We maintain a domestic noncontributory defined benefit pension plan covering certain U.S. employees who meet certain age and service requirements. In July 2003, we revised the Helmerich & Payne, Inc. Employee Retirement Plan (“Pension Plan”) to close the Pension Plan to new participants effective October 1, 2003, and reduce benefit accruals for current participants through September 30, 2006, at which time benefit accruals were discontinued and the Pension Plan was frozen.

The following table provides a reconciliation of the changes in the pension benefit obligations and fair value of Pension Plan assets over the two-year period ended September 30, 2019 and a statement of the funded status as of September 30, 2019 and 2018:



(in thousands)	2019			2018
Accumulated Benefit Obligation	$	119,845		$	106,205
Changes in projected benefit obligations
Projected benefit obligation at beginning of year	$	106,205		$	109,976
Interest cost	4,389			4,077
Actuarial (gain) loss	16,914			(2,143		)
Benefits paid	(7,663		)	(5,705		)
Projected benefit obligation at end of year	$	119,845		$	106,205
Change in plan assets
Fair value of plan assets at beginning of year	$	94,897		$	92,816
Actual return on plan assets	3,865			7,754
Employer contribution	43			32
Benefits paid	(7,663		)	(5,705		)
Fair value of plan assets at end of year	$	91,142		$	94,897
Funded status of the plan at end of year	$	(28,703	)	$	(11,308	)

The amounts recognized in Accumulated Other Comprehensive Income (Loss) at September 30, 2019 and 2018, and not yet reflected in net periodic benefit cost, are as follows (in thousands):

The amount recognized in Accumulated Other Comprehensive Income (Loss) and not yet reflected in periodic benefit cost expected to be amortized in next year’s periodic benefit cost is a net actuarial loss of $2.7 million.



	September 30,
	2019		2018		2017
Discount rate for net periodic benefit costs	4.27	%	3.79	%	3.64	%
Discount rate for year-end obligations	3.16	%	4.27	%	3.79	%
Expected return on plan assets	5.60	%	6.06	%	6.17	%

We did not make any contributions to the Pension Plan in fiscal year 2019. In fiscal year 2020, we do not expect minimum contributions required by law to be needed. However, we may make contributions in fiscal year 2020 if needed to fund unexpected distributions in lieu of liquidating pension assets.



	Year Ended September 30,
(in thousands)	2019			2018			2017
Interest cost	$	4,389		$	4,077		$	4,053
Expected return on plan assets	(5,523		)	(5,555		)	(5,130		)
Recognized net actuarial loss	1,229			1,926			2,891
Settlement	1,953			913			1,640
Net pension expense	$	2,048		$	1,361		$	3,454

The following table reflects the expected benefits to be paid from the Pension Plan in each of the next five fiscal years, and in the aggregate for the five years thereafter (in thousands).

Our investment policy and strategies are established with a long-term view in mind. The investment strategy is intended to help pay the cost of the Pension Plan while providing adequate security to meet the benefits promised under the Pension Plan. We maintain a diversified asset mix to minimize the risk of a material loss to the portfolio value that might occur from devaluation of any single investment. In determining the appropriate asset mix, our financial strength and ability to fund potential shortfalls are considered. Pension Plan assets are invested in portfolios of diversified public-market equity securities and fixed income securities. The Pension Plan does not directly hold securities of the Company.

The expected long-term rate of return on Pension Plan assets is based on historical and projected rates of return for current and planned asset classes in the Pension Plan’s investment portfolio after analyzing historical experience and future expectations of the return and volatility of various asset classes.

The target allocation for 2020 and the asset allocation for the Pension Plan at the end of fiscal years 2019 and 2018, by asset category, follows:



	Target Allocation		September 30,
Asset Category	2020		2019		2018
U.S. equities	45	%	47	%	52	%
International equities	20		16		15
Fixed income	35		37		33
Total	100	%	100	%	100	%

The fair value of Pension Plan assets at September 30, 2019 and 2018, summarized by level within the fair value hierarchy described in Note 13—Fair Value Measurement of Financial Instruments, are as follows:



	September 30, 2019
(in thousands)	Total		Level 1		Level 2		Level 3
Short-term investments	$	3,072	$	3,072	$	—	$	—
Mutual funds:
Domestic stock funds	17,555		17,555		—		—
Bond funds	18,034		18,034		—		—
Balanced funds	17,878		17,878		—		—
International stock funds	14,181		14,181		—		—
Total mutual funds	67,648		67,648		—		—
Domestic common stock	20,261		17,748		2,513		—
Oil and gas properties	161		—		—		161
Total	$	91,142	$	88,468	$	2,513	$	161



	September 30, 2018
(in thousands)	Total		Level 1		Level 2		Level 3
Short-term investments	$	2,745	$	2,745	$	—	$	—
Mutual funds:
Domestic stock funds	18,361		18,361		—		—
Bond funds	17,918		17,918		—		—
Balanced funds	17,977		17,977		—		—
International stock funds	14,548		14,548		—		—
Total mutual funds	68,804		68,804		—		—
Domestic common stock	23,232		20,771		2,461		—
Oil and gas properties	116		—		—		116
Total	$	94,897	$	92,320	$	2,461	$	116

The Pension Plan’s financial assets utilizing Level 1 inputs are valued based on quoted prices in active markets for identical securities. The Pension Plan’s Level 2 financial assets include domestic common stock. The Pension Plan’s assets utilizing Level 3 inputs consist of oil and gas properties. The fair value of oil and gas properties is determined by Wells Fargo Bank, N.A., based upon actual revenue received for the previous twelve-month period and experience with similar assets.

The following table sets forth a summary of changes in the fair value of the Pension Plan’s Level 3 assets for the fiscal years ended September 30, 2019 and 2018:



	Oil and Gas Properties
	Year Ended September 30,
(in thousands)	2019		2018
Balance, beginning of year	$	116	$	97
Unrealized gains (losses) relating to property still held at the reporting date	45		19
Balance, end of year	$	161	$	116

Substantially all employees on the U.S. payroll may elect to participate in our 401(k)/Thrift Plan by contributing a portion of their earnings. We contribute an amount equal to 100 percent of the first five percent of the participant’s compensation subject to certain limitations. The annual expense incurred for this defined contribution plan was $30.5 million, $26.6 million and $16.6 million in fiscal years 2019, 2018 and 2017, respectively.