Note 14.

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 $2.8 million, $2.5 million, and $2.2 million for the years ended June 30, 2015, 2014 and 2013, 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 514,031 and 543,234 shares of Common Stock available for purchase under the plan at June 30, 2015 and 2014, respectively.

Switzerland Defined Benefit Plan

In conjunction with the acquisition of Oclaro’s Switzerland-Based Semiconductor Laser Business, the Company assumed a pension plan covering employees of our Swiss subsidiary (the “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, 2015 were $1.9 million. Expected employer contributions in fiscal year 2016 are $2.0 million.

The funded status of the Swiss Plan in the fiscal years ended June 30, 2015 and 2014 were as follows:

Year ended June 30,	2015			2014
Change in projected benefit obligation:
Projected benefit obligation, beginning of period		39,390		$	38,748
Service cost		2,791			3,375
Interest cost		744			812
Plan amendments		-			(1,661	)
Participant contributions		965			1,110
Benefits (paid) received		(1,279	)		(3,959	)
Actuarial (gain) loss on obligation		1,520			(867	)
Currency translation adjustment		(1,556	)		1,832
Projected benefit obligation, end of period	$	42,575		$	39,390
Change in plan assets:
Plan assets at fair value, beginning of period		31,965			30,167
Actual return on plan assets		207			776
Employer contributions		1,914			2,253
Participant contributions		965			1,110
Benefits (paid) received		(1,279	)		(3,959	)
Currency translation adjustment		(1,263	)		1,617
Plan assets at fair value, end of period	$	32,509		$	31,965
Amounts recognized in consolidated balance sheets:
Other non-current assets:
Deferred tax asset	$	2,129		$	1,570
Other non-current liabilities:
Underfunded pension liability	$	10,066			7,425
Amounts recognized in accumulated other comprehensive income, net of tax:
Pension adjustment	$	(2,244	)	$	1,443
Accumulated benefit obligation, end of period	$	38,734		$	35,581

Net periodic pension cost associated with the Swiss Plan included the following components:

Year ended June 30,	2015			2014
Service cost		2,791		$	3,375
Interest cost		744			812
Expected return on plan assets		(1,106	)		(1,338	)
Net amortization		-		-
Net period pension cost	$	2,429		$	2,849

The projected and accumulated benefit obligations for the Swiss Plan were calculated as of June 30, 2015 and 2014 using the following assumptions:

Year ended June 30,	2015			2014
Discount rate		1.1	%		2.0	%
Salary increase rate		2.0	%		2.0	%
Expected return on plan assets		3.5	%		3.5	%
Expected average remaining working life (in years)	13.1				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.

As is customary with Swiss pension plans, the assets of the plan are invested in a collective fund with multiple employers. We have no investment authority over the assets of the plan that are held and invested by a Swiss insurance company. The Swiss Plan assets are measured at fair value and are classified within Level 2 of the fair value hierarchy. The investment strategy of the Swiss Plan is managed by an independent asset manager with the objective of achieving a consistent long-term return which will provide sufficient funding for future pension obligations while limiting risk.

The Swiss Plan is legally separate from II-VI, as are the assets of the plan. As of June 30, 2015, the Swiss Plan’s asset allocation was as follows:

Year ended June 30,	2015			2014
Fixed income investments		22.0	%		22.0	%
Equity investments		52.0	%		54.0	%
Real estate		16.0	%		14.0	%
Cash		8.0	%		8.0	%
Alternative investments		2.0	%		2.0	%
		100.0	%		100.0	%

Estimated future benefit payments under the Swiss Plan are estimated to be as follows:

Year Ending June 30,
($000)
2016	$	1,649
2017		2,129
2018		1,250
2019		3,429
2020		1,164
Next five years		14,259

II-VI Performance Metals Defined Benefit Plan

As a requirement of a collective bargaining agreement, II-Performance Metals 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 at June 30, 2015 and June 30, 2014. The 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.

Other Employee Benefit Plans

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, as it is currently implemented by the Company, eligible participants can elect to defer up to 100% of certain discretionary incentive compensation and certain equity 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 $0.7 million, $1.9 million, and $1.8 million for the fiscal years ended June 30, 2015, 2014, and 2013, respectively. There were no employer contributions made to the Compensation Plan for the fiscal years ended June 30, 2015, 2014 and 2013.