Note 14. Defined Benefit Pension Obligation

The Company has established a defined pension plan for its employees in its Switzerland subsidiary. The plan provides benefits to employees upon retirement, death or disability. The Company uses June 30 as the year‑end measurement date for this plan. The unfunded liability of $2.0 million was recognized in long‑term other liabilities in the accompanying balance sheet as of June 30, 2018. Actuarial gain of $0.9 million was recognized in other comprehensive loss in fiscal 2018.

Obligations and Funded Status

The following table presents the funded status of the defined benefit pension plan (in thousands):

	June 30,
	2018			2017
Change in benefit obligation:
Benefit obligation—beginning of fiscal year	$	13,979		$	12,435
Service cost		1,887			1,996
Interest cost		97			49
Plan participants’ contributions		1,878			1,945
Plan amendment		(108	)		—
Actuarial gain		(935	)		(846	)
Foreign currency changes		(470	)		265
Benefit and expense payments		(2,074	)		(1,865	)
Benefit obligation—end of fiscal year	$	14,254		$	13,979
Change in plan assets:
Plan assets—beginning of fiscal year	$	11,293		$	9,572
Employer contributions		1,347			1,283
Actual return on plan assets		141			137
Plan participants’ contributions		1,878			1,945
Foreign currency changes		(393	)		221
Benefit and expense payments		(2,074	)		(1,865	)
Plan assets—end of fiscal year	$	12,192		$	11,293
Funded status	$	(2,062	)	$	(2,686	)
Amounts recognized within the consolidated balance sheets:
Assets	$	—		$	—
Long-term other liabilities		(2,062	)		(2,686	)
Net amount recognized	$	(2,062	)	$	(2,686	)

The following table presents the amounts recognized in accumulated other comprehensive loss (before tax) for the defined benefit pension plan (in thousands):

	June 30,
	2018			2017
Net loss	$	(1,117	)	$	(2,066	)
Prior service cost		973			949
Accumulated other comprehensive loss	$	(144	)	$	(1,117	)

The following table presents the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for this defined benefit pension plan where accumulated benefit obligation exceeded the fair value of plan assets (in thousands):

	June 30,
	2018		2017
Projected benefit obligation	$	14,254	$	13,979
Accumulated benefit obligation	$	12,413	$	11,293
Fair value of plan assets	$	12,192	$	11,293

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Loss

The following table shows the components of the Company’s net periodic benefit costs and the other amounts recognized in other comprehensive loss, before tax, related to the Company’s defined benefit pension plan (in thousands):

	Year ended June 30,
	2018			2017			2016
Net Periodic Benefit Costs:
Service cost	$	1,887		$	1,996		$	1,903
Interest cost		97			49			76
Expected returns on assets		(156	)		(132	)		(102	)
Amortization of prior service cost		(44	)		(46	)		—
Amortization of net loss		11			114			53
Net periodic benefit costs		1,795			1,981			1,930
Other Amounts Recognized in Other Comprehensive Loss:
Net (gain) loss arising during the year		(901	)		(881	)		1,093
Prior service cost		(105	)		46			(491	)
Amortization of prior service cost		44			—			—
Amortization of net gain		(11	)		(114	)		(53	)
Total recognized in other comprehensive gain (loss)		(973	)		(949	)		549
Total recognized in net periodic benefit costs and other comprehensive loss	$	822		$	1,032		$	2,479

The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost during fiscal year 2019 related to the Company’s defined benefit pension plan are as follows (in thousands):

	2019
Net loss	$	631
Prior service credit		(505	)
Accumulated other comprehensive loss	$	126

Assumptions

The assumptions used to determine net periodic benefit cost and to compute the expected long‑term return on assets for the Company’s defined benefit pension plan were as follows:

	Fiscal Years
	2018			2017			2016
Net Periodic Benefit Costs:
Discount rate		0.90	%		0.70	%		0.40	%
Rate of compensation increase		1.50	%		2.00	%		2.00	%
Expected long-term return on assets		1.40	%		1.40	%		1.40	%

The assumptions used to measure the benefit obligation for the Company’s defined benefit pension plan were as follows:

	June 30,
	2018			2017
Benefit Obligation:
Discount rate		0.90	%		1.40	%
Rate of compensation increase		1.50	%		2.00	%

Estimated Contributions and Future Benefit Payments

The Company made contributions of approximately $1.3 million, $1.3 million and $1.2 million to the defined benefit pension plan during fiscal years 2018, 2017 and 2016 respectively. The Company expects total contributions to the defined benefit pension plan for fiscal year 2019 will be approximately $1.4 million.

Estimated future benefit payments to the defined benefit pension plan at June 30, 2018 were as follows (in thousands):

Year Ending June 30,	Future Benefits
2019	$	1,093
2020		1,006
2021		942
2022		894
2023		858
Thereafter		4,820
Total	$	9,613

Plan Assets

The plan assets are invested in insurance contracts with Swiss Life Foundation BVG (BVG) insurance company based in Zurich, Switzerland at the end of fiscal year 2017 and 2018 and are expected to be invested 100% in insurance contracts in fiscal 2019, which are reinsured by Swiss Life Ltd (SLL). SLL invests the vested pension capital and provides a 100% capital and interest rate guarantee as negotiated by the Company. In 2018, the Company negotiated a guaranteed interest rate of 1.25% for mandatory retirement savings and 0.75% for supplementary retirement savings. The pension plan is entitled to an annual bonus from the SLL comprising the effective savings, risk and cost results. The technical administration and management of the savings account are guaranteed by the SLL on behalf of BVG. Insurance benefits due are paid directly to the entitled persons by the SLL in the name of and for the account of the collective foundation. The Company has committed itself to pay the annual contributions and costs due under the pension fund regulations.

The contract of affiliation between the Company and BVG can be terminated by either side. In the event of a termination, recipients of retirement and survivors’ benefits would remain with the collective foundation. The Company commits itself to transfer its active insured members and recipients of disability benefits to the new employee benefits institution, thus releasing BVG from all obligations.