Retirement Plans

The Company and its subsidiaries cover certain employees under a noncontributory defined benefit retirement plan, entitled the Virco Employees’ Retirement Plan (the “Pension Plan”). Benefits under the Employees Retirement Plan are based on years of service and career average earnings. As more fully described in the Form 10-K, benefit accruals under the Employees Retirement Plan were frozen effective December 31, 2003. There is no service cost incurred under this plan.

The Company also provides a supplementary retirement plan for certain key employees, the VIP Retirement Plan (the “VIP Plan”). The VIP Plan provides a benefit of up to 50% of average compensation for the last 5 years in the VIP Plan, offset by benefits earned under the Pension Plan. As more fully described in the Form 10-K, benefit accruals under this plan were frozen since December 31, 2003. There is no service cost incurred under this plan. During the second quarter ended July 31, 2018, the Company, at the retirees request, paid lump-sum distributions for the related benefit obligations. As the amount of the lump-sum settlement exceeded the sum of the service and interest cost for the year, the distribution was treated as a settlement in accordance with U.S. GAAP, resulting in plan settlement loss of $319,000 recorded in the selling, general, and administrative expenses in the accompanying condensed consolidated statements of income and an actuarial loss on the plan re-measurement of $1,840,000, net of tax, recorded to accumulated other comprehensive income for the three and six-months ended July 31, 2018.

The net periodic pension cost (income) for the Pension Plan and the VIP Plan for the three months and six months ended July 31, 2018 and 2017 were as follows (in thousands):



	Three Months Ended
	Pension Plan						VIP Plan
	7/31/2018			7/31/2017			7/31/2018		7/31/2017
Service cost	—			—			—		—
Interest cost	266			304			89		89
Expected return on plan assets	(407		)	(342		)	—		—
Plan settlement	319			—			—		—
Amortization of prior service cost	—			—			—		—
Recognized net actuarial (gain) loss	91			179			82		60
Benefit cost	$	269		$	141		$	171	$	149



	Six Months Ended
	Pension Plan						VIP Plan
	7/31/2018			7/31/2017			7/31/2018		7/31/2017
Service cost	$	—		—			—		—
Interest cost	532			608			178		178
Expected return on plan assets	(814		)	(684		)	—		—
Plan settlement	319			—			—		—
Amortization of prior service cost	—			—			—		—
Recognized net actuarial (gain) loss	181			358			164		120
Benefit cost	$	218		$	282		$	342	$	298

401(k) Retirement Plan

The Company’s retirement plan, which covers all U.S. employees, allows participants to defer from 1% to 75% of their eligible compensation through a 401(k) retirement program. Through December 31, 2001, the plan included an employee stock ownership component. The plan continues to include Virco stock as one of the investment options. At July 31, 2018 and 2017, the plan held 608,928 shares and 565,591 shares of Virco stock, respectively. For the quarter ended July 31, 2018, the Company made a contribution to employees enrolled in the Plan in connection with an auto enrollment program and initiated a Company match effective January 1, 2018. For the six months ended July 31, 2018, the compensation costs incurred for employer match was $363,000. There was no employer match for same period ended July 31, 2017.