14. Pension Plan

All eligible salaried employees of Trans-Lux Corporation and certain of its subsidiaries are covered by a non-contributory defined benefit pension plan. Pension benefits vest after five years of service and are based on years of service and final average salary. The Company’s general funding policy is to contribute at least the required minimum amounts sufficient to satisfy regulatory funding standards, but not more than the maximum tax-deductible amount. The benefit service under the pension plan had been frozen since 2003 and, accordingly, there is no service cost for the years ended December 31, 2018 and 2017. In 2009, the compensation increments were frozen, and accordingly, no additional benefits are being accrued under the plan. For 2018 and 2017, the accrued benefit obligation of the plan exceeded the fair value of plan assets, due primarily to the plan’s investment performance and updates to actuarial longevity tables. The Company’s obligations under its pension plan exceeded plan assets by $4.3 million at December 31, 2018.

In accordance with the adoption of ASU 2017-07, the Company has retrospectively revised the presentation of the non-service components of periodic pension benefit to Pension benefit in the Consolidated Statements of Operations. The following table presents a summary of the effect for the period ended December 31, 2017:

	As reported		As revised		Effect of change
In thousands	As reported		As revised		Effect of change
General and administrative expenses	$	6,578	$	6,613	$	35
Operating loss		(2,846)		(2,881)		(35)
Pension benefit		-		(35)		(35)
Loss before income taxes		(2,849)		(2,849)		-

The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The portfolio contains a diversified blend of equity and fixed income investments. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.

At December 31, 2018 and 2017, the Company’s pension plan weighted-average asset allocations by asset category are as follows:

	2018		2017
Equity and index funds	64.7	%	72.0	%
Fixed income funds	35.3		28.0
	100.0	%	100.0	%

The pension plan asset information included below is presented at fair value as established by ASC 820.

The following table presents the pension plan assets by level within the fair value hierarchy as of December 31, 2018 and 2017:

In thousands	2018		2017
Level 1:
Equity and index funds	$	5,593	$	7,289
Fixed income funds		3,054		2,841
Total Level 1		8,647		10,130
Level 2		-		-
Level 3		-		-
Total pension plan assets	$	8,647	$	10,130

The funded status of the plan as of December 31, 2018 and 2017 is as follows:

In thousands	2018		2017
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	14,320	$	13,408
Interest cost		455		466
Actuarial (gain) loss		(908)		1,067
Benefits paid		(902)		(621)
Projected benefit obligation at end of year		12,965		14,320

Change in plan assets:
Fair value of plan assets at beginning of year		10,130		8,984
Actual return on plan assets		(1,002)		1,469
Company contributions		421		298
Benefits paid		(902)		(621)
Fair value of plan assets at end of year		8,647		10,130

Funded status (underfunded)	$	(4,318)	$	(4,190)

Amounts recognized in other accumulated comprehensive loss:
Net actuarial loss	$	7,954	$	7,301
Weighted average assumptions as of December 31:
Discount rate:
Components of cost		3.65%		4.17%
Benefit obligations		4.30%		3.66%
Expected return on plan assets		8.00%		8.00%
Rate of compensation increase		N/A		N/A

The Company determines the long-term rate of return for plan assets by studying historical markets and the long-term relationships between equity securities and fixed income securities, with the widely-accepted capital market principal that assets with higher volatility generate higher returns over the long run. The 8.0% expected long-term rate of return on plan assets is determined based on long-term historical performance of plan assets, current asset allocation and projected long-term rates of return.

In 2019, the Company expects to amortize $262,000 of actuarial losses to pension expense. The accumulated benefit obligation at December 31, 2018 and 2017 was $13.0 million and $14.3 million, respectively. The minimum required contribution in 2019 is expected to be $623,000, which is included in Accrued liabilities in the Consolidated Balance Sheets. The long-term pension liability is $3.7 million and is included in Deferred pension liability and other in the Consolidated Balance Sheets. In March 2010, 2011 and 2013, the Company submitted to the Internal Revenue Service (“IRS”) requests for waivers of the minimum funding standard for its defined benefit pension plan for the 2009, 2010 and 2012 plan years. The waiver requests were submitted as a result of the economic climate and the business hardship that the Company was experiencing. The waivers for the 2009, 2010 and 2012 plan years were approved and granted subject to certain conditions and have deferred payment of $285,000, $559,000 and $669,000 of the minimum funding standard for the 2009, 2010 and 2012 plan years, respectively. As of December 31, 2017, the Company has fully repaid the amounts deferred for each of these waivers. In 2018, we made $421,000 of the $592,000 of minimum required contributions to the plan. Subsequent to December 31, 2018, we made a $391,000 contribution to the plan. At this time, the Company is expecting to make its minimum required $623,000 of contributions remaining for 2019, which includes the balance of the 2018 minimum required contributions; however, there is no assurance that the Company will be able to make any or all such remaining payments. If we are unable to fulfill our related obligations, the implementation of any such enforcement remedies would have a material adverse impact on our financial condition, results of operations, and liquidity.

The following estimated benefit payments are expected to be paid by the Company’s pension plan in the next 5 years:

In thousands	2019		2020		2021		2022		2023
	$	924	$	703	$	1,165	$	705	$	845

The following table presents the components of the net periodic pension cost for the years ended December 31, 2018 and 2017:

In thousands	2018		2017
Interest cost	$	455	$	466
Expected return on plan assets		(787)		(716)
Amortization of net actuarial loss		229		219
Net periodic pension cost (benefit)	$	(103)	$	(31)

The following table presents the change in unrecognized pension costs recorded in other comprehensive loss as of December 31, 2018 and 2017:

In thousands	2018		2017
Balance at beginning of year	$	7,301	$	7,206
Net actuarial loss		882		314
Recognized loss		(229)		(219)
Balance at end of year	$	7,954	$	7,301

In addition, the Company provided unfunded supplemental retirement benefits for the retired, former Chief Executive Officer. During 2009 the Company accrued $0.5 million for such benefits, which has not yet been paid, which is included in Accrued liabilities in the Consolidated Balance Sheets. The Company does not offer any post-retirement benefits other than the pension and supplemental retirement benefits described herein.