15.Pension and Severance Plans

U.S. Defined Contribution Plan

We have a defined contribution plan covering substantially all U.S. employees. Eligible employees can contribute up to 60% of their salary, subject to annual Internal Revenue Service limitations. We match in cash 75% of the employee’s contributions up to a defined maximum as determined on an annual basis. The expense for this plan was $1.8 million in 2013 and 2012 and $1.9 million in 2011.

Malaysia Defined Contribution Plan

We have a defined contribution plan under the Employees Provident Fund Act in Malaysia whereby employees contribute up to 11% of their salary. We contribute an amount equivalent to no less than 12% of the employees’ salaries up to a defined maximum into their individual accounts. The expense for this plan was $1.0 million in 2013.

Taiwan Defined Contribution Plan

We have a defined contribution plan under the Taiwanese Labor Pension Act in Taiwan whereby employees can contribute up to 6% of their salary. We contribute an amount equivalent to no less than 6% of the employees’ salaries up to a defined maximum into their individual accounts. The expense for this plan was $2.4 million in 2013 and $2.3 million in 2012 and 2011.

Korean Severance Plan

Our subsidiary in Korea participates in an accrued severance plan that covers employees with at least one year of service. To the extent eligible employees are terminated, our subsidiary in Korea would be required to make lump-sum severance payments on behalf of these eligible employees based on their length of service, seniority and rate of pay at the time of termination. Accrued severance benefits are estimated assuming all eligible employees were to terminate their employment at the balance sheet date. Our contributions to the National Pension Plan of the Republic of Korea are deducted from accrued severance benefit liabilities.

The changes to the balance of our severance accrual are as follows:



	For the Year Ended December 31,
	2013			2012			2011
	(In thousands)
Balance at the beginning of year	$	126,762		$	106,715		$	88,899
Provision of severance benefits	26,550			19,667			26,705
Severance payments	(10,402		)	(8,520		)	(6,717		)
Loss (gain) on foreign currency	2,463			8,900			(2,172		)
	145,373			126,762			106,715
Payments remaining with the National Pension Fund	(241		)	(249		)	(239		)
Total severance obligation balance at the end of year	145,132			126,513			106,476
Less current portion of accrued severance obligation (Note 13)	11,197			9,516			7,476
Non-current portion of severance obligation	$	133,935		$	116,997		$	99,000

Foreign Defined Benefit Pension Plans

Our subsidiaries in Japan, Malaysia, the Philippines and Taiwan sponsor defined benefit plans (the “Plans”) that cover substantially all of their respective employees who are not covered by statutory plans. Charges to expense are based upon actuarial analyses.

The following table summarizes the Plans’ benefit obligations, fair value of the Plans’ assets and the funded status of the Plans at December 31, 2013 and 2012.



	For the Year Ended December 31,
	2013			2012
	(In thousands)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	80,528		$	78,897
Service cost	5,909			6,362
Interest cost	3,170			3,270
Benefits paid	(1,602		)	(1,168		)
Actuarial gains	(2,513		)	(3,899		)
Acquisition (Note 3)	13,017			—
Effects of curtailment	(176		)	554
Settlement	(8,701		)	(4,925		)
Foreign exchange (gain) loss	(8,060		)	1,437
Projected benefit obligation at end of year	81,572			80,528
Change in plan assets:
Fair value of plan assets at beginning of year	58,146			48,801
Actual gain on plan assets	5,159			3,500
Employer contributions	1,120			8,687
Settlement	(8,701		)	(4,925		)
Benefits paid	(1,602		)	(1,168		)
Foreign exchange (loss) gain	(3,818		)	3,251
Fair value of plan assets at end of year	50,304			58,146
Funded status of the Plans at end of year	$	(31,268	)	$	(22,382	)

The accrued benefit liability, included in pension and severance obligations in the Consolidated Balance Sheets, as of December 31, 2013 and 2012 was $31.3 million and $22.4 million, respectively. The accumulated benefit obligation as of December 31, 2013 and 2012 was $55.9 million and $54.6 million, respectively.

The following table summarizes, by component, the change in accumulated other comprehensive income related to our Plans:



	Initial Net Obligation			Prior Service Cost			Actuarial Net (Loss) Gain			Total
	(In thousands)
Balance at December 31, 2011, net of tax ($1.4 million)	$	(58	)	$	(31	)	$	(10,421	)	$	(10,510	)
Amortization included in net periodic pension cost, net of tax (less than $0.1 million)	6			219			181			406
Net gain arising during period, net of tax (less than $0.1 million)	—			—			4,731			4,731
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income, net of tax ($0.1 million)	6			219			4,912			5,137
Balance at December 31, 2012, net of tax ($1.3 million)	$	(52	)	$	188		$	(5,509	)	$	(5,373	)
Amortization included in net periodic pension cost, net of tax (less than $0.1 million)	8			250			106			364
Net gain arising during period, net of tax ($0.2 million)	—			—			3,996			3,996
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income, net of tax ($0.3 million)	8			250			4,102			4,360
Balance at December 31, 2013, net of tax ($1.0 million)	$	(44	)	$	438		$	(1,407	)	$	(1,013	)

Estimated amortization of cost to be included in 2014 net periodic pension cost	$	5		$	211		$	66		$	282

Information for pension plans with benefit obligations in excess of plan assets are as follows:



	December 31,
	2013		2012
	(In thousands)
Plans with underfunded or non-funded projected benefit obligation:
Aggregate projected benefit obligation	$	73,326	$	80,528
Aggregate fair value of plan assets	41,957		58,146
Plans with underfunded or non-funded accumulated benefit obligation:
Aggregate accumulated benefit obligation	24,877		17,816
Aggregate fair value of plan assets	—		—

The following table summarizes net periodic pension costs:



	For the Year Ended December 31,
	2013			2012			2011
	(In thousands)
Components of net periodic pension cost and total pension expense:
Service cost	$	5,909		$	6,362		$	5,744
Interest cost	3,170			3,270			3,274
Expected return on plan assets	(3,508		)	(3,188		)	(3,119		)
Amortization of transition obligation	7			7			8
Amortization of prior service cost	231			291			269
Recognized actuarial loss	135			218			83
Net periodic pension cost	5,944			6,960			6,259
Curtailment (gain) loss	(176		)	1,089			1,016
Settlement (gain) loss	(120		)	(100		)	565
Total pension expense	$	5,648		$	7,949		$	7,840

The following table summarizes the weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligation at December 31, 2013, 2012 and 2011:



	For the Year Ended December 31,
	2013		2012		2011
Discount rate for determining net periodic pension cost	3.9	%	4.2	%	5.2	%
Discount rate for determining benefit obligations at year end	3.9	%	4.0	%	4.2	%
Rate of compensation increase for determining net periodic pension cost	4.1	%	4.5	%	4.6	%
Rate of compensation increase for determining benefit obligations at year end	4.1	%	4.1	%	4.5	%
Expected rate of return on plan assets for determining net periodic pension cost	6.3	%	6.3	%	6.4	%

The measurement date for determining the Plans’ assets and benefit obligations is December 31, each year. Discount rates are generally derived from yield curves constructed from high-quality corporate or foreign government bonds, for which the timing and amount of cash outflows approximate the estimated payouts.

The expected rate of return assumption is based on weighted-average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets and include input from our actuaries. We have no control over the direction of our investments in our defined benefit plans in Taiwan as the local Labor Standards Law Fund mandates such contributions into a cash account balance at the Bank of Taiwan. The defined benefit pension plans in Japan and Malaysia are non-funded plans, and as such, no assets exist related to these plans. Our investment strategy for our Philippine defined benefit plan is based on long-term, sustained asset growth through low to medium risk investments. The current rate of return assumption targets are based on an asset allocation strategy for our Philippine plan assets of 55% debt securities (primarily Philippines domestic and U.S.) and 45% equity securities (primarily U.S. and Europe). Philippine plan assets included Amkor common stock totaling $0.6 million and $0.4 million at December 31, 2013, and December 31, 2012, respectively.

The fair value of our pension plan assets at December 31, 2013, by asset category utilizing the fair value hierarchy as discussed in Note 18, is as follows:



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
	(In thousands)
Cash and cash equivalents	$	4,542	$	—	$	4,542
Equity securities
Foreign securities	1,950		—		1,950
U.S. securities	18,223		—		18,223
	20,173		—		20,173
U.S. fixed income funds	4,186		—		4,186
Bonds
U.S. government bonds	—		2,087		2,087
Foreign treasury notes	10,374		—		10,374
	10,374		2,087		12,461
Taiwan retirement fund	8,840		—		8,840
Other	—		102		102
Total	$	48,115	$	2,189	$	50,304

The fair value of our pension plan assets at December 31, 2012, by asset category utilizing the fair value hierarchy as discussed in Note 18, is as follows:



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
	(In thousands)
Cash and cash equivalents	$	1,348	$	—	$	1,348
Equity securities
Foreign securities	394		—		394
U.S. securities	9,046		—		9,046
	9,440		—		9,440
U.S. fixed income funds	1,714		—		1,714
Bonds
U.S. government bonds	2,070		6,448		8,518
Foreign government bonds	406		—		406
Foreign treasury notes	27,503		—		27,503
	29,979		6,448		36,427
Taiwan retirement fund	8,720		—		8,720
Other	377		120		497
Total	$	51,578	$	6,568	$	58,146

The Taiwan retirement fund category of our plan assets represents accounts that our subsidiaries in Taiwan have in a government labor retirement fund in the custody of the Bank of Taiwan. The accounts earn a minimum guaranteed rate of return. We have no control over the investment decisions of the fund which is invested in a mix of cash, domestic and foreign equity securities and domestic and foreign debt securities.

Our other category of plan assets included receivables and payables at December 31, 2013 and December 31, 2012.

We contributed $1.1 million, $8.7 million and $3.6 million to the Plans during 2013, 2012 and 2011, respectively, and we expect to contribute $2.5 million during 2014. We closely monitor the funded status of the Plans with respect to legislative requirements. We intend to make at least the minimum contribution required by law each year.

The estimated future benefit payments related to our foreign defined benefit plans are as follows:



	Payments
	(In thousands)
2014	$	2,663
2015	3,410
2016	2,901
2017	3,198
2018	4,047
2019 to 2023	33,275