EMPLOYEE BENEFIT PLANS

6 Months Ended

Jun. 30, 2019

EMPLOYEE BENEFIT PLANS:

As a general rule, under Israeli law, an employee whose employment has been terminated by an employer or an employee who has resigned under circumstances which entitle him/her to receive statutory severance, in each case after completing at least one year of service with a particular employer or in a particular workplace, is entitled to statutory severance. For Israeli employees hired prior to January 1, 2007 ("Group One"), the severance pay liability is calculated based on the last monthly salary of each employee multiplied by the number of years of such employee's employment and is presented in the Company's balance sheet in other long-term liabilities, as if it was payable at each balance sheet date on an undiscounted basis. This liability is partially funded by the amounts accrued in the severance component of the employees’ pension arrangements (the “Severance Fund”). The surrender value of Severance Funds is presented in other long-term assets.

The severance pay detail is as follows:



	June 30, 2019		December 31, 2018
	(in thousands)
Accrued severance liabilities	$	6,778	$	21,645
Severance assets	5,428		17,043
Unfunded portion	$	1,350	$	4,602

As a general rule, Israeli employees who were hired on or after January 1, 2007 ("Group Two"), are subject to the arrangement pursuant to Section 14 of the Severance Pay Law, 1963 (“Section 14 Arrangement”). When the Company makes the full monthly contribution equal to 8.3% of the employee's salary towards the Severance Fund and undertakes that the amounts accumulated in the Severance Fund will be released to the employee in the event that the employment relationship comes to an end, no additional calculations shall be conducted between the parties regarding the matter of severance pay and no additional payments will be made by the Company to the employee. Further, the related obligation and amounts deposited for the employee by the Company for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid.

During the first quarter of 2019, a significant portion of the employees in Group One elected to move to Group Two under settlement agreements with the Company, which were permitted by a formal approval obtained by the Company from the Israeli Ministry of Labor. In accordance with the Ministry of Labor’s approval (which applied to each of the relevant employees individually), the Company undertook to make the necessary contributions to ensure coverage of severance based on the employees' entire salary for the period during which the employees were not subject to the Section 14 Arrangement up to June 30, 2018. The Company reclassified the accumulated amount of severance assets and accrued severance liabilities as of June 30, 2018 related to these employees to accrued and other liabilities as of March 31, 2019. The Company paid the net severance liabilities (i.e., it made the necessary contributions to each of these employees’ Severance Fund) in April 2019.