Note 15.

Employee Benefit Plans

Eligible U.S. employees of the Company participate in a profit sharing retirement plan. Contributions accrued for the plan are made at the discretion of the Company’s board of directors and were $2.5 million, $2.2 million, and $2.8 million for the years ended June 30, 2014, 2013 and 2012, respectively.

The Company has an employee stock purchase plan available for employees who have completed six months of continuous employment with the Company. The employee may purchase the Company’s Common Stock at 5% below the prevailing market price. The amount of shares which may be bought by an employee during each fiscal year is limited to 10% of the employee’s base pay. This plan, as amended, limits the number of shares of Common Stock available for purchase to 1,600,000 shares. There were 543,234 and 560,034 shares of Common Stock available for purchase under the plan at June 30, 2014 and 2013, respectively.

Switzerland Defined Benefit Plan

In conjunction with the acquisition of the Oclaro’s Switzerland-Based Semiconductor Laser Business we assumed a pension plan covering employees of our Swiss subsidiary (Swiss Plan). Employer and employee contributions are made to the Swiss plan based on various percentages of salary and wages that vary according to employee age and other factors. Employer contributions to the Swiss Plan for year ended June 30, 2014 were $2.3 million. Expected employer contributions in fiscal year 2015 are $2.1 million.

The funded status of the Swiss Plan in the fiscal year ended June 30, 2014 was as follows:

	Year Ended
	June 30, 2014
Change in projected benefit obligation:
Projected benefit obligation, date of acquisition	$	38,748
Service cost		3,375
Interest cost		812
Plan amendments		(1,661	)
Participant contributions		1,110
Benefits (paid) received		(3,959	)
Actuarial (gain) loss on obligation		(867	)
Currency translation adjustment		1,832
Projected benefit obligation, end of period	$	39,390
Change in plan assets:
Plan assets at fair value, date of acquisition		30,167
Actual return on plan assets		776
Employer contributions		2,253
Participant contributions		1,110
Benefits (paid) received		(3,959	)
Currency translation adjustment		1,617
Plan assets at fair value, end of period	$	31,965
Amounts recognized in consolidated balance sheets:
Other non-current assets:
Deferred tax asset	$	1,570
Other non-current liabilities:
Underfunded pension liability	$	7,425
Amounts recognized in accumulated other comprehensive income, net of tax:
Pension adjustment	$	1,443
Accumulated benefit obligation, end of period	$	35,581

Net periodic pension cost associated with the Swiss Plan in the fiscal year ended June 30, 2014 included the following components:

	Year Ended
	June 30, 2014
Service cost	$	3,375
Interest cost		812
Expected return on plan assets		(1,338	)
Net amortization		-
Net period pension cost	$	2,849

The Company expects to recognize approximately $0.3 million as a component of net periodic benefit cost in fiscal 2015 as a result of amortization from accumulated other comprehensive income.

The projected and accumulated benefit obligations for the Swiss Plan were calculated as of June 30, 2014 using the following assumptions:

	Year Ended
	June 30, 2014
Discount rate		2.0	%
Salary increase rate		2.0	%
Expected return on plan assets		3.5	%
Expected average remaining working life (in years)		13.1

The discount rate is based on assumed pension benefit maturity and estimates developed using the rate of return and yield curves for high quality Swiss corporate and government bonds. The salary increase rate is based on our best assessment for on-going increases over time. The expected long-term rate of return on plan assets is based on the expected asset allocation and taking into consideration historical long-term rates of return for the relevant asset categories.

The Swiss Plan is legally separate from II-VI, as are the assets of the plan. As of June 30, 2014, the Swiss Plan’s asset allocation was as follows:

	Year Ended
	June 30, 2014
Fixed income investments		22.0	%
Equity investments		54.0	%
Real estate		14.0	%
Cash		8.0	%
Alternative investments		2.0	%
		100.0	%

The Swiss Plan assets are measured at fair value and are classified into two distinct levels of the fair value hierarchy. The Swiss Plan assets are comprised of Level 1 assets, which include cash, equity investments and fixed income investments, and Level 3 assets, which include real estate and alternative investments. The investment strategy of the Swiss Plan is to achieve a consistent long-term return which will provide sufficient funding for future pension obligations while limiting risk. The investment strategy is reviewed regularly.

Estimated future benefit payments under the Swiss Plan are estimated to be $1.3 million in fiscal year 2015, $1.1 million in fiscal year 2016, $1.6 million in fiscal year 2017, $0.7 million in fiscal year 2018, $3.1 million in fiscal year 2019 and $10.7 million thereafter. These benefits will be paid out of the assets of the Swiss Plan and not by the Company.

PRM Defined Benefit Plan

As a requirement of a collective bargaining agreement, PRM maintains a defined benefit plan for substantially all of its employees. The plan provides for retirement benefits based on a certain percentage of the latest monthly salary of an employee per year of service. The pension liability was $0.6 million and $1.1 million at June 30, 2014 and June 30, 2013, respectively. The PRM Plan is an unfunded pension plan under which the Company makes payments directly to employees. As these payments are made directly by the Company, there are no separate assets utilized to fund this plan.

The Company has no program for post-retirement health and welfare benefits.

The II-VI Incorporated Deferred Compensation Plan (the “Compensation Plan”) is designed to allow officers and key employees of the Company to defer receipt of compensation into a trust fund for retirement purposes. Under the Compensation Plan, eligible participants can elect to defer up to 100% of discretionary incentive compensation, performance share awards and restricted share awards into the Compensation Plan. The Compensation Plan is a nonqualified, defined contribution employees’ retirement plan. At the Company’s discretion, the Compensation Plan may be funded by the Company making contributions based on compensation deferrals, matching contributions and discretionary contributions. Compensation deferrals will be based on an election by the participant to defer a percentage of compensation under the Compensation Plan. All assets in the Compensation Plan are subject to claims of the Company’s creditors until such amounts are paid to the Compensation Plan participants. Employees of the Company made contributions to the Compensation Plan in the amounts of approximately $1.9 million, $1.8 million, and $1.4 million for the fiscal years ended June 30, 2014, 2013, and 2012, respectively. There were no employer contributions made to the Compensation Plan for the fiscal years ended June 30, 2014, 2013 and 2012.