Employee Benefit Plans

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

Employee Benefit Plans

Note 13 – Employee Benefit Plans

Defined Benefit Plan

We have a contributory defined benefit plan that covers certain employees in the U.K. The defined benefit plan is closed to new entrants and frozen with respect to future benefit accruals. The retirement benefit is based on the final average compensation and service of each eligible employee. We determined the fair value of the defined benefit plan assets and utilize an annual measurement date of December 31. At subsequent measurement dates, defined benefit plan assets will be determined based on fair value. Defined benefit plan assets consist of a diverse range of listed and unlisted securities including corporate bonds and mutual funds and are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. The net pension and supplemental retirement benefit obligations and the related periodic costs are based on, among other things, assumptions of the discount rate, estimated return on plan assets and mortality rates. These obligations and related periodic costs are measured using actuarial techniques and assumptions. The projected unit credit method is the actuarial cost method used to compute the pension liabilities and related expenses. All unrecognized actuarial gains and losses, prior service costs and accumulated other comprehensive income are eliminated and the balance sheet liability is set equal to the funded status of the defined benefit plan at acquisition date.

The table below sets forth net periodic benefit costs of the plan for the twelve months ended December 31:

	Defined Benefit Plan
	2023			2022
Components of net periodic benefit cost:
Service cost	$	373		$	245
Interest cost		4,687			2,834
Recognized actuarial gain		3,082			2,211
Expected return on plan assets		(5,686	)		(7,405	)
Prior service cost		65			64
Net periodic benefit cost	$	2,521		$	(2,051	)

The table below sets forth the benefit obligation, the fair value of plan assets, and the funded status as of December 31:

	Defined Benefit Plan
	2023			2022
Change in benefit obligation:
Beginning balance	$	98,797		$	166,764
Service cost		373			245
Interest cost		4,687			2,834
Actuarial loss (gain)		3,441			(48,234	)
Benefits paid		(4,918	)		(4,710	)
Settlements		-			(1,052	)
Currency changes		5,728			(17,050	)
Benefit obligation at December 31	$	108,108		$	98,797
Change in plan assets:
Beginning balance - fair value	$	91,307		$	155,029
Employer contribution		2,863			2,697
Actual return on plan assets		3,515			(44,637	)
Benefits paid		(4,918	)		(4,710	)
Settlements		-			(1,230	)
Currency changes		5,249			(15,842	)
Fair value of plan assets at December 31	$	98,016		$	91,307
Underfunded status at December 31	$	(10,092	)	$	(7,490	)

Based on an actuarial study performed as of December 31, 2023, the plan was underfunded by approximately $10.1 million and the liability is reflected in our consolidated balance sheets as a noncurrent liability and the amount recognized in accumulated other comprehensive loss was approximately $42.8 million.

We apply the “10% corridor” approach to amortize unrecognized actuarial gains (losses). Under this approach, only actuarial gains (losses) that exceed 10% of the greater of the projected benefit obligation or the market-related value of the plan assets are amortized. For the twelve months ended December 31, 2023, the plan’s accumulated other comprehensive income increased by

approximately $2.4 million. The variance between the actual and expected return on plan assets during the period increased the accumulated other comprehensive income by $2.2 million. The total unrecognized net loss is more than 10% of the projected benefit obligation and 10% of the plan assets. Therefore, the excess amount will be amortized over the average term to retirement of plan participants, not yet in receipt of pension, which as of December 31, 2023, was approximately 7.5 years. The following weighted-average assumptions were used to determine net periodic benefit costs for the twelve months ended December 31:

	2023			2022
Discount rate		4.7	%		4.7	%
Expected long-term return on plan assets		6.1	%		6.1	%

The following weighted-average assumption was used to determine the benefit obligations at December 31:

	2023			2022
Discount rate		4.4	%		4.7	%

The expected long-term return on plan assets was determined based on historical and expected future returns of the various asset classes. The plan’s investment policy includes a mandate to diversify assets and invest in a variety of asset classes to achieve its expected long-term return and is currently invested in a variety of funds representing most standard equity and debt security classes. Trustees of the plan may make changes at any time.

The table below sets forth the plan asset allocations of the assets in the plan and expected long-term return by asset category:

Asset category	Expected long-term return			Asset allocation
Growth assets		7.5	%		50	%
Hedging assets		4.1	%		35	%
Cash		5.3	%		15	%

The defined benefit plan’s investment strategy is to invest 65% in growth strategy assets and 35% in hedging strategy assets. The growth strategy consists of a highly diversified set of assets, and the hedging component is designed to hedge a significant proportion of the plan’s interest and inflation rate risks. The overall strategy is designed to return a long-term return of 2.6% p.a. above the liability benchmark which is broadly equal to changes in the plan’s liabilities.

Benefit plan payments are primarily made from funded benefit plan trusts and current assets. The table below sets forth the expected future benefit payments, including future benefit accrual, as of December 31, 2023:

2024	$	5,310
2025		5,391
2026		5,516
2027		5,658
2028		5,810
2029-2033		30,288

The trustees are required to review the funding position every three years. An actuarial valuation was performed as of March 31, 2022, resulting in a deficit of approximately GBP 20 million (approximately $26 million based on a GBP: USD exchange rate of 1:1.3). As a result of this valuation we have agreed to a revised schedule of contributions of GBP 2.0 million (approximately $2.6 million based on a GBP: USD exchange rate of 1:1.3) to be paid annually with effect from January 1, 2023 to address the deficit revealed by the valuation (with the first payment made by December 31, 2023 through December 31, 2028). A final payment of GBP 1.5 million (approximately $1.95 million based on a GBP: USD rate of 1:1.3) will be made by December 31, 2029. These contributions, together with the assumed asset outperformance, are expected to eliminate the deficit by December 31, 2029.

The plan’s trustees appoint fund managers to carry out all the day-to-day functions relating to the management of the fund and its administration. The fund managers must invest their portion of the plan’s assets in accordance with their investment manager agreement agreed by the trustees. The trustees are responsible for agreeing these investment manager agreements and for deciding on the portion of the plan’s assets that will be invested with each fund manager. When making decisions, the trustees take advice from experts including the plan’s actuary and also have the option to consult with the Company.

The following table summarizes the major categories of the plan assets:

	December 31, 2023
Asset category	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	8,961	$	-	$	-	$	8,961
Equity securities:
U.K.		-		534		-		534
Overseas equities		-		12,424		-		12,424
Emerging markets		-		3,296		-		3,296
Fixed income securities:
Government bonds		-		87		-		87
Non-government bonds		-		12,860		-		12,860
Other types of investments
Hedge funds		-		18,898		-		18,898
Liability-driven investments		-		34,681		-		34,681
Commodities		-		676		-		676
Other		-		5,599		-		5,599
Total	$	8,961	$	89,055	$	-	$	98,016

Fair value is taken to mean the bid value of securities, as supplied by the fund managers. All the plan’s securities are highly liquid. The plan does not hold any Level 3 securities. See Note 3 for additional information regarding fair value and Levels 1, 2 and 3.

The investment manager agreements require the fund managers to invest in a diverse range of stocks and bonds across each particular asset class. The stocks held by the plan in a particular asset class should therefore match closely the underlying stocks in the relevant index. We believe that this leads to minimal concentration of risk within each asset class; although we recognize that some asset classes are inherently more risky than others.

We also have pension plans in Asia for which the benefit obligation, fair value of the plan assets and the funded status amounts are immaterial and therefore, not included in the amounts or assumptions above. As of December 31, 2023 and 2022, the Company has recorded a net liability of $3.2 million related to these defined benefit plans in Asia.

401(k) Retirement Plan

We maintain a 401(k) retirement plan (the “Plan”) for the benefit of qualified employees at our U.S. locations. Employees who participate may elect to make salary deferral contributions to the Plan up to 100% of the employees’ eligible payroll subject to annual Internal Revenue Code maximum limitations. We currently make a matching contribution of $1 for every $2 contributed by the participant up to 6% (3% maximum matching) of the participant’s eligible payroll, which vests over an initial four years. In addition, we may make a discretionary contribution to the entire qualified employee pool, in accordance with the Plan.

As stipulated by the regulations of China, we maintain a retirement plan pursuant to the local municipal government for the employees in China and are required to make contributions of 8% of the employee’s eligible payroll. Pursuant to the Taiwan Labor Standard Law and Factory Law, we maintain a retirement plan for the employees in Taiwan, whereby we make contributions at a rate of 8% of the employee’s eligible payroll.

For the twelve months ended December 31, 2023, 2022 and 2021, total amounts expensed under these plans were approximately $22.3 million, $21.5 million and $21.7 million, respectively.

Deferred Compensation Plan

We maintain a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for executive officers, key employees and members of the Board of Directors. The Deferred Compensation Plan allows eligible participants to defer the receipt of eligible compensation, including equity awards, until designated future dates. We offset our obligations under the Deferred Compensation Plan primarily by investing in the actual underlying investments. At December 31, 2023 and December 31, 2022, these investments totaled approximately $14.6 million and $12.1 million, respectively.