DEFINED BENEFIT PENSION PLANS

As of July 31, 2019, the Company sponsored two defined benefit pension plans covering certain of its employees in its Netherlands facility and one unfunded defined benefit pension plan covering certain of its employees in Japan. Pension costs are actuarially determined.

The plan assets are primarily related to the defined benefit plan associated with the Company's Netherlands facility. It consists of an insurance contract that guarantees the payment of the funded pension entitlements. Insurance contract assets are recorded at fair value, which is determined based on the cash surrender value of the insured benefits which is the present value of the guaranteed funded benefits. Insurance contracts are valued using unobservable inputs, primarily by discounting expected future cash flows relating to benefits paid from a notional investment portfolio in order to determine the cash surrender value of the policy. The following table presents the plan assets measured at fair value on a recurring basis as of July 31, 2019 and 2018, classified by fair value hierarchy:



					Fair Value Measurements at Reporting Date Using
(In thousands)	July 31, 2019		Asset Allocations		Level 1		Level 2		Level 3
Insurance contract	$	26,651	98	%	$	—	$	—	$	26,651
Other investments	616		2	%	—		—		616
	$	27,267	100	%	$	—	$	—	$	27,267



					Fair Value Measurements at Reporting Date Using
(In thousands)	July 31, 2018		Asset Allocations		Level 1		Level 2		Level 3
Insurance contract	$	22,339	98	%	$	—	$	—	$	22,339
Other investments	521		2	%	—		—		521
	$	22,860	100	%	$	—	$	—	$	22,860

The aggregate change in benefit obligation and plan assets related to these plans was as follows:



	July 31,
	2019			2018
	(In thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	29,849		$	27,464
Service cost	365			398
Interest cost	633			671
Actuarial loss	5,125			1,655
Employee contributions	72			93
Benefits and administrative expenses paid	(197		)	(372		)
Adjustments	(20		)	(54		)
Settlements	—			(21		)
Currency translation	(1,289		)	15
Benefit obligation at end of year	34,538			29,849
Change in plan assets
Fair value of plan assets at beginning of year	22,860			21,204
Actual return on plan assets	5,136			1,541
Employer contributions, net	422			402
Employee contributions	73			92
Settlements	(19		)	(21		)
Benefits and administrative expenses paid	(197		)	(372		)
Currency translation	(1,008		)	14
Fair value of plan assets at end of year	27,267			22,860
Funded status
Current liability	(13		)	(13		)
Noncurrent liability	(7,259		)	(6,976		)
Net amount recognized in statement of financial position as a noncurrent liability	$	(7,272	)	$	(6,989	)

The accumulated benefit obligation was approximately $32.4 million and $27.7 million at July 31, 2019 and 2018, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets was as follows:



	July 31,
	2019		2018
	(In thousands)
Projected benefit obligation	$	34,538	$	29,849
Accumulated benefit obligation	$	32,361	$	27,700
Fair value of plan assets	$	27,267	$	22,860

Components of net periodic pension cost were as follows:



	Twelve months ended July 31,
	2019			2018
	(In thousands)
Service cost	$	365		$	398
Interest costs	633			671
Expected return on plan assets	(492		)	(529		)
Amortization of net actuarial loss	127			125
Net periodic pension costs	$	633		$	665

The amount included in accumulated other comprehensive income expected to be recognized as a component of net periodic pension costs in fiscal year 2020 is approximately $4.9 million related to amortization of a net actuarial loss and prior service cost.

Assumptions:

Weighted-average assumptions used to determine benefit obligations was as follows:



	Twelve months ended July 31,
	2019		2018
Discount rate	1.48	%	2.22	%
Rate of compensation increase	1.97	%	1.93	%

Weighted-average assumptions used to determine net periodic pension cost was as follows:



	Twelve months ended July 31,
	2019		2018
Discount rate	1.46	%	2.21	%
Expected long-term rate of return on plan assets	1.45	%	2.20	%
Rate of compensation increase	1.92	%	1.94	%

The discount rate reflects the Company's best estimate of the interest rate at which pension benefits could be effectively settled as of the valuation date. It is based on the Mercer Yield Curve for the Eurozone as per July 31, 2019 for the appropriate duration of the plan.

To develop the expected long-term rate of return on assets assumptions consideration is given to the current level of expected returns on risk free investments, the historical level of risk premium associated with the other asset classes in which the portfolio is invested and the expectations for the future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio.

Benefit payments:

The following table summarizes expected benefit payments from the plans through fiscal year 2024. Actual benefit payments may differ from expected benefit payments. The minimum required contributions to the plans are expected to be approximately $0.4 million in fiscal year 2020.



	Pension Benefit Payments
	(in thousands)
For the fiscal year ended July 31:
2020	205
2021	247
2022	245
2023	294
2024	444
Next 5 years	2,436

The current target allocations for plan assets are primarily insurance contracts. The market value of plan assets using Level 3 inputs is approximately $27.3 million.

Valuation Technique:

Benefit obligations are computed using the projected unit credit method. Benefits are attributed to service based on the plan's benefit formula. Cumulative gains and losses in excess of 10% of the greater of the pension benefit obligation or market-related value of plan assets are amortized over the expected average remaining future service of the current active membership.