(11) Employee Benefits

12 Months Ended

Dec. 31, 2021

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 $1.3 million, $1.4 million, and $1.6 million respectively, for the years ended December 31, 2021, 2020 and 2019.

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, 2021 and 2020: 

	December 31,
	2021			2020
	(In thousands)
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year	$	24,678		$	22,997
Interest cost		553			693
Assumption changes		(1,074	)		2,418
Actuarial (gain) loss		(222	)		(89	)
Settlements		(865	)		–
Benefits paid		(790	)		(1,341	)
Projected benefit obligation, end of year	$	22,280		$	24,678
Change in Plan Assets
Fair value of plan assets, beginning of year	$	18,165		$	15,910
Return on assets		8,703			2,775
Employer contribution		1,124			1,161
Expenses		(239	)		(340	)
Settlements		(865	)		–
Benefits paid		(790	)		(1,341	)
Fair value of plan assets, end of year	$	26,098		$	18,165
Funded Status at end of year	$	3,818		$	(6,513	)

Additional Information

Weighted average assumptions used to determine benefit obligations and cost at December 31, 2021 and 2020 were as follows:

	December, 31
	2021		2020
Weighted average assumptions used to determine benefit obligations
Discount rate		2.65%		2.28%
Weighted average assumptions used to determine net periodic benefit cost
Discount rate		2.28%		3.07%
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, 2021. 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,
	2021			2020			2019
	(In thousands)
Amounts recognized on Consolidated Balance Sheet
Other assets	$	3,818		$	–		$	–
Other liabilities		–			(6,513	)		(7,087	)
Net amount recognized	$	3,818		$	(6,513	)	$	(7,087	)
Amounts recognized in accumulated other comprehensive loss consists of:
Net loss	$	3,794		$	13,297		$	13,092
Unrecognized transition asset		–			–			–
Net amount recognized	$	3,794		$	13,297		$	13,092
Components of net periodic benefit cost
Interest cost	$	553		$	693		$	808
Expected return on assets		(1,301	)		(1,150	)		(1,012	)
Amortization of transition asset		–			–			–
Amortization of net loss		896			839			376
Net periodic benefit cost		148			382			172
Settlement (gain)/loss		(865	)		–			–
Total	$	(717	)	$	382		$	172
Benefit Obligation Recognized in Other Comprehensive Loss (Income)
Net loss (gain)	$	(9,503	)	$	205		$	1,197
Prior service cost (credit)		–			–			–
Amortization of prior service cost		–			–			–
Net amount recognized in other comprehensive loss (income)	$	(9,503	)	$	205		$	1,197

The estimated net gain that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2022 is $1.2 million.

The weighted average asset allocation of our pension benefits at December 31, 2021 and 2020 were as follows:

	December 31,
	2021			2020
Weighted Average Asset Allocation at Year-End
Asset Category
Equity securities		78	%		82	%
Debt securities		22	%		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)
2022	$	904
2023		934
2024		957
2025		989
2026		1,034
Years 2027 - 2031		5,605
Anticipated Contributions in 2022	$	–

The fair value of plan assets at December 31, 2021 and 2020, by asset category, is as follows: 

	December 31, 2021
	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Investment Name:	(in thousands)
Company Common Stock	$	10,472	$	–	$	–	$	10,472
Large Cap Value		–		2,933		–		2,933
Mid Cap Index		–		836		–		836
Small Cap Growth		–		714		–		714
Small Cap Value		–		868		–		868
Large Cap Blend		–		859		–		859
Growth		–		2,915		–		2,915
International Growth		–		3,036		–		3,036
Core Bond		–		2,316		–		2,316
High Yield		–		473		–		473
Inflation Protected Bond		–		641		–		641
Money Market		–		35		–		35
Total	$	10,472	$	15,626	$	–	$	26,098

	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

________________________

(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.