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Employee Retirement Plans | 12 Months Ended
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Dec. 31, 2021
Retirement Benefits [Abstract] |
Employee Retirement Plans | Note 16. Employee Retirement Plans Defined Benefit Plans We sponsor several defined benefit pension plans, which include plans in the U.S., Italy, Germany, Japan and France. We maintain a frozen cash balance retirement plan in the U.S. that is a contributory, defined benefit plan designed to provide the benefit in terms of a stated account balance dependent on the employer's promised interest-crediting rate. In Italy and France, we maintain a severance pay defined benefit plan that obligates the employer to pay a severance payment in case of resignation, dismissal or retirement. In other jurisdictions, we sponsor non-contributory, defined benefit plans designated to provide a guaranteed minimum retirement benefits to eligible employees. The change in benefit obligations and funded status of our U.S. pension benefits is as follows (in thousands):
|  | U.S. Pension Benefits
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Accumulated benefit obligations at year end |  | $ | 12,578 |  |  | $ | 13,085 |  |  | $ | 11,232 |
Change in projected benefit obligation: |  |  |  |  |  |
Projected benefit obligation at beginning of year |  | $ | 13,085 |  |  | $ | 11,232 |  |  | $ | 10,591 |
Interest cost |  | 224 |  |  | 290 |  |  | 382 |
Plan settlement |  | (972) |  |  | (384) |  |  | (366) |
Actuarial loss |  | 527 |  |  | 2,225 |  |  | 871 |
Benefits paid |  | (286) |  |  | (278) |  |  | (246) |
Projected benefit obligation at end of year |  | $ | 12,578 |  |  | $ | 13,085 |  |  | $ | 11,232 |
Change in plan assets: |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 8,688 |  |  | $ | 7,574 |  |  | $ | 6,767 |
Actual return on plan assets |  | 189 |  |  | 646 |  |  | 628 |
Employer contributions |  | 401 |  |  | 1,130 |  |  | 546 |
Plan settlement |  | (972) |  |  | (384) |  |  | (366) |
Benefits paid |  | (286) |  |  | (278) |  |  | (1) |
Fair value of plan assets at end of year |  | $ | 8,020 |  |  | $ | 8,688 |  |  | $ | 7,574 |
Funded status at end of year: |  |  |  |  |  |
Fair value of plan assets |  | $ | 8,020 |  |  | $ | 8,688 |  |  | $ | 7,574 |
Projected benefit obligations |  | 12,578 |  |  | 13,085 |  |  | 11,232 |
Underfunded status of the plans |  | 4,558 |  |  | 4,397 |  |  | 3,658 |
Recognized liability |  | $ | 4,558 |  |  | $ | 4,397 |  |  | $ | 3,658 |
Amounts recognized on the consolidated balance sheets consist of: |  |  |  |  |  |
Non-current liabilities |  | $ | 4,558 |  |  | $ | 4,397 |  |  | $ | 3,658 |
Recognized liability |  | $ | 4,558 |  |  | $ | 4,397 |  |  | $ | 3,658 |
The change in benefit obligations and funded status of our non-U.S. pension benefits is as follows (in thousands):
|  | Non-U.S. Pension Benefits
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Accumulated benefit obligations at year end |  | $ | 10,522 |  |  | $ | 12,091 |  |  | $ | 17,744 |
Change in projected benefit obligation: |  |  |  |  |  |
Projected benefit obligation at beginning of year |  | $ | 13,039 |  |  | $ | 18,087 |  |  | $ | 18,975 |
Service cost |  | 354 |  |  | 691 |  |  | 478 |
Interest cost |  | 56 |  |  | 121 |  |  | 232 |
Actuarial loss (gain) |  | (1,372) |  |  | (208) |  |  | 1,071 |
Benefits paid |  | (294) |  |  | (1,245) |  |  | (2,380) |
Reclassified to liabilities held for sale (1) |  | — |  |  | (6,012) |  |  | — |
Foreign currency exchange rate changes and other |  | (966) |  |  | 1,605 |  |  | (289) |
Projected benefit obligation at end of year |  | $ | 10,817 |  |  | $ | 13,039 |  |  | $ | 18,087 |
Change in plan assets: |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | $ | 2,816 |  |  | $ | 3,423 |  |  | $ | 3,341 |
Actual return on plan assets |  | 61 |  |  | 52 |  |  | (34) |
Employer contributions |  | 302 |  |  | 454 |  |  | 383 |
Benefits paid |  | (78) |  |  | (290) |  |  | (332) |
Reclassified to liabilities held for sale (1) |  | — |  |  | (1,018) |  |  | — |
Foreign currency exchange rate changes and other |  | 41 |  |  | 195 |  |  | 65 |
Fair value of plan assets at end of year |  | $ | 3,142 |  |  | $ | 2,816 |  |  | $ | 3,423 |
Funded status at end of year: |  |  |  |  |  |
Fair value of plan assets |  | $ | 3,142 |  |  | $ | 2,816 |  |  | $ | 3,423 |
Projected benefit obligations |  | 10,817 |  |  | 13,039 |  |  | 18,087 |
Underfunded status of the plans (2) |  | 7,675 |  |  | 10,223 |  |  | 14,664 |
Recognized liability |  | $ | 7,675 |  |  | $ | 10,223 |  |  | $ | 14,664 |
Amounts recognized on the consolidated balance sheets consist of: |  |  |  |  |  |
Non-current liabilities |  | $ | 7,675 |  |  | $ | 10,223 |  |  | $ | 14,664 |
Recognized liability |  | $ | 7,675 |  |  | $ | 10,223 |  |  | $ | 14,664 |
(1)Refer to “Note 4. Divestiture of Heart Valve Business.” (2)In certain non-U.S. countries, fully funding pension plans is not a common practice. Consequently, certain pension plans have been partially funded. The tables below present net periodic benefit cost of the defined benefit pension plans by component (in thousands):
|  | U.S. Pension Benefits
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Interest cost |  | $ | 224 |  |  | $ | 290 |  |  | $ | 382 |
Expected return on plan assets |  | (358) |  |  | (318) |  |  | (298) |
Settlement and curtailment loss |  | 471 |  |  | 180 |  |  | — |
Amortization of net actuarial loss |  | 264 |  |  | 182 |  |  | 148 |
Net periodic benefit cost |  | $ | 601 |  |  | $ | 334 |  |  | $ | 232 |
|  | Non-U.S. Pension Benefits
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Service cost |  | $ | 354 |  |  | $ | 691 |  |  | $ | 478 |
Interest cost |  | 56 |  |  | 121 |  |  | 232 |
Expected return on plan assets |  | (61) |  |  | (52) |  |  | 34 |
Amortization of net actuarial loss (gain) |  | (1,372) |  |  | (208) |  |  | 1,071 |
Net periodic benefit cost |  | $ | (1,023) |  |  | $ | 552 |  |  | $ | 1,815 |
To determine the discount rate for our U.S. benefit plan, we used the FTSE Above Median Pension Discount Curve. For the discount rate used for the other non-U.S. benefit plans we consider local market expectations of long-term returns, primarily utilizing the Iboxx Corporate Index Bond rating AA, duration higher than 10 years. The resulting discount rates are consistent with the duration of plan liabilities. The expected long-term rate of return on plan assets assumption for our U.S. benefit plan was derived from a study conducted by our investment managers. The study includes a review of anticipated future long-term performance of individual asset classes and consideration of the appropriate asset allocation strategy given the anticipated requirements of the plan to determine the average rate of earnings expected on the funds invested to provide for the pension plan benefits. Major actuarial assumptions used in determining the benefit obligations and net periodic benefit cost for our significant U.S. benefit plans as of December 31, 2021, 2020 and 2019, are presented in the following table:
|  | U.S. Pension Benefits
|  | 2021 |  | 2020 |  | 2019
Weighted-average assumptions used to determine benefit obligation: |  |  |  |  |  |
Discount rate |  | 2.41% |  | 1.91% |  | 2.88%
Weighted-average assumptions used to determine net periodic benefit cost: |  |  |  |  |  |
Discount rate |  | 1.91% |  | 2.88% |  | 3.97%
Expected return on plan assets |  | 5.00% |  | 5.00% |  | 5.00%
Major actuarial assumptions used in determining the benefit obligations and net periodic benefit cost for our significant non-U.S. benefit plans as of December 31, 2021, 2020 and 2019, are presented in the following table:
|  | Non-U.S. Pension Benefits
|  | 2021 |  | 2020 |  | 2019
Weighted-average assumptions used to determine benefit obligation: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 0.15% | - | 1.00% |  | 0.23% | - | 0.35% |  | 0.20% | - | 0.71%
Rate of compensation increase |  | 2.50% | - | 3.00% |  | 2.50% | - | 3.00% |  | 2.50% | - | 3.00%
Weighted-average assumptions used to determine net periodic benefit cost: |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 0.15% | - | 1.00% |  | 0.23% | - | 0.35% |  | 0.20% | - | 0.71%
Rate of compensation increase |  | 2.50% | - | 3.00% |  | 2.50% | - | 3.00% |  | 2.50% | - | 3.00%
Retirement Benefit Plan Investment Strategy In the U.S., we have an account that holds the defined benefit frozen balance pension plan assets. The Qualified Plan Committee (the “Plan Committee”) sets investment guidelines for U.S. pension plans. The plan assets in the U.S. are invested in accordance with sound investment practices that emphasize long-term fundamentals. The investment objectives for the plan assets in the U.S. are to achieve a positive rate of return that would be expected to close the current funding deficit and so enable us to terminate the frozen pension plan at a reasonable cost. The Plan Committee also oversees the investment allocation process, selects the investment managers, and monitors asset performance. The investment portfolio contains a diversified portfolio of fixed income and equity index funds. Securities are also diversified in terms of domestic and international securities, short- and long-term securities, growth and value styles, large cap and small cap stocks. Outside the U.S., pension plan assets are typically managed by decentralized fiduciary committees. There is a significant variation in policy asset allocation from country to country. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. The table below presents our U.S. pension plan target allocations by asset category as of December 31, 2021:
Equity securities |  | 29%
Debt securities |  | 70%
Other |  | 1%
Retirement Benefit Fair Values The following is a description of the valuation methodologies used for retirement benefit plan assets measured at fair value: Equity Mutual Funds: Valued based on the year-end net asset values of the investment vehicles. The net asset values of the investment vehicles are based on the fair values of the underlying investments of the partnerships valued at the closing price reported in the active markets in which the individual security is traded. Equity mutual funds have a daily reported net asset value. Fixed Income Mutual Funds: Valued based on the year-end net asset values of the investment vehicles. The net asset values of the investment vehicles are based on the fair values of the underlying investments of the partnerships valued based on inputs other than quoted prices that are observable. Money Markets: Valued based on quoted prices in active markets for identical assets. The following tables provide information by level for the retirement benefit plan assets that are measured at fair value, as defined by U.S. GAAP (in thousands):
|  | Fair Value as of December 31, 2021 |  | Fair Value Measurement Using Inputs Considered as:
|  |  | Level 1 |  | Level 2 |  | Level 3
Equity mutual funds |  | $ | 2,341 |  |  | $ | — |  |  | $ | 2,341 |  |  | $ | — |
Fixed income mutual funds |  | 5,587 |  |  | — |  |  | 5,587 |  |  | — |
Money market funds and cash |  | 82 |  |  | 82 |  |  | — |  |  | — |
|  | $ | 8,010 |  |  | $ | 82 |  |  | $ | 7,928 |  |  | $ | — |
|  | Fair Value as of December 31, 2020 |  | Fair Value Measurement Using Inputs Considered as:
|  |  | Level 1 |  | Level 2 |  | Level 3
Equity mutual funds |  | $ | 2,405 |  |  | $ | — |  |  | $ | 2,405 |  |  | $ | — |
Fixed income mutual funds |  | 5,788 |  |  | — |  |  | 5,788 |  |  | — |
Money market funds |  | 94 |  |  | 94 |  |  | — |  |  | — |
|  | $ | 8,287 |  |  | $ | 94 |  |  | $ | 8,193 |  |  | $ | — |
Refer to “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” for discussion of the fair value measurement terms of Levels 1, 2, and 3. Defined Benefit Retirement Funding We make the minimum required contribution to fund the U.S. pension plan as determined by MAP - 21 and the Highway and Transportation Funding Act of 2014 (“HAFTA”). We contributed $0.7 million, $1.6 million and $0.9 million to the pension plans (U.S. and non-U.S.) during the years ended December 31, 2021, 2020 and 2019, respectively. We anticipate that we will make contributions to the U.S. pension plan of approximately $0.4 million during the year ended December 31, 2022. Benefit payments, including amounts to be paid from our assets, and reflecting expected future service as of December 31, 2021, are expected to be paid as follows (in thousands):
|  | U.S. Plans |  | Non-U.S. Plans
2022 |  | 4,487 |  |  | 476 |
2023 |  | 744 |  |  | 738 |
2024 |  | 764 |  |  | 526 |
2025 |  | 928 |  |  | 572 |
2026 |  | 941 |  |  | 5,632 |
2027 - 2031 |  | 2,633 |  |  | 3,087 |
Defined Contribution Plans We sponsor defined contribution plans in the U.S. including the Cyberonics, Inc. Employee Retirement Savings Plan, which qualifies under Section 401(k) of the IRC covering U.S. employees and the Cyberonics, Inc. Non-Qualified Deferred Compensation Plan (the “Deferred Compensation”), covering certain U.S. middle and senior management. In addition, we sponsor the Belgium Defined Contribution Pension Plan for Cyberonics’ Belgium employees. We incurred expenses for our defined contribution plans of $10.2 million, $11.8 million and $12.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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- Definition The entire disclosure of an entity's employee compensation and benefit plans, excluding share-based compensation and including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 712 -URI http://asc.fasb.org/topic&trid=2197446 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -URI http://asc.fasb.org/topic&trid=2127225 + Details
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