EMPLOYEE BENEFIT PLANS

Defined contribution plan. Under the Team, Inc. Salary Deferral Plan (the “Plan”), contributions are made to the Plan by qualified employees at their election and our matching contributions to the Plan are made at specified rates. Our contributions to the Plan in the years ended December 31, 2018, 2017, and 2016 were approximately $11.0 million, $10.4 million, $7.1 million, respectively.

Defined benefit plans. In connection with our acquisition of Furmanite, we assumed liabilities associated with the defined benefit pension plans of two foreign subsidiaries, one plan covering certain United Kingdom employees (the “U.K. Plan”) and the other covering certain of its Norwegian employees (the “Norwegian Plan”). As the Norwegian Plan represented approximately one percent of both the Company’s total pension plan liabilities and total pension plan assets, only the schedules of net periodic pension cost (credit) and changes in benefit obligation and plan assets include combined amounts from the two plans, while assumption and narrative information relates solely to the U.K. Plan. In connection with the sale of the Company’s Norwegian operations in 2018, all assets and liabilities associated with the Norwegian Plan were transferred to the buyer.

Benefits for the U.K. Plan are based on the average of the employee’s salary for the last three years of employment. The U.K. Plan has had no new participants added since the plan was frozen in 1994 and accruals for future benefits ceased in connection with a plan curtailment in 2013. Plan assets are primarily invested in unitized pension funds managed by U.K. registered fund managers. The most recent valuation of the U.K. Plan was performed as of December 31, 2018. Estimated defined benefit pension plan contributions for 2019 are expected to be approximately $2.3 million.

Pension benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates. The discount rate assumption used to determine end of year benefit obligations was 2.8% as of December 31, 2018. These rates are reviewed annually and adjusted to reflect current conditions. These rates are determined appropriate based on reference to yields. The expected return on plan assets of 3.3% for 2019 is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. Mortality and retirement rates are based on actual and anticipated plan experience. In accordance with GAAP, actual results that differ from the assumptions are accumulated and are subject to amortization over future periods and, therefore, generally affect recognized expense in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the pension obligation and future expense.

Net pension cost (credit) included the following components (in thousands):



	Twelve Months Ended December 31,
	2018			2017			2016¹
Service cost	$	77		$	90		79
Interest cost	2,303			2,438			2,504
Expected return on plan assets	(3,720		)	(3,110		)	(2,577	)
Amortization of net actuarial (gain) loss	(78		)	71			—
Net periodic pension cost (credit)	$	(1,418	)	$	(511	)	6

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1Reflects net pension cost from the date of the Furmanite acquisition.

The weighted-average assumptions used to determine benefit obligations at December 31, 2018 and 2017 are as follows:



	December 31,
	2018		2017
Discount rate	2.8	%	2.5	%
Rate of compensation increase¹	Not applicable		Not applicable
Inflation	3.2	%	3.1	%

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1Not applicable due to plan curtailment.

The weighted-average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31, 2018 and 2017 are as follows:



	Twelve Months Ended December 31,
	2018		2017
Discount rate	2.5	%	2.7	%
Expected long-term return on plan assets	4.7	%	4.5	%
Rate of compensation increase¹	Not applicable		Not applicable
Inflation	3.1	%	3.3	%

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1Not applicable due to plan curtailment.

The plan actuary determines the expected return on plan assets based on a combination of expected yields on equity securities and corporate bonds and considering historical returns.

The expected long-term rate of return on invested assets for 2019 is determined based on the weighted average of expected returns on asset investment categories as follows: 3.3% overall, 5.8% for equities and 2.7% for debt securities.

The following table sets forth the changes in the benefit obligation and plan assets for the years ended December 31, 2018 and 2017 (in thousands):



	Twelve Months Ended December 31,
	2018			2017
Projected benefit obligation:
Beginning of year	$	96,875		$	89,206
Service cost	77			90
Interest cost	2,303			2,438
Actuarial (gain) loss	(4,347		)	890
Benefits paid	(4,539		)	(4,187		)
Prior service cost	669			—
Disposal of Norwegian Plan	(1,075		)	—
Foreign currency translation adjustment and other	(5,404		)	8,438
End of year	84,559			96,875
Fair value of plan assets:
Beginning of year	81,899			67,967
Actual gain (loss) on plan assets	(462		)	7,383
Employer contributions	2,404			4,350
Benefits paid	(4,539		)	(4,187		)
Disposal of Norwegian Plan	(983		)	—
Foreign currency translation adjustment and other	(4,700		)	6,386
End of year	73,619			81,899
Excess projected obligation under (over) fair value of plan assets at end of year	$	(10,940	)	$	(14,976	)
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	(7,190	)	$	(7,221	)
Prior service cost	(669		)	—
Total	$	(7,859	)	$	(7,221	)

Significant changes affecting pension benefit obligations in 2018 compared to 2017 primarily includes actuarial gains in 2018 versus actuarial losses in 2017 due to changes in market conditions that affect the financial assumptions used to value liabilities as well as foreign currency translation adjustments due to the strengthening of the U.S. Dollar versus the British Pound in 2018. The accumulated benefit obligation for the U.K. Plan was $84.6 million and $95.6 million at December 31, 2018 and 2017, respectively.

At December 31, 2018, expected future benefit payments are as follows for the years ended December 31, (in thousands):



2019	$	3,403
2020	3,536
2021	3,752
2022	3,926
2023	3,811
2024-2028	22,475
Total	$	40,903

The following tables summarize the plan assets of the U.K. Plan measured at fair value on a recurring basis (at least annually) as of December 31, 2018 and 2017 (in thousands):



December 31, 2018
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3) (a)
Cash	$	1,119	$	1,119	$	—	$	—
Equity securities:
Diversified growth fund (h)	12,330		—		12,330		—
Global equity fund (o)	1,835		—		1,835		—
Fixed income securities:
U.K. government fixed income securities (k)	18,048		—		18,048		—
U.K. government index-linked securities (l)	14,245		—		14,245		—
Global absolute return bond fund (m)	18,570		—		18,570		—
Corporate bonds (n)	7,472		—		7,472		—
Total	$	73,619	$	1,119	$	72,500	$	—



December 31, 2017
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3) (a)
Cash	$	651	$	651	$	—	$	—
Equity securities:
U.K. equity (b)	17,809		—		17,809		—
U.S. equity index (c)	4,370		—		4,370		—
European equity index (d)	4,378		—		4,378		—
Pacific rim equity index (e)	3,506		—		3,506		—
Japanese equity index (f)	2,733		—		2,733		—
Emerging markets equity index (g)	2,785		—		2,785		—
Diversified growth fund (h)	17,296		—		17,296		—
Global absolute return fund (i)	6,534		—		6,534		—
Fixed income securities:
Cash fund (j)	5,315		—		5,315		—
U.K. government fixed income securities (k)	6,494		—		6,494		—
U.K. government index-linked securities (l)	8,934		—		8,934		—
Total	$	80,805	$	651	$	80,154	$	—

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The net asset value of the commingled equity and fixed income funds are determined by prices of the underlying securities, less the funds’ liabilities, and then divided by the number of shares outstanding. As the funds are not traded in active markets, the commingled funds are classified as Level 2 or Level 3 assets. The net asset value is corroborated by observable market data (e.g., purchase or sale activities) for Level 2 assets.


b)	This category includes investments in U.K. companies and aims to achieve a return that is consistent with the return of the FTSE All-Share Index.


c)	This category includes investments in a variety of large and small U.S. companies and aims to achieve a return that is consistent with the return of the FTSE All-World USA Index.


d)	This category includes investments in a variety of large and small European companies and aims to achieve a return that is consistent with the return of the FTSE All-World Developed Europe ex-U.K. Index.


e)	This category includes investments in a variety of large and small companies across the Australian, Hong Kong, New Zealand and Singapore markets and aims to achieve a return that is consistent with the return of the FTSE-All-World Developed Asia Pacific ex-Japan Index.


f)	This category includes investments in a variety of large and small Japanese companies and aims to achieve a return that is consistent with the return of the FTSE All-World Japan Index.


g)	This category includes investments in companies in the Emerging Markets to achieve a return that is consistent with the return of the IFC Investable Index ex-Malaysia.


h)	This category includes investments in a diversified portfolio of equity, bonds, alternatives and cash markets and aims to achieve a return that is consistent with the return of the Libor GBP 3 month +3% Index.


i)	This category includes investments in a diversified portfolio of equity and bonds combined with investment strategies based on advanced derivative techniques and aims to achieve a return over rolling three-year periods equivalent to cash plus 5% per year, gross of fees.


j)	This category includes investments in British pound sterling-denominated money market instruments and fixed-income securities issued by governments, corporations or other issuers which may be listed or traded on a recognized market.


k)	This category includes investments in funds with the objective to provide a leveraged return to U.K. government fixed income securities (gilts) that have maturity periods ranging from 2030 to 2060.


l)	This category includes investments in funds with the objective to provide a leveraged return to various U.K. government indexed-linked securities (gilts), with maturity periods ranging from 2022 to 2062. The funds invest in U.K. government bonds and derivatives.


m)	This category includes investments in funds predominantly in a wide range of fixed and floating rate investment grade and below investment grade debt instruments traded on regulated markets worldwide with the objective to achieve a return of 3% above 1 month LIBOR over a 3-year basis.


n)	This category includes investments in a diversified pool of debt and debt like assets to generate capital and income returns.


o)	This category includes investments in a diversified portfolio of equity, bonds, money markets, alternatives and credit markets to achieve a return with downside protection through monthly put options.

Investment objectives for the U.K. Plan, as of December 31, 2018, are to:


•	optimize the long-term return on plan assets at an acceptable level of risk


•	maintain a broad diversification across asset classes


•	maintain careful control of the risk level within each asset class

The trustees of the U.K. Plan have established a long-term investment strategy comprising global investment weightings targeted at 27.5% (range of 25% to 30%) for equity securities/diversified growth funds and 72.5% (range of 70% to 75%) for debt securities. During 2018, the U.K. Plan changed its asset allocation and target asset allocations to reduce investment strategy risk from equity to debt securities. Diversified growth funds are actively managed absolute return funds that hold a combination of debt and equity securities. Selection of the targeted asset allocation was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations and the timing of benefit payments and contributions.

The following table sets forth the weighted-average asset allocation and target asset allocations as of December 31, 2018 and 2017 by asset category:



	Asset Allocations				Target Asset Allocations
	2018		2017		2018		2017
Equity securities and diversified growth funds¹	19.2	%	73.5	%	27.5	%	65.0	%
Debt securities²	79.2	%	25.7	%	72.5	%	35.0	%
Other	1.5	%	0.8	%	—	%	—	%
Total	100	%	100	%	100	%	100	%

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1	Diversified growth funds refer to actively managed absolute return funds that hold a combination of equity and debt securities.


2	Includes investments in funds with the objective to provide leveraged returns to U.K. government fixed income securities, U.K. government indexed-linked securities, global bonds, and corporate bonds.