Annual report pursuant to Section 13 and 15(d)

EMPLOYEE BENEFIT PLANS

v3.20.2
EMPLOYEE BENEFIT PLANS
 12 Months Ended
Jun. 30, 2020
Retirement Benefits [Abstract]  
EMPLOYEE BENEFIT PLANS EMPLOYEE BENEFIT PLANS
We have a profit sharing program for eligible employees, which distributes a percentage of our pre-tax profits on a quarterly basis. In addition, we have an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Since April 1, 2011, the employer match amount was 50% of the first $8,000 of an eligible employee’s contribution (i.e., a maximum of $4,000) during each fiscal year until January 1, 2019, when the employer match was changed to the greater of 50% of the first $8,000 of an eligible employee's contributions or 50% of the first 5% of eligible compensation contributed plus 25% of the next 5% of compensation contributed.
The total expenses under the profit sharing and 401(k) programs aggregated $24.6 million, $18.6 million, and $16.0 million in the fiscal years ended June 30, 2020, 2019 and 2018, respectively. We have no defined benefit plans in the United States. In addition to the profit sharing plan and the United States 401(k), several of our foreign subsidiaries have retirement plans for their full-time employees, several of which are defined benefit plans. Consistent with the requirements of local law, our deposits funds for certain of these plans are held with insurance companies, with third-party trustees or in government-managed accounts. The assumptions used in calculating the obligation for the foreign plans depend on the local economic environment.
We apply authoritative guidance that requires an employer to recognize the funded status of each of its defined pension and post-retirement benefit plans as a net asset or liability on its balance sheets. Additionally, the authoritative guidance requires an employer to measure the funded status of each of its plans as of the date of its year-end statement of financial position. The benefit obligations and related assets under our plans have been measured as of June 30, 2020 and 2019.
Summary data relating to our foreign defined benefit pension plans, including key weighted-average assumptions used, is provided in the following tables:
  Year ended June 30,
(In thousands) 2020 2019
Change in projected benefit obligation:
Projected benefit obligation as of the beginning of the fiscal year $ 115,490    $ 96,682   
Service cost 4,823    4,220   
Interest cost 1,084    1,132   
Contributions by plan participants 78    69   
Actuarial (gain) loss (496)   4,187   
Benefit payments (3,119)   (1,755)  
Assumed benefit obligation from acquisition —    11,095   
Foreign currency exchange rate changes and others, net 2,010    (140)  
Projected benefit obligation as of the end of the fiscal year $ 119,870    $ 115,490   
  Year ended June 30,
(In thousands) 2020 2019
Change in fair value of plan assets:
Fair value of plan assets as of the beginning of the fiscal year $ 33,555    $ 27,932   
Actual return on plan assets 1,264    854   
Employer contributions 5,271    3,587   
Benefit and expense payments (3,115)   (1,752)  
Assumed plan assets from acquisition —    3,424   
Foreign currency exchange rate changes and others, net 953    (490)  
Fair value of plan assets as of the end of the fiscal year $ 37,928    $ 33,555   
 
As of June 30,
(In thousands) 2020 2019
Underfunded status $ 81,942    $ 81,935   
  As of June 30,
(In thousands) 2020 2019
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation $ 75,550    $ 72,508   
Projected benefit obligation $ 119,870    $ 115,490   
Plan assets at fair value $ 37,928    $ 33,555   
 
  Year ended June 30,
  2020 2019 2018
Weighted-average assumptions(1):
Discount rate
0.6%-1.7%
0.3%-1.7%
0.5%-2.3%
Expected rate of return on assets
0.8%-2.9%
1.0%-2.9%
1.3%-2.9%
Rate of compensation increases
1.8%-4.5%
1.8%-4.5%
3.0%-4.5%
__________________
(1)Represents the weighted-average assumptions used to determine the benefit obligation.
The assumptions for expected rate of return on assets were developed by considering the historical returns and expectations of future returns relevant to the country in which each plan is in effect and the investments applicable to the corresponding plan. The discount rate for each plan was derived by reference to appropriate benchmark yields on high quality corporate bonds, allowing for the approximate duration of both plan obligations and the relevant benchmark index.
The following table presents losses recognized in accumulated other comprehensive income (loss) before tax related to our foreign defined benefit pension plans: 
  As of June 30,
(In thousands) 2020 2019
Unrecognized transition obligation $ 310    $ 242   
Unrecognized prior service cost —    4   
Unrealized net loss 23,157    25,721   
Amount of losses recognized $ 23,467    $ 25,967   
Losses in accumulated other comprehensive income (loss) related to our foreign defined benefit pension plans expected to be recognized as components of net periodic benefit cost over the fiscal year ending June 30, 2021 are as follows: 
(In thousands)
Unrecognized prior service cost $ —   
Unrealized net loss 1,050   
Amount of losses expected to be recognized $ 1,050   
 
The components of our net periodic cost relating to our foreign subsidiaries’ defined pension plans are as follows: 
  Year ended June 30,
(In thousands) 2020 2019 2018
Components of net periodic pension cost:
Service cost(1)
$ 4,823    $ 4,220    $ 4,127   
Interest cost 1,086    1,132    1,302   
Return on plan assets (475)   (476)   (428)  
Amortization of transitional obligation —    —    —   
Amortization of prior service cost 3    21    26   
Amortization of net loss 1,214    1,047    1,731   
Net periodic pension cost $ 6,651    $ 5,944    $ 6,758   
__________________
(1)Service cost is reported in cost of revenues, research and development and selling, general and administrative expenses. All other components of net periodic pension cost are reported in other expense (income), net in the Consolidated Statements of Operations.
Fair Value of Plan Assets
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs used to measure fair value of plan assets are described in Note 3, “Fair Value Measurements.”
The foreign plans’ investments are managed by third-party trustees consistent with the regulations or market practice of the country where the assets are invested. We are not actively involved in the investment strategy, nor do we have control over the target allocation of these investments. These investments made up 100% of total foreign plan assets in the fiscal years ended June 30, 2020 and 2019.
The expected aggregate employer contribution for the foreign plans during the fiscal year ending June 30, 2021 is $4.3 million.
The total benefits to be paid from the foreign pension plans are not expected to exceed $5.1 million in any year through the fiscal year ending June 30, 2030.
Foreign plan assets measured at fair value on a recurring basis consisted of the following investment categories as of June 30, 2020 and 2019, respectively:
As of June 30, 2020 (In thousands) Total Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)
Cash and cash equivalents $ 21,420    $ 21,420    $ —   
Bonds, equity securities and other investments 16,508    —    16,508   
Total assets measured at fair value $ 37,928    $ 21,420    $ 16,508   
As of June 30, 2019 (In thousands) Total Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)
Cash and cash equivalents $ 18,571    $ 18,571    $ —   
Bonds, equity securities and other investments 14,984    —    14,984   
Total assets measured at fair value $ 33,555    $ 18,571    $ 14,984   
 Concentration of Risk
We manage a variety of risks, including market, credit and liquidity risks, across our plan assets through our investment managers. We define a concentration of risk as an undiversified exposure to one of the above-mentioned risks that increases the exposure of the loss of plan assets unnecessarily. We monitor exposure to such risks in the foreign plans by monitoring the magnitude of the risk in each plan and diversifying our exposure to such risks across a variety of instruments, markets and counterparties. As of June 30, 2020, we did not have concentrations of plan asset investment risk in any single entity, manager, counterparty, sector, industry or country.