Pension and Other Postretirement Benefit Plans

Foreign Plan

The Compensation—Retirement Benefits Subtopic of the FASB ASC requires balance sheet recognition of the total over funded or underfunded status of pension and postretirement benefit plans. Under the guidance, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized as a component of accumulated other comprehensive income within stockholders’ equity, net of tax effects, until they are amortized as a component of net periodic benefit cost (income).

The Company’s plan is regulated by the Swiss Government and is funded by the employees and the Company. The pension benefit is based on compensation, length of service and credited investment earnings. The plan guarantees both a minimum rate of return as well as minimum annuity purchase rates. The Company’s funding policy with respect to the pension plan is to contribute the amount required by Swiss law, using the required percentage applied to the employee’s compensation. In addition, participating employees are required to contribute to the pension plan. The Company made pension contributions of $640,000, $720,000 and $722,000 in 2015, 2014 and 2013, respectively; 45% of the total contributions to the plan each year are made by the employees. This plan has a measurement date of December 31. The Company does not have any rights to the assets of the plan other than the right to offset the liabilities of the plan.

The net pension asset decreased from $7.4 million to $5.8 million during the year ended December 31, 2015. The decrease in plan assets was primarily due to a significant number of employee departures and the corresponding benefits paid from account balances combined with a decreased return on plan assets. The increase in the benefit obligation was affected by an actuarial loss resulting from assumption changes made to reflect current market conditions as well as other plan costs. This increase was partially offset by the amount of benefits paid. The accumulated benefit obligation was approximately $31.3 million as of December 31, 2015 and 2014. The plan is fully funded and continues to be in a surplus condition.

The following table reflects changes in the pension benefit obligation and plan assets for the years ended December 31, 2015 and 2014 (in thousands):



	Pension Benefits
	Years ended December 31,
	2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	33,006		$	32,577
Service cost	958			846
Interest cost	332			697
Plan participant contributions	523			593
Benefits paid	(3,064		)	(3,018		)
Actuarial loss	1,262			4,974
Plan change	83			—
Effect of foreign currency translation	53			(3,663		)
Projected benefit obligation at end of year	33,153			33,006
Changes in plan assets:
Fair value of plan assets at beginning of year	40,368			43,145
Actual return on plan assets	419			3,478
Company contributions	640			720
Plan participant contributions	523			593
Benefits paid	(3,064		)	(3,018		)
Effect of foreign currency translation	116			(4,550		)
Fair value of plan assets at end of year	39,002			40,368
Funded status at end of year	$	5,849		$	7,362

Amounts recognized in the consolidated balance sheets consist of (in thousands):



	As of December 31,
	2015		2014
Net long-term pension asset	$	5,849	$	7,362

Accumulated other comprehensive loss consists of the following:
Net prior service cost	837		853
Net loss	5,668		3,897
Accumulated other comprehensive loss before taxes	$	6,505	$	4,750

The components of net periodic pension cost and other amounts recognized in other comprehensive income (loss) before taxes are as follows (in thousands):



	Years ended December 31,
	2015			2014			2013
Components of net periodic pension cost:
Service cost	$	958		$	846		$	831
Interest cost	332			697			504
Expected return on plan assets	(1,551		)	(1,784		)	(1,539		)
Prior service cost amortization	136			140			44
Deferred loss amortization	45			—			180
Settlement cost	492			420			—
Net periodic pension cost	$	412		$	319		$	20
Other amounts recognized in other comprehensive income (loss) before income taxes are as follows:
Prior service cost amortization	$	(136	)	$	(140	)	$	(44	)
Loss (gain) on value of plan assets	1,131			(1,695		)	(2,977		)
Actuarial (gain) loss on benefit obligation	1,262			4,975			(405		)
Plan change	83			—			978
Settlement	(492		)	(420		)	—
Deferred loss amortization	(45		)	—			(180		)
Total recognized in other comprehensive income (loss), before taxes	$	1,803		$	2,720		$	(2,628	)
Total recognized in net periodic pension cost and other comprehensive income (loss), before taxes	$	2,215		$	3,039		$	(2,608	)

Assumptions used to determine the benefit obligation and net periodic pension cost are as follows:



	Pension Benefits
	Years ended December 31,
	2015		2014
Weighted-average assumptions used to determine benefit obligation:
Discount rate	0.75	%	1.00	%
Rate of compensation increase	2.50	%	2.50	%
Measurement date	11/30/2015		12/31/2014
Weighted-average assumptions used to determine net periodic pension cost:
Discount rate	1.00	%	2.25	%
Expected long-term return on plan assets	3.75	%	4.25	%
Rate of compensation increase	2.50	%	2.50	%


Percentage of the fair value of total plan assets held in each major category of plan assets:
Equity securities	29	%	33	%
Debt securities	23	%	22	%
Real estate investment funds	43	%	40	%
Other	5	%	5	%
Total	100	%	100	%

The pension plan’s overall strategy and investment policy is managed by the board of the plan. The overall long-term rate is based on the target asset allocation of 14% Swiss bonds, 10% non-Swiss hedged bonds, 10% Swiss equities, 15% global equities, 40% real estate, 5% emerging market equities, 4% alternative investments and 2% cash and other short-term investments.

The 2016 expected future long-term rate of return is estimated to be 3.00%, which is based on historical asset rates of returns for each asset allocation classification at a 0.21% rate for Swiss bonds, 0% for hedged foreign bonds, 2.54% for real estate, 3.52% for Swiss equities, 5.21% for unhedged global equities, 5.21% unhedged emerging markets, 1.23% for alternative investments and 0.23% for cash. The 2015 expected long-term rate of return was 3.75% and was based on the historical asset rates of return of 0.76% for Swiss bonds, 5.31% for unhedged emerging markets, 1.04% for hedged foreign bonds, 3.69% for real property, 4.10% for Swiss equities and 5.45% for unhedged global equities, 2.33% for alternative investments and 1.32% for cash.



Expected amortization during the year ending December 31, 2016 is as follows (in thousands):

Amortization of net prior service costs	$	149

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):



2016	$	1,360
2017	1,372
2018	1,431
2019	1,411
2020	1,340
Years 2021 through 2025	7,392
Total	$	14,306

The Company expects to contribute approximately $550,000 to the pension plan in 2016.

Investment objectives:

The primary investment goal of the pension plan is to achieve a total annualized return of 3.00% over the long-term. The investments are evaluated, compared and benchmarked to plans with similar investment strategies. The plan also attempts to minimize risk by not having any single security or class of securities with a disproportionate impact on the plan. As a guideline, assets are diversified by asset classes (equity, fixed income/bonds, and alternative investments).

The fair values of the plans assets at December 31, 2015 and 2014, by asset category, are as follows (in thousands):



			Fair Value Measurements at
			December 31, 2015
	Total		Active Market Prices (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash:
Held in Swiss Franc, Euro and USD	$	808	$	808	$	—	$	—
Equity securities:
Investment funds	12,292		11,303		989		—
Real estate investment funds	16,917		—		—		16,917
Fixed income / Bond Securities
Fixed income / Bond securities:	8,949		8,949		—		—
Other assets (accounts receivable, assets at real estate management company)	36		—		36		—
Net assets of pension plan	$	39,002	$	21,060	$	1,025	$	16,917



			Fair Value Measurements at
			December 31, 2014
	Total		Active Market Prices (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash:
Held in Swiss Franc, Euro and USD	$	973	$	973	$	—	$	—
Equity securities:
Investment funds	14,481		14,481		—		—
Real estate investment funds	16,049		—		—		16,049
Fixed income / Bond Securities
Fixed income / Bond securities:	8,839		8,839		—		—
Other assets (accounts receivable, assets at real estate management company)	26		—		26		—
Net assets of pension plan	$	40,368	$	24,293	$	26	$	16,049

Fair Value of Assets

Level 1: Observable inputs such as quoted prices in active markets for identical assets.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

For those financial instruments with significant Level 3 inputs, the following table summarizes the activity for the year by investment type:



Description	Real estate investments
Beginning balance, December 31, 2014	$	16,049
Total unrealized gains included in net gain ⁽¹⁾	869
Foreign currency translation adjustments	(1		)
Ending balance, December 31, 2015	$	16,917

_____________


(1)	Total unrealized gains are reported as a component of the pension adjustment in accumulated other comprehensive income in the consolidated statement of stockholders’ equity.

U.S. Plan

The Company has a postretirement benefit plan covering its employees in the United States. Substantially all U.S. employees are eligible to elect coverage under a contributory employee savings plan which provides for Company matching contributions based on one-half of employee contributions up to certain plan limits. The Company’s matching contributions under this plan totaled $637,000, $547,000 and $506,000 for the years ended December 31, 2015, 2014 and 2013, respectively.