Defined Benefit Plan
Northwest Bank maintains the Northwest Bank Pension Plan (Retirement Plan), covering substantially all employees who started prior to August 1, 2020 and who satisfy the eligibility requirements of age 21 and the completion of one year of service. The plan is noncontributory and funded by the employer. Northwest Bank annually contributes an amount necessary to at least satisfy the actuarially determined minimum funding requirements under Section 430 of the Internal Revenue Code and in accordance with the Employee Retirement and Income Security Act of 1974, as amended (“ERISA”). For the plan year ended December 31, 2022, there was not a required contribution and therefore, the Bank elected to not contribute as management determined that the plan was in a well-funded position.
The benefits under the plan are payable on the participants normal retirement date which is age 65 and the completion of five years of service. Benefits are computed using the plan formula, eligible base pay and years of credited service. Upon retirement, benefits are payable as a lifetime annuity and the participant has the option to select from several choices of actuarially equivalent benefits. Early retirement is available as early as age 55 with the completion of five years of service or any time after the completion of 25 years of service but the benefit is reduced on an actuarial basis to account for early payment.
The plan formula for employees hired prior to January 1, 2008, and applicable to their service up through March 31, 2013, was 1.6% of five-year average monthly base pay plus 0.6% of average monthly base pay in excess of covered compensation (35 year average of the maximum taxable wage bases) multiplied by credited service up to a maximum of 25 years. The formula also provided an additional benefit equal to 0.6% of five-year average monthly base pay multiplied by credited service between 25 years and 35 years. The benefits computed under this formula were frozen effective March 31, 2013 and a new formula was adopted. Mr. Harvey was employed prior to March 31, 2013 and earned a portion of his pension benefit under this formula.
For service commencing January 1, 2013, which includes all Named Executive Officers, benefits for all participants under the plan will be equal to 1% of eligible base pay for each calendar year that a participant completes at least 1,000 hours of service.
Effective August 1, 2020, the Plan was amended to include a soft freeze. The soft freeze will allow those employees in an eligible position that were hired, rehired, or acquired on or before July 31, 2020, to continue to vest and accrue additional benefits for each year they are credited with 1,000 hours or more. Employees that are hired, rehired, acquired, or transfer to an eligible job classification on or after August 1, 2020 are not eligible to participate in the Pension Plan.
The accrued annual pension benefit as of December 31, 2022 for Messrs. Torchio, Harvey, Golding, Reitzes and Watson were $13,888, $104,572, $16,196, $8,800 and $11,600, respectively. As of December 31, 2022, Messrs. Torchio, Harvey and Golding qualified for early retirement under the Retirement Plan. If Messrs. Torchio, Harvey and Golding had retired on December 31, 2022 and began receiving benefit payments immediately upon retirement, their annual pension benefit would have been $9,259, $57,805 and $10,258, respectively.
Supplemental Executive Retirement Plan
Northwest Bank has adopted a non-qualified supplemental executive retirement plan (“SERP”) for certain participants in Northwest Bank’s Retirement Plan whose benefits are limited by Section 415(b) of the Internal Revenue Code (which limits the amount of annual benefits that may be accrued to fund future benefit payments) or Section 401(a)(17) of the Internal Revenue Code (which places a limitation on compensation taken into account for tax-qualified plan purposes; for 2022, that limit was $305,000). The SERP provides the designated executives with retirement benefits generally equal to the difference between the benefit that would be available under the Retirement Plan but for the limitations imposed by Internal Revenue Code Sections 401(a)(17) and 415(b) and that which is actually earned under the Retirement Plan as a result of the limitations.
Participants must elect the method of payment. Options for payment include a lump sum, three substantially equal annual installments, or five substantially equal annual installments, starting within 30 days of the earliest of the following events: the participant’s death, disability, retirement or a change in control, provided, however, that if the participant is a specified employee under Section 409A of the Internal Revenue Code, distribution following retirement must be delayed for six months. The SERP is considered an unfunded plan for tax and ERISA purposes. All obligations arising under the SERP are payable from the general assets of Northwest Bank. The benefits paid under the SERP supplement the benefits paid by the Retirement Plan.
The accrued annual SERP benefit as of December 31, 2022 for Messrs. Torchio, Harvey, Golding and Reitzes were $3,769, $14,941, $1,823 and $1,849, respectively. As of December 31, 2022, Messrs. Torchio, Harvey and Golding qualified for early retirement under the SERP. If Messrs. Torchio, Harvey and Golding had retired on December 31, 2022 and began receiving payments immediately upon retirement, their annual pension benefit would have been $2,512, $8,259 and $1,154, respectively.
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