Employee Benefit Plans

12 Months Ended

Jan. 01, 2021

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans

Note 11 – Employee Benefit Plans

Defined Benefit Plan – Switzerland

The Company maintains a passive pension plan (the “Swiss Plan”) covering employees of its Swiss subsidiary, which is accounted for as a defined benefit plan.

In Switzerland employers are required to provide a minimum pension plan for their staff.  Contributions of both the employees and employer finance the Swiss Plan. The amount of the contributions is defined by the plan regulations and cannot be decreased without amending the plan regulations. It is required that the employer contribute an amount equal to or greater than the employee contribution.

The following table shows the changes in the benefit obligation and plan assets and the Swiss Plan’s funded status as of January 1, 2021 and January 3, 2020 (in thousands):

Note 11 – Employee Benefit Plans (Continued)

Defined Benefit Plan – Switzerland (Continued)

	2020			2019
Change in Projected Benefit Obligation:
Projected benefit obligation, beginning of period	$	12,864		$	8,794
Service cost		1,139			739
Interest cost		51			77
Participant contributions		579			458
Benefits deposited (paid)		6,299			492
Actuarial loss		4,620			2,429
Prior service credit		(82	)		(125	)
Projected benefit obligation, end of period	$	25,470		$	12,864
Change in Plan Assets:
Plan assets at fair value, beginning of period	$	6,774		$	5,130
Actual return on plan assets (including foreign currency impact)		1,195			152
Employer contributions		704			542
Participant contributions		579			458
Benefits deposited (paid)		6,299			492
Plan assets at fair value, end of period	$	15,551		$	6,774
Funded status (pension liability), end of year(1)	$	(9,919	)	$	(6,090	)
Amount Recognized in Accumulated Other Comprehensive Income    (Loss), net of tax:
Actuarial loss on plan assets	$	(198	)	$	(1,031	)
Actuarial loss on benefit obligation		(8,453	)		(4,317	)
Actuarial gain recognized in current year		1,029			744
Prior service credit		301			258
Effect of curtailments		610			609
Accumulated other comprehensive loss	$	(6,711	)	$	(3,737	)
Accumulated benefit obligation at year end	$	(24,291	)	$	(12,043	)

⁽¹⁾ The underfunded balance was included in pension liability on the Consolidated Balance Sheets.

The change in the Projected Benefit Obligation during fiscal year 2020 was due to an increase in participant contributions, an increase in the number of participants, a translation effect (as the Swiss Plan is in Swiss Francs but the Company’s Swiss subsidiary currency is U.S. dollar, as described in Note 1) and a slight reduction in the discount rate.

Note 11 – Employee Benefit Plans (Continued)

Defined Benefit Plan – Switzerland (Continued)

Net periodic pension cost associated with the Swiss Plan included the following components (in thousands):

	Years Ended
	2020			2019			2018
Service cost(1)	$	1,139		$	739		$	474
Interest cost(2)		51			77			56
Expected return on plan assets(2)		(264	)		(147	)		(116	)
Prior service credit(2),(3)		(34	)		(21	)		(21	)
Actuarial loss recognized in current period(2),(3)		318			129			113
Net periodic pension cost	$	1,210		$	777		$	506

⁽¹⁾ Recognized in selling general and administrative expenses on the Consolidated Statements of Income.

⁽²⁾ Recognized in other income (expense), net, on the Consolidated Statements of Income.

⁽³⁾ Amounts reclassified from accumulated other comprehensive income (loss).

Changes in other comprehensive income (loss), net of tax, associated with the Swiss Plan included the following components (in thousands):

	Years Ended
	2020			2019			2018
Current year actuarial gain (loss) on plan assets	$	833		$	4		$	(101	)
Current year actuarial loss on benefit obligation		(4,136	)		(2,172	)		(243	)
Actuarial gain recorded in current year		285			114			103
Prior service credit		43			93			(19	)
Effect of curtailments		1			—			—
Change in other comprehensive loss	$	(2,974	)	$	(1,961	)	$	(260	)

Net periodic pension cost and projected and accumulated pension obligation for the Company’s Swiss Plan were calculated on January 1, 2021 and January 3, 2020 using the following assumptions:

	2020			2019
Discount rate		0.2	%		0.3	%
Salary increases		2.0	%		2.0	%
Expected return on plan assets		2.5	%		2.5	%
Expected average remaining working lives in years		10.1			10.0

The discount rates are based on an assumed duration of the pension obligations and estimated using the rates of returns for AAA and AA-rated Swiss and foreign CHF-denominated corporate bonds listed on the SIX Swiss Exchange.  The salary increase rate was based on the Company’s best estimate of future increases over time.  The expected long-term rate of return on plan assets is based on the expected asset allocation and assumptions concerning long-term interest rates, inflation rates, and risk premiums for equities above the risk-free rates of return. These assumptions take into consideration historical long-term rates of return for relevant asset categories.

Under Swiss law, pension funds are legally independent from the employer and all the contributions are invested with regulated entities. The Company has a contract with Allianz Suisse Life Insurance Company’s BVG Collective Foundation (the “Foundation”) to manage its Swiss pension fund. Multiple employers contract with the Foundation to manage the employers’ respective pension plans. The Foundation manages the pension plans of its contracted employers as a collective entity. The investment strategy is determined by the Foundation and applies to all members of the collective Foundation. There are no separate financial statements for each employer contract. The pension plan assets of all the employers that contract with the Foundation are comingled. They are considered multiple-employer plans under ASC 715-30-35-70 and therefore accounted for as single-employer plans.

Note 11 – Employee Benefit Plans (Continued)

Defined Benefit Plan – Switzerland (Continued)

As there are no separate financial statements for each employer contract, there are no individual investments that can be directly attributed to the Company’s pension plan assets. However, the funds contributed by an employer are specifically earmarked for its employees and the total assets of the plan allocable to Company’s employees are separately tracked by the Foundation. The lack of visibility into the specific investments of the plan assets and how they are valued is a significant unobservable input, therefore, the Company considers the plan assets collectively to be Level 3 assets under the fair value hierarchy (see Note 1).

The table below sets forth the fair value of Plan assets at January 3, 2020 and January 1, 2021, and the related activity in years ended 2019 and 2020, in accordance with ASC 715-20-50-1(d) (in thousands):

	Insurance Contracts (Level 3)
Beginning balance at December 28, 2018	$	5,130
Actual return on plan assets		152
Purchases, sales, and settlement		1,492
Ending balance at January 3, 2020	$	6,774
Actual return on plan assets		1,195
Purchases, sales, and settlement		7,582
Ending balance at January 1, 2021	$	15,551

During fiscal year 2021, the Company expects to make cash contributions totaling approximately $775,000 to the Swiss Plan.

The estimated future benefit payments for the Swiss Plan are as follows (in thousands):

Year Ended	Amount
2021	$	72
2022		96
2023		138
2024		156
2025		176
Thereafter		9,281
Total	$	9,919

Defined Benefit Plan-Japan

STAAR Japan maintains a noncontributory defined benefit pension plan (“Japan Plan”) substantially covering all the employees of STAAR Japan. Benefits under the Japan Plan are earned, vested, and accumulated based on a point-system, primarily based on the combination of years of service, actual and expected future grades (management or non-management) and actual and future zone (performance) levels of the employees.  Each point earned is worth a fixed monetary value, 1,000 Yen per point, regardless of the level grade or zone of the employee.  Gross benefits are calculated based on the cumulative number of points earned over the service period multiplied by 1,000 Yen.  The mandatory retirement age limit is 60 years old.

STAAR Japan administers the pension plan and funds the obligations of the Japan Plan from STAAR Japan’s operating cash flows.   STAAR Japan is not required, and does not intend, to provide contributions to the Plan to meet benefit obligations and therefore does not have any plan assets.   Benefit payments are made to beneficiaries as they become due.

Note 11 – Employee Benefit Plans (Continued)

Defined Benefit Plan-Japan (Continued)

The funded status of the benefit plan at January 1, 2021 and January 3, 2020 was as follows (in thousands): 

	2020			2019
Change in Projected Benefit Obligation:
Projected benefit obligation, beginning of period	$	1,750		$	1,646
Service cost		180			185
Interest cost		5			7
Actuarial gain		34			(58	)
Benefits paid		(35	)		(66	)
Foreign exchange adjustment		87			36
Projected benefit obligation, end of period	$	2,021		$	1,750
Change in Plan Assets:
Plan assets at fair value, beginning of period	$	—		$	—
Actual return on plan assets		—			—
Employer contributions		—			—
Benefits paid		—			—
Distribution of plan assets		—			—
Foreign exchange adjustment		—			—
Plan assets at fair value, end of period	$	—		$	—
Funded status (pension liability), end of year(1)	$	(2,021	)	$	(1,750	)
Amount Recognized in Accumulated Other Comprehensive Income    (Loss), net of tax:
Transition obligation	$	—		$	—
Actuarial loss		(38	)		(37	)
Prior service cost		7			7
Net gain		46			68
Accumulated other comprehensive income	$	15		$	38
Accumulated benefit obligation at year end	$	(1,858	)	$	(1,599	)

⁽¹⁾ The underfunded balance was included in pension liability on the Consolidated Balance Sheets.

Net periodic pension cost associated with the Japan Plan included the following components (in thousands):

	Years Ended
	2020			2019			2018
Service cost(1)	$	180		$	185		$	153
Interest cost(2)		5			7			4
Net amortization of transitional obligation(2),(3)		—			—			11
Prior service credit(2),(3)		(1	)		(1	)		(1	)
Net periodic pension cost	$	184		$	191		$	167

⁽¹⁾ Recognized in selling general and administrative expenses on the Consolidated Statements of Income.

⁽²⁾ Recognized in other income (expense), net, on the Consolidated Statements of Income.

⁽³⁾ Amounts reclassified from accumulated other comprehensive loss.

Note 11 – Employee Benefit Plans (Continued)

Defined Benefit Plan-Japan (Continued)

Changes in other comprehensive income (loss), net of tax, associated with the Japan Plan include the following components (in thousands):

	Years Ended
	2020			2019			2018
Amortization of net transition obligation	$	—		$	—		$	7
Amortization of actuarial loss		(1	)		(1	)		(1	)
Prior service cost		—			(1	)		—
Actuarial income (loss) recorded in current year		(22	)		30			(84	)
Change in other comprehensive income (loss)	$	(23	)	$	28		$	(78	)

Net periodic pension cost and projected and accumulated pension obligation for the Company’s Japan Plan were calculated on January 1, 2021 and January 3, 2020 using the following assumptions:

	2020			2019
Discount rate		0.3	%		0.3	%
Salary increases		4.4	%		4.5	%
Expected return on plan assets	N/A			N/A
Expected average remaining working lives in years		10.7			10.0

The discount rates are based on the yield curve of corporate bonds rated AA or higher.  The salary increase average rate was based on the Company’s best estimate of future increases over time.

The estimated future benefit payments for the Japan Plan are as follows (in thousands):

Year Ended	Amount
2021	$	104
2022		39
2023		212
2024		93
2025		212
Thereafter		1,361
Total	$	2,021

Defined Contribution Plan

The Company has a 401(k) profit sharing plan (“401(k) Plan”) for the benefit of qualified employees in the U.S. During the year ended January 1, 2021 employees who participate may elect to make salary deferral contributions to the 401(k) Plan up to $19,500 of the employees’ eligible payroll subject to annual Internal Revenue Code maximum limitations (with a $6,500 annual catch-up contribution permitted for those over 50 years old). The Company’s contribution percentage is 80% of the employee’s contribution up to the first 6% of the employee’s compensation. In addition, STAAR may make a discretionary contribution to qualified employees, in accordance with the 401(k) Plan.  The Company’s contributions, net of forfeitures, to the 401(k) Plan were as follows (in thousands):

	Years Ended
	2020		2019		2018
Employer contributions, net of forfeitures	$	1,281	$	1,279	$	996