Defined Benefit Pension Plans

We sponsor both funded and unfunded defined benefit pension plans offering death and disability, retirement, and special termination benefits for our international employees, primarily in Germany, France, Italy, Indonesia, Brazil, and Spain. The defined benefit obligation is calculated annually by using the projected unit credit method. The measurement date for the pension plans was December 31, 2017.

The following tables set forth the components of the changes in benefit obligations and fair value of plan assets:



	Year Ended December 31,
	2017			2016
	(in thousands)
Change in benefit obligation:
Benefit obligation at January 1,	$	97,261		$	98,767
Service cost	3,968			3,472
Interest cost	2,264			2,573
Actuarial (gain) loss	(2,351		)	7,733
Benefits paid	(3,136		)	(9,481		)
Foreign currency exchange rate changes	13,014			(4,386		)
Curtailment	(858		)	14
Settlement	(175		)	(1,431		)
Other	833			—
Benefit obligation at December 31,	$	110,820		$	97,261

Change in plan assets:
Fair value of plan assets at January 1,	$	10,215		$	9,662
Actual return on plan assets	786			604
Company contributions	399			348
Benefits paid	(383		)	(370		)
Foreign currency exchange rate changes	984			(29		)
Other	833			—
Fair value of plan assets at December 31,	12,834			10,215
Net pension benefit obligation at fair value	$	97,986		$	87,046

Amounts recognized on the Consolidated Balance Sheets consist of:



	At December 31,
	2017		2016
	(in thousands)
Assets
Plan assets in other long-term assets	$	991	$	654

Liabilities
Current portion of pension benefit obligation in wages and benefits payable	3,260		3,202
Long-term portion of pension benefit obligation	95,717		84,498

Pension benefit obligation, net	$	97,986	$	87,046

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



	At December 31,
	2017		2016
	(in thousands)
Net actuarial loss	$	25,379	$	26,767
Net prior service cost	641		619
Amount included in AOCI	$	26,020	$	27,386

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



	Year Ended December 31,
	2017			2016			2015
	(in thousands)
Net actuarial (gain) loss	$	(3,209	)	$	6,316		$	(6,894	)
Settlement (gain) loss	2			(1,343		)	(336		)
Curtailment (gain) loss	586			—			—
Plan asset (gain) loss	(192		)	(64		)	343
Amortization of net actuarial loss	(2,308		)	(1,351		)	(1,979		)
Amortization of prior service cost	(62		)	(58		)	(59		)
Other	—			4			(46		)
Other comprehensive (income) loss	$	(5,183	)	$	3,504		$	(8,971	)

If actuarial gains and losses exceed ten percent of the greater of plan assets or plan liabilities, we amortize them over the employees' average future service period. The estimated net actuarial loss and prior service cost that will be amortized from AOCI into net periodic benefit cost during 2018 is $1.6 million.

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



	Year Ended December 31,
	2017			2016			2015
	(in thousands)
Service cost	$	3,968		$	3,472		$	4,572
Interest cost	2,264			2,573			2,380
Expected return on plan assets	(594		)	(540		)	(502		)
Amortization of prior service costs	62			58			59
Amortization of actuarial net loss	2,308			1,351			1,979
Settlement	(2		)	1,343			375
Curtailment	(586		)	—			46
Other	—			(3		)	(1		)
Net periodic pension benefit costs	$	7,420		$	8,254		$	8,908

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,
	2017		2016		2015
Actuarial assumptions used to determine benefit obligations at end of period:
Discount rate	2.21	%	2.18	%	2.59	%
Expected annual rate of compensation increase	3.64	%	3.65	%	3.60	%
Actuarial assumptions used to determine net periodic benefit cost for the period:
Discount rate	2.18	%	2.59	%	2.36	%
Expected rate of return on plan assets	5.58	%	5.29	%	5.45	%
Expected annual rate of compensation increase	3.65	%	3.60	%	3.37	%

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 93% of our benefit obligation, we use two discount rates with consideration of the duration of the plans, using a hypothetical yield curve developed from euro-denominated AA-rated corporate bond issues. These bond issues are partially weighted for market value, with minimum amounts outstanding of €500 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 1.00% and 1.75%.

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, specific to plan investment asset category. 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 $101.4 million and $87.2 million at December 31, 2017 and 2016, respectively.

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



	At December 31,
	2017		2016
	(in thousands)
Projected benefit obligation	$	106,486	$	94,110
Accumulated benefit obligation	97,546		84,448
Fair value of plan assets	7,509		6,410

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 are as follows:



	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Unobservable Inputs (Level 3)
	(in thousands)
	December 31, 2017
Cash	$	789	$	789	$	—
Insurance funds	8,384		—		8,384
Other securities	3,661		—		3,661
Total fair value of plan assets	$	12,834	$	789	$	12,045

	December 31, 2016
Cash	$	783	$	783	$	—
Insurance funds	7,011		—		7,011
Other securities	2,421		—		2,421
Total fair value of plan assets	$	10,215	$	783	$	9,432

The following tables present a reconciliation of Level 3 assets held during the years ended December 31, 2017 and 2016.



	Balance at January 1, 2017		Net Realized and Unrealized Gains		Net Purchases, Issuances, Settlements, and Other			Net Transfers Into Level 3		Effect of Foreign Currency			Balance at December 31, 2017
	(in thousands)
Insurance funds	$	7,011	$	257	$	102		$	—	$	1,014		$	8,384
Other securities	2,421		523		(93		)	833		(23		)	3,661
Total	$	9,432	$	780	$	9		$	833	$	991		$	12,045



	Balance at January 1, 2016		Net Realized and Unrealized Gains		Net Purchases, Issuances, Settlements, and Other			Net Transfers Into Level 3		Effect of Foreign Currency			Balance at December 31, 2016
	(in thousands)
Insurance funds	$	7,089	$	235	$	54		$	—	$	(367	)	$	7,011
Other securities	1,778		405		(84		)	—		322			2,421
Total	$	8,867	$	640	$	(30	)	$	—	$	(45	)	$	9,432

As the plan assets and contributions are not significant to our total company assets, no further disclosures are considered material.

Annual benefit payments for the next 10 years, 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)
2018	$	3,801
2019	3,124
2020	3,744
2021	4,329
2022	4,511
2023-2027	28,121