Defined Benefit Pension Plans

We sponsor both funded and unfunded defined benefit pension plans for our international employees, primarily in Germany, France, Italy, Indonesia, Brazil, and Spain, offering death and disability, retirement, and special termination benefits. The defined benefit obligation is calculated annually by using the projected unit credit method. The measurement date for the pension plans was December 31, 2013.

Our general funding policy for these qualified pension plans is to contribute amounts sufficient to satisfy regulatory funding standards of the respective countries for each plan. We contributed $436,000 and $440,000 to the defined benefit pension plans for the years ended December 31, 2013 and 2012, respectively. The timing of when contributions are made can vary by plan and from year to year. For 2014, assuming that actual plan asset returns are consistent with our expected rate of return, and that interest rates remain constant, we expect to contribute approximately $450,000 to our defined benefit pension plans.

The following tables summarize the benefit obligation, plan assets, funded status of the defined benefit plans, amounts recognized in the Consolidated Balance Sheets and amounts recognized in accumulated other comprehensive income at December 31, 2013 and 2012.



	Year Ended December 31,
	2013			2012
	(in thousands)
Change in benefit obligation:
Benefit obligation at January 1,	$	101,766		$	72,601
Service cost	4,205			2,700
Interest cost	3,355			3,625
Actuarial (gain) loss	(6,160		)	24,492
Benefits paid	(5,369		)	(4,131		)
Foreign currency exchange rate changes	2,698			2,395
Other	2,167			84
Benefit obligation at December 31,	$	102,662		$	101,766

Change in plan assets:
Fair value of plan assets at January 1,	$	8,561		$	7,980
Actual return on plan assets	119			225
Company contributions	436			440
Benefits paid	(537		)	(227		)
Foreign currency exchange rate changes	(267		)	143
Other	3,368			—
Fair value of plan assets at December 31,	11,680			8,561
Ending balance at fair value (net pension plan benefit liability)	$	90,982		$	93,205

The weighted average discount rate used to measure our benefit obligations, which is based on published bond indexes, increased by 40 basis points from December 31, 2012 to December 31, 2013, driving a $6.2 million actuarial gain during 2013, which is recognized in OCI. The significant actuarial weighted average assumptions are discussed in greater detail below.

Our defined benefit pension plans are denominated in the functional currencies of the respective countries in which the plans are sponsored; therefore, the balances increase or decrease, with a corresponding change in OCI, due to changes in foreign currency exchange rates. Amounts recognized on the Consolidated Balance Sheets consist of:



	At December 31,
	2013		2012
	(in thousands)
Assets
Plan assets in other long-term assets	$	1,426	$	227

Liabilities
Current portion of pension plan liability in wages and benefits payable	3,721		2,899
Long-term portion of pension plan liability	88,687		90,533

Net pension plan benefit liability	$	90,982	$	93,205

Amounts in accumulated other comprehensive income (pre-tax) that have not yet been recognized as components of net periodic benefit costs consist of:



	At December 31,
	2013		2012
	(in thousands)
Net actuarial loss	$	13,262	$	20,676
Net prior service cost	1,133		1,063
Amount included in accumulated other comprehensive income	$	14,395	$	21,739

Amounts recognized in OCI (pre-tax) are as follows:



	Year Ended December 31,
	2013			2012			2011
	(in thousands)
Net actuarial (gain) loss	$	(5,881	)	$	24,492		$	(597	)
Settlement/curtailment loss	(325		)	(13		)	(25		)
Plan asset (gain) loss	516			108			(105		)
Amortization of net actuarial gain (loss)	(926		)	(161		)	85
Amortization of prior service cost	(70		)	(68		)	(74		)
Other	(658		)	—			(1		)
Other comprehensive (income) loss	$	(7,344	)	$	24,358		$	(717	)

The estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2014 is $0.6 million.

Net periodic pension benefit costs for our plans include the following components:



	Year Ended December 31,
	2013			2012			2011
	(in thousands)
Service cost	$	4,205		$	2,700		$	2,512
Interest cost	3,355			3,625			3,754
Expected return on plan assets	(635		)	(331		)	(322		)
Amortization of prior service costs	70			68			74
Amortization of actuarial net (gain) loss	926			161			(85		)
Settlements and other	(493		)	97			25
Net periodic benefit cost	$	7,428		$	6,320		$	5,958

The significant actuarial weighted average assumptions used in determining the benefit obligations and net periodic benefit cost for our benefit plans are as follows:



	At and For The Year Ended December 31,
	2013		2012		2011
Actuarial assumptions used to determine benefit obligations at end of period:
Discount rate	3.76	%	3.36	%	5.51	%
Expected annual rate of compensation increase	3.33	%	3.41	%	3.38	%
Actuarial assumptions used to determine net periodic benefit cost for the period:
Discount rate	3.36	%	5.51	%	5.35	%
Expected rate of return on plan assets	3.63	%	4.08	%	4.00	%
Expected annual rate of compensation increase	3.41	%	3.38	%	3.35	%

We determine a discount rate for our plans based on the estimated duration of each plan’s liabilities. For our euro denominated defined benefit pension plans, which represent 95% of our benefit obligation, we use three discount rates, with consideration of the duration of the plans, using a hypothetical yield curve developed from euro-denominated AA-rated corporate bond issues, partially weighted for market value, with minimum amounts outstanding of €250 million for bonds with less than 10 years to maturity and €50 million for bonds with 10 or more years to maturity, and excluding the highest and lowest yielding 10% of bonds within each maturity group. The discount rates used, depending on the duration of the plans, were 2.75%, 3.25%, and 3.50%. As a result of the 40 basis point increase in the weighted average discount rate used to measure our benefit obligations, the actuarial gain, which is recognized in OCI, was $6.2 million in 2013.

Our expected rate of return on plan assets is derived from a study of actual historic returns achieved and anticipated future long-term performance of plan assets. While the study primarily gives consideration to recent insurers’ performance and historical returns, the assumption represents a long-term prospective return.

The total accumulated benefit obligation for our defined benefit pension plans was $93.3 million and $90.8 million at December 31, 2013 and 2012, respectively.

We have two plans in which the fair value of plan assets exceeds the plan's accumulated benefit obligation.

The total obligation and fair value of plan assets for plans with accumulated benefit obligations exceeding the fair value of plan assets are as follows:



	At December 31,
	2013		2012
	(in thousands)
Projected benefit obligation	$	99,694	$	100,357
Accumulated benefit obligation	90,803		89,687
Fair value of plan assets	7,286		6,925

Our asset investment strategy focuses on maintaining a portfolio using primarily insurance funds, which are accounted for as investments and measured at fair value, in order to achieve our long-term investment objectives on a risk adjusted basis. Our general funding policy for these qualified pension plans is to contribute amounts sufficient to satisfy regulatory funding standards of the respective countries for each plan.

The fair values of our plan investments by asset category as of December 31, 2013, and 2012 are as follows:



	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Unobservable Inputs (Level 3)
	(in thousands)
2013
Cash	$	846	$	846	$	—
Insurance funds	8,260		—		8,260
Other securities	2,574		—		2,574
Total fair value of plan assets	$	11,680	$	846	$	10,834

2012
Cash	$	903	$	903	$	—
Insurance funds	7,658		—		7,658
Total fair value of plan assets	$	8,561	$	903	$	7,658

As the plan assets are not significant to our total company assets, no further breakdown is provided.

Annual benefit payments, including amounts to be paid from our assets for unfunded plans, and reflecting expected future service, as appropriate, are expected to be paid as follows:



Year Ending December 31,	Estimated Annual Benefit Payments
Year Ending December 31,	Estimated Annual Benefit Payments
	(in thousands)
2014	$	4,521
2015	3,781
2016	4,093
2017	4,464
2018	4,394
2019 - 2023	26,825