EMPLOYEE RETIREMENT PLANS

The HEICO Savings and Investment Plan (the “401(k) Plan”) is a qualified defined contribution retirement plan under which eligible employees of the Company and its participating subsidiaries may make Elective Deferral Contributions up to the limitations set forth in Section 402(g) of the Internal Revenue Code. The Company generally makes a 25% or 50% Employer Matching Contribution, as determined by the Board of Directors, based on a participant’s Elective Deferral Contribution up to 6% of the participant’s Compensation for the Elective Deferral Contribution period. The 401(k) Plan also provides that the Company may make additional Employer Contributions. Employer Contributions may be contributed in the form of the Company’s common stock or cash, as determined by the Company. Employer Contributions awarded in the form of Company common stock are valued based on the fair value of the underlying shares as of the effective date of contribution. Employer Contributions may be diversified by a participant into any of the participant-directed investment options of the 401(k) Plan; however, Employee Contributions may not be invested in Company common stock.

Participants receive 100% vesting of Employee Contributions and cash dividends received on Company common stock. Vesting in Employer Contributions is based on a participant’s number of years of vesting service. Employer Contributions to the 401(k) Plan charged to income in fiscal 2014, 2013 and 2012 totaled $6.3 million, $3.2 million and $3.0 million, respectively, and were made through the issuance of new shares of Company common stock and the use of forfeited shares within the 401(k) Plan.

In fiscal 2012, the Company's Board of Directors authorized 187,500 shares of the Company's Common Stock and 187,500 shares of the Company's Class A Common Stock be reversed and made available for issuance under the 401(k) Plan. Information concerning share-based activity pertaining to the 401(k) Plan for each of the last three fiscal years ended October 31 is as follows (in thousands):



	Common Stock		Class A Common Stock
Shares available for issuance as of October 31, 2011	—		—
Shares registered for issuance to the 401(k) Plan	187		187
Issuance of common stock to 401(k) Plan	(17	)	(17	)
Shares available for issuance as of October 31, 2012	170		170
Issuance of common stock to 401(k) Plan	(45	)	(45	)
Shares available for issuance as of October 31, 2013	125		125
Issuance of common stock to 401(k) Plan	(57	)	(57	)
Shares available for issuance as of October 31, 2014	68		68

In connection with a fiscal 2013 acquisition, the Company assumed a frozen qualified defined benefit pension plan (the "Plan"). The Plan's benefits are based on employee compensation and years of service. However, since the Plan was closed to new participants effective December 31, 2004, the accrued benefit for Plan participants was fixed as of the date of acquisition and therefore the Plan's accumulated benefit obligation is equal to the projected benefit obligation. The acquired projected benefit obligation and plan assets were recorded at fair value as of the acquisition date.

Changes in the Plan's projected benefit obligation and plan assets during fiscal 2013 subsequent to the acquisition and for the fiscal year ended October 31, 2014 are as follows (in thousands):



Change in projected benefit obligation:
Acquired projected benefit obligation		$14,539
Actuarial gain	(1,165		)
Interest cost	236
Benefits paid	(397		)
Projected benefit obligation as of October 31, 2013	13,213
Actuarial loss	930
Interest cost	610
Benefits paid	(938		)
Projected benefit obligation as of October 31, 2014		$13,815

Change in plan assets:
Acquired plan assets		$11,674
Actual return on plan assets	120
Benefits paid	(397		)
Fair value of plan assets as of October 31, 2013	11,397
Actual return on plan assets	764
Employer contributions	136
Benefits paid	(938		)
Fair value of plan assets as of October 31, 2014		$11,359

Funded status as of October 31, 2013		($1,816	)
Funded status as of October 31, 2014		($2,456	)

The $2.5 million and $1.8 million difference between the projected benefit obligation and fair value of plan assets as of October 31, 2014 and October 31, 2013, respectively, are included in other long-term liabilities within the Company's Consolidated Balance Sheets. Additionally, the Plan experienced a $.9 million net actuarial loss and $1.0 million net actuarial gain during fiscal 2014 and 2013, respectively, that were recognized in other comprehensive income (where they are reported net of ($.3) million and $.4 million of tax, respectively). As of October 31, 2014, $.1 million represents the total actuarial gain in accumulated other comprehensive income that have yet to be recognized as a component of net periodic pension income. The Company does not expect to recognize any of the amount within accumulated other comprehensive income as of October 31, 2014 as a component of net periodic pension income during fiscal 2015.

Weighted average assumptions used to determine the projected benefit obligation as of October 31, 2014 and October 31, 2013 and net pension income for the fiscal year ended October 31, 2014 and October 31, 2013 are as follows:



	Projected Benefit Obligation				Net Pension Income
	2014		2013		2014		2013
Discount rate	4.20	%	4.79	%	4.79	%	3.99	%
Expected return on plan assets	N/A		N/A		6.75	%	6.75	%

The discount rate was determined using the results of a bond yield curve model based on a portfolio of high-quality bonds matching expected Plan benefit payments. The expected return on Plan assets was based upon the current and expected target asset allocation and investment return estimates for the Plan's equity and fixed income securities. In establishing this assumption, the Company considers many factors including both the historical rate of return and projected inflation-adjusted real rate of return on the Plan's various asset classes and the expected working lifetime for Plan participants.

Components of net pension income for the fiscal years ended October 31, 2014 and October 31, 2013 that were recorded within the Company's Consolidated Statements of Operations are as follows (in thousands):



	Year ended October 31,
	2014		2013
Expected return on plan assets		$739		$320
Interest cost	610		236
Net pension income		$129		$84

The Company anticipates making contributions of $.1 million to the Plan during fiscal 2015. Estimated future benefit payments to be made during each of the next five fiscal years and in aggregate during the succeeding five fiscal years are as follows (in thousands):



Year ending October 31,
2015		$921
2016	904
2017	897
2018	868
2019	895
2020-2024	4,244

The fair value of the Plan's assets are set forth by level within the fair value hierarchy in the following tables (in thousands):



	As of October 31, 2014
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Equity securities		$5,678		$—		$—		$5,678
Fixed income securities	5,563		—		—		5,563
Money market funds and cash	118		—		—		118
		$11,359		$—		$—		$11,359



	As of October 31, 2013
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Equity securities		$2,212		$—		$—		$2,212
Fixed income securities	9,060		—		—		9,060
Money market funds and cash	125		—		—		125
		$11,397		$—		$—		$11,397

Equity securities consist of investments in common stocks, mutual funds and exchange traded funds. Fixed income securities consist of investments in mutual funds.

The Plan's actual and targeted asset allocations by investment category are as follows:



	As of October 31,
	2014				2013
	Actual		Target		Actual		Target
Equity securities	50	%	50	%	19	%	20	%
Fixed income securities	49	%	50	%	80	%	80	%
Money market funds and cash	1	%	—	%	1	%	—	%
	100	%	100	%	100	%	100	%

During fiscal 2014, the Company modified the Plan's asset allocation policy from that which was established prior to the acquisition. The Company's objective is to maximize long-term investment return while maintaining an acceptable level of risk that is accomplished through broad diversification of the Plan's assets.