Annual report pursuant to Section 13 and 15(d)

EMPLOYEE BENEFIT PLANS

v3.23.2
EMPLOYEE BENEFIT PLANS
 12 Months Ended
Jun. 30, 2023
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 January 1, 2019, the employer match is 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 amounted to $37.3 million, $33.3 million, and $27.0 million in the fiscal years ended June 30, 2023, 2022 and 2021, respectively. We have no defined benefit plans in the U.S. In addition to the profit sharing plan and the U.S. 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 deposited 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 our defined benefit 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, 2023 and 2022.
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) 2023 2022
Change in projected benefit obligation:
Projected benefit obligation as of the beginning of the fiscal year $ 124,585  $ 134,305 
Service cost 3,807  5,054 
Interest cost 1,689  1,003 
Contributions by plan participants 70  78 
Actuarial (gain) loss (7,686) 3,029 
Benefit payments (4,837) (2,164)
Plan amendment impact 191  670 
Settlements impact (931) (1,010)
Foreign currency exchange rate changes and others, net (3,752) (16,380)
Projected benefit obligation as of the end of the fiscal year $ 113,136  $ 124,585 
  Year Ended June 30,
(In thousands) 2023 2022
Change in fair value of plan assets:
Fair value of plan assets as of the beginning of the fiscal year $ 43,593  $ 44,726 
Employer contributions 8,396  6,955 
Foreign currency exchange rate changes and others, net (827) (3,831)
Settlements impact (931) (1,010)
Actual return on plan assets (1,064) (1,087)
Benefit and expense payments (3,237) (2,160)
Fair value of plan assets as of the end of the fiscal year $ 45,930  $ 43,593 
As of June 30,
(In thousands) 2023 2022
Underfunded status $ 67,206  $ 80,992 
  As of June 30,
(In thousands) 2023 2022
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation $ 65,992  $ 77,697 
Projected benefit obligation $ 108,084  $ 124,585 
Plan assets at fair value $ 40,648  $ 43,593 
 
  Year Ended June 30,
  2023 2022 2021
Weighted-average assumptions(1):
Discount rate
0.9% - 3.0%
0.9% - 3.0%
0.5% - 1.7%
Expected rate of return on assets
0.9% - 2.6%
0.9% - 3.0%
0.6% - 2.9%
Rate of compensation increases
3.0% - 5.0%
2.3% - 5.0%
2.3% - 5.0%
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(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 AOCI before tax related to our foreign defined benefit pension plans: 
  As of June 30,
(In thousands) 2023 2022
Unrecognized prior service cost $ 10,733  $ 12,414 
Unrealized net loss 12,932  19,400 
Amount of losses recognized $ 23,665  $ 31,814 
The components of our net periodic cost relating to our foreign subsidiaries’ defined benefit pension plans are as follows: 
  Year Ended June 30,
(In thousands) 2023 2022 2021
Components of net periodic pension cost:
Service cost(1)
$ 3,807  $ 5,054  $ 4,649 
Interest cost 1,678  1,003  1,187 
Return on plan assets (426) (528) (549)
Amortization of prior service cost 873  671  — 
Amortization of net loss 698  1,406  1,071 
Loss due to settlement/curtailment 85  38  130 
Foreign currency exchange rate changes —  (19) — 
Net periodic pension cost $ 6,715  $ 7,625  $ 6,488 
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(1)Service cost is reported in Cost of revenues, R&D and SG&A 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, 2023 and 2022.
The expected aggregate employer contribution for the foreign plans during the fiscal year ending June 30, 2024 is $7.7 million.
The total benefits to be paid from the foreign pension plans are not expected to exceed $6.9 million in any year through the fiscal year ending June 30, 2033.
Foreign plan assets measured at fair value on a recurring basis consisted of the following investment categories as of June 30, 2023 and 2022, respectively:
As of June 30, 2023 (In thousands) Total Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)
Cash and cash equivalents $ 32,114  $ 32,114  $ — 
Bonds, equity securities and other investments 13,816  —  13,816 
Total assets measured at fair value $ 45,930  $ 32,114  $ 13,816 
As of June 30, 2022 (In thousands) Total Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		 Significant Other
Observable Inputs
(Level 2)
Cash and cash equivalents $ 27,543  $ 27,543  $ — 
Bonds, equity securities and other investments 16,050  —  16,050 
Total assets measured at fair value $ 43,593  $ 27,543  $ 16,050 
 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, 2023, we did not have concentrations of plan asset investment risk in any single entity, manager, counterparty, sector, industry or country.