Pension and Retirement Plans

12 Months Ended

Sep. 30, 2022

Pension and Retirement Plans

Pension and Retirement Plans

14.    Pension and Retirement Plans

We have defined benefit and defined contribution plans in the U.K. and in the U.S. In the U.K., the Company provides defined benefit pension plans for certain employees and former employees and defined contribution plans for the majority of the employees. The defined benefit plans in the U.K. are frozen to newly hired employees and have been for the two years ended September 30, 2022. In the U.S., the Company also provides defined contribution plans that cover most employees and supplementary retirement plans to certain employees and former employees who are now retired. These supplementary retirement plans are also closed to newly hired employees and have been for the two years ended September 30, 2022. These supplementary plans are funded through whole life insurance policies. The Company expects to recover all insurance premiums paid under these policies in the future, through the cash surrender value of the policies and any death benefits or portions thereof to be paid upon the death of the participant. These whole life insurance policies are carried on the balance sheet at their cash surrender values as they are owned by the Company and not assets of the defined benefit plans. In the U.S., the Company also provides for officer death benefits and post-retirement health insurance benefits through supplemental post-retirement plans to certain officers. The Company also funds these supplemental plans’ obligations through whole life insurance policies on the officers. A gain on a life insurance policy of $0.1 million occurred during the second quarter of fiscal year 2022. The gain on this life insurance policy was not related to a current employee at time of expiration. The Company received $322 thousand from the life insurance policy during Q3 of fiscal year 2022. Additionally, during the fiscal third quarter management made the decision to pay back approximately $0.9 million of insurance policy loans.

Defined Benefit Plans

The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the consolidated balance sheets.

The domestic supplemental retirement plans have life insurance policies which are not considered plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. These insurance policies are included in the balance sheet at their cash surrender value, net of policy loans, aggregating $3.5 million and $2.6 million as of September 30, 2022 and 2021, respectively. The loans against the policies have been taken out by the Company to pay the premiums. The costs and benefit payments for these plans are paid through operating cash flows of the Company to the extent that they cannot be funded through the use of the cash values in the insurance policies. The Company expects that the recorded value of the insurance policies will be sufficient to fund all of the Company’s obligations under these plans.

Assumptions:

The following table provides the weighted average actuarial assumptions used to determine the actuarial present value of projected benefit obligations at:

	Domestic				International
	September 30,				September 30,
	2022		2021		2022		2021
Discount rate:	5.14	%	2.75	%	5.2	%	2.00	%
Expected return on plan assets:					6.0	%	4.00	%

The following table provides the weighted average actuarial assumptions used to determine net periodic benefit cost for years ended:

	Domestic				International
	September 30,				September 30,
	2022		2021		2022		2021
Discount rate:	2.75	%	2.50	%	5.2	%	2.0	%
Expected return on plan assets:					6.0	%	4.0	%

For domestic plans, the discount rate was determined by comparison against the FTSE pension liability index for AA rated corporate instruments. The Company monitors other indices to assure that the pension obligations are fairly reported on a consistent basis. The international discount rates were determined by comparison against country specific AA corporate indices, adjusted for duration of the obligation.

The periodic benefit cost and the actuarial present value of projected benefit obligations are based on actuarial assumptions that are reviewed on an annual basis. The Company revises these assumptions based on an annual evaluation of long-term trends, as well as market conditions that may have an impact on the cost of providing retirement benefits.

The components of net periodic benefit costs related to the U.S. and international plans are as follows:

	Year ended September 30,
	2022						2021
	U.K.		U.S.		Total		U.K.		U.S.		Total
	(Amounts in thousands)
Pension:
Interest cost	$	268	$	11	$	279	$	243	$	11	$	254
Expected return on plan assets		(449)		—		(449)		(398)		—		(398)
Amortization of past service costs		7		—		7		7		—		7
Amortization of net loss		97		1		98		181		4		185
Net periodic (benefit) cost	$	(77)	$	12	$	(65)	$	33	$	15	$	48
Post Retirement:
Service cost	$	—	$	44	$	44	$	—	$	45	$	45
Interest cost		—		46		46		—		42		42
Amortization of net (gain) loss		—		(7)		(7)		—		50		50
Net periodic cost	$	—	$	83	$	83	$	—	$	137	$	137
Pension:
Decrease in minimum liability included in other comprehensive income	$	(3,509)		(20)	$	(3,529)	$	(1,794)		(8)	$	(1,802)
Post Retirement:
Decrease in minimum liability included in other comprehensive income		—		(567)		(567)		—		(170)		(170)
Total:
Decrease in minimum liability included in other comprehensive income	$	(3,509)	$	(587)	$	(4,096)	$	(1,794)	$	(178)	$	(1,972)

The following table presents an analysis of the changes in 2022 and 2021 of the benefit obligation, the plan assets and the funded status of the plans:

	Years Ended September 30
	2022						2021
	Foreign		U.S.		Total		Foreign		U.S.		Total
	(Amounts in thousands)
Pension:
Change in projected benefit obligation (“PBO”)
Balance beginning of year	$	14,317	$	339	$	14,656	$	14,403	$	426	$	14,829
Interest cost		268		11		279		243		11		254
Changes in actuarial assumptions		(4,574)		(21)		(4,595)		(658)		(6)		(664)
Foreign exchange impact		(1,873)		—		(1,873)		670		—		670
Benefits paid		(412)		(68)		(480)		(341)		(92)		(433)
Projected benefit obligation at end of year	$	7,726	$	261	$	7,987	$	14,317	$	339	$	14,656
Changes in fair value of plan assets:
Fair value of plan assets at beginning of year	$	11,921	$	—	$	11,921	$	9,740	$	—	$	9,740
Actual (loss) gain on plan assets		(1,026)		—		(1,026)		1,655		—		1,655
Company contributions		253		68		321		457		92		549
Foreign exchange impact		(1,911)		—		(1,911)		410		—		410
Benefits paid		(412)		(68)		(480)		(341)		(92)		(433)
Fair value of plan assets at end of year	$	8,825	$	—	$	8,825	$	11,921	$	—	$	11,921
Funded status \ net amount recognized	$	1,099	$	(261)	$	838	$	(2,396)	$	(339)	$	(2,735)
Post Retirement:
Change in projected benefit obligation (“PBO”):
Balance beginning of year	$	—	$	1,670	$	1,670	$	—	$	1,703	$	1,703
Service cost		—		44		44		—		45		45
Interest cost		—		46		46		—		42		42
Changes in actuarial assumptions		—		(574)		(574)		—		(120)		(120)
Projected benefit obligation at end of year	$	—	$	1,186	$	1,186	$	—	$	1,670	$	1,670
Funded status \ net amount recognized	$	—	$	(1,186)	$	(1,186)	$	—	$	(1,670)	$	(1,670)

The amounts recognized in the consolidated balance sheet consist of:

	Years Ended September 30
	2022						2021
	Foreign		U.S.		Total		Foreign		U.S.		Total
	(Amounts in thousands)
Pension:
Accrued benefit asset (liability)	$	1,099	$	(261)	$	838	$	(2,396)	$	(339)	$	(2,735)
Deferred tax		—		25		25		—		17		17
Accumulated other comprehensive income		631		9		640		4,140		21		4,161
Net amount recognized	$	1,730	$	(227)	$	1,503	$	1,744	$	(301)	$	1,443
Post Retirement:
Accrued benefit liability	$	—	$	(1,186)	$	(1,186)	$	—	$	(1,670)	$	(1,670)
Deferred tax		—		305		305		—		78		78
Accumulated other comprehensive (loss) income		—		(282)		(282)		—		57		57
Net amount recognized	$	—	$	(1,163)	$	(1,163)	$	—	$	(1,535)	$	(1,535)
Total pension and post retirement:
Accrued benefit asset (liability)	$	1,099	$	(1,447)	$	(348)	$	(2,396)	$	(2,009)	$	(4,405)
Deferred tax		—		330		330		—		95		95
Accumulated other comprehensive income		631		(273)		358		4,140		78		4,218
Net amount recognized	$	1,730	$	(1,390)	$	340	$	1,744	$	(1,836)	$	(92)
Accumulated Benefit Obligation:
Pension	$	(7,726)	$	(261)	$	(7,987)	$	(14,317)	$	(339)	$	(14,656)
Post Retirement		—		(1,186)		(1,186)		—		(1,670)		(1,670)
Total accumulated benefit obligation	$	(7,726)	$	(1,447)	$	(9,173)	$	(14,317)	$	(2,009)	$	(16,326)

Plans with projected benefit obligations in excess of plan assets are attributable to unfunded domestic supplemental retirement plans, and our U.K. retirement plan.

Accrued benefit liability reported as:

	September 30,
	2022		2021
	(Amounts in thousands)
Non-current benefits assets	$	1,099	$	—
Current accrued benefit liability	$	110	$	308
Non-current accrued benefit liability		1,337		4,097
Total accrued benefit liability	$	1,447	$	4,405

As of September 30, 2022 and 2021, the amounts included in accumulated other comprehensive loss, consisted of deferred net losses totaling approximately $0.4 million and $4.2 million, respectively.

The amount of net deferred loss expected to be recognized as a component of net periodic benefit cost for the year ending September 30, 2022, is approximately $191 thousand.

The assumed discount rate used for the calculation of the projected benefit obligation more than doubled causing a large decrease. Additionally, the expected return on plan assets increased significantly, which cause the net pension liability to decrease.

Contributions

The Company expects to contribute $0.2 million to its pension plans for fiscal 2023.

Estimated Future Benefit Payments

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

Fiscal year ending September 30:	(Amounts in thousands)
2023	$	473
2024	$	515
2025	$	538
2026	$	571
2027	$	602
Thereafter	$	1,085

Plan Assets

At September 30, 2022, our pension plan in the U.K. was the only plan with assets, holding investments of approximately $8.8 million. Pension plan assets are managed by a fiduciary committee. The Company’s investment strategy for pension plan assets is to maximize the long-term rate of return on plan assets within an acceptable level of risk while maintaining adequate funding levels. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment process.  In deciding on the investments to be held, the trustees take into account the risk of possible fluctuations in income from, and market values of, the assets as well as the risk of departing from an asset profile which broadly matches the liability profile. The committee has invested the plan assets in a single pooled fund with an authorized investment company (the “Fund”). The Fund selected by the trustees is consistent with the plan’s overall investment principles and strategy described herein. There are no specific targets as to asset allocation other than those contained within the Fund that is managed by the authorized investment company.

The fair value of the assets held by the U.K. pension plan by asset category are as follows:

	Fair Values as of
	September 30, 2022								September 30, 2021
	Fair Value Measurements Using Inputs Considered as								Fair Value Measurements Using Inputs Considered as
Asset Category	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(Amounts in thousands)
Cash on deposit	$	27	$	27	$	—	$	—	$	93	$	93	$	—	$	—
Pooled funds		8,798		5,513		3,285		—		11,828		7,747		4,081		—
Total plan assets	$	8,825	$	5,540	$	3,285	$	—	$	11,921	$	7,840	$	4,081	$	—

The expected long-term rates of return on plan assets are equal to the yields to maturity of appropriate indices for government and corporate bonds and by adding a premium to the government bond return for equities. The expected rate of return on cash is the Bank of England base rate in force at the effective date.

Level 1 investments represent mutual funds for which a quoted market price is available on an active market. These investments primarily hold stocks or bonds, or a combination of stocks and bonds.

Level 2 investment represents a mutual fund, which a quoted market price is not available on an active market. Significant observable inputs that reflect quoted prices for similar assets or liabilities in active markets are used. This investment primarily holds stocks within developed global equity markets, excluding the UK.

Defined Contribution Plans

The Company has defined contribution plans in domestic and international locations under which the Company matches a portion of the employee’s contributions and may make discretionary contributions to the plans. The Company’s contributions were $193 thousand and $174 thousand for the years ended September 30, 2022 and 2021, respectively.