14. Employee Benefit Plans

The Company maintains a 401(k) retirement plan that covers all regular employees on Syntel’s U.S. payroll. Eligible employees may contribute the lesser of 60% of their compensation or $17,000, subject to certain limitations, to the retirement plan. The Company may make contributions to the plan at the discretion of the Board of Directors; however, through December 31, 2012, no Company contributions have been made.

Eligible employees on Syntel’s Indian payroll receive benefits under the Provident Fund (“PF”), which is a defined contribution plan. Both the employee and the Company make monthly contributions equal to a specified percentage of the covered employee’s salary. The Company has no further obligations under the plan beyond its monthly contributions. The contributions made to the fund are administered and managed by the Government of India. The Company’s monthly contributions are charged to income in the period they are incurred. Provident Fund Contribution expense recognized by Indian entities was $3.70 million, $3.28 million and $2.79 million for the years ended December 31, 2012, 2011 and 2010, respectively.

In accordance with the Payment of Gratuity Act, 1972 of India, the Indian subsidiary provides for gratuity, a defined retirement benefit plan (the “Gratuity Plan”) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation and are charged to income in the period determined. The Gratuity Plan is a non-funded plan. The amounts accrued under this plan are $8.2 million and $5.6 million as of December 31, 2012 and 2011, respectively, and are included within current and other non-current liabilities, as applicable. Expense recognized by Indian entities under the Gratuity Plan was $2.3 million, $2.3 million and $1.4 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The following table sets forth the funded status of the Gratuity Plan of the Company and the amounts recognized in the Company’s balance sheets and statements of income.


	( thousands)
	2012			2011
Accumulated benefit obligation		$3,824			$2,898
Change in projected benefit obligation:
Projected benefit obligation at beginning of the year		$5,642			$5,330
Service cost		1,671			1,660
Interest cost		644			560
Plan Amendment		—			—
Actuarial loss/(gain)		1,029			(401	)
Acquisition/Divestiture		(4	)		—
Benefits paid		(562	)		(538	)
Effect of exchange rate changes		(203	)		(969	)

Projected benefit obligation at end of the year		$8,217			$5,642

Amounts recognized in the balance sheet consists of:
Provision for gratuity (included in total current liabilities)		$433			$610
Provision for gratuity (included in non-current liabilities)		5,252			5,032

		$5,685			$5,642
As of December 31, 2012 and December 31, 2011 amounts in accumulated other comprehensive income:
Net Actuarial (Gain)/ Loss		$779			$(253	)
Net Prior Service (Credit)/Cost		262			302

Total accumulated other comprehensive (income)/loss		$1,041			$49

Expected amortization out of comprehensive income in 2012 is $0.01 million.
Reconciliation of Net Amount Recognized
Net Amount Recognized as at beginning of the period		$(5,642	)		$(5,330	)
Company Contributions		566			538
Net Periodic Benefit Cost for the period		(2,336	)		(2,256	)
Amount Recognized in Accumulated Other Comprehensive Income		(1,007	)		436
Adjustments on account of employees transferred		(12	)		—
Foreign Currency Translation adjustment		214			970

Net Amount Recognized as at end of the period		(8,217	)		(5,642	)
Funded status of the plans		—			—

Accrued benefit cost		$(8,217	)		$(5,642	)

The components of net gratuity costs are reflected below:
Service Cost		$1,670			$1,660
Interest Cost		644			560
Amortization of transition obligation/(assets)		33			39
Amortization of Net Actuarial (Gain)/Loss		(11	)		24

		$2,336			$2,283

Weighted-average assumptions used to determine benefit obligations:


	2012		2011
Discount rate		8.85% p.a.		9.30% p.a.
Long-term rate of compensation increase		11% p.a. for first year & 10% for next two years &7%p.a. thereafter		11% p.a. for first year & 9% for next two years &7%p.a. thereafter

Weighted-average assumptions used to determine net periodic benefit cost:


	2012		2011
Discount rate		8.85% p.a.		9.30% p.a.
Long-term rate of compensation increase		11% p.a. for first year & 10% for next two years &7% thereafter		11% p.a. for first year & 9% for next two years &7% thereafter

Cash Flows

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


	(USD thousands)
	Expected contribution
For the year ended December 31, 2012
2013		724
2014		877
2015		1,324
2016		1,749
2017		2,070
2018– 2022		10,921