Employee Benefit Plans

Retirement Plans:

In connection with the spin-off, the Company established a trusteed defined contribution retirement plan which is in effect for substantially all domestic employees meeting the eligibility requirements. All contributions for Kimball Electronics’ employees in former Parent’s plan at the spin date were transferred to the Company’s new plan on or around the spin date and were immediately fully vested. The Company also established a supplemental employee retirement plan (“SERP”) for executives and other key employees which enables them to defer cash compensation on a pre-tax basis in excess of IRS limitations. Assets in the former Parent SERP plan for Kimball Electronics employees were transferred to the Company’s plan on or around the spin date. The SERP is structured as a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy.

The discretionary employer contribution for domestic employees is determined annually by the Compensation and Governance Committee of the Company’s Board of Directors, and prior to the spin-off, the Compensation and Governance Committee of former Parent’s Board of Directors. Total expense related to employer contributions to the domestic retirement plans was, in millions, $1.5, $1.3, and $1.2 for fiscal years 2015, 2014, and 2013, respectively.

Employees of certain foreign subsidiaries are covered by local pension or retirement plans. Total expense related to employer contributions to these foreign plans was $0.2 million in each of fiscal years 2015, 2014, and 2013.

Severance Plans:

The Company established and maintains severance plans for all domestic employees, and prior to the spin-off, the Company’s domestic employees participated in severance plans sponsored by former Parent. These plans provide severance benefits to eligible employees meeting the plans’ qualifications, primarily involuntary termination without cause. There are no statutory requirements for the Company to contribute to the plans, nor do employees contribute to the plans. The plans hold no assets. Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment. Benefits are based upon an employee’s years of service and accumulate up to certain limits specified in the plans and include both salary and an allowance for medical benefits. The benefit obligation for periods prior to the spin-off was determined in total for each of the plans and allocated by the number of Kimball Electronics domestic employees participating in the plans. In conjunction with the spin-off, these plans were remeasured and legally separated. There were no significant changes to the actuarial assumptions used in the remeasurement.

The components and changes in the Benefit Obligation, Accumulated Other Comprehensive Income (Loss), and Net Periodic Benefit Cost are as follows:



	June 30
(Amounts in Thousands)	2015			2014
Changes and Components of Benefit Obligation:
Benefit obligation at beginning of year	$	1,495		$	1,560
Service cost	327			267
Interest cost	50			37
Actuarial (gain) loss for the period	(638		)	6
Benefits paid	(8		)	(375		)
Remeasurement of liabilities at spin-off	751			—
Benefit obligation at end of year	$	1,977		$	1,495
Balance in current liabilities	$	347		$	262
Balance in noncurrent liabilities	1,630			1,233
Total benefit obligation recognized in the Consolidated Balance Sheets	$	1,977		$	1,495



	June 30
(Amounts in Thousands)	2015			2014
Changes and Components in Accumulated Other Comprehensive Income (Loss) (before tax):
Accumulated Other Comprehensive Income (Loss) at beginning of year	$	(160	)	$	(73	)
Change in unrecognized prior service cost	(28		)	(40		)
Net change in unrecognized actuarial (gain) loss	(492		)	(47		)
Accumulated Other Comprehensive Income (Loss) at end of year	$	(680	)	$	(160	)
Balance in unrecognized prior service cost	$	28		$	55
Balance in unrecognized actuarial (gain) loss	(708		)	(215		)
Total Accumulated Other Comprehensive Income (Loss) recognized in Share Owners’ Equity	$	(680	)	$	(160	)



(Amounts in Thousands)	Year Ended June 30
Components of Net Periodic Benefit Cost (before tax):	2015			2014		2013
Service cost	$	327		$	267	$	230
Interest cost	50			37		50
Amortization of prior service cost	28			40		40
Amortization of actuarial (gain) loss	(146		)	53		37
Net periodic benefit cost recognized in the Consolidated Statements of Income	$	259		$	397	$	357

The benefit cost in the above table includes only normal recurring levels of severance activity, as estimated using an actuarial method. Unusual or non-recurring severance actions are not estimable using actuarial methods and are expensed in accordance with other applicable U.S. GAAP.

Prior service cost is amortized on a straight-line basis over the average remaining service period of employees that were active at the time of the plan initiation and actuarial (gain) loss is amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plan.

The estimated prior service cost and actuarial net (gain) loss for the severance plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year are, pre-tax in thousands, $28 and $(231), respectively.

Assumptions used to determine fiscal year end benefit obligations are as follows:



	2015	2014
Discount Rate	2.8%	2.3%
Rate of Compensation Increase	3.0%	3.0%

Weighted average assumptions used to determine fiscal year net periodic benefit costs are as follows:



	2015	2014	2013
Discount Rate	2.7%	2.5%	3.8%
Rate of Compensation Increase	3.0%	3.0%	3.8%