(10)	Employee benefit plans

Sevcon has defined contribution plans covering the majority of its U.S. and U.K. employees in the controls business. There is also a small defined contribution plan covering senior managers in the capacitor business. The Company has frozen U.K. and U.S. defined benefit plans for which no future benefits are being earned by employees. The Company uses a September 30 measurement date for its defined benefit pension plans.

The Company’s French subsidiary, Sevcon S.A.S., has a liability to pay its employees a service and salary based award when they reach retirement age and leave the Company’s employment. This liability, which is unfunded, is recognized in accrued expenses and was $194,000 and $198,000 at December 31, 2016 and September 30, 2016, respectively. The obligation to pay this award is a French legal requirement and is only payable if the employee is employed by the Company when they retire; if they leave the Company prior to that time the award is no longer payable.

The Company’s Italian subsidiary, Bassi S.r.l., has a liability to pay its employees a severance indemnity, ‘Trattamento di fine Rapporto’ (“TFR”) when they leave the Company’s employment. TFR, which is mandatory for Italian companies, is deferred compensation and is based on the employees’ years of service and the compensation earned by the employee during the service period. The related liability is recognized in the consolidated balance sheet within “Other long-term liabilities”. This liability, which is unfunded, was $965,000 and $987,000 at December 31, 2016 and September 30, 2016, respectively.

The following table sets forth the components of the net pension cost for the three month periods ended December 31, 2016 and January 2, 2016, respectively:

	(in thousands of dollars)
	Three Months ended
	December 31, 2016			January 2, 2016
Interest cost	$	210		$	296
Expected return on plan assets		(249	)		(289	)
Amortization of net loss		89			77
Net periodic benefit cost		50			84
Net cost of defined contribution plans	$	110		$	155
Net cost of all employee benefit plans	$	160		$	239

The following table sets forth the movement in the liability for pension benefits, all of which is non-current, in the three month period ended December 31, 2016:

	(in thousands of dollars)
	Three Months ended
	December 31, 2016
Liability for pension benefits at beginning of period	$	11,511
Interest cost		210
Expected return on plan assets		(249	)
Plan contributions		(143	)
Effect of exchange rate changes		(550	)
Liability for pension benefits at end of period		10,779

Sevcon, Inc. contributed $50,000 to its frozen U.S. defined benefit plan in the three months ended December 31, 2016; it presently anticipates contributing a further $150,000 to fund its U.S. plan in the remainder of fiscal 2017. In addition, employer contributions to the frozen U.K. defined benefit plan were $93,000 in the first three months and are estimated to total $648,000 in 2017.

The tables below present information about the Company’s pension plan assets measured and recorded at fair value as of December 31, 2016 and September 30, 2016, and indicate the fair value hierarchy of the inputs utilized by the Company to determine the fair values.

	(in thousands of dollars)
December 31, 2016	Level 1* (Quoted prices in active markets)		Level 2** (Significant observable inputs)		Level 3*** (Unobservable inputs)

Adept Strategy 9 Fund (a sub-fund of Adept Investment Management plc)	$	-	$	11,878	$	-
Schroder Matching Plus Nominal and Index Linked Liability Driven Investment Swap Funds (funds managed by Schroder Investment Management Limited)		-		4,800		-
U.S. Mutual Funds and Fixed Income Funds		2,723		-		-
U.S. Equity Funds		414		-		-
Other Types of Investments		280
Cash		151		-		-
Total	$	3,568	$	16,678	$	-

	(in thousands of dollars)
September 30, 2016	Level 1* (Quoted prices in active markets)		Level 2** (Significant observable inputs)		Level 3*** (Unobservable inputs)
Adept Strategy 9 Fund (a sub-fund of Adept Investment Management plc)	$	-	$	13,268	$	-
Schroder Matching Plus Nominal and Index Linked Liability Driven Investment Swap Funds (funds managed by Schroder Investment Management Limited)		-		5,335		-
U.S. Mutual Funds and Fixed Income Funds		2,837		-		-
U.S. Equity Funds		400		-		-
Other Types of Investments
Cash		439		-		-
Total	$	3,676	$	18,603	$	-

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

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The Company’s pension plan financial assets held in the Adept Strategy 9 Fund and the Schroder investments are Level 2 assets. The Company uses the Net Asset Value to determine the fair value of underlying investments which (a) do not have readily determinable fair value; and (b) prepare their financial statements consistent with the measurement principles of an investment company. The Funds are not exchange traded. The Funds are not subject to any redemption notice periods or restrictions and can be redeemed on a daily basis. No gates or holdbacks or dealing suspensions are being applied to the Funds. The Funds are of perpetual duration.

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

The estimated benefit payments, which reflect future service, as appropriate, for the years ended September 30 are as follows:

	(in thousands of dollars)
2017	$	470
2018		488
2019		494
2020		502
2021		499
2022 – 2026	$	2,722