Annual report pursuant to Section 13 and 15(d)

Pension and Other Post-retirement Benefit Plans

v3.20.1
Pension and Other Post-retirement Benefit Plans
12 Months Ended
Mar. 31, 2020
Retirement Benefits [Abstract]  
Pension and Other Post-retirement Benefit Plans Pension and Other Post-retirement Benefit Plans
The Company sponsors twelve defined benefit pension plans: six in Europe, one in Singapore, two in Mexico, two in Japan, and one in Thailand. 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 at March 31, 2020 and 2019 is as follows (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2020
 
2019
 
2020
 
2019
Change in Benefit Obligation
 
 
 
 
 
 
 
 
Benefit obligation at beginning of the year
 
$
148,440

 
$
161,673

 
$
312

 
$
367

Service cost
 
4,562

 
4,716

 

 

Interest cost
 
1,830

 
1,815

 
9

 
11

Plan participants’ contributions
 

 

 
553

 
641

Plan amendments
 
792

 

 

 

Actuarial (gain) loss
 
(1,860
)
 
1,146

 
(2
)
 
(81
)
Foreign currency exchange rate change
 
(1,684
)
 
(8,402
)
 

 

Gross benefits paid
 
(5,153
)
 
(1,097
)
 
(594
)
 
(626
)
Curtailments and settlements
 
(6,086
)
 
(11,411
)
 

 

Other events
 
(13
)
 

 

 

Benefit obligation at end of year
 
$
140,828

 
$
148,440

 
$
278

 
$
312

Change in Plan Assets
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
 
$
63,902

 
$
71,491

 
$

 
$

Actual return on plan assets
 
(543
)
 
1,165

 

 

Foreign currency exchange rate changes
 
487

 
(3,161
)
 

 

Employer contributions
 
10,208

 
7,882

 
41

 
(15
)
Settlements
 
(7,700
)
 
(12,379
)
 

 

Plan participants’ contributions
 

 

 
553

 
641

Gross benefits paid
 
(5,153
)
 
(1,096
)
 
(594
)
 
(626
)
Fair value of plan assets at end of year
 
$
61,201

 
$
63,902

 
$

 
$

Funded status at end of year
 
 
 
 
 
 
 
 
Fair value of plan assets
 
$
61,201

 
$
63,902

 
$

 
$

Benefit obligations
 
(140,828
)
 
(148,440
)
 
(278
)
 
(312
)
Amount recognized at end of year
 
$
(79,627
)
 
$
(84,538
)
 
$
(278
)
 
$
(312
)

The Company expects to contribute $4.4 million to the pension plans in fiscal year 2021, which includes direct contributions to be made for funded plans and benefit payments to be made for unfunded plans.
Amounts recognized in the Consolidated Balance Sheets at March 31, 2020 and 2019 consist of the following (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2020
 
2019
 
2020
 
2019
Noncurrent asset
 
$
2,317

 
$
670

 
$

 
$

Current liability
 
(2,663
)
 
(2,753
)
 
(47
)
 
(50
)
Noncurrent liability
 
(79,281
)
 
(82,455
)
 
(231
)
 
(262
)
Net liability recognized, end of year
 
$
(79,627
)
 
$
(84,538
)
 
$
(278
)
 
$
(312
)

Amounts recognized in accumulated other comprehensive income (loss) at March 31, 2020 and 2019 consist of the following (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2020
 
2019
 
2020
 
2019
Net actuarial loss (gain)
 
$
16,673

 
$
16,864

 
$
(646
)
 
$
(793
)
Prior service cost
 
2,034

 
1,325

 

 

Accumulated other comprehensive (income) loss
 
$
18,707

 
$
18,189

 
$
(646
)
 
$
(793
)

Although not reflected in the table above, the tax effect on the pension balances was $3.5 million and $2.4 million as of March 31, 2020 and 2019, respectively.
The components of net periodic benefit (income) costs for the fiscal years ended March 31, 2020, 2019 and 2018 are as follows (amounts in thousands):
 
 
Pension
 
Other Benefits
 
 
2020
 
2019
 
2018
 
2020
 
2019
 
2018
Net service cost
 
$
4,562

 
$
4,716

 
$
4,585

 
$

 
$

 
$

Interest cost
 
1,830

 
1,815

 
1,750

 
9

 
11

 
12

Expected return on plan assets (1)
 
(1,913
)
 
(2,037
)
 
(1,956
)
 

 

 

Amortization:
 
 
 
 
 
 
 
 
 
 
 
 
Actuarial (gain) loss (2)
 
444

 
396

 
393

 
(148
)
 
(167
)
 
(191
)
Prior service cost
 
83

 
87

 
87

 

 

 

Recurring activity
 
5,006

 
4,977

 
4,859

 
(139
)
 
(156
)
 
(179
)
One time expense (income) (3)
 
1,949

 
115

 
(71
)
 

 

 

Net periodic benefit cost (credit)
 
$
6,955

 
$
5,092

 
$
4,788

 
$
(139
)
 
$
(156
)
 
$
(179
)
______________________________________________________________________________
(1) The Company has elected to use the actual fair value of plan assets as the market-related value of assets in the determination of the expected return on plan assets.
(2) Actuarial gains and losses are amortized using a corridor approach. The total unrecognized amount of cumulative actuarial gain or loss in excess of 10% of the greater of the market value of assets or the projected benefit obligation is amortized over the average remaining service of active employees/lifetime of plan participants for plans with no active participants.
(3) The one time expense of $1.9 million in fiscal year 2020 relates to curtailment and settlement on the two defined benefit pension plans in Mexico, driven by headcount reductions in excess of ten percent.
All of the amounts in the table above, other than net service cost, were recorded in the line item “Other (income) expense, net” in the Consolidated Statements of Operations.
The estimated amounts related to pensions that will be amortized from accumulated other comprehensive income into net periodic benefit costs in fiscal year 2021 are actuarial losses of $0.2 million, and prior service costs of $0.2 million. The estimated amounts related to other benefits that will be amortized from accumulated other comprehensive income into net periodic benefit costs in fiscal year 2021 are actuarial gains of $0.1 million.
The asset allocation for the Company’s defined benefit pension plans at March 31, 2020 and the target allocation for 2020, by asset category, are as follows:
Asset Category
 
Target
Allocation
(%)
 
Plan Assets at March 31, 2020
(%)
Insurance (1)
 
1
 
1
International equities
 
34
 
31
International bonds
 
61
 
62
Other
 
4
 
6
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 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
 
 
2020
 
2019
 
2018
 
2020
 
2019
 
2018
Current year actuarial (gain) loss
 
$
588

 
$
1,684

 
$
(184
)
 
$
(2
)
 
$
(81
)
 
$
64

Amortization of actuarial gain (loss)
 
(779
)
 
(511
)
 
(322
)
 
148

 
167

 
191

Current year prior service cost
 
792

 

 

 

 

 

Amortization of prior service cost
 
(83
)
 
(87
)
 
(87
)
 

 

 

Total recognized in other comprehensive income
 
$
518

 
$
1,086

 
$
(593
)
 
$
146

 
$
86

 
$
255

Total recognized in net periodic benefit cost and other comprehensive income (loss)
 
$
7,473

 
$
6,178

 
$
4,195

 
$
7

 
$
(70
)
 
$
76


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
 
 
2021
 
2022
 
2023
 
2024
 
2025
 
2026 - 2030
Pension benefits
 
$
6,438

 
$
7,893

 
$
7,353

 
$
9,154

 
$
9,866

 
$
52,682

Other benefits
 
48

 
43

 
38

 
33

 
28

 
85

Total
 
$
6,486

 
$
7,936

 
$
7,391

 
$
9,187

 
$
9,894

 
$
52,767


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
 
 
2020
 
2019
 
2020
 
2019
Projected benefit obligation:
 
 
 
 
 
 
 
 
Discount rate
 
1.2
%
 
1.2
%
 
2.5
%
 
3.3
%
Rate of compensation increase
 
3.5
%
 
3.5
%
 
%
 
%
Health care cost trend on covered charges
 


 


 
6.25%
decreasing to
ultimate trend
of 5.0% in 2025

 
6.5%
decreasing to
ultimate trend
of 5.0% in 2025

Net periodic benefit cost:
 
 
 
 
 
 
 
 
Discount rate
 
1.2
%
 
1.3
%
 
3.3
%
 
3.5
%
Rate of compensation increase
 
3.5
%
 
3.5
%
 
%
 
%
Expected return on plan assets
 
2.9
%
 
3.0
%
 
%
 
%
Health care cost trend on covered charges
 


 


 
6.5%
decreasing to
ultimate trend
of 5.0% in 2025

 
7.0%
decreasing to
ultimate trend of 5.0% in 2022


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, 2020 and March 31, 2019 (amounts in thousands):
 
 
Fair Value
March 31,
2020
 
Fair Value Measurement Using
 
Fair Value
March 31,
2019
 
Fair Value Measurement Using
 
 
Level 1
 
Level 2 (1)
 
Level 3 (2)
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents
 
$
96

 
$
96

 
$

 
$

 
$
319

 
$
319

 
$

 
$

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International equities
 
18,895

 

 
18,895

 

 
19,965

 

 
19,965

 

Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International bonds
 
37,799

 

 
37,799

 

 
39,030

 

 
39,030

 

Insurance contracts
 
629

 

 

 
629

 
642

 

 

 
642

Diversified growth funds
 
3,782

 

 
3,782

 

 
3,946

 

 
3,946

 

 
 
$
61,201

 
$
96

 
$
60,476

 
$
629

 
$
63,902

 
$
319

 
$
62,941

 
$
642

______________________________________________________________________________
(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, 2019 and March 31, 2020 (amounts in thousands):
Balance at March 31, 2018
$
697

Actual return on plan assets
20

Employer contributions
233

Benefits paid
(247
)
Foreign currency exchange rate change
(61
)
Balance at March 31, 2019
$
642

Actual return on plan assets
18

Employer contributions
226

Benefits paid
(241
)
Foreign currency exchange rate change
(16
)
Balance at March 31, 2020
$
629


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 $47 thousand in fiscal year 2020, $51 thousand in fiscal year 2019, and $206 thousand in fiscal year 2018. Total benefits accrued under this plan were $0.4 million and $2.3 million at March 31, 2020 and March 31, 2019, 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 $3.2 million, $2.8 million and $2.2 million in fiscal years 2020, 2019, and 2018, respectively.