10.) BENEFIT PLANS

Savings Plan

The Company sponsors a defined contribution 401(k) plan (the “Company 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 2016, 2015, and 2014, 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 $2.0 million in 2016, $2.3 million in 2015, and $2.2 million in 2014.

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. The Company did not make a discretionary stock contribution in 2016 or 2015. Compensation cost recognized related to the defined contribution plan was $4.2 million in 2014. As of December 30, 2016, certain participants in the 401(k) Plan held, on an aggregate basis, approximately 334,000 shares of Company stock.

Subsequent to the Lake Region Medical acquisition, the Company continued the 401(k) plan previously provided to legacy Lake Region Medical employees. This plan is available to most Lake Region employees whereby employees are allowed to contribute up to, subject to compliance with federal 401(k) plan contribution limits, 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 were $4.4 million in 2016 and $0.8 million from the date of acquisition through the fiscal year end in 2015.

In January 2017, the Lake Region Medical plan was merged into the Company plan. Beginning in fiscal year 2017, the Company will match $0.50 per dollar of participant deferral, up to 6% of the base salary for each participant.

(10.) BENEFIT PLANS (Continued)

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 and curtailed its defined benefit plan provided to employees at those Swiss facilities. 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.

The Company’s fiscal year end dates are the measurement dates for its defined benefit plans. Information relating to the funding position of the Company’s defined benefit plans for fiscal years 2016 and 2015 were as follows (in thousands):



	2016			2015
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	7,992		$	2,843
Projected benefit obligation acquired	—			4,316
Service cost	431			439
Interest cost	174			165
Plan participants’ contribution	75			61
Actuarial loss	341			235
Benefits transferred in, net	84			258
Foreign currency translation	(369		)	(325		)
Projected benefit obligation at end of year	8,728			7,992
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	871			437
Employer contributions	36			69
Plan participants’ contributions	75			61
Actual loss on plan assets	(9		)	(39		)
Benefits transferred in, net	224			362
Foreign currency translation	(25		)	(19		)
Fair value of plan assets at end of year	1,172			871
Projected benefit obligation in excess of plan assets at end of year	$	7,556		$	7,121
Defined benefit liability classified as other current liabilities	$	109		$	46
Defined benefit liability classified as long-term liabilities	$	7,447		$	7,075
Accumulated benefit obligation at end of year	$	7,115		$	6,299

(10.) BENEFIT PLANS (Continued)

Amounts recognized in Accumulated Other Comprehensive Income (Loss) for fiscal years 2016 and 2015 are as follows (in thousands):



	2016			2015
Net loss occurring during the year	$	368		$	164
Amortization of losses	(62		)	(156		)
Prior service cost	1			(1		)
Amortization of prior service cost	(11		)	(9		)
Pre-tax adjustment (gain) loss	296			(2		)
Taxes	283			22
Net loss	$	579		$	20

The amortization of amounts in Accumulated Other Comprehensive Income (Loss) expected to be recognized as components of net periodic benefit expense during fiscal year 2017 are as follows (in thousands):



Amortization of net prior service cost	$	9
Amortization of net loss	61

Net pension cost for fiscal years 2016 and 2015 is comprised of the following (in thousands):



	2016			2015
Service cost	$	431		$	439
Interest cost	174			165
Expected return on assets	(18		)	(11		)
Recognized net actuarial loss	72			164
Net pension cost	$	659		$	757

The weighted-average rates used in the actuarial valuations to determine the net pension cost for fiscal years 2016, 2015 and 2014 were as follows:



	2016		2015		2014
Discount rate	2.2	%	2.3	%	3.4	%
Salary growth	2.9	%	3.0	%	3.1	%
Expected rate of return on assets	2.0	%	2.3	%	2.5	%

The weighted-average rates used in the actuarial valuations to determine the projected benefit obligation for fiscal years 2016, 2015 and 2014 were as follows:



	2016		2015		2014
Discount rate	1.9	%	2.2	%	2.3	%
Salary growth	2.9	%	2.9	%	3.0	%
Expected rate of return on assets	1.5	%	2.0	%	2.3	%

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.

(10.) BENEFIT PLANS (Continued)

The following table provides information by level for the defined benefit plan assets that are measured at fair value as of December 30, 2016 and January 1, 2016 (in thousands).



	Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 30, 2016
Insurance contract	$	1,172	$	—	$	1,172	$	—
January 1, 2016
Insurance contract	$	871	$	—	$	871	$	—

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. Refer to Note 1 “Summary of Significant Accounting Policies” for discussion of the fair value measurement terms of Levels 1, 2, and 3.

Estimated benefit payments over for the next ten years as of December 30, 2016 are as follows (in thousands):



	2017		2018	2019	2020	2021	2022-2026
Estimated benefit payments	$	261	191	266	216	251	1,888