EMPLOYEE BENEFIT PLANS

Defined contribution plan. Under the Team, Inc. Salary Deferral Plan (the “Plan”), contributions are made to the Plan by qualified employees at their election and our matching contributions to the Plan are made at specified rates. Our contributions to the Plan in the years ended December 31, 2019, 2018, and 2017 were approximately $9.8 million, $11.0 million, $10.4 million, respectively.

Defined benefit plans. In connection with our acquisition of Furmanite, we assumed liabilities associated with the defined benefit pension plans of two foreign subsidiaries, one plan covering certain United Kingdom employees (the “U.K. Plan”) and the other covering certain of its Norwegian employees (the “Norwegian Plan”). As the Norwegian Plan represented approximately 1.0% of both the Company’s total pension plan liabilities and total pension plan assets, only the schedules of net periodic pension cost (credit) and changes in benefit obligation and plan assets include combined amounts from the two plans in 2018, while assumption and narrative information relates solely to the U.K. Plan. In connection with the sale of the Company’s Norwegian operations in 2018, all assets and liabilities associated with the Norwegian Plan were transferred to the buyer.

Benefits for the U.K. Plan are based on the average of the employee’s salary for the last three years of employment. The U.K. Plan has had no new participants added since the plan was frozen in 1994 and accruals for future benefits ceased in connection with a plan curtailment in 2013. Plan assets are primarily invested in unitized pension funds managed by U.K. registered fund managers. The most recent valuation of the U.K. Plan was performed as of December 31, 2019. Estimated defined benefit pension plan contributions for 2020 are expected to be approximately $4.0 million.

Pension benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates. The discount rate assumption used to determine end of year benefit obligations was 2.0% as of December 31, 2019. These rates are reviewed annually and adjusted to reflect current conditions. These rates are determined appropriate based on reference to yields. The expected return on plan assets of 2.9% for 2020 is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. Mortality and retirement rates are based on actual and anticipated plan experience. In accordance with GAAP, actual results that differ from the assumptions are accumulated and are subject to amortization over future periods and, therefore, generally affect recognized expense in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the pension obligation and future expense.

Net pension cost (credit) included the following components (in thousands):



	Twelve Months Ended December 31,
	2019			2018			2017
Service cost	$	—		$	77		$	90
Interest cost	2,323			2,303			2,438
Settlement cost	221			—			—
Expected return on plan assets	(2,378		)	(3,720		)	(3,110		)
Amortization of prior service cost	32			—			—
Amortization of net actuarial (gain) loss	—			(78		)	71
Net pension cost (credit)	$	198		$	(1,418	)	(511		)

The weighted-average assumptions used to determine benefit obligations at December 31, 2019 and 2018 are as follows:



	December 31,
	2019		2018
Discount rate	2.0	%	2.8	%
Rate of compensation increase¹	Not applicable		Not applicable
Inflation	3.0	%	3.2	%

______________

1Not applicable due to plan curtailment.

The weighted-average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31, 2019 and 2018 are as follows:



	Twelve Months Ended December 31,
	2019		2018
Discount rate	2.8	%	2.5	%
Expected long-term return on plan assets	3.3	%	4.7	%
Rate of compensation increase¹	Not applicable		Not applicable
Inflation	3.2	%	3.1	%

_______________

1Not applicable due to plan curtailment.

The plan actuary determines the expected return on plan assets based on a combination of expected yields on equity securities and corporate bonds and considering historical returns.

The expected long-term rate of return on invested assets for 2020 is determined based on the weighted average of expected returns on asset investment categories as follows: 2.9% overall, 5.3% for equities and 2.1% for debt securities.

The following table sets forth the changes in the benefit obligation and plan assets for the years ended December 31, 2019 and 2018 (in thousands):



	Twelve Months Ended December 31,
	2019			2018
Projected benefit obligation:
Beginning of year	$	84,559		$	96,875
Service cost	—			77
Interest cost	2,323			2,303
Actuarial (gain) loss	8,425			(4,347		)
Benefits paid	(6,050		)	(4,539		)
Prior service cost	—			669
Disposal of Norwegian Plan	—			(1,075		)
Foreign currency translation adjustment and other	3,150			(5,404		)
End of year	92,407			84,559
Fair value of plan assets:
Beginning of year	73,619			81,899
Actual gain (loss) on plan assets	10,393			(462		)
Employer contributions	2,295			2,404
Benefits paid	(6,050		)	(4,539		)
Disposal of Norwegian Plan	—			(983		)
Foreign currency translation adjustment and other	2,829			(4,700		)
End of year	83,086			73,619
Excess projected obligation under (over) fair value of plan assets at end of year	$	(9,321	)	$	(10,940	)
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	(7,365	)	$	(7,190	)
Prior service cost	(656		)	(669		)
Total	$	(8,021	)	$	(7,859	)

Significant changes affecting pension benefit obligations in 2019 compared to 2018 primarily include actuarial losses in 2019 versus actuarial gains in 2018 due to changes in market conditions that affect the financial assumptions used to value liabilities as well as foreign currency translation adjustments due to the weakening of the U.S. Dollar versus the British Pound in 2019. The accumulated benefit obligation for the U.K. Plan was $92.4 million and $84.6 million at December 31, 2019 and 2018, respectively.

At December 31, 2019, expected future benefit payments are as follows for the years ended December 31, (in thousands):



2020	$	3,661
2021	3,884
2022	4,065
2023	3,946
2024	4,335
2025-2029	23,636
Total	$	43,527

The following tables summarize the plan assets of the U.K. Plan measured at fair value on a recurring basis (at least annually) as of December 31, 2019 and 2018 (in thousands):



December 31, 2019
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
Cash	$	10,579	$	10,579	$	—	$	—
Equity securities:
Diversified growth fund (b)	20,102		—		20,102		—
Global equity fund (c)	3,207		—		3,207		—
Fixed income securities:
U.K. government fixed income securities (d)	16,166		—		16,166		—
U.K. government index-linked securities (e)	13,012		—		13,012		—
Global absolute return bond fund (f)	11,871		—		11,871		—
Corporate bonds (g)	8,149		—		8,149		—
Total	$	83,086	$	10,579	$	72,507	$	—



December 31, 2018
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
Cash	$	1,119	$	1,119	$	—	$	—
Equity securities:
Diversified growth fund (b)	12,330		—		12,330		—
Global equity fund (c)	1,835		—		1,835		—
Fixed income securities:
U.K. government fixed income securities (d)	18,048		—		18,048		—
U.K. government index-linked securities (e)	14,245		—		14,245		—
Global absolute return bond fund (f)	18,570		—		18,570		—
Corporate bonds (g)	7,472		—		7,472		—
Total	$	73,619	$	1,119	$	72,500	$	—

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The net asset value of the commingled equity and fixed income funds are determined by prices of the underlying securities, less the funds’ liabilities, and then divided by the number of shares outstanding. As the funds are not traded in active markets, the commingled funds are classified as Level 2 assets. The net asset value is corroborated by observable market data (e.g., purchase or sale activities).


b)	This category includes investments in a diversified portfolio of equity, bonds, alternatives and cash markets that aims to achieve capital growth returns.


c)	This category includes investments in a diversified portfolio of equity, bonds, money markets, alternatives and credit markets to achieve a return with downside protection through monthly put options.


d)	This category includes investments in funds with the objective to provide a leveraged return to U.K. government fixed income securities (gilts) that have maturity periods ranging from 2030 to 2060.


e)	This category includes investments in funds with the objective to provide a leveraged return to various U.K. government indexed-linked securities (gilts), with maturity periods ranging from 2022 to 2062. The funds invest in U.K. government bonds and derivatives.


f)	This category includes investments in funds predominantly in a wide range of fixed and floating rate investment grade and below investment grade debt instruments traded on regulated markets worldwide with the objective to achieve a return of 3% above 1 month LIBOR over a 3-year basis.


g)	This category includes investments in a diversified pool of debt and debt like assets to generate capital and income returns.

Investment objectives for the U.K. Plan, as of December 31, 2019, are to:


•	optimize the long-term return on plan assets at an acceptable level of risk


•	maintain a broad diversification across asset classes


•	maintain careful control of the risk level within each asset class

The trustees of the U.K. Plan have established a long-term investment strategy comprising global investment weightings targeted at 27.5% (range of 25% to 30%) for equity securities/diversified growth funds and 72.5% (range of 70% to 75%) for debt securities. Diversified growth funds are actively managed absolute return funds that hold a combination of debt and equity securities. Selection of the targeted asset allocation was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations and the timing of benefit payments and contributions.

The following table sets forth the weighted-average asset allocation and target asset allocations as of December 31, 2019 and 2018 by asset category:



	Asset Allocations				Target Asset Allocations
	2019		2018		2019		2018
Equity securities and diversified growth funds¹	28.1	%	19.2	%	27.5	%	27.5	%
Debt securities²	59.2	%	79.2	%	72.5	%	72.5	%
Other	12.7	%	1.5	%	—	%	—	%
Total	100	%	100	%	100	%	100	%

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1	Diversified growth funds refer to actively managed absolute return funds that hold a combination of equity and debt securities.


2	Includes investments in funds with the objective to provide leveraged returns to U.K. government fixed income securities, U.K. government indexed-linked securities, global bonds, and corporate bonds.