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Employee Benefit Plans

12 Months Ended

Dec. 31, 2021

Employee Benefit Plans

Employee Benefit Plans

Note 14. 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 and Japan. Employees may contribute a portion of their compensation, which is then matched by us, subject to certain limitations. Defined contribution expense was $16.7 million, $13.4 million and $11.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.  Included in the 2021, 2020 and 2019 defined contribution expense was $2.4 million, $1.7 million and $1.6 million, respectively, of expense related to matching contributions under the non-U.S. 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, 2021 for the plans was determined using a discount rate of 0.20% and rate of compensation increase of 2.00%. The 2021 net periodic benefit cost for the plans was determined using discount rates of 0.10%, rates of compensation increase of 2.00% and long-term expected return on plan assets of 0.10%. The benefit obligation at December 31, 2020 for the plans was determined using a discount rate of 0.10% and rate of compensation increase of 2.00%. The 2020 net periodic benefit cost for the plans was determined using discount rates of 0.30%, rates of compensation increase of 2.25% and long-term expected return on plan assets of 0.30%.

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,
​	​	2021			2020		​
Benefit obligation, beginning of year		$	97,959		$	62,770
Employer service cost		​	7,977		​	6,047
Interest cost		​	92		​	193
Plan participants' contributions	​	​	2,795	​	​	2,237	​
Actuarial loss	​	​	7,618	​	​	9,372	​
Plan change	​	​	5,595	​	​	—	​
Transfer of benefits net of payments from fund	​	​	12,834	​	​	11,057	​
Expenses paid from assets	​	​	(117)	​	​	(88)	​
Translation (gain) loss	​	​	(2,787)	​	​	6,371	​
Benefit obligation, end of year	​	​	131,966	​	​	97,959	​
​	​	​	​	​	​	​	​
Fair value of plan assets, beginning of year	​	​	61,265	​	​	38,662	​
Actual return on plan assets	​	​	12,396	​	​	260	​
Employer contributions	​	​	6,858	​	​	5,413	​
Plan participants' contributions	​	​	2,795	​	​	2,237	​
Transfer of benefits net of payments from fund	​	​	12,834	​	​	11,057	​
Expenses paid from assets	​	​	(117)	​	​	(88)	​
Translation gain	​	​	(2,036)	​	​	3,724	​
Fair value of plan assets, end of year	​	​	93,995	​	​	61,265	​
​	​	​	​	​	​	​	​
Unfunded liability, end of year	​	$	37,971	​	$	36,694	​

​

The unfunded liability is reported in other liabilities on the consolidated balance sheets as of December 31, 2021 and 2020. The accumulated benefit obligation is $120.9 million and $83.2 million as of December 31, 2021 and 2020, respectively.

The net periodic benefit cost was as follows (in thousands):

​	​	​	​	​	​	​	​	​	​	​
​	​	​					​	​	​	​
​	​	Year Ended  December 31,								​
​		2021		​	2020		​	2019		​
Service cost		$	7,977	​	$	6,047	​	$	5,195	​
Interest cost		​	92	​	​	193	​	​	345
Expected return on plan assets		​	(60)	​	​	(126)	​	​	(241)
Amortization of prior service cost		​	217	​	​	216	​	​	214
Amortization of actuarial losses	​	​	1,154	​	​	667	​	​	247	​
Net periodic benefit cost		$	9,380	​	$	6,997	​	$	5,760

​

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 loss were as follows, net of tax (in thousands):

​	​	​	​	​	​	​	​	​	​	​
​		Year Ended December 31,								​
​		2021			2020			2019		​
Pension liability, beginning of year		$	23,831	​	$	15,468	​	$	9,146	​
Plan amendment		​	6,017	​	​	—	​	​	—	​
Net prior service costs	​	​	(217)	​	​	(216)	​	​	(214)	​
Net (gain) loss		​	(5,954)	​	​	8,579	​	​	6,536	​
Pension liability, end of year	​	$	23,677	​	$	23,831	​	$	15,468	​

​

We expect to contribute a total of $6.4 million to the pension plans in 2022. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

​

​	​	​	​	​	​	​	​
2022	​	​	​	​	$	4,582	​
2023	​	​	​	​	​	4,688	​
2024	​	​	​	​	​	4,760	​
2025	​	​	​	​	​	5,308	​
2026	​	​	​	​	​	5,107	​
2027-2031	​	​	​	​	​	33,815	​
Total	​	​	​	​	$	58,260	​

​

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