Note 23. Defined Benefit Pension Plan and Postretirement Benefits

Defined Benefit Pension Plans

The Company sponsors non-contributory defined benefit pension plans (the “Pension Plans”) for its covered employees in The Philippines. The Pension Plans provide defined benefits based on years of service and final salary. All permanent employees meeting the minimum service requirement are eligible to participate in the Pension Plans. As of December 31, 2015, the Pension Plans were unfunded. The Company expects to make no cash contributions to its Pension Plans during 2016.

The following table provides a reconciliation of the change in the benefit obligation for the Pension Plans and the net amount recognized, included in “Other long-term liabilities”, in the accompanying Consolidated Balance Sheets (in thousands):


	December 31,
	2015			2014
Beginning benefit obligation	$	3,100		$	2,481
Service cost		433			387
Interest cost		135			104
Actuarial (gains) losses		(121	)		50
Effect of foreign currency translation		(138	)		78

Ending benefit obligation	$	3,409		$	3,100


Unfunded status		(3,409	)		(3,100	)

Net amount recognized	$	(3,409	)	$	(3,100	)

The actuarial assumptions used to determine the benefit obligations and net periodic benefit cost for the Pension Plans were as follows:


	Years Ended December 31,
	2015	2014	2013
Discount rate	5.0 - 5.4%	4.5 - 4.9%	4.3 - 5.2%
Rate of compensation increase	2.0%	2.0%	2.0%

The Company evaluates these assumptions on a periodic basis taking into consideration current market conditions and historical market data. The discount rate is used to calculate expected future cash flows at a present value on the measurement date, which is December 31. This rate represents the market rate for high-quality fixed income investments. A lower discount rate would increase the present value of benefit obligations. Other assumptions include demographic factors such as retirement, mortality and turnover.

The following table provides information about the net periodic benefit cost and other accumulated comprehensive income for the Pension Plans (in thousands):


	Years Ended December 31,
	2015			2014			2013
Service cost	$	433		$	387		$	392
Interest cost		135			104			137
Recognized actuarial (gains)		(41	)		(50	)		(60	)

Net periodic benefit cost		527			441			469
Unrealized net actuarial (gains), net of tax		(1,029	)		(1,008	)		(1,150	)

Total amount recognized in net periodic benefit cost and other accumulated comprehensive income (loss)	$	(502	)	$	(567	)	$	(681	)

The estimated future benefit payments, which reflect expected future service, as appropriate, are as follows (in thousands):


Years Ending December 31,	Amount
2016	$	143
2017		69
2018		45
2019		253
2020		157
2021 - 2025		964

The Company expects to recognize less than $0.1 million of net actuarial gains as a component of net periodic benefit cost in 2016.

Employee Retirement Savings Plans

The Company maintains a 401(k) plan covering defined employees who meet established eligibility requirements. Under the plan provisions, the Company matches 50% of participant contributions to a maximum matching amount of 2% of participant compensation. The Company’s contributions included in the accompanying Consolidated Statements of Operations were as follows (in thousands):


	Years Ended December 31,
	2015		2014		2013
401(k) plan contributions	$	832	$	870	$	895

Split-Dollar Life Insurance Arrangement

In 1996, the Company entered into a split-dollar life insurance arrangement to benefit the former Chairman and Chief Executive Officer of the Company. Under the terms of the arrangement, the Company retained a collateral interest in the policy to the extent of the premiums paid by the Company. The postretirement benefit obligation included in “Other long-term liabilities” and the unrealized gains (losses) included in “Accumulated other comprehensive income” in the accompanying Consolidated Balance Sheets were as follows (in thousands):


	December 31,
	2015		2014
Postretirement benefit obligation	$	37	$	46
Unrealized gains (losses) in AOCI ⁽¹⁾		267		342

⁽¹⁾	Unrealized gains (losses) are due to changes in discount rates related to the postretirement obligation.

Post-Retirement Defined Contribution Healthcare Plan

On January 1, 2005, the Company established a Post-Retirement Defined Contribution Healthcare Plan for eligible employees meeting certain service and age requirements. The plan is fully funded by the participants and accordingly, the Company does not recognize expense relating to the plan.