14. Employee Benefit Plans

Supplemental Executive Retirement Plan

We maintain the United Therapeutics Corporation Supplemental Executive Retirement Plan (SERP) to provide retirement benefits to certain senior members of our management team.

Participants who retire at age 60 or older are eligible to receive either monthly payments or a lump sum payment based on an average of their total gross base salary over the last 36 months of active employment, subject to certain adjustments. Related benefit payments commence on the first day of the sixth month after retirement. Participants who elect to receive monthly payments will continue payments through the remainder of their life. Alternatively, participants who elect to receive a lump sum distribution will receive a payment equal to the present value of the estimated monthly payments that would have been received upon retirement. As of December 31, 2016 and 2015, all SERP participants had elected to receive a lump sum distribution. Participants who terminate employment for any reason other than death, disability, or change in control prior to age 60 will not be entitled to receive any benefits under the SERP.

We recognize the unfunded balance of the SERP as a liability on our consolidated balance sheets. Since we do not fund the SERP, the liability is equal to the projected benefit obligation as measured at the end of each fiscal year. Expenses related to the SERP are reported under the captions, "Research and development expense" and "Selling, general and administrative expense" in the accompanying consolidated statements of operations.

A reconciliation of the beginning and ending balances of the projected benefit obligation is presented below (in millions):

	Year Ended December 31,
	2016			2015
Projected benefit obligation at the beginning of the year	$	54.8		$	58.0
Service cost		2.7			3.5
Interest cost		1.5			1.8
Plan amendments		2.0			—
Benefits paid		—			(7.1	)
Actuarial gain(1)		(11.5	)		(1.4	)

Projected benefit obligation at the end of the year	$	49.5		$	54.8


Fair value of plan assets at the end of the year		—			—

Unfunded at end of the year	$	49.5		$	54.8


Amount included in Other current liabilities(2)	$	15.2		$	14.7


(1)	During the second quarter of 2016, certain participants in the SERP departed before retirement age under the terms of the SERP. As a result, we remeasured the benefit obligation under the SERP as of June 30, 2016, and recorded a reduction to the benefit obligation with a corresponding increase to "Actuarial gain arising during period, net of tax" within "Accumulated other comprehensive loss" of $7.1 million. As part of the re-measurement of the benefit obligation, we updated the discount rate we used to measure our SERP obligation to 3.36 percent. The discount rate as of December 31, 2015 was 3.82 percent.
(2)	The amount included under the caption "Other current liabilities" on our consolidated balance sheet represents the benefit obligation due to participants who are eligible to retire.

The accumulated benefit obligation, a measure that does not consider future increases in participants' salaries, was $37.5 million and $42.3 million at December 31, 2016 and 2015, respectively.

Future estimated benefit payments, based on current assumptions, including election of lump-sum distributions and expected future service, are as follows (in millions):

Year Ended December 31,
2017	$	15.2
2018		—
2019		7.2
2020		—
2021		—
Thereafter		65.6

Total	$	88.0

The following weighted-average assumptions were used to measure the SERP obligation:

	Year Ended December 31,
	2016			2015
Discount Rate		3.67	%		3.82	%


Salary Increases		4.00	%		4.00	%

The components of net periodic pension cost recognized on our consolidated statements of operations consist of the following (in millions):

	Year Ended December 31,
	2016			2015		2014
Service cost	$	2.7		$	3.5	$	5.5
Interest cost		1.5			1.8		2.4
Amortization of prior service cost		1.4			1.2		1.2
Amortization of net actuarial (gain) loss		(0.4	)		0.2		0.2

Total	$	5.2		$	6.7	$	9.3

Reclassification adjustments related to the SERP from accumulated other comprehensive loss to the statements of operations by line item and the tax impact of these reclassifications is presented below (in millions):

Components Reclassified from Accumulated Other Comprehensive Loss(1)	As of December 31, 2016			As of December 31, 2015
Prior service cost:
Research and development	$	0.3		$	0.4
Selling, general and administrative		1.1			0.8

Total		1.4			1.2
Amortization of net actuarial (gain) loss:
Research and development		(0.1	)		—
Selling, general and administrative		(0.3	)		0.2

Total		(0.4	)		0.2
Total prior service cost and amortization of net actuarial (gain) loss		1.0			1.4
Tax benefit		(0.4	)		(0.5	)

Total, net of tax	$	0.6		$	0.9


(1)	Refer to Note 12—Accumulated Other Comprehensive Loss.

Amounts relating to the SERP that have been recognized in other comprehensive income (loss) are as follows (in millions):

	Year Ended December 31,
	2016			2015			2014
Net unrecognized actuarial gain	$	11.0		$	1.6		$	5.0
Net unrecognized prior service (benefit) cost		(0.6	)		1.2			(2.6	)

Total		10.4			2.8			2.4
Tax benefit		(3.8	)		(1.2	)		(0.9	)

Total, net of tax	$	6.6		$	1.6		$	1.5

The table below presents amounts relating to the SERP included in accumulated other comprehensive loss that have not yet been recognized as a component of net periodic pension cost on our consolidated statements of operations (in millions):

	Year Ended December 31,
	2016			2015			2014
Net unrecognized actuarial (gain) loss	$	(9.8	)	$	1.2		$	2.8
Net unrecognized prior service cost		7.7			7.1			8.3

Total		(2.1	)		8.3			11.1
Tax expense (benefit)		0.8			(3.0	)		(4.2	)

Total, net of tax	$	(1.3	)	$	5.3		$	6.9

Estimated amounts included in accumulated other comprehensive loss as of December 31, 2016, that are expected to be recognized as components of net periodic pension cost on our statements of operations for the year ended December 31, 2017, comprise the following (in millions):

Amortization of prior service cost	$	1.5
Amortization of net actuarial gain		(0.6	)

Total	$	0.9

Employee Retirement Plan

We maintain a Section 401(k) Salary Reduction Plan which is open to all eligible full-time employees. Under the 401(k) Plan, eligible employees can make pre-tax contributions up to statutory limits. Currently, we make discretionary matching contributions to the 401(k) Plan equal to 40 percent of a participant's elected salary deferral. Matching contributions vest immediately for participants who have been employed for three years; otherwise, matching contributions vest annually, in one-third increments over a three-year period until the three-year employment requirement has been met.