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Benefit Plans And Obligations For Termination Indemnity
 12 Months Ended
Dec. 31, 2019
Defined Benefit Plan [Abstract]  
Benefit Plans And Obligations For Termination Indemnity BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY

The Company’s subsidiaries ESA, IMI and its subsidiaries in Israel, a German subsidiary (the “German Subsidiary”) and a Belgian subsidiary (the “Belgian Subsidiary”) sponsor benefit plans for their employees in the U.S., Israel, Germany and Belgium, respectively, as follows:

1.
Defined Benefit Retirement Plan based on Employer’s Contributions

a)
ESA has four defined benefit pension plans (the “Plans”) which cover the employees of ESA’s three largest subsidiaries. During September, 2019, following the acquisition of the Night Vision Business, ESA accepted the transfer of sponsorship of the Pension Plan for Employees in the Night Vision Bargaining Unit which covers represented employees of ENV. Monthly benefits are based on years of service and annual compensation. Annual contributions to the Plans are determined using the unit credit actuarial cost method and are equal to or exceed the minimum required by law. Pension fund assets of the Plans are invested primarily in stocks, bonds and cash by a financial institution, as the investment manager of the Plans’ assets. The service cost component of net periodic pension and other post-retirement benefit plan expense is recorded in operating profit and is allocated between cost of sales and general and administrative expenses, depending on the responsibilities of the employees. The non-service cost components of net periodic pension and other post-retirement benefit plan expense (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) are included in the line item Other (income) expense, net in the income statement. The measurement date for ESA subsidiaries' benefit obligation is December 31.

Participation in ESA’s qualified defined benefit plans was frozen as of January 1, 2010, for non-represented employees. Participation in ESA’s qualified defined benefit plans was frozen as of May 15, 2017 for represented employees. Benefit accruals ceased for non-represented employees effective December 31, 2018.

b)
IMI and subsidiaries have several post-employment benefit arrangements, which are based on collective agreements concluded with certain groups of employees before the privatization of IMI. According to these agreements, some groups of employees possess special retirement conditions and preferable rights for post-employment benefits that apply to employees who will terminate their employment in the event of relocation of plants as part of the post privatization restructuring of IMI and subsidiaries. The arrangements are determined according to the various existing formats of employment, seniority and other factors. The liabilities recognized in respect of these arrangements are calculated on an actuarial basis.

c)
The German Subsidiary, which is wholly-owned by the Company, has mainly one defined benefit pension plan (the “P3-plan”) which covers all employees. The P3-plan provides for yearly cash balance credits equal to a percentage of a participant’s compensation, which accumulate together with the respective interest credits on the employee’s cash balance accounts. In case of an insured event (retirement, death or disability) the benefits can be paid as a lump sum, in installments or as a life-long annuity. The P3-plan is an unfunded plan.

d)
The Belgian Subsidiary, which is wholly-owned by the Company, has a defined benefit pension plan, which is divided into two categories:

1)
Normal retirement benefit plan, with eligibility at age 65. The lump sum is based on employee contributions of 2% of the final pensionable salary up to a certain breakpoint, plus 6% exceeding the breakpoint at a maximum of 5% of pensionable salary, and the employer contributions, with a maximum of 40 years. The vested benefit is equal to the retirement benefit calculated with the pensionable salary and pensionable service observed at the date of leaving service.

2)
Pre-retirement death benefit to employees.

The plan is funded and includes profit sharing.


Note 17 - BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY (Cont.)

The following table sets forth the Plans’ funded status and amounts recognized in the consolidated financial statements for the years ended December 31, 2019 and 2018:
 
December 31,
 
2019
 
2018
Changes in benefit obligation:
 
 
 
Benefit obligation at beginning of year
$
628,424

 
$
267,141

Benefit obligation related to acquired companies
111,654

 
378,055

Service cost
18,305

 
8,391

Interest cost
19,723

 
9,631

Exchange rate differences
29,778

 
43

Amendments
3,689

 
—

Actuarial loss (gain)
90,847

 
(20,337
)
Benefits paid
(75,684
)
 
(7,560
)
Effect of curtailment
—

 
(6,940
)
Other adjustments
4,375

 
—

Benefit obligation at end of year
$
831,111

 
$
628,424

Changes in the Plans’ assets:
 
 
 

Fair value of Plans’ assets at beginning of year
164,282

 
167,961

Benefit assets related to acquired companies
91,724

 
—

Actual return on Plans’ assets (net of expenses)
37,901

 
(11,121
)
Employer contribution
3,716

 
15,002

Benefits paid
(8,130
)
 
(7,560
)
Fair value of Plans’ assets at end of year
$
289,493

 
$
164,282

Accrued benefit cost, end of year:
 
 
 

Funded status
(541,623
)
 
(464,142
)
Unrecognized net actuarial loss
123,736

 
60,141

Unrecognized prior service cost
8

 
24

 
$
(417,879
)
 
$
(403,977
)
Amount recognized in the statement of financial position:
 
 
 

Accrued benefit liability, current
(37,158
)
 
(6,040
)
Accrued benefit liability, non-current
(504,465
)
 
(458,102
)
Accumulated other comprehensive income, pre-tax
123,744

 
60,165

Net amount recognized
$
(417,879
)
 
$
(403,977
)





Note 17 - BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY (Cont.)
 
Year ended December 31,
 
2019
 
2018
 
2017
Components of the Plans’ net periodic pension cost:
 
 
 
 
 
Service cost
$
18,305

 
$
8,391

 
$
7,655

Interest cost
19,723

 
9,631

 
9,108

Expected return on  Plans’ assets
(13,507
)
 
(12,080
)
 
(10,203
)
Amortization of prior service cost
16

 
64

 
64

Amortization of net actuarial loss
4,809

 
5,884

 
6,161

Total net periodic benefit cost
$
29,346

 
$
11,890

 
$
12,785

Additional information
 

 
 

 
 

Accumulated benefit obligation
$
781,749

 
$
628,017

 
$
259,242



 
December 31,
 
2019
 
2018
Weighted average assumptions:
 
 
 

Discount rate as of December 31
1.9
%
 
3.1
%
Expected long-term rate of return on Plans’ assets
7.2
%
 
7.1
%
Rate of compensation increase
0.6
%
 
3.0
%


Asset allocation by category as of December 31:
 
2019
 
2018
Asset Category:
 
 
 
Equity Securities
67.2
%
 
61.3
%
Debt Securities
32.1
%
 
38.2
%
Other
0.7
%
 
0.5
%
Total
100.0
%
 
100.0
%


The investment policy of ESA is directed toward a broad range of securities. The diversified portfolio seeks to maximize investment return while minimizing the risk levels associated with investing. The investment policy is structured to consider the Plans' obligations and the expected timing of benefit payments. The target asset allocation for the Plans' years presented is as follows:
 
2019
 
2018
Asset Category:
 
 
 
Equity Securities
63.0
%
 
63.0
%
Debt Securities
36.0
%
 
36.0
%
Other
1.0
%
 
1.0
%
Total
100.0
%
 
100.0
%


Note 17 - BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY (Cont.)

The fair value of the asset values by category at December 31, 2019, was as follows:
 
 
 
Quoted Prices in Active Markets for Identical Assets
 
Significant Observable Inputs
 
Significant Unobservable Inputs
 
Total
 
(Level 1)
 
(Level 2)
 
(Level 3)
Asset Category
 
 
 
 
 
 
 
Cash
$
18

 
$
18

 
$
—

 
$
—

Cash Equivalents:
 

 
 

 
 

 
 

Money Market Funds (a)
1,899

 
1,899

 
—

 
—

Fixed Income Securities:
 
 
 
 
 
 
 
Mutual Funds (b)
93,149

 
93,149

 
—

 
—

Equity Securities:
 
 
 
 
 
 
 

International Companies (c)
6,016

 
6,016

 
—

 
—

Mutual Funds (d)
188,411

 
188,411

 
—

 
—

Total
$
289,493

 
$
289,493

 
$
—

 
$
—


a.
This category includes highly liquid daily traded cash-like vehicles.
b.
This category invests in highly liquid mutual funds representing a diverse offering of debt issuance.
c.
This category represents common stocks of companies domiciled outside of the U.S.; they can be represented by ordinary shares or ADRs.
d.
This category represents highly liquid diverse equity mutual funds of varying asset classes and styles.

In developing the overall expected long-term rate of return on assets assumption, ESA used a building block approach in which rates of return in excess of inflation were considered separately for equity securities, debt securities, real estate and all other assets. The excess returns were weighted by the representative target allocation and added along with an approximate rate of inflation to develop the overall expected long-term rate of return. It is the policy of ESA to meet the ERISA minimum contribution requirements for a Plan year. The minimum contribution requirements for the 2019 Plan year have been satisfied as of December 31, 2019. Benefit payments over the next five years are expected to be $13,579 in 2020, $14,628 in 2021, $15,697 in 2022, $16,696 in 2023 and $17,543 in 2024.

Note 17 - BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY (Cont.)

2.
Retiree Medical Plan

ESA offers retiree medical benefits to a limited number of retirees, The measurement date for ESA's benefit obligation is December 31. The following table sets forth the retiree medical plans’ funded status and amounts recognized in the consolidated financial statements for the years ended December 31, 2019 and 2018:
 
December 31,
 
2019
 
2018
Change in Benefit Obligation:
 
 
 
Benefit obligation at beginning of period
$
1,359

 
$
1,641

Service cost
81

 
71

Interest cost
51

 
50

Actuarial (gain) loss
(34
)
 
(353
)
Employee contribution
17

 
19

Benefits paid
(61
)
 
(69
)
Benefit obligation at end of period
$
1,413

 
$
1,359

Change in Plan Assets:
 
 
 

Employer contribution
$
45

 
$
50

Employee contribution
16

 
19

Benefits paid
(61
)
 
(69
)
Fair value of Plan assets at end of period
$
—

 
$
—



 
Year ended December 31,
 
2019
 
2018
Accrued benefit cost, end of period:
 
 
 
Funded status
$
(1,412
)
 
$
(1,359
)
Unrecognized net actuarial (gain) loss
(1,479
)
 
(1,610
)
Accrued benefit cost, end of period
$
(2,891
)
 
$
(2,969
)
Amounts recognized in the statement of financial position:
 

 
 

Accrued benefit liability, current
$
(86
)
 
$
(112
)
Accrued benefit liability, non-current
(1,326
)
 
(1,247
)
Accumulated other comprehensive gain, pretax
(1,479
)
 
(1,610
)
Net amount recognized
$
(2,891
)
 
$
(2,969
)

Components of net periodic pension cost (for period):
 
 
 
Service cost
$
81

 
$
71

Interest cost
51

 
50

Amortization of net actuarial gain
(165
)
 
(164
)
Total net periodic benefit cost
$
(33
)
 
$
(43
)

Assumptions as of end of period:
 
 

Discount rate
2.84
%
 
3.91
%
Health care cost trend rate assumed for next year
5.50
%
 
5.40
%
Ultimate health care cost trend rate
3.84
%
 
3.84
%


Note 17 - BENEFIT PLANS AND OBLIGATIONS FOR TERMINATION INDEMNITY (Cont.)

2.
Retiree Medical Plan (Cont.)

The effect of a 1% change in the health care cost trend rate at December 31, 2019 was as follows:
 
1% increase
 
1% decrease
Net periodic benefit cost
$
17

 
$
(14
)
Benefit obligation
$
111

 
$
(99
)


3.
Defined Contribution Plan

The 401(k) savings plan (“401(k) plan”) is a defined contribution retirement plan that covers all eligible ESA employees, as defined in section 401(k) of the U.S. Internal Revenue Code. Employees may elect to contribute a percentage of their annual gross compensation to the 401(k) plan. ESA may make discretionary matching contributions as determined by ESA. Total expense under the 401(k) plan amounted to $11,569, $6,453 and $5,646 for the years ended December 31, 2019, 2018 and 2017, respectively. Expense for the deferred 401(k) plan is allocated between cost of sales and general and administrative expenses depending on the responsibilities of the related employees.

4.
Non-Qualified Defined Contribution Plan

ESA has two benefit plans for the executives of the organization. The non-qualified, defined contribution plan is structured under Section 409(A). The plan provides the employees at vice president level and above the opportunity to defer up to 100% of their salary to the 409(A) plan. ESA provides a match of 50 cents on the dollar up to 10% of the employees’ total salary and incentive-based compensation. The contribution can be made into the 401(k) plan, the 409(A) plan or both plans. The purpose is to provide comparable defined contribution plan benefits for the senior management across ESA locations. The 409(A) plan funds are contributed to several life insurance policies. Participant contributions to the plan were $1,955, $3,238 and $1,962 for the years ended December 31, 2019, 2018 and 2017, respectively, and the total ESA contribution to the plan was $230 for 2019. The cash surrender value of these life insurance policies at December 31, 2019 was $5,646. The total liability related to the 409(A) plan was $13,178 at December 31, 2019.

The second plan implemented is a non-qualified, defined benefit plan for certain executives of ESA. The plan provides the executives with a calculated, guaranteed payment in addition to their regular pension through the company upon retirement. The plan is funded with several life insurance policies. The policies are not segregated into a trust or otherwise effectively restricted. These policies are corporate owned assets that are subject to the claims of general creditors and cannot be considered as formal plan assets. The defined benefit plan put in place meets the ERISA definition of an unfunded deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees. The plan assets of life insurance policies have a cash surrender of $3,419 at December 31, 2019. Related liability for the pension payments is $7,118 at December 31, 2019. As of December 31, 2019, all executives had partially vested balances in the plan.