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PENSION PLAN

12 Months Ended

Dec. 31, 2017

15. PENSION PLAN

A Canadian subsidiary of the Company sponsors a defined benefit pension plan in which a majority of its employees are members. The employer contributes 100% to the plan. The benefits, or the rate per year of credit service, are established by the Company’s subsidiary and updated at its discretion.

Cost of Benefits

The components of the expense the Company incurred under the pension plan are as follows:

	Year Ended December 31,
	2017			2016
Current service cost, net of employee contributions	$	42		$	46
Interest cost on accrued benefit obligation		103			102
Expected return on plan assets		(163	)		(163	)
Amortization of transitional obligation		10			10
Amortization of past service costs		7			7
Amortization of net actuarial gain		47			37
Total cost of benefit	$	46		$	39

Benefit Obligation

The Company’s obligation for the pension plan is valued annually as of the beginning of each fiscal year. The projected benefit obligation represents the present value of benefits ultimately payable to plan participants for both past and future services expected to be provided by the plan participants.

The Company’s obligations pursuant to the pension plan are as follows:

	December 31,
	2017			2016
Projected benefit obligation, at beginning of year	$	2,628		$	2,578
Current service cost, net of employee contributions		42			46
Employee contributions		31			30
Interest cost		103			102
Actuarial loss		—			15
Impact of change in discount rate		173			39
Benefits paid		(180	)		(167	)
Foreign exchange adjustment		188			(15	)
Projected benefit obligation, at end of year	$	2,985		$	2,628

A summary of expected benefit payments related to the pension plan is as follows:

Years Ending December 31,	Pension Plan
2018	$	169
2019		165
2020		161
2021		158
2022		154
2023–2027		728

Other changes in plan assets and benefit obligations recognized in other comprehensive income / (loss) are as follows:

	Year Ended December 31,
	2017			2016
Net loss	$	(199	)	$	(220	)
Amortization of prior service cost		7			7
Amortization of gain		47			37
Amortization of transitional asset		10			10
		(135	)		(166	)
Taxes		(27	)		(9	)
Total recognized in other comprehensive loss, net of taxes	$	(108	)	$	(157	)

The estimated net loss amortized from accumulated other comprehensive income / (loss) into net periodic benefit cost over the next year amounts to approximately $38. The estimated prior service cost amortized from accumulated other comprehensive income into net periodic benefit cost over the next year amounts to approximately $7. The estimated transitional asset amortized from accumulated other comprehensive income into net periodic benefit cost over the next year amounts to approximately $10.

The accumulated other comprehensive income / (loss) consists of the following amounts that have not yet been recognized as components of net benefit cost:

	December 31,
	2017			2016
Unrecognized prior service cost	$	88		$	96
Unrecognized net actuarial loss		1,508			1,348
Unrecognized transitional obligation		46			58
Deferred income taxes		(435	)		(404	)
Total	$	1,207		$	1,098

Plan Assets

Assets held by the pension plan are invested in accordance with the provisions of the Company’s approved investment policy. The pension plan’s strategic asset allocation was structured to reduce volatility through diversification and enhance return to approximate the amounts and timing of the expected benefit payments. The asset allocation for the pension plan at the end of 2017 and 2016 and the target allocation for 2018, by asset category, is as follows:

	December 31,						2018 Target Allocation
	2017			2016			2018 Target Allocation
Equity securities		34	%		37	%		34	%
Fixed income securities		57			53			57
Real estate		7			8			7
Other		2			2			2
Total		100	%		100	%		100	%

The fair market values, by asset category are as follows:

	Fair Value Measurements at December 31,
	2017		2016
Equity securities	$	919	$	909
Fixed income securities		1,540		1,302
Real estate		189		196
Other		54		49
Total	$	2,702	$	2,456

Changes in the assets held by the pension plan in the years 2017 and 2016 are as follows:

	December 31,
	2017			2016
Fair value of plan assets, at beginning of year	$	2,456		$	2,515
Actual return on plan assets		136			(3	)
Employer contributions		85			96
Employee contributions		31			30
Benefits paid		(180	)		(167	)
Foreign exchange adjustment		174			(15	)
Fair value of plan assets, at end of year	$	2,702		$	2,456

Contributions

The Company’s policy is to fund the pension plan at or above the minimum required by law. The Company made $0.1 million of contributions to its defined benefit pension plan in each of the 2017 and 2016 years. The Company expects to make contributions of less than $0.1 million to the defined benefit pension plan in 2018. Changes in the discount rate and actual investment returns which continue to remain lower than the long-term expected return on plan assets could result in the Company making additional contributions.

Funded Status

The funded status of the pension plan is as follows:

	December 31,
	2017		2016
Projected benefit obligation	$	2,985	$	2,628
Fair value of plan assets		2,702		2,456
Accrued obligation (long term)	$	283	$	172

Assumptions

Assumptions used in accounting for the pension plan are as follows:

	December 31,
	2017			2016
Weighted average discount rate used to determine the accrued benefit obligations		3.40	%		3.80	%
Discount rate used to determine the net pension expense		3.80	%		3.90	%
Expected long-term rate on plan assets		6.50	%		6.50	%

To determine the expected long-term rate of return on pension plan assets, the Company considers the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. The Company applies the expected rate of return to a market related value of the assets which reduces the underlying variability in assets to which the Company applies that expected return. The Company amortizes gains and losses as well as the effects of changes in actuarial assumptions and plan provisions over a period no longer than the average future service of employees.

Primary actuarial assumptions are determined as follows:

The expected long-term rate of return on plan assets is based on the Company’s estimate of long-term returns for equities and fixed income securities weighted by the allocation of assets in the plans. The rate is impacted by changes in general market conditions, but because it represents a long-term rate, it is not significantly impacted by short-term market swings. Changes in the allocation of plan assets would also impact this rate.

The assumed discount rate is used to discount future benefit obligations back to today’s dollars. The discount rate is reflective of yield rates on U.S. long-term investment grade corporate bonds on and around the December 31 valuation date. This rate is sensitive to changes in interest rates. A decrease in the discount rate would increase the Company’s obligation and expense.