Retirement Plan

Pension Plan

The Company has pension plans covering substantially all of its Taiwan-based employees. The pension plans are based on the Labor Standards Law, a defined benefit plan (Benefit Plan), and the Labor Pension Act, a defined contribution plan (Contribution Plan). Under the Labor Standards Law, the Benefit Plan provides for a lump sum payment upon retirement based on years of service and the employee’s compensation during the last six months of employment. In accordance with the Labor Standards Law of Taiwan, the Company makes monthly contributions equal to 2% of its wages and salaries. The fund is administered by the Employees’ Retirement Fund Committee and is registered in this committee’s name. Accordingly, the pension fund assets are not included in the financial statements of the Company.

Under the Labor Pension Act effective July 1, 2005, employees may choose the requirements under the Labor Standards Law or the new statute. For employees subject to the new statute, the Company shall contribute no less than 6% of the employees’ wages and salaries to the Contribution Plan.

Benefit Obligation and Plan Assets

As of September 30, 2013 and 2012, the Company’s Benefit Plan had projected benefit obligations in excess of plan assets. The changes in the benefit obligation and plan assets for the Benefit Plan described above were as follows:



	2013			2012
	(in thousands)
Change in projected benefit obligation:
Beginning benefit obligation	$	6,047		$	5,178
Service cost	200			195
Interest cost	119			108
Actuarial loss	90			75
Currency exchange rate changes	(66		)	205
Assumed liability in business combination	—			286
Ending projected benefit obligation	$	6,390		$	6,047



	2013			2012
	(in thousands)
Change in fair value plan assets:
Beginning fair value of plan assets	$	2,510		$	2,079
Actual return on plan assets	32			19
Employer contributions	86			70
Currency exchange rate changes	(29		)	83
Assets acquired in business combination	—			259
Ending fair value of plan assets	$	2,599		$	2,510

The following table summarizes the amounts recognized on the consolidated balance sheet as of September 30:



	2013		2012
	(in thousands)
Other long-term liabilities	$	3,790	$	3,537
Accumulated other comprehensive income (net of tax of $322 in 2013 and $204 in 2012)	2,044		2,126
Amount recognized	$	5,834	$	5,663

The following table summarizes the amounts recorded in accumulated other comprehensive income (loss) before taxes, as of September 30:



	2013			2012
	(in thousands)
Net transition asset	$	195		$	234
Net actuarial loss	(2,561		)	(2,564		)
Defined benefit plans, net	$	(2,366	)	$	(2,330	)

The following table summarizes the accumulated benefit obligation as of September 30:



	2013		2012
	(in thousands)
Accumulated benefit obligation	$	3,940	$	3,745

Weighted-average actuarial assumptions used to determine benefit obligations and plan assets for the Benefit Plan at September 30 were as follows:



	2013	2012
Discount rate	1.90-2.00%	1.90-2.00%
Expected return on plan assets	1.90-2.00%	1.90-2.00%
Rate of compensation increase	3.00-4.00%	3.00-4.00%

The assumptions used in the expected long-term rate of return on plan assets are determined by the Bureau of Labor Insurance in Taiwan.

The net periodic benefit cost for the Benefit Plan included the following components at September 30:



	2013			2012			2011
	(in thousands)
Service cost	$	200		$	195		$	165
Interest cost	119			108			83
Expected return on plan assets	(50		)	(44		)	(40		)
Amortization of deferred amount	40			36			2
Net periodic benefit cost	$	309		$	295		$	210

The balance of vested benefits was $352,000 and $45,000 as of September 30, 2013 and September 30, 2012, respectively.

Non-U.S. Plan Assets

For the Benefit Plan, the Company deposits funds into government-managed accounts, and accrues for the unfunded portion of its obligation.

Estimated Future Benefit Payments

The following table reflects the benefit payments, which include the amount that will be funded from retiree contributions that the Company expects to pay in the periods noted (in thousands):



Fiscal year ending:
2014	$	760
2015	$	49
2016	$	152
2017	$	69
2018	$	514
2019-2023	$	3,377

Estimated Future Contributions

The Company’s expected contributions to be paid to the Benefit Plan during fiscal 2014 is $43,000.

ISSI 401(k) Plan

The Company sponsors the ISSI 401(k) Plan (401(k) Plan) to provide retirement benefits to its eligible U.S. employees. As allowed under Section 401(k) of the Internal Revenue Code, the 401(k) Plan provides for tax-deferred salary contributions and after-tax contributions for eligible employees. The 401(k) Plan allows employees to contribute up to 75% of their eligible compensation to the 401(k) Plan on a pre-tax and after-tax basis, and effective November 1, 2011, the 401(k) Plan also allows employees to make Roth contributions. Employee contributions are limited to a maximum annual amount as set periodically by the Internal Revenue Code. The 401(k) Plan also allows employees who meet the age requirements and reach the 401(k) Plan contribution limits to make a catch-up contribution not to exceed the lesser of 75% of their eligible compensation or the limit set forth in the Internal Revenue Code. The catch-up contributions are not eligible for matching contributions. The 401(k) Plan allows for employer contributions and the Company has elected to make a contribution for the plan year beginning January 1, 2013 and ending December 31, 2013. The Company will match employee contributions in an amount equal to 50% of every dollar contributed by the employee up to 10% of the employees' eligible earnings. The matching contribution in a year will not exceed $6,000 for any participant. The Company contributions are subject to vesting of 25% for each year of service with the Company. The Company elected to make no matching contributions during the fiscal years ended September 30, 2012 and 2011. Administrative expenses relating to the plan are insignificant.

Deferred Compensation Plan

The Compensation Committee of the Board of Directors of the Company adopted the Non-qualified Deferred Compensation Plan (the Deferred Compensation Plan or NDCP), effective as of March 22, 2013. As required by applicable law, participation in the Deferred Compensation Plan is limited to a select group of management and highly-compensated employees of the Company and its participating subsidiaries and affiliates, which group includes the Company’s executive officers. Under the Deferred Compensation Plan, which is an unfunded and unsecured deferred compensation arrangement, a participant may elect to defer part of his or her base salary and/or commissions (if any), but not more than 50% of his or her base salary or commissions, and all or part of his or her eligible bonus (if any) or performance-based compensation (if any), in each case on a pre-tax basis. Such deferrals made by participants in the NDCP are at all times 100% vested. In addition, the Company and its participating subsidiaries and affiliates may, but are not required to, make matching or discretionary contributions to the accounts of participants in the NDCP. The matching or discretionary contributions (if any) made by the Company and/or its participating subsidiaries and affiliates may be subject to any vesting schedule determined by the Company when any such matching or discretionary contribution is made, but will vest in full upon a participant’s disability, death, separation from service due do retirement, or upon a “change in control” of the Company (as defined in the NDCP). The Company elected to make no matching or discretionary contributions during the fiscal year ended September 30, 2013.

The Company has a prior non-qualified deferred compensation plan; however, no employee contributions have been made to the prior plan since fiscal 1998.