EMPLOYEE BENEFIT PLANS

Retirement Savings Plan

We offer a contributory retirement savings plan that has two components: (1) A 401(k) component with a Company match and (2) A discretionary fiscal year Company contribution.

The 401(k) component of the retirement savings plan allows eligible U.S. employees to contribute a portion of their pre-tax income to the plan each pay period. Prior to October 1, 2015, we matched 50% of employees' pre-tax and Roth 401(k) contributions (excluding "catch-up" contributions that employees age 50 or older may make to the plan), up to 6% of compensation, subject to limitations imposed by federal law. Effective October 1, 2015, we increased the match from 50% to 75% of employees’ pre-tax and Roth 401(k) contributions, up to 6% of compensation, subject to limitations imposed by federal law. Our matching contributions were $4,628, $2,732 and $2,559 in fiscal years 2016, 2015 and 2014, respectively. Employees may also contribute a percentage of their salary to the plan on an after-tax basis.

We also provide, on an annual fiscal year basis, a discretionary contribution to the retirement plan for eligible U.S. employees. U.S. employees who are active as of the end of the fiscal year and whom have been paid for 1000 hours or more of service during a plan year are eligible for a fiscal year contribution. After three years as a participant, employees have a vested interest equal to 100% of the total Company’s discretionary fiscal year contributions. The plan provides for a discretionary fiscal year contribution based on company financial performance up to the maximum contribution allowed by federal law. We will fund the discretionary contribution if we exceed our Earnings Before Interest and Taxes (EBIT) target. Our Board of Directors approves any changes to the contribution levels under the plan. We did not make any contributions under the plan in fiscal years 2016, 2015 and 2014.

Defined Benefit Pension Plan

One of our German subsidiaries has a non-contributory, defined benefit retirement plan for eligible employees. This plan provides benefits based on the employee’s years of service and compensation during the years immediately preceding retirement, termination, disability or death, as defined in the plan. We use a September 30 measurement date for this defined benefit retirement plan.

We recognize the funded status of the defined benefit pension in our Consolidated Balance Sheet Statements, recognize changes in that funded status in the year in which the changes occur through comprehensive income and measure the plan’s assets and obligations that determine the plan’s funded status as of the end of our fiscal year.

The pretax amount recognized in Accumulated Other Comprehensive Income (AOCI) as of October 1, 2016 and October 3, 2015 consists of the following:



(in thousands)	2016		2015
Actuarial net loss	$	15,476	$	9,999

The portion of the pretax amount in AOCI at October 3, 2015 that was recognized in earnings during the fiscal year ended October 1, 2016 was $584. The portion of the pretax amount in AOCI at October 1, 2016 that is expected to be recognized as a component of net periodic retirement cost during the next fiscal year is $1,006. The actuarial loss in fiscal year 2016 of $6,123 was primarily a result of the change in the discount rate from 2.27% in fiscal year 2015 to 1.28% in fiscal year 2016.

The following is a summary of the changes in benefit obligations and plan assets during fiscal years 2016 and 2015.



(in thousands)	2016			2015
Change in benefit obligation
Projected benefit obligation, beginning of year	$	27,272		$	28,618
Service cost	971			860
Interest cost	608			634
Actuarial loss	6,123			1,256
Exchange rate change	93			(3,491		)
Benefits paid	(633		)	(605		)
Projected benefit obligation, end of year	$	34,434		$	27,272

Change in plan assets
Fair value of plan assets, beginning of year	$	18,767		$	20,269
Actual return on plan assets	1,119			1,040
Employer contributions	633			605
Exchange rate change	64			(2,542		)
Benefits paid	(633		)	(605		)
Fair value of plan assets, end of year	$	19,950		$	18,767

The following is a summary of the funded status of the defined benefit retirement plan and amounts recognized in our Consolidated Balance Sheets at October 1, 2016 and October 3, 2015.



(in thousands)	2016			2015
Funded status
Funded status, end of year	$	(14,484	)	$	(8,505	)
Accumulated other comprehensive loss	15,476			9,999
Net amount recognized	$	992		$	1,494

Amounts recognized in consolidated balance sheets
Accrued payroll and related costs	$	(740	)	$	(721	)
Pension benefit plan obligation	(13,744		)	(7,784		)
Deferred income taxes	4,685			3,031
Accumulated other comprehensive income, net of tax	10,791			6,968
Net amount recognized	$	992		$	1,494

The weighted average assumptions used to determine the defined benefit retirement plan obligation at October 1, 2016 and October 3, 2015, and also the net periodic benefit cost for the following fiscal year, were as follows:



	2016		2015
Discount rate	1.28	%	2.27	%
Expected rate of return on plan assets	5.50	%	5.50	%
Expected rate of increase in future compensation levels	3.00	%	3.00	%

The discount rate is calculated based on zero-coupon bond yields published by the Deutsche Bundesbank for maturities that match the weighted average duration of the pension liability, adjusted for the average credit spread of corporate bond rates above the government bond yields.

The expected rate of return on plan assets represents the weighted average of the expected returns on individual asset categories in the portfolio. We use investment services to assist with determining the overall expected rate of return on pension plan assets. Factors considered in our determination include historical long-term investment performance and estimates of future long-term returns by asset class.

The overall objective of our investment policy and strategy for the defined benefit retirement plan is to maintain sufficient liquidity to pay benefits and minimize the volatility of returns while earning the highest possible rate of return over time to satisfy the benefit obligations. The plan fiduciaries assist us with setting our long-term strategic investment objectives for the defined benefit retirement plan assets. The objectives include preserving the funded status of the trust and balancing risk and return. Investment performance and plan asset mix are reviewed periodically.

At both October 1, 2016 and October 3, 2015, plan assets were invested in a single mutual fund, the underlying assets of which are allocated to fixed income and cash and cash equivalents categories as shown in the table below. Any decisions to change the asset allocation are made by the plan fiduciaries. The investment in equity and fixed income securities has a long-term targeted allocation of assets of 50% equity and 50% fixed income.

The actual defined benefit retirement plan asset allocations within the balanced mutual fund at October 1, 2016 and October 3, 2015 are as follows:



	Percentage of Plan Assets
	2016		2015
Fixed income securities¹	75.5	%	83.0	%
Cash and cash equivalents²	24.5	%	13.0	%
Other	—	%	4.0	%
Total	100.0	%	100.0	%


¹	Fixed income securities are comprised primarily of international government agency and international corporate bonds with investment grade ratings.


²	Cash and cash equivalents include deposit accounts holding cash in Euros and other currencies and term deposits primarily held as collateral for equity futures. The market values of the equity and futures are linked to the values of equity indexes of developed country markets, including the U.S., Great Britain, Europe, Canada, Switzerland and Japan.

As of October 1, 2016 and October 3, 2015, the fair value of the defined benefit retirement plan assets, which are subject to fair value measurements as described in Note 3 are as follows:



	October 1, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Mutual fund¹	$	—	$	19,950	$	—	$	19,950



	October 3, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Mutual fund¹	$	—	$	18,767	$	—	$	18,767


¹	The fair value of the mutual fund is generally valued based on closing prices from national exchanges, if the underlying securities are traded on an active market, or fixed income pricing models that use observable market inputs.

Net periodic benefit cost for our defined benefit retirement plan for fiscal years 2016, 2015 and 2014 included the following components:



(in thousands)	2016			2015			2014
Service cost	$	971		$	860		$	800
Interest cost	608			634			833
Expected return on plan assets	(1,027		)	(1,009		)	(1,024		)
Net amortization and deferral	584			501			464
Special termination benefits	—			—			25
Net periodic benefit cost	$	1,136		$	986		$	1,098

The accumulated benefit obligation of our defined benefit retirement plan as of October 1, 2016 and October 3, 2015 was $30,716 and $24,657, respectively.

The future pension benefit payments, which reflect expected future service, for the next five fiscal years, and the combined five fiscal years thereafter, are as follows:



Fiscal Year	Pension Benefits (in thousands)
2017	$	740
2018	775
2019	841
2020	886
2021	994
2022 through 2026	5,659
Total	$	9,895

Other Retirement Plans

Certain of our international subsidiaries have non-contributory, unfunded post-retirement benefit plans that provide retirement benefits for eligible employees and managing directors. Generally, these post-retirement plans provide benefits that accumulate based on years of service and compensation levels. At October 1, 2016 and October 3, 2015, the aggregate liabilities associated with these post-retirement benefit plans was $4,508 and $3,247, respectively.