15. 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 was no service cost for the years ended December 31, 2019 and 2018. In 2009, the compensation increments were frozen, and accordingly, no additional benefits are being accrued under the plan. For 2019 and 2018, 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 $4.1 million at December 31, 2019.

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, 2019 and 2018, the Company’s pension plan weighted-average asset allocations by asset category are as follows:

	2019	2018
Equity and index funds	69.3%	64.7%
Fixed income funds	30.7	35.3
	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, 2019 and 2018:

In thousands	2019		2018
Level 1:
Equity and index funds	$	7,028	$	5,593
Fixed income funds		3,120		3,054
Total Level 1		10,148		8,647
Level 2		-		-
Level 3		-		-
Total pension plan assets	$	10,148	$	8,647

The funded status of the plan as of December 31, 2019 and 2018 is as follows:

In thousands	2019		2018
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	12,965	$	14,320
Interest cost		501		455
Actuarial loss (gain)		1,565		(908)
Benefits paid		(773)		(902)
Projected benefit obligation at end of year		14,258		12,965

Change in plan assets:
Fair value of plan assets at beginning of year		8,647		10,130
Actual return on plan assets		1,645		(1,002)
Company contributions		629		421
Benefits paid		(773)		(902)
Fair value of plan assets at end of year		10,148		8,647

Funded status (underfunded)	$	(4,110)	$	(4,318)

Amounts recognized in other accumulated comprehensive loss:
Net actuarial loss	$	8,296	$	7,954
Weighted average assumptions as of December 31:
Discount rate:
Components of cost		4.30%		3.65%
Benefit obligations		3.20%		4.30%
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 2020, the Company expects to amortize $281,000 of actuarial losses to pension expense. The accumulated benefit obligation at December 31, 2019 and 2018 was $14.3 million and $13.0 million, respectively. The minimum required contribution in 2020 is expected to be $641,000, which is included in Accrued liabilities in the Consolidated Balance Sheets. The long-term pension liability is $3.5 million and is included in Deferred pension liability and other in the Consolidated Balance Sheets.

In 2019, we made the $629,000 of minimum required contributions to the plan, which includes the balance of the 2018 minimum required contributions. Subsequent to December 31, 2019, we made an $85,000 contribution to the plan. At this time, the Company is expecting to make its minimum required $556,000 of contributions remaining for 2020; 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	2020		2021		2022		2023		2024
	$	720	$	1,229	$	731	$	865	$	956

The following table presents the components of the net periodic pension cost for the years ended December 31, 2019 and 2018:

In thousands	2019		2018
Interest cost	$	501	$	455
Expected return on plan assets		(682)		(787)
Amortization of net actuarial loss		264		229
Net periodic pension cost (benefit)	$	83	$	(103)

The following table presents the change in unrecognized pension costs recorded in other comprehensive loss as of December 31, 2019 and 2018:

In thousands	2019		2018
Balance at beginning of year	$	7,954	$	7,301
Net actuarial loss		606		882
Recognized loss		(264)		(229)
Balance at end of year	$	8,296	$	7,954

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 was settled in November 2019. The Company does not offer any post-retirement benefits other than the pension and supplemental retirement benefits described herein.