Employee Benefit Plan

We offer a savings plan to eligible U.S. employees. The plan is intended to qualify under Section 401(k) of the Internal Revenue Code. Substantially all of our U.S. employees are eligible to participate in the 401(k) savings plan. Participating employees may defer a portion of their pre-tax compensation, as defined, but not more than statutory limits. Under this plan, we match a specified percentage of employee contributions, and are able to make a discretionary core contribution, subject to certain limitations. During 2016, we contributed 50% of the amount contributed by the employee, up to a maximum of 5% of the employee’s earnings. Our matching contributions vest at a rate of 20% per year of service, with full vesting after 5 years of service.

The components of net periodic (benefit) expense for the employee benefit plan is as follows (in thousands):



	Year Ended December 31,
	2016		2015		2014
Cost of 401(k) plan Company contributions	$	1,509	$	2,886	$	3,269

Pension Plans

We maintain two benefit pension plans, a qualified noncontributory defined benefit plan ("the Plan") and a nonqualified, noncontributory defined benefit supplemental plan that provides benefits to certain retired highly compensated officers. To date, the supplemental plan remains an unfunded plan. These plans include significant pension benefit obligations which are calculated based on actuarial valuations. Key assumptions are made in determining these obligations and related expenses, including expected rates of return on plan assets and discount rates. Benefits are based primarily on years of service and employees’ compensation.

As of July 1, 2006, in connection with a revision to our retirement plan, we froze the pension benefits of our qualified noncontributory plan participants. Under the revised plan, such participants do not accrue any additional benefits under the defined benefit plan after July 1, 2006.

During fiscal year 2016, we made $1.0 million in cash contributions to our qualified defined benefit pension plan, in addition to $0.4 million in payments for our nonqualified plan. In fiscal year 2017, we expect to make cash contributions up to $1.6 million to our qualified plan and payments of $0.4 million for our nonqualified plan. Contributions to the qualified plan may differ based on a re-assessment of this plan’s funded status during 2017 based on separate IRS cash funding calculations. Capital market and interest rate fluctuations may also impact future funding requirements.

The components of net periodic (benefit) expense for the pension benefit plans are as follows (in thousands):



	Year Ended December 31,
	2016			2015			2014
Pension components of net benefit expense:
Interest cost on benefits obligation	$	2,185		$	2,193		$	2,181
Expected return on assets	(2,562		)	(2,655		)	(2,788		)
Net pension costs (income)	(377		)	(462		)	(607		)
Net loss amortization	893			843			506
Total amortization	893			843			506
Non-cash settlement charge	4,457			—			—
Net periodic cost (benefit) of defined benefit pension plans	$	4,973		$	381		$	(101	)

The weighted average assumptions used in determining the net periodic benefit cost and benefit obligations for the pension plans are shown below:



	Year Ended December 31,
	2016		2015		2014
Net periodic benefit cost:
Discount rate – qualified plan	4.14	%	3.82	%	4.70	%
Discount rate – nonqualified plan	3.87	%	3.59	%	4.30	%
Expected return on plan assets	6.75	%	7.25	%	7.25	%
Rate of compensation increase	N/A		N/A		N/A
Benefit obligations:
Discount rate – qualified plan	3.88	%	4.14	%	3.82	%
Discount rate – nonqualified plan	3.70	%	3.87	%	3.59	%
Rate of compensation increase – nonqualified plan	N/A		N/A		N/A
Rate of compensation increase – qualified plan	N/A		N/A		N/A

The amounts reported for net periodic pension cost and the respective benefit obligation amounts are dependent upon the actuarial assumptions used. The Company reviews historical trends, future expectations, current market conditions, and external data to determine the assumptions. The actuarial assumptions used to determine the net periodic pension cost are based upon the prior year’s assumptions used to determine the benefit obligation.

We derive our discount rate utilizing a commonly known pension discount curve, discounting future projected benefit obligation cash flows to arrive at a single equivalent rate. For fiscal year end 2016 benefit obligations, we utilized a weighted average basis given the level of yield on high-quality corporate bond interest rates at fiscal year-end 2016. The effect of the discount rate change decreased our projected benefit obligation at December 31, 2016 by approximately $1.2 million and we believe will decrease our 2017 pension expense by less than $0.1 million.

In selecting the expected long-term rate of return on assets for the qualified plan, we considered the average rate of earnings expected on the funds invested or to be invested to provide for the benefits of these plans. We, with input from the plans’ professional investment managers and actuaries, also considered the average rate of earnings expected on the funds invested or to be invested to provide plan benefits. This process included determining expected returns for the various asset classes that comprise the plans’ target asset allocation. This basis for selecting the long-term asset return assumptions is consistent with the prior year. Using generally accepted diversification techniques, the plans’ assets, in aggregate and at the individual portfolio level, are invested so that the total portfolio risk exposure and risk-adjusted returns best meet the plans’ long-term liabilities to employees. Plan asset allocations are reviewed periodically and rebalanced to achieve target allocation among the asset categories when necessary. This included considering the pension asset allocation and the expected returns likely to be earned over the life of the plans.

During the third quarter of 2016, management offered a lump sum cash payout option to terminated and vested participants in the Plan. In connection with this action, the window for participants who opt to avail themselves of this program closed during the fourth quarter 2016. During Q4 2016 we incurred a $4.5 million non-cash settlement charge which has been recorded within the Special and restructuring charges, net line item. Also during the fourth quarter, the Plan made $8.8 million of payments to participants who elected to receive distributions.

The funded status of the defined benefit plans and amounts recognized in the consolidated balance sheets, measured as of December 31, 2016 and December 31, 2015 are as follows (in thousands):



	December 31,
	2016			2015
Change in projected benefit obligation:
Balance at beginning of year	$	56,939		$	58,819
Interest cost	2,185			2,193
Actuarial loss (gain)	(2,932		)	(2,077		)
Benefits paid	(2,092		)	(1,996		)
Settlement payments	(8,800		)	—
Balance at end of year	$	45,300		$	56,939
Change in fair value of plan assets:
Balance at beginning of year	$	39,369		$	39,826
Actual return on assets	1,904			(457		)
Benefits paid	(2,092		)	(1,996		)
Settlement payments	(8,800		)	—
Employer contributions	1,395			1,996
Fair value of plan assets at end of year	$	31,776		$	39,369
Funded status:
Excess of projected benefit obligation over the fair value of plan assets	$	(13,524	)	$	(17,570	)
Pension plan accumulated benefit obligation (“ABO”)	$	39,886		$	51,395
Supplemental pension plan ABO	5,414			5,544
Aggregate ABO	$	45,300		$	56,939

The following information is presented as of December 31, 2016 and 2015 (in thousands):



	2016			2015
Funded status, end of year:
Fair value of plan assets	$	31,776		$	39,369
Benefit obligations	(45,300		)	(56,939		)
Net pension liability	$	(13,524	)	$	(17,570	)
Pension liability recognized in the balance sheet consists of:
Current liability	$	(393	)	$	—
Non-current liability	(13,131		)	(17,570		)
Total	$	(13,524	)	$	(17,570	)
Amounts recognized in accumulated other comprehensive income consist of:
Net losses	$	21,640		$	29,263

Estimated future pension expense to be recognized in other comprehensive income (loss):	2017
Amortization of net losses	$	594

As of December 31, 2016, the benefit payments expected to be paid in each of the next five years and the aggregate for the five fiscal years thereafter are as follows (in thousands):



	2017		2018		2019		2020		2021		2022-2025
Expected benefit payments	$	2,335	$	2,397	$	2,467	$	2,560	$	2,661	$	13,897

The fair value of our pension plan assets as of December 31, 2016 and 2015 are $31.8 million and $39.4 million, respectively. Refer to Note 16, "Fair Value" for further disclosure regarding our fair value hierarchy assessment.

Our investment objectives for the portfolio of the plans’ assets are to approximate the return of a composite benchmark comprised of 25% of the Barclays Capital Aggregate Bond Index, 8% of the Morgan Stanley Capital International EAFE Index, 47% of the Russell 1000 Index, 10% of the Russell 2000 Index, 8% of the Russell 600 Index, and 2% in cash. We also seek to maintain a level of volatility (measured as standard deviation of returns) which approximates that of the composite benchmark returns. Realigning among asset classes will occur periodically as global markets change. Portfolio diversification provides protection against a single security or class of securities having a disproportionate impact on aggregate performance. The long-term target allocations for plan assets are 73% in equities, 25% in fixed income, and 2% in cash, although the actual plan asset allocations may be within a range around these targets.