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Retirement Plans | 12 Months Ended
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Dec. 31, 2014
Retirement Plans | M. 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 as defined by ASC 715. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation at December 31. Teradyne uses a December 31 measurement date for all of its plans. 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 the 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 (the “IRC”), as well as unfunded qualified foreign plans. The December 31 balances of these defined benefit pension plans assets and obligations are shown below:
|  | 2014 |  |  | 2013 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
|  | (in thousands) |
Assets and Obligations |  |  |  |  |  |  |  |
Change in benefit obligation: |  |  |  |  |  |  |  |
Projected benefit obligation: |  |  |  |  |  |  |  |
Beginning of year |  | $ | 293,912 |  |  | $ | 52,182 |  |  | $ | 325,118 |  |  | $ | 51,380 |
Service cost |  |  | 2,218 |  |  |  | 897 |  |  |  | 2,393 |  |  |  | 1,034 |
Interest cost |  |  | 12,875 |  |  |  | 1,837 |  |  |  | 11,318 |  |  |  | 1,948 |
Actuarial loss (gain) |  |  | 72,596 |  |  |  | 8,975 |  |  |  | (31,259 | ) |  |  | (1,020 | )
Benefits paid |  |  | (13,982 | ) |  |  | (1,265 | ) |  |  | (13,658 | ) |  |  | (2,511 | )
Plan participants’ contributions |  |  | — |  |  |  | 88 |  |  |  | — |  |  |  | 95 |
Non-U.S. currency movement |  |  | — |  |  |  | (4,504 | ) |  |  | — |  |  |  | 1,256 |
End of year |  |  | 367,619 |  |  |  | 58,210 |  |  |  | 293,912 |  |  |  | 52,182 |
Change in plan assets: |  |  |  |  |  |  |  |
Fair value of plan assets: |  |  |  |  |  |  |  |
Beginning of year |  |  | 256,373 |  |  |  | 25,756 |  |  |  | 278,856 |  |  |  | 24,043 |
Company contributions |  |  | 31,753 |  |  |  | 1,168 |  |  |  | 1,738 |  |  |  | 2,522 |
Plan participants’ contributions |  |  | — |  |  |  | 88 |  |  |  | — |  |  |  | 95 |
Actual return on plan assets |  |  | 41,928 |  |  |  | 5,192 |  |  |  | (10,563 | ) |  |  | 1,190 |
Benefits paid |  |  | (13,982 | ) |  |  | (1,265 | ) |  |  | (13,658 | ) |  |  | (2,511 | )
Non-U.S. currency movement |  |  | — |  |  |  | (1,428 | ) |  |  | — |  |  |  | 417 |
End of year |  |  | 316,072 |  |  |  | 29,511 |  |  |  | 256,373 |  |  |  | 25,756 |
Funded status |  | $ | (51,547 | ) |  | $ | (28,699 | ) |  | $ | (37,539 | ) |  | $ | (26,426 | )
The following table provides amounts recorded within the account line items of the statement of financial position as of December 31:
|  | 2014 |  |  | 2013 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
|  | (in thousands) |
Retirement plans assets |  | $ | 3,090 |  |  | $ | 9,806 |  |  | $ | 4,259 |  |  | $ | 5,083 |
Accrued employees’ compensation and withholdings |  |  | (2,492 | ) |  |  | (906 | ) |  |  | (1,781 | ) |  |  | (1,143 | )
Retirement plans liabilities |  |  | (52,145 | ) |  |  | (37,599 | ) |  |  | (40,017 | ) |  |  | (30,366 | )
Funded status |  | $ | (51,547 | ) |  | $ | (28,699 | ) |  | $ | (37,539 | ) |  | $ | (26,426 | )
The following table provides amounts recognized in accumulated other comprehensive income as of December 31:
|  | 2014 |  |  | 2013 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
|  | (in thousands) |
Prior service cost, before tax |  | $ | 358 |  |  | $ | — |  |  | $ | 493 |  |  | $ | — |
Deferred taxes |  |  | 429 |  |  |  | — |  |  |  | 380 |  |  |  | — |
Total recognized in other comprehensive income, net of tax |  | $ | 787 |  |  | $ | — |  |  | $ | 873 |  |  | $ | — |
The estimated portion of prior service cost remaining in accumulated other comprehensive income that is expected to be recognized as a component of net periodic pension cost in 2015 is $0.1 million. The accumulated benefit obligation for the United States defined benefit pension plans was $357.0 million and $286.2 million at December 31, 2014 and 2013, respectively. The accumulated benefit obligation for foreign defined benefit pension plans was $49.8 million and $45.0 million at December 31, 2014 and 2013, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31:
|  | 2014 |  |  | 2013 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
|  | (in millions) |
Projected benefit obligation |  | $ | 54.6 |  |  | $ | 39.5 |  |  | $ | 41.8 |  |  | $ | 32.4 |
Accumulated benefit obligation |  |  | 48.5 |  |  |  | 32.7 |  |  |  | 37.9 |  |  |  | 27.5 |
Fair value of plan assets |  |  | — |  |  |  | 1.0 |  |  |  | — |  |  |  | 0.9 |
Expense For the years ended December 31, 2014, 2013 and 2012, Teradyne’s net periodic pension cost (income) was comprised of the following:
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
|  | (in thousands) |
Components of Net Periodic Pension Cost (Income): |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 2,218 |  |  | $ | 897 |  |  | $ | 2,393 |  |  | $ | 1,034 |  |  | $ | 2,102 |  |  | $ | 686 |
Interest cost |  |  | 12,875 |  |  |  | 1,837 |  |  |  | 11,318 |  |  |  | 1,948 |  |  |  | 13,713 |  |  |  | 1,956 |
Expected return on plan assets |  |  | (12,500 | ) |  |  | (868 | ) |  |  | (13,632 | ) |  |  | (959 | ) |  |  | (15,248 | ) |  |  | (698 | )
Amortization of prior service cost |  |  | 135 |  |  |  | — |  |  |  | 164 |  |  |  | — |  |  |  | 232 |  |  |  | — |
Net actuarial loss (gain) |  |  | 43,168 |  |  |  | 4,651 |  |  |  | (7,063 | ) |  |  | (1,252 | ) |  |  | 15,458 |  |  |  | 7,779 |
Total net periodic pension cost (income) |  | $ | 45,896 |  |  | $ | 6,517 |  |  | $ | (6,820 | ) |  | $ | 771 |  |  | $ | 16,257 |  |  | $ | 9,723 |
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Reversal of amortization items: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prior service cost |  |  | (135 | ) |  |  | — |  |  |  | (164 | ) |  |  | — |  |  |  | (232 | ) |  |  | — |
Total recognized in other comprehensive income |  |  | (135 | ) |  |  | — |  |  |  | (164 | ) |  |  | — |  |  |  | (232 | ) |  |  | — |
Total recognized in net periodic pension cost (income) and other comprehensive income |  | $ | 45,761 |  |  | $ | 6,517 |  |  | $ | (6,984 | ) |  | $ | 771 |  |  | $ | 16,025 |  |  | $ | 9,723 |
Weighted Average Assumptions to Determine Net Periodic Pension Cost at January 1:
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
Discount rate |  |  | 4.5 | % |  |  | 3.8 | % |  |  | 3.6 | % |  |  | 3.7 | % |  |  | 4.2 | % |  |  | 4.9 | %
Expected return on plan assets |  |  | 5.0 |  |  |  | 3.4 |  |  |  | 5.0 |  |  |  | 3.7 |  |  |  | 5.0 |  |  |  | 3.1 |
Salary progression rate |  |  | 3.0 |  |  |  | 3.5 |  |  |  | 3.0 |  |  |  | 3.5 |  |  |  | 3.0 |  |  |  | 3.4 |
Weighted Average Assumptions to Determine Pension Obligations at December 31:
|  | 2014 |  |  | 2013 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
Discount rate |  |  | 3.7 | % |  |  | 2.6 | % |  |  | 4.5 | % |  |  | 3.8 | %
Salary progression rate |  |  | 2.9 |  |  |  | 3.2 |  |  |  | 3.0 |  |  |  | 3.5 |
In developing the expected return on plan assets assumption, Teradyne evaluates input from its investment manager and pension consultants, including their review of asset class return expectations. Based on this review, Teradyne believes that 5.0% was an appropriate rate to use for fiscal 2014 for the U.S. Qualified Pension Plan (“U.S. Plan”). Effective January 1, 2012, Teradyne elected to immediately recognize net actuarial gains and losses and the change in the fair value of the plan assets in its operating results in the year in which they occur or upon any interim remeasurement of the plans. In addition, Teradyne used to calculate the expected return on plan assets using a calculated market-related value of plan assets. Effective January 1, 2012, Teradyne elected to calculate the expected return on plan assets using the fair value of the plan assets. The discount rate utilized to determine future pension obligations for the U.S. Plan is based on Citigroup Pension Index adjusted for the plan’s expected cash flows and was 3.7% at December 31, 2014, down from 4.5% at December 31, 2013. Plan Assets As of December 31, 2014, the fair value of Teradyne’s pension plans’ assets totaled $345.6 million of which $316.1 million was related to the U.S. Plan, $28.5 million was related to the U.K. defined benefit pension plan, and $1.0 million was related to the Taiwan defined benefit pension plan. Substantially all Teradyne’s pension plans’ assets are held in individual trusts, which were established for the investment of assets of Teradyne’s sponsored retirement plans. Teradyne’s weighted average pension asset allocation at December 31, 2014 and 2013, by asset category is as follows:
|  | 2014 |  |  | 2013 |
|  | United States |  |  | Foreign |  |  | United States |  |  | Foreign |
Fixed Income Securities |  |  | 83.3 | % |  |  | 78.2 | % |  |  | 86.7 | % |  |  | 77.1 | %
Equity Securities |  |  | 15.4 |  |  |  | 20.7 |  |  |  | 12.1 |  |  |  | 21.6 |
Other |  |  | 1.3 |  |  |  | 1.1 |  |  |  | 1.2 |  |  |  | 1.3 |
|  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | %
The assets of the U.S. Plan are overseen by the Teradyne Fiduciary Committee which is comprised of members of senior management drawn from appropriate diversified levels of the management team. The Fiduciary Committee is responsible for setting the policy that provides the framework for management of the U.S. Plan assets. In accordance with its responsibilities, the Fiduciary Committee meets on a regular basis to review the performance of the U.S. Plan assets and compliance with the investment policy. The policy sets forth an investment structure for managing U.S. Plan assets, including setting the asset allocation ranges, which are expected to provide an appropriate level of overall diversification required to maximize the long-term return on plan assets for a prudent and reasonable level of risk given prevailing market conditions, total investment return over the long term, and preservation of capital, while maintaining sufficient liquidity to pay the benefits of the U.S. Plan. The investment portfolio will not, at any time, have a direct investment in Teradyne stock. It may have indirect investment in Teradyne stock, if one of the funds selected by the investment manager invests in Teradyne stock. In developing the asset allocation ranges, third party asset allocation studies are periodically performed that consider the current and expected positions of the plan assets and funded status. Based on this study and other appropriate information, the Fiduciary Committee establishes asset allocation ranges taking into account acceptable risk targets and associated returns. The investment return objectives are to avoid excessive volatility and produce a rate of return that at least matches the Policy Index identified below. The manager’s investment performance is reviewed at least annually. Results for the total portfolio and for each major category of assets are evaluated in comparison with appropriate market indices and the Policy Index. The target asset allocation and the index for each asset category for the U.S. Plan, per the investment policy, are as follows:
Asset Category: |  | Policy Index: |  | Target Allocation |
Passive and Active Fixed Income |  | Barclays U.S. Long Government/Credit Bond Index |  |  | 85 | %
Equity (Large cap) |  | S&P 500 Stock Index |  |  | 10 |
International Equity |  | MSCI EAFE Index |  |  | 5 |
Teradyne’s U.S. Plan invests primarily in common trust funds and fixed income securities. Units held in the common trust funds are valued at the unit price as reported by the investment managers based on the asset value of the underlying investments; underlying investments in equity securities are valued at the last reported sales price, and underlying investments in fixed-income securities are generally valued using methods based upon market transactions for comparable securities. The assets of Teradyne’s foreign pension plans are invested in funds which seek to combine long-term growth potential offered through equity exposure with the relative security provided by bonds, and are governed locally by local management in accordance with specific jurisdictional requirements. Investments in the non-U.S. plans consist primarily of fixed-income and equity securities. The target asset allocation for the U.K. defined benefit pension plan, per the investment policy, is 80% fixed-income securities and 20% equity securities. During the years ended December 31, 2014 and 2013, there were no transfers of pension assets in or out of Level 1, Level 2 or Level 3. The fair value of pension plan assets by asset category and by level at December 31, 2014 and December 31, 2013 were as follows:
|  | December 31, 2014 |
|  | United States |  |  | Foreign |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
|  | (in thousands) |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate debt securities |  | $ | — |  |  | $ | 193,741 |  |  | $ | — |  |  | $ | 193,741 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
U.S. government securities |  |  | — |  |  |  | 65,830 |  |  |  | — |  |  |  | 65,830 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
U.K. government securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,811 |  |  |  | — |  |  |  | 22,811 |
Asset backed securities |  |  | — |  |  |  | 3,747 |  |  |  | — |  |  |  | 3,747 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
U.S. equity (large cap) |  |  | — |  |  |  | 33,970 |  |  |  | — |  |  |  | 33,970 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
International equity |  |  | — |  |  |  | 14,631 |  |  |  | — |  |  |  | 14,631 |  |  |  | — |  |  |  | 5,610 |  |  |  | — |  |  |  | 5,610 |
Guarantee annuity contract |  |  | — |  |  |  | 2,990 |  |  |  | — |  |  |  | 2,990 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other |  |  | — |  |  |  | 65 |  |  |  | — |  |  |  | 65 |  |  |  | — |  |  |  | 957 |  |  |  | — |  |  |  | 957 |
Cash and cash equivalents |  |  | 1,098 |  |  |  | — |  |  |  | — |  |  |  | 1,098 |  |  |  | 133 |  |  |  | — |  |  |  | — |  |  |  | 133 |
Total |  | $ | 1,098 |  |  | $ | 314,974 |  |  | $ | — |  |  | $ | 316,072 |  |  | $ | 133 |  |  | $ | 29,378 |  |  | $ | — |  |  | $ | 29,511 |
|  | December 31, 2013 |
|  | United States |  |  | Foreign |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
|  | (in thousands) |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate debt securities |  | $ | — |  |  | $ | 156,860 |  |  | $ | — |  |  | $ | 156,860 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
U.S. government securities |  |  | — |  |  |  | 62,555 |  |  |  | — |  |  |  | 62,555 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
U.K. government securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 19,610 |  |  |  | — |  |  |  | 19,610 |
Asset backed securities |  |  | — |  |  |  | 2,919 |  |  |  | — |  |  |  | 2,919 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
U.S. equity (large cap) |  |  | — |  |  |  | 21,309 |  |  |  | — |  |  |  | 21,309 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
International equity |  |  | — |  |  |  | 9,599 |  |  |  | — |  |  |  | 9,599 |  |  |  | — |  |  |  | 5,204 |  |  |  | — |  |  |  | 5,204 |
Guarantee annuity contract |  |  | — |  |  |  | 2,985 |  |  |  | — |  |  |  | 2,985 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 906 |  |  |  | — |  |  |  | 906 |
Cash and cash equivalents |  |  | 146 |  |  |  | — |  |  |  | — |  |  |  | 146 |  |  |  | — |  |  |  | 36 |  |  |  | — |  |  |  | 36 |
Total |  | $ | 146 |  |  | $ | 256,227 |  |  | $ | — |  |  | $ | 256,373 |  |  | $ | — |  |  | $ | 25,756 |  |  | $ | — |  |  | $ | 25,756 |
Contributions Teradyne’s funding policy is to make contributions to the plans in accordance with local laws and to the extent that such contributions are tax deductible. During 2014, Teradyne contributed $30.0 million to the U.S Plan, $1.8 million to the U.S. supplemental executive defined benefit pension plan and $1.2 million to certain qualified plans for non-U.S. subsidiaries. During 2013, Teradyne contributed $1.7 million to the U.S. supplemental executive defined benefit pension plan and $2.5 million to certain qualified plans for non-U.S. subsidiaries. Expected Future Pension Benefit Payments Future benefit payments are expected to be paid as follows:
|  | United States |  |  | Foreign |
|  | (in thousands) |
2015 |  | $ | 24,407 |  |  | $ | 1,018 |
2016 |  |  | 23,399 |  |  |  | 862 |
2017 |  |  | 23,129 |  |  |  | 1,069 |
2018 |  |  | 22,455 |  |  |  | 1,076 |
2019 |  |  | 21,826 |  |  |  | 1,230 |
2020-2024 |  |  | 112,546 |  |  |  | 9,349 |
Postretirement Benefit Plans 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 death, 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. The December 31 balances of the postretirement assets and obligations are shown below:
|  | 2014 |  |  | 2013 |
|  | (in thousands) |
Assets and Obligations |  |  |  |  |  |  |  |
Change in benefit obligation: |  |  |  |  |  |  |  |
Projected benefit obligation: |  |  |  |  |  |  |  |
Beginning of year |  | $ | 9,019 |  |  | $ | 11,907 |
Service cost |  |  | 59 |  |  |  | 75 |
Interest cost |  |  | 335 |  |  |  | 342 |
Actuarial (gain) loss |  |  | (1,255 | ) |  |  | (2,025 | )
Benefits paid |  |  | (996 | ) |  |  | (1,280 | )
End of year |  |  | 7,162 |  |  |  | 9,019 |
Change in plan assets: |  |  |  |  |  |  |  |
Fair value of plan assets: |  |  |  |  |  |  |  |
Beginning of year |  |  | — |  |  |  | — |
Company contributions |  |  | 996 |  |  |  | 1,280 |
Benefits paid |  |  | (996 | ) |  |  | (1,280 | )
End of year |  |  | — |  |  |  | — |
Funded status |  | $ | (7,162 | ) |  | $ | (9,019 | )
The following table provides amounts recorded within the account line items of financial position as of December 31:
|  | 2014 |  |  | 2013 |
|  | (in thousands) |
Accrued employees’ compensation and withholdings |  | $ | (780 | ) |  | $ | (1,042 | )
Retirement plans liability |  |  | (6,382 | ) |  |  | (7,977 | )
Funded status |  | $ | (7,162 | ) |  | $ | (9,019 | )
The following table provides amounts recognized in accumulated other comprehensive income as of December 31:
|  | 2014 |  |  | 2013 |
|  | (in thousands) |
Prior service credit, before tax |  | $ | (2,230 | ) |  | $ | (2,829 | )
Deferred taxes |  |  | (882 | ) |  |  | (664 | )
Total recognized in other comprehensive income, net of tax |  | $ | (3,112 | ) |  | $ | (3,493 | )
The estimated portion of prior service credit remaining in accumulated other comprehensive income that is expected to be recognized as a component of net periodic postretirement benefit (income) expense in 2015 is $(0.6) million. Expense For the years ended December 31, 2014, 2013 and 2012, Teradyne’s net periodic postretirement benefit income was comprised of the following:
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (in thousands) |
Components of Net Periodic Postretirement Benefit Income: |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 59 |  |  | $ | 75 |  |  | $ | 67 |
Interest cost |  |  | 335 |  |  |  | 342 |  |  |  | 437 |
Amortization of prior service cost |  |  | (598 | ) |  |  | (598 | ) |  |  | (599 | )
Net actuarial (gain) loss |  |  | (1,255 | ) |  |  | (2,025 | ) |  |  | 83 |
Total net periodic postretirement benefit income |  |  | (1,459 | ) |  |  | (2,206 | ) |  |  | (12 | )
Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: |  |  |  |  |  |  |  |  |  |  |  |
Reversal of amortization items: |  |  |  |  |  |  |  |  |  |  |  |
Prior service credit |  |  | 598 |  |  |  | 598 |  |  |  | 599 |
Total recognized in other comprehensive income |  |  | 598 |  |  |  | 598 |  |  |  | 599 |
Total recognized in net periodic postretirement benefit income and other comprehensive income |  | $ | (861 | ) |  | $ | (1,608 | ) |  | $ | 587 |
Weighted Average Assumptions to Determine Net Periodic Postretirement Benefit Income as of January 1:
|  | 2014 |  |  | 2013 |  |  | 2012 |
Discount rate |  |  | 4.1 | % |  |  | 3.1 | % |  |  | 3.7 | %
Initial Health Care Cost Trend Rate |  |  | 8.0 |  |  |  | 8.5 |  |  |  | 9.0 |
Ultimate Health Care Cost Trend Rate |  |  | 5.0 |  |  |  | 5.0 |  |  |  | 5.0 |
Year in which Ultimate Health Care Cost Trend Rate is reached |  |  | 2020 |  |  |  | 2020 |  |  |  | 2020 |
Weighted Average Assumptions to Determine Postretirement Benefit Obligation as of December 31:
|  | 2014 |  |  | 2013 |  |  | 2012 |
Discount rate |  |  | 3.5 | % |  |  | 4.1 | % |  |  | 3.1 | %
Initial Medical Trend |  |  | 7.5 |  |  |  | 8.0 |  |  |  | 8.5 |
Ultimate Health Care Trend |  |  | 5.0 |  |  |  | 5.0 |  |  |  | 5.0 |
Medical cost trend rate decrease to ultimate rate in year |  |  | 2022 |  |  |  | 2020 |  |  |  | 2020 |
Assumed health care trend rates could have a significant effect on the amounts reported for health care plans. A one percentage point change in the assumed health care cost trend rates for the year ended December 31, 2014, would have the following effects:
|  | 1 Percentage Point Increase |  |  | 1 Percentage Point Decrease |
|  | (in thousands) |
Effect on total service and interest cost components |  | $ | 6 |  |  | $ | (6 | )
Effect on postretirement benefit obligations |  |  | 87 |  |  |  | (83 | )
Expected Future Benefit Payments Future benefit payments are expected to be paid as follows:
|  | Benefits Payments |
|  | (in thousands) |
2015 |  | $ | 780 |
2016 |  |  | 738 |
2017 |  |  | 657 |
2018 |  |  | 599 |
2019 |  |  | 535 |
2020-2024 |  |  | 2,045 |

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