10. Postretirement Benefit Plans

Pension Plan

As a result of the Acquisition in fiscal year 2015, the Company now fully funds a defined benefit pension scheme (“the Scheme”) maintained by Wolfson, for some of the employees in the United Kingdom, which was closed to new participants as of July 2, 2002. As of April 30, 2011, the participants in the Scheme no longer accrue benefits and therefore the Company will not be required to pay contributions in respect to future accrual.

The Scheme is a trustee-administered fund that is legally separate from Wolfson, which holds the pension plan assets to meet long-term pension liabilities. The pension fund trustees comprise one employee and one employer representative and an independent chairman. The trustees are required by law to act in the best interests of the Scheme’s beneficiaries and the trustees are responsible, in consultation with Wolfson and the Company, for setting certain policies (including the investment policies and strategies) of the fund.

As of March 26, 2016, the Company was obligated, and subsequently paid, approximately $0.5 million to the Scheme on April 25, 2016, which is recorded on the consolidated balance sheets in “Accrued salaries and benefits”. The Company expects to completely close the Scheme over the next ten years.

The following tables set forth the benefit obligation, the fair value of plan assets, and the funded status of the Scheme (in thousands):



	March 26,		March 28,
	2016		2015
Change in benefit obligation:
Beginning balance	$	27,091	$	22,959
Expenses		15		16
Interest cost		821		544
Benefits paid and expenses		(1,095)		(255)
Change in foreign currency exchange rate		(1,221)		-
Actuarial (gain) / loss		(1,643)		3,827
Total benefit obligation ending balance		23,968		27,091

Change in plan assets:
Beginning balance		26,735		25,021
Actual return on plan assets		(155)		1,969
Employer contributions		1,409		-
Change in foreign currency exchange rate		(1,206)		-
Benefits paid and expenses		(1,095)		(255)
Fair value of plan assets ending balance		25,688		26,735

Funded status of Scheme at end of year	$	1,720	$	(356)

The assets and obligations of the Scheme are denominated in British Pound Sterling. Based on an actuarial study performed as of March 26, 2016, the Scheme is overfunded and a long-term asset is reflected in the Company’s consolidated balance sheet under the caption “Other assets”. The weighted-average discount rate assumption used to determine benefit obligations as of March 26, 2016 and March 28, 2015 was 3.6% and 3.2%, respectively.

The components of the Company’s net periodic pension expense (income) are as follows (in thousands):



	Fiscal Years Ended
	March 26,		March 28,
	2016		2015
Expenses	$	15	$	16
Interest cost		821		544
Expected return on plan assets		(1,212)		(792)
Amortization of actuarial loss		49		-
	$	(327)	$	(232)

The following weighted-average assumptions were used to determine net periodic benefit costs for the year ended March 26, 2016 and March 28, 2015:



	2016			2015
Discount rate		3.20	%		4.00	%
Expected long-term return on plan assets		4.65	%		5.36	%

We report and measure the plan assets of our defined benefit pension at fair value. The Company’s pension plan assets consist of cash, equity securities, corporate debt securities, and diversified growth funds. The fair value of the pension plan assets is determined through an external actuarial valuation, following a similar process of obtaining inputs as described above. The expected long-term return on plan assets is comparable to the discount rate used to value plan liabilities.

The table below sets forth the fair value of our plan assets as of March 26, 2016, using the same three-level hierarchy of fair-value inputs described in Note 4 (in thousands):



	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	Level 1		Level 2		Level 3		Total
Plan Assets:
Cash	$	42	$	-	$	-	$	42
Pension funds		-		25,646		-		25,646
	$	42	$	25,646	$	-	$	25,688

The table below sets forth the fair value of our plan assets as of March 28, 2015, (in thousands):



	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	Level 1		Level 2		Level 3		Total
Plan Assets:
Cash	$	1,160	$	-	$	-	$	1,160
Pension funds		-		25,575		-		25,575
	$	1,160	$	25,575	$	-	$	26,735

Amounts recognized in accumulated other comprehensive income (loss) for the period that have not yet been recognized as components of net periodic benefit cost consist of (in thousands):



		Fiscal Year
		2016
Net actuarial gain	$	2,660

Accumulated other comprehensive income, before tax	$	2,660

The Company will amortize the actuarial gain over a period of twenty-five years based on actuarial assumptions, including life expectancy. The following table provides the estimated amount that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in fiscal year 2017 (in thousands):



		Fiscal Year
		2017
Transition (asset) obligation	$	-
Prior service cost		-
Actuarial loss (gain)		(106)

The Company has contributed $0.5 million to the pension plan in fiscal year 2017 for deficit contributions discussed above, which is recorded on the consolidated balance sheets in “Accrued salaries and benefits”.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the following fiscal years (in thousands):


		Benefit
		Payments
2017	$	292
2018		300
2019		465
2020		544
2021		534
Thereafter		2,754

The expected long-term return on plan assets is based on historical actual return experience and estimates of future long-term performance with consideration to the expected investment mix of the plan assets. It is the policy of the Trustees and the Company to review the investment strategy periodically. The Trustees’ investment objectives and the processes undertaken to measure and manage the risks inherent in the Scheme investment strategy are illustrated by the current asset allocation. The current mix is 32% equity securities, 47% corporate debt securities, and 21% diversified growth funds. See the related fair value of the assets above.

The Scheme exposes the Company to actuarial risks such as investment (market) risk, interest rate risk, mortality risk, longevity risk and currency risk. A decrease in corporate bond yields, a rise in inflation or an increase in life expectancy would result in an increase to the Scheme liabilities and may give rise to increased benefit expenses in future periods. Caps on inflationary increases are currently in place to protect the Scheme against extreme inflation, however.

The indicative impact on net periodic benefit cost based on defined sensitivities is as follows:



Change		Approximate impact on liabilities
Decrease discount rate by 0.1%, per year		2% increase
Increase inflation linked assumptions by 0.1%, per year		2% increase (of inflation-linked liabilities)
Increase life expectancy by 1 year		2% increase

401(k) Plan

We have a 401(k) Profit Sharing Plan (the “401(k) Plan”) covering all of our qualifying domestic employees. Under the 401(k) Plan, employees may elect to contribute any percentage of their annual compensation up to the annual IRS limitations. The Company matches 50 percent of the first 8 percent of the employees’ annual contribution. We made matching employee contributions of $4.3 million, $2.5 million, and $1.8 million during fiscal years 2016, 2015, and 2014, respectively.