing of certain Company facilities in fiscal year 2011 and the associated workforce reduction resulted in the Pension Benefit Guaranty Corporation requiring the Company to accelerate the funding of $11,688,000 of accrued pension-related obligations to the Company’s defined benefit pension plan pursuant to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the regulations thereunder. The Company entered into a settlement agreement with the Pension Benefit Guaranty Corporation in fiscal year 2014 with respect to such liability. The settlement agreement with the Pension Benefit Guaranty Corporation terminated by its terms in 2019 with the Pension Benefit Guaranty Corporation being deemed to have released and discharged the Company and all other members of its controlled group from any claims under the settlement agreement or with respect to such liability.

In connection with the transactions contemplated by the Membership Purchase Agreement described in Note 2, the Company (not including the Target Group) retained their obligations under the Company’s defined benefit pension plan following the Closing Date. The transactions contemplated by the Membership Purchase Agreement and the associated workforce reduction with respect to the Company resulted in the acceleration of the funding of $5,194,000 of accrued pension-related obligations to the Company’s defined benefit pension plan pursuant to ERISA. The Company notified the Pension Benefit Guaranty Corporation of the transactions contemplated by the Membership Purchase Agreement and, as permitted by ERISA, made an election to satisfy this accelerated funding obligation over a period of seven years beginning in fiscal year 2021. During 2020, the Company made voluntary contributions to the pension plan of $3,600,000, which eliminated any requirement for the Company to further satisfy the $5,194,000 of accelerated accrued pension-related obligations to the pension plan.

The Company recognized a non-cash pre-tax pension settlement charge of $2,929,000 in 2020. This charge resulted from the Company's defined benefit pension plan paying an aggregate of $7,280,000 in lump sum payouts of pension benefits to 309 former employees. There were no such charges in 2019.

Pension assets and liabilities are measured at fair value (measured in accordance with the guidance described in Note 10) and are subject to fair value adjustment in certain circumstances (for example, when there is evidence of impairment). There were no impairments resulting in a change in fair value during 2020 and 2019.

Net periodic pension cost for 2020 and 2019 was comprised of the following components (in thousands):


	Year Ended April 30,
	2020		2019
Interest cost on projected benefit obligation	$	716	$	1,183
Expected return on assets		(1,591)		(1,854)
Plan expenses		410		415
Recognized net actuarial loss		563		905
Settlement loss		2,929		—
Net periodic pension cost	$	3,027	$	649

The estimated net loss, transition obligation and prior service cost for the pension plan that will be amortized from accumulated other comprehensive income into net periodic pension cost over fiscal year 2021 are $529,000, $0 and $0. Assumptions used in determining net periodic pension cost and the benefit obligation were:


	Year Ended April 30,
	2020		2019
Discount rate used to determine net periodic pension cost	3.54	%	3.82	%
Discount rate used to determine pension benefit obligation	2.29	%	3.54	%
Expected long-term rate of return on assets used for pension cost	7.75	%	8.00	%

The following table sets forth changes in the pension plan’s benefit obligation and assets, and summarizes components of amounts recognized in the Company’s consolidated balance sheet (in thousands):


	April 30,
	2020		2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	30,304	$	32,423
Interest cost		716		1,183
Actuarial loss (gain)		1,550		(966)
Benefits paid		(2,050)		(2,336)
Settlement paid		(7,246)		—
Benefit obligation at end of year	$	23,274	$	30,304
Change in plan assets:
Fair value of plan assets at beginning of year	$	23,903	$	23,372
Actual return on plan assets		393		1,277
Company contributions		3,600		2,000
Benefits paid		(2,050)		(2,336)
Settlement paid		(7,246)		—
Plan expenses		(340)		(410)
Fair value of plan assets at end of year	$	18,260	$	23,903
Underfunded status	$	(5,014)	$	(6,401)
Recognition of underfunded status:
Accrued pension cost	$	(5,014)	$	(6,401)

The funded status of the pension plan is equal to the net liability recognized in the consolidated balance sheets. The following table summarizes the amounts recorded in accumulated other comprehensive loss, which have not yet been recognized as a component of net periodic pension costs (in thousands):

The following table summarizes the changes in accumulated other comprehensive loss related to the pension plan for the years ended April 30, 2020 and 2019 (in thousands):


	Pension Benefits
	Pretax		Net of Tax
Accumulated comprehensive loss, May 1, 2018	$	13,184	$	7,934
Net actuarial gain		(383)		(274)
Amortization of net loss		(905)		(629)
Accumulated comprehensive loss, April 30, 2019		11,896		7,031
Net actuarial loss (gain)		2,678		1,868
Recognized settlement gain		(2,929)		(2,049)
Amortization of net loss		(563)		(383)
Accumulated comprehensive loss, April 30, 2020	$	11,082	$	6,467

The Company recorded, net of tax, other comprehensive income of $564,000, including the pension settlement, net of tax, of $2,049,000 and $903,000 in 2020 and 2019 to account for the net effect of changes to the unfunded portion of pension liability.

The asset allocation for the pension plan by asset category was as follows:


	April 30,
	2020		2019
Equity securities	27	%	52	%
Fixed income securities	59		45
Other (principally cash and cash equivalents)	14		3
Total	100	%	100	%

The investment mix between equity securities and fixed income securities seeks to achieve a desired return by balancing equity securities and fixed-income securities. Pension plan assets are invested in portfolios of diversified public-market equity securities and fixed income securities. The pension plan holds no securities of the Company. Investment allocations are made across a range of markets, industry sectors, market capitalization sizes and, in the case of fixed income securities, maturities and credit quality.

The expected return on assets for the pension plan is based on management’s expectation of long-term average rates of return to be achieved by the underlying investment portfolio. In establishing this assumption, management considers historical and expected returns for the asset classes in which the pension plan is invested, as well as current economic and market conditions. For 2020, the Company used a 7.75 % assumed rate of return for purposes of the expected return rate on assets for the development of net periodic pension costs for the pension plan. For years following 2020, the assumed rate of return for purposes of the expected return rate on assets is anticipated to be 7.75%.

The Company funds the pension plan in compliance with IRS funding requirements. The Company made voluntary contributions to the pension plan of $3,600,000 in 2020 and $2,000,000 in 2019. The Company is required to make minimum contributions to the pension plan; however, no minimum contributions are expected to be required during fiscal year 2021.

The amount of future annual benefit payments to pension plan participants payable from plan assets is expected to be as follows: 2021 - $2,506,000, 2022 - $1,769,000, 2023 - $1,710,000, 2024 - $1,637,000 and 2025 - $1,576,000 and an aggregate of $7,003,000 is expected to be paid in the fiscal five-year period 2026 through 2030.

The Company has adopted the disclosure requirements in ASC 715, which requires additional fair value disclosures consistent with those required by ASC 820. The following is a description of the valuation methodologies used for pension plan assets measured at fair value: common stock – valued at the closing price reported on a listed stock exchange; corporate bonds, debentures and government agency securities – valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flow; and U.S. Treasury securities – valued at the closing price reported in the active market in which the security is traded.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments 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 pension plan’s assets at fair value as of April 30, 2020 and 2019 (in thousands):

2020:


	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	2,655	$	2,655	$	—	$	—
Investments at fair value:
Equity securities		4,880		4,880		—		—
Fixed income securities		10,725		—		10,725		—
Total assets at fair value	$	18,260	$	7,535	$	10,725	$	—

2019:


	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	631	$	631	$	—	$	—
Investments at fair value:
Equity securities		12,473		12,473		—		—
Fixed income securities		10,799		—		10,799		—
Total assets at fair value	$	23,903	$	13,104	$	10,799	$	—

Simple IRA

In 2020, the Company established a Simple IRA plan as a retirement plan for eligible employees who earned at least $5,000 of annual compensation. Under the Simple IRA plan, eligible employees may contribute a portion of their pre-tax yearly salary, up to the maximum contribution limit for Simple IRA plans as set forth under the Internal Revenue Code of 1986, as amended, with the Company matching on a dollar-for-dollar basis up to 3% of the employees’ annual pre-tax compensation. The Company’s employer contribution was $14,000 for 2020.

Equity compensation plans

The AMREP Corporation 2006 Equity Compensation Plan (the “2006 Equity Plan”) authorized stock-based awards of various kinds to non-employee directors and employees. The 2006 Equity Plan expired by its terms during fiscal year 2017 without affecting any existing awards under the 2006 Equity Plan, and no further awards may be granted under the 2006 Equity Plan. There were no awards issued under the 2006 Equity Plan that had not vested as of April 30, 2020.

The AMREP Corporation 2016 Equity Compensation Plan (the “2016 Equity Plan”) authorizes stock-based awards of various kinds to non-employee directors and employees covering up to a total of 500,000 shares of common stock of the Company. The 2016 Equity Plan will expire by its terms on, and no award will be granted under the 2016 Equity Plan on or after, September 19, 2026. As of April 30, 2020, the Company had 391,619 shares of common stock of the Company available for issuance under the 2016 Equity Plan.

Shares of restricted common stock that are issued under the equity plans (“restricted shares”) are considered to be issued and outstanding as of the grant date and have the same dividend and voting rights as other common stock. Compensation expense related to the restricted shares is recognized over the vesting period of each grant based on the fair value of the shares as of the date of grant. The fair value of each grant of restricted shares is determined based on the trading price of the Company’s common stock on the date of such grant, and this amount will be charged to expense over the vesting term of the grant. Forfeitures are recognized as reversals of compensation expense on the date of forfeiture.

The summary of the 2019 and 2020 restricted share award activity presented below represents the maximum number of shares issued to employees that could be vested:


		Weighted Average
		Grant Date
Restricted share awards	Number of Shares	Fair Value
Non-vested at April 30, 2018	34,750	$	6.35
Granted during 2019	29,200		7.05
Vested during 2019	(21,283)		6.25
Forfeited during 2019	—		—
Non-vested at April 30, 2019	42,667		6.87

Granted during 2020	9,000		6.35
Vested during 2020	(14,833)		6.59
Forfeited during 2020	(4,000)		6.76
Non-vested at April 30, 2020	32,834	$	6.86

For 2020 and 2019, the Company recognized $113,000 and $151,000 of compensation expense related to shares of restricted common stock issued to employees under the equity plans. As of April 30, 2020, there was $49,000 of total unrecognized compensation expense related to shares of common stock issued to employees under the equity plans, which will be recognized over the weighted-average remaining vesting period of one year.

On the last trading day of calendar year 2018, each non-employee member of the Company’s Board of Directors was issued the number of deferred common share units of the Company under the 2016 Equity Plan equal to $20,000 divided by the closing price per share of Common Stock reported on the New York Stock Exchange on such date. Based on the closing price per share of $5.95 on December 31, 2018, the Company issued a total of 13,444 deferred common share units to members of the Company’s Board of Directors.

On the last trading day of calendar year 2019, each non-employee member of the Company’s Board of Directors was issued the number of deferred common share units of the Company under the 2016 Equity Plan equal to $25,000 divided by the closing price per share of Common Stock reported on the New York Stock Exchange on such date. Based on the closing price per share of $5.98 on December 31, 2019, the Company issued a total of 16,720 deferred common share units to members of the Company’s Board of Directors.

Each deferred common share unit represents the right to receive one share of Common Stock within 30 days after the first day of the month to follow such director’s termination of service as a director of the Company. Director compensation expense is recognized for the annual grant of deferred common share units ratably over the director’s service in office during the calendar year. The total non-cash director fee compensation related to the issued deferred common share units was $100,000 and $80,000 for 2020 and 2019. At April 30, 2020 and 2019, there was $33,000 and $27,000 of accrued compensation expense related to the deferred stock units expected to be issued in December of the following fiscal year.

Year Ended April 30,

Pretax accumulated comprehensive loss