15.

Employee Benefit Plans

Employee Pension Benefits. Our ESI Pension Plan, a non-contributory defined benefit pension plan, commonly referred to as a cash balance plan, covers substantially all of our employees who began their employment with us prior to June 2, 2003. This plan provides benefits based on an employee’s annual earnings times an established percentage of pay determined by the employee’s age and years of benefit service. Effective June 2, 2003, we closed participation in the ESI Pension Plan to all new employees. Employees who begin their employment with us on or after June 2, 2003 do not participate in the ESI Pension Plan.

Our ESI Excess Pension Plan, a nonqualified, unfunded retirement plan, covers a select group of our management. The purpose of the ESI Excess Pension Plan is to restore benefits earned, but not available, to eligible employees under the ESI Pension Plan due to federal statutory limitations on the amount of benefits that can be paid and compensation that may be recognized under a tax-qualified retirement plan.

The benefit accruals under the ESI Pension Plan and the ESI Excess Pension Plan for all participants in those plans were frozen effective March 31, 2006, such that no further benefits accrue under those plans after March 31, 2006. Participants in those plans, however, continue to be credited with vesting service and interest according to the terms of the ESI Pension Plan and the ESI Excess Pension Plan.

The information presented below is based on an actuarial valuation date as of December 31 for 2013 and 2012.

The following table sets forth the change in projected benefit obligation for the periods indicated:


	Year Ended December 31,
	2013			2012
Projected benefit obligation at beginning of year	$	57,246		$	54,485
Service cost		0			0
Actuarial (gain) loss		(5,345	)		3,180
Interest cost		1,756			2,062
Benefits paid		(4,245	)		(2,481	)
Plan amendments		0			0

Projected benefit obligation at end of year	$	49,412		$	57,246
Fair value of plan assets at end of year		76,710			64,390

Funded status at end of year	$	27,298		$	7,144

Our accumulated benefit obligation was $49,412 at December 31, 2013 and $57,246 at December 31, 2012.

The following table sets forth the funded status of our defined benefit plans that was recognized on our Consolidated Balance Sheets as of the dates indicated:


	As of December 31,
	2013			2012
Non-current assets	$	27,584		$	7,459
Non-current (liabilities)		(286	)		(315	)

Total	$	27,298		$	7,144

The weighted-average assumptions used to determine benefit obligations as of December 31, 2013 and 2012 are as follows:


	2013			2012
Discount rate		4.25	%		3.25	%
Rate of compensation increase		N/A			N/A

The following table sets forth the change in the fair value of plan assets for the periods indicated:


	Year Ended December 31,
	2013			2012
Fair value of plan assets at beginning of year	$	64,390		$	58,839
Actual return on plan assets		16,565			8,032
Employer contributions		0			0
Benefits paid		(4,245	)		(2,481	)

Fair value of plan assets at end of year	$	76,710		$	64,390

The following tables set forth the fair value of total plan assets by major asset category as of the dates indicated:


	Fair Value Measurements as of December 31, 2013
Asset Category	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
Cash and cash equivalents	$	934	$	934	$	0	$	0
Fixed income securities ^(a)		12,596		12,596		0		0
Equity securities:
Domestic large cap		40,669		40,669		0		0
Mid cap value/growth ^(a)		12,610		12,610		0		0
Small cap value/growth ^(a)		7,163		7,163		0		0
Foreign equities		2,738		2,738		0		0

Total	$	76,710	$	76,710	$	0	$	0

^(a)	Mutual funds.


	Fair Value Measurements as of December 31, 2012
Asset Category	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
Cash and cash equivalents	$	1,078	$	1,078	$	0	$	0
Fixed income securities ^(a)		17,318		17,318		0		0
Equity securities:
Domestic large cap		29,594		29,594		0		0
Mid cap value/growth ^(a)		9,090		9,090		0		0
Small cap value/growth ^(a)		5,137		5,137		0		0
Foreign equities		2,173		2,173		0		0

Total	$	64,390	$	64,390	$	0	$	0

^(a)	Mutual funds.

We used quoted prices in active markets for identical assets as of the measurement dates to value our plan assets that were categorized as Level 1.

The following table sets forth the amounts in Accumulated other comprehensive loss on our Consolidated Balance Sheets that have not been recognized as components of net periodic pension benefit cost as of the dates indicated:.


	As of December 31,
	2013			2012
Net actuarial (loss)	($	546	)	($	20,191	)
Prior service credit		5,578			7,133

Total accumulated other comprehensive income (loss)	$	5,032		($	13,058	)

Income tax benefit (expense)		(1,886	)		5,128

Total accumulated other comprehensive income (loss), net of tax	$	3,146		($	7,930	)

The following table sets forth the changes in the components of Accumulated other comprehensive loss on our Consolidated Balance Sheet in the fiscal year ended December 31, 2013:


	Defined Benefit Pension Items
	Accumulated Other Comprehensive Income (Loss)			Income Tax Benefit (Expense)			Accumulated Other Comprehensive Income (Loss) Net of Income Tax
Balance at January 1, 2013	($	13,058	)	$	5,128		($	7,930	)
Net actuarial gain		17,566			(6,811	)		10,755
Settlement gain		42			(17	)		25
Amortization of:
Actuarial (gains)/losses		2,037			(790	)		1,247
Prior service costs/(credits)		(1,555	)		604			(951	)

Balance at December 31, 2013	$	5,032		($	1,886	)	$	3,146

The reclassification of prior service costs or credits, actuarial gains or losses and settlement gain from Accumulated other comprehensive loss are included in the computation of net periodic pension benefit cost (income). Net periodic pension benefit cost (income) was included in compensation expense in Cost of educational services and Student services and administrative expenses in our Consolidated Statements of Income in the fiscal year ended December 31, 2013.

The following table sets forth the components of net periodic pension benefit (income) in the periods indicated:


	Year Ended December 31,
	2013			2012			2011
Interest cost	$	1,756		$	2,062		$	2,405
Expected return on assets		(4,344	)		(4,231	)		(4,756	)
Recognized net actuarial loss		2,037			2,718			1,803
Amortization of prior service (credit) cost		(1,555	)		(1,555	)		(1,555	)
Settlement loss		42			792			1,204

Total net periodic pension benefit (income)	($	2,064	)	($	214	)	($	899	)

The benefit accruals under the ESI Pension Plan and ESI Excess Pension Plan were frozen effective March 31, 2006. As a result, no service cost has been included in the net periodic pension benefit income.

The following table sets forth the amounts related to changes in plan assets and projected benefit obligations that were recognized in other comprehensive (income) loss in the periods indicated:


	Year Ended December 31,
	2013			2012			2011
Net actuarial (gain) loss	($	17,566	)	($	621	)	$	9,504
Amortization of net actuarial loss		(2,037	)		(2,718	)		(1,803	)
Prior service cost (credit)		0			0			0
Amortization of prior service cost (credit)		1,555			1,555			1,555
Settlement		(42	)		(792	)		(1,204	)

Other comprehensive (income) loss	($	18,090	)	($	2,576	)	$	8,052

Total recognized in net periodic pension benefit (income) and other comprehensive (income) loss	($	20,154	)	($	2,790	)	$	7,153

The amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period for employees expected to receive benefits under the pension plans. The estimated net actuarial loss that is expected to be amortized from accumulated other comprehensive income and recognized in net periodic pension benefit cost for the year ended December 31, 2014 is $0 and the estimated prior service credit that is expected to be amortized from accumulated other comprehensive income and recognized in net periodic pension benefit cost for the year ended December 31, 2014 is $1,555.

The weighted-average assumptions used to determine net periodic pension benefit cost in the years ended December 31, 2013, 2012 and 2011 are as follows:


	2013			2012			2011
Discount rate		3.25	%		4.00	%		5.00	%
Expected long-term return on plan assets		7.00	%		7.50	%		8.00	%
Rate of compensation increase		N/A			N/A			N/A

The following table sets forth the benefit payments that we expect to pay from the pension plans in the periods indicated:


Year	Amount
Fiscal 2014	$	3,576
Fiscal 2015	$	3,464
Fiscal 2016	$	4,315
Fiscal 2017	$	4,896
Fiscal 2018	$	3,538
Fiscal 2019 – 2023	$	16,838

We invest plan assets based on a total return on investment approach, pursuant to which the plan assets include a diversified blend of equity and fixed income investments toward a goal of maximizing the long-term rate of return without assuming an unreasonable level of investment risk. We determine the level of risk based on an analysis of plan liabilities, the extent to which the value of the plan assets satisfies the plan liabilities and our financial condition. Our investment policy includes target allocations ranging from 30% to 70% for equity investments, 20% to 60% for fixed income investments and 0% to 50% for cash equivalents. Actual asset allocations may vary from the targeted allocations for various reasons, including market conditions and the timing of transactions. The equity portion of the plan assets represents growth and value stocks of small, medium and large companies. We measure and monitor the investment risk of the plan assets both on a quarterly basis and annually when we assess plan liabilities.

We use a building block approach to estimate the long-term rate of return on plan assets. This approach is based on the capital market principle that the greater the volatility, the greater the return over the long term. An analysis of the historical performance of equity and fixed income investments, together with current market factors such as the inflation and interest rates, are used to help us make the assumptions necessary to estimate a long-term rate of return on plan assets. Once this estimate is made, we review the portfolio of plan assets and make adjustments thereto that we believe are necessary to reflect a diversified blend of equity and fixed income investments that is capable of achieving the estimated long-term rate of return without assuming an unreasonable level of investment risk. We also compare the portfolio of plan assets to those of other pension plans to help us assess the suitability and appropriateness of the plan investments.

We determine our discount rate by performing a yield curve analysis based on a portfolio of high-quality fixed income investments with various maturities. Our expected future benefit payments are discounted to their present value at the appropriate yield curve rate to generate the overall discount rate for pension obligations.

In 2013 and 2012, we made no contributions to the ESI Excess Pension Plan or the ESI Pension Plan. We do not expect to make any contributions to either the ESI Pension Plan or the ESI Excess Pension Plan in 2014.

Retirement Savings Plan. Our ESI 401(k) Plan, a defined contribution plan, covers substantially all of our employees. All of our contributions under the ESI 401(k) Plan are in the form of cash to plan investment options directed by the participant.

On July 1, 2013, we changed the rate at which we made contributions to the ESI 401(k) Plan on behalf of our employees. Prior to July 1, 2013, we contributed 100% of the first 1% and 50% of the next 4% of an employee’s salary that the employee contributed to his or her ESI 401(k) Plan account. Beginning July 1, 2013, we contribute 50% of the first 6% of an employee’s salary that the employee contributes to his or her ESI 401(k) Plan account.

Our ESI Excess Savings Plan, a nonqualified, unfunded deferred compensation plan, covers a select group of our management. The plan provided for salary deferral of contributions that the participants were unable to make under the ESI 401(k) Plan and our contributions that could not be paid under the ESI 401(k) Plan due to federal statutory limits on the amount that an employee could contribute under a defined contribution plan. Effective for plan years beginning on and after January 1, 2008, we froze the ESI Excess Savings Plan, such that employees may no longer make salary deferrals and we will no longer make contributions under the ESI Excess Savings Plan. Amounts previously credited to an employee under the ESI Excess Savings Plan will, however, continue to accrue interest in accordance with the terms of the ESI Excess Savings Plan, until those amounts are distributed pursuant to the plan’s terms.

The costs of providing the benefits under the ESI 401(k) Plan and ESI Excess Savings Plan (including certain administrative costs of the plans) were:

•

$3,454 in the year ended December 31, 2013;

•

$4,597 in the year ended December 31, 2012; and

•

$5,308 in the year ended December 31, 2011.