12. Postretirement Benefits

Defined Benefit Pension Plans

The Company has two active defined benefit pension plans (collectively, the “Plans”). The Plans cover substantially all of the Company’s employees in Switzerland and Taiwan. Retirement benefits are generally earned based on years of service and the level of compensation during active employment, but the level of benefits varies within the Plans. Eligibility is determined in accordance with local statutory requirements.

The Company uses September 30th as a measurement date to determine net periodic benefit costs, benefit obligations and the value of plan assets for all plans. The following tables set forth the funded status and amounts recognized in the Company’s Consolidated Balance Sheets as of September 30, 2017 and 2016 (in thousands):


	September 30,
	2017		2016
Benefit obligation at beginning of fiscal year	$	6,847	$	7,661
Service cost		270		548
Interest cost		27		71
Actuarial loss		(617)		106
Benefits paid		—		(712)
Employee contributions		—		156
Settlements paid		(2,526)		—
Curtailment gain		—		(1,064)
Foreign currency translation		(29)		81
Benefit obligation at end of fiscal year	$	3,972	$	6,847
Fair value of assets at beginning of fiscal year	$	4,734	$	4,838
Actual return on plan assets		57		30
Disbursements		(51)		(837)
Employer contributions		153		296
Employee contributions		101		352
Settlements paid		(2,526)		—
Foreign currency translation		(32)		55
Fair value of assets at end of fiscal year	$	2,436	$	4,734
Accrued benefit obligation	$	1,536	$	2,113

The accumulated benefit obligation of the Plans is $3.4 million and $6.3 million, respectively, at September 30, 2017 and 2016. Both Plans have an accumulated benefit obligation and projected benefit obligation in excess of plans’ assets at September 30, 2017 and 2016.

The following table provides pension-related amounts and their classification within the accompanying Consolidated Balance Sheets as of September 30, 2017 and 2016 (in thousands):


	September 30,
	2017		2016
Accrued compensation and benefits	$	112	$	155
Long-term pension liability		1,424		1,958
	$	1,536	$	2,113

Accumulated other comprehensive income at September 30, 2017 and 2016 includes unrecognized net actuarial gains (losses) of $0.4 million and ($0.3) million, respectively, and cumulative unrecognized investment losses of less than $0.1 million and ($0.9) million, respectively, during fiscal years 2017 and 2016. Unrecognized net actuarial gains (losses) and cumulative unrecognized investment losses within accumulated other comprehensive income were offset by a settlement gain of $0.3 million and a curtailment gain of $0.9 million at September 30, 2017 and 2016 which reduced accumulated other comprehensive income during fiscal years ended September 30, 2017 and 2016.

The components of the Company’s net pension cost for the fiscal years ended September 30, 2017, 2016 and 2015 are as follows (in thousands):


	Year Ended September 30,
	2017		2016		2015
Service cost	$	270	$	548	$	482
Interest cost		27		71		124
Amortization of losses		11		(159)		(210)
Expected return on plan assets		(134)		2		2
Net periodic pension cost	$	174	$	462	$	398
Curtailment gain		—		(227)		—
Settlement (gain) loss		(259)		—		232
Total pension cost (gain)	$	(85)	$	235	$	630

The following changes in Plans’ assets and benefit obligations were recognized in other comprehensive income (loss) as of September 30, 2017 and 2016 (in thousands):


	September 30,
	2017		2016
Net (gain) loss	$	(588)	$	165
Amortization of net loss		(11)		(2)
Curtailment gain		—		(852)
Settlement gain		259		—
Total recognized in other comprehensive income (loss)		(340)		(689)
Total recognized in net periodic pension cost and other comprehensive income (loss)	$	514	$	(227)

The settlement gain of $0.3 million realized during fiscal year ended September 30, 2017 was recorded as a reduction of accumulated other comprehensive income (loss) and the pension cost during the period then ended. The curtailment gain of $0.2 million and the settlement loss of $(0.2) million incurred during fiscal years ended September 30, 2016 and 2015 were reclassified from accumulated other comprehensive income (loss) into the results of operations during each fiscal year. Additionally, a curtailment gain of $1.1 million was recognized as a reclassification from accumulated other comprehensive income and a corresponding reduction in pension liabilities during fiscal year ended September 30, 2016. Please refer to Note 13, "Stockholders’ Equity", for further information on these reclassifications and their impact on the accumulated other comprehensive income and other comprehensive income during each fiscal year.

Weighted-average assumptions used to determine the projected benefit obligation for the fiscal years ended September 30, 2017, 2016 and 2015 are as follows:


	Year Ended September 30,
	2017		2016		2015
Discount rate	0.88	%	0.40	%	0.92	%
Expected return on plan assets	1.75	%	1.75	%	1.78	%
Expected rate of compensation increases	1.54	%	1.31	%	1.65	%

In selecting the appropriate discount rates for the Plans, the Company uses country-specific information, adjusted to reflect the duration of the particular plan. The expected return on plan assets is based on an evaluation of fixed income yield curves and equity return assumption studies applied to the Plans’ asset allocations.

The Company bases its determination of pension expense on a market-related valuation of assets, which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses represent the difference between the expected return calculated using the market-related value of assets and the actual return on assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recognized. At September 30, 2017, the Company had cumulative unrecognized investment losses of less than $0.1 million under the Plans which remain to be recognized in the calculation of the market-related values of assets. At September 30, 2017, the Company had cumulative unrecognized net actuarial gains of $0.4 million which are amortized into net periodic benefit cost over the average remaining service period of active Plans’ participants.

Plan Assets

The fair value of plan assets for the Switzerland Plan and Taiwan Plan were $1.9 million and $0.6 million, respectively, at September 30, 2017. The assets of the Switzerland Plan are invested in a collective fund with multiple employers through a Swiss insurance company, which is a customary practice for Swiss pension plans. The Company does not have any rights or an investment authority over the Plan’s assets which are invested primarily in highly rated debt securities.

The assets of the Taiwan Plan are invested with a trustee selected by the Taiwan government, and the Company has no investment authority over the Plan’s assets.

The allocation of the Plans’ assets at September 30, 2017 is as follows:


	September 30,
	2017
Cash and cash equivalents	6	%
Debt securities	62
Equity securities	13
Other	19
	100	%

The fair values of pension assets by asset category and by level at September 30, 2017 are as follows (in thousands):


	As of September 30, 2017
	Level 1		Level 2		Level 3		Total
Swiss Life collective foundation	$	—	$	1,886	$	—	$	1,886
Taiwan collective trust		—		550		—		550
Total	$	—	$	2,436	$	—	$	2,436

The fair values of pension assets by asset category and by level at September 30, 2016 are as follows (in thousands):


	As of September 30, 2016
	Level 1		Level 2		Level 3		Total
Swiss Life collective foundation	$	—	$	4,208	$	—	$	4,208
Taiwan collective trust		—		526		—		526
Total	$	—	$	4,734	$	—	$	4,734

Please refer to Note 19, "Fair Value Measurements" for a description of the levels of inputs used to determine fair value measurements.

Benefit payments expected to be paid over the next five fiscal years and thereafter are as follows (in thousands):


2018	$	51
2019		52
2020		53
2021		68
2022		78
Thereafter (through 2026)		295

The Company expects to contribute $0.1 million to the Plans in fiscal year 2018 to meet the minimum funding requirements of the Plans.

Defined Contribution Plans

The Company sponsors a defined contribution plan that meets the requirements of Section 401(k) of the Internal Revenue Code. All United States employees who meet minimum age and service requirements are eligible to participate in the plans. The plans allow employees to invest, on a pre-tax basis, a percentage of their annual salary and bonus subject to statutory limitations. The Company matches a portion of their contributions on a pre-tax basis up to a maximum amount of 4.5% of deferred pay. The expense recognized for the defined contribution plans was $3.6 million, $3.6 million and $3.0 million, respectively, for the fiscal years ended September 30, 2017, 2016 and 2015.