12. Employee Benefit Plans

Defined Benefit Plans

The Company maintains a defined benefit pension plan in the United Kingdom (the “U.K. Plan”). In 1997, membership to the U.K. Plan was closed. In 2003, the Company was allowed to stop accruing additional benefits to the participants. Benefits under the U.K. Plan were based on the employees’ years of service and compensation as of 2003. The Company continues to fund the plan in sufficient amounts to cover current benefit payments as well as to fund a portion of the unfunded pension obligations based on periodic agreements with the trustees of the U.K. Plan.

The net periodic pension cost included the following components (in thousands):

	Year Ended December 31,
	2015			2014			2013
Components of the net periodic pension cost:
Interest cost	$	1,340		$	1,589		$	1,403
Expected return on plan assets		(1,844	)		(1,958	)		(1,595	)
Amortization of actuarial losses		875			374			668
Net periodic pension cost	$	371		$	5		$	476

The actuarial assumptions used to compute the net periodic pension cost for the years ended December 31, 2015, 2014 and 2013, respectively, for the U.K. Plan were as follows:

	Year Ended December 31,
	2015			2014			2013
Weighted-average discount rate		3.5	%		4.6	%		4.3	%
Weighted-average long-term rate of return on plan assets		5.6	%		5.9	%		5.7	%

The actuarial assumptions used to compute the funded status of the U.K. Plan as of December 31, 2015 and 2014, respectively, were as follows:

	December 31,
	2015			2014
Weighted-average discount rate		3.8	%		3.5	%
Rate of inflation		2.8	%		2.7	%

The discount rates used are derived from (AA) corporate bonds that have maturities approximating the terms of the related obligations. In estimating the expected return on plan assets, the Company considered the historical performance of the major asset classes held and current forecasts of future rates of return for these asset classes.

The following table provides a reconciliation of benefit obligations and plan assets of the U.K. Plan (in thousands):

	December 31,
	2015			2014
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	39,421		$	35,193
Interest cost		1,340			1,589
Actuarial (gains) losses		(2,083	)		6,060
Benefits paid		(798	)		(1,006	)
Foreign currency exchange rate changes		(1,966	)		(2,415	)
Projected benefit obligation at end of year	$	35,914		$	39,421
Accumulated benefit obligation at end of year	$	35,914		$	39,421
Change in plan assets:
Fair value of plan assets at beginning of year	$	33,610		$	33,457
Actual return on plan assets		342			2,234
Employer contributions		955			1,000
Benefits paid		(798	)		(1,006	)
Foreign currency exchange rate changes		(1,735	)		(2,075	)
Fair value of plan assets at end of year	$	32,374		$	33,610
Funded status at end of year	$	(3,540	)	$	(5,811	)
Amounts included in accumulated other comprehensive loss not yet recognized in net periodic pension cost:
Net actuarial loss	$	(9,874	)	$	(11,890	)
Amounts expected to be amortized from accumulated other comprehensive loss into net periodic pension cost over the next fiscal year consists of:
Net actuarial loss	$	794		$	892

The funded status of the U.K. Plan is included in other long term liabilities in the accompanying consolidated balance sheets.

The following table reflects the total expected benefit payments to plan participants and have been estimated based on the same assumptions used to measure the Company’s benefit obligations as of December 31, 2015 (in thousands):

	Amount
2016	$	941
2017		1,043
2018		868
2019		1,244
2020		1,428
2021-2025		8,135
Total	$	13,659

In the U.K., funding valuations are conducted every three years in order to determine the future level of contributions. Based on the results of the most recent valuation completed in the fourth quarter 2015, the Company’s annual contributions will be approximately $1.0 million per year in 2016 and will increase by 2.9% per year thereafter.

Fair Value of Plan Assets

The Company’s overall objective is to invest plan assets in a portfolio of diversified assets, primarily through the use of institutional collective funds, to achieve long-term growth. The strategic asset allocation uses a combination of risk controlled and index strategies in fixed income and global equities. The target allocations are approximately 60% to funds investing in global equities, approximately 18% to funds investing in global bonds, approximately 9% to alternative assets (including private equity, real estate and hedge funds), and approximately 13% in cash.

The following table summarizes the fair values of Plan assets by asset category as of December 31, 2015 (in thousands):

Asset Category	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Mutual Funds:
Balanced (1)	$	15,611	$	—	$	15,611	$	—
Growth (2)		16,583		—		16,583		—
Cash		180		180		—		—
Total	$	32,374	$	180	$	32,194	$	—

(1)	This class comprises a diversified portfolio of global investments which seeks a balanced return between capital growth and fixed income and is allocated on a weighted average basis as follows: equities (52%), bonds (24%), other assets (9%) and cash (15%).

(2)	This class comprises a diversified portfolio of global investments which seeks long-term capital growth and is allocated on a weighted average basis as follows: equities (67%), bonds (12%), other assets (9%) and cash (12%).

The following table summarizes the fair values of Plan assets by asset category as of December 31, 2014 (in thousands):

Asset Category	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Mutual Funds:
Balanced (1)	$	16,287	$	—	$	16,287	$	—
Growth (2)		17,149		—		17,149		—
Cash		174		174		—		—
Total	$	33,610	$	174	$	33,436	$	—

(1)	This class comprises a diversified portfolio of global investments which seeks a balanced return between capital growth and fixed income and is allocated on a weighted average basis as follows: equities (54%), bonds (32%), other assets (5%) and cash (9%).

(2)	This class comprises a diversified portfolio of global investments which seeks long-term capital growth and is allocated on a weighted average basis as follows: equities (67%), other assets (15%), bonds (8%), and cash (10%).

The tables above present the fair value of plan assets in accordance with the fair value hierarchy. Certain pension plan assets are measured using net asset value per share (or its equivalent) and are reported as a level 2 investment above. These investments have quoted prices in inactive markets and there are significant other observable inputs which can be corroborated by observable market data for substantially the full term of the plan assets.

Defined Contribution Plans

The Company has defined contribution employee savings plans in the U.K., Japan, and the U.S. The Company matches the contributions of participating employees on the basis of percentages specified in each plan. Company matching contributions to the plans were $2.7 million, $2.6 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively.