Pensions and Other Postretirement Benefits

Defined Benefit Plans

Employees of the Company participate in various defined benefit pension and other postretirement benefit plans.

U.S. Pension Plan

The Vishay Precision Group Non-Qualified Retirement Plan, like all nonqualified plans, is considered to be unfunded. The Company maintains a nonqualified trust, referred to as a “rabbi” trust, to fund benefits under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as other noncurrent assets within the consolidated balance sheets. The assets held in the rabbi trust are invested in money market funds and company-owned life insurance policies. The consolidated balance sheets include assets held in trust related to the nonqualified pension plan of $1.6 million at December 31, 2018 and $1.7 million at December 31, 2017, and the related liabilities of $2.2 million and $2.3 million at December 31, 2018 and 2017, respectively.

The Vishay Precision Group Non-Qualified Retirement Plan is frozen. Accordingly, no new employees may participate in the plan, no further participant contributions are permitted, and no further benefits accrue. Benefits accumulated prior to the freezing of the U.S. pension plan will be paid to employees upon retirement, and the Company will likely need to make additional cash contributions to the rabbi trust to fund this accumulated benefit obligation.

Non-U.S. Pension Plans

The Company provides pension and similar benefits to employees of certain non-U.S. subsidiaries consistent with local practices. Pension benefits earned are generally based on years of service and compensation during active employment.

In 2018, the Company undertook several measures to de-risk the UK pension plan. The first measure was to freeze the plan, with no new participants permitted and no further benefits accrue. The second measure was to execute an enhanced transfer value exercise to transfer pension benefits outside of the plan. As s result, the Company incurred $0.7 million related to these de-risking measures.

Other Postretirement Benefit Plans

In the U.S., the Company maintains two unfunded non-pension other postretirement benefit plans (“OPEB”) which are funded as costs are incurred. These plans provide medical and death benefits to retirees.

The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to pension and other postretirement benefit plans (in thousands):



	December 31, 2018						December 31, 2017
	Pension Plans			OPEB Plans			Pension Plans			OPEB Plans
Change in benefit obligation:
Benefit obligation at beginning of year	$	28,617		$	4,726		$	25,187		$	3,833
Service cost (adjusted for actual employee contributions)	477			108			513			96
Interest cost	686			152			674			142
Contributions by participants	21						35			—
Actuarial (gains) losses	(1,568		)	(97		)	673			900
Benefits paid	(1,042		)	(244		)	(564		)	(245		)
Curtailments and settlements	(3,362		)	—			—			—
Plan amendments and other	1,107			—			—			—
Currency translation	(1,014		)	—			2,099			—
Benefit obligation at end of year	$	23,922		$	4,645		$	28,617		$	4,726

Change in plan assets:
Fair value of plan assets at beginning of year	$	17,454		$	—		$	14,553		$	—
Actual return on plan assets	(343		)	—			957			—
Company contributions	1,495			244			1,013			245
Contributions by participants	21			—			35			—
Benefits paid	(1,042		)	(244		)	(564		)	(245		)
Curtailments and settlements	(2,429		)	—			—			—
Plan amendments and other	202			—			—			—
Currency translation	(857		)	—			1,460			—
Fair value of plan assets at end of year	$	14,501		$	—		$	17,454		$	—

Funded status at end of year	$	(9,421	)	$	(4,645	)	$	(11,163	)	$	(4,726	)

Amounts recognized in the consolidated balance sheets consist of the following pre-tax amounts (in thousands):



	December 31, 2018						December 31, 2017
	Pension Plans			OPEB Plans			Pension Plans			OPEB Plans
Accrued pension and other postretirement costs	$	(9,421	)	$	(4,645	)	$	(11,163	)	$	(4,726	)

Unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes with respect to the obligations and from the difference between expected returns and actual returns on plan assets. Actuarial items consist of the following (in thousands):



	December 31, 2018				December 31, 2017
	Pension Plans		OPEB Plans		Pension Plans		OPEB Plans
Unrecognized net actuarial loss	$	5,237	$	2,095	$	8,169	$	2,370
Unrecognized prior service cost	9		—		2		—
Unamortized transition obligation	2		—		3		—
	$	5,248	$	2,095	$	8,174	$	2,370

The following table sets forth additional information regarding the projected and accumulated benefit obligations for the pension plans (in thousands):



	December 31,
	2018		2017
Accumulated benefit obligation, all plans	$	23,040	$	26,907
Plans for which the accumulated benefit obligation exceeds plan assets:
Projected benefit obligation	$	22,552	$	27,317
Accumulated benefit obligation	22,155		26,074
Fair value of plan assets	13,256		16,274

Unrecognized gains and losses are amortized into future net periodic pension cost using the 10% corridor method over the expected remaining service life of the employee group. The following table sets forth the components of net periodic cost of pension and other postretirement benefit plans (in thousands):



	Years ended December 31,
	2018					2017					2016
	Pension Plans			OPEB Plans		Pension Plans			OPEB Plans		Pension Plans			OPEB Plans
Annual service cost	$	498		$	108	$	548		$	96	$	445		$	100
Less: employee contributions	21			—		35			—		42			—
Net service cost	477			108		513			96		403			100
Interest cost	686			152		674			142		784			130
Expected return on plan assets	(549		)	—		(536		)	—		(630		)	—
Amortization of actuarial losses	507			177		463			119		192			75
Amortization of transition obligation	1			—		1			—		5			—
Curtailment and settlement losses	708			—		—			—		—			—
Net periodic benefit cost	$	1,830		$	437	$	1,115		$	357	$	754		$	305

See Note 8 for the pre-tax, tax effect, and after tax amounts included in other comprehensive income during the years ended December 31, 2018, 2017, and 2016. The estimated actuarial items that will be amortized from accumulated other comprehensive loss into net periodic pension cost during 2019 is $0.4 million.

The following weighted-average assumptions were used to determine benefit obligations at December 31 of the respective years:



	2018				2017
	Pension Plans		OPEB Plans		Pension Plans		OPEB Plans
Discount rate	2.61	%	3.99	%	2.42	%	3.33	%
Rate of compensation increase	3.08	%	N/A		2.66	%	N/A
Expected return on plan assets	2.70	%	N/A		3.46	%	N/A

The following weighted-average assumptions were used to determine the net periodic pension costs for the years ended December 31, 2018 and 2017:



	2018				2017
	Pension Plans		OPEB Plans		Pension Plans		OPEB Plans
Discount rate	2.42	%	3.33	%	2.59	%	3.77	%
Rate of compensation increase	2.66	%	N/A		2.63	%	N/A
Expected return on plan assets	3.46	%	N/A		4.49	%	N/A
Health care trend rate	N/A		17.25	%	N/A		6.36	%

The health care trend ultimate rate is 4.00% per the terms of the plan. The impact of a one-percentage-point change in assumed health care cost trend rates on the net periodic benefit cost and postretirement benefit obligation is not material.

The plans’ expected return on assets is based on management’s expectation of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, advice from pension consultants and investment advisors, and current economic and capital market conditions.

The investment mix between equity securities and fixed income securities is based upon achieving a desired return, balancing higher return, more volatile equity securities, and lower return, less volatile fixed income securities. The target allocation of plan assets approximates the actual allocation of plan assets at December 31, 2018 and 2017.

Plan assets are comprised of:



	December 31, 2018			December 31, 2017
	Pension Plans		OPEB Plans	Pension Plans		OPEB Plans
Equity securities	50	%	—	53	%	—
Fixed income securities	37	%	—	38	%	—
Cash and cash equivalents	13	%	—	9	%	—
Total	100	%	—	100	%	—

The Company maintains defined benefit retirement plans in certain of its subsidiaries. The assets of the plans are measured at fair value.

Equity securities held by the defined benefit retirement plans consist of equity securities that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the equity securities is considered a Level 1 measurement within the fair value hierarchy.

Fixed income securities held by the defined benefit retirement plans consist of government bonds and corporate notes that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the fixed income securities is considered a Level 1 measurement within the fair value hierarchy.

Cash held by the defined benefit retirement plans consists of deposits on account in various financial institutions. The carrying amount of the cash approximates its fair value. A summary of the Company’s pension plan assets for each fair value hierarchy level are as follows for the periods presented (see Note 15 for further description of the levels within the fair value hierarchy (in thousands)):



As of December 31, 2018			Fair value measurements at reporting date using:
	Total Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Defined benefit pension plan assets
Equity securities	$	7,221	$	7,221	$	—	$	—
Fixed income securities	5,309		5,309		—		—
Cash and cash equivalents	1,971		1,971		—		—
	$	14,501	$	14,501	$	—	$	—



As of December 31, 2017			Fair value measurements at reporting date using:
	Total Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Defined benefit pension plan assets
Equity securities	$	9,271	$	9,271	$	—	$	—
Fixed income securities	6,629		6,629		—		—
Cash and cash equivalents	1,554		1,554		—		—
	$	17,454	$	17,454	$	—	$	—

Estimated future benefit payments are as follows (in thousands):



	Pension Plans		OPEB Plans
2019	$	757	$	272
2020	572		345
2021	673		434
2022	662		418
2023	1,048		336
2024 - 2027	4,142		1,704

The Company anticipates making contributions to its funded and unfunded pension and postretirement benefit plans of approximately $1.3 million during 2019.

Other Retirement Obligations

The Company participates in various other defined contribution and government-mandated retirement plans based on local law or custom. The Company periodically makes required contributions for certain of these plans. At December 31, 2018 and 2017, the consolidated balance sheets include $1.3 million and $1.2 million, respectively, within accrued pension and other postretirement costs related to these plans.

Most of the Company’s U.S. employees are eligible to participate in 401(k) savings plans which provide company matching under various formulas. The Company’s matching expense for the plans was $0.7 million, $0.7 million, and $0.7 million for the years ended December 31, 2018, 2017, and 2016, respectively. No material amounts are included in the consolidated balance sheets related to unfunded 401(k) contributions.

Certain key employees participate in a nonqualified deferred compensation plan, which allows these employees to defer a portion of their compensation until retirement, or elect shorter deferral periods. The accompanying consolidated balance sheets include a liability within other noncurrent liabilities related to these deferrals. The Company maintains a nonqualified trust, referred to as a “rabbi” trust, to fund payments under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as other noncurrent assets within the consolidated balance sheets. The assets held in the rabbi trust are invested in money market funds and company-owned life insurance policies. The consolidated balance sheets include assets held in trust related to the nonqualified deferred compensation plan of $3.1 million at December 31, 2018 and $3.3 million at December 31, 2017, and the related liabilities of $4.2 million and $4.4 million at December 31, 2018 and 2017, respectively.