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, 2020 and 2019. In 2009, the compensation increments were frozen, and accordingly, no additional benefits are being accrued under the plan. For 2020 and 2019, 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 $4.7 million at December 31, 2020.

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, 2020 and 2019, the Company’s pension plan weighted-average asset allocations by asset category are as follows:

	2020	2019
Equity and index funds	68.2%	69.3%
Fixed income funds	31.8	30.7
	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, 2020 and 2019:

In thousands	2020		2019
Level 1:
Equity and index funds	$	7,139	$	7,028
Fixed income funds		3,336		3,120
Total Level 1		10,475		10,148
Level 2		-		-
Level 3		-		-
Total pension plan assets	$	10,475	$	10,148

The funded status of the plan as of December 31, 2020 and 2019 is as follows:

In thousands	2020		2019
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	14,258	$	12,965
Interest cost		387		501
Actuarial loss		1,396		1,565
Benefits paid		(896)		(773)
Projected benefit obligation at end of year		15,145		14,258

Change in plan assets:
Fair value of plan assets at beginning of year		10,148		8,647
Actual return on plan assets		1,138		1,645
Company contributions		85		629
Benefits paid		(896)		(773)
Fair value of plan assets at end of year		10,475		10,148

Funded status (underfunded)	$	(4,670)	$	(4,110)

Amounts recognized in other accumulated comprehensive loss:
Net actuarial loss	$	9,051	$	8,296
Weighted average assumptions as of December 31:
Discount rate:
Components of cost		3.20%		4.30%
Benefit obligations		2.41%		3.20%
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 $288,000 of actuarial losses to pension expense. The accumulated benefit obligation at December 31, 2020 and 2019 was $15.1 million and $14.3 million, respectively. The minimum required contribution in 2020 is expected to be $1.0 million, 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.

The minimum required pension plan contribution for 2020 was $641,000, of which the Company contributed $85,000. As allowed by the CARES Act, the Company elected to defer the payment of the $556,000 of remaining minimum required contributions due in 2020 until January 1, 2021. Subsequent to December 31, 2020, the Company made $56,000 of contributions to the pension benefit plan. At this time, we expect to make our minimum required contributions to the pension benefit plan in 2021 of $1.0 million; however, there is no assurance that we will be able to make any or all of 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	2021		2022		2023		2024		2025
	$	1,274	$	737	$	877	$	971	$	876

The following table presents the components of the net periodic pension cost for the years ended December 31, 2020 and 2019:

In thousands	2020		2019
Interest cost	$	387	$	501
Expected return on plan assets		(786)		(682)
Amortization of net actuarial loss		288		264
Net periodic pension (benefit) cost	$	(111)	$	83

The following table presents the change in unrecognized pension costs recorded in other comprehensive loss as of December 31, 2020 and 2019:

In thousands	2020		2019
Balance at beginning of year	$	8,296	$	7,954
Net actuarial loss		1,043		606
Recognized loss		(288)		(264)
Balance at end of year	$	9,051	$	8,296

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.