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 $17,500, 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, 2014, 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 expensed in the period they are incurred. Provident Fund Contribution expense recognized by Indian entities was $4.7 million, $3.30 million and $3.70 million for the years ended December 31, 2014, 2013 and 2012, 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 expensed in the period determined. The Gratuity Plan is a non-funded plan. The amounts accrued under this plan are $12.1 million and $8.9 million as of December 31, 2014 and 2013, respectively, and are included within current and other non-current liabilities, as applicable. Expense recognized by Indian entities under the Gratuity Plan was $3.1 million, $2.9 million and $2.3 million for the years ended December 31, 2014, 2013 and 2012, 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 comprehensive income.


	(In thousands)
	2014			2013
Accumulated benefit obligation	$	6,026		$	4,334
Change in projected benefit obligation:
Projected benefit obligation at beginning of the year	$	8,919		$	8,217
Service cost		2,063			1,993
Interest cost		1,002			817
Actuarial loss/(gain)		1,165			(365	)
Adjustments due to transfer of employees within the group.		(3	)		—
Benefits paid		(814	)		(703	)
Effect of exchange rate changes		(275	)		(1,040	)

Projected benefit obligation at end of the year	$	12,057		$	8,919


Amounts recognized in the balance sheet consists of:
Provision for gratuity (included in total current liabilities)	$	553		$	508
Provision for gratuity (included in non-current liabilities)		7,934			5,752

	$	8,487		$	6,260

As of December 31, 2014 and December 31, 2013 amounts in accumulated other comprehensive loss:
Net actuarial loss	$	1,461		$	319
Net prior service cost		168			201

Total accumulated other comprehensive loss	$	1,629		$	520


Expected amortization out of comprehensive income in 2015 is $0.07 million.

Reconciliation of net amount recognized
Net amount recognized as at beginning of the period	$	(8,919	)	$	(8,217	)
Company contributions		814			703
Net periodic benefit cost for the period		(3,094	)		(2,862	)
Amount recognized in accumulated other comprehensive loss		(1,165	)		397
Adjustments on account of employees transferred		32			20
Foreign currency translation adjustment		275			1,040

Net amount recognized as at end of the period		(12,057	)		(8,919	)
Funded status of the plans		—			—

Accrued benefit cost	$	(12,057	)	$	(8,919	)


The components of net gratuity costs are reflected below:
Service cost	$	2,063		$	1,992
Interest cost		1,002			817
Amortization of transition obligation		33			30
Amortization of net actuarial (gain)/loss		(3	)		23

	$	3,095		$	2,862

Weighted-average assumptions used to determine benefit obligations:


	2014		2013
Discount rate		8.65% per annum.		9.55% per annum
Long-term rate of compensation increase		11% per annum for first year, 10% for next five years & 7% thereafter		11% per annum for first year, 10% for next five years & 7% thereafter

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


	2014		2013
Discount rate		8.65% per annum		9.55% per annum
Long-term rate of compensation increase		11% per annum for first year, 10% for next five years & 7% thereafter		11% per annum for first year, 10% for next five years & 7% thereafter

Cash Flows

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


For the year ended December 31,	Expected contribution
	(In thousands)
2015	$	1,355
2016		1,628
2017		1,917
2018		2,214
2019		2,543
2020–2025		12,812