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, 2017. 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:



	As of
	December 31, 2017			December 31, 2016
Change in projected benefit obligation:
Projected benefit obligation at the beginning of the year	$	9,711		$	7,909
Service cost	1,933			1,601
Interest cost	645			599
Benefits paid	(1,001		)	(837		)
Actuarial (gain)/loss	(1,471		)	677
Acquisition	—			47
Effect of exchange rate changes	488			(285		)
Projected benefit obligation at the end of the year	$	10,305		$	9,711
Unfunded amount–non-current	$	3,377		$	1,977
Unfunded amount–current	13			2,094
Total accrued liability	$	3,390		$	4,071

Accumulated benefit obligation	$	7,022		$	6,533

Net gratuity cost includes the following components:



	Year ended December 31,
	2017			2016			2015
Service cost	$	1,933		$	1,601		$	1,638
Interest cost	645			599			550
Expected return on plan assets	(401		)	(416		)	(385		)
Amortization of Actuarial loss	256			90			211
Net gratuity cost	$	2,433		$	1,874		$	2,014

The components of accumulated other comprehensive gain/(loss) (net of tax) that have not been recognized as components of net gratuity cost in the statement of income as of December 31, 2017 and 2016 are as follows:



	December 31,
	2017			2016
Net actuarial gain/(loss)	$	697		$	(831	)
Net prior service cost	(8		)	(9		)
Deferred taxes	74			342
Accumulated other comprehensive gain/(loss), net of tax	$	763		$	(498	)

The amount in accumulated other comprehensive gain that is expected to be recognized as a component of net periodic benefit cost over the next fiscal year is $161.

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



	December 31,
	2017		2016		2015
Discount rate	7.0	%	6.8	%	7.8	%
Rate of increase in compensation levels	9.1	%	9.2	%	8.4	%
Expected long term rate of return on plan assets per annum	8.3	%	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,
2018	$	2,011
2019	$	1,772
2020	$	1,531
2021	$	1,302
2022	$	1,029
2023 to 2027	$	3,206

The 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. The company earned a return of approximately 7.9% on these Gratuity Plans for the period ended December 31, 2017.



Change in Plan Assets
Plan assets at January 1, 2016	$	4,923
Actual return	450
Employer contribution	1,242
Benefits paid*	(837		)
Effect of exchange rate changes	(138		)
Plan Assets at December 31, 2016	$	5,640
Actual return	202
Employer contribution	1,700
Benefits paid*	(1,001		)
Effect of exchange rate changes	374
Plan assets at December 31, 2017	$	6,915

* All benefits payments were made through the plan assets during the year ended December 31, 2017 and December 31, 2016.

The Company maintains several 401(k) Plans (the “401(k) Plans”) 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 4% of employee compensation within certain limits. Contributions to the 401(k) Plans amounted to $2,709, $2,383 and $1,907 during the years ended December 31, 2017, 2016 and 2015, respectively.

During the years ended December 31, 2017, 2016 and 2015, the Company contributed $7,115, $6,306 and $5,753 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.