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Pension and Severance Plans
 12 Months Ended
Dec. 31, 2019
Defined Benefit Plan [Abstract]  
Pension and Severance Plans Pension and Severance Plans

Korean Severance Plan

Our subsidiary in Korea maintains an unfunded severance plan that covers certain employees that were employed prior to August 1, 2015. 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 for service provided prior to August 1, 2015. Factors used to determine severance benefits include employees’ length of service, seniority and rate of pay. The employees’ length of service and seniority are fixed as of July 31, 2015. The employees’ rate of pay is adjusted to the 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. On August 1, 2015, our subsidiary in Korea began sponsoring a defined benefit pension plan and a defined contribution plan. Existing employees at that time were given the option of choosing either a defined benefit pension plan or a defined contribution plan for their future benefits and new employees since that date are enrolled in a defined contribution plan.

The changes to the balance of our accrued severance plan obligations are as follows:
 
For the Year Ended December 31,
 
2019
 
2018
 
2017
 
(In thousands)
Balance at January 1
$
142,298

 
$
153,920

 
$
136,396

Provision of severance benefits
1,306

 
1,939

 
11,714

Severance payments
(10,659
)
 
(7,611
)
 
(11,787
)
Foreign currency (gain) loss
(5,398
)
 
(5,950
)
 
17,597

Balance at December 31
127,547

 
142,298

 
153,920

Payments remaining with the National Pension Fund
(161
)
 
(172
)
 
(185
)
Total accrued severance plan obligations at December 31
127,386

 
142,126

 
153,735

Less current portion of accrued severance plan obligations (Note 11)
13,408

 
13,179

 
15,190

Non-current portion of accrued severance plan obligations
$
113,978

 
$
128,947

 
$
138,545



Foreign Defined Benefit Pension Plans

Our subsidiaries in Japan, Korea, Malaysia, the Philippines and Taiwan sponsor defined benefit plans (the “Plans”). Charges to expense are based upon actuarial analyses. The following table summarizes the changes to the Plans’ benefit obligations, fair value of the Plans’ assets and the funded status of the Plans at December 31, 2019 and 2018:
 
For the Year Ended December 31,
 
2019
 
2018
 
(In thousands)
Change in projected benefit obligation:
 
 
 
Projected benefit obligation at January 1
$
175,712

 
$
158,466

Service cost
31,355

 
32,913

Interest cost
5,244

 
4,867

Benefits paid
(11,742
)
 
(6,137
)
Actuarial (gain) loss
12,540

 
(5,991
)
Settlement
(5,310
)
 
(5,055
)
Foreign exchange (gain) loss
(351
)
 
(3,351
)
Projected benefit obligation at December 31
207,448

 
175,712

Change in plan assets:
 
 
 
Fair value of plan assets at January 1
123,370

 
115,725

Actual gain (loss) on plan assets
12,221

 
(4,210
)
Employer contributions
27,134

 
26,899

Settlement
(5,310
)
 
(5,055
)
Benefits paid
(11,742
)
 
(6,137
)
Foreign exchange gain (loss)
(515
)
 
(3,852
)
Fair value of plan assets at December 31
145,158

 
123,370

Funded status of the Plans at December 31
$
(62,290
)
 
$
(52,342
)


 
December 31,
 
2019
 
2018
 
(In thousands)
Amounts recognized in the Consolidated Balance Sheets consist of:
 
 
 
Prepaid benefit cost (included in non-current assets)
$
498

 
$
2,740

Accrued benefit liability (included in pension and severance obligations)
(62,788
)
 
(55,082
)
Net amount recognized at year end
$
(62,290
)
 
$
(52,342
)


The accumulated benefit obligation as of December 31, 2019 and 2018 was $154.7 million and $132.9 million, respectively.

The following table summarizes, by component, the change in accumulated other comprehensive income (loss), net of tax related to our Plans:
 
Prior Service
Cost
 
Actuarial Net Gain (Loss)
 
Total
 
(In thousands)
Balance at December 31, 2017
$
603

 
$
5,700

 
$
6,303

Amortization included in net periodic pension cost
(1
)
 
(1,735
)
 
(1,736
)
Net gain (loss) arising during period
—

 
(1,908
)
 
(1,908
)
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss)
(1
)
 
(3,643
)
 
(3,644
)
Balance at December 31, 2018
602

 
2,057

 
2,659

Amortization and settlement gain included in net periodic pension cost
—

 
(589
)
 
(589
)
Net gain (loss) arising during period
—

 
(6,890
)
 
(6,890
)
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss)
—

 
(7,479
)
 
(7,479
)
Balance at December 31, 2019
$
602

 
$
(5,422
)
 
$
(4,820
)
Estimated amortization of cost to be included in 2020 net periodic pension cost
$
—

 
$
59

 
$
59



Information for pension plans with benefit obligations in excess of plan assets is as follows:
 
December 31,
 
2019
 
2018
 
(In thousands)
Plans with underfunded or non-funded projected benefit obligation:
 
 
 
Aggregate projected benefit obligation
$
197,377

 
$
135,967

Aggregate fair value of plan assets
134,589

 
80,885

Plans with underfunded or non-funded accumulated benefit obligation:
 
 
 
Aggregate accumulated benefit obligation
71,059

 
63,274

Aggregate fair value of plan assets
24,043

 
20,094



The following table summarizes total pension expense:
 
For the Year Ended December 31,
 
2019
 
2018
 
2017
 
(In thousands)
Components of net periodic pension cost and total pension expense:
 
 
 
 
 
Service cost
$
31,355

 
$
32,913

 
$
33,823

Interest cost
5,244

 
4,867

 
4,067

Expected return on plan assets
(6,412
)
 
(5,640
)
 
(4,537
)
Amortization of prior service cost
—

 
6

 
30

Recognized actuarial (gain) loss
(374
)
 
(147
)
 
84

Net periodic pension cost
29,813

 
31,999

 
33,467

Curtailment loss
—

 
—

 
574

Settlement (gain) loss
(210
)
 
(1,639
)
 
383

Total pension expense
$
29,603

 
$
30,360

 
$
34,424


The components of net periodic pension cost other than the service cost component are included in other (income) expense, net in our Consolidated Statements of Income.

The following table summarizes the weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligations:
 
For the Year Ended December 31,
 
2019
 
2018
 
2017
Discount rate for determining net periodic pension cost
3.1
%
 
3.2
%
 
3.1
%
Discount rate for determining benefit obligations at December 31
2.5
%
 
3.1
%
 
3.2
%
Rate of compensation increase for determining net periodic
pension cost
3.6
%
 
3.8
%
 
3.8
%
Rate of compensation increase for determining benefit obligations
at December 31
3.7
%
 
3.6
%
 
3.8
%
Expected rate of return on plan assets for determining net periodic
pension cost
5.1
%
 
4.9
%
 
4.9
%

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. Our defined benefit pension plan in Malaysia is a non-funded plan, and as such, no asset exists related to this plan. Our investment strategies for our defined benefit plans in Japan, Korea and the Philippines, are based on long-term, sustained asset growth through low to medium risk investments. The current rate of return assumption targets are based on asset allocation strategies as follows:
 
Allocation
 
Debt
 
Equity
 
Other
Japan defined benefit plan
65
%
 
33
%
 
2
%
Korea defined benefit plan
15
%
 
40
%
 
45
%
Philippine defined benefit plan
40
%
 
50
%
 
10
%


The fair value of our pension plan assets, by asset category utilizing the fair value hierarchy as discussed in Note 16, is as follows:
 
December 31,
 
2019
 
2018
 
(In thousands)
Cash and cash equivalents (Level 1)
$
3,614

 
$
6,640

Equity securities
 
 
 
U.S. securities (Level 1)
19,276

 
15,069

U.S. securities (Level 2)
2

 
—

Foreign securities (Level 1)
11,854

 
10,162

Foreign securities (Level 2)
28

 
—

Foreign mutual funds (Level 1)
30,801

 
25,236

 
61,961

 
50,467

Debt securities
 
 
 
U.S. government bonds (Level 2)
1,442

 
1,039

U.S. corporate bonds (Level 2)
31

 
29

Foreign government bonds (Level 1)
3,338

 
4,427

Foreign government bonds (Level 2)
9,821

 
9,545

Foreign corporate bonds (Level 1)
379

 
5,713

Foreign corporate bonds (Level 2)
5,249

 
1,951

Foreign treasury notes (Level 1)
3,516

 
2,587

Foreign mutual funds (Level 1)
11,404

 
11,188

 
35,180

 
36,479

Foreign guaranteed investment contracts (Level 2)
33,931

 
18,120

Taiwan retirement fund (Level 1)
11,359

 
10,451

Other, net (Level 1)
99

 
680

Other, net (Level 2)
(986
)
 
533

Total fair value of pension plan assets
$
145,158

 
$
123,370



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 and are invested in a mix of cash, domestic and foreign equity securities and domestic and foreign debt securities.

We expect to make contributions of approximately $23 million during 2020. 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)
2020
$
9,569

2021
11,780

2022
13,093

2023
15,573

2024
18,584

2025 to 2029
137,242



Defined Contribution Plans

We sponsor defined contribution plans in Korea, Malaysia, Taiwan and the U.S. Total defined contribution expense was $13.6 million, $12.2 million and $10.4 million for 2019, 2018 and 2017, respectively.