12. RETIREMENT PLANS

The Company has a noncontributory defined benefit pension plan for eligible employees of its GTT and Innovative subsidiaries who meet certain age and employment criteria. The Company also has a noncontributory defined medical, dental, vision, and life benefit plan for eligible employees of its Innovative subsidiary who meet certain age and employment criteria. The Company acquired the Innovative plans as a result of the July 2016 Innovative Acquisition. Company contributions to fund the pension plans are intended to provide not only for benefits attributed for service to date but also for those expected to be earned in the future. The Company’s funding policy is to contribute to the plan such amounts as are actuarially determined to meet funding requirements. The benefits are based on the participants’ average salary or hourly wages during the last three years of employment and credited service years. The Company funds the other postretirement benefit plans as benefits are paid.

The weighted‑average rates assumed in the actuarial calculations for the pension and other postretirement benefit plans are as follows as of December 31, 2016, 2015 and 2014:


	2016		2015		2014
Discount Rate – Pension Benefit	4.3	%	5.8	%	5.8	%
Discount Rate – Postretirement Benefit	3.9	%	N/A		N/A
Annual salary increase	6.5	%	6.5	%	6.5	%
Expected long-term return on plan assets	6.3	%	6.5	%	7.0	%

The expected long‑term rate of return on plan assets was determined based on several factors including input from pension investment consultants, projected long‑term returns of equity and bond indices, and historical returns over the life of the related obligations of the fund. The Company, in conjunction with its pension investment consultants, reviews its asset allocation periodically and rebalances its investments when appropriate in an effort to earn the expected long‑term returns. The Company will continue to evaluate its long‑term rate of return assumptions at least annually and will adjust them as necessary.

The annual salary increase assumption reflects the Company’s estimated long average rate of salary increases. The assumption is not applicable to the Innovative pension and other postretirement plans as the obligations associated with these plans are not dependent on participant’s salaries.

The discount rate was determined based on a review of market data including yields on high quality corporate bonds with maturities approximating the remaining life of the project benefit obligations.

The other postretirement benefit plans healthcare cost trend assumptions is based on health care trend rates. The 2017 assumed medical health care cost trend rate is 5.8% trending to an ultimate rate of 4.5% in 2075. The 2017 assumed dental care cost trend rate is 4.0% trending to an ultimate rate of 2.0% in 2030. The effect of a one-percentage-point increase in the assumed health care cost trend rates for each future year on the accumulated postretirement benefit obligation for health care benefits and the aggregate of the service and interest cost components of net periodic postretirement health care benefit cost is shown below:


	Accumulated postretirement benefit obligation			Service cost plus interest cost

At trend		5,108		194
At trend + 1%		5,487		214
Dollar Impact		379		20
Percentage Impact		7.4	%	10.3	%
At trend – 1%		4,775		177
Dollar Impact		(333)		(17)
Percentage Impact		(6.5)	%	(8.8)	%

Changes during the year in the projected benefit obligations and in the fair value of plan assets are as follows for 2016 and 2015 (in thousands):


	2016				2015

	Pension Benefits		Postretirement Benefits		Pension Benefits		Postretirement Benefits
Projected benefit obligations:
Balance at beginning of year:	$	14,400	$	—	$	14,093	$	—
Innovative Acquisition		69,178		5,472		—		—
Service cost		1,308		97		652		—
Interest cost		2,002		97		766		—
Curtailment		128		—		—		—
Benefits and settlements paid		(6,445)		(206)		(1,329)		—
Actuarial (gain) loss		(4,437)		(325)		218		—
Experience loss		(15)		(27)		—		—
Balance at end of year	$	76,119	$	5,108	$	14,400	$	—
Plan net assets:
Balance at beginning of year:	$	11,946	$	—	$	13,165	$	—
Innovative Acquisition		45,116		—		—		—
Actual return on plan assets		1,717		—		110		—
Company contributions		22,963		206		—		—
Benefits and settlements paid		(6,411)		(206)		(1,329)		—
Balance at end of year	$	75,331	$	—	$	11,946	$	—
Under funded status of plan	$	(788)	$	(5,108)	$	(2,454)	$	—

The Company reports an asset or liability on its balance equal to the funded status of its pension and other postretirement benefit plans. Plans in an overfunded status are aggregated and recorded as a net benefit asset in other assets. Plans in an underfunded status are aggregated and recorded as a net benefit liability in other liabilities. The funded status of the Company’s pension and other retirement benefit plans is below (in thousands):


	2016						2015

	GTT Pension Benefit		Innovative Pension Benefit		Postretirement Benefits		GTT Pension Benefit		Innovative Pension Benefit		Postretirement Benefits

Projected benefit obligation	$	12,549	$	63,571	$	5,108	$	14,400	$	—	$	—
Plan Net Assets		8,655		66,676		—		11,946		—		—
Over/ (Under) funded status of plan	$	(3,894)	$	3,105	$	(5,108)	$	(2,454)	$	—	$	—

At December 31, 2016, the Company held $5.1 million of restricted cash equal to the underfunded status of the other postretirement benefit plans. The cash is restricted due to the Company’s intent and specific nature of the commitment.

The Company’s investment policy for its pension assets is to have a reasonably balanced investment approach, with a long‑term bias toward debt investments. The Company’s strategy allocates plan assets among equity, debt and other assets to achieve long‑term returns without significant risk to principal. The GTT pension fund has limitations from investing in the equity, debt or other securities of the employer, its subsidiaries or associates of the employer or any company of which the employer is a subsidiary or an associate. Furthermore, the GTT plan must invest between 70% - 80% of its total plan assets within Guyana.

The fair values for the pension plan’s net assets, by asset category, at December 31, 2016 are as follows (in thousands):


Asset Category	Total		Level 1		Level 2		Level 3
Cash, cash equivalents, money markets and other	$	32,976	$	32,976	$	—	$	—
Common stock - domestic		17,715		17,715		—		—
Common stock - foreign		4,845		3,629		1,216		—
Mutual funds - equities		7,141		6,180		961		—
Exchange traded funds - equities		1,553		1,553		—		—
Fixed income mutual funds		10,142		—		10,142		—
Fixed income securities		456		—		456		—
Annuities		503		—		—		503
Total	$	75,331	$	62,053	$	12,775	$	503

The plan’s weighted‑average asset allocations at December 31, 2016 and 2015, by asset category are as follows:


	2016		2015
Cash, cash equivalents, money markets and other	43.8	%	81.5	%
Common stock - domestic	23.5		14.7
Common stock - foreign	6.4		—
Mutual funds - equities	9.5		—
Exchange traded funds - equities	2.1		—
Fixed income mutual funds	13.5		—
Fixed income securities	0.6		3.8
Annuities	0.7		—
Total	100	%	100	%

Amounts recognized on the Company’s consolidated balance sheets consist of (in thousands):


	As of December 31,
	2016				2015
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits

Accrued and current liabilities	$	—	$	381	$	—	$	—
Other Liabilities		3,894		4,727		2,454		—
Other Assets		3,105		—		—		—
Accumulated other comprehensive income / (loss), net of tax		1,418		352		(3,481)		—

Amounts recognized in accumulated other comprehensive loss consist of (in thousands):


	As of December 31,
	2016				2015
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits

Net actuarial gain / (loss)	$	(386)	$	352	$	(5,836)	$	—
Accumulated other comprehensive income / ( loss), pre-tax		(386)		352		(5,836)		—
Accumulated other comprehensive income / ( loss), net of tax		1,418		352		(3,481)		—

Components of the plan’s net periodic pension cost are as follows for the years ended December 31, 2016, 2015 and 2014 (in thousands):


	2016				2015				2014
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits

Service cost	$	1,308	$	97	$	652	$	—	$	612	$	—
Interest cost		2,002		97		766		—		720		—
Expected return on plan assets		(2,024)		—		(813)		—		(848)		—
Amortization of unrecognized net actuarial loss		1,271		—		245		—		218		—
Curtailment		128		—		—		—		—		—
Net periodic pension cost	$	2,685	$	194	$	850	$	—	$	702	$	—

For the year ended December 31, 2017, the Company expects to contribute approximately $833 its pension plans.

The following estimated pension benefits, which reflect expected future service, as appropriate, are expected to be paid over the next ten years as indicated below (in thousands):


	Pension
Fiscal Year	Benefits
2017	$	4,433
2018		4,001
2019		4,348
2020		4,461
2021		4,676
2022 - 2026		22,651
	$	44,570