17.                   PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

 

The Bank has noncontributory defined benefit pension plans covering many of its employees.  Additionally, the Company sponsors nonqualified supplemental employee retirement plans for certain participants.  The Bank also provides certain postretirement benefits to qualified former employees.  These postretirement benefits principally pertain to certain health and life insurance coverage. Information relating to these employee benefits program are included in the tables that follow.

 

Effective June 30, 2008, the defined pension benefits for Bank employees were frozen at the current levels.    Additionally, the Bank enhanced its 401(k) Plan and combined it with its Employee Stock Ownership Plan to fund employer contributions. See Note 18 to these consolidated financial statements.

 

The following tables present a reconciliation of beginning and ending balances of benefit obligations and assets at December 31, 2013 and 2012:

 

		Pension						Other  Postretirement
		Benefits						Benefits
(Dollars in thousands)		2013			2012			2013			2012
Change in Benefit Obligation
Benefit obligation at beginning of year		$	91,746		$	82,667		$	27,154		$	25,296
Service cost		—			—			211			250
Interest cost		3,571			3,700			907			1,054
Participants’ contributions		—			—			60			83
Actuarial (gain)/loss		(9,296		)	8,863			(4,626		)	2,272
Benefits paid		(3,467		)	(3,484		)	(1,554		)	(1,801		)
Benefit obligation at end of year		$	82,554		$	91,746		$	22,152		$	27,154
Change in Assets
Fair value of assets at beginning of year		$	59,976		$	53,338		$	—		$	—
Actual return on assets		5,162			8,220			—			—
Employer contribution		24,351			2,396			1,494			1,718
Participants’ contributions		—			—			60			83
Expense		(543		)	(494		)	—			—
Benefits paid		(3,467		)	(3,484		)	(1,554		)	(1,801		)
Fair value of assets at end of year		$	85,479		$	59,976		$	—		$	—

 

The following table presents a reconciliation of the funded status of the pension and postretirement benefits at December 31, 2013 and 2012.

 

		Pension						Other Postretirement Benefits
(Dollars in thousands)		2013			2012			2013			2012
Projected benefit obligation		$	82,554		$	91,746		$	22,152		$	27,154
Fair value of plan assets		85,479			59,976			—			—
Accrued pension (benefit) cost		$	(2,925	)	$	31,770		$	22,152		$	27,154

 

The Company’s pension benefits funding policy is to contribute annually an amount, as determined by consulting actuaries and approved by the Retirement Plan Committee, which can be deducted for federal income tax purposes, if required. Based on the Bank’s strong liquidity, in January 2013, the Company contributed $24.0 million to the Consolidated Pension Plan which improved the projected benefit obligation funded status to approximately 95.7% at the time of the contribution.  In 2013 and 2012, respectively, $24.4 million and $2.4 million was contributed to the pension plans under the Bank’s funding policy.

 

The following table presents the amounts recognized in accumulated other comprehensive income of the pension and postretirement benefits at December 31, 2013 and 2012.

 

		Pension						Other Postretirement Benefits
(Dollars in thousands)		2013			2012			2013			2012
Net loss		$	23,909		$	33,670		$	4,420		$	9,518
Prior service cost		—			—			(2,576		)	(3,102		)
Transition obligation		—			—			164			327

 

The Company’s total accumulated pension benefit obligations at December 31, 2013 and December 31, 2012 were $82.6 million and $91.7 million, respectively. The accumulated pension obligation equals the projected benefit obligation as a result of the freeze in pension benefits effective June 30, 2008.

 

Significant assumptions used to calculate the net periodic pension cost and obligation as of December 31, 2013, 2012, and 2011 are as follows:

 

		Pension Benefits						Other Postretirement  Benefits
		2013		2012		2011		2013		2012		2011
Consolidated Pension Plan
Discount rate for periodic pension cost		3.95	%	4.55	%	5.55	%
Discount rate for benefit obligation		4.80	%	3.95	%	4.55	%
Expected long-term rate of return on plan assets		7.45	%	8.00	%	8.00	%
Beneficial Bank Plans
Discount rate for periodic pension cost								3.85	%	4.50	%	5.55	%
Discount rate for benefit obligation								4.80	%	3.85	%	4.50	%
Expected long-term rate of return on plan assets								—		—		—
FMS Pension Plan
Discount rate for periodic pension cost								3.85	%	4.50	%	5.55	%
Discount rate for benefit obligation								4.80	%	3.85	%	4.50	%
Expected long-term rate of return on plan assets								—		—		—

 

The components of net pension cost are as follows:

 

		Pension Benefits									Other Postretirement Benefits
(Dollars in thousands)		2013			2012			2011			2013			2012			2011
Component of Net Periodic Benefit Cost
Service cost		$	—		$	—		$	—		$	211		$	250		$	204
Interest cost		3,571			3,700			3,816			907			1,054			1,301
Expected return on assets		(6,100		)	(4,287		)	(4,195		)	—			—			—
Amortization of transition obligation		—			—			—			164			164			164
Amortization of prior service cost		—			—			—			(527		)	(452		)	146
Recognized net actuarial loss		2,142			1,893			945			472			390			173
Net periodic pension (benefit) cost		$	(387	)	$	1,306		$	566		$	1,227		$	1,406		$	1,988

 

For benefit obligation measurement purposes, the annual rate of increase in the per capita cost of postretirement health care costs for the Beneficial Bank postretirement medical plan was as follows: (1) for participants under the age 65, rates were 6.0 percent at December 31, 2011 and 2012 and projected to remain level thereafter; (2) for participants over age 65, rates were 7.0 percent and 6.0 percent at December 31, 2011 and 2012, respectively, and projected to remain level thereafter.  As of December 31, 2013, the Company revised the health care trend rate to an initial rate of 7.5 percent for all participants, which is projected to reach an ultimate trend rate of 5.0 percent as of December 31, 2018 and remain level thereafter. With respect to the FMS Financial postretirement medical plan, the annual rate decreased from 8.5 percent at December 31, 2011 to 7.5 percent at December 31, 2013 and is projected to reach an ultimate trend rate of 5.0 percent as of December 31, 2018 and remain level thereafter.

 

The impact of a 1.0 percent increase and decrease in assumed health care cost trend for each future year would be as follows:

 

(Dollars in thousands)		1.0% Increase			1.0%  Decrease
Accumulated postretirement benefit obligation		$	604		$	(705	)
Service and interest cost		25			(25		)

 

The estimated net loss for the pension benefits that will be amortized from accumulated other comprehensive income into net periodic pension costs over the next fiscal year is $1.4 million. The estimated transition, net loss and prior service cost for postretirement benefits that will be amortized from accumulated other comprehensive income into periodic pension cost over the next fiscal year are $164 thousand, $167 thousand and ($527) thousand, respectively.

 

Future benefit payments for all pension and postretirement plans are estimated to be paid as follows:

 

(Dollars in thousands)

 

Pension Benefits					Other Postretirement Benefits
2014		$	4,036		2014		$	1,514
2015		4,194			2015		1,495
2016		4,162			2016		1,476
2017		4,404			2017		1,503
2018		4,485			2018		1,469
2019-2023		24,737			2019-2023		6,859

 

The fair values of all pension and postretirement plan assets at December 31, 2013 and 2012 by asset category are as follows:

 

		Category Used for Fair Value Measurement
		December 31, 2013												December 31, 2012
(Dollars in thousands)		Level  1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Assets:
Mutual Funds:
Large cap		$	10,792		$	—		$	—		$	10,792		$	19,445		$	—		$	—		$	19,445
Small cap		2,506			—			—			2,506			2,449			—			—			2,449
International		7,070			—			—			7,070			12,143			—			—			12,143
Global Managed Volatility		6,567			—			—			6,567			—			—			—			—
US Managed Volatility		4,717			—			—			4,717			—			—			—			—
Fixed Income		53,632			—			—			53,632			25,856			—			—			25,856
Accrued Income		195			—			—			195			83			—			—			83
Total		$	85,479		$	—		$	—		$	85,479		$	59,976		$	—		$	—		$	59,976

 

As of December 31, 2013 and 2012, pension and postretirement plan assets were comprised of investments in equity and fixed income mutual funds. The Bank’s consolidated pension plan investment policy provides that assets are to be managed over a long-term investment horizon to ensure that the chances and duration of investment losses are carefully weighed against the long term potential for asset appreciation. The primary objective of managing a plan’s assets is to improve the plan’s funded status. A secondary financial objective is, where possible, to minimize pension expense volatility. The Company’s pension plan allocates assets based on the plan’s funded status to risk management and return enhancement asset classes. The risk management class is comprised of a long duration fixed income fund while the return enhancement class consists of equity and other fixed income funds. Asset allocation ranges are generally 50% to 60% for risk management and 40% to 50% for return enhancement when the funded status is between 95% and 100%, and 80% to 100% in risk management and 0% to 20% for return enhancement when the funded status reaches 110%, subject to the discretion of the Bank’s Retirement Plan Committee. Also, a small portion is maintained in cash reserves when appropriate. Weighted average asset allocations in plan assets at December 31, 2013 and December 31, 2012 were as follows:

 

		Pension
		December 31,
		2013		2012
Domestic equity securities		21.1	%	36.5	%
Fixed Income		62.7	%	43.1	%
International equity securities		16.0	%	20.2	%
Accrued income		0.2	%	0.2	%
Total		100.0	%	100.0	%

 

The Company provides life insurance benefits to eligible employees under an endorsement split-dollar life insurance program.  At December 31, 2013 and 2012, $19.5 million and $19.0 million, respectively, in cash surrender value relating to this program were recognized in “other assets” in the Company’s consolidated statements of financial condition.  The Company recognizes a liability for future benefits applicable to endorsement split-dollar life insurance arrangements that provide death benefits postretirement.  These liabilities totaled $6.2 million and $8.1 million at December 31, 2013 and 2012, respectively, and are included in the postretirement tables above.