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Pension and Other Post-retirement Benefit Plans
 12 Months Ended
Mar. 31, 2017
Compensation and Retirement Disclosure [Abstract]  
Pension and Other Post-retirement Benefit Plans
Pension and Other Post-retirement Benefit Plans
The Company sponsors nine defined benefit pension plans: six in Europe, one in Singapore and two in Mexico. The Company funds the pension liabilities in accordance with laws and regulations applicable to those plans.
In addition, the Company maintains two frozen post-retirement benefit plans: health care and life insurance benefits for certain retired United States employees who reached retirement age while working for the Company. The health care plan is contributory, with participants’ contributions adjusted annually. The life insurance plan is non-contributory.
A summary of the changes in benefit obligations and plan assets is as follows (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2017
 
2016
 
2017
 
2016
Change in Benefit Obligation
 
 
 
 
 
 
 
 
Benefit obligation at beginning of the year
 
$
45,716

 
$
49,342

 
$
623

 
$
846

Service cost
 
1,298

 
1,507

 
—

 
—

Interest cost
 
1,297

 
1,347

 
11

 
19

Plan participants’ contributions
 
—

 
—

 
592

 
464

Plan amendments
 
—

 
342

 
—

 
—

Actuarial (gain) loss
 
1,980

 
(4,922
)
 
(228
)
 
(146
)
Foreign currency exchange rate change
 
(3,732
)
 
221

 
—

 
—

Gross benefits paid
 
(1,120
)
 
(1,425
)
 
(612
)
 
(560
)
Curtailments and settlements
 
(268
)
 
(696
)
 
—

 
—

Benefit obligation at end of year
 
$
45,171

 
$
45,716

 
$
386

 
$
623

Change in Plan Assets
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
 
$
10,268

 
$
10,483

 
$
—

 
$
—

Actual return on plan assets
 
1,099

 
(46
)
 
—

 
—

Foreign currency exchange rate changes
 
(1,361
)
 
(242
)
 
—

 
—

Employer contributions
 
1,176

 
1,528

 
20

 
96

Settlements
 
(58
)
 
(30
)
 
—

 
—

Plan participants’ contributions
 
—

 
—

 
592

 
464

Gross benefits paid
 
(1,120
)
 
(1,425
)
 
(612
)
 
(560
)
Fair value of plan assets at end of year
 
$
10,004

 
$
10,268

 
$
—

 
$
—

Funded status at end of year
 
 
 
 
 
 
 
 
Fair value of plan assets
 
$
10,004

 
$
10,268

 
$
—

 
$
—

Benefit obligations
 
(45,171
)
 
(45,716
)
 
(386
)
 
(623
)
Amount recognized at end of year
 
$
(35,167
)
 
$
(35,448
)
 
$
(386
)
 
$
(623
)

In fiscal year 2016, the Company recognized a curtailment gain of $0.7 million due to headcount reductions in Landsberg, Germany corresponding with the relocation of production to lower cost regions.
The Company expects to contribute $1.6 million to the pension plans in fiscal year 2018, which includes direct contributions to be made for funded plans and benefit payments to be made for unfunded plans.
The Company does not prefund its post-retirement health care and life insurance benefit plans. As a result, the Company is responsible annually for the payment of benefits as incurred by the plans. The Company anticipates making payments of $53 thousand during fiscal year 2018.
Amounts recognized in the Consolidated Balance Sheets consist of the following (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2017
 
2016
 
2017
 
2016
Current liability
 
$
(827
)
 
$
(833
)
 
$
(52
)
 
$
(82
)
Noncurrent liability
 
(34,340
)
 
(34,615
)
 
(334
)
 
(541
)
Amount recognized, end of year
 
$
(35,167
)
 
$
(35,448
)
 
$
(386
)
 
$
(623
)


Amounts recognized in Accumulated other comprehensive income (loss) consist of the following (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2017
 
2016
 
2017
 
2016
Net actuarial loss (gain)
 
$
16,196

 
$
15,585

 
$
(1,134
)
 
$
(1,114
)
Prior service cost
 
1,500

 
1,582

 
—

 
—

Accumulated other comprehensive (income) loss
 
$
17,696

 
$
17,167

 
$
(1,134
)
 
$
(1,114
)

Although not reflected in the table above, the tax effect on the balances was $2.7 million and $2.0 million as of March 31, 2017 and 2016, respectively.
Components of benefit costs (credit) consist of the following (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Net service cost
 
$
1,298

 
$
1,507

 
$
1,286

 
$
—

 
$
—

 
$
—

Interest cost
 
1,297

 
1,347

 
1,819

 
11

 
19

 
29

Expected return on plan assets
 
(346
)
 
(433
)
 
(499
)
 
—

 
—

 
—

Amortization:
 
 
 
 
 
 
 
 
 
 
 
 
Actuarial (gain) loss
 
419

 
704

 
277

 
(207
)
 
(191
)
 
(187
)
Prior service cost
 
82

 
60

 
17

 
—

 
—

 
—

Recurring activity
 
2,750

 
3,185

 
2,900

 
(196
)
 
(172
)
 
(158
)
One time expense (income)
 
(11
)
 
—

 
—

 
—

 
—

 
—

Net periodic benefit cost (credit)
 
$
2,739

 
$
3,185

 
$
2,900

 
$
(196
)
 
$
(172
)
 
$
(158
)

The estimated amounts related to pensions that will be amortized from accumulated other comprehensive income into net periodic benefit costs in fiscal year 2018 are actuarial losses of $362 thousand, and prior service costs of $80 thousand. The estimated amounts related to other benefits that will be amortized from accumulated other comprehensive income into net periodic benefit costs in fiscal year 2018 are actuarial gains of $188 thousand.
The asset allocation for the Company’s defined benefit pension plans at March 31, 2017 and the target allocation for 2017, by asset category, are as follows:
Asset Category
 
Target
Allocation
(%)
 
Plan Assets
at March 31,
2017
(%)
Insurance (1)
 
10
 
6
International equities
 
15
 
18
International bonds
 
60
 
63
Other
 
15
 
13
Total
 
100
 
100
_______________________________________________________________________________
(1)
Comprised of assets held by the defined benefit pension plan in Germany.
The Company’s investment strategy for its defined benefit pension plans is to maximize long-term rate of return on plan assets within an acceptable level of risk in order to minimize the cost of providing pension benefits. The investment policy establishes a target allocation range for each asset class and the fund is managed within those ranges. The plans use a number of investment approaches including insurance products, equity and fixed income funds in which the underlying securities are marketable in order to achieve this target allocation. Certain plans invest solely in insurance products. The Company continuously monitors the performance of the overall pension asset portfolio, asset allocation policies, and the performance of individual pension asset managers and makes adjustments and changes, as required. The Company does not manage any assets internally, does not have any passive investments in index funds, and does not directly utilize futures, options, or other derivative instruments or hedging strategies with regard to the pension plans; however, the investment mandate of some pension asset managers allows the use of the foregoing as components of their portfolio management strategies.
The expected rate of return was determined by modeling the expected long-term rates of return for broad categories of investments held by the plan against a number of various potential economic scenarios.
Other changes in plan assets and benefit obligations recognized in Accumulated other comprehensive income (loss) are as follows (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Current year actuarial (gain) loss
 
$
1,229

 
$
(5,125
)
 
$
12,397

 
$
(228
)
 
$
(146
)
 
$
118

Amortization of actuarial gain (loss)
 
(619
)
 
(698
)
 
(258
)
 
208

 
191

 
187

Current year prior service cost
 
—

 
342

 
1,006

 
—

 
—

 
—

Amortization of prior service cost
 
(82
)
 
(60
)
 
(17
)
 
—

 
—

 
—

Total recognized in other comprehensive income
 
$
528

 
$
(5,541
)
 
$
13,128

 
$
(20
)
 
$
45

 
$
305

Total recognized in net periodic benefit cost and other comprehensive income (loss)
 
$
3,267

 
$
(2,356
)
 
$
16,028

 
$
(216
)
 
$
(127
)
 
$
147


Each of these changes has been factored into the following benefit payments schedule for the next ten fiscal years. The Company expects to have benefit payments in the future as follows (amounts in thousands):
 
 
Expected benefit payments
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
2021- 2025
Pension benefits
 
$
1,467

 
$
1,562

 
$
1,619

 
$
1,584

 
$
1,651

 
$
11,090

Other benefits
 
53

 
50

 
47

 
43

 
39

 
140

Total
 
$
1,520

 
$
1,612

 
$
1,666

 
$
1,627

 
$
1,690

 
$
11,230


The following weighted-average assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic cost for the pension and post-retirement plan (amounts in thousands except percentages):
 
 
Pension
 
Other Benefits
 
 
2017
 
2016
 
2017
 
2016
Projected benefit obligation:
 
 
 
 
 
 
 
 
Discount rate
 
3.1
%
 
3.2
%
 
3.2
%
 
2.8
%
Rate of compensation increase
 
3.5
%
 
3.4
%
 
—
%
 
—
%
Health care cost trend on covered charges
 
—
%
 
—
%
 
7.0%
decreasing to
ultimate trend
of 5% in 2021

 
7.0%
decreasing to
ultimate trend
of 5% in 2021

Net periodic benefit cost:
 
 
 
 
 
 
 
 
Discount rate
 
3.1
%
 
2.8
%
 
2.8
%
 
2.9
%
Rate of compensation increase
 
3.5
%
 
3.5
%
 
—
%
 
—
%
Expected return on plan assets
 
3.2
%
 
4.0
%
 
—
%
 
—
%
Health care cost trend on covered charges
 
—
%
 
—
%
 
7.0%
decreasing to
ultimate trend
of 5% in 2021

 
7.0%
decreasing to
ultimate trend
of 5% in 2019

Sensitivity of retiree welfare results
 
 
 
 
 
 
 
 
Effect of a one percentage point increase in assumed health care cost trend:
 
 
 
 
 
 
 
 
—On total service and interest costs components
 
 

 
 

 
$
—

 
$
—

—On post-retirement benefits obligation
 
 

 
 

 
—

 
6

Effect of a one percentage point decrease in assumed health care cost trend:
 
 
 
 
 
 
 
 
—On total service and interest costs components
 
 

 
 

 
—

 
—

—On post-retirement benefits obligation
 
 

 
 

 
—

 
(6
)

The measurement date used to determine pension and post-retirement benefits is March 31.
The Company evaluated input from its third-party actuary to determine the appropriate discount rate. The determination of the discount rate is based on various factors such as the rate on bonds, term of the expected payouts, and long-term inflation factors.
The following table sets forth by level, within the fair value hierarchy as described in Note 1, the pension plan’s assets, required to be carried at fair value on a recurring basis as of March 31, 2017 and March 31, 2016 (amounts in thousands):
 
 
Fair Value
March 31,
2017
 
Fair Value Measurement Using
 
Fair Value
March 31,
2016
 
Fair Value Measurement Using
 
 
Level 1
 
Level 2 (1)
 
Level 3 (2)
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents
 
$
86

 
$
86

 
$
—

 
$
—

 
$
129

 
$
129

 
$
—

 
$
—

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International equities
 
1,760

 
—

 
1,760

 
—

 
1,567

 
—

 
1,567

 
—

Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International bonds
 
6,275

 
—

 
6,275

 
—

 
6,469

 
—

 
6,469

 
—

Insurance contracts
 
580

 
—

 
—

 
580

 
611

 
—

 
—

 
611

Diversified growth funds
 
1,303

 
—

 
1,303

 
—

 
1,492

 
—

 
1,492

 
—

 
 
$
10,004

 
$
86

 
$
9,338

 
$
580

 
$
10,268

 
$
129

 
$
9,528

 
$
611

(1)
Level 2 plan assets consist of pooled investment funds which are unquoted and have no restriction on redemption. Fair value was determined using daily, weekly, or monthly trading activity which derives the unit price of the pooled fund.
(2)
Level 3 plan assets are invested in reinsurance contracts whose value is the sum of the actuarial reserve and the profit participation of each contract. The actuarial reserve is the sum of discounted cash flows associated with future benefits and premiums.
The table below sets forth a summary of changes in the fair value of the defined benefit pension plan’s Level 3 assets for the fiscal years ended March 31, 2016 and March 31, 2017 (amounts in thousands):
                
Balance at March 31, 2015
$
576

Actual return on plan assets
14

Employer contributions
189

Benefits paid
(202
)
Foreign currency exchange rate change
34

Balance at March 31, 2016
$
611

Actual return on plan assets
20

Employer contributions
198

Benefits paid
(211
)
Foreign currency exchange rate change
(38
)
Balance at March 31, 2017
$
580


The Company also sponsors a deferred compensation plan for highly compensated employees. The plan is non-qualified and allows certain employees to contribute to the plan. Company matches, net of gains (losses) related to the deferred compensation plan, were $176 thousand in fiscal year 2017, $5 thousand in fiscal year 2016, and $115 thousand in fiscal year 2015. Total benefits accrued under this plan were $1.8 million and $1.5 million at March 31, 2017 and March 31, 2016, respectively.
In addition, the Company has a defined contribution retirement plan (the “Savings Plan”) in which all United States employees who meet certain eligibility requirements may participate. A participant may direct the Company to contribute amounts, based on a percentage of the participant’s compensation, to the Savings Plan through the execution of salary reduction agreements. In addition, the participants may elect to make after-tax contributions. The Company matches contributions to the Savings Plan up to 6% of the employee’s salary. The Company made matching contributions of $2.4 million, $2.1 million and $2.2 million in fiscal years 2017, 2016, and 2015, respectively.