P. RETIREMENT PLANS

ASC 715, “Compensation—Retirement Benefits” requires an employer with a defined benefit plan or other postretirement benefit plan to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plan. 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 the U.S. qualified pension plan consist primarily of fixed income and equity securities. In addition, Teradyne has unfunded qualified foreign plans as well as 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”).

During the three months ended July 1, 2018, Teradyne purchased a group annuity contract for its retiree participants in the U.S. qualified pension plan. Under the group annuity, the accrued pension obligations for approximately 1,700 retiree participants were transferred to an insurance company. The reduction in the pension benefit obligation and pension assets was $150.9 million. During the three and six months ended July 1, 2018, Teradyne recorded a settlement loss of $0.1 million related to the retiree group annuity transaction.

In the six months ended July 1, 2018, Teradyne contributed $1.3 million to the U.S. supplemental executive defined benefit pension plan and $0.4 million to certain qualified pension plans for non-U.S. subsidiaries.

For the three and six months ended July 1, 2018 and July 2, 2017, Teradyne’s net periodic pension cost was comprised of the following:


	For the Three Months Ended
	July 1, 2018						July 2, 2017
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	545		$	200		$	560		$	206
Interest cost		2,430			175			3,264			179
Expected return on plan assets		(2,550	)		(5	)		(3,004	)		(6	)
Amortization of prior service cost		14			—			18			243
Net actuarial gain		(189	)		—			(2,732	)		—
Settlement loss		78			—			—			—

Total net periodic pension cost (benefit)	$	328		$	370		$	(1,894	)	$	622


	For the Six Months Ended
	July 1, 2018						July 2, 2017
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	1,116		$	426		$	1,120		$	392
Interest cost		5,427			372			6,576			342
Expected return on plan assets		(5,919	)		(10	)		(6,004	)		(12	)
Amortization of prior service cost		29			—			35			—
Net actuarial gain		(189	)		—			(2,732	)		243
Settlement loss		78			—			—			—

Total net periodic pension cost (benefit)	$	542		$	788		$	(1,005	)	$	965

Postretirement Benefit Plan

In addition to receiving pension benefits, Teradyne employees in the United States 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 and six months ended July 1, 2018 and July 2, 2017, Teradyne’s net periodic postretirement benefit cost (income) was comprised of the following:


	For the Three Months Ended						For the Six Months Ended
	July 1, 2018			July 2, 2017			July 1, 2018			July 2, 2017
	(in thousands)
Service cost	$	10		$	7		$	19		$	17
Interest cost		48			50			98			100
Amortization of prior service credit		(93	)		(124	)		(187	)		(248	)
Net actuarial loss (gain)		40			(15	)		40			(15	)
Special termination benefits		1,192			—			2,818			—

Total net periodic postretirement benefit cost (income)	$	1,197		$	(82	)	$	2,788		$	(146	)