(11) Employee Benefits

12 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

(11) Employee Benefits

(11) 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 the maximum allowed under the law. We may, at our discretion, match 100% of employees’ contributions up to $2,000 per employee per calendar year. Our matching contributions to the 401(k) Plan were $1.4 million, $1.6 million, and $1.5 respectively, for the years ended December 31, 2020, 2019 and 2018.

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, 2020 and 2019:

	December 31,
	2020			2019
	(In thousands)
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year	$	22,997		$	20,085
Service cost		–			–
Interest cost		693			808
Assumption changes		2,418			3,047
Actuarial (gain) loss		(89	)		141
Settlements		–			–
Benefits paid		(1,341	)		(1,084	)
Projected benefit obligation, end of year	$	24,678		$	22,997
Change in Plan Assets
Fair value of plan assets, beginning of year	$	15,910		$	14,368
Return on assets		2,775			3,017
Employer contribution		1,161			–
Expenses		(340	)		(391	)
Settlements		–			–
Benefits paid		(1,341	)		(1,084	)
Fair value of plan assets, end of year	$	18,165		$	15,910
Funded Status at end of year	$	(6,513	)	$	(7,087	)

Additional Information

Weighted average assumptions used to determine benefit obligations and cost at December 31, 2020 and 2019 were as follows:

	December, 31
	2020		2019
Weighted average assumptions used to determine benefit obligations
Discount rate		2.28%		3.07%
Weighted average assumptions used to determine net periodic benefit cost
Discount rate		3.07%		4.11%
Expected return on plan assets		7.25%		7.25%

Our overall expected long-term rate of return on assets is 7.25% per annum as of December 31, 2020. 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,
	2020			2019			2018
	(In thousands)
Amounts recognized on Consolidated Balance Sheet
Other assets	$	–		$	–		$	–
Other liabilities		(6,513	)		(7,087	)		(5,717	)
Net amount recognized	$	(6,513	)	$	(7,087	)	$	(5,717	)
Amounts recognized in accumulated other comprehensive loss consists of:
Net loss	$	13,297		$	13,092		$	11,896
Unrecognized transition asset		–			–			–
Net amount recognized	$	13,297		$	13,092		$	11,896
Components of net periodic benefit cost
Interest cost	$	693		$	808		$	775
Expected return on assets		(1,150	)		(1,012	)		(1,163	)
Amortization of transition asset		–			–			–
Amortization of net  loss		839			376			443
Net periodic benefit cost		382			172			55
Settlement (gain)/loss		–			–			–
Total	$	382		$	172		$	55
Benefit Obligation Recognized in Other Comprehensive Loss (Income)
Net loss (gain)	$	205		$	1,197		$	545
Prior service cost (credit)		–			–			–
Amortization of prior service cost		–			–			–
Net amount recognized in other comprehensive loss (income)	$	205		$	1,197		$	545

The estimated net loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2020 is $148,000.

The weighted average asset allocation of our pension benefits at December 31, 2020 and 2019 were as follows:

	December 31,
	2020		2019
Weighted Average Asset Allocation at Year-End
Asset Category
Equity securities		82%		82%
Debt securities		18%		18%
Cash and cash equivalents		0%		0%
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)
2021	$	896
2022		933
2023		957
2024		983
2025		1,026
Years 2026 - 2029		5,678
Anticipated Contributions in 2021	$	522

The fair value of plan assets at December 31, 2020 and 2019, by asset category, is as follows:

	December 31, 2020
	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Investment Name:	(in thousands)
Company Common Stock	$	3,811	$	–	$	–	$	3,811
Large Cap Value		–		2,523		–		2,523
Mid Cap Index		–		757		–		757
Small Cap Growth		–		765		–		765
Small Cap Value		–		785		–		785
Large Cap Blend		–		691		–		691
Growth		–		2,342		–		2,342
International Growth		–		3,003		–		3,003
Core Bond		–		1,809		–		1,809
High Yield		–		381		–		381
Inflation Protected Bond		–		485		–		485
Money Market		–		813		–		813
Total	$	3,811	$	14,354	$	–	$	18,165

	December 31, 2019
	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Investment Name:	(in thousands)
Company Common Stock	$	2,950	$	–	$	–	$	2,950
Large Cap Value		–		2,370		–		2,370
Mid Cap Index		–		658		–		658
Small Cap Growth		–		655		–		655
Small Cap Value		–		674		–		674
Large Cap Blend		–		683		–		683
Growth		–		2,342		–		2,342
International Growth		–		2,667		–		2,667
Core Bond		–		1,909		–		1,909
High Yield		–		386		–		386
Inflation Protected Bond		–		509		–		509
Money Market		–		107		–		107
Total	$	2,950	$	12,960	$	–	$	15,910

________________________

(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.