Employee Benefit Plans | Note 14 – Employee Benefit Plans The Company has qualified, defined benefit pension plans that were established to provide benefits to certain employees. These plans are frozen and participants are no longer accruing benefits. The Company also provides certain postretirement health care benefits for certain of its salaried and hourly retired employees. Generally, employees may become eligible for health care benefits if they retire after attaining specified age and service requirements. These benefits are subject to deductibles, co-payment provisions and other limitations. A substantial portion of the Company’s postretirement benefit plan obligation relates to an expired settlement agreement with the union representing employees at the Company’s and its predecessors’ Johnstown manufacturing facilities. The terms of that settlement agreement (the “2005 Settlement Agreement”) required the Company to pay until November 30, 2012 certain monthly amounts toward the cost of retiree health care coverage. The Company e ngaged in voluntary negotiations for two years in an effort to reach a consensual agreement related to the expired 2005 Settlement Agreement but no agreement was reached. The Company terminated, effective November 1, 2013, its contributions for medical coverage and life insurance benefits to affected retirees and sought declaratory relief to confirm the Company’s rights under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), to reduce or terminate retiree medical coverage and life insurance benefits pursuant to the plans that were the subject of the 2005 Settlement Agreement. On July 9, 2013, the union and certain retiree defendants filed suit in the United States District Court for the Western District of Pennsylvania regarding the same dispute (see Note 1 7 ). On August 20, 2015, the Company reached a settlement agreement with the union and the other plaintiffs. Pursuant to the settlement agreement, the parties agreed that (1) the union will create a voluntary employee’s beneficiary association trust fund (the “VEBA”) that will administer the payment of health and welfare benefits to class members and will be administered independently of the Company, (2) the Company will make a one-time contribution to the VEBA of $31,450 , (3) the Company will pay an award for plaintiffs’ attorneys’ fees in the amount of $1,300 , (4) if the Company fails to make the required payments to the VEBA prior to February 16, 2016, interest on the unpaid amounts will accrue at a rate of 5% per annum, subject to a cap of $250 , and (5) class members will fully and finally release all claims against the Company in accordance with the terms of the settlement agreement. The Pennsylvania Court granted final approval of the settlement on January 19, 2016. The plaintiffs had until February 18, 2016 to file an appeal of the court order granting final approval of the settlement. On February 17, 2016, certain class members requested a 30-day extension to file an appeal, which the Pennsylvania Court denied on February 22, 2016. The Company expects to make the cash settlement payment on or after March 23, 2016. The Company’s recorded postretirement benefit plan obligation through December 31, 2015 assume d for accounting purposes a continuation of those monthly payments after November 30, 2012 because the status of the settlement had not yet met the requirements for settlement accounting. A transaction meets the criteria to be accounted for as a settlement when a transaction is irrevocable, relieves the employer of primary responsibility for the benefit obligation, and eliminates significant risks related to the obligation and the assets used to effect the settlement. Settlement accounting will be triggered when the Company makes the cash settlement payment and will result in a pre-tax gain of approximately $19 million and a reduction in the postretirement benefit obligation of approximately $67 million . Generally, contributions to the plans are not less than the minimum amounts required under ERISA and not more than the maximum amount that can be deducted for federal income tax purposes. The plans’ assets are held by independent trustees and consist primarily of equity and fixed income securities. The changes in benefit obligation, change in plan assets and funded status as of December 31, 2015 and 2014, are as follows: Pension Benefits Postretirement Benefits 2015 2014 2015 2014 Change in benefit obligation Benefit obligation – Beginning of year $ 58,017 $ 56,341 $ 73,883 $ 63,312 Service cost - - 70 63 Interest cost 2,319 2,642 2,970 2,999 Actuarial (gain) loss (2,800) 6,799 (3,621) 7,917 Benefits paid (4,096) (4,471) (400) (408) Lump-sum settlement payments - (3,294) - - Benefit obligation – End of year 53,440 58,017 72,902 73,883 Change in plan assets Plan assets – Beginning of year 50,807 55,544 - - Return on plan assets 56 2,811 - - Employer contributions - 217 400 408 Benefits paid (4,096) (4,471) (400) (408) Lump-sum settlement payments - (3,294) - - Plan assets at fair value – End of year 46,767 50,807 - - Funded status of plans – End of year $ (6,673) $ (7,210) $ (72,902) $ (73,883) Pension Benefits Postretirement Benefits 2015 2014 2015 2014 Amounts recognized in the Consolidated Balance Sheets Noncurrent assets $ - $ - $ - $ - Current liabilities - - (405) (409) Noncurrent liabilities (6,673) (7,210) (72,497) (73,474) Net amount recognized at December 31 $ (6,673) $ (7,210) $ (72,902) $ (73,883) Amounts recognized in accumulated other comprehensive loss but not yet recognized in earnings at December 31, 2015 and 2014, are as follows: Pension Benefits Postretirement Benefits 2015 2014 2015 2014 Net actuarial loss $ 16,913 $ 17,163 $ 16,813 $ 21,081 Prior service cost - - 242 284 $ 16,913 $ 17,163 $ 17,055 $ 21,365 During the fourth quarter of 2014, the Company offered certain of its f orme r emp l o y ee s t h e o p t i o n to r ece i v e a l u m p- s u m p en s i o n p ayme n t o r a n nu it y in order to satisfy in full the Company’s future pension liabilities to such former employees , w ith pa y men ts beg i n n i n g i n t h e f our th qua r t e r o f 20 1 4 . P ayme n t s of $3,294 to e l i g i b le former employees w h o e l ec ted to pa r t i c i p a t e i n t h e o ffe r were paid in December 2014 fr o m ex i s ti n g p en s i o n p l a n a s s e ts an d c o n s t it u ted a comp l e te s e ttl emen t o f the Company’s pe n s i o n li ab ili t i e s with re s pec t to such former employees . Th e d i s co u n t ra t e s an d ac t uar i a l a s s u mp ti o n s u s e d to ca l cu l a te t h e pay o u ts were de t erm i ne d accor d i n g to fede r a l reg u l a ti o n s and app r ox i ma ted t h o s e u s e d to ca l c u l a t e our pe n s i o n o b l i g a t i o n f o r f i n anc i a l rep o r ti n g p ur p o s e s as of December 31, 2014 . A no n -ca s h s e t tl eme n t char g e of $966 was recognized in t h e fou r t h q u ar t e r of 2014 in conn e c t i o n with t h e s e ttl emen t pa y men t s . T h i s cha r g e re s u lted fr o m t h e r ecog n i ti o n in ea r n i ng s o f a p o r ti o n o f t h e l o s s e s recor d e d in accumu l a t e d o t he r comp r ehen s i v e l o s s ba s e d o n t h e p or ti o n o f t h e o b l i g a t i o n s e t t l e d . The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2016 is $460 . The estimated net loss and prior service cost for the postretirement benefit plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2016 are $ 14 5 and $17 , respectively. Components of net periodic benefit cost for the years ended December 31, 2015, 2014 and 2013, are as follows: Pension Benefits Postretirement Benefits 2015 2014 2013 2015 2014 2013 Components of net periodic benefit cost Service cost $ - $ - $ - $ 70 $ 63 $ 73 Interest cost 2,319 2,642 2,526 2,970 2,999 2,627 Expected return on plan assets (3,046) (3,620) (3,546) - - - Amortization of unrecognized prior service cost - - - 42 241 241 Amortization of unrecognized net loss 440 211 524 647 371 612 Lump-sum settlement cost - 966 - - - - Total net periodic benefit cost $ (287) $ 199 $ (496) $ 3,729 $ 3,674 $ 3,553 The increase (decrease) in accumulated other comprehensive loss (pre-tax) for the years ended December 31, 2015 and 2014, are as follows: 2015 2014 Pension Benefits Postretirement Benefits Pension Benefits Postretirement Benefits Net actuarial loss (gain) $ 190 $ (3,621) $ 7,608 $ 7,917 Amortization of net actuarial loss (440) (647) (1,177) (371) Amortization of prior service cost - (42) - (241) Total recognized in accumulated other comprehensive loss (gain) $ (250) $ (4,310) $ 6,431 $ 7,305 The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of December 31, 2015: Pension Benefits Postretirement Benefits 2016 $ 3,795 $405 2017 3,516 396 2018 3,412 381 2019 3,365 372 2020 3,342 374 2021 through 2025 16,376 1,940 T he postretirement benefit payments in the table above represent benefit payments for the Company’s salaried retirees. The Company expects to make the previously described $31,450 cash settlement payment related to the postretirement benefits for its hourly retirees on or after March 23, 2016. The Company does not expect to make any contributions to its pension plans in 2016 to meet its minimum funding requirements. The assumptions used to determine end of year benefit obligations are shown in the following table: Pension Benefits Postretirement Benefits 2015 2014 2015 2014 Discount rates 4.47% 4.15% 4.39% 4.03% The discount rate is determined using a yield curve model that uses yields on high quality corporate bonds (AA rated or better) to produce a single equivalent rate. The yield curve model excludes callable bonds except those with make-whole provisions, private placements and bonds with variable rates. In October 2015, the Society of Actuaries published updated mortality improvement assumptions for U.S. plans, scale (MP-2015), which reflects additional data that the Social Security Administration has released since prior assumptions (MP-2014) were developed. Scale (MP-2015) results in lower projected mortality improvement than scale (MP-2014). The Company has historically utilized the Society of Actuaries’ published mortality data in its plan assumptions. Accordingly, the Company adopted MP-2015 for purposes of measuring its pension and postretirement obligations at December 31, 2015. The assumptions used in the measurement of net periodic cost are shown in the following table: Pension Benefits Postretirement Benefits 2015 2014 2013 2015 2014 2013 Discount rate 4.15% 4.91% 4.11% 4.03% 4.75% 3.95% Expected return on plan assets 6.24% 6.76% 6.98% N/A N/A N/A As benefits under these postretirement healthcare plans have been capped, assumed health care cost trend rates have no effect on the amounts reported for the health care plans. The Company’s pension plans’ weighted average asset allocations at December 31, 2015 and 2014, and target allocations for 2016, by asset category, are as follows: Plan Assets at December 31, Target Allocation 2015 2014 2016 Asset Category Cash and cash equivalents 2% 1% 0% - 5% Equity securities 55% 55% 45% - 65% Fixed income securities 38% 38% 30% - 50% Real estate 5% 6% 4% -6% 100% 100% 100% The basic goal underlying the pension plan investment policy is to ensure that the assets of the plans, along with expected plan sponsor contributions, will be invested in a prudent manner to meet the obligations of the plans as those obligations come due under a broad range of potential economic and financial scenarios, maximize the long-term investment return with an acceptable level of risk based on such obligations, and broadly diversify investments across and within the capital markets to protect asset values against adverse movements in any one market. The Company’s investment strategy balances the requirement to maximize returns using potentially higher return generating assets, such as equity securities, with the need to manage the risk of such investments with less volatile assets, such as fixed-income securities. Investment practices must comply with the requirements of ERISA and any other applicable laws and regulations. The Company, in consultation with its investment advisors, has determined a targeted allocation of invested assets by category and it works with its advisors to reasonably maintain the actual allocation of assets near the target. The long term return on assets was estimated based upon historical market performance, expectations of future market performance for debt and equity securities and the related risks of various allocations between debt and equity securities. Numerous asset classes with differing expected rates of return, return volatility and correlations are utilized to reduce risk through diversification. The Company’s pension plan assets are invested in one mutual fund for each fund classification. The following table presents the fair value of pension plan assets classified under the appropriate level of the ASC 820 fair value hierarchy (see Note 2 for a description of the fair value hierarchy) as of December 31, 2015 and 2014: Pension Plan Assets As of December 31, 2015 Level 1 Level 2 Level 3 Total Mutual funds: Fixed income funds $ 17,926 $ — $ — $ 17,926 Large cap funds 14,718 — — 14,718 Small cap funds 4,371 — — 4,371 International funds 6,538 — — 6,538 Real estate funds 2,520 — — 2,520 Cash and equivalents 694 — — 694 Total $ 46,767 $ — $ — $ 46,767 Pension Plan Assets As of December 31, 2014 Level 1 Level 2 Level 3 Total Mutual funds: Fixed income funds $ 19,276 $ — $ — $ 19,276 Large cap funds 15,422 — — 15,422 Small cap funds 5,024 — — 5,024 International funds 7,382 — — 7,382 Real estate funds 2,982 — — 2,982 Cash and equivalents 721 — — 721 Total $ 50,807 $ — $ — $ 50,807 The Company also maintains qualified defined contribution plans, which provide benefits to their employees based on employee contributions and employee earnings, with discretionary contributions allowed. Expenses related to these plans were $2,857 , $1,649 and $1,465 for the years ended December 31, 2015, 2014 and 2013, respectively. |