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PENSIONS | 12 Months Ended
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Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract] |
PENSIONS |
27. | PENSIONS
Defined contribution scheme We operate a defined contribution scheme. The pension cost for the period represents contributions payable by us to the scheme. The charge to net income for the years ended December 31, 2016, 2015 and 2014 was $1.3 million, $0.2 million and $0.9 million, respectively. The total contributions to our defined contribution scheme were as follows:
(in thousands of $) | 2016 |  |  | 2015 |  |  | 2014 |
Employers' contributions | 1,324 |  |  | 1,035 |  |  | 684 |
Defined benefit schemes We have two defined benefit pension plans both of which are closed to new entrants but which still cover certain of our employees. Benefits are based on the employee's years of service and compensation. Net periodic pension plan costs are determined using the Projected Unit Credit Cost method. Our plans are funded by us in conformity with the funding requirements of the applicable government regulations. Plan assets consist of both fixed income and equity funds managed by professional fund managers. We use December 31 as a measurement date for our pension plans. The components of net periodic benefit costs are as follows:
(in thousands of $) | 2016 |  |  | 2015 |  |  | 2014 |
Service cost | 302 |  |  | 379 |  |  | 369 |
Interest cost | 2,051 |  |  | 2,042 |  |  | 2,359 |
Expected return on plan assets | (806 | ) |  | (946 | ) |  | (984 | )
Recognized actuarial loss | 1,060 |  |  | 1,195 |  |  | 998 |
Net periodic benefit cost | 2,607 |  |  | 2,670 |  |  | 2,742 |
The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic pension benefit cost during the year ended December 31, 2016 is $1.2 million. The change in benefit obligation and plan assets and reconciliation of funded status as of December 31 are as follows:
(in thousands of $) | 2016 |  |  | 2015 |
Reconciliation of benefit obligation: |  |  |
Benefit obligation at January 1 | 49,473 |  |  | 53,166 |
Service cost | 302 |  |  | 379 |
Interest cost | 2,051 |  |  | 2,042 |
Actuarial loss (gain) | 3,547 |  |  | (2,547 | )
Foreign currency exchange rate changes | (1,887 | ) |  | (509 | )
Benefit payments | (3,110 | ) |  | (3,058 | )
Benefit obligation at December 31 | 50,376 |  |  | 49,473 |
The accumulated benefit obligation at December 31, 2016 and 2015 was $49.1 million and $48.5 million, respectively.
(in thousands of $) | 2016 |  |  | 2015 |
Reconciliation of fair value of plan assets: |  |  |
Fair value of plan assets at January 1 | 13,194 |  |  | 14,496 |
Actual return on plan assets | 1,994 |  |  | (155 | )
Employer contributions | 2,342 |  |  | 2,411 |
Foreign currency exchange rate changes | (1,917 | ) |  | (500 | )
Benefit payments | (3,110 | ) |  | (3,058 | )
Fair value of plan assets at December 31 | 12,503 |  |  | 13,194 |
(in thousands of $) | 2016 |  |  | 2015 |
Projected benefit obligation | (50,376 | ) |  | (49,473 | )
Fair value of plan assets | 12,503 |  |  | 13,194 |
(Unfunded) funded status (1) | (37,873 | ) |  | (36,279 | )
Employer contributions and benefits paid under the pension plans include $2.3 million (2015: $2.4 million) paid from employer assets for the year ended December 31, 2016. (1) Our plans compose of two plans. The details of these plans are as follows:
| December 31, 2016 |  | December 31, 2015
(in thousands of $) | UK Scheme |  |  | Marine Scheme |  |  | Total |  |  | UK Scheme |  |  | Marine Scheme |  |  | Total |
Projected benefit obligation | (10,461 | ) |  | (39,915 | ) |  | (50,376 | ) |  | (10,145 | ) |  | (39,328 | ) |  | (49,473 | )
Fair value of plan assets | 10,651 |  |  | 1,852 |  |  | 12,503 |  |  | 10,277 |  |  | 2,917 |  |  | 13,194 |
Funded status at end of year | 190 |  |  | (38,063 | ) |  | (37,873 | ) |  | 132 |  |  | (36,411 | ) |  | (36,279 | )
The fair value of our plan assets, by category, as of December 31, 2016 and 2015 were as follows:
(in thousands of $) | 2016 |  |  | 2015 |
Equity securities | 8,936 |  |  | 9,620 |
Debt securities | 2,860 |  |  | 3,032 |
Cash | 707 |  |  | 542 |
| 12,503 |  |  | 13,194 |
The amounts recognized in accumulated other comprehensive income consist of:
(in thousands of $) | 2016 |  |  | 2015 |
Net actuarial loss | 12,956 |  |  | 12,400 |
The actuarial loss recognized in the other comprehensive income is net of tax of $0.0 million, $0.0 million, and $0.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. The asset allocation for our Marine scheme at December 31, 2016 and 2015, by asset category are as follows:
Marine scheme |  |  | 2016 (%) |  | 2015 (%)
Equity |  |  | 30-65 |  | 30-65
Bonds |  |  | 10-50 |  | 10-50
Other |  |  | 20-40 |  | 20-40
Total |  |  | 100 |  | 100
The asset allocation for our UK scheme at December 31, 2016 and 2015, by asset category are as follows:
UK scheme |  |  | 2016 (%) |  | 2015 (%)
Equity |  |  | 75.2 |  | 75.7
Bonds |  |  | 24.8 |  | 24.3
Total |  |  | 100 |  | 100
Our investment strategy is to balance risk and reward through the selection of professional investment managers and investing in pooled funds. We are expected to make the following contributions to the schemes during the year ended December 31, 2017, as follows:
(in thousands of $) | UK scheme |  | Marine scheme |
Employer contributions | 370 |  |  | 1,800 |
We are expected to make the following pension disbursements as follows:
(in thousands of $) | UK scheme |  |  | Marine scheme |
2017 | 284 |  |  | 3,000 |
2018 | 370 |  |  | 3,000 |
2019 | 308 |  |  | 3,000 |
2020 | 432 |  |  | 3,000 |
2021 | 493 |  |  | 3,000 |
2022 - 2026 | 2,467 |  |  | 15,000 |
The weighted average assumptions used to determine the benefit obligation for our plans for the years ended December 31 are as follows:
| 2016 |  |  | 2015 |
Discount rate | 3.87 | % |  | 4.34 | %
Rate of compensation increase | 2.38 | % |  | 2.07 | %
The weighted average assumptions used to determine the net periodic benefit cost for our plans for the years ended December 31 are as follows:
| 2016 |  |  | 2015 |
Discount rate | 4.34 | % |  | 3.95 | %
Expected return on plan assets | 6.75 | % |  | 6.75 | %
Rate of compensation increase | 2.07 | % |  | 2.21 | %
The overall expected long-term rate of return on assets assumption used to determine the net periodic benefit cost for our plans for the years ended December 31, 2016 and 2015 is based on the weighted average of various returns on assets using the asset allocation as at the beginning of 2016 and 2015. For equities and other asset classes, we have applied an equity risk premium over ten year governmental bonds.

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