(9)	Employee benefit plans

Sevcon, Inc. has defined contribution plans covering the majority of its U.S. and U.K. employees in the controls business. There is also a small defined contribution plan covering senior managers in the capacitor business.

The Company’s French subsidiary, Sevcon S.A.S., has a liability to pay its employees a service and salary based award when they reach retirement age and leave the Company’s employment. This liability, which is unfunded, is recognized in accrued expenses and was $166,000 and $148,000 at April 2, 2016 and April 4, 2015, respectively. The obligation to pay this award is a French legal requirement and is only payable if the employee is employed by the Company when they retire; if they leave the Company prior to that time the award is no longer payable.

The Company’s Italian subsidiary, Bassi S.r.l., has a liability to pay its employees a severance indemnity, ‘Trattamento di fine Rapporto’ (“TFR”) when they leave the Company’s employment. TFR, which is mandatory for Italian companies, is deferred compensation and is based on the employees’ years of service and the compensation earned by the employee during the service period. TFR is considered a “Defined Benefit Plan” and the related liability is recognized in the consolidated balance sheet within “Liability for pension benefits”. This liability, which is unfunded, was $1,262,000 at April 2, 2016.

The Company has frozen the U.K. and U.S. defined benefit plans for which no future benefits are being earned by employees. The Company uses a September 30 measurement date for its defined benefit pension plans.

	(in thousands of dollars)
	Three Months ended						Six Months ended
	April 2, 2016			April 4, 2015			April 2, 2016			April 4, 2015
Interest cost	$	285		$	304		$	581		$	620
Service cost		33			-			33			-
Expected return on plan assets		(276	)		(313	)		(565	)		(626	)
Amortization of net loss		73			68			150			132
Net periodic benefit cost		115			59			199			126
Net cost of defined contribution plans	$	128		$	125		$	283		$	272
Net cost of all employee benefit plans	$	243		$	184		$	482		$	398

The following table sets forth the movement in the liability for pension benefits in the six month periods ended April 2, 2016 and April 4, 2015, respectively:

	(in thousands of dollars)
	Six Months ended
	April 2, 2016			April 4, 2015
Liability for pension benefits at beginning of period		10,963			9,529
Liability assumed on acquisition of subsidiary		1,167			-
Interest cost		581			620
Service cost		33			-
Expected return on plan assets		(565	)		(626	)
Plan contributions		(319	)		(332	)
Effect of exchange rate changes		(432	)		(785	)
Balance at end of period		11,428			8,406

Amounts recognized in the balance sheet consist of:

	(in thousands of dollars)
	April 2, 2016		April 4, 2015
Non-current liabilities	$	11,428	$	8,406

Amounts recognized in accumulated other comprehensive loss consist of:

	(in thousands of dollars)
	Three Months ended				Six Months ended
	April 2, 2016		April 4, 2015		April 2, 2016		April 4, 2015
Actuarial loss, net of $17 and $35 tax benefit for the three and six month periods, respectively, (2015: net of $17 and $31 tax benefit for the three and six month periods, respectively)	$	55	$	51	$	114	$	101

Sevcon, Inc. contributed $100,000 to its frozen U.S. defined benefit plan in the six months ended April 2, 2016; it presently anticipates contributing a further $100,000 to fund its U.S. plan in the remainder of fiscal 2016. In addition, employer contributions to the frozen U.K. defined benefit plan were $219,000 in the first six months and are estimated to total $435,000 in 2016.

The table below presents information about the Company’s pension plan assets measured and recorded at fair value as of April 2, 2016 and indicates the fair value hierarchy of the inputs utilized by the Company to determine the fair values.

	(in thousands of dollars)
April 2, 2016	Level 1* (Quoted prices in active markets)		Level 2** (Significant observable inputs)		Level 3*** (Unobservable inputs)

Adept Strategy 9 Fund (a sub-fund of Adept Investment Management plc)		-		12,845		-
Schroder Matching Plus Nominal and Index Linked Liability Driven Investment Swap Funds (funds managed by Schroder Investment Management Limited)		-		4,993		-
U.S. Mutual Funds and Fixed Income Funds		2,706		-		-
U.S. Equity Funds		380		-		-
Other Types of Investments
Cash		778		-		-
Total		3,864		17,838		-

	(in thousands of dollars)
September 30, 2015	Level 1* (Quoted prices in active markets)		Level 2** (Significant observable inputs)		Level 3*** (Unobservable inputs)
Adept Strategy 9 Fund (a sub-fund of Adept Investment Management plc)		-		13,044		-
Schroder Matching Plus Nominal and Index Linked Liability Driven Investment Swap Funds (funds managed by Schroder Investment Management Limited)		-		3,845		-
U.S. Mutual Funds and Fixed Income Funds		2,557		-		-
U.S. Equity Funds		350		-		-
Other Types of Investments
Cash		331		-		-
Total		3,238		16,889		-

Level 1 investments represent mutual funds for which a quoted market price is available on an active market. These investments primarily hold stocks or bonds, or a combination of stocks and bonds.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The Company’s pension plan financial assets held in the Adept Strategy 9 Fund and the Schroder investments are Level 2 assets. The Company uses the Net Asset Value to determine the fair value of underlying investments which (a) do not have readily determinable fair value; and (b) prepare their financial statements consistent with the measurement principles of an investment company. The Funds are not exchange traded. The Funds are not subject to any redemption notice periods or restrictions and can be redeemed on a daily basis. No gates or holdbacks or dealing suspensions are being applied to the Funds. The Funds are of perpetual duration.

***

The Company currently does not have any Level 3 pension plan financial assets.

The following estimated benefit payments have been, or are expected, to be paid:

	(in thousands of dollars)
2016	$	435
2017		514
2018		532
2019		540
2020		550
2021 – 2025	$	2,958