O. Retirement Plans

ASC 715, “Compensation—Retirement Benefits” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation.

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of domestic employees and employees of certain non-U.S. subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to make contributions to these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of these plans consist primarily of fixed income and equity securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (“IRC”), as well as unfunded foreign plans.

In the six months ended July 3, 2016, Teradyne contributed $1.3 million to the U.S. supplemental executive defined benefit pension plan and $0.7 million to certain qualified plans for non-U.S. subsidiaries.

For the three and six months ended July 3, 2016 and July 5, 2015, Teradyne’s net periodic pension (income) cost was comprised of the following:


	For the Three Months Ended
	July 3, 2016						July 5, 2015
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	575		$	199		$	615		$	263
Interest cost		3,401			199			3,289			385
Expected return on plan assets		(3,472	)		(5	)		(3,634	)		(215	)
Amortization of prior service cost		24			—			34			—
Actuarial gain		(654	)		—			(3	)		—

Total net periodic pension (income) cost	$	(126	)	$	393		$	301		$	433


	For the Six Months Ended
	July 3, 2016						July 5, 2015
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	1,151		$	406		$	1,231		$	510
Interest cost		6,815			405			6,571			744
Expected return on plan assets		(6,915	)		(11	)		(7,259	)		(410	)
Amortization of prior service cost		48			—			67			—
Actuarial gain		(1,848	)		—			(3	)		—
Settlement		—			(238	)		—			—

Total net periodic pension (income) cost	$	(749	)	$	562		$	607		$	844

Postretirement Benefit Plan

In addition to receiving pension benefits, U.S. Teradyne employees who meet early retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.

For the three months and six months ended July 3, 2016 and July 5, 2015, Teradyne’s net periodic postretirement income was comprised of the following:


	For the Three Months Ended						For the Six Months Ended
	July 3, 2016			July 5, 2015			July 3, 2016			July 5, 2015
	(in thousands)
Service cost	$	9		$	12		$	19		$	24
Interest cost		53			59			109			118
Amortization of prior service income		(154	)		(150	)		(304	)		(299	)
Actuarial gain		(15	)		(19	)		(15	)		(19	)

Total net periodic post-retirement benefit	$	(107	)	$	(98	)	$	(191	)	$	(176	)