Employee Benefit Plans

The Company’s Gratuity Plans in India and the Philippines ("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.

The benefit obligation has been measured as of December 31, 2015. 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,
	2015			2014
Change in projected benefit obligation:
Benefit obligation at the beginning of the year	$	7,563		$	6,567
Service cost	1,638			1,523
Interest cost	550			559
Benefits paid	(851		)	(749		)
Actuarial (gain)/loss	(609		)	161
Divestiture	—			(350		)
Effect of exchange rate changes	(382		)	(148		)

Projected benefit obligation at the end of the year	$	7,909		$	7,563
Unfunded amount–non-current	$	1,441		$	1,544
Unfunded amount–current	1,545			1,267
Total accrued liability	$	2,986		$	2,811

Accumulated benefit obligation	$	5,537		$	5,034

Net gratuity cost includes the following components:



	Year ended December 31,
	2015			2014			2013
Service cost	$	1,638		$	1,523		$	1,341
Interest cost	550			559			444
Expected return on plan assets	(385		)	(172		)	(164		)
Actuarial loss	211			149			139
Net gratuity cost	$	2,014		$	2,059		$	1,760

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 $92. 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, 2015 and 2014 is as follows:



	December 31,
	2015		2014
Net actuarial loss	$	77	$	819
Net prior service cost	9		9
Accumulated other comprehensive loss, net of tax	$	86	$	828

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



	December 31,
	2015		2014		2013
Discount rate	7.8	%	8.0	%	8.3	%
Rate of increase in compensation levels	8.4	%	8.2	%	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,
2016	$	2,129
2017	$	1,632
2018	$	1,291
2019	$	971
2020	$	736
2021 to 2025	$	2,000

The Company's gratuity plan in India is partially funded. 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, 2014	$	2,156
Actual return	259
Employer contribution	2,567
Benefits paid*	(105		)
Effect of exchange rate changes	(125		)
Plan assets December 31, 2014	$	4,752
Actual return	355
Employer contribution	903
Benefits paid*	(851		)
Effect of exchange rate changes	(236		)
Plan assets December 31, 2015	$	4,923

* All Benefits payments were made through the plan assets during the year ended December 31, 2015. During the year ended December 31, 2014, benefits payment of $644 were made directly by the Company and benefit payments of $105 were made through the plan assets.

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 $1,907, $1,503 and $1,147 during the years ended December 31, 2015, 2014 and 2013, respectively.

During the years ended December 31, 2015, 2014 and 2013, the Company contributed $5,753, $5,802 and $5,448 for the years ended December 31, 2015, 2014 and 2013, respectively for various defined contribution plans on behalf of its employees in India, the Philippines, Romania, Bulgaria and the Czech Republic.