Employee Benefit Plans

The Company’s Gratuity Plans in India ("Gratuity Plan") provide for lump sum payment to vested employees on retirement or upon termination of employment in an amount based on the respective employee’s salary and years of employment with the Company. Liabilities with regard to the Gratuity Plans are determined by actuarial valuation using the projected unit credit method. Current service costs for the Gratuity Plan are accrued in the year to which they relate. Actuarial gains or losses or prior service costs, if any, resulting from amendments to the plans are recognized and amortized over the remaining period of service of the employees.

In addition, the Company’s subsidiary operating in the Philippines conforms to the minimum regulatory benefit which provide for lump sum payment to vested employees on retirement from employment in an amount based on the respective employee’s salary and years of employment with the Company (the "Philippines Plan"). The benefit costs of the Philippines Plan for the year are calculated on an actuarial basis.

The benefit obligation has been measured as of December 31, 2016. The following table sets forth the activity and the funded status of the Gratuity Plans and the amounts recognized in the Company’s consolidated financial statements at the end of the relevant periods:



	December 31,
	2016			2015
Change in projected benefit obligation:
Projected benefit obligation at the beginning of the year	$	7,909		$	7,563
Service cost	1,601			1,638
Interest cost	599			550
Benefits paid	(837		)	(851		)
Actuarial (gain)/loss	677			(609		)
Acquisition	47			—
Effect of exchange rate changes	(285		)	(382		)

Projected benefit obligation at the end of the year	$	9,711		$	7,909
Unfunded amount–non-current	$	1,977		$	1,441
Unfunded amount–current	2,094			1,545
Total accrued liability	$	4,071		$	2,986

Accumulated benefit obligation	$	6,533		$	5,537

Net gratuity cost includes the following components:



	Year ended December 31,
	2016			2015			2014
Service cost	$	1,601		$	1,638		$	1,523
Interest cost	599			550			559
Expected return on plan assets	(416		)	(385		)	(172		)
Actuarial loss	90			211			149
Net gratuity cost	$	1,874		$	2,014		$	2,059

The amount in accumulated other comprehensive loss that is expected to be recognized as a component of net periodic benefit cost over the next fiscal year is $268. The components of accumulated other comprehensive loss that have not been recognized as components of net gratuity cost in the statement of income as of December 31, 2016 and 2015 is as follows:



	December 31,
	2016		2015
Net actuarial loss	$	489	$	77
Net prior service cost	9		9
Accumulated other comprehensive loss, net of tax	$	498	$	86

The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are:



	December 31,
	2016		2015		2014
Discount rate	6.8	%	7.8	%	8.0	%
Rate of increase in compensation levels	9.2	%	8.4	%	8.2	%
Expected long term rate of return on plan assets per annum	9.0	%	9.0	%	9.0	%

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government securities adjusted for a suitable risk premium.



Expected benefit payments during the year ending December 31,
2017	$	2,782
2018	$	2,407
2019	$	2,146
2020	$	1,960
2021	$	1,785
2022 to 2026	$	5,238

The Company's gratuity plan in India is partially funded and the Philippines Plan is unfunded. The Company makes annual contributions to the employees’ gratuity fund established with Life Insurance Corporation of India and HDFC Standard Life Insurance Company. They calculate the annual contribution required to be made by the Company and manage the Gratuity Plans, including any required payouts. Fund managers manage these funds on a cash accumulation basis and declare interest retrospectively on March 31 of each year.



Change in Plan Assets
Plan assets at January 1, 2015	$	4,752
Actual return	355
Employer contribution	903
Benefits paid*	(851		)
Effect of exchange rate changes	(236		)
Plan assets December 31, 2015	$	4,923
Actual return	450
Employer contribution	1,242
Benefits paid*	(837		)
Effect of exchange rate changes	(138		)
Plan assets December 31, 2016	$	5,640

* All Benefits payments were made through the plan assets during the year ended December 31, 2016 and December 31, 2015.

The Exl Service 401(k) Plan (the “401(k) Plan”) under Section 401(k) of the Internal Revenue Code of 1986 (the “Code”), covering all eligible employees, as defined in the Code is a defined contribution plan. The Company may make discretionary contributions of up to a maximum of 3% of employee compensation within certain limits. Contributions to the 401(k) Plan amounted to $2,383, $1,907 and $1,503 during the years ended December 31, 2016, 2015 and 2014, respectively.

During the years ended December 31, 2016, 2015 and 2014, the Company contributed $6,306, $5,753 and $5,802 for the years ended December 31, 2016, 2015 and 2014, respectively, for various defined contribution plans on behalf of its employees in India, the Philippines, Bulgaria, Romania, the Czech Republic, South Africa, Colombia, and Singapore.