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 nine months ended October 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 $22,000 and $341,000 for the three and nine months ended October 31, 2018. All settlement costs were recorded in the selling, general and administrative expenses in the accompanying condensed consolidated statements of income and an actuarial gain on the plan re-measurement of $1,376,000 and $27,000, net of tax, recorded to accumulated other comprehensive income for the three and nine months ended October 31, 2018.

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



	Three Months Ended
	Pension Plan						VIP Plan
	10/31/2018			10/31/2017			10/31/2018		10/31/2017
Service cost	—			—			—		—
Interest cost	281			304			89		89
Expected return on plan assets	(348		)	(342		)	—		—
Plan settlement	22			—			—		—
Amortization of prior service cost	—			—			—		—
Recognized net actuarial (gain) loss	171			179			82		60
Benefit cost	$	126		$	141		$	171	$	149



	Nine Months Ended
	Pension Plan						VIP Plan
	10/31/2018			10/31/2017			10/31/2018		10/31/2017
Service cost	$	—		—			—		—
Interest cost	813			912			267		267
Expected return on plan assets	(1,162		)	(1,026		)	—		—
Plan settlement	341			—			—		—
Amortization of prior service cost	—			—			—		—
Recognized net actuarial (gain) loss	351			537			246		180
Benefit cost	$	343		$	423		$	513	$	447

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 October 31, 2018 and 2017, the plan held 646,984 shares and 556,633 shares of Virco stock, respectively. For the quarter ended October 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 nine months ended October 31, 2018, the compensation costs incurred for employer match was $553,000. There was no employer match for same period ended October 31, 2017.