Employee Benefit Plans

12 Months Ended

Dec. 31, 2023

Employee Benefit Plans

Employee Benefit Plans

13. Employee Benefit Plans

German Pension Plan

The Company’s subsidiary in Germany provides pension benefits to certain retirees. Employees eligible for participation include all employees who started working for the Company or its predecessors prior to September 30, 1987 and have finished a qualifying period of at least 10 years. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. The German pension plan is an unfunded plan and therefore has no plan assets. No new employees are registered under this plan and the participants who are already eligible to receive benefits under this plan are no longer employees of the Company.

U.K. Pension Plan

The Company’s subsidiary in the United Kingdom provides pension benefits to certain retirees and eligible dependents. Employees eligible for participation included all full-time regular employees who were more than three years from retirement prior to October 2001. A retirement pension or a lump-sum payment may be paid dependent upon length of service at the mandatory retirement age. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. No new employees are registered under this plan and the pension obligation for the existing participants of the plan is calculated based on actual salary of the participants as at the earlier of two dates, the participants leaving the Company or December 31, 2015.

The expected rate of return assumptions for plan assets relate solely to the UK plan and are based mainly on historical performance achieved over a long period of time (15 to 20 years) encompassing many business and economic cycles. The Company assumed a weighted average expected long-term rate on plan assets of 5.87%.

Norway Pension Plan

The Company’s subsidiary in Norway provides pension benefits to eligible retirees and eligible dependents. Employees eligible for participation include all employees who were more than three years from retirement prior to March 2018. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. No new employees are registered under this plan and the pension obligation for the existing participants of the plan is calculated based on actual salary of the participants as at the later of two dates, the participants leaving the Company or April 30, 2018.

Asterion Pension Plan

In April 2018, through its acquisition of Asterion International Group, the Company became obligated to provide pension benefits to eligible retirees and eligible dependents of Asterion. Employees eligible for participation included all full-time regular employees who were more than three years from retirement prior to July 2003. A retirement pension or a lump-sum payment may be paid dependent upon length of service at the mandatory retirement age. The Company accrues the cost of these benefits over the service lives of the covered employees based on an actuarial calculation. The Company uses a December 31 measurement date for this plan. No new employees are registered under this plan and the pension obligation for the existing participants of the plan is calculated based on actual salary of the participants as at the earlier of two dates, the participants leaving the Company or April 10, 2018.

Funded Status

The change in benefit obligations, the change in the fair value of the plan assets and the funded status of the Company’s pension plans (except for the German pension plan which is unfunded) and the amounts recognized in the Company’s consolidated financial statements are as follows:

	Year ended December,
	2023		2022
Change in Benefit Obligation:
Benefit obligation at beginning of period (a)	$	61,770	$	117,472
Service cost		37		53
Interest cost		3,050		1,910
Actuarial gain		(1,019)		(44,778)
Plan amendments		—		149
Benefits paid		(2,577)		(1,915)
Foreign-exchange rate changes		3,028		(11,159)
Benefit obligation at end of year	$	64,289	$	61,732
Change in Plan Assets:
Fair value of plan assets at beginning of period	$	45,694	$	89,972
Actual return on plan assets		3,559		(36,679)
Employer contributions		2,993		2,866
Benefits paid		(2,473)		(1,818)
Foreign-exchange rate changes		2,308		(8,647)
Fair value of plan assets at end of year		52,081		45,694
Funded status at end of year	$	(12,208)	$	(16,038)
Net amount recognized in the Consolidated Balance Sheets:
Pension liability, net (b)	$	(13,192)	$	(16,917)
Amounts recognized in accumulated other comprehensive loss, net of tax consist of:
Net actuarial gain (loss)		(174)		(3,583)
Net amount recognized in accumulated other comprehensive loss, net of tax	$	(174)	$	(3,583)
Plans with underfunded or non-funded accumulated benefit obligation:
Aggregate projected benefit obligation	$	64,289	$	61,732
Aggregate accumulated benefit obligation	$	64,289	$	61,732
Aggregate fair value of plan assets	$	52,081	$	45,694

(a) An immaterial change was made in the benefit obligation at beginning of year 2023 compared to the benefit obligation at end of year 2022 on account of inclusion of payroll tax liability on Norway pension plan.

(b) Consolidated balance of $13.2 million as of December 31, 2023 includes pension liabilities of $10.1 million, $1.6 million, $(1.0) million and $1.5 million under U.K., Asterion, German and Norway pension plans, respectively, and minimum regulatory benefit for a Philippines legal entity of $1.0 million. Consolidated balance of $16.9 million as of December 31, 2022 includes pension liabilities of $13.7 million, $1.7 million, $1.2 million and $(0.6) million under U.K., Asterion, German and Norway pension plans, respectively, and minimum regulatory benefit for a Philippines legal entity of $0.8 million.

Tax Effect on Accumulated Other Comprehensive Loss

As of December 31, 2023 and 2022, the Company recorded actuarial losses of $0.2 million and $3.6 million in accumulated other comprehensive loss on the consolidated balance sheets, respectively, which is net of a deferred tax benefit of $2.0 million for each period.

Pension and Postretirement Expense

The components of the net periodic benefit cost are as follows:

	Year ended December 31,
	2023		2022
Service cost	$	37	$	53
Interest cost		3,050		1,910
Expected return on plan assets		(2,717)		(2,856)
Amortization:
Amortization of prior service cost		124		273
Amortization of net loss		1,664		1,616
Net periodic benefit cost	$	2,158	$	996

Valuation

The Company uses the corridor approach and projected unit credit method in the valuation of its defined benefit plans for the UK, Germany, and Norway. The corridor approach defers all actuarial gains and losses resulting from variances between actual results and economic estimates or actuarial assumptions. For defined benefit pension plans, these unrecognized gains and losses are amortized when the net gains and losses exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the beginning of the year. The amount in excess of the corridor is amortized over 9 years. Similarly, the Company used the Projected Unit Credit Method for the German Plan, and evaluated the assumptions used to derive the related benefit obligations consisting primarily of financial and demographic assumptions including commencement of employment, biometric decrement tables, retirement age, staff turnover. The projected unit credit method determines the present value of the Company’s defined benefit obligations and related service costs by taking into account each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately in building up the final obligation. Benefit is attributed to periods of service using the plan’s benefit formula, unless an employee’s service in later years will lead to a materially higher of benefit than in earlier years, in which case a straight-line basis is used.

The following tables set forth the principal actuarial assumptions used to determine benefit obligation and net periodic benefit costs:

	December 31,
	2023		2022		2023		2022		2023		2022		2023		2022
	UK				Germany				Norway				Asterion
Weighted-average assumptions used to determine benefit obligations:
Discount rate	4.80	%	5.00	%	3.16	%	3.80	%	3.10	%	3.00	%	3.16	%	3.80	%
Rate of compensation increase	N/A		N/A		N/A		N/A		3.50	%	3.50	%	N/A		N/A
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate	5.00	%	1.80	%	3.16	%	3.80	%	3.10	%	3.00	%	3.16	%	3.80	%
Expected asset return	5.87	%	3.45	%	N/A		N/A	%	4.45	%	4.15	%	3.16	%	3.80	%
Rate of compensation increase	N/A		N/A		N/A		N/A		3.50	%	3.50	%	N/A		N/A

The Germany plan is an unfunded plan and therefore has no plan assets. The expected rate of return assumptions for plan assets are based mainly on historical performance achieved over a long period of time (10 to 20 years) encompassing many business and economic cycles. Adjustments, upward and downward, may be made to those historical returns to reflect future capital market expectations; these expectations are typically derived from expert advice from the investment community and surveys of peer company assumptions.

The Company assumed a weighted average expected long-term rate of return on plan assets for the overall scheme of 5.79%. The Company’s long-term expected rate of return on cash is determined by reference to UK

government 10 year bond yields at the balance sheet dates. The long-term expected return on bonds is determined by reference to corporate bond yields at the balance sheet date. The long-term expected rate of return on equities and diversified growth funds is based on the rate of return on UK long dated government bonds with an allowance for out-performance. The long-term expected rate of return on the liability driven investments holdings is determined by reference to UK government 20 year bond yields at the balance sheet date.

The discount rate assumption was developed considering the current yield on an investment grade non-gilt index with an adjustment to the yield to match the average duration of the index with the average duration of the plan’s liabilities. The index utilized reflected the market’s yield requirements for these types of investments.

The inflation rate assumption was developed considering the difference in yields between a long-term government stocks index and a long-term index-linked stocks index. This difference was modified to consider the depression of the yield on index-linked stocks due to the shortage of supply and high demand, the premium for inflation above the expectation built into the yield on fixed-interest stocks and the government’s target rate for inflation (CPI) at 2.3%. The assumptions used are the best estimates chosen from a range of possible actuarial assumptions which, due to the time scale covered, may not necessarily be borne out in practice.

Plan Assets

The investment objective for the plan is to earn, over moving fifteen to twenty year periods, the long-term expected rate of return, net of investment fees and transaction costs, to satisfy the benefit obligations of the plan, while at the same time maintaining sufficient liquidity to pay benefit obligations and proper expenses, and meet any other cash needs, in the short-to medium-term.

The Company’s investment policy related to the defined benefit plan is to continue to maintain investments in government gilts and highly rated bonds as a means to reduce the overall risk of assets held in the fund. No specific targeted allocation percentages have been set by category, but are set at the direction and discretion of the plan trustees. The weighted average allocation of plan assets by asset category is as follows:

	December 31,
	2023		2022
U.K. and other international equities	27.3	%	27.0	%
U.K. government and corporate bonds	5.1		5.5
Diversified growth fund	15.1		18.5
Liability driven investments	50.9		44.3
Multi-asset credit fund	1.6		4.7
Total	100.0	%	100.0	%

The following tables set forth, by category and within the fair value hierarchy, the fair value of the Company’s pension assets at December 31, 2023 and 2022:

	December 31, 2023
	Total		Level 1		Level 2		Level 3
Asset Category:
Cash	$	941	$	941	$	—	$	—
Equity funds:
U.K.		—		—		—		—
Other international		13,297		—		13,297		—
Fixed income securities:
Corporate bonds / U.K. Gilts		2,671		—		2,671		—
Other investments:
Diversified growth fund		7,846		—		7,846		—
Liability driven investments		26,488		—		26,488		—
Multi-asset credit fund		838		—		838		—
Total fair value	$	52,081	$	941	$	51,140	$	—

	December 31, 2022
	Total		Level 1		Level 2		Level 3
Asset Category:
Cash	$	932	$	932	$	—	$	—
Equity funds:
U.K.		—		—		—		—
Other international		11,400		—		11,400		—
Fixed income securities:
Corporate bonds / U.K. Gilts		2,529		—		2,529		—
Other investments:
Diversified growth fund		8,417		—		8,417		—
Liability driven investments		20,258		—		20,258		—
Multi-asset credit fund		2,158		—		2,158		—
Total fair value	$	45,694	$	932	$	44,762	$	—

The plan assets are categorized as follows, as applicable:

Level 1: Any asset for which a unit price is available and used without adjustment, cash balances, etc.

Level 2: Any asset for which the amount disclosed is based on market data, for example a fair value measurement based on a present value technique (where all calculation inputs are based on data).

Level 3: Other assets. For example, any asset value with a fair value adjustment made not based on available indices or data.

Employer Contributions

The Company’s funding is based on governmental requirements and differs from those methods used to recognize pension expense. The Company made contributions of $3.0 million and $2.9 million to its pension plans during the years ended December 31, 2023 and 2022, respectively. The Company has fully funded the pension plans for 2023 based on current plan provisions. The Company expects to contribute $2.7 million to the pension plans during 2024, based on current plan provisions.

Estimated Future Benefit Payments

The estimated future pension benefit payments expected to be paid to plan participants are as follows:

	Estimated
	Benefit
	Payments
Year ended December 31,
2024	$	2,161
2025		2,781
2026		2,800
2027		3,122
2028		3,537
2029 – 2033		18,062
Total	$	32,463