17. Retirement Benefit Arrangements

For employee retirement benefits, the Company maintains certain defined contributions plans and other active and frozen defined benefit plans. The majority of the defined benefit obligation at December 31, 2014 relates to the active defined benefit plan for the Company’s Zurich office employees (the Zurich Plan).

Defined Contribution Plans

Contributions are made by the Company, and in some locations, these contributions are supplemented by the local plan participants. Contributions are based on a percentage of the participant’s base salary depending upon competitive local market practice and vesting provisions meeting legal compliance standards and market trends. The accumulated benefits for the majority of these plans vest immediately or over a four-year period. As required by law, certain retirement plans also provide for death and disability benefits and lump sum indemnities to employees upon retirement.

The Company incurred expenses for these defined contribution arrangements of $15.9 million, $14.5 million and $15.7 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Active Defined Benefit Plan

The Company maintains the Zurich Plan, which is classified as a hybrid plan and accounted for as a defined benefit plan under U.S. GAAP. At December 31, 2014 and 2013, the funded status of the Zurich Plan was as follows (in thousands of U.S. dollars):



	2014			2013
Funded status
Unfunded pension obligation at beginning of year	$	24,614		$	32,262
Change in pension obligation
Service cost	6,188			6,934
Interest cost	2,635			2,314
Plan participants’ contributions	1,838			1,938
Actuarial loss (gain)	15,796			(8,408		)
Plan amendments	2,667			—
Benefits paid	(7,392		)	(216		)
Foreign currency adjustments	(13,493		)	2,901
Settlements	—			(13,783		)
Change in pension obligation	8,239			(8,320		)
Change in fair value of plan assets
Actual return on plan assets	1,707			3,119
Employer contributions	5,492			5,922
Plan participants’ contributions	1,838			1,938
Benefits paid	(7,392		)	(216		)
Foreign currency adjustments	(10,157		)	2,348
Settlements	—			(13,783		)
Change in fair value of plan assets	(8,512		)	(672		)
Funded status
Unfunded pension obligation at end of year	$	41,365		$	24,614
Additional information:
Projected benefit obligation at end of year	$	134,629		$	126,390
Accumulated pension obligation at end of year	127,322			123,524
Fair value of plan assets at end of year	93,264			101,776

At December 31, 2014 and 2013, the funded status was included in Accounts payable, accrued expenses and other in the Consolidated Balance Sheets. The total amounts recognized in Accumulated other comprehensive loss at December 31, 2014 and 2013 were $25.4 million (net of $6.8 million of taxes) and $12.9 million (net of $3.4 million of taxes), respectively.

The net periodic benefit cost for the years ended December 31, 2014, 2013 and 2012 was $7.3 million, $10.7 million and $8.3 million, respectively.

The investment strategy of the Zurich Plan’s Pension Committee is to achieve a consistent long-term return, which will provide sufficient funding for future pension obligations while limiting risk. The expected long-term rate of return on plan assets is based on the expected asset allocation and assumptions concerning long-term interest rates, inflation rates and risk premiums for equities above the risk-free rates of return. These assumptions take into consideration historical long-term rates of return for the relevant asset categories. The investment strategy is reviewed regularly.

The fair value of the Zurich Plan’s assets at December 31, 2014 and 2013 were insured funds and cash (Level 2) of $93.3 million and $101.8 million, respectively. The insured funds comprise the accumulated pension plan contributions and investment returns thereon, which are held in an insurance arrangement that provides at least a guaranteed minimum investment return. The insured funds are held by a collective foundation of AXA Life Ltd. and are guaranteed under the insurance arrangement.

The assumptions used to determine the Zurich Plan’s pension obligation and net periodic benefit cost for the years ended December 31, 2014, 2013 and 2012 were as follows:



	2014				2013				2012
	Pension obligation		Net periodic benefit cost		Pension obligation		Net periodic benefit cost		Pension obligation		Net periodic benefit cost
Discount rate	1.25	%	2.25	%	2.25	%	1.75	%	1.75	%	2.50	%
Expected return on plan assets	—		2.25	%	—		1.75	%	—		2.50	%
Rate of compensation increase	2.25	%	2.50	%	2.50	%	2.50	%	2.50	%	3.50	%

At December 31, 2014, estimated employer contributions to be paid in 2015 related to the Zurich Plan were $5.1 million and future benefit payments were estimated to be paid as follows (in thousands of U.S. dollars):



Year	Amount
2015	$	3,959
2016	4,461
2017	4,332
2018	4,108
2019	4,086
2020 to 2024	26,983

The Company does not believe that any of the Zurich Plan’s assets will be returned to the Company during 2015.