Pension and Severance Plans

12 Months Ended

Dec. 31, 2023

Korean Severance Plan

Our subsidiary in Korea maintains an unfunded severance plan that covers certain employees that were employed prior to August 1, 2015. To the extent eligible employees are terminated, our subsidiary in Korea would be required to make lump-sum severance payments on behalf of these eligible employees for service provided prior to August 1, 2015. Factors used to determine severance benefits include employees’ length of service, seniority and rate of pay. The employees’ length of service and seniority are fixed as of July 31, 2015. The employees’ rate of pay is adjusted to the rate of pay at the time of termination. Accrued severance benefits are estimated assuming all eligible employees were to terminate their employment at the balance sheet date. Our contributions to the National Pension Plan of the Republic of Korea are deducted from accrued severance benefit liabilities. On August 1, 2015, our subsidiary in Korea began sponsoring a defined benefit pension plan and a defined contribution plan. Existing employees at that time were given the option of choosing either a defined benefit pension plan or a defined contribution plan for their future benefits and new employees since that date are enrolled in a defined contribution plan.

The changes to the balance of our accrued severance plan obligations are as follows:


	For the Year Ended December 31,
	2023		2022
	(In thousands)
Balance at January 1	$	56,289	$	73,345
Provision of severance benefits	1,653		2,119
Severance payments	(8,770)		(15,295)
Foreign currency (gain) loss	(1,266)		(3,880)
Balance at December 31	47,906		56,289
Payments remaining with the National Pension Fund	(119)		(124)
Total accrued severance plan obligations at December 31	47,787		56,165
Less current portion of accrued severance plan obligations (Note 10)	7,906		7,422
Non-current portion of accrued severance plan obligations	$	39,881	$	48,743

Foreign Defined Benefit Pension Plans

Our subsidiaries in Japan, Korea, Malaysia, the Philippines and Taiwan sponsor defined benefit plans (the “Plans”). Charges to expense are based upon actuarial analyses. The following table summarizes the changes to the Plans’ benefit obligations, fair value of the Plans’ assets and the funded status of the Plans at December 31, 2023 and 2022:


	For the Year Ended December 31,
	2023		2022
	(In thousands)
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	159,760	$	200,187
Service cost	15,032		20,072
Interest cost	6,202		4,731
Benefits paid	(14,056)		(8,573)
Actuarial (gain) loss	4,150		(24,571)



Effects of curtailment	(617)		508
Settlement	(1,073)		(16,914)
Foreign exchange (gain) loss	(5,117)		(15,680)
Projected benefit obligation at December 31	164,281		159,760
Change in plan assets:
Fair value of plan assets at January 1	127,338		157,012
Actual gain (loss) on plan assets	12,325		(6,528)
Employer contributions	7,368		12,946

Settlement	(1,073)		(16,914)
Benefits paid	(14,056)		(8,573)
Foreign exchange gain (loss)	(2,706)		(10,605)
Fair value of plan assets at December 31	129,196		127,338
Funded status of the Plans at December 31	$	(35,085)	$	(32,422)


	December 31,
	2023		2022
	(In thousands)
Amounts recognized in the Consolidated Balance Sheets consist of:
Prepaid benefit cost (included in non-current assets)	$	12,039	$	12,308
Accrued benefit liability (included in pension and severance obligations)	(47,124)		(44,730)
Net amount recognized at year end	$	(35,085)	$	(32,422)

The accumulated benefit obligation as of December 31, 2023 and 2022 was $128.3 million and $125.6 million, respectively.

The following table summarizes, by component, the change in accumulated other comprehensive income (loss), net of tax related to our Plans:


	Prior Service Cost		Actuarial Net Gain (Loss)		Total
	(In thousands)
Balance at December 31, 2021	$	602	$	5,014	$	5,616
Amortization and settlement gain included in net periodic pension cost	—		(1,021)		(1,021)
Net gain (loss) arising during period	—		9,625		9,625
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss)	—		8,604		8,604
Balance at December 31, 2022	$	602	$	13,618	$	14,220
Amortization and settlement gain included in net periodic pension cost	—		(46)		(46)
Net gain (loss) arising during period	—		1,731		1,731
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss)	—		1,685		1,685
Balance at December 31, 2023	$	602	$	15,303	$	15,905

Information for pension plans with benefit obligations in excess of plan assets is as follows:


	December 31,
	2023		2022
	(In thousands)
Plans with underfunded or non-funded projected benefit obligation:
Aggregate projected benefit obligation	$	100,662	$	96,310
Aggregate fair value of plan assets	53,539		51,581
Plans with underfunded or non-funded accumulated benefit obligation:
Aggregate accumulated benefit obligation	60,638		61,764
Aggregate fair value of plan assets	21,304		20,740

The following table summarizes total pension expense:


	For the Year Ended December 31,
	2023		2022		2021
	(In thousands)
Components of net periodic pension cost and total pension expense:
Service cost	$	15,032	$	20,072	$	25,908
Interest cost	6,202		4,731		4,900
Expected return on plan assets	(5,144)		(5,605)		(5,600)

Recognized actuarial (gain) loss	(156)		53		128
Net periodic pension cost	15,934		19,251		25,336
Curtailment (gain) loss	(617)		—		(954)
Settlement (gain) loss	132		(1,374)		(743)
Total pension expense	$	15,449	$	17,877	$	23,639

The components of net periodic pension cost other than the service cost component are included in other (income) expense, net in our Consolidated Statements of Income.

The following table summarizes the weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligations:


	For the Year Ended December 31,
	2023		2022		2021
Discount rate for determining net periodic pension cost	4.2	%	2.6	%	2.3	%
Discount rate for determining benefit obligations at December 31	3.8	%	4.2	%	2.6	%
Rate of compensation increase for determining net periodic pension cost	3.6	%	3.7	%	3.7	%
Rate of compensation increase for determining benefit obligations at December 31	3.7	%	3.6	%	3.7	%
Expected rate of return on plan assets for determining net periodic pension cost	4.1	%	3.8	%	3.7	%

The measurement date for determining the Plans’ assets and benefit obligations is December 31, each year. Discount rates are generally derived from yield curves constructed from high-quality corporate or foreign government bonds, for which the timing and amount of cash outflows approximate the estimated payouts.

The expected rate of return assumption is based on weighted-average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets and include input from our actuaries. We have no control over the direction of our investments in our defined benefit plans in Taiwan as the local Labor Standards Law Fund mandates such contributions into a cash account balance at the Bank of Taiwan. Our defined benefit pension plan in Malaysia is a non-funded plan, and as such, no asset exists related to this plan. Our investment strategies for our defined benefit plans in Japan, Korea and the Philippines are based on long-term, sustained asset growth through low to medium risk investments. The current rate of return assumption targets are based on asset allocation strategies as follows:


	Allocation
	Debt		Equity		Other
Japan defined benefit plan	64	%	34	%	2	%
Korea defined benefit plan	30	%	20	%	50	%
Philippine defined benefit plan	56	%	42	%	2	%

The fair value of our pension plan assets, by asset category utilizing the fair value hierarchy as discussed in Note 16, is as follows:


	December 31, 2023				December 31, 2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
	(In thousands)				(In thousands)
Cash and cash equivalents	$	217	$	—	$	217	$	1,117	$	—	$	1,117
Equity securities	13,680		—		13,680		13,339		—		13,339
Debt securities
Government bonds	3,674		—		3,674		2,982		—		2,982
Corporate bonds	1,130		—		1,130		540		—		540
Treasury notes	11,993		—		11,993		11,561		—		11,561
Mutual and commingled funds
Equity funds	29,016		7,807		36,823		23,931		7,157		31,088
Debt funds	12,031		13,163		25,194		11,651		13,409		25,060
Guaranteed investment contracts	—		23,189		23,189		—		28,340		28,340
Taiwan retirement fund	12,478		—		12,478		12,845		—		12,845
Other, net	—		818		818		(383)		849		466
Total fair value of pension plan assets	$	84,219	$	44,977	$	129,196	$	77,583	$	49,755	$	127,338

The Taiwan retirement fund category of our plan assets represents accounts that our subsidiaries in Taiwan have in a government labor retirement fund in the custody of the Bank of Taiwan. The accounts earn a minimum guaranteed rate of return and are invested in a mix of cash, domestic and foreign equity securities and domestic and foreign debt securities.

We expect to make contributions of approximately $11 million during 2024. We closely monitor the funded status of the Plans with respect to legislative requirements. We intend to make at least the minimum contribution required by law each year.

The estimated future benefit payments related to our foreign defined benefit plans are as follows:


	Payments
	(In thousands)
2024	$	9,369
2025	11,715
2026	12,383
2027	15,185
2028	16,062
2029 to 2033	98,940

Defined Contribution Plans

We sponsor defined contribution plans in Korea, Malaysia, Taiwan and the U.S. Total defined contribution expense was $27.0 million, $24.2 million and $21.8 million for 2023, 2022 and 2021, respectively.