14. Defined Benefit Pension Plan

Certain employees of GoIndustry (UK) Limited ("GoIndustry"), which the Company acquired in July 2012, are covered by the Henry Butcher Pension Fund and Life Assurance Scheme (the "Scheme"), a qualified defined benefit pension plan.

The Company recognizes the funded status of its postretirement benefit plans, with a corresponding noncash adjustment to accumulated other comprehensive loss, net of tax, in stockholders' equity. The funded status is measured as the difference between the fair value of the plan's assets and the benefit obligation of the plan.

The net periodic benefit cost recognized for the years ended September 30, 2016, 2015 and 2014, included the following components:

Qualified Defined Benefit Pension Plan

	Year ended September 30,
	2016		2015		2014
	(in thousands)
Interest cost	$	814	$	964	$	1,125
Expected return on plan assets		(1,066)		(1,186)		(1,324)

Total net periodic benefit cost	$	(252)	$	(222)	$	(199)

The following table provides a reconciliation of benefit obligations, plan assets, and funded status related to the Company's qualified defined benefit pension plan for the years ended September 30, 2016 and September 30, 2015:

Qualified Defined Benefit Pension Plan

	Year ended September 30,
	2016		2015
	(in thousands)
Change in benefit obligation
Beginning balance	$	24,069	$	27,527
Interest cost		814		964
Benefits paid		(1,246)		(1,674)
Actuarial loss/(gain)		5,999		(905)
Foreign currency exchange rate changes		(3,315)		(1,843)

Ending balance	$	26,321	$	24,069

Qualified Defined Benefit Pension Plan

	Year ended September 30,
	2016		2015
	(in thousands)
Change in plan assets
Beginning balance at fair value	$	24,537	$	24,946
Actual return on plan assets		4,831		1,382
Benefits paid		(1,246)		(1,674)
Employer's contributions		1,482		1,613
Foreign currency exchange rate changes		(3,837)		(1,730)

Ending balance at fair value	$	25,767	$	24,537


(Underfunded) overfunded status of the plan	$	(554)	$	468

The accrued pension liability of $0.6 million is recorded in Other long-term liabilities in the Consolidated Balance Sheet. Because the plan is closed to new participants, the accumulated benefit obligation is equal to the projected benefit obligation, and totals $26.3 million and $24.1 million at September 30, 2016 and September 30, 2015, respectively.

The amount recognized in other comprehensive loss related to the Company's qualified defined benefit pension plan, net of tax, for the year ended September 30, 2016 and September 30, 2015, is shown in the following table:

Qualified Defined Benefit Pension Plan

	Year ended September 30,
	2016		2015
	(in thousands)
Accumulated OCI
Accumulated OCI at beginning of year	$	(1,321)	$	(220)
New actuarial losses/(gains)		2,547		(1,101)

Accumulated OCI at end of year	$	1,226	$	(1,321)

Estimated amounts to be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost during 2016 based on September 30, 2016 plan measurements are $0. The plan complies with the funding provisions of the UK Pensions Act 2004 and the Occupational Pension Schemes Regulations Act 2005. In fiscal year 2017, the Company expects to contribute $1.4 million to the plan. In addition, the Company expects to make the following pension plan contributions over the next 10 years:

	Plan Contributions
	(in thousands)
Year ending September 30,
2017	$	1,358
2018		1,358
2019		340
2020		—
2021		—
2022 through 2026		—

Total	$	3,056

Actuarial Assumptions

The actuarial assumptions used to determine the benefit obligations at September 30, 2016 and September 30, 2015, and to determine the net periodic (benefit) cost for the year were as follows:

Qualified Defined Benefit Pension Plan

	2016			2015
Discount rate		2.30	%		3.70	%
Expected return on plan assets		3.20	%		4.60	%
Increases to non-GMP pensions in payment accrued pre 4/6/97		0.00	%		0.00	%
Increases to non-GMP pensions in payment accrued post 4/6/97		2.00	%		1.90	%
Rate of increases to deferred CPI linked benefits		2.00	%		1.90	%
Rate of increases to deferred RPI linked benefits		3.10	%		3.00	%

Mortality—100% for males and 105% for females of S2PxA "light" tables, projected in line with 2014 CMI projection model and 1.5% pa long-term rate of improvement.

Estimated Future Benefit Payments

The Company's pension plan expects to make the following benefit payments to participants over the next 10 years:

	Pension Benefits
	(in thousands)
Year ending September 30,
2017	$	859
2018		704
2019		722
2020		748
2021		651
2022 through 2026		4,119

Total	$	7,803

Fair Value Measurements

The investment policy and strategy of the plan assets, as established by the Trustees of the plan, strive to maximize the likelihood of achieving primary objectives of the investment policy established for the plan. The primary objectives are:


	1)	Funding—to ensure that the Plan is fully funded using assumptions that contain a modest margin for prudence. Where an actuarial valuation reveals a deficit, a recovery plan will be put in place which will take into account the financial covenant of the employer;
	2)	Stability—to have due regard to the likely level and volatility of required contributions when setting the Plan's investment strategy; and
	3)	Security—to ensure that the solvency position of the Plan is expected to improve. The Trustees will take into account the strength of employer's covenant when determining the expected improvement in the solvency position of the Plan.

The assets are allocated among equity investments and fixed income securities. The assets are not rebalanced but the allocation between equities and bonds is reviewed on a periodic basis to ensure that the investments are appropriate to the Scheme's circumstances. The Trustees review the investment policy on an ongoing basis, to determine whether a change in the policy or asset allocation targets is necessary. The assets consisted of the following as of September 30, 2016:

	Actual 2016
Equity securities		39.1	%
Fixed-income securities		58.8	%
Cash equivalents		2.1	%

Total		100.0	%

The class of equity securities consists of one pooled fund whose strategy is to invest in approximately 70% UK company shares (domestic) and 30% international equity securities. The class of fixed-income securities consists of one pooled fund whose strategy is to invest in a limited number of government and corporate bonds.

The expected long-term rate of return for the plan's total assets is based on the expected returns of each of the above categories, weighted based on the current target allocation for each class. The Trustees evaluate whether adjustments are needed based on historical returns to more accurately reflect expectations of future returns.

The Company is required to present certain fair value disclosures related to its postretirement benefit plan assets, even though those assets are not included on the Company's Consolidated Balance Sheets. The following table presents the fair value of the assets of the Company's qualified defined benefit pension plan by asset category and their level within the fair value hierarchy, which has three levels based on reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets, Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs.

Balance as of September 30, 2015	Level 1		Level 2		Level 3		Total
	(in thousands)
Equity securities	$	—	$	9,692	$	—	$	9,692
Fixed-income securities		—		14,477		—		14,477
Cash equivalents		368		—		—		368

Total	$	368	$	24,169	$	—	$	24,537

Balance as of September 30, 2016	Level 1		Level 2		Level 3		Total
	(in thousands)
Equity securities	$	—	$	10,087	$	—	$	10,087
Fixed-income securities		—		15,149		—		15,149
Cash equivalents		531		—		—		531

Total	$	531	$	25,236	$	—	$	25,767

Valuation Techniques

The Company relies on pricing inputs from investment fund managers to value investments. The fund manager prices the underlying securities using independent external pricing sources.