Employee Benefit Plans

12 Months Ended

Dec. 31, 2011

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plans

NOTE L – EMPLOYEE BENEFIT PLANS

The following summarizes the Corporation’s expense under its retirement plans for the years ended December 31:

	2011		2010		2009
	(in thousands)
Fulton Financial Corporation 401(k) Retirement Plan	$	11,271	$	11,378	$	11,118
Pension Plan	413		742		1,674
	$	11,684	$	12,120	$	12,792

Fulton Financial Corporation 401(k) Retirement Plan – A defined contribution plan that includes two contribution features:

• Employer Profit Sharing – elective contributions based on a formula providing for an amount not to exceed 5% of each eligible employee’s covered compensation. During an eligible employee’s first five years of employment, employer contributions vest over a five-year graded vesting schedule. Employees hired after July 1, 2007 are not eligible for this contribution.

• 401(k) Contributions – eligible employees may defer a portion of their pre-tax covered compensation on an annual basis, with employer matches of up to 5% of employee contributions. Employee and employer contributions under these features are 100% vested.

Defined Benefit Pension Plan – Contributions to the Corporation’s defined benefit pension plan (Pension Plan) are actuarially determined and funded annually, if necessary. Effective January 1, 2008, the Pension Plan was curtailed.

The Corporation recognizes the funded status of its Pension Plan and postretirement benefits plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income. See the heading “Postretirement Benefits” below for a description of the Corporation’s postretirement benefits plan.

Pension Plan

The net periodic pension cost for the Pension Plan, as determined by consulting actuaries, consisted of the following components for the years ended December 31:

	2011			2010			2009
	(in thousands)
Service cost (1)	$	60		$	104		$	153
Interest cost	3,412			3,367			3,282
Expected return on assets	(3,348		)	(3,206		)	(2,809		)
Net amortization and deferral	289			477			1,048
Net periodic pension cost	$	413		$	742		$	1,674

(1) Pension plan service cost for all years presented was related to administrative costs associated with the plan and not due to the accrual of additional participant benefits.

The following table summarizes the changes in the projected benefit obligation and fair value of plan assets for the plan year ended December 31:

	2011			2010
	(in thousands)
Projected benefit obligation, beginning of year	$	63,460		$	61,997
Service cost	60			104
Interest cost	3,412			3,367
Benefit payments	(2,309		)	(2,490		)
Change due to change in assumptions	12,652			112
Experience (gain) loss	(220		)	370
Projected benefit obligation, end of year	$	77,055		$	63,460
Fair value of plan assets, beginning of year	$	57,011		$	54,597
Actual return on assets	400			4,904
Benefit payments	(2,309		)	(2,490		)
Fair value of plan assets, end of year	$	55,102		$	57,011

The funded status of the Pension Plan, included in other liabilities on the consolidated balance sheets as of December 31, 2011 and 2010 was as follows:

	2011			2010
	(in thousands)
Projected benefit obligation (1)	$	(77,055	)	$	(63,460	)
Fair value of plan assets	55,102			57,011
Funded status	$	(21,953	)	$	(6,449	)

(1) As a result of the Pension Plan’s curtailment, the accumulated benefit obligation is equal to the projected benefit obligation as of December 31, 2011 and 2010.

The following table summarizes the changes in the unrecognized net loss recognized as a component of accumulated other comprehensive loss:

	Unrecognized Net Loss
	Gross of tax			Net of tax
	(in thousands)
Balance as of January 1, 2010	$	11,116		$	7,225
Recognized as a component of 2010 periodic pension cost	(477		)	(310		)
Unrecognized gains arising in 2010	(1,214		)	(789		)
Balance as of December 31, 2010	9,425			6,126
Recognized as a component of 2011 periodic pension cost	(289		)	(188		)
Unrecognized losses arising in 2011	15,377			9,995
Balance as of December 31, 2011	$	24,513		$	15,933

The total amount of unrecognized net loss that will be amortized as a component of net periodic pension cost in 2012 is expected to be $1.7 million.

The following rates were used to calculate net periodic pension cost and the present value of benefit obligations as of December 31:

	2011		2010		2009
Discount rate-projected benefit obligation	4.25	%	5.50	%	5.50	%
Expected long-term rate of return on plan assets	6.00	%	6.00	%	6.00	%

As of December 31, 2011 and December 31, 2010, the discount rate used to calculate the present value of benefit obligations was determined using the Citigroup Average Life discount rate table, rounded to the nearest 0.25%. As of December 31, 2009, the discount rate used to calculate the present value of benefit obligations was determined using published long-term AA corporate bond rates as of the measurement date, rounded to the nearest 0.25%. The change to the Citigroup Average Life discount rate table in 2010 resulted in a pension discount yield curve that more closely matched the Pension Plan’s expected benefit payments.

The 6.00% long-term rate of return on plan assets used to calculate the net periodic pension cost was based on historical returns, adjusted for expectations of long-term asset returns based on the December 31, 2011 weighted average asset allocations. The expected long-term return is considered to be appropriate based on the asset mix and the historical returns realized.

The following table presents a summary of the fair values of the Pension Plan’s assets as of December 31:

	2011				2010
	Estimated Fair Value		% of Total Assets		Estimated Fair Value		% of Total Assets
	(dollars in thousands)
Equity mutual funds	$	9,706			$	14,362
Equity common trust funds	6,002				15,365
Equity securities	15,708		28.5	%	29,727		52.1	%
Cash and money market funds	8,115				2,482
Fixed income mutual funds	7,983				11,668
Corporate debt securities	6,813				6,194
U.S. Government agency securities	5,716				6,940
Fixed income securities and cash	28,627		52.0	%	27,284		47.9	%
Other alternative investment mutual funds	10,767		19.5	%	—		—	%
	$	55,102	100.0	%	$	57,011	100.0	%

Investment allocation decisions are made by a retirement plan committee, which meets periodically. During 2011, the investment allocation strategy was revised to reduce risk and to match certain benefit obligations with maturities of fixed income securities.

Pension Plan assets are invested with a conservative growth objective, with target asset allocations of approximately 25% in equities, 55% in fixed income securities and cash and 20% in alternative investments. Alternative investments may include managed futures, commodities, real estate investment trusts, master limited partnerships, long-short strategies with traditional stocks and bonds. All alternative investments are in the form of mutual funds, not individual contracts, to enable daily liquidity.

Prior to 2011, Pension Plan assets were invested with a balanced growth objective, with target asset allocations of approximately 55% for equity securities and approximately 45% percent for fixed income securities and cash.

The fair values for all assets held by the Pension Plan, excluding equity common trust funds, are based on quoted prices for identical instruments and would be categorized as Level 1 assets under FASB ASC Topic 810. Equity common trust funds would be categorized as Level 2 assets under FASB ASC Topic 810.

Estimated future benefit payments are as follows (in thousands):

Year
2012	$	2,341
2013	2,476
2014	2,602
2015	2,844
2016	3,090
2017 – 2021	19,757
	$	33,110

Postretirement Benefits

The Corporation currently provides medical benefits and life insurance benefits under a postretirement benefits plan (Postretirement Plan) to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998. Certain full-time employees may become eligible for these discretionary benefits if they reach retirement age while working for the Corporation. Early retirees receive no benefits for the time between their retirement date to the date they attain age 65. Benefits are based on a graduated scale for years of service after attaining the age of 40.

The components of the expense for postretirement benefits other than pensions are as follows:

	2011			2010			2009
	(in thousands)
Service cost	$	201		$	190		$	211
Interest cost	428			441			485
Expected return on plan assets	(3		)	(3		)	(4		)
Net amortization and deferral	(363		)	(363		)	(325		)
Net postretirement benefit cost	$	263		$	265		$	367

The following table summarizes the changes in the accumulated postretirement benefit obligation and fair value of plan assets for the years ended December 31:

	2011			2010
	(in thousands)
Accumulated postretirement benefit obligation, beginning of year	$	8,345		$	9,132
Service cost	201			190
Interest cost	428			441
Benefit payments	(363		)	(406		)
Experience loss	(305		)	(796		)
Change due to change in assumptions	1,345			(216		)
Accumulated postretirement benefit obligation, end of year	$	9,651		$	8,345
Fair value of plan assets, beginning of year	$	105		$	110
Employer contributions	333			401
Actual return on assets	—			—
Benefit payments	(363		)	(406		)
Fair value of plan assets, end of year	$	75		$	105

The funded status of the Postretirement Plan, included in other liabilities on the consolidated balance sheets as of December 31, 2011 and 2010 was as follows:

	2011			2010
	(in thousands)
Accumulated postretirement benefit obligation	$	(9,651	)	$	(8,345	)
Fair value of plan assets	75			105
Funded status	$	(9,576	)	$	(8,240	)

The following table summarizes the changes in items recognized as a component of accumulated other comprehensive loss:

	Gross of tax
	Unrecognized Prior Service Cost			Unrecognized Net Loss (Gain)			Total			Net of tax
	(in thousands)
Balance as of January 1, 2010	$	(2,936	)	$	963		$	(1,973	)	$	(1,283	)
Recognized as a component of 2010 postretirement benefit cost	363			—			363			236
Unrecognized gains arising in 2010	—			(1,023		)	(1,023		)	(665		)
Balance as of December 31, 2010	(2,573		)	(60		)	(2,633		)	(1,712		)
Recognized as a component of 2011 postretirement benefit cost	363			—			363			236
Unrecognized losses arising in 2011	—			1,042			1,042			677
Balance as of December 31, 2011	$	(2,210	)	$	982		$	(1,228	)	$	(799	)

The total amount of unrecognized prior service cost and unrecognized net loss that will be recognized as a reduction to net periodic postretirement cost in 2012 is expected to be $363,000 and $2,000, respectively.

For measuring the postretirement benefit obligation, the annual increase in the per capita cost of health care benefits was assumed to be 8% in year one, declining to an ultimate rate of 5.5% by year five. This health care cost trend rate has a significant impact on the amounts reported. Assuming a 1.0% increase in the health care cost trend rate above the assumed annual increase, the accumulated postretirement benefit obligation would increase by approximately $1.2 million and the current period expense would increase by approximately $91,000. Conversely, a 1.0% decrease in the health care cost trend rate would decrease the accumulated postretirement benefit obligation by approximately $1.0 million and the current period expense by approximately $74,000.

The following rates were used to calculate net periodic postretirement benefit cost and the present value of benefit obligations as of December 31:

	2011		2010		2009
Discount rate-projected benefit obligation	4.25	%	5.50	%	5.50	%
Expected long-term rate of return on plan assets	3.00	%	3.00	%	3.00	%

As of December 31, 2011 and December 31, 2010, the discount rate used to calculate the accumulated postretirement benefit obligation was determined using the Citigroup Average Life discount rate table, rounded to the nearest 0.25%. As of December 31, 2009, the discount rate used in determining the accumulated postretirement benefit obligation was determined using published long-term AA corporate bond rates as of the measurement date, rounded to the nearest 0.25%. The change to the Citigroup Average Life discount rate table in 2010 resulted in a postretirement discount yield curve that more closely matched the Postretirement Plan’s expected benefit payments.

Estimated future benefit payments are as follows (in thousands):

Year
2012	$	483
2013	483
2014	478
2015	498
2016	517
2017 – 2021	2,772
	$	5,231