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 nine months ended September 30, 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 $151.3 million. During the three and nine months ended September 30, 2018, Teradyne recorded a settlement loss of $0.3 million related to the retiree group annuity transaction.

In the nine months ended September 30, 2018, Teradyne contributed $1.9 million to the U.S. supplemental executive defined benefit pension plan and $0.6 million to certain qualified pension plans for non-U.S. subsidiaries.

For the three and nine months ended September 30, 2018 and October 1, 2017, Teradyne’s net periodic pension cost was comprised of the following:


	For the Three Months Ended
	September 30, 2018						October 1, 2017
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	538		$	203		$	560		$	215
Interest cost		1,750			177			3,288			186
Expected return on plan assets		(1,551	)		(5	)		(3,002	)		(6	)
Amortization of prior service cost		14			—			18			—
Settlement loss		267			—			—			—

Total net periodic pension cost	$	1,018		$	375		$	864		$	395


	For the Nine Months Ended
	September 30, 2018						October 1, 2017
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	1,657		$	609		$	1,679		$	606
Interest cost		7,188			532			9,863			527
Expected return on plan assets		(7,484	)		(15	)		(9,006	)		(19	)
Amortization of prior service cost		43			—			53			—
Net actuarial gain		(189	)		—			(2,732	)		243
Settlement loss		345			—			—			—

Total net periodic pension cost (benefit)	$	1,560		$	1,126		$	(143	)	$	1,357

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 nine months ended September 30, 2018 and October 1, 2017, Teradyne’s net periodic postretirement benefit cost (income) was comprised of the following:


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2018			October 1, 2017			September 30, 2018			October 1, 2017
	(in thousands)
Service cost	$	10		$	8		$	29		$	25
Interest cost		49			50			147			151
Amortization of prior service credit		(93	)		(124	)		(280	)		(372	)
Net actuarial loss (gain)		—			—			40			(15	)
Special termination benefits		601			—			3,419			—

Total net periodic postretirement benefit cost (income)	$	567		$	(66	)	$	3,355		$	(211	)