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Pension Plans | 12 Months Ended
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Sep. 30, 2016
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] |
Pension Plans | Pension Plans We maintain several international defined benefit pension plans primarily covering certain employees of Computervision, which we acquired in 1998, CoCreate, which we acquired in 2008 and covering employees in Japan. Benefits are based upon length of service and average compensation with vesting after one to five years of service. The pension cost was actuarially computed using assumptions applicable to each subsidiary plan and economic environment. We adjust our pension liability related to our plans due to changes in actuarial assumptions and performance of plan investments, as shown below. Effective in 1998, benefits under one of the international plans were frozen indefinitely. We maintained a U.S. defined benefit pension plan (the Plan) that covered certain persons who were employees of Computervision Corporation (acquired by us in 1998). Benefits under the Plan were frozen in 1990. In the second quarter of 2014, we began the process of terminating the Plan, which included settling Plan liabilities by offering lump sum distributions to plan participants and purchasing annuity contracts to cover vested benefits. We completed the termination in the fourth quarter of 2015. In connection with the termination, we contributed $25.5 million to the Plan and recorded a settlement loss of $66.3 million. The following table presents the actuarial assumptions used in accounting for the pension plans:
| U.S. Plan |  | International Plans
| 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
Weighted average assumptions used to determine benefit obligations at September 30 measurement date: |  |  |  |  |  |  |  |  |  |  |
Discount rate | — | % |  | — | % |  | 3.80 | % |  | 1.3 | % |  | 2.2 | % |  | 2.4 | %
Rate of increase in future compensation | — | % |  | — | % |  | — | % |  | 2.8 | % |  | 3.0 | % |  | 3.0 | %
Weighted average assumptions used to determine net periodic pension cost for fiscal years ended September 30: |  |  |  |  |  |  |  |  |  |  |
Discount rate | — | % |  | 3.80 | % |  | 4.90 | % |  | 2.2 | % |  | 2.4 | % |  | 3.3 | %
Rate of increase in future compensation | — | % |  | — | % |  | — | % |  | 3.0 | % |  | 3.0 | % |  | 3.0 | %
Rate of return on plan assets | — | % |  | 1.35 | % |  | 7.25 | % |  | 5.7 | % |  | 5.8 | % |  | 5.7 | %
In selecting the expected long-term rate of return on assets, we considered the current investment portfolio and the investment return goals in the plans’ investment policy statements. We, with input from the plans’ professional investment managers and actuaries, also considered the average rate of earnings expected on the funds invested or to be invested to provide plan benefits. This process included determining expected returns for the various asset classes that comprise the plans’ target asset allocation. This basis for selecting the long-term asset return assumptions is consistent with the prior year. Using generally accepted diversification techniques, the plans’ assets, in aggregate and at the individual portfolio level, are invested so that the total portfolio risk exposure and risk-adjusted returns best meet the plans’ long-term liabilities to employees. Plan asset allocations are reviewed periodically and rebalanced to achieve target allocation among the asset categories when necessary. As of September 30, 2016, for the international plans, the weighted long-term rate of return assumption is 5.44%. These rates of return, together with the assumptions used to determine the benefit obligations as of September 30, 2016 in the table above, will be used to determine our 2017 net periodic pension cost, which we expect to be approximately $2.7 million. The actuarially computed components of net periodic pension cost recognized in our Consolidated Statements of Operations for each year are shown below:
| U.S. Plan |  | International Plans
| 2016 |  | 2015 |  | 2014 |  | 2016 |  | 2015 |  | 2014
| (in thousands)
Interest cost of projected benefit obligation | $ | — |  |  | $ | 4,591 |  |  | $ | 5,461 |  |  | $ | 1,374 |  |  | $ | 1,828 |  |  | $ | 2,442 |
Service cost | — |  |  | — |  |  | — |  |  | 1,599 |  |  | 1,466 |  |  | 1,659 |
Expected return on plan assets | — |  |  | (1,364 | ) |  | (7,151 | ) |  | (3,305 | ) |  | (3,364 | ) |  | (2,506 | )
Amortization of prior service cost | — |  |  | — |  |  | — |  |  | (5 | ) |  | (4 | ) |  | (5 | )
Recognized actuarial loss | — |  |  | 2,577 |  |  | 2,213 |  |  | 2,292 |  |  | 1,815 |  |  | 1,181 |
Settlement loss | — |  |  | 66,332 |  |  | — |  |  | — |  |  | — |  |  | — |
Net periodic pension cost | $ | — |  |  | $ | 72,136 |  |  | $ | 523 |  |  | $ | 1,955 |  |  | $ | 1,741 |  |  | $ | 2,771 |
The following tables display the change in benefit obligation and the change in the plan assets and funded status of the plans as well as the amounts recognized in our Consolidated Balance Sheets:
| U.S. Plan |  | International Plans |  | Total
| Year ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015
| (in thousands)
Change in benefit obligation: |  |  |  |  |  |  |  |  |  |  |
Projected benefit obligation—beginning of year | $ | — |  |  | $ | 134,453 |  |  | $ | 78,188 |  |  | $ | 84,106 |  |  | $ | 78,188 |  |  | $ | 218,559 |
Service cost | — |  |  | — |  |  | 1,599 |  |  | 1,466 |  |  | 1,599 |  |  | 1,466 |
Interest cost | — |  |  | 4,591 |  |  | 1,374 |  |  | 1,828 |  |  | 1,374 |  |  | 6,419 |
Actuarial loss | — |  |  | 1,606 |  |  | 10,556 |  |  | 1,988 |  |  | 10,556 |  |  | 3,594 |
Foreign exchange impact | — |  |  | — |  |  | 2,431 |  |  | (9,515 | ) |  | 2,431 |  |  | (9,515 | )
Participant contributions | — |  |  | — |  |  | 147 |  |  | 198 |  |  | 147 |  |  | 198 |
Benefits paid | — |  |  | (5,300 | ) |  | (1,600 | ) |  | (1,883 | ) |  | (1,600 | ) |  | (7,183 | )
Settlements | — |  |  | (135,350 | ) |  | — |  |  | — |  |  | — |  |  | (135,350 | )
Projected benefit obligation—end of year | $ | — |  |  | $ | — |  |  | $ | 92,695 |  |  | $ | 78,188 |  |  | $ | 92,695 |  |  | $ | 78,188 |
Change in plan assets and funded status: |  |  |  |  |  |  |  |  |  |  |
Plan assets at fair value—beginning of year | $ | — |  |  | $ | 112,859 |  |  | $ | 57,961 |  |  | $ | 44,491 |  |  | $ | 57,961 |  |  | $ | 157,350 |
Actual return on plan assets | — |  |  | 2,316 |  |  | 1,742 |  |  | (438 | ) |  | 1,742 |  |  | 1,878 |
Employer contributions | — |  |  | 25,475 |  |  | 1,978 |  |  | 21,225 |  |  | 1,978 |  |  | 46,700 |
Participant contributions | — |  |  | — |  |  | 147 |  |  | 198 |  |  | 147 |  |  | 198 |
Foreign exchange impact | — |  |  | — |  |  | 1,707 |  |  | (5,632 | ) |  | 1,707 |  |  | (5,632 | )
Settlements | — |  |  | (135,350 | ) |  | — |  |  | — |  |  | — |  |  | (135,350 | )
Benefits paid | — |  |  | (5,300 | ) |  | (1,600 | ) |  | (1,883 | ) |  | (1,600 | ) |  | (7,183 | )
Plan assets at fair value—end of year | — |  |  | — |  |  | 61,935 |  |  | 57,961 |  |  | 61,935 |  |  | 57,961 |
Projected benefit obligation—end of year | — |  |  | — |  |  | 92,695 |  |  | 78,188 |  |  | 92,695 |  |  | 78,188 |
Underfunded status | $ | — |  |  | $ | — |  |  | $ | (30,760 | ) |  | $ | (20,227 | ) |  | $ | (30,760 | ) |  | $ | (20,227 | )
Accumulated benefit obligation—end of year | $ | — |  |  | $ | — |  |  | $ | 88,768 |  |  | $ | 74,928 |  |  | $ | 88,768 |  |  | $ | 74,928 |
Amounts recognized in the balance sheet: |  |  |  |  |  |  |  |  |  |  |
Non-current liability | $ | — |  |  | $ | — |  |  | $ | (30,760 | ) |  | $ | (20,227 | ) |  | $ | (30,760 | ) |  | $ | (20,227 | )
Current liability | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Amounts in accumulated other comprehensive loss: |  |  |  |  |  |  |  |  |  |  |
Unrecognized actuarial loss | $ | — |  |  | $ | — |  |  | $ | 38,667 |  |  | $ | 28,339 |  |  | $ | 38,667 |  |  | $ | 28,339 |
We expect to recognize approximately $3.4 million of the unrecognized actuarial loss as of September 30, 2016 as a component of net periodic pension cost in 2017. The following table shows change in accumulated other comprehensive loss:
| U.S. Plan |  | International Plans |  | Total
| Year ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015
| (in thousands)
Accumulated other comprehensive loss- beginning of year | $ | — |  |  | $ | 68,256 |  |  | $ | 28,339 |  |  | $ | 27,669 |  |  | $ | 28,339 |  |  | $ | 95,925 |
Recognized during year - net actuarial (losses) | — |  |  | (2,577 | ) |  | (2,288 | ) |  | (1,811 | ) |  | (2,288 | ) |  | (4,388 | )
Occurring during year - settlement loss | — |  |  | (66,332 | ) |  | — |  |  | — |  |  | — |  |  | (66,332 | )
Occurring during year - net actuarial losses | — |  |  | 653 |  |  | 12,119 |  |  | 5,792 |  |  | 12,119 |  |  | 6,445 |
Foreign exchange impact | — |  |  | — |  |  | 497 |  |  | (3,311 | ) |  | 497 |  |  | (3,311 | )
Accumulated other comprehensive loss- end of year | $ | — |  |  | $ | — |  |  | $ | 38,667 |  |  | $ | 28,339 |  |  | $ | 38,667 |  |  | $ | 28,339 |
The following table shows the percentage of total plan assets for each major category of plan assets:
| International Plans
| September 30,
| 2016 |  | 2015
Asset category: |  |  |
Equity securities | 49% |  | 53%
Fixed income securities | 30% |  | 32%
Commodities | 4% |  | —%
Insurance company | 16% |  | 13%
Cash | 1% |  | 2%
| 100% |  | 100%
We periodically review the pension plans’ investments in the various asset classes. The current asset allocation target is 60% equity securities and 40% fixed income securities for the CoCreate plan in Germany, and 100% fixed income securities for the other international plans. The fixed income securities for the other international plans primarily include investments held with insurance companies with fixed returns. The plans’ investment managers are provided specific guidelines under which they are to invest the assets assigned to them. In general, investment managers are expected to remain fully invested in their asset class with further limitations on risk as related to investments in a single security, portfolio turnover and credit quality. The German CoCreate plan's investment policy prohibits the use of derivatives associated with leverage and speculation or investments in securities issued by PTC, except through index-related strategies and/or commingled funds. An investment committee oversees management of the pension plans’ assets. Plan assets consist primarily of investments in mutual funds invested in equity and fixed income securities. In 2016, 2015 and 2014 our actual return on plan assets was $1.7 million, $1.9 million and $15.9 million, respectively. Based on actuarial valuations and additional voluntary contributions, we contributed $2.0 million, $46.7 million, and $12.9 million in 2016, 2015 and 2014, respectively, to the plans. As of September 30, 2016, benefit payments expected to be paid over the next ten years are outlined in the following table:
| Future Benefit Payments
| (in thousands)
Year ending September 30, |
2017 | $ | 1,899 |
2018 | 2,314 |
2019 | 2,566 |
2020 | 2,861 |
2021 | 3,175 |
2022 to 2026 | 22,034 |
Fair Value of Plan Assets The International Plan assets are comprised primarily of investments in a trust and an insurance company. The underlying investments in the trust are primarily publicly traded European DJ EuroStoxx50 equities and European governmental fixed income securities. They are classified as Level 1 because the underlying units of the trust are traded in open public markets. The fair value of the underlying investments in equity securities and fixed income are based upon publicly-traded exchange prices.
| September 30, 2016
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (in thousands)
International plan assets: |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |
Government | $ | 8,518 |  |  | $ | — |  |  | $ | — |  |  | $ | 8,518 |
Europe corporate investment grade | 10,218 |  |  | — |  |  | — |  |  | 10,218 |
Europe large capitalization stocks | 30,615 |  |  | — |  |  | — |  |  | 30,615 |
Commodities | 2,709 |  |  | — |  |  | — |  |  | 2,709 |
Insurance company funds (1) | — |  |  | 9,578 |  |  | — |  |  | 9,578 |
Cash | 297 |  |  | — |  |  | — |  |  | 297 |
| $ | 52,357 |  |  | $ | 9,578 |  |  | $ | — |  |  | $ | 61,935 |
| September 30, 2015
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (in thousands)
International plan assets: |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |
Government | $ | 11,086 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,086 |
Europe corporate investment grade | 7,487 |  |  | — |  |  | — |  |  | 7,487 |
Europe large capitalization stocks | 30,887 |  |  | — |  |  | — |  |  | 30,887 |
Insurance company funds (1) | — |  |  | 7,668 |  |  | — |  |  | 7,668 |
Cash | 833 |  |  | — |  |  | — |  |  | 833 |
| $ | 50,293 |  |  | $ | 7,668 |  |  | $ | — |  |  | $ | 57,961 |
(1) These investments are comprised primarily of funds invested with an insurance company in Japan with a guaranteed rate of return. The insurance company invests these assets primarily in government and corporate bonds.

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