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Employee Benefit Plans
12 Months Ended
Dec. 31, 2019
Employee Benefit Plans  
Employee Benefit Plans

Note 15. Employee Benefit Plans

Defined Contribution Plans

We have a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code covering all U.S. employees and defined contribution plans for other Incyte employees in Europe and Japan. Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations. Defined contribution expense was $11.7 million, $10.5 million and $8.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.  Included in the 2019, 2018 and 2017 defined contribution expense was $1.6 million, $1.4 million and $1.0 million, respectively, of expense related to matching contributions under the non-U.S. defined contribution plans.

Defined Benefit Pension Plans

We have defined benefit pension plans for our employees in Europe which provide benefits to employees upon retirement, death or disability. The assets of the pension plans are held in collective investment accounts represented by the cash surrender value of an insurance policy and are classified as Level 2 within the fair value hierarchy.

The pension plans assumptions reflect the expected investment return and discount rate on plan assets and disability rate probabilities. The benefit obligation at December 31, 2019 for the plans was determined using a discount rate of 0.30% and rate of compensation increase of 2.25%.  The 2019 net periodic benefit cost for the plans was determined using discount rates of 0.75%, rates of compensation increase of 2.25% and long-term expected return on plan assets of 0.75%. The benefit obligation at December 31, 2018 for the plans was determined using a discount rate of 0.75%, rate of compensation increase of 2.25% and long-term expected return on plan assets of 0.75%.  The 2018 net periodic benefit

cost for the plans was determined using discount rates of 0.75% to 1.00%, rates of compensation increase of 2.00% to 2.25% and long-term expected return on plan assets of 0.75%.

Summarized information regarding changes in the obligations and plan assets, the funded status and the amounts recorded were as follows (in thousands):

    

Year Ended December 31,

    

2019

    

2018

Benefit obligation, beginning of year

 

$

46,038

 

$

37,584

 

Employer service cost

 

5,195

 

4,450

 

Interest cost

 

345

 

278

 

Plan participants' contributions

1,613

1,282

Actuarial loss

6,672

698

Transfer of benefits net of payments from fund

2,184

2,268

Expenses paid from assets

(61)

(51)

Translation loss (gain)

784

(471)

Benefit obligation, end of year

62,770

46,038

Fair value of plan assets, beginning of year

30,368

24,191

Actual return on plan assets

132

95

Employer contributions

3,910

3,133

Plan participants' contributions

1,613

1,282

Transfer of benefits net of payments from fund

2,184

1,910

Expenses paid from assets

(61)

(51)

Translation loss (gain)

516

(192)

Fair value of plan assets, end of year

38,662

30,368

Unfunded liability, end of year

$

24,108

$

15,670

The unfunded liability is reported in other liabilities on the consolidated balance sheet as of December 31, 2019 and 2018. The accumulated benefit obligation is $52.9 million and $39.8 million as of December 31, 2019 and 2018, respectively.

The net periodic benefit cost was as follows (in thousands):

Year Ended  December 31,

    

2019

2018

2017

Service cost

 

$

5,195

$

4,450

$

2,836

Interest cost

 

345

278

190

 

Expected return on plan assets

 

(241)

(195)

(138)

 

Amortization of prior service cost

 

214

179

154

 

Amortization of actuarial losses

247

265

141

Net periodic benefit cost

 

$

5,760

$

4,977

$

3,183

 

The components of net periodic benefit cost other than the service cost component are included in other income (expense), net on the consolidated statements of operations.

Other changes in the plans assets and the benefit obligation that is recognized in accumulated other comprehensive loss were as follows, net of tax (in thousands):

    

Year Ended December 31,

    

2019

    

2018

    

2017

Pension liability, beginning of year

 

$

9,146

$

8,450

$

2,750

Plan change

 

1,276

Net prior service costs

(214)

(179)

(140)

Net loss

 

6,536

875

4,564

Pension liability, end of year

$

15,468

$

9,146

$

8,450

The prior service cost for the pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $0.2 million.  The actuarial loss for the pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $0.7 million.  

We expect to contribute a total of $4.1 million to the pension plans in 2020. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

2020

$

2,082

2021

2,361

2022

2,250

2023

2,293

2024

2,323

2025-2028

14,980

Total

$

26,289