Employee benefit plans

9 Months Ended

Jul. 02, 2011

Employee benefit plans [Abstract]

Employee benefit plans

(8)           Employee benefit plans

Sevcon has a defined benefit plan covering the majority of its U.K. employees. U.S. employees and certain employees in the capacitor business have a defined contribution plan. The following table sets forth the components of the net pension cost:

	(in thousands of dollars)
	Three Months ended						Nine Months ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
Service cost	$	78		$	78		$	299		$	242
Interest cost		315			287			951			892
Expected return on plan assets		(294	)		(220	)		(844	)		(685	)
Amortization of net loss		71			55			210			173
Amortization of prior service cost		16			11			7			35
Net periodic benefit cost	$	186		$	211		$	623		$	657
Net cost of defined contribution plans	$	55		$	6		$	69		$	19

Amounts recognized in the balance sheet consist of:

	(in thousands of dollars)
	July 2, 2011		September 30, 2010
Non current liabilities	$	7,205	$	8,203

Amounts recognized in accumulated other comprehensive loss consist of:

	(in thousands of dollars)
	Three Months ended					Nine Months ended
	July 2, 2011			July 3, 2010		July 2, 2011			July 3, 2010
Amortization of net actuarial loss net of tax benefit	$	56		$	-	$	156		$	-
Amortization of prior service cost net of tax benefit		(4	)		8		(10	)		25
Actuarial gain net of tax benefit		31			-		837			-
Net cost of defined contribution plans	$	83		$	8	$	983		$	25

Sevcon contributed $10,000 to its U.S. pension plan in the nine months ended July 2, 2011; it presently anticipates contributing a further $46,000 to fund its U.S. plan in the remainder of 2011. In addition, employer contributions to the U.K. defined benefit plan were $426,000 in the first nine months and are estimated to total $505,000 in 2011.

In the second quarter of 2011, the Company changed the inflation index used to calculate the annual increase in accrued benefits for deferred pension plan members of the U.K. defined benefit pension plan. The change in inflation index was from the Retail Prices Index (“RPI”) to the Consumer Prices Index (“CPI”). Deferred pension plan members are current or former employees of the Company who have left the pension plan, retaining a right to future pension benefits, but not having yet brought those benefits into payment. The change of inflation index was for this one class of pension plan member only. As a result of this change, the Company recorded a one-time decrease in the liability for pension benefits of $806,000, net of a tax benefit. This decrease was recorded in the second quarter of 2011 through other comprehensive loss as a reduction to remaining prior service costs of $212,000 and the remaining $594,000 is being amortized as a component of net period benefit costs over 34 years, this being the estimated life expectancy of the deferred members of the U.K. pension plan.

The table below presents information about the Company's pension plan assets measured and recorded at fair value as of July 2, 2011 and indicates the fair value hierarchy of the inputs utilized by the Company to determine the fair values.

	(in thousands of dollars)
	Level 1* (Quoted prices in active markets)		Level 2** (Significant observable inputs)		Level 3*** (Unobservable inputs)
Mutual Funds
Standard Life Pension Global Absolute Returns Strategies Fund	$	5,323	$	-	$	-
Standard Life UK Indexed Linked Fund		1,390		-		-
Standard Life Long Corporate Bond Fund		1,302		-		-
CF Ruffer Absolute Return Fund		5,737		-		-
BNY Mellon Large Cap Stock Fund		805		-		-
BNY Mellon U.S. Core Equity 130/30 Fund		91		-		-
BNY Mellon Short Term U.S. Government Securities Fund		81		-		-
BNY Mellon Intermediate Bond Fund		596		-		-
BNY Mellon Bond Fund Class M		490		-		-
Other Types of Investments
Cash		96		-		-
Total	$	15,911	$	-	$	-

* Level 1 investments represent mutual funds for which a quoted market price is available on an active market. These investments will primarily hold stocks or bonds, or a combination of stocks and bonds.

** The Company currently does not have any Level 2 pension plan financial assets.

*** The Company currently does not have any Level 3 pension plan financial assets.

The following estimated benefit payments, which reflect future service, as appropriate have been or are expected to be paid:

	(in thousands of dollars)
2011	$	361
2012		360
2013		453
2014		644
2015		716
2016 – 2020	$	3,945

The following table sets forth the movement in the liability for pension benefits in the nine months ended July 2, 2011 and July 3, 2010, respectively:

	(in thousands of dollars)
	Nine Months ended
	July 2, 2011			July 3, 2010
Liability for pension benefits at beginning of period	$	8,203		$	7,166
Net periodic benefit cost		623			657
Plan contributions		(436	)		(435	)
Amortization of net loss		(210	)		-
Amortization of prior service costs		14			-
Actuarial gain		(1,139	)		(35	)
Effect of exchange rate changes		150			(331	)
Liability for pension benefits at end of period	$	7,205		$	7,022