Employee Benefit Plans

The Company’s Gratuity Plans in India ("Gratuity Plan") provide for lump sum payment to vested employees on retirement or upon termination of employment in an amount based on the respective employee’s salary and years of employment with the Company. Liabilities with regard to the Gratuity Plans are determined by actuarial valuation using the projected unit credit method. Current service costs for the Gratuity Plan are accrued in the year to which they relate. Actuarial gains or losses or prior service costs, if any, resulting from amendments to the plans are recognized and amortized over the remaining period of service of the employees.

In addition, the Company’s subsidiary operating in the Philippines conforms to the minimum regulatory benefit which provide for lump sum payment to vested employees on retirement from employment in an amount based on the respective employee’s salary and years of employment with the Company (the "Philippines Plan"). The benefit costs of the Philippines Plan for the year are calculated on an actuarial basis.

The benefit obligation has been measured as of December 31, 2018. The following table sets forth the activity and the funded status of the Gratuity Plans and the amounts recognized in the Company’s consolidated financial statements at the end of the relevant periods:



	2018			2017
Change in projected benefit obligation:
Projected benefit obligation as of January 1	$	10,305		$	9,711
Business acquisition	326			—
Service cost	1,735			1,933
Interest cost	714			645
Benefits paid	(1,066		)	(1,001		)
Actuarial (gain)/loss	(134		)	(1,471		)
Effect of exchange rate changes	(836		)	488
Projected benefit obligation as of December 31	$	11,044		$	10,305
Unfunded amount–non-current	$	3,616		$	3,377
Unfunded amount–current	8			13
Total accrued liability	$	3,624		$	3,390
Accumulated benefit obligation	$	7,239		$	7,022

Components of net periodic benefit costs:



	Year ended December 31,
	2018			2017			2016
Service cost	$	1,735		$	1,933		$	1,601
Interest cost	714			645			599
Expected return on plan assets	(514		)	(401		)	(416		)
Amortization of actuarial (gain)/loss	(153		)	256			90
Net periodic benefit cost	$	1,782		$	2,433		$	1,874

Effective January 1, 2018, the Company adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost. Pursuant to this, the Company retrospectively included only the service cost component of the net periodic benefit cost in the same line item or items on the 2017 and 2016 consolidated statements of income as other compensation costs arising from services rendered by the respective employees during the period. The interest cost, expected return on plan assets and amortization of actuarial (gain)/loss, have been reclassified from “Cost of revenues”, “General and administrative expenses” and “Selling and marketing expenses” to “Other income, net”.

Refer Note 27 for the effect of the adoption of the ASU No. 2017-07 on 2017 and 2016 financial information.

The components of accumulated other comprehensive gain/(loss), net of tax as of December 31, 2018 and 2017 are as follows:



	December 31,
	2018			2017			2016
Net actuarial gain/(loss)	$	940		$	697		$	(831	)
Net prior service cost	(22		)	(8		)	(9		)
Deferred taxes	53			74			342
Accumulated other comprehensive gain/(loss), net of tax	$	971		$	763		$	(498	)

The amount in accumulated other comprehensive gain that is expected to be recognized as a component of net periodic benefit cost over the next fiscal year is $156.

The weighted average actuarial assumptions used to determine benefit obligations and net periodic gratuity cost are:



	December 31,
	2018		2017		2016
Discount rate	7.5	%	7.0	%	6.8	%
Rate of increase in compensation levels	8.2	%	9.1	%	9.2	%
Expected long term rate of return on plan assets per annum	7.3	%	8.3	%	9.0	%

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government securities adjusted for a suitable risk premium.



Expected benefit payments during the year ending December 31,
2019	$	1,820
2020	$	1,692
2021	$	1,621
2022	$	1,424
2023	$	1,332
2024 to 2028	$	4,577

The gratuity plan in India is partially funded and the Philippines Plan is unfunded. The Company makes annual contributions to the employees’ gratuity fund established with Life Insurance Corporation of India and HDFC Standard Life Insurance Company. They calculate the annual contribution required to be made by the Company and manage the Gratuity Plans, including any required payouts. Fund managers manage these funds on a cash accumulation basis and declare interest retrospectively on March 31 of each year. The Company earned a return of approximately 8.0% on these Gratuity Plans for the year ended December 31, 2018.



Change in Plan Assets
Plan assets at January 1, 2017	$	5,640
Actual return	202
Employer contribution	1,700
Benefits paid*	(1,001		)
Effect of exchange rate changes	374
Plan Assets at December 31, 2017	$	6,915
Business acquisition	231
Actual return	779
Employer contribution	1,175
Benefits paid*	(1,059		)
Effect of exchange rate changes	(621		)
Plan assets at December 31, 2018	$	7,420

* Benefits payments were substantially made through the plan assets during the year ended December 31, 2018 and December 31, 2017.

The Company maintains several 401(k) plans (the “401(k) Plans”) under Section 401(k) of the Internal Revenue Code of 1986 (the “Code”), covering all eligible employees, as defined in the Code as a defined contribution plan. The Company may make discretionary contributions of up to a maximum of 4% of employee compensation within certain limits. Contributions to the 401(k) Plans amounted to $3,423, $2,709 and $2,383 during the years ended December 31, 2018, 2017 and 2016, respectively.

During the years ended December 31, 2018, 2017 and 2016, the Company contributed $7,614, $7,116 and $6,306 respectively, for various defined contribution plans on behalf of its employees in India, the Philippines, Bulgaria, Romania, the Czech Republic, South Africa, Colombia, and Singapore.