Employee Benefits | 12 Months Ended |
Dec. 31, 2013 |
Employee Benefits [Abstract] | ' |
Pension and Other Postretirement Benefits Disclosure | ' |
Employee Benefits |
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Retirement Plans |
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The Company’s Retirement Income Plan (the "Retirement Plan") covers employees who have completed one year of service with the Company and work at least a minimum number of hours each year. The Retirement Plan is a qualified noncontributory defined benefit plan. Retirement benefits are based on the employee's final average pay and years of service. Upon retirement or death of a vested plan participant, assets of the Retirement Plan are used to pay benefit obligations under the Retirement Plan. Contributions from the Company are at least the minimum funding amounts required by the IRS under provisions of the Retirement Plan, as actuarially calculated. The assets of the Retirement Plan are primarily invested in common collective trusts which hold equity securities, debt securities and cash equivalents and are managed by a professional investment manager appointed by the Company. |
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The Company has two non-qualified retirement plans that are non-funded defined benefit plans. The Company's Supplemental Retirement Plan covers certain former employees and directors of the Company. The other plan, the Excess Benefit Plan was adopted in 2004 and covers certain active and former employees of the Company. The benefit cost for the non-qualified retirement plans are based on substantially the same actuarial methods and economic assumptions as those used for the Retirement Plan. The Company complies with FASB guidance on disclosure for pension and other post-retirement plans that requires disclosure of investment policies and strategies, categories of investment and fair value measurements of plan assets, and significant concentrations of risk. |
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The obligations and funded status of the plans are presented below (in thousands): |
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| December 31, | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | |
| Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | | | | | | | | | | |
Income | Retirement | Income | Retirement | | | | | | | | | | | |
Plan | Plans | Plan | Plans | | | | | | | | | | | |
Change in projected benefit obligation: | | | | | | | | | | | | | | | | | | |
Benefit obligation at end of prior year | $ | 320,846 | | | $ | 27,241 | | | $ | 296,293 | | | $ | 26,547 | | | | | | | | | | | | |
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Service cost | 9,137 | | | 190 | | | 8,530 | | | 299 | | | | | | | | | | | | |
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Interest cost | 12,742 | | | 872 | | | 12,594 | | | 963 | | | | | | | | | | | | |
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Actuarial (gain) loss | (15,373 | ) | | (533 | ) | | 12,417 | | | 1,338 | | | | | | | | | | | | |
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Benefits paid | (9,537 | ) | | (1,872 | ) | | (8,988 | ) | | (1,906 | ) | | | | | | | | | | | |
Benefit obligation at end of year | 317,815 | | | 25,898 | | | 320,846 | | | 27,241 | | | | | | | | | | | | |
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Change in plan assets: | | | | | | | | | | | | | | | | | | |
Fair value of plan assets at end of prior year | 220,568 | | | — | | | 191,369 | | | — | | | | | | | | | | | | |
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Actual return on plan assets | 31,800 | | | — | | | 20,187 | | | — | | | | | | | | | | | | |
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Employer contribution | 15,000 | | | 1,872 | | | 18,000 | | | 1,906 | | | | | | | | | | | | |
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Benefits paid | (9,537 | ) | | (1,872 | ) | | (8,988 | ) | | (1,906 | ) | | | | | | | | | | | |
Fair value of plan assets at end of year | 257,831 | | | — | | | 220,568 | | | — | | | | | | | | | | | | |
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Funded status at end of year | $ | (59,984 | ) | | $ | (25,898 | ) | | $ | (100,278 | ) | | $ | (27,241 | ) | | | | | | | | | | | |
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Amounts recognized in the Company's balance sheets consist of the following (in thousands): |
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| December 31, | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | |
| Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | | | | | | | | | | |
Income | Retirement | Income | Retirement | | | | | | | | | | | |
Plan | Plans | Plan | Plans | | | | | | | | | | | |
Current liabilities | $ | — | | | $ | (1,870 | ) | | $ | — | | | $ | (1,829 | ) | | | | | | | | | | | |
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Noncurrent liabilities | (59,984 | ) | | (24,028 | ) | | (100,278 | ) | | (25,412 | ) | | | | | | | | | | | |
Total | $ | (59,984 | ) | | $ | (25,898 | ) | | $ | (100,278 | ) | | $ | (27,241 | ) | | | | | | | | | | | |
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The accumulated benefit obligation in excess of plan assets is as follows (in thousands): |
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| December 31, | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | |
| Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | | | | | | | | | | |
Income | Retirement | Income | Retirement | | | | | | | | | | | |
Plan | Plans | Plan | Plans | | | | | | | | | | | |
Projected benefit obligation | $ | (317,815 | ) | | $ | (25,898 | ) | | $ | (320,846 | ) | | $ | (27,241 | ) | | | | | | | | | | | |
Accumulated benefit obligation | (275,555 | ) | | (25,077 | ) | | (274,890 | ) | | (26,363 | ) | | | | | | | | | | | |
Fair value of plan assets | 257,831 | | | — | | | 220,568 | | | — | | | | | | | | | | | | |
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Amounts recognized in accumulated other comprehensive income consist of the following (in thousands): |
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| Years Ended December 31, | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | |
| Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | | | | | | | | | | |
Income | Retirement | Income | Retirement | | | | | | | | | | | |
Plan | Plans | Plan | Plans | | | | | | | | | | | |
Net loss | $ | 85,261 | | | $ | 8,508 | | | $ | 125,763 | | | $ | 9,701 | | | | | | | | | | | | |
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Prior service cost | — | | | 219 | | | 3 | | | 314 | | | | | | | | | | | | |
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Total | $ | 85,261 | | | $ | 8,727 | | | $ | 125,766 | | | $ | 10,015 | | | | | | | | | | | | |
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The following are the weighted-average actuarial assumptions used to determine the benefit obligations: |
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| December 31, | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | |
| | | Non-Qualified | | | | Non-Qualified | | | | | | | | | |
| Retirement | | Supplemental | | Excess | | Retirement | | Supplemental | | Excess | | | | | | | | | |
Income | Retirement | Benefit | Income | Retirement | Benefit | | | | | | | | | |
Plan | Plan | Plan | Plan | Plan | Plan | | | | | | | | | |
Discount rate | 4.9 | % | | 3.9 | % | | 4.9 | % | | 4 | % | | 3.1 | % | | 4 | % | | | | | | | | | |
Rate of compensation increase | 4.75 | % | | N/A | | | 4.75 | % | | 4.75 | % | | N/A | | | 4.75 | % | | | | | | | | | |
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The Company reassesses various actuarial assumptions at least on an annual basis. The discount rate is reviewed at each measurement date. The discount rate used to measure obligations is based on a spot rate yield curve that matches projected future payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. A 1% increase in the discount rate would decrease the December 31, 2013 retirement plans' projected benefit obligation by 12.5%. A 1% decrease in the discount rate would increase the December 31, 2013 retirement plans' projected benefit obligation by 15.5%. |
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The components of net periodic benefit cost are presented below (in thousands): |
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| Years Ended December 31, | | | |
| 2013 | | 2012 | | 2011 | | | |
| Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | | |
Income | Retirement | Income | Retirement | Income | Retirement | | | |
Plan | Plans | Plan | Plans | Plan | Plans | | | |
Service cost | $ | 9,137 | | | $ | 190 | | | $ | 8,530 | | | $ | 299 | | | $ | 6,590 | | | $ | 260 | | | | |
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Interest cost | 12,742 | | | 872 | | | 12,594 | | | 963 | | | 12,871 | | | 1,116 | | | | |
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Expected return on plan assets | (17,108 | ) | | — | | | (14,443 | ) | | — | | | (14,095 | ) | | — | | | | |
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Amortization of: | | | | | | | | | | | | | | |
Net loss | 10,437 | | | 661 | | | 10,729 | | | 627 | | | 6,190 | | | 354 | | | | |
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Prior service cost | 3 | | | 94 | | | 21 | | | 94 | | | 21 | | | 94 | | | | |
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Net periodic benefit cost | $ | 15,211 | | | $ | 1,817 | | | $ | 17,431 | | | $ | 1,983 | | | $ | 11,577 | | | $ | 1,824 | | | | |
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The changes in benefit obligations recognized in other comprehensive income are presented below (in thousands): |
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| Years Ended December 31, | | | |
| 2013 | | 2012 | | 2011 | | | |
| Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | | |
Income | Retirement | Income | Retirement | Income | Retirement | | | |
Plan | Plans | Plan | Plans | Plan | Plans | | | |
Net (gain) loss | $ | (30,065 | ) | | $ | (533 | ) | | $ | 6,672 | | | $ | 1,337 | | | $ | 40,181 | | | $ | 2,980 | | | | |
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Amortization of: | | | | | | | | | | | | | | |
Net loss | (10,437 | ) | | (661 | ) | | (10,729 | ) | | (627 | ) | | (6,190 | ) | | (354 | ) | | | |
Prior service cost | (3 | ) | | (94 | ) | | (21 | ) | | (94 | ) | | (21 | ) | | (94 | ) | | | |
Total recognized in other comprehensive income | $ | (40,505 | ) | | $ | (1,288 | ) | | $ | (4,078 | ) | | $ | 616 | | | $ | 33,970 | | | $ | 2,532 | | | | |
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The total amount recognized in net periodic benefit costs and other comprehensive income are presented below (in thousands): |
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| Years Ended December 31, | | | |
| 2013 | | 2012 | | 2011 | | | |
| Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | Retirement | | Non-Qualified | | | |
Income | Retirement | Income | Retirement | Income | Retirement | | | |
Plan | Plans | Plan | Plans | Plan | Plans | | | |
Total recognized in net periodic benefit cost and other comprehensive income | $ | (25,294 | ) | | $ | 529 | | | $ | 13,353 | | | $ | 2,599 | | | $ | 45,547 | | | $ | 4,356 | | | | |
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The following are amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during 2014 (in thousands): |
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| Retirement | | Non-Qualified | | | | | | | | | | | | | | | | | | | |
Income | Retirement | | | | | | | | | | | | | | | | | | | |
Plan | Plans | | | | | | | | | | | | | | | | | | | |
Net loss | $ | 6,270 | | | $ | 570 | | | | | | | | | | | | | | | | | | | | |
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Prior service cost | — | | | 90 | | | | | | | | | | | | | | | | | | | | |
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The following are the weighted-average actuarial assumptions used to determine the net periodic benefit cost for the twelve months ended December 31: |
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| 2013 | | 2012 | | 2011 |
| | | Non-Qualified | | | | Non-Qualified | | | | Non-Qualified |
| Retirement | | Supplemental Retirement | | Excess | | Retirement | | Supplemental Retirement | | Excess | | Retirement | | Supplemental Retirement | | Excess |
Income | Plan | Benefit | Income | Plan | Benefit | Income | Plan | Benefit |
Plan | | Plan | Plan | | Plan | Plan | | Plan |
Discount rate | 4 | % | | 3.1 | % | | 4 | % | | 4.3 | % | | 3.6 | % | | 4.1 | % | | 5.4 | % | | 4.6 | % | | 5.3 | % |
Expected long-term return on plan assets | 7.5 | % | | N/A | | | N/A | | | 7.5 | % | | N/A | | | N/A | | | 7.5 | % | | N/A | | | N/A | |
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Rate of compensation increase | 4.75 | % | | N/A | | | 4.75 | % | | 5 | % | | N/A | | | 5 | % | | 5 | % | | N/A | | | 5 | % |
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The Company reassesses various actuarial assumptions at least on an annual basis. The discount rate is reviewed at each measurement date. The discount rate used to measure net periodic benefit cost is based on a spot rate yield curve that matches projected future payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. |
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The Company’s overall expected long-term rate of return on assets is 7.5% effective January 1, 2013, which is both a pre-tax and after-tax rate as pension funds are generally not subject to income tax. The expected long-term rate of return is based on the weighted average of the expected returns on investments based upon the target asset allocation of the pension fund. The Company’s target allocations for the plan’s assets are presented below: |
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| | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | |
Equity securities | | 55 | % | | | | | | | | | | | | | | | | | | | | | | | |
Fixed income | | 40 | % | | | | | | | | | | | | | | | | | | | | | | | |
Alternative investments | | 5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Total | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | |
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The Retirement Plan invests the majority of its plan assets in common collective trusts which includes a diversified portfolio of domestic and international equity securities and fixed income securities. The Retirement Plan fund also invests in a real estate limited partnership. The expected rate of returns for the funds are assessed annually and are based on long-term relationships among major asset classes and the level of incremental returns that can be earned by the successful implementation of different active investment management strategies. Equity returns are based on estimates of long-term inflation rate, real rate of return, 10-year Treasury bond premium over cash and equity risk premium. Fixed income returns are based on maturity, long-term inflation, real rate of return and credit spreads. |
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FASB guidance on disclosure for pension plans requires disclosure of fair value measurements of plan assets. To increase consistency and comparability in fair value measurements FASB guidance on fair value measurements established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: |
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• | Level 1 – Observable inputs that reflect quoted market prices for identical assets and liabilities in active markets. Prices or securities held in the mutual funds and underlying portfolios of the Retirement Plan are primarily obtained from | | | | | | | | | | | | | | | | | | | | | | | | | |
independent pricing services. These prices are based on observable market data. |
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• | Level 2 – Inputs other than quoted market prices included in Level 1 that are observable for the asset or liability either directly or indirectly. The fair value of the Guaranteed Investment Contract is based on market interest rates of investments | | | | | | | | | | | | | | | | | | | | | | | | | |
with similar terms and risk characteristics. The Common Collective Trusts are valued using the net asset value ("NAV") provided by the administrator of the fund. The NAV price is quoted on a restrictive market although the underlying investments are traded on active markets. |
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• | Level 3 – Unobservable inputs using data that is not corroborated by market data. The fair value of the real estate limited partnership is reported at the NAV of the investment. | | | | | | | | | | | | | | | | | | | | | | | | | |
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During 2013, the Company sold the majority of its assets held in active markets, classified as Level 1, and invested these assets in common collective trusts which are classified as Level 2. The fair value of the Company’s Retirement Plan assets at December 31, 2013 and 2012, and the level within the three levels of the fair value hierarchy defined by FASB guidance on fair value measurements are presented in the table below (in thousands): |
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Description of Securities | Fair Value as of | | Quoted Prices | | Significant | | Significant | | | | | | | | | | | |
December 31, | in Active | Other | Unobservable | | | | | | | | | | | |
2013 | Markets for | Observable | Inputs | | | | | | | | | | | |
| Identical Assets | Inputs | (Level 3) | | | | | | | | | | | |
| (Level 1) | (Level 2) | | | | | | | | | | | | |
Cash and Cash Equivalents | $ | 940 | | | $ | 940 | | | $ | — | | | $ | — | | | | | | | | | | | | |
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Guaranteed Investment Contract | 1,126 | | | — | | | 1,126 | | | — | | | | | | | | | | | | |
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Common Collective Trusts (a) | | | | | | | | | | | | | | | | | | |
Equity funds | 142,960 | | | — | | | 142,960 | | | — | | | | | | | | | | | | |
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Fixed income funds | 103,948 | | | — | | | 103,948 | | | — | | | | | | | | | | | | |
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Total Common Collective Trusts | 246,908 | | | — | | | 246,908 | | | — | | | | | | | | | | | | |
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Limited Partnership Interest in Real Estate (b) | 8,857 | | | — | | | — | | | 8,857 | | | | | | | | | | | | |
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Total Plan Investments | $ | 257,831 | | | $ | 940 | | | $ | 248,034 | | | $ | 8,857 | | | | | | | | | | | | |
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Description of Securities | Fair Value as of | | Quoted Prices | | Significant | | Significant | | | | | | | | | | | |
December 31, | in Active | Other | Unobservable | | | | | | | | | | | |
2012 | Markets for | Observable | Inputs | | | | | | | | | | | |
| Identical Assets | Inputs | (Level 3) | | | | | | | | | | | |
| (Level 1) | (Level 2) | | | | | | | | | | | | |
Cash and Cash Equivalents | $ | 9,163 | | | $ | 9,163 | | | $ | — | | | $ | — | | | | | | | | | | | | |
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U.S. Treasury Securities | 24,854 | | | 24,854 | | | — | | | — | | | | | | | | | | | | |
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Guaranteed Investment Contract | 1,059 | | | — | | | 1,059 | | | — | | | | | | | | | | | | |
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Common Stock | 52,149 | | | 52,149 | | | — | | | — | | | | | | | | | | | | |
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Mutual Funds - Fixed Income | 59,150 | | | 59,150 | | | — | | | — | | | | | | | | | | | | |
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Mutual Funds - Equity | 65,634 | | | 65,634 | | | — | | | — | | | | | | | | | | | | |
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Limited Partnership Interest in Real Estate (b) | 8,559 | | | — | | | — | | | 8,559 | | | | | | | | | | | | |
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Total Plan Investments | $ | 220,568 | | | $ | 210,950 | | | $ | 1,059 | | | $ | 8,559 | | | | | | | | | | | | |
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(a) | The Common Collective Trusts are invested in equity or fixed income securities, or a combination thereof. The investment objective of each trust is to produce returns in excess of, or commensurate with, its predefined index. | | | | | | | | | | | | | | | | | | | | | | | | | |
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(b) | This investment is a commercial real estate partnership that purchases land, develops limited infrastructure, and sells it for commercial development. The Company is restricted from selling its partnership interest during the life of the partnership which is generally 5-7 years. Return on investment is realized as land is sold. The fair value of the limited partnership interest in real estate is based on the NAV of the partnership which reflects the appraised value of the land. | | | | | | | | | | | | | | | | | | | | | | | | | |
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The table below reflects the changes in the fair value of investments in real estate during the period (in thousands): |
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| Fair Value of | | | | | | | | | | | | | | | | | | | | | | | |
Investments in | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | | | | | | | | | | | | |
Balances at December 31, 2011 | $ | 8,511 | | | | | | | | | | | | | | | | | | | | | | | | |
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Unrealized gain in fair value | 48 | | | | | | | | | | | | | | | | | | | | | | | | |
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Balances at December 31, 2012 | 8,559 | | | | | | | | | | | | | | | | | | | | | | | | |
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Unrealized gain in fair value | 298 | | | | | | | | | | | | | | | | | | | | | | | | |
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Balances at December 31, 2013 | $ | 8,857 | | | | | | | | | | | | | | | | | | | | | | | | |
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There were no transfers in or out of Level 1 and Level 2 fair value measurements categories due to changes in observable inputs during the twelve month periods ending December 31, 2013 and 2012. There were no purchases, sales, issuances, and settlements related to the assets in the Level 3 fair value measurement category during the twelve month periods ending December 31, 2013 and 2012. |
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The Company adheres to the traditional capital market pricing theory which maintains that over the long term, the risk of owning equities should be rewarded with a greater return than available from fixed income investments. The Company seeks to minimize the risk of owning equity securities by investing in funds that pursue risk minimization strategies and by diversifying its investments to limit its risks during falling markets. The investment manager has full discretionary authority to direct the investment of plan assets held in trust within the guidelines prescribed by the Company through the plan’s investment policy statement including the ability to hold cash equivalents. The investment guidelines of the investment policy statement are in accordance with the Employee Retirement Income Security Act of 1974 ("ERISA") and Department of Labor ("DOL") regulations. |
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The Company contributes at least the minimum funding amounts required by the IRS for the Retirement Plan, as actuarially calculated. The Company expects to contribute $13.9 million to its retirement plans in 2014. |
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The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands): |
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| Retirement | | Non-Qualified | | | | | | | | | | | | | | | | | | | |
Income | Retirement | | | | | | | | | | | | | | | | | | | |
Plan | Plans | | | | | | | | | | | | | | | | | | | |
2014 | $ | 10,902 | | | $ | 1,870 | | | | | | | | | | | | | | | | | | | | |
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2015 | 12,015 | | | 1,818 | | | | | | | | | | | | | | | | | | | | |
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2016 | 13,180 | | | 1,772 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
2017 | 14,440 | | | 1,829 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
2018 | 15,807 | | | 1,715 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
2019-2023 | 96,510 | | | 9,447 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
|
In 2014, the Company will implement a redesigned Retirement Income Plan and Excess Benefit Plan. Effective April 1, 2014, the Company will offer a cash balance pension plan as an alternative to its current final average pay pension plan for employees hired prior to January 1, 2014. The cash balance pension plan will also include an enhanced employer matching contribution to the employee’s respective 401(k) Defined Contribution Plan (discussed below). For employees that elect the new cash balance pension plan, the pension benefit earned under the existing final average pay pension plan will be frozen as of March 31, 2014. Employees hired after January 1, 2014 will be automatically enrolled in the cash balance pension plan. The Company anticipates remeasuring the assets and liabilities of the retirement plans during the first quarter of 2014. |
|
401(k) Defined Contribution Plans |
|
The Company sponsors 401(k) defined contribution plans covering substantially all employees. Annual matching contributions made to the savings plans for the years 2013, 2012 and 2011 were $1.9 million, $1.8 million, and $1.7 million, respectively. Historically, the Company has provided a 50 percent matching contribution up to 6 percent of the employee’s compensation subject to certain other limits and exclusions. Effective April 1, 2014, for employees who enroll in the cash balance pension plan (discussed above), the Company will provide a 100 percent matching contribution up to 6 percent of the employee's compensation subject to certain other limits and exclusions. |
|
Other Postretirement Benefits |
|
The Company provides certain health care benefits for retired employees and their eligible dependents and life insurance benefits for retired employees only. Substantially all of the Company’s employees may become eligible for those benefits if they retire while working for the Company. Contributions from the Company are no more than the IRS tax deductible limit, as actuarially calculated. The assets of the plan are primarily invested in common collective trusts which hold equity securities, debt securities, and cash equivalents and are managed by a professional investment manager appointed by the Company. |
|
The Company determined that the prescription drug benefits of its plan were actuarially equivalent to the Medicare Part D benefit provided for in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. FASB guidance on accounting and disclosure requirements related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 requires measurement of the postretirement benefit obligation, the plan assets, and the net periodic postretirement benefit cost to reflect the effects of the subsidy. In March 2010, the President signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act and the Health Care Education and Affordability Reconciliation Act (the "Acts"). The Company modified the operations of the plan to conform to the effective provisions of the Acts. |
|
The following table contains a reconciliation of the change in the benefit obligation, the fair value of plan assets, and the funded status of the plan (in thousands): |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | |
Change in benefit obligation: | | | | | | | | | | | | | | | | | | | | | | |
Benefit obligation at end of prior year | $ | 135,680 | | | $ | 133,272 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Service cost | 3,843 | | | 4,378 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Interest cost | 5,156 | | | 5,651 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Actuarial gain | (48,778 | ) | | (5,009 | ) | | | | | | | | | | | | | | | | | | | |
Amendment (a) | (97 | ) | | — | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Benefits paid | (4,013 | ) | | (3,929 | ) | | | | | | | | | | | | | | | | | | | |
Retiree contributions | 1,056 | | | 1,086 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Medicare Part D subsidy | — | | | 231 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Benefit obligation at end of year | 92,847 | | | 135,680 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Change in plan assets: | | | | | | | | | | | | | | | | | | | | | | |
Fair value of plan assets at end of prior year | 36,510 | | | 32,817 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Actual return on plan assets | 5,539 | | | 2,605 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Employer contribution | 3,100 | | | 3,700 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Benefits paid | (4,013 | ) | | (3,929 | ) | | | | | | | | | | | | | | | | | | | |
Retiree contributions | 1,056 | | | 1,086 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Medicare Part D subsidy | — | | | 231 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Fair value of plan assets at end of year | 42,192 | | | 36,510 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Funded status (b) | $ | (50,655 | ) | | $ | (99,170 | ) | | | | | | | | | | | | | | | | | | | |
_____________________ |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Amendment relates to modification of the Company's Other Postretirement Benefit Plan which limits the Company's premium contribution. The amendment became effective October 3, 2013 and resulted in a remeasurement of the plan. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) | These amounts are recognized in the Company’s balance sheets as a non-current liability. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Amounts recognized in accumulated other comprehensive income that have not been recognized as a component of net periodic cost consist of the following (in thousands): |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | |
Net (gain) loss | $ | (38,110 | ) | | $ | 13,630 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Prior service credit | (19,210 | ) | | (24,770 | ) | | | | | | | | | | | | | | | | | | | |
| $ | (57,320 | ) | | $ | (11,140 | ) | | | | | | | | | | | | | | | | | | | |
|
The following are the weighted-average actuarial assumptions used to determine the accrued postretirement benefit obligations: |
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | | | | | | | | | | | |
Discount rate at end of year | 4.9 | % | | 4.1 | % | | | | | | | | | | | | | | | | | | | | | |
Health care cost trend rates: | | | | | | | | | | | | | | | | | | | | | | | | |
Initial | 7.5 | % | | 7.75 | % | | | | | | | | | | | | | | | | | | | | | |
Ultimate | 4.5 | % | | 4.5 | % | | | | | | | | | | | | | | | | | | | | | |
Year ultimate reached | 2026 | | | 2026 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
The discount rate is reviewed at each measurement date. The discount rate used to measure obligations is based on a spot rate yield curve that matches projected future payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. A 1% increase in the discount rate would decrease the December 31, 2013 accumulated postretirement benefit obligation by 12.8%. A 1% decrease in the discount rate would increase the December 31, 2013 accumulated postretirement benefit obligation by 16.1%. |
|
Net periodic benefit cost is made up of the components listed below (in thousands): |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | |
Service cost | $ | 3,843 | | | $ | 4,378 | | | $ | 2,988 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Interest cost | 5,156 | | | 5,651 | | | 5,379 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Expected return on plan assets | (1,951 | ) | | (1,714 | ) | | (1,823 | ) | | | | | | | | | | | | | | | |
Amortization of: | | | | | | | | | | | | | | | | | | | | |
Prior service benefit | (5,657 | ) | | (5,877 | ) | | (5,927 | ) | | | | | | | | | | | | | | | |
Net (gain) loss | (626 | ) | | 615 | | | (39 | ) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Net periodic benefit cost | $ | 765 | | | $ | 3,053 | | | $ | 578 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
|
The changes in benefit obligations recognized in other comprehensive income are presented below (in thousands): |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | |
Net (gain) loss | $ | (52,366 | ) | | $ | (5,900 | ) | | $ | 34,517 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Prior service benefit | (97 | ) | | — | | | — | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Amortization of: | | | | | | | | | | | | | | | | | | | | |
Prior service benefit | 5,657 | | | 5,877 | | | 5,927 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Net gain (loss) | 626 | | | (615 | ) | | 39 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total recognized in other comprehensive income | $ | (46,180 | ) | | $ | (638 | ) | | $ | 40,483 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
|
The total recognized in net periodic benefit cost and other comprehensive income are presented below (in thousands): |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | |
Total recognized in net periodic benefit cost and other comprehensive income | $ | (45,415 | ) | | $ | 2,415 | | | $ | 41,061 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
|
The amount in accumulated other comprehensive income that is expected to be recognized as a component of net periodic benefit cost during 2014 is a prior service benefit of $4.8 million and a net gain of $2.6 million. |
|
The following are the weighted-average actuarial assumptions used to determine the net periodic benefit cost for the twelve months ended December 31: |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 (a) | | 2012 | | 2011 | | | | | | | | | | | | | | | | | | |
Discount rate at beginning of year | 4.1 | % | | 4.3 | % | | 5.5 | % | | | | | | | | | | | | | | | | | | |
Expected long-term return on plan assets | 5.2 | % | | 5.2 | % | | 5.2 | % | | | | | | | | | | | | | | | | | | |
Health care cost trend rates: | | | | | | | | | | | | | | | | | | | | | | | |
Initial | 7.75 | % | | 8 | % | | 8.5 | % | | | | | | | | | | | | | | | | | | |
Ultimate | 4.5 | % | | 4.5 | % | | 5 | % | | | | | | | | | | | | | | | | | | |
Year ultimate reached | 2026 | | | 2026 | | | 2018 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
_____________________ |
(a) The Other Postretirement Benefits Plan was remeasured at October 3, 2013 due to a plan amendment. The discount rate increased from 4.1% as of January 1, 2013 to 4.9% at the remeasurement date. All other assumptions remained consistent with assumptions used at January 1, 2013. |
|
The Company reassesses various actuarial assumptions at least on an annual basis. The discount rate is reviewed at each measurement date. The discount rate used to measure net periodic benefit cost is based on a spot yield curve that matches projected future payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. |
|
For measurement purposes, an 7.75% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2013. The rate was assumed to decrease gradually to 4.5% for 2026 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. The effect of a 1% change in these assumed health care cost trend rates would increase or decrease the December 31, 2013 benefit obligation by $14.3 million or $10.8 million, respectively. In addition, a 1% change in said rate would increase or decrease the aggregate 2013 service and interest cost components of the net periodic benefit cost by $2.1 million or $1.2 million, respectively. |
|
The Company’s overall expected long-term rate of return on assets, on an after-tax basis, is 5.2% effective January 1, 2013. The expected long-term rate of return is based on the after-tax weighted average of the expected returns on investments based upon the target asset allocation. The Company’s target allocations for the plan’s assets are presented below: |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | |
Equity securities | | 65 | % | | | | | | | | | | | | | | | | | | | | | | | |
Fixed income | | 30 | % | | | | | | | | | | | | | | | | | | | | | | | |
Alternative investments | | 5 | % | | | | | | | | | | | | | | | | | | | | | | | |
Total | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | |
|
The Other Postretirement Benefit Plan invests the majority of its plan assets in common collective trusts which includes a diversified portfolio of domestic and international equity securities and fixed income securities. The asset portfolio also includes cash equivalents and a real estate limited partnership.The expected rate of returns for the funds are assessed annually and are based on long-term relationships among major asset classes and the level of incremental returns that can be earned by the successful implementation of different active investment management strategies. Equity returns are based on estimates of long-term inflation rate, real rate of return, 10-year Treasury bond premium over cash and equity risk premium. Fixed income returns are based on maturity, long-term inflation, real rate of return and credit spreads. |
|
FASB guidance on disclosure for other postretirement benefit plans requires disclosure of fair value measurements of plan assets. To increase consistency and comparability in fair value measurements, FASB guidance on fair value measurements established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• | Level 1 – Observable inputs that reflect quoted market prices for identical assets and liabilities in active markets. Prices or securities held in the mutual funds and underlying portfolios of the Other Postretirement Benefits Plan are primarily obtained from independent pricing services. These prices are based on observable market data. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• | Level 2 – Inputs other than quoted market prices included in Level 1 that are observable for the asset or liability either directly or indirectly. The fair value of municipal securities-tax-exempt are reported at fair value based on evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences. The Common Collective Trusts are valued using the NAV provided by the administrator of the fund. The NAV price is quoted on a restrictive market although the underlying investments are traded on active markets. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
• | Level 3 – Unobservable inputs using data that is not corroborated by market data. The fair value of the real estate limited partnership is reported at the NAV of the investment. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
During 2013, the Company sold the majority of its assets held in active markets, classified as Level 1, and invested these assets in common collective trusts which are classified as Level 2. The fair value of the Company’s Other Postretirement Benefits Plan assets at December 31, 2013 and 2012, and the level within the three levels of the fair value hierarchy defined by FASB guidance on fair value measurements are presented in the table below (in thousands): |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Description of Securities | Fair Value as of | | Quoted Prices | | Significant | | Significant | | | | | | | | | | | |
December 31, | in Active | Other | Unobservable | | | | | | | | | | | |
2013 | Markets for | Observable | Inputs | | | | | | | | | | | |
| Identical Assets | Inputs | (Level 3) | | | | | | | | | | | |
| (Level 1) | (Level 2) | | | | | | | | | | | | |
Cash and Cash Equivalents | $ | 33 | | | $ | 33 | | | $ | — | | | $ | — | | | | | | | | | | | | |
| | | | | | | | | | |
Common Collective Trusts (a) | | | | | | | | | | | | | | | | | | |
Equity funds | 28,077 | | | — | | | 28,077 | | | — | | | | | | | | | | | | |
| | | | | | | | | | |
Fixed income funds | 12,421 | | | — | | | 12,421 | | | — | | | | | | | | | | | | |
| | | | | | | | | | |
Total Common Collective Trusts | 40,498 | | | — | | | 40,498 | | | — | | | | | | | | | | | | |
| | | | | | | | | | |
Limited Partnership Interest in Real Estate (b) | 1,661 | | | — | | | — | | | 1,661 | | | | | | | | | | | | |
| | | | | | | | | | |
Total Plan Investments | $ | 42,192 | | | $ | 33 | | | $ | 40,498 | | | $ | 1,661 | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Description of Securities | Fair Value as of | | Quoted Prices | | Significant | | Significant | | | | | | | | | | | |
December 31, | in Active | Other | Unobservable | | | | | | | | | | | |
2012 | Markets for | Observable | Inputs | | | | | | | | | | | |
| Identical Assets | Inputs | (Level 3) | | | | | | | | | | | |
| (Level 1) | (Level 2) | | | | | | | | | | | | |
Cash and Cash Equivalents | $ | 2,075 | | | $ | 2,075 | | | $ | — | | | $ | — | | | | | | | | | | | | |
| | | | | | | | | | |
Municipal Securities – Tax Exempt | 12,811 | | | — | | | 12,811 | | | — | | | | | | | | | | | | |
| | | | | | | | | | |
Common Stock | 14,397 | | | 14,397 | | | — | | | — | | | | | | | | | | | | |
| | | | | | | | | | |
Mutual Funds – Equity | 5,622 | | | 5,622 | | | — | | | — | | | | | | | | | | | | |
| | | | | | | | | | |
Limited Partnership Interest in Real Estate (b) | 1,605 | | | — | | | — | | | 1,605 | | | | | | | | | | | | |
| | | | | | | | | | |
Total Plan Investments | $ | 36,510 | | | $ | 22,094 | | | $ | 12,811 | | | $ | 1,605 | | | | | | | | | | | | |
| | | | | | | | | | |
___________________ |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | The Common Collective Trusts are invested in equity or fixed income securities, or a combination thereof. The investment objective of each trust is to produce returns in excess of, or commensurate with, its predefined index. | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(b) | This investment is a commercial real estate partnership that purchases land, develops limited infrastructure, and sells it for commercial development. The Company is restricted from selling its partnership interest during the life of the partnership which is generally 5-7 years. Return of investment is realized as land is sold. The fair value of the limited partnership interest in real estate is based on the NAV of the partnership which reflects the appraised value of the land. | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The table below reflects the changes in the fair value of the investments in real estate during the period (in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value of | | | | | | | | | | | | | | | | | | | | | | | |
Investments in | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2011 | $ | 1,596 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Unrealized gain in fair value | 9 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | 1,605 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Unrealized gain in fair value | 56 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2013 | $ | 1,661 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
There were no transfers in or out of Level 1 and Level 2 fair value measurements categories due to changes in observable inputs during the twelve month periods ending December 31, 2013 and 2012. There were no purchases, sales, issuances, and settlements related to the assets in the Level 3 fair value measurement category during the twelve month periods ending December 31, 2013 and 2012. |
|
The Company adheres to the traditional capital market pricing theory which maintains that over the long term, the risk of owning equities should be rewarded with a greater return than available from fixed income investments. The Company seeks to minimize the risk of owning equity securities by investing in funds that pursue risk minimization strategies and by diversifying its investments to limit its risks during falling markets. The investment manager has full discretionary authority to direct the investment of plan assets held in trust within the guidelines prescribed by the Company through the plan’s investment policy statement including the ability to hold cash equivalents. The investment guidelines of the investment policy statement are in accordance with the ERISA and DOL regulations. |
The Company does not expect to contribute to its other postretirement benefits plan in 2014. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands): |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2014 | $ | 3,024 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
2015 | 3,414 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
2016 | 3,810 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
2017 | 4,230 | | | | | | | | | | | | | | | | | | | | | | | | |
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2018 | 4,639 | | | | | | | | | | | | | | | | | | | | | | | | |
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2019-2023 | 28,238 | | | | | | | | | | | | | | | | | | | | | | | | |
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Annual Short-Term Incentive Plan |
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The Annual Short-Term Incentive Plan (the "Incentive Plan") provides for the payment of cash awards to eligible Company employees, including each of its named executive officers. Payment of awards is based on the achievement of performance measures reviewed and approved by the Company’s Board of Directors’ Compensation Committee. Generally, these performance measures are based on meeting certain financial, operational and individual performance criteria. The financial performance goals are based on earnings per share and the operational performance goals are based on safety, regulatory compliance, and customer satisfaction. If a specified level of earnings per share is not attained, no amounts will be paid under the Incentive Plan. In 2013, the Company reached the required levels of earnings per share, safety, regulatory compliance, and customer satisfaction goals for an incentive payment of $4.0 million. The Company reached the required levels of earnings per share, safety, and regulatory compliance goals for an incentive payment of $7.9 million and $7.3 million in 2012 and 2011, respectively. The Company has renewed the Incentive Plan in 2014 with similar goals. |