

10.		BENEFIT PLANS

Savings Plan – The Company sponsors a defined contribution 401(k) plan, for its U.S. based employees. The plan provides for the deferral of employee compensation under Section 401(k) and a discretionary Company match. In 2015, 2014, and 2013, this match was 35% per dollar of participant deferral, up to 6% of the total compensation for legacy Greatbatch associates. Net costs related to this defined contribution plan were $2.3 million in 2015, $2.2 million in 2014, and $2.0 million in 2013.

In addition to the above, under the terms of the 401(k) plan document there is an annual discretionary defined contribution of up to 4% of each legacy Greatbatch employee’s eligible compensation based upon the achievement of certain performance targets. This amount is contributed to the 401(k) plan in the form of Company stock. Compensation cost recognized related to the defined contribution plan was $0.0 million, $4.2 million, $4.8 million in 2015, 2014, and 2013, respectively. As of January 1, 2016, the 401(k) Plan held approximately 580,000 shares of Company stock.

Subsequent to the Lake Region Medical acquisition, the Company continued the 401(k) plan previously provided to Lake Region Medical employees. This plan is available to most Lake Region employees whereby employees are allowed to contribute up to 50% of gross salary. The Company matches 50% of an employee’s contributions for the first 6% of the employee’s gross salary at a maximum contribution rate per employee of 3% of the employee’s gross salary. The employee’s contributions vest immediately, while the Company’s contributions vest over a five-year period. Net costs related to this defined contribution plan since the date of acquisition was $0.8 million in 2015.

Defined Benefit Plans – The Company is required to provide its employees located in Switzerland, Mexico, France, and Germany certain statutorily mandated defined benefits. Under these plans, benefits accrue to employees based upon years of service, position, age and compensation. The defined benefit pension plan provided to the Company’s employees located in Switzerland is a funded contributory plan, while the plans that provide benefits to the Company’s employees located in Mexico, France, and Germany are unfunded and noncontributory. The liability and corresponding expense related to these benefit plans is based on actuarial computations of current and future benefits for employees.

During 2012, the Company transferred most major functions performed at its facilities in Switzerland into other existing facilities. As a result, the Company curtailed its defined benefit plan provided to employees at those Swiss facilities during 2012. In accordance with ASC 715, this gain was recognized in Other Operating Expenses, Net as the related employees were terminated. Since Swiss plan assets were sufficient to cover all plan liabilities, during 2012 the plan assets were transferred into cash. During 2013, the plan assets that remained after settlement payments were made were transferred to an AA- rated insurance carrier who bears the pension risk and longevity risk, and will be used to cover the pension liability for the remaining retirees of the Swiss plan, as well as the remaining employees at that location.

Information relating to the funding position of the Company’s defined benefit plans as of the plans measurement date of January 1, 2016 and January 2, 2015 were as follows (in thousands):



	Year Ended
	January 1, 2016			January 2, 2015
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	2,843		$	2,422
Projected benefit obligation acquired	4,316			—
Service cost	439			203
Interest cost	165			75
Plan participants’ contribution	61			36
Actuarial loss	235			630
Benefits transferred in, net	258			155
Settlement/curtailment gain	—			(337		)
Foreign currency translation	(325		)	(341		)
Projected benefit obligation at end of year	7,992			2,843
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	437			731
Employer contributions (refund)	69			(39		)
Plan participants’ contributions	61			36
Actual loss on plan assets	(39		)	(101		)
Benefits transferred in, net	362			198
Settlements	—			(337		)
Foreign currency translation	(19		)	(51		)
Fair value of plan assets at end of year	871			437
Projected benefit obligation in excess of plan assets at end of year	$	7,121		$	2,406
Defined benefit liability classified as other current liabilities	$	46		$	25
Defined benefit liability classified as long-term liabilities	$	7,075		$	2,381
Accumulated benefit obligation at end of year	$	6,299		$	1,938

Amounts recognized in Accumulated Other Comprehensive Income are as follows (in thousands):



	Year Ended
	January 1, 2016			January 2, 2015
Net loss occurring during the year	$	164		$	736
Amortization of losses	(156		)	(138		)
Prior service cost	(1		)	(2		)
Amortization of prior service cost	(9		)	(11		)
Foreign currency translation	—			(76		)
Pre-tax adjustment	(2		)	509
Taxes	22			(135		)
Net loss	$	20		$	374

The amortization of amounts in Accumulated Other Comprehensive Income expected to be recognized as components of net periodic benefit expense during 2016 are as follows (in thousands):



Amortization of net prior service cost	$	10
Amortization of net loss	172

Net pension cost is comprised of the following (in thousands):



	Year Ended
	January 1, 2016			January 2, 2015
Service cost	$	439		$	203
Interest cost	165			75
Settlements loss	—			105
Expected return on assets	(11		)	(3		)
Recognized net actuarial loss	164			45
Net pension cost	$	757		$	425

The weighted-average rates used in the actuarial valuations were as follows:



	Projected Benefit Obligation				Net Pension Cost
	January 1, 2016		January 2, 2015		2015		2014		2013
Discount rate	2.2	%	2.3	%	2.3	%	3.4	%	2.1	%
Salary growth	2.9	%	3.0	%	3.0	%	3.1	%	2.4	%
Expected rate of return on assets	2.0	%	2.3	%	2.3	%	2.5	%	—	%

The discount rate used is based on the yields of AA bonds with a duration matching the duration of the liabilities plus approximately 50 basis points to reflect the risk of investing in corporate bonds. The expected rate of return on plan assets reflects earnings expectations on existing plan assets.

Plan assets were comprised of the following (in thousands):



			Fair Value Measurements Using
	January 1, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Insurance contract	$	871	$	—	$	871	$	—
Total	$	871	$	—	$	871	$	—



			Fair Value Measurements Using
	January 2, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Insurance contract	$	437	$	—	$	437	$	—
Total	$	437	$	—	$	437	$	—

The fair value of Level 2 plan assets are obtained from quoted market prices in inactive markets or valuation models with observable market data inputs to estimate fair value. These observable market data inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data.

Estimated benefit payments over the next ten years are as follows (in thousands):



2016	$	166
2017	205
2018	225
2019	277
2020	265
2020-2024	1,619