EMPLOYEE BENEFIT PLANS

Retirement Savings Plan

We sponsor a defined contribution retirement savings plan subject to the provisions of the Employee Retirement Income Security Act. Employees may contribute a portion of their eligible compensation to the plan on a pre-tax or after-tax basis. We match a portion of certain employee contributions by contributing cash into the investment options selected by the employees. The total amount contributed by MTS is determined by plan provisions for matching contributions, as well as at our discretion. Matching contributions were 75% of eligible compensation for fiscal years 2018, 2017 and 2016, up to a maximum of 6% of compensation subject to Internal Revenue Service (IRS) limitations. Employer matching and discretionary contributions were $5,394, $5,483 and $4,694 for fiscal years 2018, 2017 and 2016, respectively.

Defined Benefit Pension Plan

We sponsor a non-contributory, defined benefit pension plan for eligible employees of one of our German subsidiaries. This plan provides benefits based on the employee's years of service and compensation during the years immediately preceding retirement, termination, disability or death, as defined in the plan. We use a September 30 measurement date for this defined benefit pension plan.

We recognize the funded status of the defined benefit pension plan in our Consolidated Balance Sheets, recognize changes in the funded status in the year in which the changes occur through comprehensive income and measure the plan's assets and obligations that determine the plan's funded status as of the end of our fiscal year.

The portion of the pre-tax amount in AOCI as of September 30, 2017 that was recognized in earnings during fiscal year 2018 was $526. The portion of the pre-tax amount in AOCI as of September 29, 2018 that is expected to be recognized as a component of net periodic retirement cost during fiscal year 2019 is $560. The actuarial loss in fiscal year 2018 of $871 was primarily a result of the change in the discount rate from 1.99% in fiscal year 2017 to 1.89% in fiscal year 2018.

Changes in benefit obligations and plan assets are as follows:



	2018			2017
Change in benefit obligation
Projected benefit obligation, beginning of year	$	32,280		$	34,434
Service cost	1,282			1,426
Interest cost	640			431
Actuarial (gain) loss	871			(5,214		)
Currency translation	(405		)	1,866
Benefits paid	(759		)	(663		)
Projected benefit obligation, end of year	$	33,909		$	32,280
Change in plan assets
Fair value of plan assets, beginning of year	$	22,886		$	19,950
Actual return on plan assets	1,269			1,848
Employer contributions	759			663
Currency translation	(284		)	1,088
Benefits paid	(759		)	(663		)
Fair value of plan assets, end of year	$	23,871		$	22,886

The funded status of the defined benefit pension plan and amounts included in our Consolidated Balance Sheets are as follows:



	2018			2017
Funded status
Funded status, end of year	$	(10,038	)	$	(9,394	)
Actuarial net loss in AOCI, pre-tax	9,496			9,261
Net amount recognized	$	(542	)	$	(133	)
Included in Consolidated Balance Sheets
Accrued payroll and related costs	$	(861	)	$	(806	)
Defined benefit pension plan obligation	(9,177		)	(8,588		)
Deferred income taxes	2,880			2,809
AOCI, net of tax	6,616			6,452
Net amount recognized	$	(542	)	$	(133	)

The weighted average assumptions used to determine the defined benefit pension plan obligation as of September 29, 2018 and September 30, 2017 in the Consolidated Balance Sheets and the net periodic benefit cost for fiscal year 2019 are as follows:



	2018		2017
Discount rate	1.89	%	1.99	%
Expected rate of return on plan assets	5.50	%	5.50	%
Expected rate of increase in future compensation levels	3.00	%	3.00	%

The discount rate is calculated based on zero-coupon bond yields published by the Deutsche Bundesbank for maturities that match the weighted average duration of the pension liability, adjusted for the average credit spread of corporate bond rates above the government bond yields.

The expected rate of return on plan assets represents the weighted average of the expected returns on individual asset categories in the portfolio. We use investment advisors to assist with determining the overall expected rate of return on plan assets. Factors considered in our determination include historical long-term investment performance and estimates of future long-term returns by asset class.

The overall objective of our investment policy and strategy for the defined benefit pension plan is to maintain sufficient liquidity to pay benefits and minimize the volatility of returns while earning the highest possible rate of return over time to satisfy the benefit obligations. The plan fiduciaries assist us with setting our long-term strategic investment objectives for the defined benefit pension plan assets. The objectives include preserving the funded status of the trust and balancing risk and return. Investment performance and plan asset mix are reviewed periodically.

As of both September 29, 2018 and September 30, 2017, plan assets were invested in a single mutual fund, the underlying assets of which were allocated to fixed income and cash and cash equivalents categories as shown in the table below. Any decisions to change the asset allocation are made by the plan fiduciaries. The investment in equity and fixed income securities has a long-term targeted allocation of assets of 50% equity and 50% fixed income.

The actual defined benefit pension plan asset allocations within the balanced mutual fund are as follows:



	Percentage of Plan Assets
	2018		2017
Fixed income securities¹	77.2	%	71.4	%
Cash and cash equivalents²	22.8	%	28.6	%
Total	100.0	%	100.0	%


¹	Fixed income securities are comprised primarily of international government agency and international corporate bonds with investment grade ratings.


²	Cash and cash equivalents include deposit accounts holding cash in Euros and other currencies and term deposits primarily held as collateral for equity futures. The market values of the equity and futures are linked to the values of equity indices of developed country markets, including the U.S., Great Britain, Europe, Canada, Switzerland and Japan.

The fair value of the defined benefit pension plan assets, which are subject to fair value measurement as described in Note 3, are as follows:



	September 29, 2018
	Level 1		Level 2		Level 3		Total
Mutual fund¹	$	—	$	23,871	$	—	$	23,871



	September 30, 2017
	Level 1		Level 2		Level 3		Total
Mutual fund¹	$	—	$	22,886	$	—	$	22,886


¹	The fair value of the mutual fund is valued based on closing prices from national exchanges, if the underlying securities are traded on an active market, or fixed income pricing models that use observable market inputs.

Net periodic benefit cost for the defined benefit pension plan includes the following components:



	2018			2017			2016
Service cost	$	1,282		$	1,426		$	971
Interest cost	640			431			608
Expected return on plan assets	(1,270		)	(1,085		)	(1,027		)
Net amortization and deferral	526			996			584
Net periodic benefit cost	$	1,178		$	1,768		$	1,136

The accumulated benefit obligation of our defined benefit pension plan as of September 29, 2018 and September 30, 2017 was $31,077 and $29,581, respectively.

Future pension benefit payments, which reflect expected future service for the next five fiscal years and the combined five fiscal years thereafter, are as follows:



Fiscal Year	Pension Benefit Payments
2019	$	861
2020	906
2021	1,024
2022	1,096
2023	1,123
2024 through 2028	6,382
Total	$	11,392

Other Retirement Plans

Certain of our international subsidiaries have non-contributory, unfunded post-retirement benefit plans that provide retirement benefits for eligible employees and managing directors. Generally, these post-retirement plans provide benefits that accumulate based on years of service and compensation levels. As of September 29, 2018 and September 30, 2017, the aggregate liabilities associated with these post-retirement benefit plans were $3,924 and $4,585, respectively.