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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2018
Employee Benefit Plans |
Employee Benefit Plans | Note 16. Employee Benefit Plans Defined Contribution Plans We have a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code covering all U.S. employees and defined contribution plans for other Incyte employees in Europe. Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations. Defined contribution expense was $10.5 million, $8.9 million and $6.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. Included in the 2018, 2017 and 2016 defined contribution expense was $1.4 million, $1.0 million and $0.3 million, respectively, of expense related to matching contributions under the European defined contribution plans. Defined Benefit Pension Plans We have defined benefit pension plans for our employees in Europe which provide benefits to employees upon retirement, death or disability. The assets of the pension plans are held in collective investment accounts represented by the cash surrender value of an insurance policy and are classified as Level 2 within the fair value hierarchy. The pension plans assumptions reflect the expected investment return and discount rate on plan assets and disability rate probabilities. The benefit obligation at December 31, 2018 for the plans was determined using a discount rate of 0.75%, rate of compensation increase of 2.25% and long-term expected return on plan assets of 0.75%. The 2018 net periodic benefit cost for the plans was determined using discount rates of 0.75% to 1.00%, rates of compensation increase of 2.00% to 2.25% and long-term expected return on plan assets of 0.75%. The benefit obligation at December 31, 2017 for the plans was determined using a discount rate of 0.75%, rate of compensation increase of 2.00% and long-term expected return on plan assets of 0.75%. The 2017 net periodic benefit cost for the plans was determined using a discount rate of 0.75%, rate of compensation increase of 1.50% and long-term expected return on plan assets of 0.75%. Summarized information regarding changes in the obligations and plan assets, the funded status and the amounts recorded were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  | 2017 |
Benefit obligation, beginning of year |  | $ | 37,584 |  | $ | 23,787 |
Employer service cost |  |  | 4,450 |  |  | 2,836 |
Interest cost |  |  | 278 |  |  | 190 |
Plan participants' contributions |  |  | 1,282 |  |  | 1,101 |
Actuarial loss |  |  | 698 |  |  | 4,514 |
Plan change |  |  | — |  |  | 1,430 |
Transfer of benefits net of payments from fund |  |  | 2,268 |  |  | 2,853 |
Expenses paid from assets |  |  | (51) |  |  | (36) |
Translation (gain) loss |  |  | (471) |  |  | 909 |
Benefit obligation, end of year |  |  | 46,038 |  |  | 37,584 |
Fair value of plan assets, beginning of year |  |  | 24,191 |  |  | 16,699 |
Actual return on plan assets |  |  | 95 |  |  | 88 |
Employer contributions |  |  | 3,133 |  |  | 2,891 |
Plan participants' contributions |  |  | 1,282 |  |  | 1,101 |
Transfer of benefits net of payments from fund |  |  | 1,910 |  |  | 2,853 |
Expenses paid from assets |  |  | (51) |  |  | (36) |
Translation (gain) loss |  |  | (192) |  |  | 595 |
Fair value of plan assets, end of year |  |  | 30,368 |  |  | 24,191 |
Unfunded liability, end of year |  | $ | 15,670 |  | $ | 13,393 |
The unfunded liability is reported in other liabilities on the consolidated balance sheet as of December 31, 2018 and 2017. The accumulated benefit obligation is $39.8 million and $33.1 million as of December 31, 2018 and 2017, respectively. The net periodic benefit cost was as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  | 2017 |  | 2016 |
Service cost |  | $ | 4,450 |  | $ | 2,836 |  | $ | 1,225 |
Interest cost |  |  | 278 |  |  | 190 |  |  | 76 |
Expected return on plan assets |  |  | (195) |  |  | (138) |  |  | (59) |
Amortization of prior service cost |  |  | 179 |  |  | 154 |  |  | — |
Amortization of actuarial losses |  |  | 265 |  |  | 141 |  |  | — |
Net periodic benefit cost |  | $ | 4,977 |  | $ | 3,183 |  | $ | 1,242 |
The components of net periodic benefit cost other than the service cost component are included in other income (expense), net on the consolidated statements of operations. Other changes in the plans assets and the benefit obligation that is recognized in accumulated other comprehensive income (loss) were as follows, net of tax (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  | 2017 |  | 2016 |
Pension liability, beginning of year |  | $ | 8,450 |  | $ | 2,750 |  | $ | — |
Plan change |  |  | — |  |  | 1,276 |  |  | 506 |
Net prior service costs |  |  | (179) |  |  | (140) |  |  | — |
Net loss |  |  | 875 |  |  | 4,564 |  |  | 2,244 |
Pension liability, end of year |  | $ | 9,146 |  | $ | 8,450 |  | $ | 2,750 |
The prior service cost for the pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is $0.2 million. The actuarial loss for the pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is $0.3 million. We expect to contribute a total of $3.6 million to the pension plans in 2019. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):
2019 |  |  |  |  | $ | 1,647 |
2020 |  |  |  |  |  | 1,759 |
2021 |  |  |  |  |  | 2,020 |
2022 |  |  |  |  |  | 2,131 |
2023 |  |  |  |  |  | 1,973 |
2024-2027 |  |  |  |  |  | 11,790 |
Total |  |  |  |  | $ | 21,320 |

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- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
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