Employee Benefits |
(12) Employee Benefits
We sponsor
a pretax savings and profit sharing plan (the “401(k) Plan”) qualified under Section 401(k) of the Internal Revenue
Code. Under the 401(k) Plan, eligible employees are able to contribute up to 15% of their compensation (subject to stricter limitation
in the case of highly compensated employees). We may, at our discretion, match 100% of employees’ contributions up to $1,500
per employee per calendar year. Our contributions to the 401(k) Plan were $838,000, $642,000 and $471,000, respectively, for the
year ended December 31, 2015, 2014 and 2013.
We also sponsor
a defined benefit plan, the MFN Financial Corporation Pension Plan (the “Plan”). The Plan benefits were frozen on
June 30, 2001.
The following
tables represents a reconciliation of the change in the plan’s benefit obligations, fair value of plan assets, and funded
status at December 31, 2015 and 2014:
| |
December
31, | |
| |
2015 | | |
2014 | |
| |
(In thousands) | |
Change in Projected Benefit Obligation | |
| | | |
| | |
Projected benefit obligation, beginning of year | |
$ | 22,559 | | |
$ | 18,841 | |
Service cost | |
| – | | |
| – | |
Interest cost | |
| 843 | | |
| 888 | |
Assumption changes | |
| (485 | ) | |
| 3,570 | |
Actuarial (gain) loss | |
| (14 | ) | |
| 211 | |
Settlements | |
| – | | |
| – | |
Benefits paid | |
| (1,518 | ) | |
| (951 | ) |
Projected benefit obligation, end of year | |
$ | 21,385 | | |
$ | 22,559 | |
| |
| | | |
| | |
Change in Plan Assets | |
| | | |
| | |
Fair value of plan assets, beginning of year | |
$ | 19,848 | | |
$ | 21,664 | |
Return on assets | |
| (1,818 | ) | |
| (1,009 | ) |
Employer contribution | |
| – | | |
| 237 | |
Expenses | |
| (138 | ) | |
| (93 | ) |
Settlements | |
| – | | |
| – | |
Benefits paid | |
| (1,518 | ) | |
| (951 | ) |
Fair value of plan assets, end of year | |
$ | 16,374 | | |
$ | 19,848 | |
| |
| | | |
| | |
Funded Status at end of
year | |
$ | (5,011 | ) | |
$ | (2,711 | ) |
Additional Information
Weighted average
assumptions used to determine benefit obligations and cost at December 31, 2015 and 2014 were as follows:
|
|
| December,
31 | |
|
|
| 2015 | | |
| 2014 | |
Weighted average assumptions used to determine
benefit obligations |
|
| | | |
| | |
Discount rate |
|
| 4.20% | | |
| 3.80% | |
|
|
| | | |
| | |
Weighted average assumptions used to determine
net periodic benefit cost |
|
| | | |
| | |
Discount rate |
|
| 3.80% | | |
| 4.75% | |
Expected return on plan assets |
|
| 7.75% | | |
| 8.00% | |
Our overall
expected long-term rate of return on assets is 7.75% per annum as of December 31, 2015. The expected long-term rate of return
is based on the weighted average of historical returns on individual asset categories, which are described in more detail below.
| |
December
31, | |
| |
2015 | | |
2014 | | |
2013 | |
| |
(In thousands) | |
Amounts recognized on Consolidated Balance Sheet | |
| | | |
| | | |
| | |
Other assets | |
$ | – | | |
$ | – | | |
$ | 2,823 | |
Other liabilities | |
| (5,011 | ) | |
| (2,711 | ) | |
| – | |
Net amount recognized | |
$ | (5,011 | ) | |
$ | (2,711 | ) | |
$ | 2,823 | |
| |
| | | |
| | | |
| | |
Amounts recognized in accumulated other comprehensive
loss consists of: | |
| | | |
| | | |
| | |
Net loss | |
$ | 10,592 | | |
$ | 7,977 | | |
$ | 1,367 | |
Unrecognized transition asset | |
| – | | |
| – | | |
| – | |
Net amount recognized | |
$ | 10,592 | | |
$ | 7,977 | | |
$ | 1,367 | |
| |
| | | |
| | | |
| | |
Components of net periodic benefit cost | |
| | | |
| | | |
| | |
Interest cost | |
$ | 843 | | |
$ | 888 | | |
$ | 823 | |
Expected return on assets | |
| (1,508 | ) | |
| (1,727 | ) | |
| (1,335 | ) |
Amortization of transition asset | |
| – | | |
| – | | |
| – | |
Amortization of net loss | |
| 349 | | |
| – | | |
| 484 | |
Net periodic benefit cost | |
| (316 | ) | |
| (839 | ) | |
| (28 | ) |
Settlement (gain)/loss | |
| – | | |
| – | | |
| – | |
Total | |
$ | (316 | ) | |
$ | (839 | ) | |
$ | (28 | ) |
| |
| | | |
| | | |
| | |
Benefit Obligation Recognized in Other Comprehensive
Loss (Income) | |
| | | |
| | | |
| | |
Net loss (gain) | |
$ | 2,615 | | |
$ | 6,610 | | |
$ | (7,586 | ) |
Prior service cost (credit) | |
| – | | |
| – | | |
| – | |
Amortization of prior service cost | |
| – | | |
| – | | |
| – | |
Net amount recognized
in other comprehensive loss (income) | |
$ | 2,615 | | |
$ | 6,610 | | |
$ | (7,586 | ) |
The estimated
net loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2016 is $553,000.
The weighted
average asset allocation of our pension benefits at December 31, 2015 and 2014 were as follows:
| |
December
31, | |
| |
2015 | | |
2014 | |
Weighted Average Asset Allocation at Year-End | |
| |
Asset Category | |
| | | |
| | |
Equity securities | |
| 84% | | |
| 84% | |
Debt securities | |
| 16% | | |
| 15% | |
Cash and cash equivalents | |
| 0% | | |
| 1% | |
Total | |
| 100% | | |
| 100% | |
Our investment
policies and strategies for the pension benefits plan utilize a target allocation of 75% equity securities and 25% fixed income
securities (excluding Company stock). Our investment goals are to maximize returns subject to specific risk management policies.
We address risk management and diversification by the use of a professional investment advisor and several sub-advisors which
invest in domestic and international equity securities and domestic fixed income securities. Each sub-advisor focuses its investments
within a specific sector of the equity or fixed income market. For the sub-advisors focused on the equity markets, the sectors
are differentiated by the market capitalization, the relative valuation and the location of the underlying issuer. For the sub-advisors
focused on the fixed income markets, the sectors are differentiated by the credit quality and the maturity of the underlying fixed
income investment. The investments made by the sub-advisors are readily marketable and can be sold to fund benefit payment obligations
as they become payable.
| Cash
Flows |
| |
| |
| |
| Estimated
Future Benefit Payments (In thousands) |
| |
| 2016 |
$ | 766 |
| 2017 |
| 804 |
| 2018 |
| 840 |
| 2019 |
| 884 |
| 2020 |
| 930 |
| Years 2021 - 2025 |
| 5,289 |
| |
| |
| Anticipated Contributions
in 2016 |
$ | – |
The
fair value of plan assets at December 31, 2015 and 2014, by asset category, is as follows:
| |
December 31, 2015 | |
| |
Level
1 (1) | | |
Level
2 (2) | | |
Level
3 (3) | | |
Total | |
Investment Name: | |
(in thousands) | |
Company Common Stock | |
$ | 4,643 | | |
$ | – | | |
$ | – | | |
$ | 4,643 | |
Large Cap Value | |
| – | | |
| 2,061 | | |
| – | | |
| 2,061 | |
Mid Cap Index | |
| – | | |
| 578 | | |
| – | | |
| 578 | |
Small Cap Growth | |
| – | | |
| 552 | | |
| – | | |
| 552 | |
Small Cap Value | |
| – | | |
| 573 | | |
| – | | |
| 573 | |
Focus Value | |
| – | | |
| 571 | | |
| – | | |
| 571 | |
Growth | |
| – | | |
| 2,215 | | |
| – | | |
| 2,215 | |
International Growth | |
| – | | |
| 2,475 | | |
| – | | |
| 2,475 | |
Core Bond | |
| – | | |
| 1,833 | | |
| – | | |
| 1,833 | |
High Yield | |
| – | | |
| 354 | | |
| – | | |
| 354 | |
Inflation Protected Bond | |
| – | | |
| 482 | | |
| – | | |
| 482 | |
Money Market | |
| – | | |
| 37 | | |
| – | | |
| 37 | |
Total | |
$ | 4,643 | | |
$ | 11,731 | | |
$ | – | | |
$ | 16,374 | |
| |
December 31, 2014 | |
| |
Level
1 (1) | | |
Level
2 (2) | | |
Level
3 (3) | | |
Total | |
Investment Name: | |
(in thousands) | |
Company Common Stock | |
$ | 6,542 | | |
$ | – | | |
$ | – | | |
$ | 6,542 | |
Large Cap Value | |
| – | | |
| 2,378 | | |
| – | | |
| 2,378 | |
Mid Cap Index | |
| – | | |
| 682 | | |
| – | | |
| 682 | |
Small Cap Growth | |
| – | | |
| 691 | | |
| – | | |
| 691 | |
Small Cap Value | |
| – | | |
| 673 | | |
| – | | |
| 673 | |
Focus Value | |
| – | | |
| 700 | | |
| – | | |
| 700 | |
Growth | |
| – | | |
| 2,383 | | |
| – | | |
| 2,383 | |
International Growth | |
| – | | |
| 2,649 | | |
| – | | |
| 2,649 | |
Core Bond | |
| – | | |
| 1,969 | | |
| – | | |
| 1,969 | |
High Yield | |
| – | | |
| 382 | | |
| – | | |
| 382 | |
Inflation Protected Bond | |
| – | | |
| 518 | | |
| – | | |
| 518 | |
Money Market | |
| – | | |
| 281 | | |
| – | | |
| 281 | |
Total | |
$ | 6,542 | | |
$ | 13,306 | | |
$ | – | | |
$ | 19,848 | |
________________________
| (1) | Company common stock
is classified as level 1 and valued using quoted prices in active markets for identical
assets. |
| (2) | All other plan assets
in stock, bond and money market funds are classified as level 2 and valued using significant
observable inputs. |
| (3) | There are no plan assets
classified as level 3 in the fair value hierarchy as a result of having significant unobservable
inputs. |
|