NOTE 8. POST-RETIREMENT BENEFITS

401(k) Plan

In the U.S., we sponsor a 401(k) plan that allows voluntary contributions by eligible employees, who may elect to contribute up to the maximum allowed under the U.S. Internal Revenue Service regulations. We generally make 100 percent matching contributions on the first 3 percent and 50 percent matching contributions on the following 2 percent (up to a maximum of $10,400 per eligible employee for calendar year 2014) and we recorded related expenses of $0.8 million, $1.4 million and $1.0 million in fiscal years ended June 28, 2014, June 29, 2013 and June 30, 2012, respectively, including amounts related to our discontinued operations.

Defined Contribution Plan

We contribute to a U.K. based defined contribution pension scheme for employees. Contributions under this plan and the related expenses were $1.4 million, $1.3 million and $1.4 million in the fiscal years ended June 28, 2014, June 29, 2013 and June 30, 2012, respectively.

Switzerland Defined Benefit Plan

During the first quarter of fiscal year 2014, we sold our Zurich Business, and as part of the sale transferred our pension plan covering employees of our Swiss subsidiary (the “Swiss Plan”) to II-VI. At the end of our first quarter of fiscal year 2014, we had no remaining obligations under the Swiss Plan.

Net periodic pension costs associated with our Swiss Plan are recorded in discontinued operations and included the following components in fiscal years ended June 28, 2014, June 29, 2013 and June 30, 2012:



	Year Ended
	June 28, 2014			June 29, 2013			June 30, 2012
	(Thousands)
Service cost	$	703		$	3,291		$	2,341
Interest cost	169			722			826
Expected return on plan assets	(279		)	(1,197		)	(1,084		)
Net amortization	76			369			—
Net periodic pension cost	$	669		$	3,185		$	2,083

Prior to transferring our pension plan to II-VI in the first quarter of fiscal year 2014, we contributed $0.5 million to our Swiss Plan. During the fiscal years ended June 29, 2013 and June 30, 2012, we contributed $2.3 million and $2.4 million, respectively, to our Swiss Plan.

Japan Defined Contribution and Benefit Plan

In connection with our acquisition of Opnext, we assumed a defined contribution plan and a defined benefit plan that provides retirement benefits to our employees in Japan.

Under the defined contribution plan, contributions are provided based on grade level and totaled $0.8 million and $0.9 million for the year ended June 28, 2014 and June 29, 2013, respectively. Employees can elect to receive the benefit as additional salary or contribute the benefit to the plan on a tax-deferred basis. Under the defined benefit plan in Japan (the "Japan Plan"), we calculate benefits based on an employee’s individual grade level and years of service. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination. As of June 28, 2014, there were no plan assets.

The reconciliation of the actuarial present value of the projected benefit obligations for the defined benefit plan for the year ended June 28, 2014 and June 29, 2013 was as follows:



	June 28, 2014			June 29, 2013
	(Thousands)
Change in projected benefit obligation:
Projected benefit obligation, beginning of period	$	8,084		$	8,399
Service cost	963			1,059
Interest cost	95			135
Benefits paid	(674		)	(285		)
Actuarial loss on obligation	22			523
Currency translation adjustment	(203		)	(1,747		)
Projected benefit obligation, end of period	$	8,287		$	8,084
Amounts recognized in consolidated balance sheets:
Accrued expenses and other liabilities:
Underfunded pension liability	$	129		$	—
Other non-current liabilities:
Underfunded pension liability	$	8,186		$	8,084
Amounts recognized in accumulated other comprehensive income, net of tax:
Pension adjustment	$	414		$	445
Accumulated benefit obligation, end of period	$	7,776		$	7,542

Net periodic pension cost associated with the Japan Plan in fiscal years ended June 28, 2014 and June 29, 2013 include the following components:



	June 28, 2014		June 29, 2013
	(Thousands)
Service cost	$	963	$	1,059
Interest cost	95		135
Net amortization	62		74
Net periodic pension cost	$	1,120	$	1,268

The projected and accumulated benefit obligations for the Japan Plan were calculated as June 28, 2014 and June 29, 2013 using the following assumptions:



	June 28, 2014		June 29, 2013
Discount rate	1.2	%	1.8	%
Salary increase rate	2.2	%	2.4	%
Expected average remaining working life (in years)	14.1		14.4

As of June 28, 2014, the accumulated benefit obligation was $7.8 million. Estimated future benefit payments under the Japan Plan are estimated to be $0.3 million in fiscal year 2015, $0.4 million in fiscal year 2016, $0.4 million in fiscal year 2017, $0.4 million in fiscal year 2018, $0.3 million in fiscal year 2019 and a total of $3.6 million for the following 5 years.