Note 18. Employee benefits

Defined benefit plans

Pursuant to the ROC Labor Standards Law, the Company has established a defined benefit pension plan covering full-time employees in the ROC that provides retirement benefits to retiring employees based on years of service and the average salary for the six-month period before the employee’s retirement.

Reconciliations of defined benefit obligation at present value and plan asset at fair value are as follows:


	December 31,		December 31,
	2018		2019
		(in thousands)

Present value of the defined benefit obligations	$	3,184	3,142
Fair value of plan assets		(3,565)	(3,730)
	$	(381)	(588)
Net defined benefit liabilities		151	50
Prepaid pension costs		(532)	(638)
	$	(381)	(588)

(i)

Plan assets

The Company contributes an amount equal to 2% of wages and salaries paid every month to the Fund (required by law). The Fund is administered by a pension fund monitoring committee (the “Committee”) and is deposited in the Committee’s name in the Bank of Taiwan. Under the ROC Labor Standards Law, the minimum return on the plan assets should not be lower than the average interest rate on two-year time deposits published by the local banks. As of December 31, 2019, the Funds deposited in the Committee’s name in the Bank of Taiwan amounted to $3,730 thousand.

(ii)

Movements in present value of the defined benefit obligations


	Year ended December 31,
	2018		2019
	(in thousands)
Balance at beginning of year	$	4,460	3,184
Service costs		20	26
Interest expense		76	121
Remeasurements loss (gain):
Actuarial loss (gain) arising from:
-Changes in demographic assumptions		47	2
-Experience adjustment		10	(149)
-Change in financial assumptions		(1,217)	53
Refund of overfunding		-	(18)
Effect of changes in exchange rates		(212)	(77)
Balance at end of year	$	3,184	3,142

(iii)

Movements in the fair value of plan assets


	Year ended December 31,
	2018		2019
	(in thousands)
Balance at beginning of year	$	3,410	3,565
Interest income		57	140
Remeasurements gain (loss):
-Return on plan assets excluding interest income		81	120
Contributions paid by the employer		132	56
Refund of overfunding		-	(70)
Effect of changes in exchange rate		(115)	(81)
Balance at end of year	$	3,565	3,730

(iv)

Expenses recognized in profit or loss


	Year ended December 31,
	2017		2018	2019
	(in thousands)

Current service costs	$	15	20	26
Interest expense (income)		19	19	(19)
	$	34	39	7
Cost of revenues	$	9	14	6
Research and development		17	18	1
General and administrative		5	4	-
Sales and marketing		3	3	-
	$	34	39	7

(v)

Remeasurement of net defined benefit liability recognized in other comprehensive income


	Year ended December 31,
	2018		2019
	(in thousands)

Balance at beginning of year	$	1,262	129
Recognized during the period		(1,133)	(189)
Balance at end of year	$	129	(60)

(vi)

Actuarial assumptions

The principal actuarial assumptions were as follows:


	December 31,		December 31,
	2018		2019
Discount rate	1.22%‑1.24	%	0.87%-0.88	%
Rate of increase in compensation levels	3.00	%	3.00	%

The Company expects to make contribution of $57 thousand to the defined benefit plans in the next year starting from January 1, 2020.

As at December 31, 2019, the weighted average duration of the defined benefits obligation was between 19 years to 20 years.

(vii)

Sensitivity analysis

Reasonably possible changes at December 31, 2018 and 2019 to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.


	December 31, 2018		December 31, 2019
	+ 0.5%	- 0.5%	+ 0.5%	‑0.5%
	(in thousands)		(in thousands)
Discount rate	(284)	317	(272)	302
Rate of increase in compensation levels	310	(281)	294	(268)

Defined contribution plans

Beginning July 1, 2005, pursuant to the newly effective ROC Labor Pension Act, the Company is required to make a monthly contribution for full-time employees in the ROC that elected to participate in the Defined Contribution Plan at a rate no less than 6% of the employee’s monthly wages to the employees’ individual pension fund accounts at the ROC Bureau of Labor Insurance. Expenses recognized in 2017, 2018 and 2019, based on the contribution called for were $3,367 thousand, $3,527 thousand and $3,316 thousand, respectively.

The Company established a defined contribution plan in the United States that qualifies under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet the service requirement. The Company’s contribution to the plan may be made at the discretion of the board of directors. As now, no contributions have been made by the Company to the plan.

All PRC employees participate in employee social security plans, including pension and other welfare benefits, which are organized and administered by governmental authorities. The Company has no other substantial commitments to employees. The premiums and welfare benefit contributions that should be borne by the Company are calculated in accordance with relevant PRC regulations, and are paid to the labor and social welfare authorities. Expenses recognized based on this plan were $1,523 thousand, $1,655 thousand and $1,489 thousand for the years ended December 31, 2017, 2018 and 2019, respectively.

Other foreign subsidiaries recognized pension expenses of $178 thousand, $253 thousand and $434 thousand for the years ended December 31, 2017, 2018 and 2019, respectively, for the defined contribution plans based on their respective local government regulations.