Pension and Retirement Plans |
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Pension and Retirement Plans | 14. Pension and Retirement Plans We have defined benefit and defined contribution plans in the U.K. and in the U.S. In the U.K., the Company provides defined benefit pension plans for certain employees and former employees and defined contribution plans for the majority of the employees. The defined benefit plan in the U.K. is frozen to newly hired employees and has been for the two years ended September 30, 2024. In the U.S., the Company provides defined contribution plans that cover most employees and supplementary retirement plans to certain employees and former employees who are now retired. These supplementary retirement plans are also closed to newly hired employees and have been for the two years ended September 30, 2024. These supplementary plans are funded through whole life insurance policies. The Company expects to recover all insurance premiums paid under these policies in the future, through the cash surrender value of the policies and any death benefits or portions thereof to be paid upon the death of the participant. These whole life insurance policies are carried on the balance sheet at their cash surrender values as they are owned by the Company and not assets of the defined benefit plans. In the U.S., the Company also provides for officer death benefits and post-retirement health insurance benefits through supplemental post-retirement plans to certain officers. The Company also funds these supplemental plans’ obligations through whole life insurance policies on the officers. Defined Benefit Plans The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the consolidated balance sheets. If the liabilities are below funding levels an asset is recorded. The domestic supplemental retirement plans have life insurance policies which are not considered plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. These insurance policies are included in the balance sheet in the financial statement line item “Cash surrender value of life insurance” at their cash surrender value, net of policy loans aggregating $3.8 million and $3.7 million as of September 30, 2024 and 2023, respectively. The loans against the policies have been taken out by the Company to pay the premiums. The costs and benefit payments for these plans are paid through operating cash flows of the Company to the extent that they cannot be funded through the use of the cash values in the insurance policies. The Company expects that the recorded value of the insurance policies will be sufficient to fund all of the Company’s obligations under these plans. Assumptions: The following table provides the weighted average actuarial assumptions used to determine the actuarial present value of projected benefit obligations at:
The following table provides the weighted average actuarial assumptions used to determine net periodic benefit cost for years ended:
For domestic plans, the discount rate was determined by comparison against the FTSE pension liability index for AA rated corporate instruments. The Company monitors other indices to assure that the pension obligations are fairly reported on a consistent basis. The international discount rates were determined by comparison against country specific AA corporate indices, adjusted for duration of the obligation. The periodic benefit cost and the actuarial present value of projected benefit obligations are based on actuarial assumptions that are reviewed on an annual basis. The Company revises these assumptions based on an annual evaluation of long-term trends, as well as market conditions, that may have an impact on the cost of providing retirement benefits. For the supplementary domestic plan, medical benefits are assumed to be increasing based on the Long Term Healthcare Cost Trends Getzen Model commencing with 7.5% per year with such increase decreasing by 0.5% per year over the next several years and decreasing in accordance with the model pre 65 and 4.54% post 65. Life expectancy for medical benefits is based on the PRI-2012 White Collar for Males and Females Pre and Post retirement, Adjusted to 2006 projected using scale MP-2021. The components of net periodic benefit costs related to the U.S. and international plans are as follows:
The following table presents an analysis of the changes in 2024 and 2023 of the benefit obligation, the plan assets and the funded status of the plans:
The amounts recognized in the consolidated balance sheet consist of:
Plans with projected benefit obligations in excess of plan assets are attributable to unfunded domestic supplemental retirement plans. Accrued benefit assets and liabilities reported as:
As of September 30, 2024 and 2023, the amounts included in accumulated other comprehensive income, consisted of deferred net gains totaling approximately $0.1 million and $0.1 million, respectively. The amount of net deferred gain expected to be recognized as a component of net periodic benefit cost for the year ending September 30, 2024, is approximately $185 thousand. Contributions The Company expects to contribute $0.1 million to its pension plans in fiscal 2025. Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (amounts in thousands):
Plan Assets As of September 30, 2024, our pension plan in the U.K. was the only plan with assets, holding investments of approximately $10.8 million. Pension plan assets are managed by a fiduciary committee. The Company’s investment strategy for pension plan assets is to maximize the long-term rate of return on plan assets within an acceptable level of risk while maintaining adequate funding levels. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment process. In deciding on the investments to be held, the trustees take into account the risk of possible fluctuations in income from, and market values of, the assets as well as the risk of departing from an asset profile which broadly matches the liability profile. The committee has invested the plan assets in a single pooled fund with an authorized investment company (the “Fund”). The Fund selected by the trustees is consistent with the plan’s overall investment principles and strategy described herein. There are no specific targets as to asset allocation other than those contained within the Fund that is managed by the authorized investment company. The fair value of the assets held by the U.K. pension plan by asset category are as follows:
The expected long-term rates of return on plan assets are equal to the yields to maturity of appropriate indices for government and corporate bonds and by adding a premium to the government bond return for equities. The expected rate of return on cash is the Bank of England base rate in force at the effective date. Level 1 investments represent mutual funds for which a quoted market price is available on an active market. These investments primarily hold stocks or bonds, or a combination of stocks and bonds. Level 2 investment represents a mutual fund, which a quoted market price is not available on an active market. Significant observable inputs that reflect quoted prices for similar assets or liabilities in active markets are used. This investment primarily holds stocks within developed global equity markets, excluding the UK. Potential sale of U.K. Pension Subsequent to September 30, 2024 the U.K. pension assets, excluding cash, were all converted into cash to sell the U.K. pension obligation. As of the date of this filing, there is an agreement to sell the pension obligation in full. This agreement has many contingencies and the expected timeframe of the sale occurring is to 16 months from the date of these consolidated financial statements are issued.Defined Contribution Plans The Company has defined contribution plans in domestic and international locations under which the Company matches a portion of the employee’s contributions and may make discretionary contributions to the plans. The Company’s contributions were $212 thousand and $206 thousand for the years ended September 30, 2024 and 2023, respectively. |