Benefit Plans

U.S. Pension Plan

We maintain a defined benefit pension plan, Jefferies Group LLC Employees’ Pension Plan (the “U.S. Pension Plan”), which is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, and covers certain of our employees. Under the U.S. Pension Plan, benefits to participants are based on years of service and the employee’s career average pay. Effective December 31, 2005, benefits under the U.S. Pension Plan were frozen with no further benefit accruing to participants for future service after December 31, 2005.

Employer Contributions - Our funding policy is to contribute to the U.S. Pension Plan at least the minimum amount required for funding purposes under applicable employee benefit and tax laws. We contributed $3.0 million to the U.S. Pension Plan during the year ended November 30, 2016. We do not anticipate making a contribution to the plan during the year ended November 30, 2017.

The following tables summarize the changes in the projected benefit obligation, the fair value of the assets and the funded status of the plan (in thousands):



	Year Ended November 30,
	2016			2015
Change in projected benefit obligation:
Projected benefit obligation, beginning of period	$	58,330		$	55,262
Service cost	400			250
Interest cost	2,311			2,340
Actuarial losses	862			4,280
Administrative expenses paid	(461		)	(359		)
Benefits paid	(2,711		)	(729		)
Settlements	—			(2,714		)
Projected benefit obligation, end of period	$	58,731		$	58,330
Change in plan assets:
Fair value of assets, beginning of period	$	47,031		$	51,085
Benefits paid	(2,711		)	(729		)
Administrative expenses paid	(461		)	(359		)
Actual return on plan assets	3,133			(252		)
Contributions	3,000			—
Settlements	—			(2,714		)
Fair value of assets, end of period	$	49,992		$	47,031
Funded status at end of period	$	(8,739	)	$	(11,299	)

The amounts recognized in our Consolidated Statements of Financial Condition are as follows (in thousands):



	November 30,
	2016			2015
Consolidated statements of financial condition:
Liabilities	$	8,739		$	11,299
Accumulated other comprehensive income, before taxes:
Net losses	$	(5,901	)	$	(5,255	)

The following tables summarize the components of net periodic pension cost and other amounts recognized in Other comprehensive income, before taxes (in thousands):



	Year Ended November 30,
	2016			2015			2014
Components of net periodic pension cost:
Service cost	$	400		$	250		$	250
Interest cost on projected benefit obligation	2,311			2,340			2,429
Expected return on plan assets	(2,917		)	(3,357		)	(3,125		)
Net amortization	—			—			(94		)
Settlement losses	—			244			—
Net periodic pension cost	$	(206	)	$	(523	)	$	(540	)



	Year Ended November 30,
	2016		2015			2014
Amounts recognized in Other comprehensive income:
Net losses arising during the period	$	646	$	7,890		$	3,784
Amortization of net gain	—		—			94
Settlements during the period	—		(244		)	—
Total losses recognized in Other comprehensive income	646		7,646			3,878
Net losses recognized in net periodic benefit cost and Other comprehensive income	$	440	$	7,123		$	3,338

The assumptions used to determine the actuarial present value of the projected obligation and net periodic pension benefit cost are as follows:



	Year Ended November 30,
	2016		2015		2014
Discount rate used to determine benefit obligation	3.90	%	4.10	%	4.30	%
Weighted average assumptions used to determine net pension cost:
Discount rate	4.10	%	4.30	%	5.10	%
Expected long-term rate of return on plan assets	6.25	%	6.75	%	6.75	%

Expected Benefit Payments - Expected benefit payments for each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows (in thousands):



2017	$	1,981
2018	2,149
2019	3,039
2020	2,475
2021	2,311
2022 through 2026	23,957

Plan Assets - The following tables present the fair value of plan assets by level within the fair value hierarchy (in thousands):



	At November 30, 2016
	Level 1		Level 2		Total
Plan assets (1):
Cash and cash equivalents	$	1,135	$	—	$	1,135
Listed equity securities (2)	32,342		—		32,342
Fixed income securities:
Corporate debt securities	—		4,906		4,906
Foreign corporate debt securities	—		1,835		1,835
U.S. government securities	5,370		—		5,370
Agency mortgage-backed securities	—		3,330		3,330
CMBS	—		591		591
ABS	—		483		483
Total plan assets	$	38,847	$	11,145	$	49,992


(1)	There are no plan assets classified within Level 3 of the fair value hierarchy.


(2)	Listed equity securities are diversified across a spectrum of primarily U.S. large-cap companies.



	At November 30, 2015
	Level 1		Level 2		Total
Plan assets (1):
Cash and cash equivalents	$	487	$	—	$	487
Listed equity securities (2)	29,156		—		29,156
Fixed income securities:
Corporate debt securities	—		6,598		6,598
Foreign corporate debt securities	—		2,140		2,140
U.S. government securities	3,975		—		3,975
Agency mortgage-backed securities	—		3,504		3,504
CMBS	—		425		425
ABS	—		746		746
Total plan assets	$	33,618	$	13,413	$	47,031


(1)	There are no plan assets classified within Level 3 of the fair value hierarchy.


(2)	Listed equity securities are diversified across a spectrum of primarily U.S. large-cap companies.

Valuation technique and inputs - The following is a description of the valuation techniques and inputs used in measuring plan assets accounted for at fair value on a recurring basis:


•	Cash equivalents are valued at cost, which approximates fair value and are categorized in Level 1 of the fair value hierarchy;


•	Listed equity securities are valued using the quoted prices in active markets for identical assets;


•	Fixed income securities:

◦

Corporate debt, mortgage- and asset-backed securities and other securities valuations use data readily available to all market participants and use inputs available for substantially the full term of the security. Valuation inputs include benchmark yields, reported trades, broker dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers, reference data, and industry and economic events;


◦	U.S. government and agency securities valuations generally include quoted bid prices in active markets for identical or similar assets.

Investment Policies and Strategies - Assets in the plan are invested under guidelines adopted by the Administrative Committee of the U.S. Pension Plan. Because the U.S. Pension Plan exists to provide a vehicle for funding future benefit obligations, the investment objectives of the portfolio take into account the nature and timing of future plan liabilities. The policy recognizes that the portfolio’s long-term investment performance and its ability to meet the plan’s overall objectives are dependent on the strategic asset allocation which includes adequate diversification among assets classes.

The target allocation of plan assets for 2017 is approximately 50% equities and 50% fixed income securities. The target asset allocation was determined based on the risk tolerance characteristics of the plan and, at times, may be adjusted to achieve the plan’s investment objective and to minimize any concentration of investment risk. The Administrative Committee evaluates the asset allocation strategy and adjusts the allocation if warranted based upon market conditions and the impact of the investment strategy on future contribution requirements. The expected long-term rate of return assumption is based on an analysis of historical experience of the portfolio and the summation of prospective returns for each asset class in proportion to the fund’s current asset allocation.

The equity portfolio may invest up to 5% of the market value of the portfolio in any one company and may invest up to 10% of the market value of the portfolio in any one sector or up to two times the percentage weighting of any one sector as defined by the S&P 500 or the Russell 1000 Value indices, whichever is higher. Permissible investments specified under the equity portfolio of the plan include equity securities of U.S. and non-U.S. incorporated entities and private placement securities issued pursuant to Rule 144A. At least 75% of the market value of the fixed income portfolio must be invested in investment grade securities rated BBB-/Baa3, including cash and cash equivalents. Permissible investments specified under the fixed income portfolio of the plan include: public or private debt obligations issued or guaranteed by U.S. or foreign issuers; preferred, hybrid, mortgage or asset-backed securities; senior loans; and derivatives and foreign currency exchange contracts.

German Pension Plan

In connection with the acquisition of Jefferies Bache from Prudential on July 1, 2011, we acquired a defined benefits pension plan located in Germany (the “German Pension Plan”) for the benefit of eligible employees of Jefferies Bache in that territory. The German Pension Plan has no plan assets and is therefore unfunded. We have purchased insurance contracts from multi-national insurers held in the name of Jefferies Bache Limited to provide for the plan’s future obligations. The investment in these insurance contracts is included in Financial Instruments owned in the Consolidated Statements of Financial Condition and has a fair value of $15.2 million and $15.3 million at November 30, 2016 and 2015, respectively. We expect to pay our pension obligations from the cash flows available to us under the insurance contracts. All costs relating to the plan (including insurance premiums and other costs as computed by the insurers) are paid by us. In connection with the acquisition, it was agreed with Prudential that any insurance premiums and funding obligations related to pre-acquisition date service will be reimbursed to us by Prudential.

The provisions and assumptions used in the German Pension Plan are based on local conditions in Germany. We did not contribute to the plan during the years ended November 30, 2016 and 2015.

The following tables summarize the changes in the projected benefit obligation and the components of net periodic pension cost (in thousands):



	Year Ended November 30,
	2016			2015
Change in projected benefit obligation:
Projected benefit obligation, beginning of period	$	23,545		$	28,434
Interest cost	529			523
Actuarial loss (gain)	1,157			(40		)
Benefits paid	(1,104		)	(1,069		)
Currency adjustment	39			(4,303		)
Projected benefit obligation, end of period	$	24,166		$	23,545
Funded status at end of period	$	(24,166	)	$	(23,545	)

The amounts recognized in our Consolidated Statements of Financial Condition are as follows (in thousands):



	November 30,
	2016			2015
Consolidated statements of financial condition:
Liabilities	$	24,166		$	23,545
Accumulated other comprehensive income, before taxes:
Net losses	$	(5,748	)	$	(4,917	)

The following tables summarize the components of net periodic pension cost and other amounts recognized in Other comprehensive income, before taxes (in thousands):



	Year Ended November 30,
	2016		2015		2014
Components of net periodic pension cost:
Service cost	$	—	$	—	$	40
Interest cost on projected benefit obligation	529		523		801
Net amortization	326		325		244
Net periodic pension cost	$	855	$	848	$	1,085



	Year Ended November 30,
	2016			2015			2014
Amounts recognized in other comprehensive income:
Net (gain) loss arising during the period	$	1,157		$	(39	)	$	4,631
Amortization of net loss	(326		)	(325		)	(244		)
Total loss (gain) recognized in Other comprehensive income	$	831		$	(364	)	$	4,387
Net losses recognized in net periodic benefit cost and Other comprehensive income	$	1,686		$	484		$	5,472

The following are assumptions used to determine the actuarial present value of the projected benefit obligation and net periodic pension benefit cost:



	Year Ended November 30,
	2016	2015	2014
Projected benefit obligation:
Discount rate	1.70%	2.20%	2.10%
Rate of compensation increase (1)	N/A	N/A	3.00%
Net periodic pension benefit cost:
Discount rate	2.20%	2.10%	3.40%
Rate of compensation increase (1)	N/A	N/A	3.00%

(1) There were no active participants of the pension plan at November 30, 2016 and 2015.

Expected Benefit Payments - Expected benefit payments for each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows (in thousands):



2017	$	1,142
2018	1,147
2019	1,122
2020	1,169
2021	1,177
2022 through 2026	5,814