LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT

12 Months Ended

Dec. 31, 2011

LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT

NOTE 5 - LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT

The Israeli Subsidiary is required to make a severance payment upon dismissal of an employee, or upon termination of employment in certain circumstances. The severance pay liability to the employees (based upon length of service and the latest monthly salary - one month’s salary for each year employed) is recorded on the Company’s balance sheets under “Liability for employee rights upon retirement.” The liability is recorded as if it were payable at each balance sheet date on an undiscounted basis.

The liability is funded in part from the purchase of insurance policies or by the establishment of pension funds with dedicated deposits in the funds. The amounts used to fund these liabilities are included in the Company’s balance sheets under “Funds in respect of employee rights upon retirement.” These policies are the Company’s assets. However, under labor agreements and subject to certain limitations, any policy may be transferred to the ownership of the individual employee for whose benefit the funds were deposited. In the years ended December 31, 2009, 2010 and 2011, the Company deposited $79, $174 and $181, respectively, with insurance companies in connection with its severance payment obligations.

In accordance with the current employment agreements with certain employees, the Company makes regular deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employee’s rights upon retirement. The Company is fully relieved from any severance pay liability with respect to each such employee after it makes the payments on behalf of the employee. The liability accrued in respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected in the Company’s balance sheets, as the amounts funded are not under the control and management of the Company and the pension or severance pay risks have been irrevocably transferred to the applicable insurance companies (the “Contribution Plans”).

The amounts of severance pay expenses were $488, $1,118 and $816 for the years ended December 31, 2009, 2010 and 2011, respectively, of which $335, $531 and $641 in the years ended December 31, 2009, 2010 and 2011, respectively, were in respect of a Contribution Plan. Gain on amounts funded in respect of employee rights upon retirement totaled $81, $26 and $14 for the years ended December 31, 2009, 2010 and 2011, respectively.

The Company expects to contribute approximately $779 in the year ending December 31, 2012 to insurance companies in connection with its severance liabilities for its operations for that year, $607 of which will be contributed to one or more Contribution Plans.

During the five-year period following December 31, 2011, the Company expects to pay future benefits to one employee upon the employee's normal retirement age. The Company anticipates that the benefits payable will be immaterial.